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CALIFORNIA PIZZA KITCHEN, INC. - S-1 - 20000525 - PROSPECTUS_SUMMARY
PROSPECTUS SUMMARY
The items in the following summary are described in more detail later in
this prospectus. The summary provides an overview of selected information and
does not contain all the information you should consider. Therefore, you should
also read the more detailed information set out in this prospectus, including
the "Risk Factors" section and the consolidated financial statements and notes.
California Pizza Kitchen
California Pizza Kitchen is a leading casual dining restaurant chain in the
premium pizza segment with a recognized consumer brand and an established,
loyal customer base. We currently own, license or franchise 100 restaurants in
21 states, the District of Columbia and three foreign countries, of which 74
are company-owned and 26 are licensed or franchised. Our signature line of
innovative premium pizzas include our original best sellers, the BBQ Chicken
Pizza and the Thai Chicken Pizza, and more recent creations such as the Philly
Cheesesteak Pizza, Havana Chicken Pizza, and Grilled Garlic Shrimp Pizza. We
also serve distinctive pastas, salads, soups, appetizers and desserts,
including our Chicken-Tequila Fettuccine, BBQ Chicken Chopped Salad, Hearth-
Baked Tortilla Spring Rolls and Key Lime Pie. Our restaurants feature an
exhibition-style kitchen centered around an open-flame oven and provide a high
energy, casual dining experience. We believe our restaurants, which offer a
highly differentiated and distinctive menu, outstanding customer service, and
an average guest check of approximately $10.50, provide an exceptional dining
value and appeal to a broad base of consumers.
California Pizza Kitchen was founded in 1985 by Rick Rosenfield and Larry
Flax who were among the first to recognize the broad consumer appeal of
innovative premium pizzas. In 1992, PepsiCo, Inc. acquired a majority interest
in our company. In September 1997, PepsiCo divested its interest, and
Bruckmann, Rosser, Sherrill & Co., L.P. became our controlling shareholder
through a merger and leveraged recapitalization transaction. Soon thereafter, a
new management team led by Frederick R. Hipp, our Chief Executive Officer and
President and a 25-year veteran of the restaurant industry, was put in place.
Under our new ownership and management team, and in conjunction with our co-
founders, we implemented a number of new initiatives including increased
portion sizes, cost reduction strategies, broadened distribution channels,
upgraded ingredients and menu items, and a more disciplined growth plan. These
initiatives have resulted in improved operating results as evidenced by an
increase in our restaurant level cash flow margins from 13.9% in 1997, to 17.6%
in 1998, to 18.4% in 1999 and to 19.4% in the first three months of 2000, and
increases in company-owned comparable restaurant sales of 6.1% in 1998, 4.1% in
1999 and 6.8% during the first three months of 2000.
Since our inception 15 years ago, we believe we have developed strong brand
awareness primarily through the development of our full service restaurants. As
part of our strategy to build upon our leadership position in the premium pizza
segment and expand our channels of distribution, we have developed a high
quality fast-casual concept called California Pizza Kitchen ASAP. Our ASAP
restaurants, which are significantly smaller than our full service restaurants
and offer a limited selection of our most popular pizzas, salads, sandwiches
and appetizers, provide us with additional development opportunities in
attractive high traffic venues. There are currently a total of 19 franchised
ASAP locations, of which 18 are franchised by Host Marriott Services. We also
have a strategic alliance with Kraft Pizza Company, a subsidiary of Kraft
Foods, Inc., to distribute a line of premium frozen pizzas through supermarkets
and other retail outlets. We expect these additional distribution channels to
provide significant growth opportunities; however, development of full service
restaurants will remain our primary focus in the near-term.
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Our objectives include continuing to build our brand awareness and customer
loyalty, and extending our leadership position in the casual dining and premium
pizza segments. We intend to utilize the strategies discussed below to achieve
these objectives.
. Offer high quality, innovative menu items. We believe the success of our
concept is due to our ability to interpret various food trends on our
platform of pizza, pasta, salads and appetizers, and offer items that
appeal to a variety of tastes. Our restaurants feature menu items that
use high quality ingredients, such as 100% pure olive oil, imported
cheeses and fresh produce, imaginative pizza toppings such as barbecue
chicken, spicy peanut ginger and sesame sauce and Japanese eggplant, and
showcase recipes that capture an assortment of unique tastes and flavors
that customers readily identify, but do not typically associate with
pizza.
. Provide an excellent dining value with broad consumer appeal. We offer
large portions of innovative, high quality food, superior service and a
sophisticated yet casual atmosphere, all for an average guest check of
approximately $10.50. We believe this price-to-value relationship
differentiates us from our competitors, many of whom have significantly
higher average checks, and allows us to appeal to a broad group of
consumers.
. Build awareness of the California Pizza Kitchen brand. We believe that
California Pizza Kitchen is a brand that has traditionally been
associated with high quality, innovative food items, exceptional service
and a strong price-to-value relationship. We also believe that many of
our original recipes are closely associated with the California Pizza
Kitchen brand name. We have promoted brand awareness through the
distinctive features of our yellow, black and white logo, innovative
marketing and public relations programs and strategic alliances with high
quality partners, including Kraft Pizza Company which distributes our
premium frozen pizzas, and Host Marriott Services, which franchises our
ASAP fast-casual concept.
. Pursue disciplined restaurant growth. Our new management team adheres to
a disciplined expansion strategy, including the limited development of
additional franchise restaurants. We opened five company-owned full
service restaurants in 1999 and expect to open an additional company-
owned restaurants in 2000, of which will be full service restaurants
and will be ASAP restaurants. Thus far in 2000, we have opened three
full service restaurants in Chicago, Denver and San Diego. We currently
have four company-owned restaurants under construction, including two
ASAP restaurants. We have signed leases and letters of intent
covering the remaining restaurants we plan to open in 2000. In
addition, in late 1999 we hired a Senior Vice President and Chief
Development Officer with more than ten years of restaurant real estate
experience to oversee our expansion.
. Maintain strong unit economics. For 1999, sales for our 66 full service
restaurants open for the entire year averaged $2.6 million and generated
average restaurant-level pre-tax cash flow of $496,000 or 19.2% of
restaurant sales. Since the beginning of 1998, our total cash investment
per full service restaurant, net of landlord contributions, averaged $1.4
million, excluding pre-opening costs, which were approximately $147,000
per restaurant. We believe that our cash flow margins and return on
investment for our company-owned ASAP restaurants will be comparable to
those of our full service restaurants.
. Provide superior customer service. We have developed and fostered an
organizational culture based on mutual respect, open communication and
strong relationships with our employees. We believe that our culture, a
highly evolved training program for our restaurant staff, and a
profitability and service-based bonus program for our restaurant
managers, allow us to achieve a high level of customer service and
satisfaction and help us to ensure superior execution at the restaurant
level.
We are a California corporation formed on October 7, 1985. Our principal
executive offices are located at 6053 West Century Boulevard, 11th Floor, Los
Angeles, California 90045, and our telephone number is (310) 342-5000. Our
website is located at www.cpk.com.
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The Offering
Common stock offered............................... shares
Common stock to be outstanding after the offering.. shares(1)
Use of proceeds.................................... We will receive
approximately $ million
in net proceeds in this
offering, assuming the
midpoint of the filing
range. We intend to use
the proceeds:
. to repay approximately
$40.0 million of
outstanding bank debt;
. to redeem up to
approximately
$ million of our
outstanding preferred
stock; and
. for other general
corporate purposes.
Proposed Nasdaq National Market symbol............. "CPKI"
Risk factors....................................... See "Risk Factors" and the
other information included
in this prospectus for a
discussion of factors you
should carefully consider
before deciding to invest
in shares of our common
stock.
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(1) The number of shares to be outstanding after the offering does not include
1,346,313 shares of common stock issuable upon exercise of options
outstanding as of the date of this prospectus at a weighted average
exercise price of $2.44 per share. Our Chief Executive Officer and
President has advised us that he intends to exercise options to purchase an
aggregate of 221,392 of these shares concurrently with the consummation of
this offering.
We currently have outstanding an aggregate of 20,303,542 shares of preferred
stock, all of which we intend to redeem upon consummation of this offering.
However, as described under "Use of Proceeds," we are allowing the holders of
our redeemable preferred stock to convert their preferred shares into common
stock at the initial public offering price prior to the redemption of the
shares. Assuming a public offering price of $ per share, we estimate that an
aggregate of shares of common stock will be issued upon the conversion of
shares of preferred stock. The number of common shares which will be
outstanding after the offering reflected throughout this prospectus includes
the issuance of these shares. We will redeem all shares of preferred stock
which are not converted using a portion of the net proceeds we receive upon
consummation of this offering.
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Summary Consolidated Financial and Operating Data
(dollars in thousands, except per share, operating data and footnotes)
Three Months
Fiscal Year Ended
--------------------------------- ----------------
April April
1997 1998 1999 4, 1999 2, 2000
-------- -------- -------- ------- -------
(unaudited)
Statement of Operations
Data:
Total revenues........... $160,416 $167,041 $179,193 $41,934 $48,266
Operating income (loss).. (895) 9,455 12,784 2,763 3,824
Other expense(1)......... (9,604) (85) (1,198) -- --
Interest expense......... (930) (3,956) (3,415) (968) (761)
Income (loss) before
income tax benefit
(provision)............. (11,429) 5,414 8,171 1,795 3,063
Net income (loss)........ (11,680)(2) 10,553(2) 5,399 1,184 1,991
Redeemable preferred
stock accretion......... -- (4,478) (5,147) (1,314) (1,438)
Net income (loss)
attributable to common
shareholders(3)......... (11,680) 6,075 252 (130) 553
Net income per common
share(4):
Basic.................. $ 0.01 $ 0.03
Diluted................ $ 0.01 $ 0.03
Shares used in computing
net income per common
share(4):
Basic.................. 21,598 21,793
Diluted................ 22,335 22,432
Pro Forma Data(5):
Net income attributable
to common shareholders.. $ 8,253 $ 2,632
Net income per common
share:
Basic..................
Diluted................
Shares used in computing
net income per common
share:
Basic..................
Diluted................
Selected Operating Data:
System-wide restaurants
open at end of period... 80 90 96 90 97
Company-owned restaurants
open at end of period... 66 67 70 66 71
Average weekly company-
owned restaurant sales.. $ 43,514 $ 47,490 $ 49,490 $47,755 $51,692
Company-owned comparable
restaurant sales
increase(6)............. 0.6% 6.1% 4.1% 6.2% 6.8%
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April 2, 2000
---------------------
Pro Forma As
Actual Adjusted(7)
------- ------------
(unaudited)
Balance Sheet Data:
Cash and cash equivalents................................. $ 3,732 $
Total assets.............................................. 94,130
Total debt, including current portion..................... 40,075 75
Redeemable preferred stock................................ 45,359 --
Total shareholders' equity (deficiency)................... (9,276)
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(1) Other expenses consist of $9.6 million in 1997 related to loss on
impairment of property and equipment, $85,000 in 1998 related to
establishment of a reserve for the closure of a restaurant, and
$1.2 million in 1999 related to the write-off of bank financing fees and
obsolete equipment.
(2) Net income for 1998 was favorably impacted by the reversal of a $7.6
million deferred tax asset valuation allowance that was previously provided
for in 1997. We eliminated the valuation allowance in 1998 due to our
belief that current year activity made realization of this benefit more
likely than not.
(3) Net income (loss) attributable to common shareholders includes the effect
of the accretion of the liquidation preference on the redeemable preferred
stock which reduces net income attributable to common shareholders for the
relative periods.
(4) See notes 2 and 9 of notes to audited consolidated financial statements and
notes 3 and 4 of notes to unaudited consolidated financial statements for
an explanation of the method used to calculate the net income per common
share and shares used in computing net income per common share, basic and
diluted.
(5) Pro forma information gives effect, as of the beginning of each period, to
the sale of shares of common stock offered by us at an assumed initial
public offering price of $ per share, net of estimated underwriting
discounts and estimated offering expenses, the conversion of shares
of preferred stock into shares of common stock, the use of the net
proceeds to redeem all other shares of preferred stock, the elimination of
interest expense related to the repayment of our bank debt, and the
elimination of $900,000 in annual compensation expense ($225,000 per
quarter) due to the amendment of our co-founders' employment agreements.
(6) Company-owned restaurants are included in the computation of comparable
restaurant sales after they have been open 12 months.
(7) Reflects our receipt of estimated net proceeds of $ from the sale of
shares of common stock offered by us at an assumed initial public
offering price of $ per share, net of estimated underwriting discounts
and estimated offering expenses, the conversion of shares of
preferred stock into shares of common stock, the use of the net
proceeds to redeem all other shares of preferred stock and to repay $40.0
million in bank debt that was outstanding as of April 2, 2000, and the
elimination of interest expense on bank debt and $225,000 in compensation
expense due to the amendment of our co-founders' employment agreements. See
"Use of Proceeds."
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RISK FACTORS
You should read the following risk factors carefully before purchasing any
common stock. If any of the risks discussed below actually occur, our business,
financial condition, operating results or cash flows could be materially
adversely affected. This impact could cause the trading price of our common
stock to decline, and you could lose all or part of your investment.
We may not be able to achieve and manage our planned expansion
We are pursuing an accelerated, but disciplined, growth strategy which to be
successful will depend in large part on our ability, and the ability of our
franchisees and licensees, to open new restaurants and to operate these
restaurants on a profitable basis. Under the direction of PepsiCo, Inc., we
opened only two new company-owned restaurants a year in 1996 and 1997. Since
the group led by Bruckmann, Rosser, Sherrill & Co., L.P. acquired a controlling
interest in our company and our new management team was put into place, we have
opened ten new company-owned, full service restaurants, two in 1998, five in
1999 and three to date in 2000. We presently anticipate that we will open
new company-owned restaurants during 2000, of which will be full service
restaurants and of which will be ASAP restaurants. We also anticipate that
our franchisees will open approximately seven or eight new restaurants during
2000. The success of our planned expansion will be dependent upon numerous
factors, many of which are beyond our control, including the following:
. the hiring, training and retention of qualified operating personnel,
especially managers;
. identification and availability of suitable restaurant sites;
. competition for restaurant sites;
. negotiation of favorable lease terms;
. timely development of new restaurants, including the availability of
construction materials and labor;
. management of construction and development costs of new restaurants;
. securing required governmental approvals and permits;
. competition in our markets; and
. general economic conditions.
Our two biggest challenges in meeting our growth objectives will be
attracting and retaining personnel of the requisite caliber and number, and
securing an adequate supply of suitable new restaurant sites. We have
experienced delays in opening some of our restaurants and may experience delays
in the future. We were unable to achieve our originally targeted number of new
openings in 1999 due in large part to the lack of a senior executive who
focused full-time on real estate development prior to our hiring of a Senior
Vice President and Chief Development Officer in November 1999, intense
competition for restaurant sites and our unwillingness to compromise on lease
economics. There can be no assurance that we will be able to find sufficient
suitable locations for our planned expansion in any future period. Delays or
failures in opening new restaurants could materially adversely affect our
business, financial condition, operating results or cash flows. We cannot
guarantee that we or our franchisees will be able to achieve our expansion
goals or that new restaurants will be operated profitably. Furthermore, we
cannot assure you that any new restaurant that we open will obtain similar
operating results to those of our existing restaurants.
We anticipate that our new restaurants will typically take several months to
reach budgeted operating levels due to problems commonly associated with new
restaurants, including lack of market awareness, inability to hire sufficient
staff and other factors. Although we have attempted to mitigate these factors
by expanding primarily in markets in which we already have a significant
presence and by careful attention to training and staffing needs, there can be
no assurance that we will be successful in operating our new restaurants on a
profitable basis. In addition, we entered Denver, Colorado earlier this year,
which is a new market in which we
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have no prior operating experience. The Denver market may have different
competitive conditions, consumer tastes and discretionary spending patterns
than our existing markets, which may cause our new Denver restaurants to be
less successful than restaurants in our existing markets. We may also enter
other new markets over the next several years which will involve these same
risks and uncertainties.
We also face the risk that our existing systems and procedures, restaurant
management systems, financial controls, and information systems will be
inadequate to support our planned expansion. We cannot predict whether we will
be able to respond on a timely basis to all of the changing demands that our
planned expansion will impose on management and these systems and controls. If
we fail to continue to improve our information systems and financial controls
or to manage other factors necessary for us to achieve our expansion
objectives, our business, financial condition, operating results or cash flows
could be materially adversely affected.
We depend upon our key personnel
Our future success significantly depends on the continued services and
performance of our senior management, particularly Frederick R. Hipp, our Chief
Executive Officer and President; H.G. Carrington, Jr., our Executive Vice
President and Chief Financial Officer; Frederick F. Wolfe, our Senior Vice
President Operations; and Tom N. Jenneman, our Senior Vice President and Chief
Development Officer. Our future performance will depend on our ability to
motivate and retain these and other executive officers and key employees,
particularly restaurant general managers and kitchen managers. Competition for
these employees is intense. The loss of the services of members of our senior
management or key employees or the inability to attract additional personnel as
needed could materially adversely affect our business, financial condition,
operating results or cash flows. See "Management."
We will experience fluctuations in operating results as we open additional
restaurants
Our operating results will fluctuate because of several factors, including
the timing of new restaurant openings and related expenses, profitability of
our new restaurants, and increases or decreases in comparable restaurant sales.
In the past, our pre-opening costs have varied significantly from quarter to
quarter primarily due to the timing of restaurant openings. We typically incur
most pre-opening costs for a new restaurant within the one month immediately
preceding, and the month of, its opening. In addition, our labor and operating
costs for a newly opened restaurant during the first three months of operation
are often materially greater than what can be expected after that time, both in
aggregate dollars and as a percentage of restaurant sales. Accordingly, the
volume and timing of new restaurant openings in any quarter has had and is
expected to continue to have a significant impact on quarterly pre-opening
costs, labor costs and direct operating and occupancy expenses. In addition, in
accordance with SFAS No. 121, we recognize the impairment of certain property
and equipment by reducing the carrying value of the assets to the estimated
fair value based on discounted cash flows. Such a write-down in any period will
further increase the fluctuations in our operating results.
In accordance with our expansion strategy, we intend to open new restaurants
primarily in our existing markets. Since we typically draw customers from a
relatively small radius around each of our restaurants, the sales performance
and customer counts for restaurants near the area in which a new restaurant
opens may decline due to cannibalization.
Our business is also subject to seasonal fluctuations. Historically, sales
in most of our restaurants have been higher during the summer months and winter
holiday season of each fiscal year. As a result, we expect our highest earnings
to occur in those periods. In addition to seasonality, and other factors
discussed earlier, our quarterly and annual operating results and comparable
unit sales may fluctuate significantly as a result of a variety of additional
factors, including labor costs for our hourly and management personnel,
particularly in the event of an increase in federal or state minimum wage
requirements.
Accordingly, results for any one quarter are not necessarily indicative of
the results to be expected for any other quarter or for any year and comparable
unit sales for any particular future period may decrease. In the
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future, results of operations may fall below the expectations of public market
analysts and investors. In that event, the price of our common stock would
likely decrease. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Potential Fluctuations in Quarterly
Results and Seasonality" for a discussion of factors which have historically
affected our operating results.
Our operations are susceptible to changes in food and supply costs which could
adversely affect our margins
Our profitability depends, in part, on our ability to anticipate and react
to changes in food and supply costs. Our centralized purchasing staff
negotiates prices for all of our ingredients and supplies through either
contracts (terms of one month up to one year) or commodity pricing formulas.
Our master distributor delivers goods at a set, flat fee per case twice a week
to all of our restaurants. Our contract with our master distributor expires in
December 2000. Although we believe we will be able to negotiate a similarly
priced contract with either our current master distributor or another
distributor, any increase in distribution prices could cause our food and
supply costs to increase. Furthermore, various factors beyond our control,
including adverse weather conditions and governmental regulations, could also
cause our food and supply costs to increase. We cannot predict whether we will
be able to anticipate and react to changing food and supply costs by adjusting
our purchasing practices. A failure to do so could adversely affect our
operating results and cash flows.
Changes in consumer preferences or discretionary consumer spending could
negatively impact our results
Our restaurants feature pizzas, pastas, salads and appetizers in an upscale,
family-friendly, casual environment. Our continued success depends, in part,
upon the popularity of these foods and this style of informal dining. Shifts in
consumer preferences away from this cuisine or dining style could materially
adversely affect our future profitability. Also, our success depends to a
significant extent on numerous factors affecting discretionary consumer
spending, including economic conditions, disposable consumer income and
consumer confidence. Adverse changes in these factors could reduce customer
traffic or impose practical limits on pricing, either of which could materially
adversely affect our business, financial condition, operating results or cash
flows. Like other restaurant chains, we can also be materially adversely
affected by negative publicity concerning food quality, illness, injury,
publication of government or industry findings concerning food products served
by us, or other health concerns or operating issues stemming from one
restaurant or a limited number of restaurants.
We operate in a highly competitive industry
Competition in the restaurant industry is increasingly intense. We compete
on the basis of the taste, quality, and price of food offered, customer
service, ambiance and overall dining experience. We believe that our operating
concept, attractive dining value and quality of food and customer service
enable us to differentiate ourselves from our competitors. However, while we
believe that our restaurants are distinctive in design, we are aware of other
restaurants that operate with somewhat similar concepts. Our competitors
include a large and diverse group of restaurant chains and individual
restaurants that range from independent local operators that have opened
restaurants in various markets, to well-capitalized national restaurant
companies. In addition, we compete with other restaurants and with retail
establishments for real estate. Many of our competitors are well-established in
the casual dining market segment and some of our competitors have substantially
greater financial, marketing and other resources than we do.
We could face labor shortages which could slow our growth
Our success depends in part upon our ability to attract, motivate and retain
a sufficient number of qualified, high energy employees, including restaurant
managers, kitchen staff and servers, necessary to keep pace with our expansion
schedule. Qualified individuals needed to fill these positions are in short
supply in some areas, and the inability to recruit and retain these individuals
may delay the planned openings of new restaurants or result in high employee
turnover in existing restaurants, which could have a material adverse effect on
our
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business, financial condition, operating results or cash flows. Additionally,
competition for qualified employees could require us to pay higher wages to
attract sufficient employees, which could result in higher labor costs.
We are subject to extensive government regulation
The restaurant business is subject to various federal, state and local
government regulations, including those relating to the sale of food and
alcoholic beverages. While at this time we have been able to obtain and
maintain the necessary governmental licenses, permits and approvals, the
failure to maintain these licenses, permits and approvals, including food and
liquor licenses, could have a material adverse effect on our operating results.
Difficulties or failure in obtaining the required licenses and approvals could
delay or result in our decision to cancel the opening of new restaurants. Local
authorities may suspend or deny renewal of our food and liquor licenses if they
determine that our conduct does not meet applicable standards. Although we have
satisfied restaurant and liquor licensing requirements for our existing
restaurants, we cannot predict whether we will be able to maintain these
approvals or obtain these approvals at future locations. We are also subject to
state and local health code requirements, including regulations relating to
food safety and food handling and storage.
We are also subject to federal regulation and state laws that regulate the
offer and sale of franchises and aspects of the licensor-licensee relationship.
Many state franchise laws impose restrictions on the franchise agreement,
including limitations on non-competition provisions and the termination or non-
renewal of a franchise. Some states, such as California, require that franchise
materials be registered before franchises can be offered or sold in the state.
Various federal and state labor laws govern our relationship with our
employees and affect operating costs. These laws include minimum wage
requirements, overtime pay, unemployment tax rates, workers' compensation
rates, citizenship requirements and sales taxes. Additional government-imposed
increases in minimum wages, overtime pay, paid leaves of absence and mandated
health benefits, or increased tax reporting and tax payment requirements for
employees who receive gratuities could materially adversely affect us.
California, where almost half of our company-owned restaurants are located,
instituted a change to its overtime pay regulations effective January 1, 2000.
We are required to pay 1 1/2 times regular pay for any hours worked in excess
of eight per day, and double time for hours in excess of 12 per day, even if an
employee is a part-time worker. We hope to be able to schedule our employees'
shifts around these requirements and, to the extent we can do so, this change
will not have a material adverse effect on us. Furthermore, changes in the
state laws, or a reduction in the number of states that allow tips to be
credited toward minimum wage requirements, could materially adversely affect
us.
Given the location of many of our restaurants, even though we operate our
restaurants in strict compliance with the requirements of the Immigration and
Naturalization Service, our employees may not all meet federal citizenship or
residency requirements, which could lead to disruptions in our work force. In
addition, the Federal Americans with Disabilities Act prohibits discrimination
on the basis of disability in public accommodations and employment. Although
our restaurants are designed to be accessible to the disabled, we could be
required to make modifications to our restaurants to provide service to, or
make reasonable accommodation for, disabled persons. See "Business--Government
Regulation."
We face risk of litigation
We are sometimes the subject of complaints or litigation from customers
alleging illness, injury or other food quality, health or operational concerns.
Adverse publicity resulting from these allegations may materially adversely
affect us and our restaurants, regardless of whether the allegations are valid
or whether California Pizza Kitchen is liable. In fact, we are subject to the
same risks of adverse publicity resulting from these sorts of allegations even
if the claim actually involves one of our franchisees or licensees. Further,
employee claims against us based on, among other things, discrimination,
harassment or wrongful termination may divert our financial and management
resources that would otherwise be used to benefit the future performance of our
operations. We have been subject to these employee claims before, and a
significant increase in the number of these claims or any increase in the
number of successful claims could materially adversely affect our business,
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financial condition, operating results or cash flows. We also are subject to
some states' "dram shop" statutes. These statutes generally provide a person
injured by an intoxicated person the right to recover damages from an
establishment that wrongfully served alcoholic beverages to the intoxicated
person.
Geographic concentration
Forty percent of our restaurants are located in California. As a result, we
are particularly susceptible to adverse trends and economic conditions in
California. In addition, given our geographic concentration, negative publicity
regarding any of our restaurants in California could have a material effect on
our business and operations, as could other regional occurrences such as local
strikes, earthquakes or other natural disasters.
Our existing shareholders will retain significant control
Upon consummation of this offering, and assuming the conversion of an
aggregate of shares of preferred stock owned by our executive
officers, directors and principal shareholders (including Bruckmann, Rosser,
Sherrill & Co., L.P.) into shares of common stock upon the closing
of this offering, Bruckmann, Rosser and its affiliates will own approximately
% of the outstanding shares of common stock (or % if the underwriters'
over-allotment option is exercised), and our executive officers, directors and
principal shareholders (including Bruckmann, Rosser) and their affiliates will
own approximately % of the outstanding shares of common stock (or % if
the underwriters' over-allotment option is exercised). As a result, Bruckmann,
Rosser and/or these other shareholders will be able to control us and direct
our affairs, including the election of directors and approval of significant
corporate transactions. This concentration of ownership also may delay, defer
or prevent a change in control of California Pizza Kitchen, and make some
transactions more difficult or impossible without the support of these
shareholders. These transactions might include proxy contests, mergers, tender
offers, open market purchase programs or other purchases of common stock that
could give our shareholders the opportunity to realize a premium over the then-
prevailing market price for shares of common stock. See "Management," "Use of
Proceeds" and "Principal Shareholders."
A significant number of shares will be eligible for future sale either in the
market or through the exercise of registration rights
The shares of common stock sold in this offering (and any
shares sold upon exercise of the underwriters' over-allotment option) will be
freely tradable without restriction under the Securities Act of 1933, as
amended, except for any shares held by our officers, directors and principal
shareholders. The other shares of our common stock which are
outstanding are "restricted shares" within the meaning of Rule 144 under the
Securities Act and sales of these shares are subject to restrictions under the
Securities Act. Of these restricted shares, are subject to lock-up
agreements under which the holders have agreed not to sell or otherwise dispose
of any of their shares for a period of 180 days after the date of this
prospectus without the prior written consent of Banc of America Securities LLC.
In its sole discretion and at any time without notice, Banc of America
Securities may release all or any portion of the shares subject to the lock-up
agreements. All of the restricted shares subject to lock-up agreements will
become available for sale in the public market immediately following expiration
of the 180-day lock-up period, subject (to the extent applicable) to the volume
and other limitations of Rule 144 or Rule 701 under the Securities Act.
Beginning 90 days after the date of this prospectus, restricted shares not
subject to lock-up agreements or contractual restrictions will become available
for sale in the public market, subject to the volume and other limitations of
Rule 144 or Rule 701. In addition, after expiration of the lock-up period, some
of our securityholders have the contractual right to require us to register
some of their shares of common stock for future sale.
We intend to file a registration statement on Form S-8 covering all shares
of common stock issuable upon exercise of stock options in effect on the date
of this prospectus and stock options or other stock rights to be granted under
our stock option plans. Upon this registration on Form S-8, up to an additional
1,346,313 shares of common stock, together with any additional shares of common
stock that will be issuable pursuant to stock
10
options or other stock rights granted in the future under our stock option
plans, will be eligible for sale in the public market.
Sales of substantial amounts of common stock in the public market, or the
perception that these sales may occur, could adversely affect the prevailing
market price of our common stock and our ability to raise capital through a
public offering of our equity securities. See "Shares Eligible for Future
Sale," "Principal Shareholders" and "Description of Capital Stock."
Provisions of our articles of incorporation could discourage potential
acquisition proposals and delay or prevent a change in control
Our articles of incorporation authorize our board of directors to issue up
to 40,000,000 shares of preferred stock and to determine the powers,
preferences, privileges, rights, including voting rights, qualifications,
limitations and restrictions of those shares, without any further vote or
action by the shareholders. All of the currently outstanding shares of
preferred stock will be either converted into shares of common stock or
redeemed upon consummation of this offering and therefore the full 40,000,000
shares of preferred stock will be available for designation and issuance by our
board of directors. The rights of the holders of our common stock will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock could have the effect of delaying, deterring, or preventing a change in
control and could adversely affect the voting power of your shares.
In addition, provisions of California law could make it more difficult for a
third party to acquire a majority of our outstanding voting stock by
discouraging a hostile bid, or delaying or deterring a merger, acquisition or
tender offer in which our shareholders could receive a premium for their
shares, or a proxy contest for control of our company or other changes in our
management. See "Description of Capital Stock" for a discussion of these
provisions.
11
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of
common stock offered by us at an assumed initial public offering price of $
per share, after deducting estimated underwriting discounts and estimated
offering expenses, will be approximately $ . We will receive an additional
$ , after deducting estimated underwriting discounts and estimated offering
expenses, if the underwriters' over-allotment option is exercised in full. We
intend to use approximately $40.0 million of the net proceeds from the offering
to repay outstanding bank debt under our existing credit agreement with Bank of
America, N.A. This debt consists of a $25.0 million term loan due September 30,
2004 and a $25.0 million revolving line of credit, under which we have drawn
approximately $15.0 million. Both the term loan and the revolving line of
credit bear interest at a rate of LIBOR as of the date of borrowing plus 1.50%
(currently, 7.79%). The entire amount of debt outstanding under the credit
facility with Bank of America, N.A. was drawn on October 29, 1999, the date of
initial funding, and all of this debt was used to repay other outstanding bank
debt, which bore interest at a higher rate.
The balance of the net proceeds from this offering will be used to redeem
approximately % of the outstanding shares of our preferred stock and for
general corporate purposes. Currently, we have two outstanding series of
preferred stock, Series A 12 1/2% Cumulative Compounding Preferred Stock and
Series B 13 1/2% Cumulative Compounding Preferred Stock. All preferred
shareholders own an equal number of shares of Series A Preferred Stock and
Series B Preferred Stock. All of the outstanding Series A Preferred Stock is
currently redeemable at our option at a fixed price per share of $1.9095 per
share, plus accrued and unpaid dividends as of the date of redemption, and all
of the outstanding Series B Preferred Stock is currently redeemable at our
option at a fixed price per share of $1.4688, plus accrued and unpaid dividends
as of the date of redemption. Prior to the consummation of this offering, we
will notify all preferred shareholders that we intend to redeem their
outstanding shares with the proceeds from this offering. Additionally, we will
also extend an offer to allow them to convert an equal number of their shares
of Series A Preferred Stock and their shares of Series B Preferred Stock into
common stock at the initial public offering price. All preferred shares that
are not converted into common stock will be redeemed using the proceeds from
this offering. Any and all conversions will be effected concurrently with the
consummation of this offering.
Assuming an initial public offering price of $ per share and that this
offering is completed on or about July , 2000, we estimate that an aggregate
of shares of common stock will be issued upon the conversion of
shares of preferred stock and $ of the net proceeds will be used to redeem
the remaining shares of preferred stock. This results in the conversion of
approximately % of our preferred stock and redemption of the remaining %.
The number of shares of common stock which will be outstanding after the
offering as reflected throughout this prospectus includes the issuance of these
shares.
Pending application of the net proceeds, we intend to invest the net
proceeds in short-term, investment-grade, interest-bearing securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for additional information
regarding our sources and uses of capital.
12
DIVIDEND POLICY
We currently intend to retain all future earnings for the operation and
expansion of our business and do not anticipate paying cash dividends on our
common stock in the foreseeable future. We have not paid any cash dividends
since 1992 when dividends were paid in connection with PepsiCo's acquisition of
a controlling interest in us. In 1997, we declared a stock dividend of one
share of Series A 12 1/2% Cumulative Compounding Preferred Stock and one share
of Series B 13 1/2% Cumulative Compounding Preferred Stock on each outstanding
share of our common stock. In November 1998, we effected a two-for-one forward
split of our common stock.
Our credit agreement with Bank of America, N.A. currently prohibits us from
declaring or paying any dividends or other distributions on any shares of our
capital stock other than dividends payable solely in shares of capital stock or
the stock of our subsidiaries. Any payment of cash dividends in the future will
be at the discretion of our board of directors and will depend upon our results
of operations, earnings, capital requirements, contractual restrictions
contained in our credit agreement with Bank of America, N.A., or other
agreements, and other factors deemed relevant by our board.
13
CAPITALIZATION
The following table sets forth at April 2, 2000 our capitalization on an
actual basis and on a pro forma as adjusted basis to reflect the sale of the
shares of common stock offered by us and the application of the estimated net
proceeds from this offering, including the use of $40.0 million to repay our
bank debt that was outstanding as of April 2, 2000, $ to redeem an
estimated shares of our Series A 12 1/2% Cumulative Compounding
Preferred Stock and $ to redeem an estimated shares of
our Series B 13 1/2% Cumulative Compounding Preferred Stock, the conversion of
the remaining shares of both series of preferred stock into common stock at the
public offering price, and the elimination of interest expense on bank debt and
$225,000 in compensation expense due to the amendment of our co-founders'
employment agreements. This table assumes we will sell shares of
common stock in this offering at a price per share of $ and is based
on the number of shares of common stock and Class A Preferred Stock outstanding
on April 2, 2000. It excludes 1,346,313 shares of common stock issuable upon
the exercise of options outstanding at a weighted average exercise price of
$2.44 per share. The capitalization information set forth in the table below is
qualified by the more detailed consolidated financial statements and notes
included elsewhere in this prospectus and should be read in conjunction with
those consolidated financial statements and notes.
April 2, 2000
-----------------------------------
Pro Forma
Actual As Adjusted
---------------- -----------------
(dollars in thousands, except
share and per share data)
Cash and cash equivalents................... $ 3,732 $
================ =============
Long-term debt, including current portion... $ 40,075 $ 75
Class A Redeemable Preferred Stock:
40,000,000 shares authorized,
20,303,542 shares issued and outstanding,
actual; 40,000,000 shares authorized, no
shares issued and outstanding, pro forma as
adjusted(1)................................ 45,359 --
Shareholders' equity (deficiency):
Common Stock, $ 0.01 par value: 80,000,000
shares authorized, 21,793,372 shares
issued and outstanding, actual;
80,000,000 shares authorized,
shares issued and outstanding, pro forma
as adjusted.............................. 218
Additional paid-in capital.................. 102,793
Accumulated deficit......................... (112,287)
---------------- -------------
Total shareholders' equity
(deficiency)........................... (9,276)
---------------- -------------
Total capitalization.................... $ 76,158 $
================ =============
|
(1) Class A Redeemable Preferred Stock is divided into two series: (a) Series A
12 1/2% Cumulative Compounding Preferred Stock, $0.01 par value; 10,151,775
shares authorized, 10,151,771 shares issued and outstanding, and (b) Series
B 13 1/2% Cumulative Compounding Preferred Stock, $0.01 par value;
10,151,775 shares authorized, 10,151,771 shares issued and outstanding.
Upon consummation of this offering and the application of the net proceeds,
no shares of Class A Redeemable Preferred Stock will be outstanding.
14
DILUTION
Our net tangible book value as of April 2, 2000 was approximately $
million or $ per share of common stock. Net tangible book value per
share is equal to our total tangible assets less our total liabilities, divided
by the number of shares of common stock outstanding as of April 2, 2000. Our
pro forma net tangible book value as of April 2, 2000 would have been
$ million or $ per share of outstanding common stock after giving effect to
the conversion of shares of preferred stock into shares of
common stock at an assumed initial public offering price of $ upon
consummation of this offering, and after giving effect to the sale of
shares of common stock offered by us at the same assumed initial public
offering price and our receipt of the estimated net proceeds after deducting
estimated underwriting discounts and estimated offering expenses. This
represents an immediate increase in net tangible book value of $ per share
to existing shareholders and an immediate dilution of $ per share to new
investors purchasing shares in this offering. If the initial public offering
price is higher or lower, the dilution to the new investors will be greater or
less. The following table illustrates this per share dilution:
Assumed initial public offering price per share.............. $
Net tangible book value per share as of April 2, 2000...... $( )
Increase in net tangible book value per share attributable
to new investors..........................................
------
Pro forma net tangible book value per share after the
offering....................................................
