EXHIBIT 4.26
THIRD AMENDMENT
TO
PURCHASE AGREEMENT
Third Amendment to Purchase Agreement dated effective as of July 10, 1998
(the "Amendment"), among WATERMARC FOOD MANAGEMENT CO., a Texas corporation
formerly known as Billy Blues Food Corporation (the "Company"), and the persons
listed in Schedule 1 hereto (the "Purchasers");
WITNESSETH:
Whereas, the Company and the Purchasers are parties to a Purchase
Agreement dated as of December 19, 1994, as amended by the First Amendment to
Purchase Agreement dated as of March 31, 1996, and a Second Amendment to
Purchase Agreement dated as of July 31, 1997, (such Purchase Agreement, as
amended, being referred to herein as the "Purchase Agreement"), pursuant to
which the Company issued and the Purchasers purchased (a) the Company's 12%
Subordinated Notes due March 31, 1996, in the aggregate principal amount
(%f$3,000,000 (the "Notes") and (b) warrants (the "Warrants") evidencing the
right to purchase an aggregate of 1,333,320 shares of Common Stock, $.05 par
value (the "Company Common Stock"), of the Company, at $2.25 per share; and
Whereas, the Company has paid $1,250,000 in principal amount on the Notes
and has paid accrued interest on the Notes through July 31, 1998, and $500,000
in aggregate principal amount of the Notes has been converted to other debt; and
Whereas, the Company has requested that the Purchasers agree to extend the
maturity date of the remaining Notes until December 31, 1999; and
Whereas, the Purchasers are willing to extend the maturity date of the
Notes upon the terms and subject to the conditions set forth herein;
Now, therefore, in consideration of the foregoing premises, the following
mutual agreement, and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Company and the Purchasers
agree to amend the Purchase Agreement as follows:
1. DEFINITIONS. Capitalized terms used herein shall have the meaning
assigned to them in the Purchase Agreement unless otherwise defined herein or
the context otherwise requires.
2. AMENDMENTS TO THE PURCHASE AGREEMENT. The Purchase Agreement is hereby
amended as follows:
(a) Section 1 of the Purchase Agreement is hereby amended bv:
(i) deleting the words "July 10, 1998" and substituting in
place thereof the words "December 31, 1999,"
(ii) deleting reference to "$0.25" and substituting in place
thereof "$0.09," and
(iii) deleting the third sentence in its entirety and substituting
in place there of the following sentence:
Each Note issued hereunder will be dated the date purchased by you
hereunder, will mature on December 31, 1999, and will bear interest
on its unpaid balance at the rate of 12% per annum, payable monthly
on or before the first day of each month for the preceding month,
commencing on September 1, 1998, and will have the other terms and
provisions provided herein and in the form of Note attached hereto
as EXHIBIT A.
(b) The Company's breach of any of its covenants and agreements contained
in this Agreement, including its agreement to reduce the outstanding principal
amount of the Notes by $150,000 on or before December 31, 1998, shall constitute
an "Event of Default" under the Purchase Agreement.
3. AMENDMENTS TO THE NOTES. Each of the Notes is hereby amended by
deleting the words "July 10, 1998" wherever they may appear and substituting in
place thereof the words "December 31, 1999" and by deleting "and to pay interest
thereon quarterly on March 31, June 30, September 30, and December 31 (each an
"Interest Payment Date"), in each year commencing March 31, 1995," in the first
paragraph of the Note and substituting in place thereof the following "and to
pay interest thereon monthly on or before the first (1st) day of each month for
the preceding month (each an "Interest Payment Date"), in each year commencing
on September 1, 1998."
4. AMENDMENTS TO THE WARRANTS. Each of the Warrants is hereby amended by
deleting the number "$0.25" in the first paragraph and substituting in place
thereof the number "$0.09."
5. PRINCIPAL PAYMENTS. The Company shall make a principal payment on the
Notes in the aggregate amount of $100,000 and shall pay accrued interest through
July 31, 1998, upon execution of this Agreement. The Company shall make an
additional payment of principal on the Notes in the aggregate amount of $150,000
on or before December 31, 1998.
6. ADDITIONAL WARRANTS. The Company will issue to the Purchasers the
number of warrants (the "New Warrants") evidencing the right to purchase
1,150,000 shares of Common Stock of the Company at $0.25 per share, such number
of shares and the purchase price being subject to adjustment as provided in the
New Warrant, specified opposite their names on Exhibit A.. Each New warrant
shall be in the form attached hereto as Exhibit B. The shares of Common
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Stock issued or issuable upon exercise of the New Warrants shall be deemed
"Restricted Stock" under the Purchase Agreement and the holder of the New
Warrants shall be deemed "Eligible Holders" under the Purchase Agreement. The
New Warrants shall expire on the fifth anniversary of their issuance; provided,
however, if the Company pays the Notes in full on or before December 31, 1999,
the New Warrants shall expire on the later of December 31, 1999, or 30 days
after the date the Notes are paid in full.
7. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants as
follows:
(a) The execution, delivery and performance of this Amendment
and the Purchase Agreement, as modified by this Amendment, and the
transactions contemplated hereby and thereby (i) are within the
corporate authority of the Company, (ii) have been authorized by all
necessary corporate proceedings on the part of the Company, (iii) do
not conflict with or result in any material breach or contravention
of any provision of law, statute, rule, or regulation to which the
Company is subject or any judgment, order, writ, injunction,
license, or permit applicable to the Company, and (iv) do not
conflict with any provision of the corporate charter or bylaws of
the Company or any agreement or other instrument binding upon the
Company.
(b) The execution, delivery, and performance of this Amendment
and the Purchase Agreement, as modified by this Amendment, will
result in valid and legally binding obligations of the Company
enforceable against it in accordance with the respective terms and
provisions hereof and thereof.
(c) The execution, delivery, and performance of this Amendment
and the Purchase Agreement, as modified by this Amendment, and the
consummation by the Company of the transactions contemplated hereby
and thereby do not require any approval or consent of, or filing
with, any governmental agency or authority.
8. RATIFICATION. Except as expressly amended hereby, the Purchase
Agreement, the Notes, the Warrants, and the Security Agreement dated as of May
20, 1996, by the Company in favor of the Purchasers with respect to the shares
of Marco's, are hereby ratified and confirmed in all respects and shall continue
in full force and effect. This Amendment and the Purchase Agreement shall
hereafter be read and construed together as a single document, and all
references to the Purchase Agreement or any agreement or instrument related to
the Purchase Agreement shall hereafter refer to the Purchase Agreement as
amended by this Amendment. This ratification and amendment is made effective as
of July 10, 1998, and the Purchasers agree that, as amended, the Notes are not
in default and, if due to timing factors a default in the Notes existed for a
temporary period, such default is waived and/or cured by this Amendment.
9. NOTATION ON NOTES AND WARRANTS. Promptly following execution of this
Amendment and in any event within 30 days thereof, each holder of a Note and/or
a Warrant agrees to deliver
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such Note and/or Warrant to the Company so that the amendments effected by this
Amendment may be noted thereon.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
counterparts taken together shall be deemed to constitute one and the same
instrument.
11. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas (without reference to conflict of
laws).
12. EXECUTION BY MARCO'S. Marco's has executed this Amendment to evidence
its agreement to comply with the covenant's contained in Sections 7.13 and 7.14
of the Purchase Agreement.
13. EXECUTION BV GHULAM M. BOMBAYWALA. Mr. Bombaywala has executed this
Amendment to evidence his agreement to comply with the covenants contained in
Section 7.15 of the Purchase Agreement and his agreement that the Put Option
Agreement dated as of December 19, 1994, between Mr. Bombaywala and the
Purchasers; the two Security Agreements dated as of July 31, 1997, by Mr.
Bombaywala in favor of the Purchasers with. respect to the shares of
Michelangelo's, Inc. and S.P.P., Inc.; and the Guaranty dated as of October23,
1997, by Mr. Bombaywala in favor of the Purchasers are hereby ratified and
confirmed in all respects and shall continue in full force and effect.
In witness whereof, the Company and the Purchasers have executed this
Amendment effective as of the date first above written.
WATERMARC FOOD MANAGEMENT CO.
By:/s/ GHULAM M. BOMBAYWALA
Name:_______________________________
Title:______________________________
MARCO'S MEXICAN RESTAURANTS, INC.
By:/s/ GHULAM M. BOMBAYWALA
Name:_______________________________
Title:______________________________
/s/ GHULAM M. BOMBAYWALA
---------------------------------
GHULAM M. BOMBAYWALA
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---------------------------------
Don A. Sanders
Atlantis Software Company Employee
Profit Sharing Plan -
By:_________________________________
Name:_______________________________
Title:______________________________
_________________________________
Philip M. Mount
_________________________________
John I. Mundy
_________________________________
Katherine U. Sanders
_________________________________
Ben T. Morris
_________________________________
Neil Lande, Custodian for Lynne Lande,
Stephen Lande, Sara Lande, and
Caroline Lande
_________________________________
John E. Drury
_________________________________
George L. Ball
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_________________________________
John M. O'Quinn
_________________________________
Nolan Ryan
_________________________________
Roger P. Lindstedt
_________________________________
Ray C. Childress
_________________________________
Kara S. Chudress
_________________________________
Morton A. Cohn
_________________________________
Michael S. Chadwick
_________________________________
Laura K. Sanders
_________________________________
Quinlan Quiros Schnitzer
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Exhibit B
NO.*
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES ACT OF ANY STATE (COLLECTIVELY, THE "ACTS"). NEITHER
THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGIS~ON STATEMENT WITH
RESPECT HERETO UNDER ALL OF THE APPLICABLE ACTS, OR AN OPIMON OF COUNSEL
SATISFACTORY TO WATERMARC FOOD MANAGEMENT CO. TO THE EFFECT THAT SUCH REGIS~ONS
ARE NOT REQUIRED. THIS WARRANT IS SUBJECT TO OTHER LIMITATIONS ON TRANSFER.
WARRANT
to Purchase Common Stock of
WATERMARC FOOD MANAGEMENT CO.
Expiring on August 31, 2003
THIS IS TO CERTIFY THAT, for value received,*, or permitted assigns, is
entitled to purchase from WATERMARC FOOD MANAGEMENT CO., a Texas corporation
(the "Company"), at the place where the Warrant Office designated pursuant to
Section 2.1 is located, at a purchase price per share of $0.25 (as adjusted
pursuant to the terms of this Warrant, the "Exercise Price'1), * shares of duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
$.05 par value, of the Company (the '1Common Stock"), and is entitled also to
exercise the other appurtenant rights, powers and privileges hereinafter set
forth. The number of shares of the Common Stock purchasable hereunder and the
Exercise Price are subject to adjustment in accordance with Article III hereof.