-----
Dilution per share to new investors...................... $
=====
|
The following table summarizes as of April 2, 2000, on a pro forma basis
after giving effect to the conversion of an aggregate of shares of
preferred stock into shares of common stock and the redemption of the
remaining shares of preferred stock upon consummation of this offering,
the number of shares of common stock purchased from us, the total consideration
paid to us, and the average price per share paid by existing shareholders and
by the investors purchasing shares of common stock in this offering (before
deducting estimated underwriting discounts and estimated offering expenses):
Shares
Purchased Total Consideration
-------------- ---------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ---------- ---------- -------------
Existing shareholders... % $ % $
New investors(1)(2)..... $
---- --- ---------- --------
Total................. 100% $ 100%
==== === ========== ========
|
(1) As of April 2, 2000, we had reserved 1,346,313 shares of our common stock
for issuance upon exercise of outstanding options at a weighted average
exercise price of $2.44 per share. To the extent any of the options are
exercised, including, without limitation, the exercise of 221,392 of these
shares by our Chief Executive Officer and President, there will be further
dilution to new investors. See "Management--Stock Plans" and note 8 to
notes to consolidated financial statements for additional information.
(2) Assuming full exercise of the underwriters' over-allotment option, the
number of shares of common stock held by new shareholders would be
increased to shares or % of the total number of shares
outstanding.
15
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following selected consolidated financial and operating data for each of
the five fiscal years in the period ended January 2, 2000 are derived from our
audited consolidated financial statements. The selected consolidated financial
and operating data as of and for the three months ended April 4, 1999 and April
2, 2000 have been derived from our unaudited consolidated financial statements
which, in the opinion of management, reflect all adjustments necessary to
present fairly, in accordance with generally accepted accounting principles,
the information for those periods. The audited consolidated financial
statements and notes for each of the three fiscal years in the period ended
January 2, 2000, and the report of independent auditors on those years, are
included elsewhere in this prospectus. This selected consolidated financial and
operating data should be read in conjunction with the consolidated financial
statements and notes, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other financial information included
elsewhere in this prospectus.
16
Selected Consolidated Financial and Operating Data
(dollars in thousands, except per share, operating data and footnotes)
Three Months
Fiscal Year Ended
----------------------------------------------------- ------------------
April 4, April 2,
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(unaudited)
Statement of Operations
Data:
Revenues:
Restaurant sales....... $155,890 $160,133 $159,391 $165,028 $176,933 $41,438 $47,711
Franchise and other
revenues.............. 620 698 1,025 2,013 2,260 496 555
-------- -------- -------- -------- -------- ------- -------
Total revenues....... 156,510 160,831 160,416 167,041 179,193 41,934 48,266
Costs and expenses:
Cost of sales.......... 41,170 43,647 43,361 43,201 44,740 10,399 11,799
Labor.................. 59,811 57,796 57,321 58,547 63,701 14,960 17,086
Direct operating and
occupancy............. 37,183 36,633 36,481 34,171 35,848 8,497 9,582
-------- -------- -------- -------- -------- ------- -------
Total restaurant
operating costs..... 138,164 138,076 137,163 135,919 144,289 33,856 38,467
General and
administrative........ 12,769 15,722 15,896 13,890 13,123 3,250 3,550
Depreciation and
amortization.......... 14,762 9,944 7,807 7,543 8,234 2,065 2,289
Pre-opening............ -- 279 445 234 763 -- 136
-------- -------- -------- -------- -------- ------- -------
Operating income
(loss)................. (9,185) (3,190) (895) 9,455 12,784 2,763 3,824
Other income (expense):
Loss on impairment of
property and
equipment and
restaurant closures... (15,453) (280) (9,604) (85) (200) -- --
Insurance gain and
bank financing fees... 973 277 -- -- (998) -- --
Interest expense....... (6,885) (3,297) (930) (3,956) (3,415) (968) (761)
-------- -------- -------- -------- -------- ------- -------
Total other income
(expense), net...... (21,365) (3,300) (10,534) (4,041) (4,613) (968) (761)
-------- -------- -------- -------- -------- ------- -------
Income (loss) before
income tax benefit
(provision)............ (30,550) (6,490) (11,429) 5,414 8,171 1,795 3,063
Income tax benefit
(provision)............ (51) 514 (251)(1) 5,139(1) (2,772) (611) (1,072)
-------- -------- -------- -------- -------- ------- -------
Net income (loss)....... (30,601) (5,976) (11,680) 10,553 5,399 1,184 1,991
Redeemable preferred
stock accretion........ -- (2,626) -- (4,478) (5,147) (1,314) (1,438)
-------- -------- -------- -------- -------- ------- -------
Net income (loss)
attributable to common
shareholders(2)(4)..... $(30,601) $ (8,602) $(11,680) $ 6,075 $ 252 $ (130) $ 553
======== ======== ======== ======== ======== ======= =======
Net income (loss) per
common share(3)(4):
Basic.................. $ 0.30 $ 0.01 $ (0.01) $ 0.03
Diluted................ $ 0.29 $ 0.01 $ (0.01) $ 0.03
Shares used in computing
net income per common
share (in
thousands)(3):
Basic.................. 20,226 21,598 21,504 21,793
Diluted................ 21,058 22,335 22,240 22,432
Pro Forma Data(5):
Net income attributable
to common
shareholders........... $ 8,253 $ 2,632
Net income per common
share:
Basic..................
Diluted................
Shares used in computing
net income per common
share (in thousands):
Basic..................
Diluted................
Selected Operating Data:
System-wide restaurants
open at end of period.. 80 90 96 90 97
Company-owned
restaurants open at end
of period.............. 66 67 70 66 71
Average weekly company-
owned restaurant
sales.................. $43,514 $47,490 $49,490 $47,755 $51,692
Comparable company-owned
restaurant sales
increase(6)............ 0.6% 6.1% 4.1% 6.2% 6.8%
|
17
Fiscal Year April 2, 2000
----------------------------------------------- --------------------
Pro Forma
As
1995 1996 1997 1998 1999 Actual Adjusted(7)
-------- -------- -------- -------- ------- ------- -----------
(unaudited)
Cash and cash
equivalents............ $ 1,774 $ 4,143 $ 5,455 $ 14,553 $ 5,686 $ 3,732 $
Total assets............ 110,414 104,953 82,915 96,155 94,750 94,130
Total debt, including
current portion........ 115,928 192 47,157 45,385 40,085 40,075 75
Redeemable preferred
stock.................. -- 118,791 33,783 38,774 43,921 45,359 --
Shareholders' equity
(deficiency)........... (33,591) (39,567) (16,840) (10,439) (9,829) (9,276)
|
(1) Net income for 1998 was favorably impacted by the reversal of a $7.6
million deferred tax asset valuation allowance that was previously provided
for in 1997. We eliminated the valuation allowance in 1998 due to our
belief that current year activity made realization of this benefit more
likely than not.
(2) Net income (loss) attributable to common shareholders includes the effect
of the accretion of the liquidation preference on the redeemable preferred
stock which reduces net income or increases net loss attributable to common
shareholders for the relative periods.
(3) See notes 2 and 9 of notes to audited consolidated financial statements and
notes 3 and 4 of notes to unaudited consolidated financial statements for
an explanation of the method used to calculate the net income per common
share and shares used in computing net income per common share, basic and
diluted.
(4) Net income for 1998 was favorably impacted by the reversal of a $7.6
million deferred tax asset valuation allowance. Assuming an effective tax
rate of 33.9%, consistent with fiscal year 1999, net income would have been
$3,579,000 before redeemable preferred stock accretion. Net income
attributable to common shareholders would have been a loss of $899,000 and
net loss per common share, basic and diluted, would have been $0.04.
(5) Pro forma information gives effect, as of the beginning of each period, to
the sale of shares of common stock offered by us at an assumed initial
public offering price of $ per share, net of estimated underwriting
discounts and estimated offering expenses, the conversion of shares
of preferred stock into shares of common stock, the use of the net
proceeds to redeem all other shares of preferred stock and to the
elimination of interest expense related to the repayment of our bank debt,
and the elimination of $900,000 in annual compensation expense ($225,000
per quarter) due to the amendment of our co-founders' employment
agreements.
(6) Company-owned restaurants are included in the computation of comparable
restaurant sales after they have been open 12 months.
(7) Reflects our receipt of estimated net proceeds of $ from the sale of
shares of common stock offered by us at an assumed initial public
offering price of $ per share, net of estimated underwriting discounts
and estimated offering expenses, the conversion of shares of
preferred stock into shares of common stock, the use of the net
proceeds to redeem all other shares of preferred stock and to repay $40.0
million in bank debt that was outstanding as of April 2, 2000, and the
elimination of interest expense on bank debt and $225,000 in compensation
expense due to the amendment of our co-founders' employment agreements.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
California Pizza Kitchen is a leading casual dining restaurant chain in the
premium pizza segment with a recognized consumer brand and an established,
loyal customer base. We currently own, license or franchise 100 upscale, casual
dining restaurants in 21 states, the District of Columbia and three foreign
countries, of which 74 are company-owned and 26 operate under franchise or
license arrangements. During our 15 years of operating history, we believe we
have developed strong brand awareness and demonstrated the appeal of our
concept in a wide variety of geographic areas. Our concept was, and remains, to
take our customers' favorite food cravings and put them on a pizza--to
figuratively put the world on a pizza.
We opened our first casual dining restaurant in 1985 in Beverly Hills,
California and grew steadily to 25 restaurants by early 1992. Our concept, with
its signature line of innovative, premium pizzas, open-flame ovens in
exhibition-style kitchens and excellent guest service, attracted PepsiCo, Inc.
which bought a controlling interest in our company in May 1992.
During the approximately five-year period when PepsiCo was our controlling
shareholder, we opened 60 restaurants, 16 of which have subsequently been
closed. We experimented with different locations and different restaurant
sizes, ranging from 3,600 square feet to more than 11,000 square feet. Our
rapid expansion strained our infrastructure, resulted in a variety of
management and operational changes, diverted our attention from the execution
of our concept and led to disappointing operating results and financial
performance, including a decline in comparable restaurant sales in 1996.
At the end of 1996, PepsiCo concluded that it would sell or otherwise divest
all of its restaurant businesses, including California Pizza Kitchen. In
September 1997, we consummated a series of transactions to effect a merger and
leveraged recapitalization through which an investor group led by Bruckmann,
Rosser, Sherrill & Co., L.P. acquired a 67.4% interest in our company. Under
the terms of the merger and leveraged recapitalization agreements, PepsiCo
contributed all of its shares of Class A Common Stock to us and converted all
of its redeemable preferred stock and Class B Common Stock into a right to
receive a cash payment of approximately $60.0 million. The holders of our
outstanding shares of Class A Common Stock received merger consideration
consisting of cash and shares of our new common stock in exchange for their
shares of our old Class A Common Stock, which were then canceled. Immediately
after giving effect to the recapitalization, there were 10,000,001 shares of
common stock outstanding and no shares of preferred stock (we subsequently
effected a two-for-one forward stock split of our common stock in November
1998). As a result of the recapitalization, PepsiCo retained no ownership
interest in our company, although it did retain four under-performing
restaurants which were subsequently closed, and assumed some of the obligations
and liabilities of six other restaurants that had closed prior to the
completion of the merger and leveraged recapitalization transaction. As a
result of PepsiCo's retention of these restaurants and other liabilities, our
financial position was materially improved.
Since the recapitalization, we have hired new management, who, in
conjunction with our co-founders, refocused our efforts on improving food
quality, customer service, and the overall dining experience at our
restaurants. Our new management team, led by Frederick R. Hipp, Chief Executive
Officer and President, H. G. Carrington, Jr., Executive Vice President and
Chief Financial Officer, and Frederick F. Wolfe, Senior Vice President
Operations, reorganized our operations and developed a new business strategy.
Initiatives put in place at the end of 1997 included increasing the size of our
pizzas by 17% and the size of our pasta portions by 25% to enhance the price-
to-value relationship of our core menu offerings, and reducing the number of
tables assigned per server to improve the overall customer experience. Since
the beginning of 1998 we have introduced 17 new menu items, improved the
quality of many of our ingredients, and introduced a new, updated decor package
for our new and remodeled restaurants. We believe these initiatives, coupled
with our innovative food and average guest check of approximately $10.50,
provide an excellent dining value and have contributed
19
to our company-owned comparable restaurant sales growth of 6.1% in 1998, 4.1%
in 1999 and 6.8% through the first three months of 2000.
Our new management team was able to fund these initiatives while still
improving our operating margins by realizing various operating and purchasing
efficiencies. Specifically, we instituted real-time reporting requirements,
significantly reduced our food costs by negotiating improved terms under our
purchasing contracts, and substantially reduced general and administrative
expenses by rationalizing our corporate office structure. These initiatives
have resulted in improved profitability as evidenced by an improvement in our
restaurant level cash flow margins from 13.9% in 1997, to 17.6% in 1998, 18.4%
in 1999 and 19.4% in the first three months of 2000.
We have instituted an accelerated, but disciplined, growth plan, focused
largely on further penetrating our existing markets. Since the beginning of
1998, we have opened ten new company-owned, full service restaurants. In 1999,
we hired a Senior Vice President and Chief Development Officer with more than
ten years of restaurant real estate experience to spearhead our expansion
efforts. We plan to add additional company-owned restaurants in 2000, of
which three have opened. We have signed leases and letters of intent
covering the remaining restaurants we plan to open in 2000. Our new
restaurants typically experience lower operating margins in their first few
months of operation due to operational inefficiencies, but are expected to
achieve a level of operating performance similar to those of our mature
restaurants after 90 days.
Our revenues are comprised of restaurant sales, franchise royalties and
other income. Our restaurant sales are comprised almost entirely of food and
beverage sales. In 1999 and for the first three months of 2000, alcohol sales
represented 5.3% of restaurant sales. Our franchise royalties and other
revenues consist primarily of monthly royalty income and initial franchise
fees.
Cost of sales is composed of food, beverage and paper supply expenses. The
components of costs of sales are variable and increase with sales volume. Labor
costs include direct hourly and management wages, bonuses, taxes and benefits
for restaurant employees. Direct and occupancy costs generally increase with
sales volume but decline as a percentage of restaurant sales. Direct and
occupancy costs include restaurant supplies, marketing costs, fixed rent,
percentage rent, common area maintenance charges, utilities, real estate taxes,
repairs and maintenance and other related costs.
General and administrative costs include all corporate and administrative
functions that support existing operations and provide infrastructure to
facilitate our future growth. Components of this category include management,
supervisory and staff salaries and related employee benefits, travel,
information systems, training, corporate rent and professional and consulting
fees. Depreciation and amortization principally includes depreciation on
capital expenditures for restaurants. Pre-opening costs, which are expensed as
incurred, consist of the costs of hiring and training the initial workforce,
travel, the cost of food used in training, marketing costs, the cost of the
initial stocking of operating supplies and other direct costs related to the
opening of a new restaurant.
In calculating company-owned comparable restaurant sales, we include a
restaurant in the comparable base once it has been open for 12 months. As of
April 2, 2000, we had 66 company-owned restaurants which met this criteria.
In the second quarter of 2000, we expect to take a one-time charge of
approximately $ related to the prior grant of performance options to
Frederick R. Hipp. With the filing of this registration statement, it becomes
more likely than not that Mr. Hipp's performance options will become
exercisable, which triggers the charge for variable plan accounting purposes.
20
Results of operations
Our operating results for 1997, 1998 and 1999 and for the three months ended
April 4, 1999 and April 2, 2000 are expressed as a percentage of revenue below,
except for restaurant operating costs and expenses, which are expressed as a
percentage of restaurant sales:
Three Months
Fiscal Year Ended
-------------------- -----------------
April 4, April 2,
1997 1998 1999 1999 2000
----- ----- ----- -------- --------
(unaudited)
Revenues:
Restaurant sales..................... 99.4% 98.8% 98.7% 98.8% 98.9%
Franchise and other revenues......... 0.6 1.2 1.3 1.2 1.1
----- ----- ----- ----- -----
Total revenues..................... 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of sales........................ 27.2 26.2 25.3 25.1 24.7
Labor................................ 36.0 35.5 36.0 36.1 35.8
Direct operating and occupancy....... 22.9 20.7 20.3 20.5 20.1
----- ----- ----- ----- -----
Total restaurant operating costs... 86.1 82.4 81.6 81.7 80.6
General and administrative........... 9.9 8.3 7.3 7.8 7.4
Depreciation and amortization........ 4.9 4.5 4.6 4.9 4.7
Pre-opening.......................... 0.3 0.1 0.4 -- 0.3
----- ----- ----- ----- -----
Operating income (loss)................ (0.6) 5.7 7.1 6.6 7.9
Other income (expense):
Loss on impairment of property and
equipment and restaurant closures... (6.0) (0.1) (0.1) -- --
Bank financing fees.................. -- -- (0.6) -- --
Interest expense..................... (0.6) (2.5) (1.9) (2.3) (1.6)
----- ----- ----- ----- -----
Total other income (expense), net.. (6.6) (2.4) (2.6) (2.3) (1.6)
Income (loss) before income tax benefit
(provision)........................... (7.1) 3.2 4.6 4.3 6.4
Income tax benefit (provision)......... (0.2) 3.1 (1.5) (1.5) (2.2)
----- ----- ----- ----- -----
Net income (loss)...................... (7.3)% 6.3% 3.0% 2.8% 4.2%
===== ===== ===== ===== =====
|
Three months ended April 2, 2000 compared to three months ended April 4, 1999
Total revenues. Total revenues increased by $6.3 million, or 15.2%, to $48.3
million in the first three months of 2000 from $41.9 million in the first three
months of 1999 due to a $ 6.3 million increase in restaurant sales and a
$59,000 increase in franchise and other revenues. The increase in restaurant
sales was due to $3.5 million in sales from a full three months of operations
for the five restaurants that opened in 1999, $642,000 in sales derived from
the consolidation of our limited partnership restaurant and $2.7 million from
comparable restaurant sales increases of 6.8%. This increase in restaurant
sales was offset by the loss of revenue from two restaurants that closed in
1999. The increase in comparable restaurant sales was driven by increases in
customer counts of approximately 4.7% and increases in the average check of
approximately 2.1% compared to the first three months of 1999. Approximately
one-half of the increase in the average check was due to price increases taken
in 1999 and the remainder was due to modest shifts in our menu mix. Franchise
and other revenue growth was due primarily to a full three months of operations
for the seven new franchise restaurants that opened in 1999.
Cost of sales. Cost of sales increased by $1.4 million, or 13.5%, to $11.8
million for the first three months of 2000 from $10.4 million for the first
three months of 1999. Cost of sales as a percentage of restaurant sales
decreased to 24.7% for the first three months of 2000 from 25.1% in the prior
period. This reduction was primarily a result of lower commodity costs in
produce and dairy compared to 1999 and increased operational efficiency.
21
Labor. Labor increased by $2.1 million, or 14.2%, to $17.1 million for the
first three months of 2000 from $15.0 million for the first three months of
1999. Labor as a percentage of restaurant sales decreased to 35.8% for the
first three months of 2000 from 36.1% for the prior period. The decrease in
labor was primarily due to lower restaurant level management wages as a
percentage of sales resulting from higher weekly restaurant sales. Hourly labor
as a percentage of sales increased to 21.3% for the first three months of 2000
from 21.2% of sales for the prior period.
Direct operating and occupancy. Direct operating and occupancy increased by
$1.1 million, or 12.8%, to $9.6 million for the first three months of 2000 from
$8.5 million for the first three months of 1999. Direct operating and occupancy
as a percentage of restaurant sales decreased to 20.1% for the first three
months of 2000 from 20.5% from the prior period. The reduction was due
primarily to higher net sales spread over relatively fixed restaurant level
operating expenses.
General and administrative. General and administrative increased by
$300,000, or 9.2%, to $3.6 million for the first three months of 2000 from $3.3
million for the first three months of 1999. General and administrative as a
percentage of total revenues decreased to 7.2% for the first three months of
2000 from 7.6% for the prior period. The dollar increase in general and
administrative was primarily a result of higher travel and moving expenses
related to manager relocations for our new restaurants and higher personnel
costs related to new management positions. The decrease as a percentage of
sales was due to the relatively fixed nature of many of our general and
administrative expenses.
Depreciation and amortization. Depreciation and amortization increased
$224,000, or 10.9%, to $2.3 million for the first three months of 2000 from
$2.1 million for the first three months of 1999. The increase was primarily due
to the additional depreciation on the five new restaurants opened during 1999
and depreciation related to our new point of sales system that was implemented
in all restaurants during fiscal year 1999.
Pre-opening. Pre-opening was $136,000 for the first three months of 2000,
and related to the three new restaurants that opened in April 2000. In 1999 we
did not open our first restaurant until the end of May and therefore did not
incur pre-opening expenses until the second quarter.
Interest expense. Interest expense decreased by $207,000, or 21.4%, to
$761,000 for the first three months of 2000 from $968,000 for the first three
months of 1999. The decrease was primarily a result of a lower debt balance due
to payments made under our credit facility and a lower interest rate due to our
new credit facility that was put in place in October 1999.
Income tax benefit (provision). The income tax benefit (provision) for the
first three months of 2000 and 1999 was based on annual effective tax rates
applied to the income (loss) before income tax benefit (provision). The 35.0%
tax rate applied to the first three months of 2000 comprises the federal and
state statutory rates based on the annual estimated effective tax rate for
2000. The 33.9% tax rate applied to the first three months of 1999 comprises
the federal and state statutory rates based on the annual estimated effective
tax rate for 1999.
1999 (52 weeks) compared to 1998 (53 weeks)
Total revenues. Total revenues increased by $12.2 million, or 7.3%, to
$179.2 million in 1999 from $167.0 million in 1998 due to an $11.9 million
increase in restaurant sales and a $247,000 increase in franchise and other
revenues. The increase in restaurant sales was due to $3.1 million in sales
from a full year of operations for the two restaurants that opened in 1998,
$7.3 million in sales derived from the five restaurants opened in 1999, and
$6.5 million from comparable restaurant sales increases of 4.1%. This increase
in restaurant sales was offset by two restaurant closures in 1999 and one
restaurant closure in 1998, plus the impact of one additional week of sales in
1998 which contributed $3.4 million of revenue in 1998. The increase in
comparable restaurant sales was driven by an increase in customer counts of
approximately 1.9% and an increase in the average check of approximately 2.2%
compared to 1998. The increase in average check was
22
primarily due to price increases implemented in 1998 and 1999. Franchise and
other revenue growth was due to seven new franchise restaurants that opened in
1999 and a full year of operations for the 12 franchise restaurants that opened
in 1998.
Cost of sales. Cost of sales increased by $1.5 million, or 3.6%, to $44.7
million in 1999 from $43.2 million in 1998. Cost of sales as a percentage of
restaurant sales decreased to 25.3% in 1999 from 26.2% in 1998. This reduction
was primarily a result of lower commodity costs in 1999 compared to 1998 and
management's ongoing effort to reduce the cost of food products and improve
margins.
Labor. Labor increased by $5.2 million, or 8.8%, to $63.7 million in 1999
from $58.5 million in 1998. Labor as a percentage of restaurant sales increased
to 36.0% in 1999 from 35.5% in 1998. The increase in labor was primarily due to
higher restaurant level management wages as a result of our ongoing initiative
to reduce management turnover. Hourly labor as a percentage of sales remained
constant at 21.7% in 1999 and 1998.
Direct operating and occupancy. Direct operating and occupancy increased by
$1.7 million, or 4.9%, to $35.8 million in 1999 from $34.1 million in 1998.
Direct operating and occupancy as a percentage of restaurant sales decreased to
20.3% in 1999 from 20.7% in 1998. The reduction was due primarily to higher net
sales spread over relatively fixed restaurant level operating expenses.
General and administrative. General and administrative decreased by
$767,000, or 5.5%, to $13.1 million in 1999 from $13.9 million in 1998. General
and administrative as a percentage of total revenues decreased to 7.3% in 1999
from 8.3% in 1998. The decrease was primarily a result of improved cost
management initiatives related to certain insurance programs.
Depreciation and amortization. Depreciation and amortization increased
$691,000, or 9.2%, to $8.2 million in 1999 from $7.5 million in 1998. The
increase was primarily due to the additional depreciation on the two new
restaurants opened during the second half of 1998 and the five new restaurants
opened in 1999.
Pre-opening. Pre-opening increased by $529,000 to $763,000 in 1999 from
$234,000 in 1998. The increase was due to the five new restaurants opened in
1999 compared to only two restaurants opened in 1998.
Loss on impairment of property and equipment and restaurant closures. Loss
on impairment of property and equipment and restaurant closures increased by
$115,000 to $200,000 in 1999 from $85,000 in 1998. The increase was due to the
write off of our old point of sale system. In 1999 we implemented new point of
sale systems in all of our restaurant locations.
Bank financing fees. Bank financing fees of $1.0 million represents the
unamortized costs relating to our prior credit agreement, which were written
off when we refinanced our senior credit facility in 1999.
Interest expense. Interest expense decreased by $541,000, or 13.7%, to $3.4
million in 1999 from $3.9 million in 1998. The decrease was primarily a result
of a lower debt balance due to payments made under our credit facility and
higher interest earning cash balances.
Income tax benefit (provision). The income tax benefit (provision) in 1999
and 1998 was based on annual effective tax rates applied to the income (loss)
before income tax benefit (provision). The effective tax rate was 33.9% in
1999. In 1998, the income tax benefit differs from the expected income tax
provision derived by applying the effective tax rate as a result of an
offsetting reduction in the previously provided deferred income tax asset
valuation allowance of $7.6 million.
1998 (53 weeks) compared to 1997 (52 weeks)
Total revenues. Total revenues increased by $6.6 million, or 4.1%, to $167.0
million in 1998 from $160.4 million in 1997. The one additional week of
operations in 1998, contributed $3.5 million of the increased revenue in 1998,
of which $3.4 million came from increased restaurant sales. The remainder of
the increase in
23
revenues was primarily attributable to a $2.1 million increase in restaurant
sales and a $1.0 million increase in franchise and other revenues. The increase
in restaurant revenue was primarily attributable to comparable restaurant
sales' increases of $9.2 million, or 6.1%, offset by the closure of three
restaurants and the conversion of four restaurants to licensed locations in
connection with the merger and leveraged recapitalization. The increase in
comparable restaurant sales was driven by increases in customer counts of
approximately 3.0% and an increase in average check of approximately 3.1% in
1998. Most of the increase in the average check was due to price increases
taken in 1998. Franchise revenue growth was due to 12 new franchise restaurants
that opened in 1998 and a full year of operations for the three franchise
restaurants that opened in 1997.
Cost of sales. Cost of sales decreased by $160,000, or 0.4%, to $43.2
million in 1998 from $43.4 million in 1997. Cost of sales as a percentage of
restaurant sales decreased to 26.2% in 1998 from 27.2% in 1997. This reduction
was a result of management's effort to reduce the cost of food products and
improve margins through the renegotiation of many of our food vendor contracts.
Labor. Labor increased by $1.2 million, or 2.1%, to $58.5 million in 1998
from $57.3 million in 1997 primarily due to one additional week of operations
in 1998. Labor as a percentage of restaurant sales decreased to 35.5% in 1998
from 36.0% in 1997. The decrease in labor as a percentage of restaurant sales
was primarily due to improvements in the management of hourly labor, which
decreased to 21.7% of restaurant sales in 1998 from 22.1% in 1997. Management
labor as a percentage of restaurant sales decreased to 7.4% in 1998 from 7.6%
in 1997, primarily as a result of increased restaurant efficiencies and higher
net sales.
Direct operating and occupancy. Direct operating and occupancy decreased by
$2.3 million, or 6.3%, to $34.2 million in 1998 from $36.5 million in 1997.
Direct operating and occupancy as a percentage of restaurant sales decreased to
20.7% in 1998 from 22.9% in 1997. The reduction was due primarily to higher net
sales spread over relatively fixed restaurant operating expenses and the
closure of three restaurants and the conversion of four restaurants to licensed
locations in connection with the merger and leveraged recapitalization.
General and administrative. General and administrative decreased by $2.0
million, or 12.6%, to $13.9 million in 1998 from $15.9 million in 1997. General
and administrative as a percentage of restaurant sales decreased to 8.3% in
1998 from 9.9% in 1997. The decrease was primarily a result of improved cost
management in legal and consulting expenses of $840,000 and reduced travel and
entertainment costs of $700,000.
Depreciation and amortization. Depreciation and amortization decreased by
$264,000, or 3.4%, to $7.5 million in 1998 from $7.8 million in 1997. The
decrease was primarily due to the write-down of 12 restaurant locations in 1997
in accordance with Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 121.
Pre-opening. Pre-opening decreased by $211,000, or 47.4%, to $234,000 in
1998 from $445,000 in 1997. The decrease was due to a more disciplined approach
to managing pre-opening expenses implemented by our new management team for the
two restaurants we opened in 1998 compared to the two restaurants we opened in
1997.
Loss on impairment of property and equipment and restaurant closures. Loss
on impairment of property and equipment and restaurant closures decreased by
$9.5 million to $85,000 in 1998 from $9.6 million in 1997. The decrease was due
to the reserve for restaurant closure expenses related to one restaurant
recognized in 1998 compared to the write-down of 12 restaurant locations in
1997 in accordance with Financial Accounting Standards No. 121.
Interest expense. Interest expense increased by $3.0 million to $4.0 million
in 1998 from $930,000 in 1997. The increase was a result of a full year of
interest related to the borrowings incurred as of September 30, 1997 in
connection with the merger and leveraged recapitalization transaction.
24
Income tax benefit (provision). The income tax provision in 1998 and 1997
was based on annual effective tax rates applied to the income (loss) before
income tax benefit (provision). In 1998, the income tax benefit differs from
the expected provision for income taxes derived by applying the effective tax
rate as a result of an offsetting reduction in the previously provided deferred
income tax asset valuation allowance of $7.6 million. Prior to the merger and
leveraged recapitalization in 1997, income taxes were filed on a consolidated
basis with PepsiCo under a tax sharing agreement. Subsequent to the merger and
leveraged recapitalization, the income tax provision in 1997 was adjusted
because we established a valuation allowance equal to the net deferred tax
asset. The valuation allowance was recorded due to uncertainty at the time of
our ability to realize the benefit of the net deferred tax asset.
Potential fluctuations in quarterly results and seasonality
Our quarterly operating results may fluctuate significantly as a result of a
variety of factors, including the timing of new restaurant openings and related
expenses, profitability of new restaurants, increases or decreases in
comparable restaurant sales, general economic conditions, consumer confidence
in the economy, changes in consumer preferences, competitive factors, changes
in food costs, changes in labor costs, and weather conditions. In the past we
have experienced significant variability in pre-opening costs from quarter to
quarter. These fluctuations are primarily a function of the timing of
restaurant openings. We typically incur the most significant portion of pre-
opening costs associated with a given restaurant within the one month
immediately preceding, and the month of, the opening of a restaurant. In
addition, our experience to date has been that labor and direct operating and
occupancy costs associated with a newly opened restaurant for the first three
months of operation are often materially greater than what will be expected
after that time, both in aggregate dollars and as a percentage of restaurant
sales. Accordingly, the volume and timing of new restaurant openings in any
quarter has had and is expected to continue to have a significant impact on
quarterly pre-opening costs and labor and direct operating and occupancy costs.
As a result of our plans to open new restaurants at an accelerated pace, we
anticipate that we will experience significantly increased pre-opening costs,
labor and direct operating and occupancy costs in 2000.
Our business is also subject to seasonal fluctuations. Historically, sales
in most of our restaurants have been higher during the summer months and winter
holiday season. As a result, we expect our highest earnings to occur in those
periods. As a result of all of these factors, results of any one quarter are
not necessarily indicative of the results to be expected for any other quarter
or for any year.
Liquidity and capital resources
In recent years we have funded our capital requirements through cash flow
from operations. In 1997, in order to fund the merger and leveraged
recapitalization, Bruckmann, Rosser, Sherrill & Co., L.P. and its co-investors
made a $25.0 million capital contribution to us and we entered into a $57.0
million credit facility, of which $49.0 million was drawn.
For the first three months of 2000, net cash flows from operating activities
were $2.2 million. Net cash flows from operating activities decreased from
$15.0 million in 1998 to $13.6 million in 1999. The decrease from 1998 to 1999
was primarily due to the reduction of certain current liabilities partially
offset by an increase in prepaid expenses and other current assets.
For the first three months of 2000, net cash used in investing activities
was $4.3 million. Net cash used in investing activities was $5.0 million in
1998 and $17.3 million in 1999. The increase from 1998 to 1999 was primarily
due to the increase in the number of restaurant openings from two in 1998 to
five in 1999. In addition, we spent approximately $3.3 million for our new
point of sale system which was installed in all of our restaurants in 1999. We
opened our first three new restaurants of 2000 in April and anticipate opening
another restaurants this year. Capital expenditures consist primarily of
construction of new restaurants and remodels of existing restaurants. In 1998,
we incurred capital expenditures of approximately $7.5 million, of which $3.1
million was spent on new restaurants opened in 1998 and $2.2 million was spent
on remodels. In
25
1999 we spent approximately $17.3 million on capital expenditures, of which
approximately $7.7 million was spent on new restaurants opened in 1999, $2.1
million was spent on remodels and $3.3 million was spent on our new point of
sales system. Total capital expenditures for 2000 are expected to be
approximately $22.0 million, of which $17.0 million is expected to be invested
in the opening of new restaurants and $5.0 million is expected to be spent on
remodels. Our capital expenditures for 1997 through 1999 were financed through
internally generated funds and we expect our capital expenditures for 2000 to
be financed through internally generated funds and the proceeds of this
offering.
For the first three months of 2000, cash used in financing activities was
$9,000. Net cash used in financing activities increased from $1.0 million in
1998 to $5.2 million in 1999. The increase from 1998 to 1999 was due to an
increase in payments on debt incurred in connection with the merger and
leveraged recapitalization transaction. On September 30, 1997 we entered into a
$57.0 million credit facility, a portion of which was used to fund the merger
and leveraged recapitalization transaction. On October 29, 1999, we repaid all
borrowings under that facility and replaced it with a new credit facility led
by Bank of America, N.A. The new credit facility consists of a $25.0 million
term loan and a $25.0 million revolving line of credit, of which we have drawn
$15.0 million. Both the term loan and the revolving line of credit currently
bear interest at a rate of LIBOR as of the date of borrowing plus 1.50%
(currently, 7.79%). Under the terms of the credit agreement, the term loan must
be repaid upon consummation of this offering. We also currently intend to repay
all amounts outstanding under the revolving line of credit using proceeds from
this offering.
We believe that the proceeds from this offering, together with anticipated
cash flows from operations and funds anticipated to be available from our
credit facility, will be sufficient to satisfy our working capital and capital
expenditures requirements for at least the next twelve months. Changes in our
operating plans, acceleration of our expansion plans, lower than anticipated
sales, increased expenses or other events may cause us to seek additional
financing sooner than anticipated. Additional financing may not be available on
acceptable terms, or at all. Failure to obtain additional financing as needed
could have a material adverse effect on our business and results of operations.
Quantitative and qualitative disclosures about market risk
Our market risk exposures are related to our cash and cash equivalents. We
invest our excess cash in investment grade, highly liquid investments,
consisting of money market instruments, bank certificates of deposit and short-
term investments in commercial paper. We anticipate investing our net proceeds
from this offering in similar investment grade and highly liquid investments
pending their use as described in this prospectus. We do not feel these
investments are subject to significant market risk. We have no derivative
financial instruments or derivative commodity investments in our cash and cash
equivalents and investments.
Under our revolving credit facility, we will be exposed to market risk from
changes in interest rates on borrowings which bear interest at the lending
bank's reference rate or LIBOR plus a fixed percentage. Because we do not
believe that the amount of borrowings under the revolving line of credit will
be material to our operations, we do not believe this risk will be material.
Primarily all of our transactions are conducted, and our accounts are
denominated, in United States dollars. Accordingly, we are not exposed to
foreign currency risk.
Many of the food products purchased by us are affected by commodity pricing
and are, therefore, subject to price volatility caused by weather, production
problems, delivery difficulties and other factors which are outside our
control. We believe that substantially all of our food and supplies are
available from several sources, which helps to control food commodity risk. We
believe we have the ability to increase menu prices, or vary the menu items
offered, if needed in response to a food product price increase.
26
Inflation
The primary inflationary factors affecting our operations are food and labor
costs. A large number of our restaurant personnel are paid at rates based on
the applicable minimum wage, and increases in the minimum wage directly affect
our labor costs. Many of our leases require us to pay taxes, maintenance,
repairs, insurance and utilities, all of which are generally subject to
inflationary increases. We believe inflation has not had a material impact on
our results of operations in recent years.
Preferred stock accretion
In December 1997, we issued an aggregate of 10,000,001 shares of Series A 12
1/2% Cumulative Compounding Preferred Stock and 10,000,001 shares of Series B
13 1/2% Cumulative Compounding Preferred Stock as a stock dividend on our
outstanding shares of common stock. In 1998, we sold an additional
151,769 shares of our Series A Preferred Stock and 151,769 shares of our Series
B Preferred Stock at $1.91 and $1.47 per share, respectively. The Series A
Preferred Stock is entitled to receive cash dividends of $0.2387 per annum and
all dividends are cumulative, whether or not declared. Unpaid dividends accrue
interest at 14.5% annually. The Series B Preferred Stock is entitled to receive
cash dividends of $0.1983 per annum and all dividends are cumulative, whether
or not declared. Unpaid dividends accrue interest at 15.5% annually. We may
redeem the Series A and Series B Preferred Stock at a price equal to their
liquidation value plus any unpaid and accrued dividends. There was no dividend
accretion on the Series A and Series B Preferred Stock in 1997. Dividend
accretion on the Series A and Series B Preferred Stock for 1998, 1999 and the
first three months of 2000 was $4.5 million, $5.1 million and $1.4 million,
respectively. At April 2, 2000, the carrying basis of the preferred stock was
$45.4 million. We will use the proceeds from this offering to redeem
approximately shares of Series A Preferred Stock and shares of
Series B Preferred Stock, and will convert the remaining preferred stock into
shares of common stock at the initial public offering price.
27
BUSINESS
Overview
California Pizza Kitchen is a leading casual dining restaurant chain in the
premium pizza segment with a recognized consumer brand and an established,
loyal customer base. We currently own, license or franchise 100 restaurants in
21 states, the District of Columbia and three foreign countries, of which 74
are company-owned and 26 operate under franchise or license arrangements.
During our 15 years of operating history, we have developed strong brand
awareness and demonstrated the appeal of our concept in a wide variety of
geographic areas.