This Warrant shall expire at 5:00 p.m., Houston Time, on August 31, 2003;
provided, however, if the Company pays in full all outstanding principal and
interest on its 12% Subordinated Notes (the "Notes") issued pursuant to the
Purchase Agreement dated December 19, 1994, as amended (the "Purchase
Agreement"), on or before December 31, 1999, this warrant shall expire on the
later of (i) December 31, 1999, or (ii) the date 30 days following the date that
the Notes are paid in full.
Certain Terms used in this Warrant are defined in Article IV.
ARTICLE I
EXERCISE OF WARRANT
1.1 METHOD OF EXERCISE. This Warrant may be exercised as a whole or in
part from time to time. To exercise this Warrant, the holder hereof or permitted
assignees of all rights of the registered owner hereof shall deliver to the
Company, at the Warrant Office designated in Section 2.1, (a) a written notice
in the form of the Subscription Notice attached as an exhibit here-
to, stating therein the election of such holder or such permitted assignees of
the holder to exercise this Warrant in the manner provided in the Subscription
Notice, (b) payment in full of the Exercise Price (in the manner described
below) for all Warrant Shares purchased hereunder, and (c) this Warrant. Subject
to compliance with Section 3. l(a)(vii), this Warrant shall be deemed to be
exercised on the date of receipt by the Company of the Subscription Notice,
accompanied by payment for the Warrant Shares and surrender of this Warrant, as
aforesaid, and such date is referred to herein as the "Exercise Date". Upon such
exercise (subject as aforesaid), the Company shall issue and deliver to such
holder a certificate for the full number of the Warrant Shares purchasable by
such holder hereunder, against the receipt by the Company of the total Exercise
Price payable hereunder for all the Warrant Shares, (a) in cash or by certified
or cashier's check or by surrendering Warrant Shares having a Current Market
Value equal to the Exercise Price for all of the Warrant Shares, so purchased.
The Person in whose name the certificate(s) for Common Stock is to be issued
shall be deemed to have become a holder of record of such Common Stock on the
Exercise Date.
1.2 FRACTIONAL SHARES. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon exercise of this Warrant, no shares will
be issued for less than one-half a share and the Company shall issue a
certificate for the next higher number of whole shares of Common Stock for any
fraction of a share which is one-half or greater.
1.3 CONVERSION RIGHT. This Warrant may be converted as a whole or in part
from time to time into shares of Common Stock. To convert this Warrant, the
holder hereof or permitted assignees of all rights of the registered owner
hereof shall deliver to the Company, at the Warrant Office designated in Section
2.1, (a) a written notice in the form of the Subscription Notice attached as an
exhibit hereto, stating therein the election of such holder or such permitted
assignees of the holder to convert this Warrant in the manner provided in the
Subscript ion Notice and (1,) this Warrant. Subject to compliance with Section
3. 1(a)(vii), this Warrant shall be deemed to be converted on the date of
receipt by the Company of the Subscription Notice, accompanied by this Warrant,
as aforesaid, and such date is referred to herein as the "Conversion Date". Upon
such conversion (subject as aforesaid), the Company shall issue and deliver to
such holder (without payment of any Exercise Price) a certificate for the full
number of the Warrant Shares equal to the quotient obtained by dividing (a) the
amount determined by subtracting the aggregate Exercise Price on the Conversion
Date for the Warrant Shares purchasable by such holder hereunder from the
Current Market Value (as hereinafter defined) for such Warrant Shares on the
Conversion Date by (b) the Current Market Value of one share of Common Stock on
the Conversion Date. The Person in whose name the certificate(s) for Common
Stock is to be issued shall be deemed to have become a holder of record of such
Common Stock on the Conversion Date.
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ARTICLE II
WARRANT OFFICE: TRANSFER
2.1 WARRANT OFFICE. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's office at 11111 Wilcrest Green, Suite 350, Houston, Texas 77042
and may subsequently be such other office of the Company or of any transfer
agent of the Common Stock in the continental United States as to which written
notice has previously been given to the holder of this Warrant. The Company
shall maintain, at the Warrant Office, a register for the Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each permitted
assignee of the rights of the registered owner hereof.
2.2 OWNERSHIP OF WARRANT. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Article II.
2.3 RESTRICTIONS ON EXERCISE AND TRANSFER OF WARRANTS. The Company agrees
to maintain at the Warrant Office books for the registration and transfer of
this Warrant. Subject to the restrictions on transfer of Warrants in this
Section 2.3, the Company, from time to time, shall register the transfer of this
Warrant in such books upon surrender of this Warrant at the Warrant Office
properly endorsed or accompanied by appropriate instruments of transfer and
written instructions for transfer satisfactory to the Company. Upon any such
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be canceled by the Company. The Company shall pay all taxes (other
than securities transfer taxes) and all other expenses and charges payable in
connection with the transfer of Warrants pursuant to this Sect ion 2.3.
(a) RESTRICTIONS IN GENERAL. Notwithstanding any provisions contained in
this Warrant to the contrary, this Warrant shall not be exercisable or
transferable and the related shares of Common Stock issuable upon exercise of
this Warrant (the "Warrant Shares") shall not be transferable except upon the
conditions specified in this Section 2.3, which conditions are intended, among
other things, to insure compliance with the provisions of the Securities Act in
respect of the exercise or transfer of this Warrant or transfer of such Warrant
Shares. The registered holder of this Warrant agrees that it will neither (i)
transfer this Warrant prior to delivery to the Company of the opinion of counsel
referred to in, and to the effect described in, clause (1) of Section 2.3(b), or
until registration hereof under the Securities Act and any applicable state
securities or blue sky laws, (ii) exercise this Warrant prior to delivery to the
Company of the opinion of counsel referred to in, and to the effect described
in, clause (1) of Section 2.3(b), or until registration of the related Warrant
Shares under the Securities Act and any applicable state securities or blue sky
laws have become effective, nor (iii) transfer such Warrant
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Shares prior to delivery to the Company of the opinion of counsel referred to
in, and to the effect described in, clause (1) of Section 2.3), or until
registration of such Warrant Shares under the Securities Act and any applicable
state securities or blue sky laws have become effective.
(b) STATEMENT OF INTENTION TO EXERCISE: OPINION OF COUNSEL. The registered
holder of this Warrant, by its acceptance hereof, agrees that prior to any
exercise or transfer of this Warrant or any transfer of the related Warrant
Shares, said holder will deliver to the Company a statement setting forth either
said holder's intention with respect to the retention or disposition of any
Warrant Shares, or the intention of said holder's prospective transferee with
respect to its retention or disposition of this Warrant or of said Warrant
Shares (whichever is involved in such transfer), in either such case, together
with a signed copy of the opinion of said holder's counsel, or such other
counsel as shall be acceptable to the Company, as to the necessity or
non-necessity for registration under the Securities Act and any applicable state
securities or blue sky laws in connection with such exercise or such transfer.
The following provisions shall then apply:
(1) If, in the opinion of said holder's counsel, concurred in by
counsel to the Company, the proposed exercise or transfer of this Warrant
or the proposed transfer of such Warrant Shares may be effected without
registration under the Securities Act and any applicable state securities
or blue sky laws of this Warrant or such Warrant Shares, as the case may
be, then the registered holder of this Warrant shall be entitled to
exercise or transfer this Warrant or to transfer such Warrant Shares in
accordance with the statement of intention delivered by said holder to the
Company.
(2) If, in the opinion of said counsel, concurred in by counsel to
the Company, either the proposed exercise or transfer of this Warrant or
the proposed transfer of such Warrant Shares may not be effected without
registration under the Securities Act and any applicable state securities
or blue sky laws of this Warrant or such Warrant Shares, as the case may
be, the registered holder of this Warrant shall not be entitled to
exercise or transfer this Warrant or to transfer such Warrant Shares, as
the case may be, until such registration is effected.
2.4 REGISTRATION RIGHTS. The registered holder of this Warrant shall be
entitled to all of the rights and benefits of a purchaser under the Purchase
Agreement. The Warrant Shares shall be considered Restricted Stock under the
Purchase Agreement. The terms of the Purchase Agreement are hereby incorporated
herein for all purposes and shall be considered a part of this Agreement as if
they had been fully set forth herein.
2.5 ACKNOWLEDGMENT OF RIGHTS. The Company will, at the time of the
exercise of this Warrant in accordance with the terms hereof, upon the request
of the registered holder hereof, acknowledge in writing its continuing
obligation to afford to such holder any rights (including without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Warrant, provided that if the holder of this Warrant shall fail to make any
such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
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2.6 EXPENSES OF DELIVERY OF WARRANTS. The Company shall pay all expenses,
taxes (other than transfer taxes) and other charges payable in connection with
the preparation, issuance and delivery of Warrants and related Warrant Shares
hereunder.
2.7 COMPLIANCE WITH SECURITIES LAWS. The holder hereof understands and
agrees that the following restrictions and limitations shall be applicable to
all Warrant Shares and resales or other transfers of such Shares pursuant to the
Securities Act:
(a) The holder hereof agrees that the Warrant Shares shall not be sold or
otherwise transferred unless the Warrant Shares are registered under the
Securities Act and state securities laws or are exempt therefrom.
(b) A legend in substantially the following form has been or will be
placed on the certificate(s) evidencing the Warrant Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities act. The shares
have been acquired for investment and may not be sold, transferred,
pledged or hypothecated unless (i) they shall have been registered under
the Securities Act of 1933 and any applicable state securities act, or
(ii) the corporation shall have been furnished with an opinion of counsel,
satisfactory to counsel for the corporation that registration is not
required under any of such acts."
(c) Stop transfer instructions have been or will be imposed with respect
to the Warrant Shares so as to restrict resale or other transfer thereof,
subject to this Section 2.7.