Our restaurants feature our signature line of innovative premium pizzas,
including our original best sellers, the BBQ Chicken Pizza and the Thai Chicken
Pizza, and more recent creations such as the Philly Cheesesteak Pizza, Havana
Chicken Pizza and Grilled Garlic Shrimp Pizza. We also serve a broad selection
of distinctive pastas, salads, soups, appetizers and desserts, including our
Chicken-Tequila Fettuccine, BBQ Chicken Chopped Salad, Hearth-Baked Tortilla
Spring Rolls and Key Lime Pie. Our restaurants, which feature an exhibition-
style kitchen centered around an open-flame oven, provide a high-energy, casual
dining experience which is family-friendly and has broad consumer appeal. We
believe our restaurants, with an average guest check of approximately $10.50,
provide an exceptional dining value and are recognized by consumers for
offering a highly differentiated and distinctive menu, with outstanding
customer service.
We intend to expand in other distribution channels by building upon our
longstanding position as an innovator and leader in the premium pizza segment.
For instance, our premium fast-casual California Pizza Kitchen ASAP concept
provides a selection of the high quality, innovative menu items that we serve
in our full service restaurants, and we may introduce distinctive items made
specifically for the "grab and go" market. Host Marriott Services, our largest
franchisee, operates 18 ASAP restaurants, primarily at airports throughout the
United States. We expect to develop company-owned ASAP restaurants in a wide
variety of venues, including regional shopping centers and high-traffic urban
office areas and currently have two such restaurants under construction, both
of which are scheduled to open by July 2000. We are also extending our leading
brand position in the premium pizza segment through a strategic alliance with
Kraft Pizza Company. Together, we have developed and are distributing a line of
premium frozen pizzas through supermarkets and other retail outlets in selected
markets.
History
California Pizza Kitchen was formed in 1985 by Rick Rosenfield and Larry
Flax, who were the first to combine fresh, distinctive ingredients on premium
pizzas to create innovative tastes that consumers could easily identify with,
yet had never previously associated with pizza. By May 1992, we were operating
23 California Pizza Kitchen restaurants in seven states including California,
Hawaii, Georgia, Virginia, Illinois, Missouri, and Arizona. We had also
licensed two California Pizza Kitchen restaurants to Mirage Resorts
International in Las Vegas. Through our efforts to raise capital to expand our
concept across the United States, PepsiCo, Inc. became interested in our
concept and purchased a controlling interest in our company in May 1992. We
then embarked on an aggressive growth plan which strained our infrastructure,
resulted in a number of management and operational changes, diverted our
attention from the execution of our concept and led to disappointing operating
results and financial performance. In the five-year period during which PepsiCo
was our controlling shareholder, we opened 60 restaurants, including 43 in 1993
and 1994. At the end of 1996, PepsiCo decided that it would sell or divest all
of its restaurant businesses, including California Pizza Kitchen.
In September 1997, we consummated a series of transactions to effect a
merger and leveraged recapitalization through which a group led by Bruckmann,
Rosser, Sherrill & Co., L.P., an experienced restaurant investor, acquired a
controlling interest in our company. As a result of these transactions, PepsiCo
retained no ownership interest in our company. We hired a new management team
led by Frederick R. Hipp, Chief Executive Officer and President, H.G.
Carrington, Jr., Executive Vice President and Chief Financial Officer, and
Frederick F. Wolfe, Senior Vice President Operations, with over 50 years of
combined experience
28
in the restaurant industry. The new management team, in conjunction with our
co-founders, implemented a number of initiatives to restore and improve overall
operations and financial performance. These initiatives included improving the
food quality, customer service and overall dining experience at our
restaurants, while simultaneously improving profitability. Specifically, we
upgraded a number of our existing menu items by improving the quality of our
ingredients, reduced the number of tables typically assigned to each server,
and increased portion sizes to enhance our dining value. We also instituted
programs calculated to attract, motivate, and retain quality management
personnel, pursued cost reduction initiatives and extended our brand into new
distribution channels. Finally, we embarked on a new, more disciplined
restaurant expansion program.
These improvements have enabled us to attract an extremely loyal base of
customers, resulting in company-owned comparable restaurant sales increases of
6.1% in 1998, 4.1% in 1999 and another 6.8% in the first three months of 2000.
Our restaurant-level cash flow margins improved from 13.9% in 1997, to 17.6% in
1998, 18.4% in 1999, and 19.4% in the first three months of 2000. Our new
management team also restructured our corporate organization, resulting in a
decrease in corporate general and administrative expenses from $15.9 million or
9.9% of total revenues in 1997 to $13.1 million or 7.3% of total revenues for
1999. We believe that our quality-enhancing initiatives, coupled with improved
cost controls and operating efficiencies, have greatly strengthened our concept
and our organization.
Our concept and business strategy
Our objectives include continuing to build our brand awareness and customer
loyalty, and extending our leadership position in the casual dining and premium
pizza segments. We intend to utilize the strategies discussed below to achieve
these objectives.
Offer high quality, innovative menu items. Our restaurants feature menu
items that use imaginative toppings, and showcase recipes that capture tastes
and flavors that customers readily identify, but do not typically associate
with pizza, pasta or salads. While we do offer traditional menu items, we
believe the success of our concept is due to our ability to interpret food
trends on our platform of pizza, pasta, salads and appetizers, and to offer
items that appeal to a variety of tastes. For instance, our menu includes
numerous items incorporating Asian influences (Thai Chicken Pizza, Kung Pao
Spaghetti and Oriental Chicken Salad with Crispy Angel Hair Pasta),
Southwestern influences (Santa Fe Chicken Pizza, Chicken-Tequila Fettuccine and
Sedona White Corn Tortilla Soup), and California cuisine (Goat Cheese with
Roasted Peppers Pizza and White Balsamic Provencal Salad with Feta Cheese and
Sun-Dried Tomatoes). Another distinguishing characteristic of our food is our
use of high quality ingredients, including imported Italian tomatoes and
pastas, 100% pure or extra virgin Italian olive oil, imported Kalamata olives,
Japanese eggplant, black tiger shrimp, imported cheeses and exotic lettuces and
other fresh produce.
Provide an excellent dining value with broad consumer appeal. We offer large
portions of innovative, high quality food, superior service and a sophisticated
yet casual atmosphere, all for an average check of approximately $10.50. We
believe this price-to-value relationship differentiates us from our
competitors, many of whom have significantly higher average checks, and allows
us to appeal to a broad group of consumers. In addition to attracting families
and groups, our restaurants feature counter seating around the open kitchen,
which is popular with single diners. Our restaurants are popular during both
the day and evening hours as evidenced by our nearly equal split between lunch
and dinner sales. We believe that our diverse menu, which incorporates a wide
array of both traditional and multi-ethnic flavors and ingredients, further
enhances our broad appeal by accommodating groups with varied tastes or
cravings. Our guests dine in a clean, high energy environment that vividly
displays the colorful ingredients used in the preparation of our menu items,
many of which are prepared in our signature open-flame ovens which cook with
intense heat to sear in our unique flavors. In addition, the redesigned decor
used in our new and remodeled restaurants gives them a softer, more comfortable
look and further refines our "sophisticated yet casual" ambience.
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Build awareness of the California Pizza Kitchen brand. We believe that
California Pizza Kitchen is a brand that has traditionally been associated with
high quality, innovative food items, exceptional service and a strong price-to-
value relationship. We also believe that many of our original recipes,
including the BBQ Chicken Pizza and Thai Chicken Pizza, are closely associated
with the California Pizza Kitchen brand name. The design features of our
trademarked yellow, black and white logo are intended to further enhance our
brand awareness. We have promoted awareness of the California Pizza Kitchen
brand through innovative marketing and public relations programs, including the
California Pizza Kitchen cookbooks and various local and national media events.
We intend to continue to expand our brand awareness through the use of multiple
distribution channels, including our ASAP fast-casual concept and our premium
frozen pizzas. We also intend to pursue additional strategic alliances with
large, well-established partners, similar to our relationships with Kraft Pizza
Company and Host Marriott Services.
Pursue disciplined restaurant growth. Our new management team adheres to a
disciplined expansion strategy, focused primarily on existing markets and the
limited development of additional franchise restaurants. In late 1999, we hired
Tom N. Jenneman, with more than ten years of restaurant real estate experience,
as our Senior Vice President and Chief Development Officer to spearhead our
development efforts. We opened five company-owned, full service restaurants in
1999 and intend to open an additional company-owned restaurants in 2000,
of which will be full service restaurants and will be ASAP restaurants. Our
largest franchisee, Host Marriott Services, which currently operates 18 ASAP
restaurants, has plans to open four new ASAP restaurants in 2000, one of which
has already opened.
Maintain strong unit economics. For 1999, sales for our 66 full service
restaurants open for the entire year averaged $2.6 million and generated
average restaurant-level pre-tax cash flow of $496,000 or 19.2% of restaurant
sales. Our cash investment per full service restaurant, net of landlord
contributions, is expected to average $1.4 million, excluding pre-opening
costs, which are anticipated to be approximately $150,000 per restaurant. We
believe that our cash flow margins and return on investment for our company-
owned ASAP restaurants will be comparable to those of our full service
restaurants.
Provide superior customer service. We enjoy a high rate of repeat business
and view the personal interaction of our employees with our customers as an
integral part of our success. We have developed and fostered an organizational
culture we refer to as R.O.C.K. (Respect, Opportunity, Communication and
Kindness) which fosters strong relationships with our employees. We believe
that our culture, together with a highly evolved training program for our
servers, kitchen staff and management, leads to a superior customer experience.
We encourage our employees to share a sense of ownership and mission with
management and believe that an employee-oriented culture creates a sense of
pride in our company and our menu items and helps to ensure superior execution
at the restaurant level.
Growth strategies
We believe that we are extremely well-positioned to grow our concept and
brand through several channels simultaneously, including company-owned
restaurants, franchised restaurants, and retail and other non-traditional
channels. In 2000, we intend to open company-owned restaurants, of which
will be full service restaurants and of which will be ASAP restaurants. Our
franchisees have advised us that they intend to open an aggregate of seven or
eight restaurants in 2000.
Full service restaurants. Our full service restaurant concept has been our
core business unit and our primary source of growth historically, and we
anticipate that it will be our primary source of expansion in the near term. We
have adopted a manageable growth strategy and intend to develop many of our new
restaurants in our existing markets to gain operational efficiencies, enhance
convenience for our customers, and increase brand awareness. Our site selection
criteria for new full service restaurants is flexible and allows us to adapt to
a variety of locations, including regional shopping malls, retail and
entertainment centers, in-line shopping centers, office buildings and free-
standing buildings. Our growth strategy incorporates a market penetration or
cluster strategy which we believe enhances convenience and ease of access for
our customers and results in significant repeat business.
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Company ASAP restaurants. We currently franchise a total of 19 ASAP
restaurants, of which 18 are franchised by Host Marriott Services. Two company-
owned ASAP restaurants are currently under construction. We intend to increase
the development of company-owned ASAP restaurants as part of our strategy to
provide our customers with access to California Pizza Kitchen in a convenient,
fast-casual environment. In addition to our signature menu items, we may
introduce other unique items designed specifically for the "grab and go" nature
of our ASAP concept. Our company-owned ASAP menus will generally provide ten to
15 pizza varieties, as well as salads, sandwiches, appetizers, and desserts.
Our ASAP restaurants are designed to be 2,000 to 3,000 square feet in size, and
include seating for 50 to 60 customers. In addition to accommodating customers
desiring to order and eat in, the concept caters to customers wishing to order
and take out, or pre-order and pick up. We believe that our ASAP restaurants
will be successful in regional shopping centers, high density urban office and
retail centers, entertainment centers, transportation centers including
airports, and similar venues.
Franchise channels. Although our main focus will be on company-owned
domestic expansion, we believe that franchise development will complement our
growth strategy. Our principal growth in franchise operations is expected to
occur through the development of new restaurants by existing franchisees. We
also intend to pursue the limited development of additional franchise
relationships with quality-conscious partners that operate in specialized
segments of the restaurant industry or in targeted international territories
and that possess the expertise and resources to execute the development of new
restaurants on a large scale.
Alternative retail channels. We have entered into a strategic alliance with
Kraft Pizza Company to manufacture and distribute a line of California Pizza
Kitchen premium frozen pizzas in the United States and Canada. Currently, Kraft
distributes our pizzas in supermarkets in Atlanta, Las Vegas, Phoenix, the
San Francisco Bay area, Sacramento and the greater Southern California area,
including Los Angeles and San Diego. Kraft intends to expand the markets in
which our frozen pizzas are distributed, with an initial focus on those markets
in which our restaurants are located. We are strategically positioning our
pizzas to attract not only the typical purchaser of a premium frozen pizza, but
also to tap into the potentially huge home meal replacement market by
attracting the attention of the quality-oriented supermarket shopper who is not
presently a consumer of frozen pizza. We are also investigating the potential
for selling our premium frozen pizzas in alternative settings.
Take-out and delivery services. We offer take-out and/or delivery services
in each of our restaurants. Our new restaurants are designed to accommodate
this growing segment of our business and typically have separate take-out order
windows and waiting areas and, in most cases, a separate cashier. Our goal is
to capture a greater share of this market and maximize our revenue-generating
opportunities by developing a more customer-friendly, operationally-efficient
take-out and delivery service. We generally use independent third parties to
provide our delivery services. In 1999, take-out and delivery sales comprised
approximately 16.4% of our total restaurant sales. For the first three months
of 2000, our take-out and delivery sales accounted for approximately 17.7% of
our restaurant sales.
Unit level economics
For 1999, sales for our 66 full service restaurants open for the entire year
averaged $2.6 million and generated restaurant-level pre-tax cash flow of
$496,000 or 19.2% of restaurant sales. Our prototype full service restaurant is
approximately 4,800 to 5,000 square feet. Our average cash investment, net of
landlord contributions, was approximately $1.4 million for the ten restaurants
opened since 1998, excluding pre-opening costs which averaged approximately
$147,000 per restaurant. We expect that in the future our cash investment, net
of landlord contributions, will average approximately $1.4 million, excluding
pre-opening costs, which are anticipated to be approximately $150,000 per
restaurant.
Our ASAP restaurants will generally be in the range of 2,000 to 3,000 square
feet. We estimate that future ASAP restaurants, net of landlord contributions,
will generally cost approximately $750,000 and that pre-opening expenses will
average approximately $75,000. We believe that our cash flow margins and return
on investment for our company-owned ASAP restaurants will be comparable to
those of our full service restaurants.
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Menu
We continuously experiment with food items and flavor combinations in an
attempt to create selections that are innovative and capture unique tastes. We
first applied our innovative approach to creating and defining a new category
of pizza--the premium pizza. For example, our signature creation, the Original
BBQ Chicken Pizza, utilizes barbecue sauce instead of tomato sauce, and adds
toppings of marinated chicken breast, smoked gouda and mozzarella cheeses,
sliced red onion and fresh cilantro. Our Original Thai Chicken Pizza is created
with a base of spicy, peanut-ginger and sesame sauce, and topped with marinated
chicken breast, mozzarella cheese, roasted peanuts, green onions, bean sprouts,
julienne carrots and fresh cilantro. Our other innovative pizzas include the
Philly Cheesesteak Pizza, Grilled Garlic Shrimp Pizza, Rosemary Chicken-Potato
Pizza and B.L.T. Pizza.
We have broadened our menu beyond pizza to include pastas, salads, soups,
appetizers and desserts, and we strive to bring the same level of creativity
and innovation involved in developing our pizzas to our entire menu. Among our
other signature menu items are Tequila-Chicken Fettuccine which captures unique
Southwestern flavors in a rich tequila-lime and jalapeno cream sauce, our BBQ
Chicken Chopped Salad which uses both barbecue sauce and garden-herb ranch
dressing, Oriental Chicken Salad with Crispy Angel Hair Pasta, and our hearth-
baked Tortilla Spring Roll Appetizers which are sprinkled with parmesan cheese
and baked in our pizza ovens. The Spring Rolls include such flavors as the
Bangkok BBQ Chicken with grilled chicken breast, carmelized onions, smoked
gouda and mozzarella cheeses, fresh cilantro, and our Bangkok BBQ sauce served
with a side of horseradish cream sauce, and the recently introduced Baja with
grilled lime chicken breast, roasted corn and black bean relish, Monterey jack
and cheddar cheeses, fire-roasted mild chiles, red onions and fresh cilantro
served with a side of guacamole.
Our menu is also designed to satisfy customers who seek traditional,
American-style, tomato sauce-based pizza or authentic, Italian-style Neapolitan
pizza. For the traditionalist, we offer a variety of items such as the
Mushroom, Pepperoni and Sausage Pizza, the Fresh Tomato, Basil and Garlic
Pizza, and the Sweet and Spicy Italian Sausages Pizza which combines sweet
Italian sausage and grilled spicy Italian sausage, a tomato sauce base, roasted
red and yellow peppers and mild onions. Our Neapolitan pizzas are prepared on a
thin, crisp crust and include our Classic Margherita Pizza with imported
tomatoes, fresh mozzarella, fresh basil and parmesan cheese and our Rustica
Pizza made with imported tomatoes, fresh mozzarella, garlic, crushed chilies,
capers and Mediterranean olives. Our menu similarly accommodates traditional
tastes in pastas and salads, with a wide variety of tomato sauce-based pastas
and our high quality versions of popular salads, including our Caesar Salad and
Original Chopped Salad.
We believe that an important point of differentiation from our competitors
is that all of our menu items are prepared to order in our full service
restaurants. This reinforces our customers' confidence in the freshness and
quality of our preparations as well as allows us to customize any dish to
accommodate specific dietary or taste preferences.
Our menu is continuously evolving to track the increasingly discriminating
and sophisticated palate of the American public. We review the sales mix of our
menu items and replace lower selling items in each category with new menu items
once or twice a year. Because of our ability to quickly change our menu, we
believe that we are able to meet our customers' changing tastes and
expectations. Our entrees range in price from $6.99 to $11.99 and our average
guest check is currently approximately $10.50 including alcoholic beverages. We
offer a variety of wines by the bottle or the glass, as well as bottled and tap
beers, primarily to complement our menu offerings.
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Current restaurant locations
We currently own 74 restaurants in 17 states and the District of Columbia.
We franchise or license our concept to other restaurant operators including:
Host Marriott Services, which operates 18 ASAP restaurants; Mirage Resorts,
which operates two full service Las Vegas casino restaurants; a franchisee,
which operates one full service restaurant in Texas; a franchisee, which
operates one ASAP restaurant in California; and two international franchisees,
which currently operate a total of four full service restaurants in Singapore,
Malaysia and the Philippines.
Franchised/Licensed Franchised
Company-Owned Full service ASAP
Region Restaurants(1) Restaurants Restaurants Total
------ -------------- ------------------- ----------- -----
Domestic
Arizona................ 2 -- 1 3
California............. 35 -- 6 41
Colorado............... 1 -- -- 1
Florida................ 3 -- 3 6
Georgia................ 3 -- -- 3
Hawaii................. 3 -- -- 3
Illinois............... 5(2) -- -- 5
Indiana................ -- -- 1 1
Maryland............... 3 -- -- 3
Massachusetts.......... 3 -- -- 3
Michigan............... 1 -- -- 1
Minnesota.............. -- -- 1 1
Missouri............... 1 -- 2 3
Nevada................. -- 2 -- 2
New Jersey............. 1 -- -- 1
New York............... 4 -- -- 4
North Carolina......... -- -- 2 2
Pennsylvania........... 1 -- -- 1
Texas.................. 4 1 -- 5
Virginia............... 2 -- 3 5
Washington............. 1 -- -- 1
Washington, D.C........ 1 -- -- 1
International
Singapore.............. -- 1 -- 1
Malaysia............... -- 1 -- 1
The Philippines........ -- 2 -- 2
--- --- --- ---
Totals............... 74 7 19 100
|
(1) All of our company-owned restaurants are full service.
(2) Includes one restaurant in the Chicago area in which we are the general
partner and own approximately 70% of the total partnership interests.
Expansion strategy and site selection
Our restaurant expansion strategy focuses primarily on further penetrating
existing markets. This clustering approach enables us to increase brand
awareness and improve our operating and marketing efficiencies. For example,
clustering also enables us to reduce costs associated with regional supervision
of restaurant operations and provides us with the opportunity to leverage
marketing costs over a greater number of restaurants. We also believe this
approach reduces the risks involved with opening new restaurants given that we
better understand the competitive conditions, consumer tastes, demographics and
discretionary spending patterns in our existing markets. In addition, our
ability to hire qualified employees is enhanced in markets in which we are well
known.
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We believe that our site-selection strategy is critical to our success and
we devote substantial effort to evaluating each potential site at the highest
levels within our organization. We identify areas within our target markets
that meet our demographic requirements, focusing on daytime and evening
populations, shopping patterns, availability of personnel and household income
levels. We will presently only consider expanding to new markets that will meet
our strict demographic criteria. Our site selection criteria are flexible given
that we operate restaurants in regional shopping malls, in-line shopping
centers, retail and entertainment centers, free-standing buildings in
commercial and residential neighborhoods, office buildings and hotels. Our
prototype full service restaurant is approximately 4,800 to 5,000 square feet
and has 150 seats. However, we have the ability to operate a full service
restaurant in less than 4,000 square feet, particularly if we are able to
secure additional patio seating. While our ASAP restaurants are primarily being
operated in airports, we believe they could also be successful in a variety of
additional venues including regional shopping centers, high density urban
locations, office kiosks, food courts, stadiums, and other similar locations.
Currently we have two company-owned ASAP restaurants under construction at
shopping malls in the San Francisco Bay area. Our company-owned ASAP
restaurants will generally be 2,000 to 3,000 square feet and have dedicated in-
restaurant seating which will allow our customers to either dine in or take
out.
Our full service restaurants will continue to represent the majority of our
growth in the near-term. We expect to open new restaurants in 2000,
including full service restaurants and ASAP restaurants. Thus far in
2000, we have opened three full service restaurants and are building four
company-owned restaurants, including two ASAP restaurants. We have signed
leases and letters of intent covering the remaining restaurants we plan
to open in 2000.
Host Marriott Services has advised us that it anticipates opening four
additional ASAP restaurants in 2000, one of which already opened in the first
quarter. One of our other domestic franchisees has requested approval to open
one full service restaurant in California in 2000. Our international
franchisees currently operate a total of four full service restaurants, two in
the Philippines, one in Singapore and one in Malaysia. Our Philippines
franchisee has a full service restaurant in Guam and a full service restaurant
in the Philippines under construction and expects both of them to open in 2000.
Our Singapore franchisee has a full service restaurant under construction in
Singapore and expects it to open in 2000.
With the exception of the five sites for which we own the real estate, we
operate our restaurants under leases. We do not intend to purchase real estate
for any of our sites in the future. We believe that the flexibility of our two
formats (full service and fast-casual), both of which offer high quality casual
dining menu items, provides us with a competitive advantage in securing sites.
We have several long-standing relationships with major mall developers and
owners, and are therefore afforded the opportunity to negotiate multiple
location deals. Our two formats provide us with a great deal of flexibility in
these negotiations since these concepts are suitable for a wide variety of
venues and lend themselves to a broad range of sizes and footprints.
Marketing
Our marketing strategy focuses on communicating the California Pizza Kitchen
brand through many creative and non-traditional avenues. As the innovators of a
new and exciting food product, we continue to benefit from national media
attention which we believe provides us with a significant competitive
advantage. Rick Rosenfield and Larry Flax, our co-founders, currently serve as
the focal point of our public relations and media efforts. They have been the
subject of a national print and television campaign sponsored by American
Express and appeared in a recent People magazine article. In addition, we have
been featured on the Today Show for three years in a row during national pizza
month, and have been the subject of feature stories appearing in Forbes,
Business Week, The Wall Street Journal and USA Today. We appear periodically on
The Food Channel and have been featured on The Oprah Winfrey Show and NBC's
Later Today show. Rosie O'Donnell has given unsolicited rave reviews about our
pizza on her show. For added exposure, we seek to obtain placement for our
products and restaurants in movies and television shows.
We also engage to a limited extent in paid advertising for individual
restaurant locations, including billboards, newspaper ads and radio. We utilize
a variety of printed marketing materials, including restaurant location
brochures, hotel concierge cards, take-out menus and direct mailings. During
1999, we spent an
34
aggregate of 1.2% of restaurant sales on marketing efforts. We expect to
continue investing approximately 1.0% to 1.5% of restaurant sales in marketing
efforts in the future, primarily in connection with the opening of new
restaurants.
We use the openings of our new restaurants as opportunities to reach out to
the media. Our openings are often featured on live local television and radio
broadcasts and receive coverage in local newspapers. We employ a variety of
marketing techniques in connection with our new restaurant openings, including
concierge parties, and invitations to media personalities and community
leaders. In addition, our openings are generally associated with a charitable
event.
Our involvement in the community does not end once we have opened a
restaurant. In each of the markets in which we operate, we continuously engage
in a variety of charitable and civic causes and donate food and services on an
on-going basis. We have developed two cookbooks and have donated all of our
proceeds to worthwhile children's charities. These cookbooks are sold at our
restaurants, through national bookstore chains and through on-line retailers.
We are also the official restaurant of the Starlight Children's Foundation Wish
Granting Program.
We recently formed the CPK Foundation as a California non-profit public
benefit corporation. The Foundation will support designated children's
charities in the markets in which we operate. We intend to fund the Foundation
by contributing a portion of the selling price of each BBQ Chicken Pizza we
sell on a system-wide basis.
Operations
Restaurant management. We currently have 13 regional directors who report to
our Senior Vice President Operations. Each regional director oversees three to
eight restaurants and supervises the general manager for each restaurant within
his or her area of control. The typical full service restaurant management team
consists of a general manager, who oversees the entire operation of the
restaurant, an assistant general manager, a kitchen manager and an assistant
manager. Additionally, depending upon the size and sales volume of a
restaurant, we may also employ an assistant kitchen manager or a second
assistant manager in the dining area. Most of our full service restaurants
employ approximately 50 to 75 hourly employees, many of whom work part-time.
The general manager of each restaurant is responsible for the day-to-day
operation of that restaurant, including hiring, training and development of
personnel, as well as operating results. The kitchen manager is responsible for
product quality, food costs and kitchen labor costs. Our full service
restaurants are generally open Sunday through Thursday from 11:00 a.m. until
10:00 p.m., and on Friday and Saturday from 11:00 a.m. until 11:00 p.m.
Training. We strive to maintain quality and consistency in each of our
restaurants through the careful training and supervision of personnel and the
establishment of, and adherence to, high standards relating to personal
performance, food and beverage preparation and maintenance facilities. We
provide all new employees with complete orientation and training for their
positions to ensure they are able to meet our high standards. Each location has
certified trainers who provide classroom and on-the-job instruction. Employees
are certified for their positions by passing a series of tests and evaluations.
New restaurant managers are trained over a nine-week period at a certified
training restaurant. Training includes service, kitchen and management
responsibilities. An extensive series of interactive modules and on-line
quizzes are used in conjunction with on-the-job training. Newly trained
managers are then assigned to their home restaurant where they spend one
additional training week with their general manager. We place a high priority
on our continuing management development programs in order to ensure that
qualified managers are available for our future openings. In addition we have
detailed written operating procedures, standards, and controls, food quality
assurance systems, and safety programs. Once a year we hold a general manager
conference in which all of our general managers receive additional training on
financial information, food preparation, hospitality and other relevant topics.
When we open a new restaurant, we provide varying levels of training to each
type of employee as is necessary to ensure the smooth and efficient operation
of a California Pizza Kitchen restaurant from the first
35
day it opens to the public. Approximately two weeks prior to opening a new
restaurant, our dedicated training/opening team travels to the location to
begin intensive seven-day per week training of all new employees for that
restaurant. Our training teams stay on site during the first two weeks of
operation. We believe this additional investment in our new restaurants is
important since it helps us provide our customers with a quality dining
experience from day one. We also make on-site training teams available when our
franchisees open new restaurants. After a restaurant has been opened and is
operating smoothly, the general manager supervises the training of new
employees.
Recruiting and retention. We seek to hire experienced general managers and
staff. We support our employees by offering competitive wages, competitive
benefits including a 401(k) plan and salary deferral plan, both with a
discretionary match, medical insurance for all of our employees, including
part-time workers, generous discounts on dining, and, effective upon completion
of this offering, an employee stock purchase plan which will allow all
employees who have worked for us for at least a year and who work a minimum of
20 hours per week to participate.
We attempt to motivate and retain our employees by providing them with
opportunities for increased responsibilities and advancement, as well as
performance-based cash incentives tied to sales, profitability and qualitative
measures such as our mystery shoppers, who anonymously evaluate individual
restaurants. Our most successful general managers are eligible for promotion to
senior general manager status and are entitled to receive more lucrative
compensation packages based on various performance criteria. We believe we also
enjoy the recruiting advantage of offering our general managers restaurants
that are easier to manage because they are generally smaller than those of our
competitors, have hours that typically do not extend late into the night, and
generally do not require management of a separate bar business. We believe
these advantages offer our managers an excellent quality of life compared to
many of our competitors.
Customer satisfaction. Customer satisfaction is of extreme importance to us.
To that end, we routinely solicit and analyze our customers' opinions through
periodic surveys of 20,000 to 25,000 randomly-selected guests. The mystery
shopper program is also an important tool in our quality control efforts from
both a food quality and customer service perspective.
Restaurant franchise and licensing arrangements
Our largest franchisee, Host Marriott Services, operates 18 California Pizza
Kitchen ASAP restaurants, primarily in airports, throughout the United States
under a development and franchise arrangement. Mirage Resorts operates two full
service California Pizza Kitchen restaurants in high-profile resorts in Las
Vegas, Nevada. We also have a franchisee operating one full service restaurant
in San Antonio, Texas, a franchisee operating one ASAP restaurant in Thousand
Oaks, California, an international franchisee operating two full service
franchised restaurants in Singapore and Malaysia, and an international
franchisee operating two full service franchised restaurants in the
Philippines. During 2000, we expect Host Marriott Services to open four ASAP
restaurants and our international franchisees to open three additional full
service restaurants. In addition, one of our other domestic franchisees has
requested our approval to open a full service restaurant in California in 2000.
Our development agreement with Host Marriott Services grants it limited
exclusive rights to open new ASAP restaurants in airports, in travel plazas
along toll-roads and in mall food court locations; however, any location
proposed by Host Marriott Services is subject to approval by us in our sole
discretion. If Host Marriott Services determines not to submit a bid or
proposal for a new airport, or travel plaza or mall location or determines not
to include us in the proposal or bid, we are free to bid ourselves or to
license another party to operate an ASAP in that location. Under our agreement,
Host Marriott Services may only develop a franchised restaurant in a mall when
it obtains a master concessionaire agreement with the landlord to provide all
food services within the food court or other multiple-concept area. Once we
have agreed to Host Marriott Services' development of an ASAP restaurant in an
airport or travel plaza location, we may not license or operate a full service
restaurant ourselves at those locations. There is no corresponding prohibition
with respect to mall locations.
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Host Marriott Services retains its limited exclusive rights for the
development of ASAP restaurants until May 2003, after which it may continue our
agreement for three additional terms which ultimately expire in 2018. We have
the right to terminate the agreement if Host Marriott Services does not open 25
restaurants by May 2003. Host Marriott Services pays an initial franchise fee
of $20,000 for each ASAP restaurant at a new location and $10,000 for each
additional ASAP restaurant at an existing location, and continuing royalties at
rates of 5% to 5.5% of gross sales. The Host Marriott Services franchise
agreements typically terminate at the same time as Host Marriott Services'
concessionaire agreement to operate at an airport or mall.
Our territorial development agreements with our other franchisees grant them
the exclusive right to an identified territory subject to meeting development
obligations. Our basic franchise agreement with these franchisees generally
requires payment of an initial fee of between $55,000 and $65,000 for a full
service restaurant, as well as continuing royalties at a rate of 5% to 6% of
gross revenue. Most of our franchise agreements contain a ten or 20 year term.
Agreement with Kraft Pizza Company
We have entered into a strategic alliance with Kraft Pizza Company to
manufacture and distribute a line of California Pizza Kitchen premium frozen
pizzas in the United States and Canada. Kraft currently makes and distributes
frozen versions of seven of our pizzas: the Five Cheese Pizza, BBQ Chicken
Pizza, Garlic Chicken Pizza, Rosemary Chicken-Potato Pizza, Portabello Mixed
Mushroom Pizza, Southwestern Chicken Pizza, and Thai Chicken Pizza. Our frozen
pizzas are currently sold in supermarkets in Atlanta, Las Vegas, Phoenix, the
San Francisco Bay area, Sacramento and the greater Southern California area,
including Los Angeles and San Diego. We intend to expand our distribution area
to include additional selected markets, with an initial focus on those markets
in which our restaurants are located. We are also investigating the potential
for selling our premium frozen pizza in alternative settings.
Management information systems
All of our restaurants use computerized management information systems,
which are designed to improve operating efficiencies, provide corporate
management timely access to financial and marketing data, and reduce restaurant
and corporate administrative time and expense. Our restaurant systems include a
point-of-sale system which facilitates the movement of customer food and
beverage orders from the dining areas to the appropriate menu item preparation
area within the restaurant. The data captured by our restaurant level systems
include restaurant sales, cash and credit card receipts, quantities of each
menu item sold, customer counts and daily labor expense. This information is
generally transmitted to the corporate office daily. Each week, every
restaurant prepares a flash profit and loss statement that is compared to
budget and the prior year.
Our corporate information systems provide management with operating reports
that show restaurant performance comparisons with budget and prior year results
both for the current accounting period and year-to-date. These systems allow us
to closely monitor restaurant sales, cost of sales, labor expense and other
restaurant trends on a daily, weekly and monthly basis. We believe these
systems will enable both restaurant and corporate management to adequately
manage the operational and financial performance of our restaurants as
necessary to support our planned expansion.
Purchasing
Our purchasing staff procures all of our food ingredients, products and
supplies. We seek to obtain the highest quality ingredients, products and
supplies from reliable sources at competitive prices. To that end, we
continually research and evaluate various food ingredients, products and
supplies for consistency and compare them to our detailed specifications.
Specific qualified manufacturers and growers are then inspected and approved
for use. This process is repeated at least once a year. To maximize our
purchasing efficiencies and obtain the lowest possible prices for our
ingredients, products and supplies, while maintaining the highest quality, our
centralized purchasing staff generally negotiates all prices in one of two
formats: (a) fixed price contracts generally with terms of between one month to
one year or (b) based on monthly commodity pricing formulas.
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In order to provide the freshest ingredients and products, and to maximize
operating efficiencies between purchase and usage, each restaurant's kitchen
manager determines its daily usage requirements for food ingredients, products
and supplies. The kitchen manager orders accordingly from approved local
vendors and our national master distributor. The kitchen managers also inspect
all deliveries daily to ensure that the items received meet our quality
specifications and negotiated prices. We believe that competitively priced,
high quality alternative manufacturers, vendors, growers and distributors are
available should the need arise.
Employees
As of the date of this prospectus, we have approximately 5,000 employees,
including 66 employees located at our corporate headquarters. Our employees are
not covered by any collective bargaining agreement. We consider our employee
relations to be very good.
Competition
The restaurant industry is intensely competitive. We compete on the basis of
the taste, quality and price of food offered, customer service, ambience,
location and overall dining experience. We believe that our concept, attractive
price-value relationship and quality of food and service enable us to
differentiate ourselves from our competitors. Although we believe we compete
favorably with respect to each of these factors, many of our direct and
indirect competitors are well-established national, regional or local chains
and some have substantially greater financial, marketing, and other resources
than we do. We also compete with many other restaurant and retail
establishments for site locations and restaurant level employees. The packaged
food industry is also intensely competitive.
Properties
Our corporate headquarters are located in Los Angeles, California. We occupy
this facility under a lease which terminates in August 2002, with an option to
extend until August 2007. We lease the majority of our restaurant facilities,
although we own our restaurants in: Alpharetta, Georgia; Grapevine, Texas;
Scottsdale, Arizona; Schaumberg, Illinois; and one location in Atlanta,
Georgia. The majority of our leases are for ten- or fifteen-year terms and
include options to extend the terms. The majority of our leases also include
both minimum rent and percentage-of-sales rent provisions.
Trademarks
Our registered trademarks and service marks include, among others, the word
mark "California Pizza Kitchen" and our stylized logo set forth on the front
and back pages of this prospectus. We have registered all of our marks with the
United States Patents and Trademark Office. We have registered our most
significant trademarks and service marks in 22 foreign countries, in addition
to the Benelux Customs Union and the European Union. In order to better protect
our brand, we have also registered our ownership of the Internet domain names
"www.cpk.com" and "www.californiapizzakitchen.com". We believe that our
trademarks, service marks and other proprietary rights have significant value
and are important to our brand-building efforts and the marketing of our
restaurant concepts. We have in the past and expect to continue to vigorously
protect our proprietary rights. We cannot predict, however, whether steps taken
by us to protect our proprietary rights will be adequate to prevent
misappropriation of these rights or the use by others of restaurant features
based upon, or otherwise similar to, our concept. It may be difficult for us to
prevent others from copying elements of our concept and any litigation to
enforce our rights will likely be costly.
Government regulation
Our restaurants are subject to licensing and regulation by state and local
health, sanitation, safety, fire and other authorities, including licensing and
regulation requirements for the sale of alcoholic beverages and food. To date,
we have not experienced an inability to obtain or maintain any necessary
licenses, permits or
38
approvals, including restaurant, alcoholic beverage and retail licensing. The
development and construction of additional restaurants will also be subject to
compliance with applicable zoning, land use and environmental regulations. We
are also subject to federal regulation and state laws that regulate the offer
and sale of franchises and substantive aspects of a licensor-licensee
relationship. Various federal and state labor laws govern our relationship with
our employees and affect operating costs. These laws include minimum wage
requirements, overtime, unemployment tax rates, workers' compensation rates,
citizenship requirements and sales taxes. In addition, the federal Americans
With Disabilities Act prohibits discrimination on the basis of disability in
public accommodations and employment.