ARTICLE III
ANTI-DILUTION PROVISIONS
3.1 ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price shall be subject to adjustment from time to time as hereinafter
in this Article III provided. Upon each adjustment of the Exercise Price, except
pursuant to 3. 1(a)(vi) and 3. 1(a)(vii), the registered holder of the Warrant
shall thereafter be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of shares of the Common Stock (calculated to the
nearest whole share pursuant to Section 1.2) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of the Common Stock purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) EXERCISE PRICE ADJUSTMENTS. The Exercise Price shall be subject
to adjustment from time to time as follows:
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(i) ISSUANCES OF COMMON STOCK. (A) If, at any time, during the
period (the "Note Period") that any principal amount is outstanding on the
Notes (as defined in the Purchase Agreement), the Company shall issue any
Common Stock other than Excluded Stock or Additional Excluded Stock (as
hereinafter defined) without consideration or for a consideration per
share less than the Exercise Price applicable immediately prior to such
issuance, the Exercise Price in effect immediately prior to each such
issuance shall immediately (except as provided below) be reduced to the
price equal to the greater of (I) the result obtained by dividing (aa) the
consideration, if any, received by the Company upon such issuance by (b)
the total number of shares of Common Stock issued by the Company upon such
issuance and (II) $0.05 or
(B) If, at any time, subsequent to the Note Period, the Company
shall issue any Common Stock other than Excluded Stock (as hereinafter
defined) without consideration or for a consideration per share less than
the Exercise Price applicable immediately prior to such issuance, the
Exercise Price in effect immediately prior to each such issuance shall
immediately (except as provided below) be reduced to the price determined
as follows:
by dividing (A) an amount equal to the sum of (x) the number of shares of
Common Stock outstanding immediately prior to such issuance multiplied by
the Exercise Price immediately prior to such issuance and ~) the
consideration, if ~ received by the Company upon such issuance, by ~) the
total number of shares of Common Stock outstanding immediately after such
issuance;
provided, however, that if the number of shares of Common Stock (other than
Excluded Stock) issued or reserved or agreed to be reserved for issuance by the
Company should at any time exceed 5 % of the Company's issued and outstanding
shares of Common Stock none of such shares (whether or not previously issued or
reserved for issuance by the Company) shall be considered Additional Excluded
Stock for purposes of determining the Exercise Price adjustment in Section 3.1
(a) (i) (A) and the Exercise Price shall be readjusted accordingly in accordance
with the provisions of Section 3. 1(a)(i)(A) using the lowest per share price of
any Common Stock so issued or reserved or agreed to be reserved for issuance.
For the purpose of any adjustment of the Exercise Price pursuant to this
clause (i) of this Section 3.1(a), the following provisions shall be applicable:
(A) CASH. In the case of the issuance of Common Stock for
cash, the amount of the consideration received by the Company shall
be deemed to be the amount of the cash proceeds received by the
Company for such Common Stock before deducting therefrom any
reasonable discounts, commissions, taxes or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(B) CONSIDERATION OTHER THAN CASH. In the case of the issuance
of Common Stock (otherwise than upon the conversion of shares of
capital stock or other securities of the Company) for a
consideration in whole or in part other than
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cash, including securities acquired in exchange therefor (other than
securities by their terms so exchangeable), the consideration other
than cash shall be deemed to be the fair value thereof as determined
by the Board of Directors in good faith, irrespective of any
accounting treatment.
(ii) OPTIONS AND CONVERTIBLE SECURITIES ETC. In case, at any time, the
Company shall issue any (i) options, warrants or other rights to purchase or
acquire Common Stock other than Excluded Stock (whether or not at the time
exercisable), (ii) securities by their terms convertible into or exchangeable
for Common Stock (whether or not at the time so convertible or exercisable) or
(i~) options, warrants or rights to purchase such convertible or exchangeable
securities (whether or not at the time exercisable), and such securities so
issued or rights granted in the cases of (i), (ii) or (iii) are not Excluded
Stock, the Exercise Price in effect immediately prior to each such issuance
shall immediately (except as provided below) be reduced to the price determined
in accordance with Section 3. 1(a)(i) and the following:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options, warrants or other rights to
purchase or acquire Common Stock shall be deemed to have been issued at
the time such options, warrants or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subclauses (A) and (B) above), if any, received by the Company
upon the issuance of such options, warrants or rights plus the minimum
purchase price provided in such options, warrants or rights for the Common
Stock covered thereby;
(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options, warrants or
other rights to purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange thereof, shall be
deemed to have been issued at the time such securities were issued or such
options, warrants or rights were issued and for a consideration equal to
the consideration, if any, received by the Company for any such securities
and related options, warrants 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 Company upon the conversion
or exchange of such securities and the exercise of any related options,
warrants or rights (the consideration in each case to be determined in the
manner provided in subclauses (A) and (B) above);
(3) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options, warrants or rights or
conversion or of exchange for such convertible or exchangeable securities
or any change in the consideration to be received by the Company upon such
exercise, conversion or exchange, including, but not limited to, a change
resulting from the antidilution provisions
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thereof, the Exercise Price as then in effect shall forthwith be
readjusted to such Exercise Price as would have been obtained had an
adjustment been made upon the issuance of such options, warrants or
rights not exercised prior to such change, or securities not converted or
exchanged prior to such change, on the basis of such change;
(4) on the expiration or cancellation of any such options, warrants
or rights, or the termination of the right to convert or exchange such
convertible or exchangeable securities, if the Exercise Price shall have
been adjusted upon the issuance thereof, the Exercise Price shall
forthwith be readjusted to such Exercise Price as would have been obtained
had an adjustment been made upon the issuance of such options, warrants,
rights or securities on the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options,
warrants or rights, or upon the conversion or exchange of such securities;
and
(5) if the Exercise Price shall have been adjusted upon the issuance
of any such options, warrants, rights or convertible or exchangeable
securities, no further adjustment of the Exercise Price shall be made for
the actual issuance of Common Stock upon the exercise, conversion or
exchange thereof;
PROVIDED, HOWEVER, that no increase in the initial Exercise Price shall be made
pursuant to this Section 3.1 (a)(ii).