Litigation
Occasionally, we are a defendant in litigation arising in the ordinary
course of our business, including claims resulting from "slip and fall"
accidents, employment-related claims and claims from guests alleging illness,
injury or other food quality, health or operational concerns. To date, none of
these types of litigation, all of which are covered by insurance, has had a
material effect on us and, as of the date of this prospectus, we are not a
party to any material litigation except as described below.
We are a defendant to a lawsuit filed on March 11, 1998 in the 152nd
Judicial District Court of Harris County, Texas, brought under the Telephone
Consumer Protection Act of 1991. This lawsuit alleges that we sent 8,200 faxes
in violation of the federal act that requires the recipient's consent prior to
sending an unsolicited fax. The federal act provides for minimum damages of
$500 per fax received by a plaintiff with the possibility for an additional
$1,000 per fax if the plaintiff can prove that the defendant knowingly violated
the law. Although not currently so certified, if the plaintiff is able to
achieve class certification, we could potentially be liable for significant
amounts, including the amounts claimed by plaintiff of $4.1 million in regular
damages, and $8.2 million in additional damages. We currently believe we will
prevail on this claim because the plaintiffs have been unable thus far to
produce evidence that any faxes were actually sent by us or on our behalf, or
that the agent that we employed to send the faxes did so without obtaining the
necessary consents. We filed for and successfully obtained summary judgment in
this matter on March 7, 2000. The plaintiffs subsequently moved for a new
trial, and we expect the judge to make a ruling on the motion in the near
future.
39
MANAGEMENT
Executive officers and directors
The following table sets forth information with respect to our executive
officers and directors.
Name Age Position
---- --- --------
Larry S. Flax............... 57 Co-Chairman of the Board of Directors and
Director
Richard L. Rosenfield....... 55 Co-Chairman of the Board of Directors and
Director
Frederick R. Hipp........... 50 Chief Executive Officer, President and
Director
H.G. Carrington, Jr. ....... 45 Executive Vice President, Chief Financial
Officer and Secretary
Frederick F. Wolfe.......... 50 Senior Vice President Operations
Tom N. Jenneman............. 39 Senior Vice President and Chief Development
Officer
Sarah A. Goldsmith.......... 35 Vice President Marketing and Public
Relations
Julie Carruthers............ 38 Vice President Human Resources and Training
Douglas A. MacDonald........ 58 Vice President Design and Construction
Karen M. Settlemyer......... 48 Vice President Product Development and
Purchasing
Gregory S. Levin............ 32 Vice President, Controller and Assistant
Secretary
Harold O. Rosser(1)......... 51 Director
Bruce C. Bruckmann(1)....... 46 Director
Fortunato N. Valenti........ 52 Director
Brian P. Friedman(1)........ 44 Director
|
(1) Compensation and Audit Committee member.
Larry S. Flax, a co-founder, has served as Co-Chairman of the Board of
Directors since our formation in October 1985. From 1985 to 1996, Mr. Flax also
served as Co-Chief Executive Officer. Prior to founding our company, he
practiced law as a principal in Flax and Rosenfield, Inc. after serving as an
Assistant United States Attorney, Department of Justice and Assistant Chief of
Criminal Division and Chief, Civil Rights Division of the United States
Attorney's Office in Los Angeles. Mr. Flax also serves on the board of
directors of Arden Realty, Inc.
Richard L. Rosenfield, a co-founder, has served as Co-Chairman of the Board
of Directors since our formation in October 1985. From 1985 to 1996, Mr.
Rosenfield also served as Co-Chief Executive Officer. Prior to founding our
company, he practiced law as a principal of Flax and Rosenfield, Inc. after
serving with the Department of Justice, Criminal Division, Appellate Section in
Washington, D.C. and as an Assistant United States Attorney, Special
Prosecutions Section of the Criminal Division, in Los Angeles. Mr. Rosenfield
also serves on the board of directors of Callaway Golf Company.
Frederick R. Hipp has served as Chief Executive Officer and President since
January 1998 and as a Director since February 1998. From 1980 to 1997, Mr. Hipp
was employed by Houlihan's Restaurant Group, in Kansas City, Missouri, where he
most recently served as President and Chief Executive Officer. From 1978 to
1980, Mr. Hipp was President of Restaurant Data Systems in Dallas, Texas where
he consulted with major hotel and restaurant chains on financial and restaurant
operations. From 1972 to 1978, Mr. Hipp worked for Steak & Ale Restaurants in
Dallas, Texas where he last served as the Director of Restaurant Systems and
Administration. Mr. Hipp serves on the board of directors of Acapulco
Restaurants, Inc.
40
H.G. Carrington, Jr. has served as Executive Vice President, Chief Financial
Officer, and Secretary since May 1998. From 1993 to 1998, Mr. Carrington served
as Chief Financial Officer of Dallas-based Spaghetti Warehouse, Inc., and, from
1990 to 1998, on its board of directors.
Frederick F. Wolfe has served as Senior Vice President Operations since July
1997. From 1983 to 1997, Mr. Wolfe worked at Acapulco Restaurants where he most
recently served as Senior Vice President Operations.
Tom N. Jenneman has served as Senior Vice President and Chief Development
Officer since November 1999. From 1992 to 1999, Mr. Jenneman worked at Brinker
International where he most recently served as Vice President, Real Estate, New
Business Development.
Sarah A. Goldsmith has served as Vice President Marketing and Public
Relations since 1992. Ms. Goldsmith joined us in 1990 as Director of Public
Relations. In addition to her duties at California Pizza Kitchen, Ms. Goldsmith
currently acts as Co-Chairperson of the Board of Marketing Executives Group, a
division of the National Restaurant Association. In 1996, Advertising Age
Magazine named Ms. Goldsmith one of the "Marketing 100," a distinction given to
the top 100 marketers in the United States.
Julie Carruthers has served as Vice President Human Resources and Training
since 1998. We hired Ms. Carruthers as our first employee in January 1985 to
create a service training program and train the service staff of the first
location. Ms. Carruthers was Vice President of Training from 1990 to 1998.
Douglas A. MacDonald has served as Vice President Design and Construction
since 1997. From 1996 to 1997, Mr. MacDonald was Director of Design and
Construction with Papa Murphy's, a 240 unit "take and bake" chain. From 1987 to
1996, he served as Director of Design and Construction with International House
of Pancakes in Glendale, California. Mr. MacDonald has directed the design and
construction of over 580 new food facilities throughout the United States and
Canada as well as the remodeling of over 450 existing restaurants.
Karen M. Settlemyer, has served as Vice President Product Development and
Purchasing since 1996. From 1993 to 1996, Ms. Settlemyer was Director of
Product Development at Boston Market, Inc., during which time she created their
very successful Carver Sandwich Program. In 1989, she held the position of Vice
President of Research and Development for Grand American Fare. Ms. Settlemyer
is a 22 year food service veteran and registered dietician.
Gregory S. Levin has served as Controller and Assistant Secretary since
August 1998 and was appointed a Vice President in November 1999. Since joining
us in 1996, Mr. Levin has served in various accounting and finance positions.
From 1990 to 1996, Mr. Levin worked at Ernst & Young LLP, most recently as a
manager in their Entrepreneurial Services Group.
Harold O. Rosser has served as a Director since September 1997. Since 1995,
Mr. Rosser has been a managing director of the investment firm of Bruckmann,
Rosser, Sherrill & Co., Inc., the management company for Bruckmann, Rosser,
Sherrill & Co., L.P., which is a 39.5% shareholder in our company. Mr. Rosser
serves on numerous boards of directors including those of O'Sullivan
Industries, Inc., B&G Foods, Inc., American Paper Group, Inc., Acapulco
Restaurants, Inc., Au Bon Pain Corporation and Penhall International, Inc.
Bruce C. Bruckmann has served as a Director since September 1997. Since
1995, Mr. Bruckmann has been a managing director of the investment firm of
Bruckmann, Rosser, Sherrill & Co., Inc. Mr. Bruckmann serves on numerous boards
of directors including those of Mohawk Industries, Inc., AmeriSource Health
Corporation, Chromcraft Revington Corporation, Jitney-Jungle Stores of America,
Inc., Town Sports International, Inc., Anvil Knitwear, Inc., Mediq
Incorporated, Acapulco Restaurants, Inc. and Penhall International, Inc.
Fortunato N. Valenti has served as a Director since September 1997, and
briefly served as our Chief Executive Officer from mid-1997 to January 1998.
Since 1994, Mr. Valenti has been the President and Chief Executive Officer of
Restaurant Associates, Corp. Mr. Valenti also serves on the boards of directors
of Papa Gino's pizza chain, Au Bon Pain Corporation and Acapulco Restaurants,
Inc.
41
Brian P. Friedman has served as a Director since October 1997. Since 1994,
Mr. Friedman has been the President of ING Furman Selz Investments, a private
equity investment firm. Furman Selz SBIC Investments LLC, of which Mr. Friedman
is the president, is the general partner in Furman Selz SBIC, L.P. which is a
11.5% shareholder in our company. Mr. Friedman also serves on the boards of
directors of Acapulco Restaurants, Inc., Au Bon Pain Corporation, BricsNet
N.V., Gilat-To-Home, Inc., Cognitive Arts, Inc. and IDB Carries B.V. Mr.
Friedman also serves on the boards of managers of Apartment MediaWorks LLC,
Beacon Industrial Group LLC and Stagebill LLC.
Board of directors; committees
Our board of directors consists of seven members. Subject to a securities
holders agreement, in accordance with our bylaws, our board of directors may
elect to increase the number of directors as long as the number of directors is
not below five or above nine.
Pursuant to a securities holders agreement which we expect will terminate
upon the consummation of this offering, our board of directors must be composed
of at least five persons, with the exact number to be determined by Bruckmann,
Rosser, Sherrill & Co., L.P. from time to time. Pursuant to this agreement,
Rick Rosenfield and Larry Flax each were elected Co-Chairman of the Board, and
all remaining members of our board have been designated by Bruckmann, Rosser.
The voting rights contained in this agreement will terminate upon the
completion of this offering.
The compensation committee of our board of directors recommends, reviews and
oversees the salaries, benefits and option plans for our employees, consultants
and other individuals compensated by us. The compensation committee also
administers our option plan. The members of the compensation committee are
Messrs. Rosser, Bruckmann and Friedman.
The audit committee of our board of directors reviews, acts on and reports
to our board with respect to various auditing and accounting matters, including
the recommendation of our auditors, the scope of our annual audits, fees to be
paid to the auditors, evaluating the performance of our independent auditors
and our accounting practices. The members of the audit committee are Messrs.
Rosser, Bruckmann and Friedman.
Director compensation
Our directors do not receive cash compensation for their services. Non-
employee directors are reimbursed for reasonable expenses incurred in
connection with serving as a director.
Compensation committee interlocks and insider participation
Our compensation committee currently consists of Messrs. Rosser, Bruckmann
and Friedman. No member of the compensation committee has served as one of our
officers or employees at any time. None of our executive officers serves as a
member of the board of directors or compensation committee of any other company
that has one or more executive officers serving as a member of our board of
directors or compensation committee.
Indemnification and limitation of director and officer liability
In accordance with provisions of the California Corporations Law, our
articles of incorporation provide that the liability for monetary damages of
our directors shall be eliminated to the fullest extent permitted by California
law. Further, our articles authorize us to provide indemnification to our
agents (including our officers and directors). Our bylaws provide for this
indemnification of our corporate agents to the maximum extent permitted by
California law. See "Certain Relationships and Related Transactions."
42
Executive compensation
The following table sets forth information regarding the compensation earned
during 1999 by our Chief Executive Officer and President and each of our other
four most highly compensated executive officers.
Summary Compensation Table
Long Term
Annual Compensation
Compensation(1) Awards
-------------------- ------------
Securities
Underlying
Name and Principal Position Salary Bonus Options
--------------------------- -------- -------- ------------
Frederick R. Hipp
Chief Executive Officer and President....... $500,000 $312,500 --
Larry S. Flax
Co-Founder and Co-Chairman of the Board of
Directors.................................. 450,000(2) -- --
Richard L. Rosenfield
Co-Founder and Co-Chairman of the Board of
Directors.................................. 450,000(2) -- --
H.G. Carrington, Jr.
Executive Vice President and Chief Financial
Officer..................................... 207,523 118,720 35,000
Frederick F. Wolfe
Senior Vice President Operations............ 188,754 104,720 35,000
|
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation described in this table does not include medical, group life
insurance or other benefits received by the named executive officers that
are available generally to all of our salaried employees and perquisites
and other personal benefits received by the named executive officers that
do not exceed the lesser of $50,000 or 10% of the officer's salary and
bonus disclosed in this table.
(2) We expect Messrs. Flax and Rosenfield to execute amended and restated two
year employment agreements that become effective upon consummation of this
offering. These agreements will provide that we will eliminate their
individual salaries as of October 1, 2000 and grant each of them non-
qualified stock options to purchase 180,000 shares of common stock with an
exercise price equal to the initial public offering price. See
"Management--Employment Agreements."
43
Option grants during 1999
The following table sets forth information concerning stock options that we
granted to our named executive officers in 1999. We have never issued stock
appreciation rights.
Individual Grants
---------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Number of Percentage of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Option Term(5)
Options Employees in Exercise Price Expiration --------------------
Name Granted(1) 1999(2) (per share)(3) Date(4) 5% 10%
---- ---------- ------------- -------------- ---------- --------- ----------
Frederick R. Hipp....... -- --% $ -- -- $ -- $ --
Larry S. Flax........... -- -- -- -- -- --
Richard L. Rosenfield... -- -- -- -- -- --
H.G. Carrington, Jr. ... 35,000(6) 6.38 4.35 11/02/09 95,749 242,647
Frederick F. Wolfe...... 35,000(6) 6.38 4.35 11/02/09 95,749 242,647
|
(1) Represents options we granted under our 1998 Stock Option Plan.
(2) Based on an aggregate of 549,000 shares of our common stock which are
subject to options granted to employees during 1999.
(3) We granted options at an exercise price equal to the fair market value of
our common stock as determined by our board of directors at the date of
grant. In determining the fair market value of our common stock, the board
considered various factors, including the formula used to value our stock
in our merger and leveraged recapitalization transaction, our financial
condition and business prospects, operating results, the absence of a
market for our common stock and the risks normally associated with
investments in companies engaged in similar businesses.
(4) The term of each option we grant is generally ten years from the date of
grant. Our options may terminate before their expiration dates if the
option holder's status as an employee is terminated or upon the option
holder's death or disability.
(5) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and do
not represent either historical appreciation or our estimate or projection
of our future common stock prices.
(6) 8,750 of these options vest on each of the first four anniversaries of the
grant date of November 2, 1999.
44
Aggregated option exercises in 1999 and year-end option values
The following table sets forth information concerning options that our named
executive officers exercised during 1999 and the number of shares subject to
both exercisable and unexercisable stock options as of January 2, 2000. The
table also reports values for "in-the-money" options that represent the
positive spread between the exercise prices of outstanding options and the
assumed initial public offering price. We have never issued stock appreciation
rights.
Number of Securities
Underlying Unexercised Value of Unexercised
Number of Options at January 2, In-the-Money Options at
Shares 2000 January 2, 2000 (1)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Frederick R. Hipp....... -- $ -- $ -- 221,392(2) $ -- $
Larry S. Flax........... -- -- -- -- -- --
Richard L. Rosenfield... -- -- -- -- -- --
H.G. Carrington, Jr..... 140,122 236,025 -- 35,000 --
Frederick F. Wolfe...... 123,196 161,683 -- 72,500 --
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(1) Calculated by determining the difference between the initial public
offering price and the exercise price of each officer's options.
(2) This option grant will become fully exercisable upon the consummation of
this initial public offering, if the public offering price implies an
aggregate market value for all shares of our common stock, on a pre-
offering basis of $150 million. If this implied pricing is not achieved,
the option may then become exercisable if Bruckmann, Rosser, Sherrill &
Co., L.P. and its co-investors sell a majority of their shares of our
capital stock at minimum prices which imply an aggregate market value for
all outstanding shares of our common stock of $115,875,758 if the sale
occurs before January 1, 2002 or $165,875,758 if the sale occurs after
January 1, 2002 but prior to January 1, 2004.
Stock plans
As of the date of this prospectus, our employees hold outstanding stock
options for the purchase of 1,346,313 shares of our common stock. Options for
the purchase of an additional 1,201,132 shares of the our common stock are
presently reserved for issuance under our 1998 Stock Plan. The following
section provides more detailed information concerning this plan as well as
information concerning stock options that we granted in prior years under older
plans.
Employee stock purchase plan
In November 1999, we adopted an employee stock purchase plan under Section
423 of the Internal Revenue Code of 1986, as amended, which will become
effective upon the completion of this offering. Under our employee stock
purchase plan, all employees who work at least 20 hours a week and have been
with us for a minimum of one year are eligible to purchase shares of our common
stock through after-tax payroll deductions. Eligible employees will be able to
apply up to 15% of their annual gross pay towards the purchase of our common
stock at a price equal to 85% of the then fair market value of the shares. The
fair market value will be the lesser of (a) the price on the first day of each
offering period under the plan (which, in the case of the first offering
period, will be the price at which shares are sold in this offering) or, if the
employee is not eligible to participate on the first day of the offering
period, on the date he or she actually begins to participate, and (b) the price
on the date of actual purchase. All employees with rights to purchase shares
under the plan will only be able to do so on pre-determined exercise dates that
will occur four times per offering period, and may only purchase up to that
number of shares having an aggregate fair market value of $21,250 per year.
45
1998 Stock-Based Incentive Compensation Plan
In February 1998, we adopted our 1998 Stock-Based Incentive Compensation
Plan to assist us in attracting, retaining and rewarding valued employees,
directors and independent contractors by offering them a greater stake in our
success and to encourage ownership in our stock by these employees, directors
and independent contractors. A total of 4,000,000 shares of our common stock
have been reserved for issuance under this plan. To date we have granted
options to acquire 2,798,868 shares under this plan and our employees have
exercised options to purchase 1,475,976 shares. We last granted options under
this plan in February 2000.
Our 1998 plan functions as a discretionary option grant program, under which
eligible individuals in our employ or service, including officers, non-employee
board members and consultants, may, at the discretion of the plan
administrator, be granted options to purchase shares of common stock at an
exercise price to be determined by our compensation committee. However, the
exercise price of incentive stock options must be not less than 100% of the
fair market value of the shares on the grant date or, in the case of incentive
stock options granted to our employees who hold more than 10% of our
outstanding common stock, the exercise price must be not less than 110% of the
fair market value of the shares on the grant date.
Our compensation committee administers our 1998 plan and has complete
discretion to determine which individuals are eligible to receive option
awards, the time or times when these option awards are to be made, the number
of shares subject to each award, the status of any grant as either an incentive
stock option or a non-statutory stock option under the federal tax laws, the
vesting schedule to be in effect for the option award, the term for which any
granted option is to remain outstanding (not to exceed ten years), the extent
to which a change in control of our company will affect outstanding option
awards, the extent of transferability of non-qualified option awards by the
holder, and the extent to which an option may be exchanged for cash.
The exercise price for the shares of common stock subject to option grants
made under our 1998 plan may be paid in cash, in shares of common stock valued
at fair market value on the exercise date or other consideration as our
compensation committee may determine. The option may also be exercised through
a same-day sale program without any cash outlay by the optionee.
The 1998 plan shall remain in effect until 2008 unless terminated earlier by
our board of directors.
1990 Employee Equity Participation Plan
We adopted our 1990 Employee Equity Participation Plan effective March 1,
1990. This plan enabled our board of directors to grant to officers, directors,
employees and consultants of our company options for the purchase of up to an
aggregate of 1,000,000 shares of common stock. We granted both non-qualified
options and incentive stock options under this 1990 plan. The number of
outstanding and exercisable options remaining under this plan totals 23,421 and
the exercise price of each option is $7.50. No further options can be granted
under this plan.
Employment agreements
We expect to enter into an amended employment agreement with our Co-Chairman
of the Board of Directors, Rick Rosenfield, which will be effective upon
consummation of this offering. This agreement will provide that we will
continue to employ Mr. Rosenfield through September 30, 2002 to assist us in
developing our menu and recipes, engage in public relations activities, work on
the aesthetic design of the restaurants and identify potential locations and
franchisees for new restaurant locations. Under this agreement, we will pay
Mr. Rosenfield a salary of $450,000 per year through September 30, 2000. After
that date, Mr. Rosenfield will not receive any further salary or bonus
payments. However, Mr. Rosenfield will be granted options to purchase an
additional 180,000 shares of our common stock which will vest as to half of the
shares on September 30, 2001 and as to the remaining shares on September 30,
2002. Mr. Rosenfield will also receive an automobile allowance of $2,000 each
month and reimbursement of dues in a country or dining club. During the term of
the agreement, Mr. Rosenfield may not compete in any business that sells pizza
or other menu items with recipes
46
that are identical or substantially the same as our recipes. Mr. Rosenfield has
also agreed not to solicit any of our employees until three years after his
employment terminates.
We also expect to enter into an amended employment agreement with our Co-
Chairman of the Board of Directors, Larry S. Flax, on the same terms as Mr.
Rosenfield's amended employment agreement.
In March 1998, we entered into a severance agreement with our Chief
Executive Officer and President, Frederick R. Hipp. This agreement provides
that we will be obligated to pay Mr. Hipp the amount of his base salary (up to
a maximum of $500,000) for one year following the date his employment
terminates, unless we terminate Mr. Hipp for cause, his employment terminates
because of his death, disability or retirement, or he voluntarily terminates
his employment. This severance agreement does not obligate Mr. Hipp to continue
his employment with us or obligate us to continue to employ him.
In May 1998, we entered into a severance agreement with our Executive Vice
President and Chief Financial Officer, H.G. Carrington, Jr. This agreement
provides that if we terminate Mr. Carrington, or constructively terminate him
(by demoting him or decreasing his base salary), following a change in control
or after Mr. Hipp is no longer the person to whom Mr. Carrington reports or the
person who has ultimate control over Mr. Carrington's employment, we will be
obligated to pay Mr. Carrington the amount of his base salary for one year
following the termination. We will not make this severance payment if we
terminate Mr. Carrington for cause or if his employment is terminated because
of death, disability or retirement. This severance agreement does not obligate
Mr. Carrington to continue his employment with us or obligate us to continue to
employ him.
In November 1999, we entered into an agreement with our Senior Vice
President Operations, Frederick F. Wolfe, that provides that, after the
termination of his employment, we will continue to pay him amounts equal to his
base salary for a period of twenty-six weeks unless his employment is
terminated as a result of his death, disability or retirement or unless we
terminate his employment for cause. We will continue to pay him thereafter for
a subsequent period of twenty-six weeks amounts equal to his base salary if he
is reasonably unable to find new employment unless his employment is terminated
as a result of his death, disability or retirement or unless we terminate his
employment for cause. If he finds employment during this subsequent twenty-six
week period that pays less than the base salary we would otherwise owe him, we
will pay him an amount equal to the difference.
In November 1999, we entered into an agreement with our Senior Vice
President and Chief Development Officer, Tom N. Jenneman, on the same terms as
Mr. Wolfe's severance agreement.
47
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our articles of incorporation provide that the liability of our directors to
us for monetary damages shall be eliminated to the fullest extent permissible
under California law. Our articles of incorporation further provide that we are
authorized to provide indemnification of agents (as defined in the California
General Corporation Law) for breach of duty to us and our shareholders which is
in excess of the indemnification otherwise permitted by Section 317 of the
California General Corporation Law, subject to the limits set forth in the
Section 204 of the California General Corporation law which exclude
indemnification for (a) acts or omissions that involve intentional misconduct
or knowing and culpable violation of law, (b) acts or omissions that a director
believes to be contrary to our best interests or to the best interests of our
shareholders or that involve the absence of good faith on the part of the
director, (c) any transaction from which a director derived an improper
personal benefit, (d) for acts or omissions that show a reckless disregard for
the director's duty to us or our shareholders in circumstances in which the
director was aware, or should have been aware, in the ordinary course of
performing the director's duties, of a risk of serious loss to us or our
shareholders, (e) acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to us or our
shareholders, (f) in certain circumstances involving contracts in which the
director has a material financial interest, and (g) for circumstances involving
improper dividends, loans and guarantees.
Our bylaws provide that we will indemnify any person who is made a party or
is threatened to be made a party to any legal action based on the person's
serving as our officer or director or at our request as an officer or director
of another entity. Our bylaws also provide that we will advance expenses in
defending against any such action.
Our Chief Executive Officer and President, Frederick R. Hipp, has advised us
that he intends to exercise options to purchase an aggregate of 221,392 shares
concurrently with the consummation of this offering. Under the agreement
granting these options, we must pay Mr. Hipp an amount of cash equal to 20% of
the gain he will recognize for federal income tax purposes as a result of such
exercise. We intend to loan Mr. Hipp an amount equal to difference between this
cash payment and the total tax liability he will incur as a result of this
exercise (including the amount of the cash payment). The promissory note will
bear interest at the rate of %. The principal and interest under the note
will be due and payable on the earlier to occur of (a) three days after the
date of sale of any of the option shares purchased upon exercise, (b) 30 days
after the date his employment is terminated for cause or after the date he
voluntarily terminates his employment, (c) one year after the date his
employment terminates due to death or disability, and (d) , 2002. Mr. Hipp
will also be required to apply a portion of any amounts which would otherwise
be payable as bonus compensation against amounts due under this note.
On September 28, 1999, we loaned $96,000 to our Executive Vice President and
Chief Financial Officer, H. G. Carrington, Jr., and $71,000 to our Senior Vice
President Operations, Frederick F. Wolfe, to enable them to pay the taxes
resulting from their exercise of options to purchase shares of our common stock
on the same date. The loans are evidenced by promissory notes which bear
interest at 7.5%. The principal and interest under the notes is due and payable
on the earlier to occur of (a) three days after the date of sale of any of the
option shares purchased upon exercise and (b) March 31, 2001. Each officer must
also apply a portion of any amounts which would otherwise be payable as bonus
compensation against amounts due under the notes. We also have the right to
repurchase 56,049 of Mr. Carrington's shares and 55,348 of Mr. Wolfe's shares
for their original exercise price of $0.1655 per share if that officer
voluntarily terminates his employment or is terminated for cause prior to the
consummation of this offering. As of April 2, 2000 the amounts outstanding
under Mr. Carrington's and Mr. Wolfe's promissory notes are $70,000 and
$49,000, respectively.
48
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of the date of this prospectus and after the
offering, in each case as adjusted to reflect the conversion and redemption of
our outstanding preferred stock and the sale of the common stock offered by us
with respect to:
. each person or entity who is known by us to beneficially own five percent
or more of our outstanding common stock;
. each of our directors;
. each of our named executive officers; and
. all of our directors and executive officers as a group.
Shares
Shares Beneficially Beneficially
Owned Prior to the Owned After the
Offering(1) Offering(2)
--------------------- -----------------
Name of Beneficial Owner Number Percentage Number Percentage
------------------------ ---------- ---------- ------ ----------
Bruckmann, Rosser, Sherrill & Co.,
L.P.(3).............................. 8,738,169 39.5% %
Larry S. Flax(4)...................... 2,613,729 11.8
Richard L. Rosenfield(5).............. 2,469,552 11.2
Bruce Bruckmann(3)(6)................. 9,352,757 42.3
Harold O. Rosser(3)(7)................ 12,489,944 56.4
Stephen C. Sherrill(3)(8)............. 9,352,757 42.3
Stephen F. Edwards(3)(9).............. 12,489,188 56.4
Furman Selz SBIC LP(10)............... 2,535,894 11.5
Frederick R. Hipp(11)................. 1,087,588 4.9
F. Nicholas Valenti(12)............... 830,220 3.8
H.G. Carrington, Jr.(13).............. 280,244 1.3
Frederick F. Wolfe(14)................ 123,196 *
Brian P. Friedman(15)................. 2,535,894 11.5
All directors and executive officers
as a group (15 persons)(16).......... 20,075,167 90.7
|
* Less than 1%
(1) Percentage of ownership is calculated as required by Commission Rule 13d-
3(d)(1). Except as indicated in the footnotes to this table, the persons
named in this table have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them, subject to
community property laws. The table above includes the number of shares
underlying options which are exercisable within 60 days after the date of
this prospectus. The share numbers in this section have been rounded to
the nearest whole number.
(2) Reflects the number of shares of common stock expected to be issued upon
conversion of shares of preferred stock owned by the named shareholder.
This assumes an initial public offering price of $ per share and is
based upon responses received from the preferred shareholders regarding
their desire to convert their shares into shares of common stock as of the
date of this prospectus.
(3) Bruckmann, Rosser, Sherrill & Co., L.P. is a limited partnership, the sole
general partner of which is BRS Partners, Limited Partnership and the
manager of which is Bruckmann, Rosser, Sherrill & Co., Inc. The sole
general partner of BRS Partners is BRSE Associates, Inc. Bruce C.
Bruckmann, Harold O. Rosser, Stephen C. Sherrill and Stephen F. Edwards
are the only stockholders of Bruckmann, Rosser, Sherrill & Co., Inc. and
BRSE Associates and may be deemed to share beneficial ownership of the
shares shown as beneficially owned by Bruckmann, Rosser, Sherrill & Co.,
L.P. Each of Messrs. Bruckmann, Rosser, Sherrill and Edwards disclaims
beneficial ownership of any such shares. The address for all of these
shareholders is Greenwich Plaza, Suite 100, Greenwich, CT 06830.
49
(4) Mr. Flax exercises voting control over 169,918 of these shares as the
trustee of the Rosenfield Children's Trust. Mr. Flax disclaims any
beneficial ownership over these shares. Mr. Flax's address is 6053 West
Century Blvd., 11th Floor, Los Angeles, California 90045.
(5) Mr. Rosenfield's address is 6053 West Century Blvd., 11th Floor, Los
Angeles, California 90045.
(6) Mr. Bruckmann individually owns 177,748 shares of our common stock. The
total number also includes shares which are owned by Bruckmann, Rosser,
Sherrill & Co., L.P. and other entities and individuals affiliated with
it. Although Mr. Bruckmann may be deemed to share beneficial ownership of
such shares, he disclaims any beneficial ownership thereof.
(7) Mr. Rosser individually owns 36,222 shares of our common stock. Mr. Rosser
shares voting power over 3,137,188 shares with Stephen F. Edwards as co-
voting trustee under a Voting Trust Agreement dated September 30, 1997.
The voting trust will terminate upon consummation of this offering. Mr.
Rosser disclaims any beneficial ownership of such shares. The total number
also includes shares which are owned by Bruckmann, Rosser, Sherrill & Co.,
L.P. and other entities and individuals affiliated with it. Although Mr.
Rosser may also be deemed to share beneficial ownership of such shares, he
disclaims any beneficial ownership thereof.
(8) Mr. Sherrill individually owns 185,935 shares of our common stock. The
total number also includes shares which are owned by Bruckmann, Rosser,
Sherrill & Co., L.P. and other entities and individuals affiliated with
it. Although Mr. Sherrill may be deemed to share beneficial ownership of
such shares, he disclaims any beneficial ownership thereof.
(9) Mr. Edwards shares voting power over 3,137,188 shares with Harold O.
Rosser as co-voting trustee under a Voting Trust Agreement dated September
30, 1997. The voting trust will terminate upon consummation of this
offering. Mr. Edwards disclaims any beneficial ownership of such shares.
The total number also includes shares which are owned by Bruckmann,
Rosser, Sherrill & Co., L.P. and other entities and individuals affiliated
with it. Although Mr. Edwards also may be deemed to share beneficial
ownership of such shares, he disclaims any beneficial ownership thereof.
(10) Furman Selz has transferred its voting power to Messrs. Rosser and Edwards
under a Voting Trust Agreement dated September 30, 1997. The voting trust
will terminate upon consummation of this offering. Furman Selz's address
is 55 E. 52nd Street, New York, NY 10055.
(11) Mr. Hipp individually owns 664,176 shares of our common stock. We have the
right to repurchase 221,392 of these shares at a price of $0.15054 per
share if Mr. Hipp is terminated for cause or voluntarily quits his
employment prior to January 1, 2001. As the trustee of the Frederick R.
Hipp Revocable Trust, he controls an additional 202,020 shares.
Additionally, upon the completion of this initial public offering, Mr.
Hipp's options to buy 221,392 shares of our common stock may immediately
vest if the public offering price implies an aggregate market value for
all shares of our common stock, on a pre-offering basis, of $150 million.
If this implied pricing is not achieved, the option may then become
exercisable if Bruckmann, Rosser and its co-investors sell a majority of
their shares of our capital stock at minimum prices which imply an
aggregate market value for all outstanding shares of our common stock of
$115,875,758 if the sale occurs before January 1, 2002 or $165,875,758 if
the sale occurs after January 1, 2002 but prior to January 1, 2004. Mr.
Hipp's address is 6053 West Century Blvd., 11th Floor, Los Angeles,
California 90045.
(12) Mr. Valenti's address is Restaurant Associates, 120 E. 45th Street, New
York, NY 10036.
(13) Mr. Carrington, in joint tenancy with his wife, Ricki L. Carrington, owns
280,244 shares of our common stock. Mr. Carrington has options to buy an
additional 35,000 shares, none of which will be exercisable within 60 days
of this initial public offering. Mr. Carrington's address is 6053 West
Century Blvd., 11th Floor, Los Angeles, California 90045.
(14) Mr. Wolfe, as trustee of the 1998 Frederick Wolfe Revocable Trust,
exercises voting control over 123,196 shares of our common stock. Mr.
Wolfe has options to buy an additional 72,500 shares, 12,500 of which will
be exercisable within 60 days of this initial public offering. Mr. Wolfe's
address is 6053 West Century Blvd., 11th Floor, Los Angeles, California
90045.
50
(15) Mr. Friedman serves as the president of Furman Selz SBIC Investments LLC,
a general partner of Furman Selz SBIC LP which owns all 2,615,120 shares.
Mr. Friedman's address is ING Furman Selz Investments, 55 E. 52nd Street,
New York, NY 10055.
(16) These 15 persons include all directors and executive officers detailed in
the "Management" section above. See notes 4, 5, 6, 7, 11, 12, 13, 14 and
15 above. Sarah Goldsmith individually owns 15,803 shares and has options
to buy an additional 89,273 shares, 20,523 of which will be exercisable
within 60 days of this initial public offering. Julie Carruthers
individually owns 20,874 shares and has options to buy an additional
98,494 shares, 29,744 of which will be exercisable within 60 days of this
initial public offering. Douglas MacDonald individually owns 12,500 shares
and has options to buy 52,500 shares, 12,500 of which will be exercisable
within 60 days of this initial public offering. Karen Settlemyer
individually owns 12,500 shares and has options to buy 52,500 shares,
12,500 of which will be exercisable within 60 days of this initial public
offering. Tom N. Jenneman individually owns no shares and has options to
buy 75,000 shares, 18,750 of which will be exercisable within 60 days of
this initial public offering. Greg Levin individually owns no shares and
has options to buy 55,000 shares, 12,500 of which will be exercisable
within 60 days of this initial public offering. The address for all these
officers is 6053 West Century Blvd., 11th Floor, Los Angeles, California
90045.
51
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, our authorized capital stock will consist
of 80,000,000 shares of common stock, par value $0.01 per share, of which
shares will be issued and outstanding (assuming shares are sold in this
offering), and 40,000,000 shares of Class A Preferred Stock, of which no shares
will be issued and outstanding. In December 1997, we declared a dividend of one
share of Series A 12 1/2% Cumulative Compounding Preferred Stock and one share
of Series B 13 1/2% Cumulative Compounding Preferred Stock on each outstanding
share of our common stock. Subsequently, two of our executive officers were
also permitted to purchase shares of preferred stock (each was required to
purchase the same number of shares of Series A Preferred Stock as Series B
Preferred Stock). As discussed under "Use of Proceeds", all outstanding shares
of preferred stock will be converted into shares of common stock upon
consummation of this offering or redeemed using the proceeds of this offering.
All of the shares of outstanding Class A Preferred Stock which are redeemed or
converted will return to the status of authorized and unissued shares of
preferred stock and may be reissued as a part of a new series of preferred
stock to be created by resolution or resolutions of the board of directors.
Common stock
Before giving effect to the conversion of preferred stock into common stock
in connection with this offering, there are 21,793,372 shares of common stock
outstanding as of the date of this prospectus. These shares are held of record
by shareholders.
Holders of common stock are entitled to one vote per share on all matters to
be voted upon by shareholders. In accordance with California law, prior to the
closing of this offering, holders of common stock were entitled to cumulate
votes in the election of directors. However, after consummation of this
offering, holders of common stock will no longer be entitled to cumulate votes
in the election of directors. The shares of common stock have no preemptive
rights, no redemption or sinking fund provisions, and are not liable for
further call or assessment.
The holders of common stock are entitled to receive dividends when and as
declared by the board of directors out of funds legally available for
dividends. In the past, we have declared and paid cash dividends only in
connection with extraordinary corporate transactions such as PepsiCo's
acquisition of a controlling interest in us 1992. We currently intend to retain
all future earnings for the operation and expansion of our business and do not
anticipate paying cash dividends on the common stock in the foreseeable future.
Upon a liquidation of California Pizza Kitchen, our creditors and holders of
our preferred stock with preferential liquidation rights will be paid before
any distribution to holders of our common stock. The holders of common stock
would be entitled to receive a pro rata distribution per share of any excess
amount.
The rights, preferences and privileges of holders of common stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock which we may designate and issue in the
future.
Class A Preferred Stock
Our articles of incorporation empower the board of directors to issue up to
40,000,000 shares of Class A Preferred Stock from time to time in one or more
series. The board also may fix the designation, privileges, preferences and
rights and the qualifications, limitations and restrictions of those shares,
including dividend rights, conversion rights, voting rights, redemption rights,
terms of sinking funds, liquidation preferences and the number of shares
constituting any series or the designation of the series. Terms selected could
decrease the amount of earnings and assets available for distribution to
holders of our common stock or adversely affect the rights and power, including
voting rights, of the holders of our common stock without any further vote or
action by the shareholders. The rights of holders of common stock will be
subject to, and may be adversely affected
52
by, the rights of the holders of any Class A Preferred Stock that may be issued
by us in the future. The issuance of Class A Preferred Stock could have the
effect of delaying or preventing a change in control of the company or make
removal of management more difficult. Additionally, the issuance of Class A
Preferred Stock may have the effect of decreasing the market price of our
common stock, and may adversely affect the voting and other rights of the
holders of common stock. Upon consummation of this offering, there will be no
outstanding shares of our Class A Preferred Stock. While we have no present
intention to issue any shares of Class A Preferred Stock, any issuance could
have the effect of making it more difficult for a third party to acquire a
majority of our outstanding voting stock.