(iii) EXCLUDED STOCK. "Excluded Stock" shall mean shares of Common Stock
issued or reserved or agreed to be reserved for issuance by the Company (A)
under options, warrants, or other securities convertible or exercisable into
Common Stock (whether pursuant to a stock option plan or otherwise), provided
the same are issued to officers, directors or employees of the Company and
provided that the aggregate number of shares of Common Stock issued or issuable
under this clause (A) shall not exceed 10% of the Company's issued and
outstanding shares of Common Stock, (B) pursuant to anti-dilution provisions or
rights with respect to any other presently issued and outstanding securities of
the Company convertible into, exchangeable for, or giving the holder thereof the
option or right to purchase shares of Common Stock, (C) pursuant to warrants to
purchase 1,111,100 shares of Common Stock issued under the Purchase Agreement
dated as of December 19,1994, (D) pursuant to up to 950,000 warrants issued to
GTI Partners LLC pursuant to the Consulting Agreement dated May 13, 1998, and
pursuant up to 10,000,000 warrants to be issued to Ghulam Bombaywala, both as
authorized by the Board of Directors of the Company on May 1, 1998, or (E)
pursuant to a stock dividend, subdivision or split-up covered by clause (iv) of
this Section 3.1(a). "Additional Excluded Stock" shall mean shares of Common
Stock (other than Excluded Stock) issued or reserved or agreed to be reserved
for issuance by the Company whether directly or under options, warrants, or
other securities convertible or exercisable into Common Stock, provided that the
aggregate number of shares of Common Stock issued or issuable under such
options,
8
warrants, or other convertible securities shall not exceed 5% of the Company's
issued and outstanding shares of Common Stock.
(iv) STOCK DIVIDENDS AND SPLITS. If the number of shares of Common Stock
outstanding at any time after the date of this Warrant is increased by a stock
dividend payable in shares of Common Stock or increased or decreased by a
subdivision or split-up of shares of Common Stock, then immediately after the
record date fixed for the determination of holders of Common Stock entitled to
receive such stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Exercise Price shall be appropriately adjusted
so that the adjusted Exercise Price shall bear the same relation to the Exercise
Price in effect immediately prior to such adjustment as the total number of
shares of Common Stock outstanding immediately prior to such action shall bear
to the total number of shares of Common Stock outstanding immediately after such
action.
(v) COMBINATION OF STOCK. If the number of shares of Common Stock
outstanding at any time after the date of issuance of this Warrant is decreased
by a combination of the outstanding shares of Common Stock, then, immediately
after the effective date of such combination, the Exercise Price shall be
appropriately adjusted so that the adjusted Exercise Price shall bear the same
relation to the Exercise Price in effect immediately prior to such adjustment as
the total number of shares of Common Stock outstanding immediately prior to such
action shall bear to the total number of shares of Common Stock outstanding
immediately after such action.
(vi) REORGANIZATIONS. ETC. In case of any capital reorganization of the
Company, or of any reclassification of the Common Stock, or in case of the
consolidation of the Company with or the merger of the Company with or into any
other Person or of the sale, lease or other transfer of all or substantially all
of the assets of the Company to any other Person, this Warrant shall, after such
capital reorganization, reclassification, consolidation, merger, sale, lease or
other transfer, be exercisable for the number of shares of stock or other
securities or property to which the Common Stock issuable (at the time of such
capital reorganization, reclassification, consolidation, merger, sale, lease or
other transfer) upon exercise of this Warrant would have been entitled to
receive upon such capital reorganization, reclassification, consolidation,
merger, sale, lease or other transfer if such exercise had taken place; and in
any such case, if necessary, the provisions set forth herein with respect to the
rights and interests thereafter of the holder of this Warrant shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant. In case of any distribution by the Company of any
security (including rights or warrants to subscribe for any such securities but
excluding Common Stock and any securities referred to in Section 3. l(a)(ii)) of
the Company, evidences of its indebtedness, cash or other assets to all of the
holders of its Common Stock, then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction the numerator of which shall be the
total number of outstanding shares of Common Stock multiplied by the
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Current Market Price on the record date mentioned below, less the fair market
value (as determined in good faith by the Board of Directors) of the securities,
evidences of its indebtedness, cash or other assets distributed by the Company
and the denominator of which shall be the total number of outstanding shares of
Common Stock multiplied by the Current Market Price; such adjustment shall
become effective as of the record date for the determination of stockholders
entitled to receive such distribution. The subdivision or combination of shares
of Common Stock issuable upon exercise of this Warrant at any time outstanding
into a greater or lesser number of shares of Common Stock (whether with or
without par value) shall not be deemed to be a reclassification of the Common S
tock of the Company for the purposes of this clause (vi).