Potential anti-takeover effect of provisions of California law
Section 1203 of the California General Corporations Law includes provisions
that may have the effect of deterring hostile takeovers or delaying or
preventing changes in control or management of our company. First, if an
"interested person" makes an offer to purchase the shares of some or all of our
shareholders, we must obtain an affirmative opinion in writing as to the
fairness of the offering price prior to completing the transaction. California
law considers a person to be an "interested person" if the person directly or
indirectly controls our company, if the person is directly or indirectly
controlled by one of our officers or directors, or if the person is an entity
in which one of our officers or directors holds a material financial interest.
If after receiving an offer from such an "interested person" we receive a
subsequent offer from a neutral third party, then we must notify our
shareholders of this offer and afford each of them the opportunity to withdraw
their consent to the "interested person" offer.
Section 1203 and other provisions of California law could make it more
difficult for a third party to acquire a majority of our outstanding voting
stock, by discouraging a hostile bid, or delaying, preventing or detering a
merger, acquisition or tender offer in which our shareholders could receive a
premium for their shares, or effect a proxy contest for control of our company
or other changes in our management.
Registration rights
Following this offering the holders of shares of common stock will be
entitled to registration rights with respect to these shares pursuant to a
registration rights agreement by and among Bruckmann, Rosser, Sherrill & Co.,
L.P. and its co-investors and Rick Rosenfield and Larry Flax dated September
30, 1997. Subject to several exceptions, including our right to defer a demand
registration for a single period of up to 180 days under some circumstances,
Bruckmann, Rosser may require that we use our best efforts to register for
public resale under the Securities Act all shares of common stock they request
be registered. Bruckmann, Rosser may exercise an unlimited number of demand
registrations so long as the securities being registered are reasonably
expected to produce aggregate proceeds of $5 million or more. Rick Rosenfield,
Larry Flax and all of the co-investors with Bruckmann, Rosser in the
recapitalization transaction are entitled to piggyback registration rights on a
pro rata basis with respect to any demand registration request made by
Bruckmann, Rosser. All fees, costs and expenses of this registration, other
than underwriting discounts and commissions, will be borne by us.
In addition, all holders of shares with registration rights have the right
to piggyback on any registration for our account or the account of another
shareholder. Accordingly, in the event that we propose to register additional
shares of common stock under the Securities Act, either for our own account or
for the account of any other security holder, the holders of shares having
piggyback registration rights are entitled to receive notice of this
registration and to include their shares in the registration, subject to
limitations described in the agreement. All registration rights are subject to
conditions and limitations, among them the right of the underwriters of any
offering to limit the number of shares of common stock held by these security
holders to be included in the registration. We are generally required to bear
all of the expenses of all registrations, except underwriting discounts and
selling commissions. Registration of the shares of common stock held by
security holders with registration rights would result in these shares becoming
freely tradeable without restriction under the Securities Act immediately upon
effectiveness of this registration.
53
Transfer agent and registrar
has been appointed as the transfer agent and
registrar for the common stock. Its telephone number is .
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no market for our common stock. Future
sales of substantial amounts of common stock in the public market could
adversely affect market prices prevailing from time to time. Upon completion of
this offering, we will have outstanding an aggregate of shares of common
stock, assuming no exercise of the underwriters' over-allotment option, no
exercise of outstanding options and the conversion of shares of our
preferred stock into shares of common stock. Of these shares, the shares sold
in this offering will be freely tradeable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 of the
Securities Act, may generally only be sold in compliance with the limitations
of Rule 144 described below.
Sales of restricted shares
The remaining shares of common stock held by existing shareholders
are "restricted securities" under Rule 144. The number of shares of common
stock available for sale in the public market is limited by restrictions under
the Securities Act and lock-up agreements under which the holders of
shares have agreed not to sell or otherwise dispose of any of their shares for
a period of 180 days after the date of this prospectus without the prior
written consent of Banc of America Securities LLC. On the date of this
prospectus, no shares other than those offered in this initial public offering
will be eligible for sale. In addition, following the expiration of the lock-up
period, none of the restricted shares will become available for sale in the
public market until the expiration of their respective holding periods
(approximately % of these shares will have been held for more than one
year).
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned restricted shares for at least one year (including
the holding period of any prior owner, except if the prior owner was an
affiliate) would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of: (a) one percent of the number of
shares of common stock then outstanding (which will equal approximately
shares immediately after the offering); or (b) the average weekly trading
volume of the common stock on the Nasdaq National Market during the four
calendar weeks preceding the filing of a notice on Form 144 with respect to
this sale. Sales under Rule 144 are also subject to manner of sale provisions
and notice requirements and to the availability of current public information
about us. Under Rule 144(k), a person who is not deemed to have been an
affiliate of ours at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner except a prior owner who was
an affiliate), is entitled to sell its shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule
144; therefore, unless otherwise restricted, "144(k) shares" could be sold
immediately upon the completion of the offering. On the date of this
Prospectus, an aggregate of shares will qualify as "144(k)" shares which
are not otherwise restricted.
Upon completion of the offering, the holders of shares of common
stock, or their transferees, will be entitled to rights with respect to the
registration of their shares under the Securities Act. Registration of these
shares under the Securities Act would result in these shares becoming freely
tradeable without restriction under the Securities Act (except for shares
purchased by affiliates) immediately upon the effectiveness of this
registration.
54
Options
We intend to file a registration statement on Form S-8 covering all shares
of common stock issuable upon exercise of stock options in effect on the date
of this prospectus and stock options or other stock rights to be granted under
our stock option plan. Upon this registration on Form S-8, up to an additional
1,346,313 shares of common stock, together with any additional shares of common
stock that will be issuable pursuant to stock options or other stock rights
granted in the future under our stock option plan, will be eligible for sale in
the public market.
Subject to certain conditions, Rule 701 under the Securities Act may be
relied upon with respect to the resale of securities originally purchased from
us by our employees, directors, officers, consultants or advisors prior to the
closing of this offering, under written compensatory benefit plans or written
contracts relating to the compensation of these persons. This also applies to
stock options we granted prior to this offering, along with the shares acquired
upon exercise of those options after the closing of this offering. Beginning 90
days after the date of this prospectus (unless subject to lockup agreements or
other contractual restrictions) these shares may be sold by persons other than
affiliates subject only to the manner of sale provisions of Rule 144 and by
affiliates under Rule 144 without compliance with the one year minimum holding
period requirement.
Sales of substantial amounts of common stock in the public market, or the
perception that these sales may occur, could adversely affect the prevailing
market price of our common stock and our ability to raise capital through
capital offering or equity securities.
55
PLAN OF DISTRIBUTION
We are offering the shares of common stock described in this prospectus
through a number of underwriters. Banc of America Securities LLC, Deutsche Bank
Securities Inc. and FleetBoston Robertson Stephens Inc. are the representatives
of the underwriters. We have entered into an underwriting agreement with the
representatives. According to the terms and conditions of the underwriting
agreement, we have agreed to sell to the underwriters, and each of the
underwriters has agreed to purchase, the number of shares of common stock
listed next to its name in the following table:
Number
of
Underwriter Shares
----------- ------
Banc of America Securities LLC........................................
Deutsche Bank Securities Inc. ........................................
FleetBoston Robertson Stephens Inc. ..................................
----
Total...............................................................
====
|
The underwriting agreement provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell the shares to
the public when and if the underwriters buy the shares from us. The
underwriters initially will offer shares to the public at the price specified
on the cover page of this prospectus. The underwriters may allow to some
dealers a concession of not more than $ per share. The underwriters
also may allow, and any other dealers may reallow, a concession of not more
than $ per share to some other dealers. If all the shares are not sold
at the initial public offering price, the underwriters may change the offering
price and the other selling terms. The common stock is offered subject to a
number of conditions, including:
. receipt and acceptance of our common stock by the underwriters, and
. the right on the part of the underwriters to reject orders in whole or in
part.
We have granted an option to the underwriters to buy up to
additional shares of common stock. These additional shares would cover
sales of shares by the underwriters which exceed the number of shares specified
in the table above. The underwriters have 30 days to exercise this option. If
the underwriters exercise this option, they will each purchase additional
shares approximately in proportion to the amounts specified in the table above.
We, all of our officers and directors and our principal shareholders have
entered into lock-up agreements with the underwriters. Under those agreements,
we may not issue any new shares of common stock (except upon exercise of
outstanding options), and we and those holders of stock and options may not
dispose of or hedge any common stock or securities convertible into or
exchangeable for shares of common stock. These restrictions will be in effect
for a period of 180 days after the date of this prospectus. At any time and
without notice, Banc of America Securities LLC may, in its sole discretion,
release all or some of the securities from these lock-up agreements.
We will indemnify the underwriters against some liabilities, including some
liabilities under the Securities Act. If we are unable to provide this
indemnification, we will contribute to payments the underwriters may be
required to make in respect to those liabilities.
In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include:
. short sales,
. stabilizing transactions, and
. purchases to cover positions created by short sales.
56
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while this offering
is in progress.
The underwriters also may impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.
The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the common stock, including:
. over-allotment,
. stabilization,
. syndicate covering transactions, and
. imposition of penalty bids.
As a result of these activities, the price of the common stock may be higher
than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the Nasdaq National
Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of shares of common stock offered by this prospectus.
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be negotiated between us and the
underwriters. Among the factors to be considered in the negotiations are:
. our history and prospects, and the history and prospects of the industry
in which we compete,
. our past and present financial performance,
. an assessment of our management,
. the present state of our development,
. our prospects for future earnings,
. the prevailing market conditions of the U.S. securities markets at the
time of this offer,
. market valuations of publicly traded companies that we and the
underwriters believe to be comparable to us, and
. other factors deemed relevant by us and the underwriters.
It is anticipated that more than ten percent of the proceeds of the offering
will be applied to repay our debt obligations owed to affiliates of Banc of
America Securities LLC and Deutsche Bank Securities Inc. under our credit
agreement. Because more than ten percent of the net proceeds of the offering
may be paid to members or affiliates of members of the National Association of
Securities Dealers, Inc. participating in the offering, the offering will be
conducted in accordance with NASD Conduct Rule 2710(c)(8). This rule requires
that the public offering price of an equity security be no higher than the
price recommended by a "qualified independent underwriter" which has
participated in the preparation of the registration statement and performed its
usual standard of due diligence with respect thereto. FleetBoston Robertson
Stephens Inc. has agreed to act as qualified independent underwriter for the
offering, and the price of the shares will be no higher than that recommended
by FleetBoston Robertson Stephens Inc. An affiliate of FleetBoston Robertson
Stephens Inc. owns 519,598 shares of our common stock and 539,200 shares of our
preferred stock. The affiliate has advised us that it intends to convert all of
its shares of preferred stock into common stock upon consummation of this
offering.
57
LEGAL MATTERS
The validity of the shares of common stock offered in this initial public
offering will be passed upon for California Pizza Kitchen by Paul, Hastings,
Janofsky & Walker LLP, Los Angeles, California. Legal matters in connection
with the common stock offered in this initial public offering will be passed
upon for the underwriters by Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations), Los Angeles, California.
EXPERTS
The consolidated financial statements of California Pizza Kitchen, Inc. at
January 3, 1999 and January 2, 2000, and for each of the three fiscal years in
the period ended January 2, 2000, appearing in this Prospectus and the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of such firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission for the common stock we are offering by this prospectus.
This prospectus does not include all the information contained in the
registration statement and its exhibits and schedules. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make reference in this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and should refer to the
exhibits attached to the registration statement for copies of the actual
contract, agreement or other documents. When we complete this offering, we will
also be required to file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You can read our filings with the Securities and Exchange Commission,
including the registration statement, over the internet at the SEC's website at
www.sec.gov. You may read and copy any document we file with the SEC at its
public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549,
the New York Regional Office located at 7 World Trade Center, 13th Floor, New
York, NY 10048, and the Chicago Regional Office located at Northwestern Atrium
Center, 500 West Madison Street, Chicago, IL 60661. You may also obtain copies
of the documents at prescribed rates by writing to the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference facilities. Our SEC filings are also available at the office of the
Nasdaq National Market. For further information on obtaining copies of our
public filings at the Nasdaq National Market you should call (212) 656-5060.
58
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors............................................ F-2
Consolidated Financial Statements
Consolidated Balance Sheets at January 3, 1999 and January 2, 2000........ F-3
Consolidated Statements of Operations for the Years Ended December 28,
1997, January 3, 1999 and January 2, 2000................................ F-4
Consolidated Statements of Shareholders' Deficiency for the Years Ended
December 28, 1997, January 3, 1999 and January 2, 2000................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 28,
1997, January 3, 1999 and January 2, 2000................................ F-6
Notes to Consolidated Financial Statements................................ F-8
Unaudited Consolidated Financial Statements
Unaudited Consolidated Balance Sheet at April 2, 2000..................... F-19
Unaudited Consolidated Statements of Operations for the Three Months Ended
April 4, 1999 and April 2, 2000.......................................... F-20
Unaudited Consolidated Statements of Cash Flows for the Three Months Ended
April 4, 1999 and April 2, 2000.......................................... F-21
Notes to Unaudited Consolidated Financial Statements...................... F-22
|
F-1
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
California Pizza Kitchen, Inc.
We have audited the accompanying consolidated balance sheets of California
Pizza Kitchen, Inc. and Subsidiaries (the "Company") as of January 3, 1999 and
January 2, 2000, and the related consolidated statements of operations,
shareholders' deficiency and cash flows for each of the three fiscal years in
the period ended January 2, 2000. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of California
Pizza Kitchen, Inc. and Subsidiaries at January 3, 1999 and January 2, 2000,
and the consolidated results of their operations and their cash flows for each
of the three fiscal years in the period ended January 2, 2000 in conformity
with accounting principles generally accepted in the United States.
Woodland Hills, California
January 28, 2000, except for notes 9 and 12,
as to which the date is , 2000
The foregoing report is in the form that it will be signed upon the
completion of the restatement of the capital accounts described in notes 9 and
12 to the consolidated financial statements and the execution of the amendments
of the co-founders' and co-chairmen's employment agreements described in note 9
to the consolidated financial statements.
/s/ Ernst & Young LLP
Woodland Hills, California
May 24, 2000
|
F-2
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 3, 1999 and January 2, 2000
(in thousands, except for share and per share data)
1998 1999
--------- ---------
Assets
Current assets:
Cash and cash equivalents.............................. $ 14,553 $ 5,686
Trade accounts receivable.............................. 2,097 1,509
Inventories............................................ 1,208 1,239
Prepaid expenses and other current assets.............. 891 2,395
--------- ---------
Total current assets..................................... 18,749 10,829
Property and equipment, net.............................. 69,028 78,048
Deferred taxes........................................... 6,102 4,754
Other assets............................................. 2,276 1,119
--------- ---------
Total assets............................................. $ 96,155 $ 94,750
========= =========
Liabilities and shareholders' deficiency
Current liabilities:
Accounts payable....................................... $ 4,585 $ 3,661
Accrued compensation and benefits...................... 6,947 7,658
Accrued rent........................................... 4,571 4,655
Other accrued liabilities.............................. 5,365 3,993
Current maturities of long-term debt................... 2,562 1,537
--------- ---------
Total current liabilities................................ 24,030 21,504
Long-term debt, less current maturities.................. 42,823 38,548
Other liabilities........................................ 967 606
Commitments..............................................
Redeemable preferred stock:
Series A Class A Redeemable Preferred Stock--10,151,770
shares issued and outstanding at January 3, 1999 and
January 2, 2000, respectively; liquidation preference
of $21,831 and $24,625 at January 3, 1999 and January
2, 2000, respectively................................. 21,831 24,625
Series B Class A Redeemable Preferred Stock--10,151,770
shares issued and outstanding at January 3, 1999 and
January 2, 2000, respectively; liquidation preference
of $16,943 and $19,296 at January 3, 1999 and January
2, 2000, respectively................................. 16,943 19,296
Shareholders' deficiency:
Common Stock--$0.01 par value, 80,000,000 shares
authorized, 20,937,577 and 21,793,370 shares issued
and outstanding at January 3, 1999 and January 2,
2000, respectively.................................... 209 218
New Class B Common Stock--$0.01 par value, 80,000,000
shares authorized, 539,200 and 0 shares issued and
outstanding at January 3, 1999 and January 2, 2000,
respectively.......................................... 6 --
Additional paid-in capital............................. 109,023 104,231
Accumulated deficit.................................... (119,677) (114,278)
--------- ---------
Total shareholders' deficiency........................... (10,439) (9,829)
--------- ---------
Total liabilities and shareholders' deficiency........... $ 96,155 $ 94,750
========= =========
|
See accompanying notes.
F-3
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 28, 1997, January 3, 1999 and January 2, 2000
(in thousands, except for per share data)
1997 1998 1999
-------- -------- --------
Revenues:
Restaurant sales.............................. $159,391 $165,028 $176,933
Franchise and other revenues.................. 1,025 2,013 2,260
-------- -------- --------
Total revenues.............................. 160,416 167,041 179,193
Costs and expenses:
Cost of sales................................. 43,361 43,201 44,740
Labor......................................... 57,321 58,547 63,701
Direct operating and occupancy................ 36,481 34,171 35,848
-------- -------- --------
Total restaurant operating costs............ 137,163 135,919 144,289
General and administrative.................... 15,896 13,890 13,123
Depreciation and amortization................. 7,807 7,543 8,234
Pre-opening................................... 445 234 763
-------- -------- --------
Operating income (loss)..................... (895) 9,455 12,784
Other income (expenses):
Loss on impairment of property and equipment
and restaurant closures...................... (9,604) (85) (200)
Bank financing fees........................... -- -- (998)
Interest expense.............................. (930) (3,956) (3,415)
-------- -------- --------
Total other income (expenses), net.......... (10,534) (4,041) (4,613)
-------- -------- --------
Income (loss) before income tax benefit
(provision).................................... (11,429) 5,414 8,171
Income tax benefit (provision).................. (251) 5,139 (2,772)
-------- -------- --------
Net income (loss)............................... $(11,680) $ 10,553 $ 5,399
======== ======== ========
Redeemable preferred stock accretion............ -- (4,478) (5,147)
-------- -------- --------
Net income (loss) attributable to common
shareholders................................... $(11,680) $ 6,075 $ 252
======== ======== ========
Net income per common share:
Basic......................................... $ 0.30 $ 0.01
======== ========
Diluted....................................... $ 0.29 $ 0.01
======== ========
Shares used in calculating net income per common
share:
Basic......................................... 20,226 21,598
======== ========
Diluted....................................... 21,058 22,335
======== ========
Pro forma net income attributable to common
shareholders (unaudited)....................... $ 8,253
========
Pro forma net income per common share
(unaudited):
Basic......................................... $
========
Diluted....................................... $
========
Pro forma shares used in calculating pro forma
net income per common share (unaudited):
Basic.........................................
========
Diluted.......................................
========
|
See accompanying notes.
F-4
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIENCY
(in thousands, except for share data)
Class A Class B New Class B
Common Stock Common Stock Common Stock Common Stock Additional
-------------------- --------------------- ----------------- ---------------- Paid-in Accumulated
Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit
----------- ------- ----------- -------- ---------- ------ -------- ------ ---------- -----------
Balances at
December 29,
1996............. 5,445,686 $ 7,694 5,915,566 $ 71,289 -- $-- -- $ -- $ -- $(118,550)
Contribution of
Class A Common
Stock........... (2,185,686) (2,495) -- -- -- -- -- -- 2,495 --
Exercise of
stock options... -- 14 -- -- -- -- -- -- -- --
Merger with CP
Kitchen
Acquisition
Corp. .......... -- -- -- -- 12,940,801 130 539,200 6 1,864 --
Conversion of
Class B Common
Stock to right
to receive cash
and certain net
assets.......... -- -- (5,915,566) (71,289) -- -- -- -- 126,796 --
Conversion of
Class A Common
Stock to right
to receive cash
and Common
Stock........... (3,260,000) (5,213) -- -- 6,520,000 65 -- -- (4,852) --
Capital
contribution.... -- -- -- -- -- -- -- -- 23,000 --
Restructuring
related
expenses........ -- -- -- -- -- -- -- -- (2,331) --
Preferred stock
dividend........ -- -- -- -- -- -- -- -- (33,783) --
Net loss........ -- -- -- -- -- -- -- -- -- (11,680)
----------- ------- ----------- -------- ---------- ---- -------- ---- -------- ---------
Balances at
December 28,
1997............. -- -- -- -- 19,460,801 195 539,200 6 113,189 (130,230)
Issuance of
Common Stock.... -- -- -- -- 314,118 3 -- -- 58 --
Exercise of
employee stock
options......... -- -- -- -- 692,200 6 -- -- 109 --
Exercise of
nonemployee
stock options... -- -- -- -- 470,458 5 -- -- 120 --
Preferred stock
accretion....... -- -- -- -- -- -- -- -- (4,478) --
Other........... -- -- -- -- -- -- -- -- 25 --
Net income...... -- -- -- -- -- -- -- -- -- 10,553
----------- ------- ----------- -------- ---------- ---- -------- ---- -------- ---------
Balances at
January 3, 1999.. -- -- -- -- 20,937,577 209 539,200 6 109,023 (119,677)
Exercise of
employee stock
options......... -- -- -- -- 316,593 3 -- -- 133 --
Tax benefit from
employee stock
option
exercises....... -- -- -- -- -- -- -- -- 222 --
Conversion of
New Class B to
Common Stock.... -- -- -- -- 539,200 6 (539,200) (6) -- --
Preferred stock
accretion....... -- -- -- -- -- -- -- -- (5,147) --
Net income...... -- -- -- -- -- -- -- -- -- 5,399
----------- ------- ----------- -------- ---------- ---- -------- ---- -------- ---------
Balances at
January 2, 2000.. -- $ -- -- $ -- 21,793,370 $218 -- $ -- $104,231 $(114,278)
=========== ======= =========== ======== ========== ==== ======== ==== ======== =========
Total
---------
Balances at
December 29,
1996............. $(39,567)
Contribution of
Class A Common
Stock........... --
Exercise of
stock options... 14
Merger with CP
Kitchen
Acquisition
Corp. .......... 2,000
Conversion of
Class B Common
Stock to right
to receive cash
and certain net
assets.......... 55,507
Conversion of
Class A Common
Stock to right
to receive cash
and Common
Stock........... (10,000)
Capital
contribution.... 23,000
Restructuring
related
expenses........ (2,331)
Preferred stock
dividend........ (33,783)
Net loss........ (11,680)
---------
Balances at
December 28,
1997............. (16,840)
Issuance of
Common Stock.... 61
Exercise of
employee stock
options......... 115
Exercise of
nonemployee
stock options... 125
Preferred stock
accretion....... (4,478)
Other........... 25
Net income...... 10,553
---------
Balances at
January 3, 1999.. (10,439)
Exercise of
employee stock
options......... 136
Tax benefit from
employee stock
option
exercises....... 222
Conversion of
New Class B to
Common Stock.... --
Preferred stock
accretion....... (5,147)
Net income...... 5,399
---------
Balances at
January 2, 2000.. $ (9,829)
=========
|
See accompanying notes.
F-5
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 28, 1997, January 3, 1999 and January 2, 2000
(in thousands)
1997 1998 1999
-------- ------- -------
Operating activities:
Net income (loss)................................. $(11,680) $10,553 $ 5,399
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization of property and
equipment...................................... 7,799 7,300 8,086
Amortization of bank fees....................... 8 243 148
Net loss on sale of assets...................... 295 118 200
Bank financing fees write-off................... -- -- 998
Equity in net losses of limited partnerships.... 82 46 --
Loss on impairment of property and equipment.... 9,604 -- --
Reserve for restaurant closure.................. -- 85 --
Bad debt write-off.............................. 484 -- --
Change in deferred tax asset.................... 250 (6,102) 1,348
Changes in operating assets and liabilities:
Trade accounts receivable..................... 2,659 28 588
Inventories................................... 119 142 (31)
Prepaid expenses and other assets............. (294) (525) (1,493)
Accounts payable.............................. 744 (102) (924)
Accrued liabilities........................... (439) 2,876 (355)
Other liabilities............................. (440) 346 (361)
-------- ------- -------
Net cash provided by operating activities......... 9,191 15,008 13,603
Investing activities:
Capital expenditures.............................. (6,607) (7,517) (17,318)
Proceeds from sale of property and equipment...... 1,106 2,490 12
Purchase of liquor licenses....................... (142) -- --
Distribution from limited partnership............. 46 50 --
-------- ------- -------
Net cash used in investing activities............. (5,597) (4,977) (17,306)
Financing activities:
Proceeds from long-term debt...................... 47 -- 25,000
Payments on long-term debt........................ (34) (1,772) (45,300)
Capitalized bank fees............................. (1,395) -- --
Proceeds from revolving line of credit............ 2,000 -- 15,000
Payments on revolving line of credit.............. (2,000) -- --
Proceeds from stock purchases, net................ 14 864 136
Capital contribution.............................. 23,000 -- --
Cash paid to previous shareholders................ (70,536) -- --
Restructuring related expenses.................... (2,331) (25) --
-------- ------- -------
Net cash used in financing activities............. (4,282) (933) (5,164)
-------- ------- -------
Net increase (decrease) in cash and cash
equivalents...................................... (688) 9,098 (8,867)
Cash and cash equivalents at beginning of year.... 4,143 5,455 14,553
Cash from merger.................................. 2,000 -- --
-------- ------- -------
Cash and cash equivalents at end of year.......... $ 5,455 $14,553 $ 5,686
======== ======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest...................................... $ 418 $ 4,552 $ 3,640
Income taxes.................................. $ -- $ 575 $ 1,303
|
F-6
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
Years ended December 28, 1997, January 3, 1999 and January 2, 2000
(in thousands)
Supplemental disclosure of noncash financing activities:
In September 1997, the Company completed a merger and leveraged
recapitalization. In connection with the recapitalization, assets with a net
book value of $2,748 were distributed to PepsiCo, Inc., the prior majority
shareholder, as part of the settlement payment for its Preferred Stock and
Class B Common Stock.
During December 1997, the Company declared a preferred stock dividend
payable to the Common and New Class B Common Shareholders. The dividend
consisted of Series A Class A Redeemable Preferred Stock and Series B Class A
Redeemable Preferred Stock.
During the fiscal year ended January 3, 1999, certain employees and
nonemployees exercised stock options. Compensation expense incurred by the
Company related to the option exercises was approximately $123.
See accompanying notes.
F-7
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 28, 1997, January 3, 1999 and January 2, 2000
(in thousands, except for share and per share data)
1. Description of Business
Nature of Business
As of January 2, 2000, the Company operates 72 restaurants in 16 states and
the District of Columbia; 70 restaurants are wholly owned by the Company, one
restaurant is owned by a limited partnership in which the Company is a general
partner and one restaurant is owned by a third party and operated under a
management agreement. In addition to the 72 restaurants operated by the
Company, there are an additional 25 franchised restaurants, of which 21 are
located in the United States and four are located in the Pacific Rim.
The Company manages its operations by restaurant. The Company has aggregated
its operations to one reportable segment.
Recapitalization
In September 1997, the Company consummated a series of transactions to
effect a merger and leveraged recapitalization of the Company. The merger and
leveraged recapitalization was completed after PepsiCo, Inc., the majority
shareholder of the Company, contributed all of its shares of Class A Common
Stock to the Company. Then, under the terms of a Merger and Recapitalization
Agreement (the "Agreement"), the Company merged with C.P. Kitchen Acquisition
Corp. ("C.P.K. Acquisition"). CPK was a newly formed wholly owned subsidiary of
Bruckmann, Rosser, Sherrill & Co. ("BRS"), which was capitalized with
$2.0 million. The merger was completed by the exchange of all outstanding
shares of C.P.K. Acquisition for 6,470,000 shares of the Company's New Class A
Common Stock ("Common Stock") and 269,600 shares of New Class B Common Stock.
Then, under the terms of the Agreement, the Company converted all the Preferred
Stock and Class B Common Stock owned by PepsiCo, Inc. into a right to receive
cash of $30,977 and $29,022, respectively. The Company then converted all
remaining outstanding shares of Class A Common Stock into a right to receive
cash and .884986 shares of Common Stock for each of the then outstanding shares
of Class A Common Stock. BRS then made an additional capital contribution to
the Company in the amount of $23.0 million. In order to fund the rights to
receive cash, the Company entered into a long-term borrowing arrangement with a
bank, borrowing $49.0 million. The bank borrowings plus capital contributions
received under the terms of the Agreement, and certain other assets of the
Company, were used to fund the rights to receive cash discussed above.
2. Summary of Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
California Pizza Kitchen, Inc. and its wholly owned subsidiaries (the
"Company"). In addition, the Company is a general partner in two limited
partnerships which were formed to operate two restaurants in Chicago of which
one was closed in December 1999. The Company accounts for its investments in
these limited partnerships (which are not material) under the equity method and
are included in other assets in the accompanying consolidated balance sheets.
All significant intercompany balances and transactions have been eliminated.
Fiscal Year End
The Company's fiscal year ends on the Sunday closest to December 31. The
Company's fiscal years ended December 28, 1997, January 3, 1999 and January 2,
2000, covered 52, 53 and 52 weeks, respectively. For
F-8
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
purposes of the accompanying consolidated financial statements, the years ended
December 28, 1997, January 3, 1999 and January 2, 2000 may be referred to as
the fiscal years 1997, 1998 and 1999, respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents. The Company places its
cash deposits with highly qualified financial institutions.
Inventories
Inventories consist of food and beverage, uniforms and supplies. Inventories
are stated at the lower of cost (first-in, first-out method) or market.
Property and Equipment
The Company depreciates property and equipment over the assets' estimated
useful lives using the straight-line method. Leasehold improvements are
amortized using the straight-line method over the estimated useful life of the
asset or the term of the related lease, whichever is shorter. The lives for
furniture, fixtures, and equipment are ten years. The lives for buildings and
leasehold improvements are the shorter of ten to 20 years or the term of the
related operating lease.
Liquor Licenses
Transferable liquor licenses, included in other long-term assets, which have
a market value are carried at cost and are not amortized.
Gift Certificates
The Company sells gift certificates and recognizes deferred revenue,
included in accrued liabilities, for gift certificates outstanding until the
gift certificates are redeemed.
Restaurant and Franchise Revenues
Revenues from the operation of Company-owned restaurants are recognized when
sales occur. All fees from franchised operations are included in revenue as
earned. Royalty fees are based on franchised restaurants' revenues and are
recorded by the Company in the period the related franchised restaurants'
revenues are earned.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expenses
totaled $2,270 in fiscal 1997, $2,495 in fiscal 1998 and $2,100 in fiscal 1999.
F-9
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pre-opening Costs
The Company follows Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-up Activities," which was issued by the Accounting Standards
Executive Committee and provides guidance on the financial reporting of the
start-up costs and organization costs. The SOP requires costs of start-up
activities and organization costs to be expensed as incurred.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No 128, "Earnings Per Share"
(EPS), effective for all financial statements issued after December 15, 1997.
SFAS No. 128 requires dual presentation of "Basic" and "Diluted" EPS by
entities with complex capital structures, replacing "Primary" and "Fully
Diluted" EPS under Accounting Principles Board (APB) Opinion No. 15. Basic EPS
excludes dilution and is computed by dividing net income or loss attributable
to common shareholders by the weighted average of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock (convertible preferred
stock, warrants to purchase common stock and common stock options using the
treasury stock method) were exercised or converted into common stock. Potential
common shares in the diluted EPS computation are excluded where their effect
would be antidilutive. The Company's EPS for all periods presented have been
computed in accordance with SFAS No. 128 (see note 9).
Earnings per share data for periods prior to fiscal 1998 have not been
reported in the accompanying financial statements as the Company had a
substantially different capital structure prior to the September 30, 1997
merger and leveraged recapitalization transaction.
Pro forma net income is computed assuming the elimination of interest
expense related to the repayment of the Company's outstanding bank debt,
elimination of the co-founders' and co-chairmen's compensation expense and the
elimination of the accretion of the liquidation preference on the redeemable
preferred stock then outstanding.
Pro forma basic net income per share is computed based on the weighted
average number of common shares outstanding during the year, assuming the
conversion of shares of redeemable preferred stock then outstanding
into shares of Common Stock at January 3, 1999 and the issuance of
shares of Common Stock upon the closing of this initial public offering.
Pro forma diluted earnings per share is computed based on the weighted average
number of common shares outstanding during the year, assuming the conversion of
shares of redeemable preferred stock then outstanding into shares of
Common Stock, the issuance of shares of Common Stock upon the closing of
this offering and the dilution upon exercise of options to purchase common
shares using the treasury stock method, as if such events occurred on January
3, 1999.
Fair Value of Financial Instruments
The fair values of the Company's cash and cash equivalents, trade accounts
receivable, accounts payable and all other current liabilities approximate the
carrying values because of the short maturities of these instruments.
The fair value of the Company's long-term debt approximates the carrying
value based on current rates available to the Company for debt with comparable
terms.
F-10
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk, consist primarily of cash and cash equivalents. The Company
places its cash and cash equivalents with high quality financial institutions.
At times, balances in the Company's cash accounts may exceed the Federal
Deposit Insurance Corporation (FDIC) limit.
Reclassifications
Certain reclassifications have been made to the December 28, 1997 and
January 3, 1999, consolidated financial statements to conform with the January
2, 2000 presentation.
3. Property and Equipment
Property and equipment consists of the following at January 3, 1999 and
January 2, 2000:
1998 1999
-------- --------
Land...................................................... $ 5,786 $ 5,786
Buildings................................................. 7,965 7,965
Furniture, fixtures, and equipment........................ 40,209 47,030
Leasehold improvements.................................... 62,649 68,845
Construction in progress.................................. 1,695 1,120
-------- --------
118,304 130,746
Less accumulated depreciation and amortization............ 49,276 52,698
-------- --------
$ 69,028 $ 78,048
======== ========
|
The Company periodically reviews the carrying value of long-lived assets in
accordance with SFAS No. 121, "Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." In accordance with SFAS No. 121,
the Company recognizes the impairment of certain property and equipment by
reducing the carrying value of the assets to the estimated fair value based on
discounted cash flows. The Company increased accumulated depreciation and
amortization and recorded a loss on impairment of property and equipment in the
amount of $9,604 at December 28, 1997.
4. Long-term Debt
Long-term debt consists of the following at January 3, 1999 and January 2,
2000:
1998 1999
------- -------
Term Loan................................................... $ -- $25,000
Revolving Note.............................................. -- 15,000
A Term Loan................................................. 20,575 --
B Term Loan................................................. 24,688 --
10% note payable due November 2001.......................... 122 85
------- -------
45,385 40,085
Less current maturities..................................... 2,562 1,537
------- -------
$42,823 $38,548
======= =======
|
On September 30, 1997, the Company entered into a credit agreement with a
banking syndication providing for a $10,000 revolving line of credit (Line), a
$22,000 A Term Loan and a $25,000 B Term Loan.
F-11
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On October 29, 1999, the Company repaid all borrowings under the September 30,
1997 credit agreement and replaced it with a new credit facility. The new
credit facility provides for a $25,000 term loan (Term Loan) and a $25,000
revolving note (Revolving Note), of which $15,000 is outstanding as of January
2, 2000. The Term Loan and Revolving Note are secured by first priority
security interests. The Term Loan expires on September 30, 2004 and the
Revolving Note expires on October 31, 2004. Both the Term Loan and Revolving
Note bear interest at the prime rate (8.50% at January 2, 2000) plus 0.25% or
LIBOR (6.04% at January 2, 2000) plus 1.5%. Interest is payable quarterly for
both the Term Loan and the Revolving Note. Principal payments for the Term Loan
begin September 30, 2000. The terms of the credit facility include financial
covenants which the Company was in compliance with as of January 2, 2000.
Interest expense for all loans totaled $4,012 and $3,722 for the years ended
January 3, 1999 and January 2, 2000, respectively. In connection with entering
into the new credit facility, the Company wrote-off $998 of deferred bank
financing costs related to the prior credit agreement.
The new credit facility provides for the issuance of letters of credit,
which reduce the availability under the Revolving Note. Letters of credit
outstanding in connection with various insurance programs totaled $755 and $652
at January 3, 1999 and January 2, 2000, respectively.
The aggregate maturities of long-term debt for each of the five years
subsequent to fiscal 1999 are as follows:
Fiscal year ending:
2000............................................................... $ 1,537
2001............................................................... 3,037
2002............................................................... 5,011
2003............................................................... 6,000
2004............................................................... 24,500
-------
$40,085
=======
|
5. Income Taxes
For the period from the date of the merger and leveraged recapitalization,
September 30, 1997 to December 28, 1997, the Company began filing separate
income tax returns. For the period from June 15, 1996 to September 30, 1997,
the Company filed a consolidated federal income tax return with PepsiCo, Inc.,
the majority shareholder. The income tax provision since September 30, 1997,
has been calculated on a separate-entity basis. For the period during which the
Company filed consolidated tax returns with PepsiCo Inc., the Company had
allocated income tax benefit (provision) based on 35% of income (loss) before
income taxes, pursuant to a tax-sharing agreement.
F-12
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The details of the benefit (provision) for income taxes for the fiscal years
1997, 1998 and 1999 are set forth below:
1997 1998 1999
----- ------ -------
Current:
Federal............................................ $ -- $ (576) $(1,052)
State.............................................. (1) (387) (372)
----- ------ -------
(1) (963) (1,424)
Deferred:
Federal............................................ (250) 5,335 (1,151)
State.............................................. -- 767 (197)
----- ------ -------
(250) 6,102 (1,348)
----- ------ -------
$(251) $5,139 $(2,772)
===== ====== =======
|
The income tax benefit (provision) differs from the federal statutory rate
because of the effect of the following items for the fiscal years 1997, 1998
and 1999:
1997 1998 1999
----- ----- -----
Statutory rate.......... 34.0 % (34.0)% (34.0)%
State income taxes, net
of federal benefit..... 4.5 (4.5) (4.5)
Tax tip credit.......... 1.3 5.2 4.9
Other................... -- -- (0.3)
Valuation allowance..... (42.0) 128.2 --
----- ----- -----
(2.2)% 94.9 % (33.9)%
===== ===== =====
|
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying value of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The valuation allowance
during the year ended January 3, 1999 was reduced by $7,567, as in management's
opinion--it is more likely than not that the benefit of the deferred tax amount
will be realized. As a result, there was no valuation allowance at January 3,
1999 and January 2, 2000. Significant components of the Company's net deferred
tax asset at January 3, 1999 and January 2, 2000 consist of the following:
1998 1999
------ ------
Deferred tax assets:
Restaurant asset reserves.................................. $3,882 $2,665
Insurance reserves......................................... 476 396
Vacation reserves.......................................... 408 439
Other accruals............................................. 388 685
Inventory UNICAP........................................... 134 125
Tax credits................................................ 470 275
Accrued rent............................................... 502 544
Deferred tax liabilities:
Tax depreciation over book depreciation.................... (158) (375)
------ ------
Net deferred tax asset................................... $6,102 $4,754
====== ======
|
F-13
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Preferred Stock
In December 1997, the Company authorized 10,101,010 shares of Series A 12
1/2% Cumulative Compounding Preferred Stock and 10,101,010 shares of Series B
13 1/2% Cumulative Compounding Preferred Stock. Concurrently, the Company
issued 10,000,001 shares of Series A Preferred Stock and 10,000,001 shares of
Series B Preferred Stock as a stock dividend to all shareholders of record.
Each shareholder received one share of Series A Preferred Stock and one share
of Series B Preferred Stock for each share of common stock or New Class B
Common Stock held.
The Series A Preferred Stock has a $0.01 par value and is nonvoting. There
were 10,151,771 shares issued and outstanding at January 3, 1999 and January 2,
2000. The Series A Preferred Stock has a liquidation value of $1.9095 per share
and a liquidation preference over the Series B Preferred Stock and over the
common stock. The Series A Preferred Stock is entitled to receive cash
dividends of $0.2387 per share per annum and all dividends are cumulative,
whether or not declared, and are payable annually in arrears. Unpaid dividends
accrue interest at 14.5% annually. The Company, at its option, may redeem the
Series A Preferred Stock at a redemption price equal to the liquidation value
plus unpaid and accrued dividends ($24,625 as of January 2, 2000) at any time.
Additionally, the Series A Preferred Stock is mandatorily redeemable at a value
equal to its liquidation value plus unpaid and accrued dividends on January 15,
2008. The accretion of the liquidation preference on the Series A Preferred
Stock is reflected in the consolidated statement of shareholders' deficiency as
a reduction of additional paid-in capital and an increase in the preferred
stock book value. Accumulated, but undeclared, dividends for the Series A
Preferred Stock are $2,446 at January 3, 1999 and $5,240 at January 2, 2000.
The Series B Preferred Stock has a $0.01 par value and is nonvoting. There
were 10,151,771 shares issued and outstanding at January 3, 1999 and January 2,
2000. The Series B Preferred Stock, has a liquidation value of $1.4688 and a
liquidation preference over the common stock, but is junior to the Series A
Preferred Stock. The Series B Preferred Stock is entitled to receive cash
dividends of $0.1983 per share per annum and all dividends are cumulative,
whether or not declared, and are payable annually in arrears. Unpaid dividends
accrue interest at 15.5% annually. The Company, at its option, may redeem the
Series B Preferred Stock at a redemption price equal to the liquidation value
plus unpaid and accrued dividends ($19,296 as of January 2, 2000) at any time.
Additionally, the Series B Preferred Stock is mandatorily redeemable at a value
equal to the liquidation value plus any unpaid and accrued dividends on January
15, 2008. The accretion of the liquidation preference on the Series B Preferred
Stock is reflected in the consolidated statement of shareholders' deficiency as
a reduction of additional paid-in capital and an increase in the preferred
stock book value. Accumulated, but undeclared, dividends for the Series B
Preferred Stock are $2,032 at January 3, 1999 and $4,385 at January 2, 2000.
During the year ended January 3, 1999, the Company sold 151,769 shares each
of Series A Preferred Stock and Series B Preferred Stock to certain members of
management. The shares were sold for cash at their estimated fair value at date
of issue.
7. Shareholders' Deficiency
During the year ended January 3, 1999, the Company issued a two-for-one
stock split on the common stock and New Class B Common Stock. The financial
statements have been adjusted for all periods presented to reflect this change.
Additionally, the Company sold 314,118 shares (adjusted for the two-for-one
stock split) of common stock during the year ended January 3, 1999 at their
estimated fair value.
On November 30, 1999, the shareholder of New Class B Common Stock converted
all of its shares into 539,200 shares of Common Stock.
F-14
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Common Stock Option Plans
In 1998, the Company adopted the 1998 Stock Based Incentive Compensation
Plan ("1998 Plan"). The 1998 Plan allows for the Company to reward, retain and
attract valued employees, directors and independent contractors. The Company
has reserved 4,000,000 shares of common stock under the 1998 Plan for future
awards. Options under the 1998 Plan may be either nonqualified options or
incentive stock options. Nonqualified options may be granted at prices
determined by the Company's Board of Directors. Incentive stock options may be
granted at not less than 100% of fair value on the date of grant for employees
owning 10% or less of the Company's stock and at not less than 110% for
employees owning more than 10% of the Company's stock. The terms governing the
exercise of options and direct stock bonuses are determined by the Company's
Board of Directors.
Shares subject to option under the Plans were as follows:
Weighted
Average
Shares Exercise Price
---------- --------------
Outstanding at December 29, 1996................. 817,140 $6.08
Anti-dilution adjustment at September 29, 1997... (11,720) --
Granted.......................................... -- --
Exercised........................................ (18,798) 4.71
Canceled......................................... (708,658) 6.04
---------- -----
Outstanding at December 28, 1997................. 77,964 6.62
Granted.......................................... 2,249,868 0.46
Exercised........................................ (1,162,658) 0.17
Canceled......................................... (51,268) 6.59
---------- -----
Outstanding at January 3, 1999................... 1,113,906 0.93
Granted.......................................... 549,000 4.22
Exercised........................................ (316,593) 0.43
Canceled......................................... -- --
---------- -----
Outstanding at January 2, 2000................... 1,346,313 $2.39
========== =====
|
The following table summarizes information regarding options outstanding and
options exercisable at January 2, 2000:
Weighted Number
Average Exercisable
Remaining Weighted as of Weighted
Number of Contractual Average January 2, Average
Range of Exercise Prices Shares Life Exercise Price 2000 Exercise Price
------------------------ --------- ----------- -------------- ----------- --------------
$0.17................... 221,392 5.00 $0.17 -- $ --
1.25................... 552,500 8.64 1.25 91,250 1.25
3.25-7.50.............. 572,421 9.40 4.36 42,171 6.10
--------- ---- ----- ------- -----
1,346,313 8.36 $2.39 133,421 $2.78
========= ==== ===== ======= =====
|
Options available for future grant totaled 1,361,718 and 1,201,132 shares at
January 3, 1999 and January 2, 2000, respectively.
During the year ended January 3, 1999, certain employees exercised stock
options, which required the recording of compensation expense. Additionally,
two non-employees exercised options during 1998, which
F-15
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
have been accounted for in accordance with SFAS No. 123. These options were
valued at the date of grant and their value was recorded as consulting expense
in the statement of operations. The Company recognized compensation expense of
approximately $123 related to the exercise of employee and non-employee stock
options and received total proceeds of $240.
The Company has elected to follow APB No. 25, "Accounting for Stock Issued
to Employees," and related Interpretations in accounting for its employee stock
options because, as discussed below, the alternative fair value accounting
provided for under SFAS No. 123, "Accounting for Stock Based Compensation,"
requires use of option valuation models that were not developed for use in
valuing employee stock Options. Under APB No. 25, because the exercise price of
the Company's employee stock options equals or exceeds the fair value of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income is required by SFAS No. 123,
which also requires that the information be determined as if the Company has
accounted for its employee stock options granted subsequent to December 31,
1994, under the fair value method of that Statement. The fair value of these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following assumptions for the year ended January 2, 2000:
Risk free interest rate................................................ 5.43%
Expected lives (in years).............................................. 5
Dividend yield......................................................... 0%
Expected volatility.................................................... 0%
|
The Black-Scholes option valuation model was developed for use in estimating
the fair value of the traded options which have no vesting restrictions and are
usually transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price and expected
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in
the subjective input assumptions can materially affect the estimate of fair
value, in management's opinion, the existing models do not necessarily provide
a reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Under SFAS
No. 123, the Company would have incurred an additional compensation expense of
$60 and $92 for the fiscal year 1998 and 1999, respectively.
F-16
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. Net Income Per Share and Pro Forma Net Income Per Share
Reconciliation of basic and diluted net income per share in accordance with
SFAS No. 128 (see note 1) for the fiscal year ended January 3, 1999 and January
2, 2000 is as follows, both actual and pro forma:
Fiscal 1998 Fiscal 1999 Fiscal 1999
Actual Actual Pro Forma(1)
----------- ----------- ------------
(Unaudited)
Numerator:
Net income attributable to common
shareholders............................ $6,075 $ 252 $ 252
Adjustments for the calculation of pro
forma net income per share attributable
to common shareholders:
Interest expense, net of income taxes.. -- -- 2,259
Co-founders' and co-chairmen's
compensation expense, net of income
taxes(2).............................. -- -- 595
Redeemable preferred stock accretion... -- -- 5,147
------ ------ ------
Numerator for basic and diluted net
income per share attributable to
common shareholders................. $6,075 $ 252 $8,253
====== ====== ======
Denominator:
Denominator for basic net income per
share--weighted average shares.......... 20,226 21,598
Effect on denominator upon closing of
this offering: -- --
Common shares issued................... -- --
Redeemable preferred shares converted
to Common Stock.......................
Effect of dilutive securities:
Employee stock options................. 832 737
------ ------ ------
Denominator for diluted net income
per share--weighted average shares.. 21,058 22,335
====== ====== ======
|
(1) Pro forma basic net income per share is computed based on the weighted
average number of common shares outstanding during the year assuming the
conversion of shares of redeemable preferred stock then outstanding
into shares of Common Stock and the issuance of shares of Common
Stock upon the closing of this offering, as if such events occurred on
January 3, 1999. Pro forma diluted earnings per share is computed based on
the weighted average number of common shares outstanding during the year
assuming the conversion of shares of redeemable preferred stock then
outstanding into shares of Common Stock, the issuance of shares
of Common Stock upon the closing of this offering and the dilution upon
exercise of options to purchase common shares using the treasury stock
method, as if such events occurred on January 3, 1999.
(2) The co-founders and co-chairmen of the Board executed amendments to their
employment agreements that become effective upon the closing of this
offering which will grant each of them non-qualified stock options to
purchase 180,000 shares of Common Stock with an exercise price equal to the
initial public offering price.
10. Commitments
The Company leases certain restaurant facilities and its corporate
headquarters under noncancelable operating leases with terms ranging from five
to 20 years. The restaurant leases generally require payment of contingent
rental based on a percentage of sales and require payment of various expenses
incidental to the use of property. Rent expense on all operating leases
approximated $10,013 for fiscal 1997, $9,234 for fiscal 1998 and $10,719 for
fiscal 1999, including contingent rental expense of $595, $654 and $615 for the
fiscal years
F-17
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
1997, 1998 and 1999, respectively. Most leases contain renewal options and may
be subject to periodic adjustments for inflation and scheduled escalations.
The aggregate future minimum annual lease payments under noncancelable
operating leases for the fiscal year end January 2, 2000 are as follows:
Fiscal year ending:
2000............................................................. $ 9,803
2001............................................................. 9,926
2002............................................................. 9,382
2003............................................................. 9,019
2004............................................................. 8,955
Thereafter....................................................... 57,887
--------
Total future minimum annual lease payments..................... $104,972
========
|
11. Employee Benefit Plan
In January 1994, the Company established a defined contribution plan for
certain qualified employees as defined. Participants may contribute from 1% to
15% of pretax compensation, subject to certain limitation. The plan provides
for certain discretionary contributions by the Company. The Company has
recorded contribution expense of $200 for 1999, and no Company contributions
were made for 1999.
12. Subsequent Events
On May 5, 2000, the Company amended its Articles of Incorporation to change
the name of the Company's New Class A Common Stock to "Common Stock." The
consolidated financial statements and accompanying notes have been restated for
all periods presented to reflect this change.
On , 2000, the board of directors approved a for reverse
stock split. The consolidated financial statements and accompanying notes have
been restated for all periods presented to reflect this change.
F-18
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in thousands, except for share data)
Pro forma as
adjusted
Shareholders'
Equity
April 2, 2000 April 2, 2000
------------- -------------
Assets
Current assets:
Cash and cash equivalents........................ $ 3,732
Trade accounts receivable, net................... 1,995
Inventories...................................... 1,184
Prepaid expenses and other current assets........ 1,275
---------
Total current assets............................... 8,186
Property and equipment, net........................ 79,933
Deferred taxes..................................... 4,754
Other assets....................................... 1,257
---------
Total assets....................................... $ 94,130
=========
Liabilities and shareholders' equity (deficiency)
Current liabilities:
Accounts payable................................. $ 1,616
Accrued compensation and benefits................ 5,217
Accrued rent..................................... 4,636
Other accrued liabilities........................ 5,838
Current maturities of long-term debt............. 2,287
---------
Total current liabilities.......................... 19,594
Long-term debt, less current maturities............ 37,788
Other liabilities.................................. 665
Commitments........................................
Redeemable stock:
Series A Class A Redeemable Preferred Stock--
10,151,771 shares issued and outstanding at
April 2, 2000; liquidation preference of $25,401
at April 2, 2000................................ 25,401 $
Series B Class A Redeemable Preferred Stock--
10,151,771 shares issued and outstanding at
April 2, 2000; liquidation preference of $19,958
at April 2, 2000................................ 19,958
Shareholders' equity (deficiency):
Common Stock--$0.01 par value, 80,000,000 shares
authorized, 21,793,372 shares issued and
outstanding at April 2, 2000; pro forma
shares issued and outstanding............. 218
Additional paid-in capital....................... 102,793
Accumulated deficit.............................. (112,287)
--------- ---
Total shareholders' equity (deficiency)............ (9,276)
--------- ---
Total liabilities and shareholders' equity
(deficiency)...................................... $ 94,130 $
========= ===
|
See accompanying notes.
F-19
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
For the
Three Months
Ended
------------------
April 4, April 2,
1999 2000
-------- --------
Revenues:
Restaurant sales......................................... $41,438 $47,711
Franchise and other revenues............................. 496 555
------- -------
Total revenues......................................... 41,934 48,266
Costs and expenses:
Cost of sales............................................ 10,399 11,799
Labor.................................................... 14,960 17,086
Direct operating and occupancy........................... 8,497 9,582
------- -------
Total restaurant operating costs....................... 33,856 38,467
General and administrative............................... 3,250 3,550
Depreciation and amortization............................ 2,065 2,289
Pre-opening.............................................. -- 136
------- -------
Operating income........................................... 2,763 3,824
Other income (expenses):
Interest expense......................................... (968) (761)
------- -------
Total other income (expense), net...................... (968) (761)
Income before income tax provision......................... 1,795 3,063
Income tax provision....................................... (611) (1,072)
------- -------
Net income................................................. $ 1,184 $ 1,991
======= =======
Redeemable preferred stock accretion....................... (1,314) (1,438)
------- -------
Net income (loss) attributable to common shareholders...... $ (130) $ 553
======= =======
Net income (loss) per common share:
Basic.................................................... $ (0.01) $ 0.03
======= =======
Diluted.................................................. $ (0.01) $ 0.03
======= =======
Shares used in calculating net income (loss) per common
share:
Basic.................................................... 21,504 21,793
======= =======
Diluted.................................................. 22,240 22,432
======= =======
Pro-forma net income....................................... $ 2,632
=======
Pro forma net income per common share:
Basic.................................................... $
=======
Diluted.................................................. $
=======
Pro forma shares used in calculating pro forma net income
per common share:
Basic....................................................
=======
Diluted..................................................
=======
|
See accompanying notes.
F-20
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the
Three Months
Ended
----------------
April April
4, 1999 2, 2000
------- -------
Operating activities:
Net income.................................................. $ 1,184 $ 1,991
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization of property and equipment... 2,016 2,289
Amortization of bank fees................................. 49 --
Changes in operating assets and liabilities:
Trade accounts receivable............................... 128 (637)
Inventories............................................. 11 73
Prepaid expenses and other assets....................... 34 1,156
Accounts payable........................................ (3,491) (2,064)
Accrued liabilities..................................... (1,574) (536)
Other liabilities....................................... 408 (52)
------- -------
Net cash provided by (used in) operating activities......... (1,235) 2,220
Investing activities:
Capital expenditures........................................ (2,276) (4,337)
------- -------
Net cash used in investing activities....................... (2,276) (4,337)
Financing activities:
Payments on long-term debt.................................. (3,490) (9)
------- -------
Net cash used in financing activities....................... (3,490) (9)
------- -------
Net decrease in cash and cash equivalents................... (7,001) (2,126)
Cash and cash equivalents at beginning of period............ 14,553 5,686
Cash from consolidation of investment in limited
partnership................................................ -- 172
------- -------
Cash and cash equivalents at end of period.................. $ 7,552 $ 3,732
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................................. $ 309 $ 38
Income taxes.............................................. $ 89 $ 355
|
See accompanying notes.
F-21
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial information has been prepared by
California Pizza Kitchen, Inc. and its wholly-owned subsidiaries (collectively,
the "Company") without audit, in accordance with the instructions to Form 10-Q
and therefore does not include all information and footnotes necessary for a
fair presentation of financial position, results of operations and cash flows
in accordance with accounting principles generally accepted in the United
States.
In January 2000, the Company acquired a majority interest in its remaining
Limited Partnership restaurant. As such, beginning January 3, 2000, the Company
began to consolidate the financial statements of the limited partnership with
its own financial statements. Prior to fiscal 2000, the Company accounted for
its ownership in the limited partnership under the equity method of accounting.
All significant intercompany balances and transactions have been eliminated.
Unaudited Interim Financial Data
In the opinion of management, the unaudited consolidated financial
statements for the interim periods presented reflect all adjustments,
consisting of only normal recurring accruals, necessary for a fair presentation
of the consolidated financial position and results of operations as of and for
such periods indicated. These consolidated financial statements and notes
thereto should be read in conjunction with the consolidated financial
statements and notes thereto included elsewhere in this prospectus for the year
ended January 2, 2000. Results for the interim periods presented herein are not
necessarily indicative of results which may be reported for any other interim
period or for the entire fiscal year.
Pro Forma Net Income and Net Income Per Share
Pro forma net income is computed assuming the elimination of interest
expense related to the repayment of the Company's outstanding bank debt,
elimination of the co-founders' and co-chairmen's compensation expense and the
elimination of the accretion of the liquidation preference on the redeemable
preferred stock then outstanding.
Pro forma basic net income per share is computed based on the weighted
average number of common shares outstanding during the period, assuming the
conversion of shares of redeemable preferred stock then outstanding
into shares of Common Stock at the beginning of the period and the
issuance of shares of Common Stock upon the closing of this offering.
Pro forma diluted earnings per share is computed based on the weighted average
number of common shares outstanding during the period, assuming the conversion
of shares of redeemable preferred stock then outstanding into
shares of Common Stock, the issuance of shares of Common Stock upon
the closing of this offering and the dilution upon exercise of options to
purchase common shares using the treasury stock method, as if such events
occurred at the beginning of the period.
Pro Forma Shareholders' Equity
Consolidated shareholders' equity as of April 2, 2000 has been shown on a
pro forma basis, assuming the conversion of shares of redeemable
preferred stock then outstanding into shares of common stock and the
issuance of shares of common stock upon the closing of this
offering.
F-22
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Property and Equipment
Property and equipment consists of the following at April 2, 2000:
Land............................................................... $ 5,786
Buildings.......................................................... 7,965
Furniture, fixtures, and equipment................................. 46,250
Leasehold improvements............................................. 71,174
Construction in progress........................................... 1,150
--------
132,325
Less accumulated depreciation and amortization..................... 52,392
--------
$ 79,933
========
|
3. Net Income (Loss) Per Share
Reconciliation of basic and diluted net income per share in accordance with
SFAS No. 128 for the three months ended April 4, 1999 and April 2, 2000 is as
follows:
For the
Three Months
Ended
-------------- Pro Forma
April April for the
4, 2, Three Months Ended
1999 2000 April 2, 2000(1)
------ ------ ------------------
Numerator:
Net income (loss) attributable to common
shareholders............................... $ (130) $ 553 $ 553
Adjustments for the calculation of pro forma
net income (loss) per share attributable to
common shareholders:
Interest expense, net of income taxes..... -- -- 495
Co-founders' and co-chairmen's
compensation expense, net of income
taxes(2)................................. -- -- 146
Redeemable preferred stock accretion...... -- -- 1,438
------ ------ ------
Numerator for basic and diluted net
income (loss) per share attributable to
common shareholders.................... $ (130) $ 553 $2,632
====== ====== ======
Denominator:
Denominator for basic net income (loss) per
share--weighted average shares............. 21,504 21,793
Effect on denominator upon closing of this
offering:
Common shares issued...................... -- --
Redeemable preferred shares converted to
Common Stock............................. -- --
Effect of dilutive securities:
Employee stock options.................... 736 639
------ ------ ------
Denominator for diluted net income
(loss) per share--weighted average
shares................................. 22,240 22,432
====== ====== ======
Net income (loss) per common share:
Basic....................................... $(0.01) $ 0.03 $
====== ====== ======
Diluted..................................... $(0.01) $ 0.03 $
====== ====== ======
|
F-23
CALIFORNIA PIZZA KITCHEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(1) Pro forma basic net income per share is computed based on the weighted
average number of common shares outstanding during the period, assuming the
conversion of shares of redeemable preferred stock then outstanding
into shares of Common Stock at the beginning of the period and the
issuance of shares of Common Stock upon the closing of this offering.
Pro forma diluted earnings per share is computed based on the weighted
average number of common shares outstanding during the period, assuming the
conversion of shares of redeemable preferred stock then outstanding
into shares of Common Stock, the issuance of shares of Common
Stock upon the closing of this offering and the dilution upon exercise of
options to purchase common shares using the treasury stock method, as if
such events occurred at the beginning of the period.
(2) The co-founders and co-chairmen of the Board executed amendments to their
employment agreements that become effective upon the closing of this
offering which will grant each of them non-qualified stock options to
purchase 180,000 shares of Common Stock with an exercise price equal to the
initial public offering price.
4. Subsequent events
On May 5, 2000, the Company amended its Articles of Incorporation to change
the name of the Company's New Class A Common Stock to "Common Stock." The
unaudited consolidated financial statements and accompanying notes have been
restated for all periods presented to reflect this change.
On , 2000 the board of directors approved a for reverse stock
split. The consolidated financial statements and accompanying notes have been
restated for all periods presented to reflect this change.
F-24
Shares
[CALIFORNIA PIZZA KITCHEN LOGO APPEARS HERE]
Prospectus
, 2000
Banc of America Securities LLC
Deutsche Banc Alex. Brown
Robertson Stephens
Until , 2000 (25 days after the date of this prospectus), all
dealers that buy, sell or trade these shares of common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other expenses of issuance and distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the common stock being registered, all of which will be paid by the
Registrant. All amounts are estimates except the registration fee and the NASD
filing fee.
Registration fee.................................................. $18,480
NASD filing fee................................................... 7,500
Nasdaq National Market application fee............................ *
Blue Sky fees and expenses........................................ 5,000
Accounting fees and expenses...................................... *
Legal fees and expenses........................................... *
Transfer agent and registrar fees................................. *
Printing and engraving expenses................................... *
Miscellaneous expenses............................................ *
-------
Total........................................................... $ *
=======
|
*To be completed by amendment.
Item 14. Indemnification of directors and officers
Section 317 of the California General Corporations Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers who are parties or are threatened to be made parties to any
proceeding (with certain exceptions) by reason of the fact that the person is
or was an agent of the corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with the proceeding if that person acted in good faith and in a manner the
person reasonably believed to be in the best interests of the corporation.
Section 204 of the law provides that this limitation on liability has no effect
on a director's liability (a) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (b) for acts or
omissions that a director believes to be contrary to the best interests of the
corporation or its shareholders or that involve the absence of good faith on
the part of the director, (c) for any transaction from which a director derived
an improper personal benefit, (d) for acts or omissions that show a reckless
disregard for the director's duty to the corporation or its shareholders in
circumstances in which the director was aware, or should have been aware, in
the ordinary course of performing a director's duties, of a risk of a serious
injury to the corporation or its shareholders, (e) for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the corporation or its shareholders, (f) under Section
310 of the law (concerning contracts or transactions between the corporation
and a director), or (g) under Section 316 of the law (directors' liability for
improper dividends, loans and guarantees). Section 317 does not extend to acts
or omissions of a director in his capacity as an officer. Further, Section 317
has no effect on claims arising under federal or state securities laws and does
not affect the availability of injunctions and other equitable remedies
available to our shareholders for any violation of a director's fiduciary duty
to us or our shareholders. Although the validity and scope of the legislation
underlying Section 317 have not yet been interpreted to any significant extent
by the California courts, Section 317 may relieve directors of monetary
liability to us for grossly negligent conduct, including conduct in situations
involving attempted takeovers of our company.
In accordance with Section 317, our articles of incorporation eliminate the
liability of each of our directors for monetary damages to the fullest extent
permissible under California law. Our articles further authorize us to provide
indemnification to our agents (including our officers and directors), subject
to the limitations set forth above. The articles and bylaws further provide for
indemnification of our corporate agents
II-1
to the maximum extent permitted by California law. Additionally, we maintain
insurance policies which insure our officers and directors against certain
liabilities. Finally, reference is made to the indemnification and contribution
provisions of the Underwriting Agreement filed as an exhibit to this
Registration Statement.
The foregoing summaries are necessarily subject to the complete text of the
statute, our articles, our bylaws and the agreements referred to above and are
qualified in their entirety by reference thereto.
Item 15. Recent sales of unregistered securities
Since May 1, 1997, we have sold and issued the following securities:
1. During the period, the Registrant granted options to purchase an
aggregate of 2,798,868 shares of common stock, at exercise prices ranging from
$0.17 per share to $4.63 per share, to key employees, officers and directors
under its 1998 Stock-Based Incentive Compensation Plan. These options vest over
a period of time ranging from one to four years following their respective
dates of grant.
2. On November 19, 1999, the Registrant sold 1,773 shares of its common
stock to Julie Carruthers for aggregate consideration of $8,865.00.
3. On November 10, 1998, the Registrant sold 28,024 shares of its common
stock to H.G. Carrington, Jr. and Ricki L. Carrington, as joint tenants with
rights of survivorship, for aggregate consideration of $4,637.97 pursuant to
the exercise of stock options.
4. On May 4, 1999, the Registrant sold 28,024 shares of its common stock to
H.G. Carrington, Jr. and Ricki L. Carrington, as joint tenants with rights of
survivorship, for aggregate consideration of $4,637.97 pursuant to the exercise
of stock options.
5. On September 28, 1999 the Registrant sold 112,098 shares of its common
stock to H.G. Carrington, Jr. and Ricki L. Carrington, as joint tenants with
rights of survivorship, for aggregate consideration of $18,546.61 pursuant to
the exercise of stock options.
6. On November 10, 1998, the Registrant sold 110,696 shares of its common
stock to Frederick R. Hipp, as trustee of the Frederick R. Hipp Revocable
Trust, for aggregate consideration of $18,314.65 pursuant to the exercise of
stock options.
7. On December 24, 1998, the Registrant sold 553,480 shares of its common
stock to Frederick R. Hipp for aggregate consideration of $91,573.27 pursuant
to the exercise of stock options.
8. On December 24, 1998, the Registrant sold 415,110 shares of its common
stock to Fortunato N. Valenti for aggregate consideration of $68,679.95
pursuant to the exercise of stock options.
9. On December 24, 1998, the Registrant sold 55,348 shares of its common
stock to Richard C. Stockinger for aggregate consideration of $9,157.33
pursuant to the exercise of stock options.
10. On January 5, 1999, the Registrant sold 27,674 shares of its common
stock to Frederick F. Wolfe, as trustee of the 1998 Frederick Wolfe Revocable
Trust, for aggregate consideration of $4,578.66 pursuant to the exercise of
stock options.
11. On August 19, 1999, the Registrant sold 12,500 shares of its common
stock to Frederick F. Wolfe, as trustee of the 1998 Frederick Wolfe Revocable
Trust, for aggregate consideration of $15,625.00 pursuant to the exercise of
stock options.
12. On September 28, 1999, the Registrant sold 83,022 shares of its common
stock to Frederick F. Wolfe, as trustee of the 1998 Frederick Wolfe Revocable
Trust, for aggregate consideration of $13,735.99 pursuant to the exercise of
stock options.
II-2
13. On July 15, 1999, the Registrant sold 1,502 shares of common stock to
Julie Carruthers for aggregate consideration of $6,383.50 pursuant to the
exercise of stock options.
14. On August 19, 1999, the Registrant sold 12,500 shares of its common
stock to Julie Carruthers for aggregate consideration of $15,625.00 pursuant to
the exercise of stock options.
15. On August 19, 1999, the Registrant sold 12,500 shares of its common
stock to Sarah Goldsmith for aggregate consideration of $15,625.00 pursuant to
the exercise of stock options.
16. On August 19, 1999, the Registrant sold 12,500 shares of its common
stock to Karen Settlemyer for aggregate consideration of $15,625.00 pursuant to
the exercise of stock options.
17. On August 19, 1999, the Registrant sold 12,500 shares of its common
stock to Douglas MacDonald for aggregate consideration of $15,625.00 pursuant
to the exercise of stock options.
18. On November 10, 1998, the Registrant sold 112,098 shares of its common
stock, 50,759 shares of its Series A 12 1/2% Cumulative Compounding Preferred
Stock and 50,759 shares of its Series B 13 1/2% Cumulative Compounding
Preferred Stock to H.G. Carrington, Jr. for aggregate consideration of
$198,381.67 pursuant to a Securities Purchase Agreement and Joinder, dated
November 10, 1998, between the Registrant and Mr. Carrington.
19. On March 31, 1998, the Registrant sold 202,020 shares of its common
stock, 101,010 shares of its Series A 12 1/2% Cumulative Compounding Preferred
Stock and 101,010 shares of its Series B 13 1/2% Cumulative Compounding
Preferred Stock to Frederick R. Hipp for aggregate consideration of $374,666.30
pursuant to a Securities Purchase Agreement and Joinder, dated March 31, 1998,
between the Registrant and Mr. Hipp.
20. On September 30, 1997, the Registrant effected a recapitalization of its
capital stock in connection with the Company's merger with C.P. Kitchen
Acquisition Corp. Pursuant to the merger, the Registrant issued .884986 shares
of new Class A Common Stock in exchange for each share of old Class A Common
Stock outstanding immediately before the recapitalization. Additionally, the
Registrant issued 6,470,400 shares of its Class A Common Stock and 269,600
shares of its Class B Common Stock to Bruckmann, Rosser, Sherrill & Co., L.P.
and its co-investors in exchange for an aggregate capital contribution of
$25,000,000. All Class B Common Stock has subsequently been converted into
Class A Common Stock and the class renamed "Common Stock."
21. On June 13, 1997, the Registrant sold 10,855 shares of its Common Stock
to Gary Beauregard for aggregate consideration of $60,095.00 pursuant to the
exercise of stock options.
22. On June 13, 1997, the Registrant sold 1,559 shares of its Common Stock
to Julie Carruthers for aggregate consideration of $7,488.50 pursuant to the
exercise of stock options.
23. On June 13, 1997, the Registrant sold 708 shares of its Common Stock to
Priscilla Nanong for aggregate consideration of $3,400.00 pursuant to the
exercise of stock options.
24. On June 13, 1997, the Registrant sold 3,513 shares of its Common Stock
to Douglas Middleton for aggregate consideration of $19,147.50 pursuant to the
exercise of stock options.
25. On December 22, 1997, the Registrant declared a dividend of two shares
of Series A 12 1/2% Cumulative Compounding Preferred Stock and two shares of
Series B 13 1/2% Cumulative Compounding Preferred Stock on each outstanding
share of common stock.
26. On November 9, 1998, the Registrant effected a two-for-one forward stock
split of its common stock by issuing a stock dividend.
II-3
The transactions referred to in numbers 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13, 14, 15, 16 and 17 were made in reliance upon the exemption from
registration provided pursuant to Rule 701 under the Securities Act for
securities sold pursuant to certain compensatory benefit plans and contracts
relating to compensation. The transactions referred to in numbers 18 and 19
were made in reliance upon the exemption from registration provided pursuant to
Rule 504 of Regulation D of the Securities Act. The transactions referred to in
number 20 were made in reliance upon the exemptions from registration provided
pursuant to Section 3(a)(9) and Section 4(2) of the Securities Act. The
transactions referred to in numbers 21 and 22 did not require registration
under the Securities Act because they do not fall within the definition of
"sale" under Section 5 of the Securities Act. No underwriters were involved in
connection with the above-referenced sales of securities.
Item 16. Exhibits and financial statement schedules
a. Exhibits
EXHIBIT INDEX
Number Description Page
------ ----------- ----
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation, and amendments
thereto
3.2 Amended and Restated Bylaws
4.1* Specimen Common Stock Certificate
4.2 Registration Rights Agreement dated September 30, 1997
4.3* Form of Lock-Up Agreement
5.1* Paul, Hastings, Janofsky & Walker LLP Opinion of Legality
9.1 Voting Trust Agreement dated September 30, 1997
10.1 Memorandum of Understanding Regarding Form of Agreement between
Host Marriott Services and California Pizza Kitchen, Inc. dated
May 12, 1998
10.2 Credit Agreement by and among California Pizza Kitchen, Inc. and
Bank Of America, N.A., as Administrative Agent and Issuing
Lender, Bankers Trust Company, as Documentation Agent, and each
lender from time to time party thereto, dated October 29, 1999
10.3 Security Agreement by and among California Pizza Kitchen, Inc.,
CPK Management Company, California Pizza Kitchen of Illinois,
Inc. and Bank of America, N.A. dated October 29, 1999
10.4 Supplemental Security Agreement (Trademarks) by and between CPK
Management Company and Bank of America, N.A. dated October 29,
1999
10.5 Pledge Agreement by and among California Pizza Kitchen, Inc.,
California Pizza Kitchen of Illinois, Inc., H.G. Carrington,
Jr., Gregory S. Levin and Bank of America, N.A. dated October
29, 1999
10.6 Master Subsidiary Guaranty issued to Bank of America, N.A. by
CPK Management Company and California Pizza Kitchen of
Illinois, Inc. dated October 29, 1999
10.7* Third Amended and Restated Employment Agreement of Richard L.
Rosenfield dated May 25, 2000
10.8* Third Amended and Restated Employment Agreement of Larry S. Flax
dated May 25, 2000
10.9 Severance Agreement between Frederick R. Hipp and California
Pizza Kitchen, Inc. dated March 31, 1998
10.10 Severance Agreement between H.G. Carrington, Jr. and California
Pizza Kitchen, Inc. dated May 4, 1998
10.11 Severance Agreement between Frederick F. Wolfe and California
Pizza Kitchen, Inc. dated November [sic], 1999
10.12 Severance Agreement between Tom N. Jenneman and California Pizza
Kitchen, Inc. dated November [sic], 1999
|
II-4
Number Description Page
------ ----------- ----
10.13 California Pizza Kitchen, Inc. Employee Stock Purchase Plan
adopted on November 2, 1999
10.14 California Pizza Kitchen, Inc. 1998 Stock-Based Incentive
Compensation Plan adopted February 5, 1998, as amended on July
21, 1998 and November 2, 1999 and forms of stock option
agreement thereunder
10.15 California Pizza Kitchen, Inc. Non-Qualified Stock Option
Agreements between California Pizza Kitchen, Inc. and Frederick
R. Hipp dated March 31, 1998
10.16 Promissory Note between California Pizza Kitchen, Inc. and H.G.
Carrington, Jr. dated September 28, 1999
10.17 Promissory Note between California Pizza Kitchen, Inc. and
Frederick F. Wolfe dated September 28, 1999
10.18 Securities Holders Agreement dated as of September 30, 1998
among California Pizza Kitchen, Inc., Bruckmann, Rosser,
Sherrill & Co., L.P., Richard L. Rosenfield, Larry S. Flax and
the additional investors named therein
21.1 Subsidiaries of California Pizza Kitchen, Inc.
23.1 Consent of Ernst & Young LLP
23.2* Consent of Paul, Hastings, Janofsky & Walker LLP (included in
Exhibit 5.1)
24.1 Power of Attorney
27.1 Financial Data Schedule
|
*To be filed by amendment.
(b) Financial Statement Schedules
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this Registration Statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Los Angeles, State of
California, on May 25, 2000.
California Pizza Kitchen, Inc.