(vii) ROUNDING OF CALCULATIONS: MINIMUM ADJUSTMENT. All calculations under
this Section 3.1(a) shall be made to the nearest cent or to the nearest whole
share (as provided in Section 1.2) share, as the case may be. Any provision of
this Section 3.1 to the contrary notwithstanding, no adjustment in the Exercise
Price shall be made if the amount of such adjustment would be less than $.05,
but any such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $.05 or more. In case ~e Company shall at any time
issue shares of Common Stock in any transaction described in Section 3. l(a)(iv)
or 3. 1(a)(v), such amount of $.05 per share (as theretofore increased or
decreased, if such amount shall have been adjusted in accordance with the
provisions of this Section 3. 1(a)(vii)) shall forthwith be proportionately
increased in the case of a transaction described in Section 3. 1(a)(v) or
decreased in the case of a transaction described in Section 3. 1(a)(iv) so as
appropriately to reflect such transaction.
(viii) TIMING OF ISSUANCE OF ADDITIONAL COMMON STOCK UPON CERTAIN
ADJUSTMENTS. In any case in which the provisions of this Section 3.1(a) shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the holder of this Warrant after such record date and before the
occurrence of such event the additional shares of Common Stock or other property
issuable or deliverable upon exercise by reason of the adjustment required by
such event over and above the shares of Common Stock or other property issuable
or deliverable upon such exercise before giving effect to such adjustment;
PROVIDED, HOWEVER, that the Company upon request shall deliver to such holder a
due bill or other appropriate instrument evidencing such holder's right to
receive such additional shares or other property, and such cash, upon the
occurrence of the event requiring such adjustment.
(b) CURRENT MARKET PRICE. The Current Market Price shall mean, as of any
date, 10 % of the sum of the average, for each of the 10 consecutive Trading
Days immediately prior to such date, of either: (i) the high and low sales
prices of the Common Stock on such Trading Day as reported on the composite tape
for the principal national securities exchange on which the Common Stock may
then be listed, or (ii) if the Common Stock shall not be so listed on any such
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Trading Day, the high and low sales prices of Common Stock in the
over-the-counter market as reported by the Nasdaq Stock Market ("Nasdaq") for
National Market Issues, or (iii) if the Common Shares shall not be included in
the Nasdaq National Market on any such Trading Day, the representative bid and
asked prices at the end of such Trading Day in such market as reported by
Nasdaq, or 1(iv) if there be no such representative prices reported by Nasdaq,
the lowest bid and highest asked prices at the end of such Trading Day in the
over-the-counter market as reported by the National Quotation Bureau, Inc., or
any successor organization. For purposes of determining Current Market Price,
the term 'tTrading Day" shall mean a day on which an amount greater than zero
can be calculated with respect to the Common Stock under any one or more of the
foregoing categories (i), (ii), (iii) and (iv), and the "end" thereof, for the
purposes of categories (iii) and (iv), shall mean the exact time at which
trading shall end on the New York Stock Exchange. If the Current Market Price
cannot be determined under any of the foregoing methods, Current Market Price
shall mean the fair value per share of Common Stock on such date determined by
the Board of Directors in good faith, irrespective of any accounting treatment,
upon a review of relevant factors.
(c) STATEMENT REGARDING ADJUSTMENTS. Whenever the Exercise Price shall be
adjusted as provided in Section 3.1(a), and upon each change in the number of
shares ~f the Common Stock issuable upon exercise of this Warrant, the Company
shall forthwith file, at the office of any transfer agent for this Warrant and
at the principal office of the Company, a statement showing in detail the facts
requiring such adjustment and the Exercise Price and new number of shares
issuable that shall be in effect after such adjustment, and the Company shall
also cause a copy of such statement to be given to the holder of this Warrant.
Each such statement shall be signed by the Company's chief financial or
accounting officer. Where appropriate, such copy may be given in advance and may
be included as part of a notice required to be mailed under the provisions of
Section 3.1(d).
(d) NOTICE TO HOLDERS. In the event the Company shall propose to take any
action of the type described in clause (i) or (ii) (but only if the action of
the type described in such clause would result in an adjustment in the Exercise
Price), (iv), (v) or (vi) of Section 3.1(a), the Company shall give notice to
the holder of this Warrant, in the manner set forth in Section 6.6, which notice
shall specify the record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice shall also
set forth such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the Exercise Price and the number, kind or class of
shares or other securities or property which shall be deliverable upon exercise
of this Warrant. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 15
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action.
(e) TREASURV STOCK. For the purposes of this Section 3.1, the sale or
other disposition of any Common Stock of the Company theretofore held in its
treasury shall be deemed to be an issuance thereof.
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3.2 COSTS. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of shares of Common
Stock of the Company upon exercise of this Warrant; provided, HOWEVER, that the
Company shall not be required to pay any taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificate for such
shares in a name other than that of the holder of this Warrant in respect of
which such shares are being issued.
3.3 RESERVATIONS OF SHARES. The Company shall reserve at all times so long
as this Warrant remains outstanding, free from preemptive rights, out of its
treasury Common Stock or its authorized but unissued shares of Common Stock, or
both, solely for the purpose of effecting the exercise of this Warrant,
sufficient shares of Common Stock to provide for the exercise hereof.
3.4 VALID ISSUANCE. All shares of Common Stock which may be issued upon
exercise of this Warrant will upon issuance by the Company be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof attributable to any act or omission by the
Company, and the Company shall take no action which will cause a contrary result
(including without limitation, any action which would cause the Exercise Price
to be less than the par value, if any, of the Common Stock). ~
ARTICLE IV
TERMS DEFINED
As used in this Warrant, unless the context otherwise requires, the
following terms have the respective meanings set forth below or in the Section
indicated:
BOARD OF DIRECTORS -- the Board of Directors of the Company.