/s/ Frederick R. Hipp
By: _________________________________
Name: Frederick R. Hipp
Title: Chief Executive Officer and
President, and Director
|
II-6
EXHIBIT INDEX
Number Description Page
------ ----------- ----
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation, and amendments
thereto
3.2 Amended and Restated Bylaws
4.1* Specimen Common Stock Certificate
4.2 Registration Rights Agreement dated September 30, 1997
4.3* Form of Lock-Up Agreement
5.1* Paul, Hastings, Janofsky & Walker LLP Opinion of Legality
9.1 Voting Trust Agreement dated September 30, 1997
10.1 Memorandum of Understanding Regarding Form of Agreement between
Host Marriott Services and California Pizza Kitchen, Inc. dated
May 12, 1998
10.2 Credit Agreement by and among California Pizza Kitchen, Inc. and
Bank Of America, N.A., as Administrative Agent and Issuing
Lender, Bankers Trust Company, as Documentation Agent, and each
lender from time to time party thereto, dated October 29, 1999
10.3 Security Agreement by and among California Pizza Kitchen, Inc.,
CPK Management Company, California Pizza Kitchen of Illinois,
Inc. and Bank of America, N.A. dated October 29, 1999
10.4 Supplemental Security Agreement (Trademarks) by and between CPK
Management Company and Bank of America, N.A. dated October 29,
1999
10.5 Pledge Agreement by and among California Pizza Kitchen, Inc.,
California Pizza Kitchen of Illinois, Inc., H.G. Carrington,
Jr., Gregory S. Levin and Bank of America, N.A. dated October
29, 1999
10.6 Master Subsidiary Guaranty issued to Bank of America, N.A. by
CPK Management Company and California Pizza Kitchen of
Illinois, Inc. dated October 29, 1999
10.7* Third Amended and Restated Employment Agreement of Richard L.
Rosenfield dated May 25, 2000
10.8* Third Amended and Restated Employment Agreement of Larry S. Flax
dated May 25, 2000
10.9 Severance Agreement between Frederick R. Hipp and California
Pizza Kitchen, Inc. dated March 31, 1998
10.10 Severance Agreement between H.G. Carrington, Jr. and California
Pizza Kitchen, Inc. dated May 4, 1998
10.11 Severance Agreement between Frederick F. Wolfe and California
Pizza Kitchen, Inc. dated November [sic], 1999
10.12 Severance Agreement between Tom N. Jenneman and California Pizza
Kitchen, Inc. dated November [sic], 1999
10.13 California Pizza Kitchen, Inc. Employee Stock Purchase Plan
adopted on November 2, 1999
10.14 California Pizza Kitchen, Inc. 1998 Stock-Based Incentive
Compensation Plan adopted February 5, 1998, as amended on July
21, 1998 and November 2, 1999 and forms of stock option
agreement thereunder
10.15 California Pizza Kitchen, Inc. Non-Qualified Stock Option
Agreements between California Pizza Kitchen, Inc. and Frederick
R. Hipp dated March 31, 1998
10.16 Promissory Note between California Pizza Kitchen, Inc. and H.G.
Carrington, Jr. dated September 28, 1999
|
Number Description Page
------ ----------- ----
10.17 Promissory Note between California Pizza Kitchen, Inc. and
Frederick F. Wolfe dated September 28, 1999
10.18 Securities Holders Agreement dated as of September 30, 1998
among California Pizza Kitchen, Inc., Bruckmann, Rosser,
Sherrill & Co., L.P., Richard L. Rosenfield, Larry S. Flax
and the additional investors named therein
21.1 Subsidiaries of California Pizza Kitchen, Inc.
23.1 Consent of Ernst & Young LLP
23.2* Consent of Paul, Hastings, Janofsky & Walker LLP (included in
Exhibit 5.1)
24.1 Power of Attorney
27.1 Financial Data Schedule
|
* To be filed by amendment.
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CALIFORNIA PIZZA KITCHEN, INC.
I
The name of this corporation is CALIFORNIA PIZZA KITCHEN, INC. and is
sometimes referred to herein as the "Corporation."
II
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
III
A. Designation of Capital Stock. The Corporation is authorized to
issue two classes of common stock designated respectively "Class A Common
Stock" and "Class B Common Stock" and one class of preferred stock designated as
"Class A Preferred Stock." Class A Common Stock and Class B Common Stock are
sometimes hereinafter collectively referred to as "Common Stock." Class A
Preferred Stock is sometimes hereinafter referred to as "Preferred Stock."
B. Number of Authorized Shares. The total number of shares of Class
A Common Stock authorized to be issued is 40,000,000. The total number of shares
of Class B Common Stock authorized to be issued is 40,000,000. The total number
of shares Class A Preferred Stock authorized to be issued is 40,000,000.
C. Class A and Class B Common Stock. The par value of both of the
Class A Common Stock and Class B Common Stock is $.01 per share. Except as
otherwise provided herein, all shares of Class A Common Stock and Class B Common
Stock will be identical and will entitle the holders thereof to the same rights
and privileges.
1. Dividends. Holders of Common Stock will be entitled to receive
such dividends as may be declared by the Board of Directors, provided that if
dividends are declared which are payable in shares of Class A Common Stock or
Class B Common Stock, dividends will be declared which are payable at the same
rate on each class of Common Stock, and the dividends payable in shares of Class
A Common Stock will be payable to holders of Class A Common Stock and the
dividends payable in shares of Class B Common Stock will be payable to holders
of Class B Common Stock.
2. Conversion. Each record holder of Class A Common Stock will be
entitled to convert any or all of such holder's Class A Common Stock into the
same number of shares of Class B Common Stock, and each record holder of Class B
Common Stock will be entitled to convert any or all of the shares of such
holder's Class B Common
Stock into the same number of shares of Class A Common Stock, provided that at
the time of conversion of shares of Class B Common Stock into shares of Class A
Common Stock such holder would be permitted, pursuant to applicable law, to
hold the total number of shares of Class A Common Stock such holder would hold
after giving effect to such conversion. The delivery to the Corporation of a
certificate from a holder of shares of Class B Common Stock who wishes to
convert such shares into shares of Class A Common Stock, which certificate is to
the effect that in the good faith judgment of such holder such holder is
permitted, pursuant to applicable law, to hold the total number of shares of
Class A Common Stock which such holder would hold after giving effect to such
conversion, shall be conclusive and binding on the Corporation.
Each conversion of shares of one class of Common Stock into shares of
another class of Common Stock will be effected by the surrender of the
certificate or certificates representing the shares to be converted at the
principal office of the Corporation at any time during normal business hours,
together with a written notice by the holder of such shares stating the number
of shares that any such holder desires to convert into the other class of Common
Stock. Such conversion will be deemed to have been effected as of the close of
business on the date on which such certificate or certificates have been
surrendered and such notice has been received by the Corporation, and at such
time the rights of any such holder with respect to the converted class of Common
Stock will cease and the person or persons in whose name or names the
certificate or certificates for shares of the other class of Common Stock are to
be issued upon such conversion will be deemed to have become the holder or
holders of record of the shares of such other class of Common Stock represented
thereby.
Promptly after such surrender and the receipt by the Corporation of
the written notice from the holder hereinbefore referred to, the Corporation
will issue and deliver in accordance with the surrendering holder's instructions
the certificate or certificates for the other class of Common Stock issuable
upon such conversion and a certificate representing any shares of Common Stock
which were represented by the certificate or certificates delivered to the
Corporation in connection with such conversion but which were not converted. The
issuance of certificates for the other class of Common Stock upon conversion
will be made without charge to the holder or holders of such shares for any
issuance tax (except stock transfer taxes) in respect thereof or other cost
incurred by the Corporation in connection with such conversion.
3. Transfers. The Corporation will not close its books against the
transfer of any share of Common Stock, or of any share of Common Stock issued or
issuable upon conversion of shares of the other class of Common Stock, in any
manner that would interfere with the timely conversion of such shares of Common
Stock.
4. Subdivision and Combinations of Shares. If the Corporation in any
manner subdivides or combines the outstanding shares of any class of Common
Stock, the outstanding shares of the other class of Common Stock will be
proportionately subdivided or combined.
5. Reservation of Shares for Conversion. So long as any shares of any
class of Common Stock are outstanding, the Corporation will at all times reserve
and keep available out of its authorized but unissued shares of Class A Common
Stock and Class
-2-
B Common Stock (or any shares of Class A Common Stock or Class B Common Stock
which are held as treasury shares), the number of shares sufficient for issuance
upon conversion.
6. Distribution of Assets. In the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, holders
of Common Stock will be entitled to receive all of the remaining assets of the
Corporation available for distribution to its stockholders after all amounts to
which the holders of any Preferred Stock are entitled have been paid or set
aside in cash for payment.
7. Voting Rights. The holders of Class A Common Stock shall have
the general right to vote for all purposes, including the election of directors,
as provided by law. Each holder of Class A Common Stock shall be entitled to one
vote for each share thereof held. Except as otherwise required by law, the
holders of Class B Common Stock shall have no voting rights.
8. Merger, etc. In connection with any merger, consolidation, or
recapitalization (other than the merger contemplated by the Agreement and Plan
of Merger, dated as of July 1, 1997, as amended, among the Corporation and the
other parties thereto) in which holders of Class A Common Stock generally
receive, or are given the opportunity to receive, consideration for their shares
(a) all holders of Class B Common Stock shall be given the opportunity to
receive the same form of consideration for their shares as is received by
holders of Class A Common Stock and (b) holders of Class B Common Stock shall be
entitled to receive the same amount of consideration per share as received by
holders of Class A Common Stock.
D. Class A Preferred Stock.
1. Issue in Series. Shares of Class A Preferred Stock may be issued
from time to time in one or more series, each such series to have the terms
stated herein or in a resolution of the Board of Directors of the Corporation
providing for its issue. All shares of any one series of Class A Preferred Stock
will be identical, but shares of different series of Class A Preferred Stock
need not be identical or rank equally except insofar as provided by law or
herein.
2. Creation of Series. The Board of Directors will have authority
by resolution to cause to be created one or more series of Class A Preferred
Stock and to determine and fix with respect to each such series prior to the
issuance of any shares of the series to which such resolution relates:
(i) The distinctive designation of the series and the number of
shares which will constitute the series, which number may be increased or
decreased (but not below the number of shares then outstanding) from time to
time by action of the Board of Directors;
(ii) The dividend rate and the times of payment of dividends on the
shares of the series, whether dividends will be cumulative, and if so, from what
date or dates;
(iii) The price or prices at which, and the terms and conditions on
which, the shares of the series may be redeemed at the option of the
Corporation;
-3-
(iv) Whether or not the shares of the series will be entitled to the
benefit of a retirement or sinking fund to be applied to the purchase or
redemption of such shares and, if so entitled, the amount of such fund and the
terms and provisions relative to the operation thereof;
(v) Whether or not the shares of the series will be convertible
into, or exchangeable for, any other shares of stock of the Corporation or other
securities, and if so convertible or exchangeable, the conversion price or
prices, or the rates of exchange, and any adjustments thereof, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
(vi) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(vii) Whether or not the shares of the series will have priority over
or be on a parity with or be junior to the shares of any other series or class
in any respect or will be entitled to the benefit of limitations restricting the
issuance of shares of any other series or class having priority over or being on
a parity with the shares of such series in any respect, or restricting the
payment of dividends on or the making of other distributions in respect of
shares of any other series or class ranking junior to the shares of the series
as to dividends or assets, or restricting the purchase or redemption of the
shares of any such junior series or class, and the terms of any such
restriction;
(viii) Whether the series will have voting rights, in addition to any
voting rights provided by law, and, if so, the terms of such voting rights; and
(ix) Any other preferences, qualifications, privileges, options and
other relative or special rights and limitations of that series.
3. Dividends. Holders of Class A Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of funds legally
available for the payment thereof, dividends at the rates fixed for the
respective series, and no more, before any dividends shall be declared and paid,
or set apart for payment, on Common Stock with respect to the same dividend
period.
4. Preference on Liquidation. In the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, holders
of each series of Class A Preferred Stock created will be entitled to receive
the amount fixed for such series plus, in the case of any series on which
dividends are cumulative, an amount equal to all dividends accumulated and
unpaid thereon to the date of final distribution whether or not earned or
declared before any distribution shall be paid, or set aside for payment, to
holders of Common Stock. If the assets of the Corporation are not sufficient to
pay such amounts in full, holders of all shares of such Class A Preferred Stock
will participate in the distribution of assets ratably in proportion to the full
amounts to which they are entitled or in such order or priority, if any, as will
have been fixed for the series of Class A Preferred Stock. Neither the merger
nor consolidation of the Corporation into or with any other corporation, nor a
sale, transfer or lease of all or part of its assets, will be deemed a
liquidation, dissolution or winding up of the Corporation within the meaning of
this paragraph except to the extent specifically provided for herein.
-4-
(5) Redemption. The Corporation, at the option of the Board of
Directors, may redeem all or part of the shares of any series of Class A
Preferred Stock on the terms and conditions fixed for such series.
IV
The liability of the directors of this Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
This Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the General Corporation Law of the State of
California) for breach of duty to the Corporation and its shareholders through
bylaw provisions or through agreements with the agents, or both, in excess of
the indemnification otherwise permitted by Section 317 of the General
Corporation Law of the State of California, subject to the limits on such excess
indemnification set forth in Section 204 of the General Corporation Law of the
State of California. Any repeal or modification of the provisions of this
Article IV shall not adversely affect any rights or protections to which the
corporation's directors, officers or agents were entitled prior to such repeal
or modification.
-5-
CERTIFICATE OF DETERMINATION FOR
SERIES A 12 1/2% CUMULATIVE COMPOUNDING PREFERRED STOCK
AND SERIES B 13 1/2% CUMULATIVE COMPOUNDING PREFERRED STOCK
OF
CALIFORNIA PIZZA KITCHEN, INC.
To the Secretary of State
State of California
Pursuant to the provisions of Section 401 of the General Corporation
Law of the State of California, the undersigned officers of the corporation
hereinafter named (the "Corporation") do hereby certify as follows:
(1) The name of the Corporation is California Pizza Kitchen, Inc.
(2) The following is a copy of the resolution adopted by the Board of
Directors of the Corporation pursuant to the authority given to the Board of
Directors by the Corporation's Articles of Incorporation:
RESOLVED, that, pursuant to Article III, Section D of the Articles of
Incorporation, as amended (which authorizes the creation and issuance of shares
of Class A Preferred Stock on such terms as are determined by the Board of
Directors), the Board of Directors hereby fixes the designations, rights,
preferences, privileges, restrictions and limitations of the following two
series of Class A Preferred Stock:
A. Series A Class A Preferred Stock.
1. Designation of Series. The first series of Class A Preferred
Stock shall be designated as Series A 12 1/2% Cumulative Compounding
Preferred Stock ("Series A Preferred Stock"), and the number of shares which
shall constitute such series shall be 10,101,010. The par value of Series A
Preferred Stock shall be $.01 per share.
2. Rank. With respect to dividend rights and rights on
liquidation, winding up and dissolution of the Corporation, Series A Preferred
Stock shall rank (a) senior to (i) the Class A Common Stock of the Corporation,
par value $.01 per share ("Class A Common Stock"), the Class B Common Stock of
the Corporation, par value $.01 per share ("Class B Common Stock"), the Series B
Preferred Stock (defined in paragraph B(l) below) of the Corporation,and (ii)
each other class of capital stock or class or series of preferred stock issued
by the Corporation after the date hereof the terms of which specifically provide
that such class or series shall rank junior to Series A Preferred Stock as to
dividend distributions or distributions upon the liquidation, winding up and
dissolution of the Corporation (each of the securities in clauses (i) and (ii)
collectively referred to as "Series A Junior Securities"), (b) on a parity with
each other class of capital stock or class or series of preferred stock issued
by the Corporation after the date hereof the terms of which do not specifically
provide that they rank junior to Series A Preferred Stock or senior to Series A
Preferred Stock as to
dividend distributions or distributions upon liquidation, winding up and
dissolution of the Corporation (collectively referred to as "Series A Parity
Securities"), and (c) junior to each other class of capital stock or other class
or series of preferred stock issued by the Corporation after the date hereof the
terms of which specifically provide that such class or series shall rank senior
to Series A Preferred Stock as to dividend distributions or distributions upon
the liquidation, winding up and dissolution of the Corporation (collectively
referred to as "Series A Senior Securities").
3. Dividends.
(a) Each Holder (as defined in paragraph C) of Series A
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available therefor, cash dividends on
each share of Series A Preferred Stock at a rate equal to $0.2387 per share per
annum. All dividends shall be cumulative, whether or not earned or declared, and
shall accrue on a daily basis from the date of issuance of Series A Preferred
Stock, and shall be payable annually in arrears on each Dividend Payment Date
(as defined in paragraph C), commencing on the second Dividend Payment Date
after the date of issuance of such Series A Preferred Stock. Each dividend on
Series A Preferred Stock shall be payable to the Holders of record of Series A
Preferred Stock as they appear on the stock register of the Corporation on such
record date as may be fixed by the Board of Directors, which record date shall
not be less than ten nor more than 60 days prior to the applicable Dividend
Payment Date. Dividends shall cease to accrue in respect of shares of Series A
Preferred Stock on the date of their repurchase by the Corporation unless the
Corporation shall have failed to pay the relevant repurchase price on the date
fixed for repurchase. Notwithstanding anything to the contrary set forth above,
unless and until such dividends are declared by the Board of Directors, there
shall be no obligation to pay such dividends in cash; provided, that such
dividends shall continue to cumulate and shall be paid at the time of repurchase
as provided herein if not earlier declared and paid. Accrued dividends on the
Series A Preferred Stock if not paid on the first or any subsequent Dividend
Payment Date following accrual shall thereafter accrue additional dividends
("Additional Dividends") in respect thereof, compounded annually, at the rate of
14 1/2% per annum.
(b) All dividends paid with respect to shares of Series A
Preferred Stock pursuant to paragraph A(3)(a) shall he paid pro rata to the
Holders entitled thereto.
(c) Dividends on account of arrears for any past Dividend
Period and dividends in connection with any optional redemption pursuant to
paragraph A(5)(a) may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to the Holders of record on any date as may be
fixed by the Board of Directors, which date is not more than 30 days prior to
the payment of such dividends.
(d) No full dividends shall be declared by the Board of
Directors or paid or funds set apart for the payment of dividends or other
distributions on any Series A Parity Securities for any period, and no Series A
Parity Securities may be repurchased, redeemed or otherwise retired, nor may
funds be set apart for such payment, unless (i) full Accumulated Dividends have
been paid or set apart for such payment on the Series A Preferred Stock and
Series A Parity Securities for all Dividend
2
Periods terminating on or prior to the date of payment of such full dividends or
distributions on, or such repurchase or redemption of, such Series A Parity
Securities (the "Series A Parity Payment Date") and (ii) an amount equal to a
prorated dividend on the Series A Preferred Stock and Series A Parity Securities
at the customary dividend rates for such securities for the period from the
Dividend Payment Date immediately prior to the Series A Parity Payment Date to
the Series A Parity Payment Date have been paid or set apart for payment. In the
event that such dividends are not paid in full or set apart for payment with
respect to all outstanding shares of Series A Preferred Stock and of any Series
A Parity Securities and funds available for payment of dividends shall be
insufficient to permit payment in full to the holders of all such stock of the
full preferential amounts to which they are then entitled, then the entire
amount available for payment of dividends shall be distributed ratably among all
such holders of Series A Preferred Stock and of any Series A Parity Securities
in proportion to the full amount to which they would otherwise be respectively
entitled.
(e) The Holders shall be entitled to receive the dividends
provided for in paragraph A(3)(a) hereof in preference to and in priority over
any dividends, upon any of the Series A Junior Securities. Such dividends on the
Series A Preferred Stock shall be cumulative, whether or not earned or declared,
so that if at any time full Accumulated Dividends on all shares of Series A
Preferred Stock then outstanding have not been paid for all Dividend Periods
then elapsed and a prorated dividend on the Series A Preferred Stock at the rate
aforesaid from the Dividend Payment Date immediately preceding the Series A
Junior Payment Date (as defined below) to the Series A Junior Payment Date have
not been paid or set aside for payment, the amount of such unpaid dividends
shall be paid before any sum shall be set aside for or applied by the
Corporation to the purchase, redemption or other acquisition for value of any
shares of Series A Junior Securities (either pursuant to any applicable sinking
fund requirement or otherwise) or any dividend or other distribution shall be
paid or declared and set apart for payment on any Series A Junior Securities
(the date of any such actions to be referred to as the "Series A Junior Payment
Date"); provided, however, that the foregoing shall not prohibit the Corporation
from repurchasing shares of Series A Junior Securities from a Holder who is, or
was, a director or employee of the Corporation (or a subsidiary of the
Corporation).
(f) Dividends payable on Series A Preferred Stock for any
period less than one year shall be computed on the basis of a 360-day year
consisting of twelve 30-day months and the actual number of days elapsed in the
period for which such dividends are payable.
(g) The Corporation shall not claim any deduction from
gross income for dividends paid on Series A Preferred Stock in any Federal
income tax return, claim for refund, or other statement, report or submission
made to the Internal Revenue Service, and shall make any election or take any
similar action to effectuate the foregoing except, in each case, if there shall
be a change in law such that the Corporation may claim such dividends as
deductions from gross income without affecting the ability of the Holders to
claim the dividends received deduction under Section 243(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code") (or any successor provision). At
the reasonable request of any Holder (and at the expense of such Holder), the
Corporation shall join in the submission to the Internal Revenue Service of a
request for a ruling that the dividends paid on Series A Preferred Stock shall
be eligible for the dividends received deduction under Section 243(a)(1) of the
3
Code (or any successor provision). In addition, the Corporation shall cooperate
with any Holder (at the expense of such Holder) in any litigation, appeal or
other proceeding relating to the eligibility for the dividends received
deduction under Section 243(a)(1) of the Code (or any successor provision) of
any dividends (within the meaning of Section 316(a) of the Code or any successor
provision) paid on Series A Preferred Stock. To the extent possible, the
principles of this paragraph A(3)(g) shall also apply with respect to state and
local income taxes.
4. Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the Holders of all shares of
Series A Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1.9095 in cash per share, plus an amount equal to full
cumulative dividends (whether or not earned or declared) accrued and unpaid
thereon, including Additional Dividends, to the date of final distribution and
no more, before any distribution is made on any Series A Junior Securities. If
upon any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the application of all amounts available for payments with respect
to Series A Preferred Stock and all other Series A Parity Securities would not
result in payment in full of Series A Preferred Stock and such other Series A
Parity Securities, the Holders and holders of Series A Parity Securities shall
share equally and ratably in any distribution of assets of the Corporation in
proportion to the full liquidation preference to which each is entitled. After
payment in full pursuant to this paragraph A(4)(a), the Holders shall not be
entitled to any further participation in any distribution in the event of
liquidation, dissolution or winding up of the affairs of the Corporation.
(b) For the purposes of this paragraph A(4), neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Corporation nor the consolidation, merger or other business
combination of the Corporation with one or more corporations shall be deemed to
be a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, unless such sale, conveyance, exchange or transfer is in connection
with a dissolution or winding up of the business of the Corporation; provided,
however, that any consolidation or merger of the Corporation in which the
Corporation is not the surviving entity shall be deemed to be a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of this paragraph A(4) if, (i) in connection therewith, the holders of Common
Stock of the Corporation receive as consideration, whether in whole or in part,
for such Common Stock (1) cash, (2) notes, debentures or other evidences of
indebtedness or obligations to pay cash or (3) preferred stock of the surviving
entity (whether or not the surviving entity is the Corporation) which ranks on a
parity with or senior to the preferred stock received by holders of the Series A
Preferred Stock with respect to liquidation or dividends or (ii) the holders of
the Series A Preferred Stock do not receive preferred stock of the surviving
entity with rights, powers and preferences equal to (or more favorable to the
holders than) the rights, powers and preferences of the Series A Preferred
Stock.
4
5. Redemption.
(a) Optional Redemption.
(i) The Corporation may, at its option, redeem
at any time or from time to time, from any source of funds legally available
therefor, in whole or in part, in the manner provided in paragraph A(5)(c)
hereof, any or all of the shares of Series A Preferred Stock, at a redemption
price per share of $1.9095 per share, plus an amount equal to full cumulative
dividends (whether or not earned or declared) accrued and unpaid thereon,
including Additional Dividends, to the Redemption Date (as defined in
paragraph C).
(ii) No partial redemption of Series A Preferred
Stock pursuant to paragraph A(5)(a) hereof may be authorized or made unless
prior thereto, full accrued and unpaid dividends thereon for all Dividend
Periods terminating on or prior to the Redemption Date and an amount equal to a
prorated dividend thereon for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date have been or
immediately prior to the Redemption Notice are declared and paid in cash or are
declared and there has been a sum set apart sufficient for such cash payment on
the Redemption Date.
(iii) In the event of a redemption pursuant to
paragraph A(5)(a) hereof of only a portion of the then outstanding shares of
Series A Preferred Stock, the Corporation shall effect such redemption pro rata
according to the number of shares held by each Holder of Series A Preferred
Stock.
(b) Mandatory Redemption. All outstanding shares of
the Series A Preferred Stock shall be redeemed from funds legally available
therefor on January 15, 2008 (the "Mandatory Redemption Date"), at a price per
share equal to $1.9095 plus an amount per share equal to full cumulative
dividends (whether or not earned or declared) accrued and unpaid thereon,
including Additional Dividends, to the Mandatory Redemption Date.
(c) Procedures for Redemption.
(i) At least 30 days and not more than 60 days
prior to the date fixed for any redemption of Series A Preferred Stock, written
notice (the "Redemption Notice") shall be given by first class mail, postage
prepaid, to each Holder of record of Series A Preferred Stock on the record date
fixed for such redemption of Series A Preferred Stock at such Holder's address
as set forth on the stock register of the Corporation on such record date;
provided that no failure to give such notice nor any deficiency therein shall
affect the validity of the procedure for the redemption of any shares of
Series A Preferred Stock to be redeemed except as to the Holder or Holders to
whom the Corporation has failed to give said notice or except as to the Holder
or Holders whose notice was defective. In addition to any information required
by law or by the applicable rules of any exchange upon which shares of Series A
Preferred Stock may be listed or admitted to trading, the Redemption Notice
shall state:
(A) the redemption price;
5
(B) whether all or less than all of the
outstanding shares of Series A Preferred Stock redeemable thereunder are to be
redeemed and the aggregate number of shares of Series A Preferred Stock being
redeemed;
(C) the number of shares of Series A
Preferred Stock held, as of the appropriate record date, by the Holder that the
Corporation intends to redeem;
(D) the Redemption Date;
(E) that the Holder is to surrender to the
Corporation, at the place or places where certificates for shares of Series A
Preferred Stock are to be surrendered for redemption, in the manner and at the
price designated, his, her or its certificate or certificates representing the
shares of Series A Preferred Stock to be redeemed; and
(F) that dividends on the shares of Series
A Preferred Stock to be redeemed shall cease to accumulate on such Redemption
Date unless the Corporation defaults in the payment of the redemption price.
Upon the mailing of any such Redemption Notice, the Corporation shall
become obligated to redeem, on the Redemption Date specified therein, all shares
of Series A Preferred Stock called for redemption.
(ii) Each Holder shall surrender the certificate
or certificates representing such shares of Series A Preferred Stock being so
redeemed to the Corporation, duly endorsed, in the manner and at the place
designated in the Redemption Notice, and on the Redemption Date the full
redemption price for such shares shall be payable in cash to the Person whose
name appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(iii) If a Redemption Notice has been mailed in
accordance with paragraph A(5)(c) above, unless the Corporation defaults in the
payment in full of the redemption price, dividends on Series A Preferred Stock
called for redemption shall cease to accumulate on the Redemption Date, and the
Holders of such redemption shares shall cease to have any further rights with
respect thereto on the Redemption Date, other than the right to receive the
redemption price without interest.
6. Voting Rights.
(a) The Holders shall not be entitled or permitted
to vote on any matter required or permitted to be voted upon by the shareholders
of the Corporation, except as otherwise required by California law or these
Articles of Incorporation and except that without the written consent of the
holders of a majority of the outstanding shares of Series A Preferred Stock or
the vote of the holders of a majority of the outstanding shares of Series A
Preferred Stock at a meeting of the holders of Series A Preferred Stock called
for such purpose, the Corporation shall not
6
(a) create, authorize or issue any other class or series of stock entitled to a
preference prior to Series A Preferred Stock upon any dividend or distribution
or any liquidation, distribution of assets, dissolution or winding up of the
Corporation, or increase the authorized amount of any such other class or
series, or (b) amend, alter or repeal any provision of the Corporation's
Articles of Incorporation so as to adversely affect the relative rights and
preferences of the Series A Preferred Stock; provided, however that any such
amendment that changes the dividend payable on, or liquidation preference of,
the Series A Preferred Stock shall require the affirmative vote of the holder of
each share of Series A Preferred Stock at a meeting of such holders called for
such purpose or the written consent of the holder of each share of Series A
Preferred Stock.
(b) In any case in which the Holders shall be entitled
to vote, each Holder shall be entitled to one vote for each share of Series A
Preferred Stock held unless otherwise required by applicable law.
7. Conversion or Exchange. The Holders shall not have any
rights hereunder to convert such shares into or exchange such shares for shares
of any other class or classes or of any other series of any class or classes of
Capital Stock of the Corporation.
8. Reissuance of Series A Preferred Stock. Shares of
Series A Preferred Stock which have been issued and reacquired in any manner,
including shares purchased, redeemed or exchanged, shall have the status of
authorized and unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors or as part of any other series of Preferred Stock, all
subject to the conditions or restrictions on issuance set forth in any
resolution or resolutions adopted by the Board of Directors providing for the
issuance of any series of Preferred Stock; except that the Corporation may
reissue shares of Series A Preferred Stock which are reacquired by the
Corporation from a Holder who is, or was, an employee or director of the
Corporation (or its subsidiaries) provided that such reissued shares of Series A
Preferred Stock are reissued to a person who is an employee or director of the
Corporation (or its subsidiaries) at the time of such reissue.
9. Business Day. If any payment shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment shall
be made on the immediately succeeding Business Day.
10. Certain Additional Provisions.
(a) Reports. So long as any shares of Series A
Preferred Stock remain outstanding, the Corporation shall send to the Holders of
such Series A Preferred Stock at their addresses as set forth on the stock
register of the Corporation all quarterly and annual reports sent to holders of
Common Stock of the Corporation.
(b) Method of Payment. Series A Preferred Stock shall
be payable as to liquidation preference, dividends, redemption payments, cash in
lieu of fractional shares or other payments at the office of the Corporation
maintained for such purpose or, at the option of the Corporation, payment of
dividends may be made by check mailed to the Holders at their addresses set
forth in the stock register of the Corporation.
7
(c) Prohibitions and Restrictions Imposed by Senior
Securities and Indebtedness. To the extent that any action required to be taken
by the Corporation under this Resolution shall be prohibited or restricted by
the terms of the Senior Securities or any contract or instrument to which the
Corporation is a party in respect of the incurrence of indebtedness, such
Corporation's actions shall be delayed until such time as such prohibition or
restriction is no longer in force.
B. Series B Class A Preferred Stock.
1. Designation of Series. The second series of Class A
Preferred Stock shall be designated as Series B 13 1/2% Cumulative Compounding
Preferred Stock ("Series B Preferred Stock"), and the number of shares which
shall constitute such series shall be 10,101,010. The par value of Series B
Preferred Stock shall be $.01 per share.
2. Rank. With respect to dividend rights and rights on
liquidation, winding up and dissolution of the Corporation, Series B Preferred
Stock shall rank (a) senior to (i) the Class A Common Stock and Class B Common
Stock of the Corporation, and (ii) each other class of capital stock or class
or series of preferred stock issued by the Corporation after the date hereof the
terms of which specifically provide that such class or series shall rank junior
to Series B Preferred Stock as to dividend distributions or distributions upon
the liquidation, winding up and dissolution of the Corporation (each of the
securities in clauses (i) and (ii) collectively referred to as "Series B Junior
Securities"), (b) on a parity with each other class of capital stock or class
or series of preferred stock issued by the Corporation after the date hereof the
terms of which do not specifically provide that they rank junior to Series B
Preferred Stock or senior to Series B Preferred Stock as to dividend
distributions or distributions upon liquidation, winding up and dissolution of
the Corporation (collectively referred to as "Series B Parity Securities"), and
(c) junior to Series A Preferred Stock and each other class of capital stock or
other class or series of preferred stock issued by the Corporation after the
date hereof the terms of which specifically provide that such class or series
shall rank senior to Series B Preferred Stock as to dividend distributions or
distributions upon the liquidation, winding up and dissolution of the
Corporation (collectively referred to as "Series B Senior Securities").
3. Dividends.
(a) Each Holder of Series B Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, cash dividends on each share of Series B
Preferred Stock at a rate equal to $0.1983 per share per annum. All dividends
shall be cumulative, whether or not earned or declared, and shall accrue on a
daily basis from the date of issuance of Series B Preferred Stock, and shall be
payable annually in arrears on each Dividend Payment Date (as defined in
paragraph C), commencing on the second Dividend Payment Date after the date of
issuance of such Series B Preferred Stock. Each dividend on Series B Preferred
Stock shall be payable to the Holders of record of Series B Preferred Stock as
they appear on the stock register of the Corporation on such record date as may
be fixed by the Board of Directors, which record date shall not be less than ten
nor more than 60 days prior to the applicable Dividend Payment Date. Dividends
8
shall cease to accrue in respect of shares of Series B Preferred Stock on the
date of their repurchase by the Corporation unless the Corporation shall have
failed to pay the relevant repurchase price on the date fixed for repurchase.
Notwithstanding anything to the contrary set forth above, unless and until such
dividends are declared by the Board of Directors, there shall be no obligation
to pay such dividends in cash; provided, that such dividends shall continue to
cumulate and shall be paid at the time of repurchase as provided herein if not
earlier declared and paid. Accrued dividends on the Series B Preferred Stock if
not paid on the first or any subsequent Dividend Payment Date following accrual
shall thereafter accrue Additional Dividends (as defined in paragraph C) in
respect thereof, compounded annually, at the rate of 15 1/2% per annum.
(b) All dividends paid with respect to shares of
Series B Preferred Stock pursuant to paragraph B(3)(a) shall be paid pro rata
to the Holders entitled thereto.
(c) Dividends on account of arrears for any past
Dividend Period and dividends in connection with any optional redemption
pursuant to paragraph B(5)(a) may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to the Holders of record on any
date as may be fixed by the Board of Directors, which date is not more than 30
days prior to the payment of such dividends.
(d) No full dividends shall be declared by the Board
of Directors or paid or funds set apart for the payment of dividends or other
distributions on any Series B Parity Securities for any period, and no Series B
Parity Securities may be repurchased, redeemed or otherwise retired, nor may
funds be set apart for such payment, unless (i) full Accumulated Dividends have
been paid or set apart for such payment on Series B Preferred Stock and Series B
Parity Securities for all Dividend Periods terminating on or prior to the date
of payment of such full dividends or distributions on, or such repurchase or
redemption of, such Series B Parity Securities (the "Series B Parity Payment
Date") and (ii) an amount equal to a prorated dividend on the Series B Preferred
Stock and Series B Parity Securities at the customary dividend rates for such
securities for the period from the Dividend Payment Date immediately prior to
the Series B Parity Payment Date to the Series B Parity Payment Date have been
paid or set apart for payment. In the event that such dividends are not paid in
full or set apart for payment with respect to all outstanding shares of Series B
Preferred Stock and of any Series B Parity Securities and funds available for
payment of dividends shall be insufficient to permit payment in full to the
holders of all such stock of the full preferential amounts to which they are
then entitled, then the entire amount available for payment of dividends shall
be distributed ratably among all such holders of Series B Preferred Stock and of
any Series B Parity Securities in proportion to the full amount to which they
would otherwise be respectively entitled.
(e) The Holders shall be entitled to receive the
dividends provided for in paragraph B(3)(a) hereof in preference to and in
priority over any dividends upon any of the Series B Junior Securities. Such
dividends on the Series B Preferred Stock shall be cumulative, whether or not
earned or declared, so that if at any time full Accumulated Dividends on all
shares of Series B Preferred Stock then outstanding have not been paid for all
Dividend Periods then elapsed and a prorated dividend at the rate aforesaid from
the Dividend Payment Date immediately preceding
9
the Series B Junior Payment Date (as defined below) to the Series B Junior
Payment Date have not been paid or set aside for payment, the amount of such
unpaid dividends shall be paid before any sum shall be set aside for or applied
by the Corporation to the purchase, redemption or other acquisition for value of
any shares of Series B Junior Securities (either pursuant to any applicable
sinking fund requirement or otherwise) or any dividend or other distribution
shall be paid or declared and set apart for payment on any Series B Junior
Securities (the date of any such actions to be referred to as the "Series B
Junior Payment Date"); provided, however, that the foregoing shall not prohibit
the Corporation from repurchasing shares of Series B Junior Securities from a
Holder who is, or was, a director or employee of the Corporation (or a
subsidiary of the Corporation).
(f) Dividends payable on Series B Preferred Stock for
any period less than one year shall be computed on the basis of a 360-day year
consisting of twelve 30-day months and the actual number of days elapsed in the
period for which such dividends are payable.
(g) The Corporation shall not claim any deduction from
gross income for dividends paid on Series B Preferred Stock in any Federal
income tax return, claim for refund, or other statement, report or submission
made to the Internal Revenue Service, and shall make any election or take any
similar action to effectuate the foregoing except, in each case, if there shall
be a change in law such that the Corporation may claim such dividends as
deductions from gross income without affecting the ability of the Holders to
claim the dividends received deduction under Section 243(a)(1) of the Code (as
defined in paragraph C) (or any successor provision). At the reasonable request
of any Holder (and at the expense of such Holder), the Corporation shall join in
the submission to the Internal Revenue Service of a request for a ruling that
the dividends paid on Series B Preferred Stock shall be eligible for the
dividends received deduction under Section 243(a)(1) of the Code (or any
successor provision). In addition, the Corporation shall cooperate with any
Holder (at the expense of such Holder) in any litigation, appeal or other
proceeding relating to the eligibility for the dividends received deduction
under Section 243(a)(1) of the Code (or any successor provision) of any
dividends (within the meaning of Section 316(a) of the Code or any successor
provision) paid on Series B Preferred Stock. To the extent possible, the
principles of this paragraph B(3)(g) shall also apply with respect to state and
local income taxes.
4. Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the Holders of all shares of
Series B Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders an
amount in cash equal to $1.4688 in cash per share, plus an amount equal to full
cumulative dividends (whether or not earned or declared) accrued and unpaid
thereon, including Additional Dividends, to the date of final distribution and
no more, before any distribution is made on any Series B Junior Securities.