COMMON STOCK -- the Company's authorized Common Stock, par value $.05
per share.
COMPANY -- Watermarc Food Management Co., a Texas corporation, and any
other corporation assuming or required to assume the obligations undertaken in
connection with this Warrant.
CURRENT MARKET PRICE -- Section 3.1(b).
EXCLUDED STOCK -- Section 3. l(a)(iii).
OUTSTANDING -- when used with reference to Common Stock at any date, all
issued shares of Common Stock (including, but without duplication, shares deemed
issued pursuant to Article III) at such date, except shares then held in the
treasury of the Company.
NASDAQ -- Section 3(b).
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PERSON-- any individual, corporation, partnership, trust, organization,
association or other entity or individual.
SECURITIES ACT -- the Securities Act of 1933 and the rules and regulations
thereunder, all as the same shall be in effect at the time.
TRADING DAY -- Section 3. l~).
WARRANT - this Warrant and any successor or replacement Warrant delivered
in accordance with Section 2.3 or 6.8.
WARRANT OFFICE -- Section 2.1
WARRANT SHARES -- shall mean the shares of Common Stock purchased or
purchasable by the registered holder of this Warrant or the permitted assignees
of such holder upon exercise thereof pursuant to Article I hereof.
ARTICLE V
COVENANT OF THE COMPANY
The Company covenants and agrees that this Warrant shall be binding upon
any corporation succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets.
ARTICLE VI
MISCELLANEOUS
6.1 ENTIRE AGREEMENT. This Warrant contains the entire agreement between
the holder hereof and the Company with respect to the shares which he can
purchase upon exercise hereof and the related transactions and supersedes all
prior arrangements or understanding with respect thereto.
6.2 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of Texas.
6.3 WAIVER AND AMENDMENT. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant must be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party's
rights
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hereunder at any time to enforce strict compliance thereafter with every term or
condition of this Warrant.
6.4 ILLEGALITY. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
6.5 COPY OF WARRANT. A copy of this Warrant shall be filed among the
records of the Company.
6.6 NOTICE. Any notice or other document required or permitted to be given
or delivered to the holder hereof shall be delivered at, or sent by certified or
registered mail to such holder at, the last address shown on the books of the
Company maintained at the Warrant Office for the registration of this Warrant or
at any more recent address of which the holder hereof shall have notified the
Company in writing. Any notice or other document required or permitted to be
given or delivered to the Company, other than such notice or documents required
to be delivered to the Warrant Office, shall be delivered at, or sent by
certified or registered mail to, the office of the Company at 11111 Wilcrest
Green, Suite 350, Houston, Texas 77042 or such other address within the
continental United States of America as shall have been furnished by the Company
to the holders of this Warrant.
6.7 LIMITATION OF LIABILITY: NOT STOCKHOLDERS. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices (other than as herein
expressly provided) in respect of meetings of stockholders for the election of
directors of the Company or any other right whatsoever as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder for the purchase price of any shares of Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
6.8 EXCHANGE. LOSS DESTRUCTION. ETC. OF WARRANT. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
this Warrant, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation upon surrender
and cancellation of this Warrant, the Company will make and deliver a new
Warrant of like tenor, in lieu of such lost, stolen, destroyed or mutilated
Warrant. Any Warrant issued under the provisions of this Section 6.8 in lieu of
any Warrant alleged to be lost, destroyed or stolen, or in lieu of any mutilated
Warrant, shall constitute an original contractual obligation on the part of the
Company. This Warrant shall be promptly canceled by the Company upon the
surrender hereof in connection with any exchange or replacement. The Company
shall pay all
14
taxes (other than securities transfer taxes) and all other expenses and charges
payable in connection with the preparation, execution and delivery of Warrants
pursuant to this Section 6.8.
6.9 HEADINGS. The Article and Section and other headings herein are for
convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name.
Dated: August __, 1998
WATERMARC FOOD MANAGEMENT CO.
By:________________________
Ghulam M. Bombaywala,
Chairman of the Board and Chief
Executive Officer
15
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented by said Warrant for, and to purchase
thereunder _________________________ _____ shares of the Common Stock covered by
said Warrant and (Choose one option)
[ ] (i) herewith makes payment in full therefor pursuant to Section
1.1 of such Warrant, or
[ ] (ii) elects the Conversion Right as set forth in Section 1.3 of
the Warrant
and requests (a) that certificates for such shares (and any securities or other
property issuable upon such exercise) be issued in the name of, and delivered
to, ___________________________, ____________________, ________________________
and (b) if such shares shall not include all of the shares issuable as provided
in said Warrant, that a new Warrant of like tenor and date for the balance of
the shares issuable thereunder be delivered to the undersigned.
---------------------------------
Dated:__________ , 19__
ASSIGNMENT
For value received, __________________________________________________,
hereby sells, assigns and transfers unto ___________________________________
the within Warrant, together with all right, title and interest therein and does
hereby irrevocably constitute and appoint ____________________________ attorney,
to transfer said Warrant on the books of the Company, with full power of
substitution.
---------------------------------
Dated:______________, 19__
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