If upon any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, the application of all amounts available for payments with
respect to Series B Preferred Stock and all other Series B Parity Securities
would not result in payment in full of Series B Preferred Stock and such other
Series B Parity Securities, the Holders and holders of Series B Parity
10
Securities shall share equally and ratably in any distribution of assets of the
Corporation in proportion to the full liquidation preference to which each is
entitled. After payment in full pursuant to this paragraph B(4)(a), the Holders
shall not be entitled to any further participation in any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation.
(b) For the purposes of this paragraph B(4), neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Corporation nor the consolidation, merger or other business
combination of the Corporation with one or more corporations shall be deemed to
be a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, unless such sale, conveyance, exchange or transfer is in connection
with a dissolution or winding up of the business of the Corporation; provided,
however, that any consolidation or merger of the Corporation in which the
Corporation is not the surviving entity shall be deemed to be a liquidation,
dissolution or winding up of the affairs of the Corporation within the meaning
of this paragraph B(4) if, (i) in connection therewith, the holders of Common
Stock of the Corporation receive as consideration, whether in whole or in part,
for such Common Stock (1) cash, (2) notes, debentures or other evidences of
indebtedness or obligations to pay cash or (3) preferred stock of the surviving
entity (whether or not the surviving entity is the Corporation) which ranks on
a parity with or senior to the preferred stock received by holders of the Series
B Preferred Stock with respect to liquidation or dividends or (ii) the holders
of the Series B Preferred Stock do not receive preferred stock of the surviving
entity with rights, powers and preferences equal to (or more favorable to the
holders than) the rights, powers and preferences of the Series B Preferred
Stock.
5. Redemption.
(a) Optional Redemption.
(i) The Corporation may, at its option, redeem at
any time or from time to time, from any source of funds legally available
therefor, in whole or in part, in the manner provided in paragraph B(5)(c)
hereof, any or all of the shares of Series B Preferred Stock, at a redemption
price per share of $1.4688 per share, plus an amount equal to full cumulative
dividends (whether or not earned or declared) accrued and unpaid thereon,
including Additional Dividends, to the Redemption Date.
(ii) No partial redemption of Series B Preferred
Stock pursuant to paragraph B(5)(a) hereof may be authorized or made unless
prior thereto, full accrued and unpaid dividends thereon for all Dividend
Periods terminating on or prior to the Redemption Date and an amount equal to a
prorated dividend thereon for the period from the Dividend Payment Date
immediately prior to the Redemption Date to the Redemption Date have been or
immediately prior to the Redemption Notice are declared and paid in cash or are
declared and there has been a sum set apart sufficient for such cash payment on
the Redemption Date.
(iii) In the event of a redemption pursuant to
paragraph B(5)(a) hereof of only a portion of the then outstanding shares of
Series B Preferred Stock, the Corporation shall effect such redemption pro rata
according to the number of shares held by each Holder of Series B Preferred
Stock.
11
(b) Mandatory Redemption. All outstanding shares of the
Series B Preferred Stock shall be redeemed from funds legally available therefor
on January 15, 2008 (the "Mandatory Redemption Date"), at a price per share
equal to $1.4688 plus an amount per share equal to full cumulative dividends
(whether or not earned or declared) accrued and unpaid thereon, including
Additional Dividends, to the Mandatory Redemption Date.
(c) Procedures for Redemption.
(i) At least 30 days and not more than 60 days prior to
the date fixed for any redemption of Series B Preferred Stock, a Redemption
Notice (as defined in paragraph C) shall be given by first class mail, postage
prepaid, to each Holder of record of Series B Preferred Stock on the record date
fixed for such redemption of Series B Preferred Stock at such Holder's address
as set forth on the stock register of the Corporation on such record date;
provided that no failure to give such notice nor any deficiency therein shall
affect the validity of the procedure for the redemption of any shares of Series
B Preferred Stock to be redeemed except as to the Holder or Holders to whom the
Corporation has failed to give said notice or except as to the Holder or Holders
whose notice was defective. In addition to any information required by law or by
the applicable rules of any exchange upon which shares of Series B Preferred
Stock may be listed or admitted to trading, the Redemption Notice shall state.
(A) the redemption price;
(B) whether all or less than all of the
outstanding shares of Series B Preferred Stock redeemable thereunder are to be
redeemed and the aggregate number of shares of Series B Preferred Stock being
redeemed;
(C) the number of shares of Series B Preferred
Stock held, as of the appropriate record date, by the Holder that the
Corporation intends to redeem;
(D) the Redemption Date;
(E) that the Holder is to surrender to the
Corporation, at the place or places where certificates for shares of Series B
Preferred Stock are to be surrendered for redemption, in the manner and at
the price designated, his, her or its certificate or certificates representing
the shares of Series B Preferred Stock to be redeemed; and
(F) that dividends on the shares of Series B
Preferred Stock to he redeemed shall cease to accumulate on such Redemption Date
unless the Corporation defaults in the payment of the redemption price.
Upon the mailing of any such Redemption Notice, the Corporation shall
become obligated to redeem, on the Redemption Date specified therein, all shares
of Series B Preferred Stock called for redemption.
12
(ii) Each Holder shall surrender the certificate or
certificates representing such shares of Series B Preferred Stock being so
redeemed to the Corporation, duly endorsed, in the manner and at the place
designated in the Redemption Notice, and on the Redemption Date the full
redemption price for such shares shall be payable in cash to the Person whose
name appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled and retired. In the event that less
than all of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(iii) If a Redemption Notice has been mailed in accordance
with paragraph B(5)(c) above, unless the Corporation defaults in the payment in
full of the redemption price, dividends on Series B Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and the Holders of
such redemption shares shall cease to have any further rights with respect
thereto on the Redemption Date, other than the right to receive the redemption
price without interest.
6. Voting Rights.
(a) The Holders shall not be entitled or permitted to vote on
any matter required or permitted to be voted upon by the shareholders of the
Corporation, except as otherwise required by California law or these Articles of
Incorporation and except that without the written consent of the holders of a
majority of the outstanding shares of Series B Preferred Stock or the vote of
the holders of a majority of the outstanding shares of Series B Preferred Stock
at a meeting of the holders of Series B Preferred Stock called for such purpose,
the Corporation shall not (a) create, authorize or issue any other class or
series of stock entitled to a preference prior to Series B Preferred Stock upon
any dividend or distribution or any liquidation, distribution of assets,
dissolution or winding up of the Corporation, or increase the authorized amount
of any such other class or series, or (b) amend, alter or repeal any provision
of the Corporation's Articles of Incorporation so as to adversely affect the
relative rights and preferences of the Series B Preferred Stock; provided,
however, that any such amendment that changes the dividend payable on, or
liquidation preference of, the Series B Preferred Stock shall require the
affirmative vote of the holder of each share of Series B Preferred Stock at a
meeting of such holders called for such purpose or the written consent of the
holder of each share of Series B Preferred Stock.
(b) In any case in which the Holders shall be entitled to
vote, each Holder shall be entitled to one vote for each share of Series B
Preferred Stock held unless otherwise required by applicable law.
7. Conversion or Exchange. The Holders shall not have any rights
hereunder to convert such shares into or exchange such shares for shares of any
other class or Classes or of other series of any class or classes of Capital
Stock of the Corporation.
8. Reissuance of Series B Preferred Stock. Shares of Series B
Preferred Stock which have been issued and reacquired in any manner, including
shares purchased, redeemed or exchanged, shall have the status of authorized and
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors or as
13
part of any other series of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in any resolution or resolutions adopted by
the Board of Directors providing for the issuance of any series of Preferred
Stock; except that the Corporation may reissue shares of Series B Preferred
Stock which are reacquired by the Corporation from a Holder who is, or was, an
employee or director of the Corporation (or its subsidiaries) provided that such
reissued shares of Series B Preferred Stock are reissued to a person who is an
employee or director of the Corporation (or its subsidiaries) at the time of
such reissue.
9. Business Day. If any payment shall be required by the terms hereof
to be made on a day that is not a Business Day, such payment shall be made on
the immediately succeeding Business Day.
10. Certain Additional Provisions.
(a) Reports. So long as any shares of Series B Preferred Stock
remain outstanding, the Corporation shall send to the Holders of such Series B
Preferred Stock at their addresses as set forth on the stock register of the
Corporation all quarterly and annual reports sent to holders of Common Stock of
the Corporation.
(b) Method of Payment. Series B Preferred Stock shall be payable
as to liquidation preference, dividends, redemption payments, cash in lieu of
fractional shares or other payments at the office of the Corporation maintained
for such purpose or, at the option of the Corporation, payment of dividends may
be made by check mailed to the Holders at their addresses set forth in the stock
register of the Corporation.
(c) Prohibitions and Restrictions Imposed by Senior Securities and
Indebtedness. To the extent that any action required to be taken by the
Corporation under this Resolution shall be prohibited or restricted by the terms
of the Senior Securities or any contract or instrument to which the Corporation
is a party in respect of the incurrence of indebtedness, such Corporation's
actions shall be delayed until such time as such prohibition or restriction is
no longer in force.
C. Definitions. As used in this Resolution, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
"Accumulated Dividends" means (i) with respect to any share of
Preferred Stock, the dividends that have accrued on such share as of such
specific date for Dividend Periods ending on or prior to such date and that have
not previously been paid in cash, and (ii) with respect to any Series A Parity
Security or Series B Parity Security, the dividends that have accrued and are
due on such security as of such specific date.
"Additional Dividends" has the meaning given to such term in
paragraph A(3)(a).
" Annual Dividend Period" means the annual period commencing on
each January 16 and ending on each Dividend Payment Date, respectively.
14
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banking institutions in New York City are authorized by law or
executive order to close.
"Capital Stock" means any and all shares, interests, participations,
rights, or other equivalents (however designated) of corporate stock including,
without limitation, partnership interests.
"Dividend Payment Date" means January 15 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Annual Dividend Period.
"Holder" means a holder of shares of Series A Preferred Stock and/or
Series B Preferred Stock, as applicable.
"Initial Dividend Period" means the dividend period commencing on the
Issue Date and ending on the second Dividend Payment Date to occur thereafter.
"Issue Date" means December 26, 1997.
"Person" means any individual, corporation, partnership, joint
venture, incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or any other entity of any kind.
"Preferred Stock" means Series A Preferred Stock and/or Series B
Preferred Stock, as applicable.
"Redemption Date", with respect to any shares of Preferred Stock,
means the date on which such shares of Preferred Stock are redeemed by the
Corporation pursuant to paragraph A(5) or B(5).
"Redemption Notice" has the meaning given to such term in paragraph
A(5)(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Junior Payment Date" has the meaning given to such term in
A(3)(e).
"Series A Junior Securities" has the meaning given to such term in
paragraph A(2).
"Series A Parity Payment Date" has the meaning given to such term in
A(3)(d).
"Series A Parity Securities" has the meaning given to such term in
paragraph A(2).
15
"Series A Preferred Stock" has the meaning given to such term in
paragraph A(i).
"Series A Senior Securities" has the meaning given to such term in
paragraph A(2).
"Series B Junior Payment Date" has the meaning given to such term
in B(3)(e).
"Series B Junior Securities" has the meaning given to such term
in paragraph B(2).
"Series B Parity Payment Date" has the meaning given to such term
in B(3)(d).
"Series B Parity Securities" has the meaning given to such term in
paragraph B(2).
"Series B Preferred Stock" has the meaning given to such term in
paragraph B(1).
"Series B Senior Securities" has the meaning given to such term in
paragraph B(2).
* * *
(3) The number of authorized shares of Series A Preferred Stock is
10,101,010, none of which have been issued.
(4) The number of authorized shares of Series B Preferred Stock is
10,101,010, none of which have been issued.
Each of the undersigned does hereby declare under the penalty of
perjury under the laws of the State of California that he signed this
Certificate of Determination in the official capacity set forth beneath his
signature, and that the statements set forth in said document are true of his
own knowledge.
16
IN WITNESS WHEREOF, the undersigned officers of the corporation have
caused this Certificate of Determination to be signed this 23/rd/ day of
December, 1997.
By: Fortunato N. Valenti
Fortunato N. Valenti
Acting Chief Executive Officer
By: Richard C. Stockinger
Richard C. Stockinger
Assistant Secretary
17
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CALIFORNIA PIZZA KITCHEN, INC.
We, Frederick R. Hipp, the President, and H.G. Carrington, Jr., the
Secretary of California Pizza Kitchen, Inc., a corporation duly organized and
existing under the laws of the State of California, do hereby certify:
1. That they are the President and the Secretary, respectively of
California Pizza Kitchen, Inc., a California corporation.
2. That an amendment to the articles of incorporation has been approved by
the board of directors.
3. The amendment so approved by the board of directors is as follows:
Paragraph B of Article III of the articles of incorporation of this
corporation is amended to read in its entirety as follows:
B. Number of Authorized Shares. The total number of shares of Class A
Common Stock authorized to be issued is 80,000,000. The total number of shares
of Class B Common Stock authorized to be issued is 80,000,000. The total number
of shares of Class A Preferred Stock authorized to be issued is 40,000,000.
Upon the filing and the effectiveness of this amendment of this article, each
outstanding share of Class A Common Stock is split up and converted into two
such shares. Upon the filing and the effectiveness of this amendment of this
article, each outstanding share of Class B Common Stock is split up and
converted into two such shares.
4. That the shareholders have adopted said amendment by written consent.
That the wording of said amendment as approved by written consent of the
shareholders is the same as that set forth above. That said written consent
was signed by holders of outstanding shares having not less than the minimum
number of required votes of shareholders necessary to approve said amendment in
accordance with Section 902 of the California Corporations Code.
5. That the designation and total number of outstanding shares entitled to
vote on or give written consent to said amendment and the minimum percentage
vote required of each class or series entitled to vote on or give written
consent to said amendment for approval thereof are as follows:
Number of shares
outstanding entitled
to vote or give Minimum percentage vote
Designation written consent required to approve
----------- -------------------- -----------------------
Class A Common 9,887,459 more than 50%
Class B Common 269.600 more than 50%
|
6. That the number of shares of each class which gave written consent in
favor of said amendment equaled or exceeded the minimum percentage vote
required of each class entitled to vote, as set forth above.
7. That this certificate shall become effective on the date of filing
with the Secretary of State of California.
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true of their own
knowledge. Executed at Los Angeles, California on September 30, 1998.
By: /s/ Frederick R. Hipp
____________________________
Name: Frederick R. Hipp
Title: President
By: /s/ H.G. Carrington, Jr.
_____________________________
Name: H.G. Carrington, Jr.
Title: Secretary
|
CERTIFICATE OF INCREASE IN NUMBER
OF SERIES A PREFERRED SHARES
OF
CALIFORNIA PIZZA KITCHEN, INC.,
a California corporation
The undersigned President and Chief Financial Officer do hereby certify
that:
1. They are the duly elected and acting President and Chief Financial
Officer, respectively, of the Corporation.
2. Pursuant to authority given by the Corporation's Articles of
Incorporation, the Board of Directors of the corporation has duly adopted the
following recitals and resolutions:
WHEREAS, the Articles of Incorporation of this Corporation provide for a
class of shares known as Class A Preferred Stock, issuable from time to time in
one or more series; and
WHEREAS, the Board of Directors of this Corporation is authorized to
determine or alter the rights, preferences, privileges, and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock and increase or
decrease (but not below the number of shares of that series then outstanding)
the number of shares of any series after the issue of shares of that series; and
WHEREAS, the rights, preferences, privileges, and restrictions relating to
a series of Preferred Stock designated "Series A Preferred Stock" were fixed by
a resolution adopted by the Board of Directors on December 22, 1997, and a
Certificate of Determination of Preferences of Preferred shares of that series
was executed by the officers of this corporation on December 23, 1997, and filed
with the Secretary of State of the State of California on December 24, 1997; and
WHEREAS, the number of shares of that series is 10,101,010 and this Board
of Directors now desires to increase that number to 10,151,769, and there are
no limits or restrictions stated in the resolution of the Board of Directors
originally fixing the number of shares constituting shares of that series:
WHEREAS, the increase in the number of shares of Series A Preferred Stock
has been approved by the holders of a majority of shares of Series B Preferred
Stock;
NOW, THEREFORE, BE IT RESOLVED, that the number of shares of Series A
Preferred Stock constituting shares of that series be and it hereby is
increased to 10,151,769; and
RESOLVED, FURTHER, that the Chairman of the Board, the President, or any
Vice President, and the Secretary, the Chief Financial Officer, the Treasurer or
any Assistant Secretary or Assistant Treasurer of this corporation are each
authorized to execute, verify, and file a Certificate of Increase in the number
of shares of that series in accordance with California Law.
3. The authorized number of shares of Preferred Stock of the corporation
is 40,000,000, and the number of shares constituting Series A Preferred Stock
which are outstanding as of the date hereof, is 10,101,010 and the increase in
the number of shares constituting shares of that series is 50,759.
4. The increase in the number of shares of Series A Preferred Stock has
been approved by the vote of a majority of the outstanding shares of Series B
Preferred Stock.
2
IN WITNESS WHEREOF, the undersigned have executed this certificate on
August 21, 1998.
/s/ Frederick R. Hipp
--------------------------
Frederick R. Hipp
President
/s/ H.G. Carrington, Jr.
--------------------------
H.G. Carrington, Jr.
Chief Financial Officer
|
On the date set forth below, in the City of Los Angeles in the State
of California, each of the undersigned does hereby declare under the penalty
of perjury under the laws of the State of California that the statements
set forth in this certificate are true of his own knowledge.
Dated: August 21, 1998
/s/ Frederick R. Hipp
--------------------------
Frederick R. Hipp
President
/s/ H.G. Carrington, Jr.
--------------------------
H.G. Carrington, Jr.
Chief Financial Officer
|
3
CERTIFICATE OF INCREASE IN NUMBER
OF SERIES B PREFERRED SHARES
OF
CALIFORNIA PIZZA KITCHEN, INC.,
a California corporation
The undersigned President and Chief Financial Officer do hereby certify
that:
1. They are the duly elected and acting President and Chief Financial
Officer, respectively, of the Corporation.
2. Pursuant to authority given by the Corporation's Articles of
Incorporation, the Board of Directors of the corporation has duly adopted the
following recitals and resolutions:
WHEREAS, the Articles of Incorporation of this Corporation provide for a
class of shares known as Class A Preferred Stock, issuable from time to time in
one or more series; and
WHEREAS, the Board of Directors of this Corporation is authorized to
determine or alter the rights, preferences, privileges, and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock and increase or
decrease (but not below the number of shares of that series then outstanding)
the number of shares of any series after the issue of shares of that series; and
WHEREAS, the rights, preferences, privileges, and restrictions relating to
a series of Preferred Stock designated "Series B Preferred Stock" were fixed by
a resolution adopted by the Board of Directors on December 22, 1997, and a
Certificate of Determination of Preferences of Preferred shares of that series
was executed by the officers of this corporation on December 23, 1997, and filed
with the Secretary of State of the State of California on December 24, 1997;
and
WHEREAS, the number of shares of that series is 10,101,010 and this
Board of Directors now desires to increase that number to 10,151,769, and there
are no limits or restrictions stated in the resolution of the Board of Directors
originally fixing the number of shares constituting shares of that series;
NOW, THEREFORE, BE IT RESOLVED, that the number of shares of Series B
Preferred Stock constituting shares of that series be and it hereby is
increased to 10,151,769, and
RESOLVED, FURTHER, that the Chairman of the Board, the President, or any
Vice President, and the Secretary, the Chief Financial Officer, the Treasurer or
any Assistant Secretary or Assistant Treasurer of this corporation are each
authorized to execute, verify, and file a Certificate of Increase in the number
of shares of that series in accordance with California Law.
3. The authorized number of shares of Preferred Stock of the corporation
is 40,000,000, and the number of shares constituting Series B Preferred Stock
which are outstanding as of the date hereof, is 10,101,010 and the increase
in the number of shares constituting shares of that series is 50,759.
2
IN WITNESS WHEREOF, the undersigned have executed this certificate on
August 21, 1998.
/s/ Frederick R. Hipp
----------------------------
Frederick R. Hipp
President
/s/ H.G. Carrington, Jr.
----------------------------
H.G. Carrington, Jr.
Chief Financial Officer
|
On the date set forth below, in the City of Los Angeles in the State of
California, each of the undersigned does hereby declare under the penalty of
perjury under the laws of the State of California that the statements set forth
in this certificate are true of his own knowledge.
Dated: August 21, 1998
/s/ Frederick R. Hipp
------------------------------
Frederick R. Hipp
President
/s/ H.G. Carrington, Jr.
------------------------------
H.G. Carrington, Jr.
Chief Financial Officer
|
3
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
CALIFORNIA PIZZA KITCHEN, INC.
ARTICLE I
Shareholders
SECTION 1. Annual Meetings. The annual meeting of the shareholders
(the "Annual Meeting of Shareholders") of California Pizza Kitchen, Inc. (the
"Corporation") for the purpose of electing directors and for the transaction of
such other business as may be brought before the meeting shall be held, in each
year on such day, at such time and such place within or without the State of
California as shall be fixed by the Board of Directors and stated in the notice
of the meeting.
SECTION 2. Special Meetings. Special meetings of the shareholders
may be called at any time by the Board of Directors, or by any number of
shareholders owning or having the right to vote an aggregate of not less than a
majority of outstanding shares of capital stock entitled to vote. Special
meetings shall be held on such day, at such time and such place either within
or without the State of California specified in the notice thereof.
SECTION 3. Notice of Meetings. Except as otherwise expressly
required by applicable law or the Articles of Incorporation, written notice to
shareholders complying with Section 601 of the California General Corporation
Law, or any successor section, shall be given either by delivering a notice
personally or mailing a notice to each shareholder of record entitled to vote
thereat at his address as it appears on the records of the Corporation not less
than ten (10) nor more than sixty (60) days prior to the meeting. No business
other than that stated in the notice shall be transacted at any special meeting.
Notice of any meeting of shareholders shall not be required to be given to any
shareholder who shall attend such meeting in person or represented by proxy;
and if any shareholder shall, in person or by attorney thereunto duly
authorized, in writing or by telegraph, cable or wireless, waive notice of any
meeting, whether before or after such meeting be held, the notice thereof need
not be given to him. Notice of any adjourned meeting of shareholders need not be
given except as provided in Section 5 of this Article 1.
SECTION 4. Quorum. Subject to the provisions of law and the Articles
of Incorporation in respect of the vote that shall be required for a specific
action, the number of shares the holders of which shall be present or
represented by proxy at any meeting of shareholders in order to constitute a
quorum for the transaction of any business, shall be a majority of all the
shares issued and outstanding and entitled to vote at such meeting.
SECTION 5. Adjournment. At any meeting of shareholders, whether or
not there shall be a quorum present, the holders of a majority of shares voting
at the meeting, whether present in person at the meeting or represented by
proxy at the meeting, may adjourn the meeting from time to time. Except as
otherwise provided by law, notice of such adjourned meeting need not be given
otherwise than by announcement of the time and place of such adjourned meeting
at the meeting at which the adjournment is taken. At any adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the original meeting.
SECTION 6. Organization. The President, or in his absence, a Vice
President, shall call meetings of the shareholders to order, and shall act as
chairman of such meetings. In the absence of the President or a Vice President,
the holders of a majority in number of the shares of the capital stock of the
Corporation present in person or represented by proxy and entitled to vote at
such meeting shall elect a chairman, who may be the Secretary of the
Corporation. The Secretary of the Corporation shall act as secretary of all
meetings of the shareholders, but in the absence of the Secretary, the chairman
of the meeting may appoint any person to act as secretary of the meeting.
SECTION 7. Voting. Each shareholder of record shall, except as
otherwise provided by law or by the Articles of Incorporation, at every meeting
of the shareholders, be entitled to one vote in person or by proxy for each
share of capital stock entitled to vote held by such shareholder. Unless
otherwise provided by applicable law or the Articles of Incorporation, no vote
upon any matter before the meeting, including the election of directors, need be
by ballot, provided however upon the demand of any shareholder, the vote for
directors and the vote upon any matter before the meeting, shall be by ballot.
SECTION 8. Election of Directors. Directors shall be elected in
accordance with the requirements of the Articles of Incorporation and applicable
law.
SECTION 9. Addresses of Shareholders. Each shareholder shall
designate to the Secretary of the Corporation an address to which notice of
meetings and all other corporate notices may be served upon or mailed to him,
and if any shareholder shall fail to designate such address, corporate notices
may be served upon him by mail directed to him at his last known post office
address.
SECTION 10. Inspectors of Election. The Board of Directors may at
any time appoint one or three persons to serve as Inspectors of Election at the
next succeeding Annual Meeting of Shareholders or at any other meeting or
meetings and the Board of Directors may at any time fill any vacancy in the
office of Inspectors of Election. If the Board of Directors fails to appoint
Inspectors of Election, or if any Inspector of Election appointed is absent or
refuses to act, or if his office becomes vacant and not filled by the Board of
Directors, the chairman of any meeting of the shareholders may appoint a
temporary Inspector of Election for such meeting. All proxies shall be filed
with the Inspectors of Election of the meeting before being voted upon.
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ARTICLE II
Directors
SECTION 1. Powers. Subject to the Corporations Code and any
limitations in the Articles of Incorporation relating to action requiring
approval by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors.
SECTION 2. Number and Qualification of Directors. The Board of
Directors shall have authority to determine the number of directors constituting
the Board of Directors; provided, however, that in no event shall the number be
less than five or more than nine, with the exact number within that range to be
fixed by resolution of the Board of Directors.
SECTION 3. Election and Term of Office. Directors shall be elected
at each annual meeting of shareholders, but if any such annual meeting is not
held or the directors are not elected at any annual meeting, the directors may
be elected at any special meeting of shareholders held for that purpose. Each
director, including a director elected to fill a vacancy, shall, subject to
Section 4, hold office until the expiration of the term for which elected and
until his successor has been elected and qualified.
SECTION 4. Place of Meetings. Regular and special meetings of the
Board of Directors may be held at any place within or without the State of
California which has been designated in the notice of the meeting, or, if not
stated in the notice or there is no notice, designated by resolution or by
written consent of all of the members of the Board of Directors. If the place of
a regular or special meeting is not designated in the notice or fixed by a
resolution of the Board or consented to in writing by all members of the Board
of Directors, it shall be held at the Corporation's principal executive office.
SECTION 5. Regular Meetings. Immediately following each annual
shareholder's meeting the Board of Directors shall hold a regular meeting to
elect officers and transact other business. Such meeting shall be held at the
same place as the annual shareholders' meeting or such other place as shall be
fixed by the Board of Directors. Other regular meetings of the Board of
Directors shall be held at such times and places as are fixed by the board.
Call and notice of regular meetings of the Board of Directors shall not be
required and is hereby dispensed with.
SECTION 6. Special Meetings. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by a majority of
the Board of Directors. Notice of the time and place of special meetings shall
be given to each director. A notice need not specify the purpose of any regular
or special meeting of the Board of Directors. Special meetings of the Board of
Directors may also be called by a number of directors constituting less than a
majority of the Board of Directors; provided, however, that (i) no such meeting
called by less than
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a majority of the Board of Directors may be called within 30 days before or
after a regular meeting of the Board of Directors and (ii) no more than two
special meetings may be called by less than a majority of the Board of Directors
in any calendar year. Any special meeting called by less than a majority of the
Board of Directors shall be called on not less than one week's prior notice
given to each director.
SECTION 7. Quorum. A majority of the members of the Board of Directors
shall constitute a quorum of the Board of Directors for the transaction of
business. Every act or decision done or made by the vote of a majority of the
directors present at a meeting duly held at which a quorum is present is the act
of the Board of Directors, subject to the provisions of Section 310
(Transactions with Interested Directors) and subdivision (e) of Section 317
(Indemnification of Corporate Agents) of the Corporations Code.
SECTION 8. Waiver of Notice or Consent. The transactions of any
meeting of the Board of Directors, however called and noticed or wherever held,
shall be as valid as though had at a meeting duly held after regular call and
notice, if a quorum is present and if, either before or after the meeting, each
of the directors not present or who, though present, has prior to the meeting or
at its commencement, protested the lack of proper notice to him, signs a written
waiver of notice, or a consent to holding the meeting, or an approval of the
minutes of the meeting. All such waivers, consents and approvals shall be filed
with the corporate records or made a part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the Board of Directors. Notice of a meeting need not be given to any director
who attends the meeting without protesting, prior to or at its commencement, the
lack of notice to such director.
SECTION 9. Adjournment. A majority of the directors present, whether
or not a quorum is present, may adjourn any meeting to another time and place.
If the meeting is adjourned for more than twenty-four (24) hours, notice of the
adjournment to another time or place shall be given prior to the time of the
adjourned meeting to the directors who were not present at the time of the
adjournment.
SECTION 10. Meetings by Conference Telephone. Members of the Board of
Directors may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear one another. Participation by directors in a meeting in the
manner provided in this section constitutes presence in person at such meeting.
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ARTICLE III
Officers
SECTION 11. Executive Officers. The officers of the Corporation, who
shall be elected by the Board of Directors, shall be a President, a Chief
Financial Officer, a Secretary and the Chairman of the Board (which office may
be held by two persons). In addition, the Board of Directors may elect such
other officers as may be appointed in accordance with the provisions of Section
3 of this Article III. Any number of offices may be held by the same person.
Whenever any officer of the Corporation ceases to be an employee of the
Corporation and of all corporations which control, are controlled by or are
under common control with, the Corporation, such officer shall thereupon also
cease to be an officer of the Corporation without any further action on his part
or on the part of the Board of Directors.
SECTION 12. Election, Term of Office and Qualification. So far as is
practicable, the officers shall be elected annually by the Board of Directors at
their first meeting after each Annual Meeting of Shareholders of the
Corporation. Each officer, except such officers as may be appointed in
accordance with the provisions of Section 3 of this Article III, shall hold
office until his successor shall have been duly elected and qualified in his
stead, or until his death, resignation, disqualification or removal in the
manner hereinafter provided.
SECTION 13. Subordinate Officers. The Board of Directors or the
President may from time to time appoint such other officers, including one or
more Vice Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries, and such agents and employees of the Corporation as may be deemed
necessary or desirable. Such officers, agents and employees shall hold office
for such period and upon such terms and conditions, have such authority and
perform such duties as provided in these Bylaws or as the Board of Directors or
the President may from time to time prescribe. The Board of Directors or the
President may from time to time authorize any officer to appoint and remove
agents and employees and to prescribe the powers and duties thereof.
SECTION 14. Removal. Any officer may be removed, either with or
without cause, by the Board of Directors or, except in the case of any officer
elected by the Board of Directors, by any committee or superior officer upon
whom the power of removal may be conferred by the Board of Directors or by these
Bylaws.
SECTION 15. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall take effect immediately unless a date
certain is specified therein for it to take effect, in which event it shall be
effective upon such date, and the acceptance of such resignation shall not be
necessary to make it effective, irrespective of whether the resignation is
tendered subject to such acceptance.
5
SECTION 16. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled for
the unexpired portion of the term in the manner prescribed in the Bylaws for the
regular election or appointment to such office.
SECTION 17. Chairman of the Board. The Chairman or Chairmen shall
have such duties and responsibilities as (i) are set forth in the Chairman's
employment agreement with the Corporation or (ii) adopted in a resolution of the
Board of Directors so long as such resolution is not inconsistent with the terms
of the Chairman's employment agreement with the Corporation. The Chairman or
Chairmen shall have the authority (i) set forth in the Chairman's employment
agreement with the Corporation or (ii) as is expressly granted in a resolution
of the Board of Directors.
SECTION 18. The President. The President shall have general direction
of the affairs of the Corporation and general supervision over its several
officers, subject, however, to the control of the Board of Directors. He shall
at each annual meeting and from time to time report to the shareholders and to
the Board of Directors all matters within his knowledge which the interest of
the Corporation may require to be brought to their notice; may sign with the
Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary any or all Certificates of stock of the Corporation; shall
preside at all meetings of the shareholders and at all meetings of the Board of
Directors; shall have the power to sign and execute in the name of the
Corporation all contracts, or other instruments authorized by the Board of
Directors; and in general, shall perform all duties incident to the office of
President and such other duties as from time to time may be assigned to him by
the Board of Directors or as are prescribed by these Bylaws.
SECTION 19. The Vice Presidents. Each Vice President shall have such
powers and shall perform such duties as may from time to time be assigned to him
by the Board of Directors or by the President and shall have the power to sign
and execute in the name of the Corporation all contracts or other instruments
authorized by the Board of Directors, except where the Board of Directors or the
Bylaws shall expressly delegate or permit some other officer to do so. A Vice
President may also sign with the Chief Financial Officer or an Assistant
Treasurer or the Secretary or an Assistant Secretary Certificates of stock of
the Corporation.
SECTION 20. The Secretary. The Secretary shall keep or cause to be
kept the minutes of the meetings of the shareholders, of the Board of Directors
and of any committee when so required; shall see that all notices are duly given
in accordance with the provisions of these Bylaws and as required by law; shall
be custodian of the corporate records and of the seal of the Corporation and see
that the seal is affixed to all documents on which it is required, the execution
of which on behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of the Bylaws; shall keep or cause, to be kept a
register of the post office address of each shareholder; may sign with the
President or Vice President Certificates of stock of the Corporation; and, in
general, shall perform all duties incident to the office of Secretary and
6
such other duties as may from time to time be assigned to him by the Board of
Directors or by the President.
SECTION 21. Assistant Secretaries. At the request of the Secretary,
or in his absence or disability, an Assistant Secretary shall perform the duties
of the Secretary and, when so acting, shall have all the powers of, and be
subject to, all the restrictions upon, the Secretary. An Assistant Secretary
shall perform such other duties as from time to time may be assigned to him by
the President, the Secretary or the Board of Directors.
SECTION 22. The Chief Financial Officer. The Chief Financial Officer
shall have charge and custody of, and be responsible for, all funds and
securities of the Corporation, and deposit all such funds in the name of the
Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of these Bylaws; at all reasonable
times exhibit his books of account and records, and cause to be exhibited the
books of account and records of any corporation controlled by the Corporation,
to any of the directors of the Corporation upon application during business
hours at the office of the Corporation, or such other corporation where such
books and records are kept; render a statement of the condition of the finances
of the Corporation at all regular meetings of the Board of Directors and a full
financial report at the Annual Meeting of Shareholders; if called upon to do
so, receive and give receipts for moneys due and payable to the Corporation from
any source whatsoever, may sign with the President or Vice President
Certificates of stock of the Corporation; and, in general, perform all the
duties incident to the office of Chief Financial Officer and such other duties
as from time to time may be assigned to him by the Board of Directors or the
President.
SECTION 23. Assistant Treasurers. At the request of the Chief
Financial Officer, or in his absence or disability, an Assistant Treasurer
shall perform the duties of the Chief Financial Officer, and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
Chief Financial Officer. An Assistant Treasurer shall perform such duties as
from time to time may be assigned to him by the President, the Chief Financial
Officer or the Board of Directors.
SECTION 24. Salaries. The salaries of the officers shall be fixed
from time to time by the Board of Directors. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE IV
Contracts, Checks, Drafts, Bank Account, Etc.
SECTION 1. Contracts, etc., How Executed. The Board of Directors,
except as otherwise provided in these Bylaws, may authorize any officer or agent
of the Corporation to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances; and, unless so
7
authorized by the Board of Directors or by these Bylaws, no agent or employee,
other than an officer of the Corporation acting within the scope of his
authority, shall have any power or authority to bind the Corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or to any amount.
SECTION 2. Checks, Drafts, etc. All checks, drafts or other orders
for the payment of money and all notes or other evidences of indebtedness issued
in the name of the Corporation shall be signed by such officer or officers,
employee or employees of the Corporation as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 3. Deposits. All funds of the Corporation shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the Board of Directors may from time to time
designate, or as may be designated by any officer or officers of the Corporation
to whom such power may be delegated by the Board of Directors, and for the
purpose of such deposit, the President, Vice President, Chief Financial Officer,
Assistant Treasurer, Secretary or Assistant Secretary may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.
SECTION 4. General and Special Bank Accounts. The Board of Directors
may from time to time authorize the opening and keeping with such banks, trust
companies or other depositories as it may designate of general and special bank
accounts, and may make such special rules and regulations with respect thereto,
not inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE V
Stock and Transfer of Stock
SECTION 1. Certificates of Stock. Certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
law, as shall be approved by the Board of Directors. They shall be numbered in
order of their issue, and shall be signed by the President or a Vice President
and by the Chief Financial Officer or an Assistant Treasurer or the Secretary or
an Assistant Secretary of the Corporation, and the seal of the Corporation shall
be affixed thereto. The signatures of any of such officers and the seal of the
Corporation upon such Certificates may be in facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a Certificate shall have ceased to be such officer, transfer agent
or registrar before such Certificate is issued, it may nevertheless be issued
and delivered by the Corporation with the same effect as if he were such
officer, transfer agent or registrar.
SECTION 2. Transfers of Stock. Transfers of shares of the capital
stock of the Corporation shall be made only on the books of the Corporation by
the holder thereof, or by his
8
attorney thereunto authorized by a power of attorney duly executed and filed
with the Secretary of the Corporation or with a transfer agent of the
Corporation, if any, and on surrender of the Certificates for such shares
properly endorsed. A person in whose name shares of stock stand on the books of
the Corporation shall be deemed the owner thereof as regards the Corporation and
the Corporation shall not be bound to recognize any equitable or other claim to,
or interest in, such shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by the
laws of the State of California.
SECTION 3. Lost, Destroyed and Mutilated Certificates. The holder
of any stock issued by the Corporation shall immediately notify the Corporation
of any loss, destruction or mutilation of the Certificates therefor, or failure
to receive Certificates of stock issued by the Corporation, and the Board of
Directors or the Secretary of the Corporation may, in its or his discretion,
cause to be issued to such holder of stock a new Certificates of stock upon
compliance with such rules, regulations and/or procedures as may have been
prescribed by the Board of Directors with respect to the issuance of new
Certificates in lieu of such other Certificates or Certificates of stock.
ARTICLE VI
Seal
The Board of Directors shall provide a suitable seal containing the
name of the Corporation, which seal shall be in the charge of the Secretary and
which may be used by causing it or a facsimile thereof to be impressed or
affixed or in any other manner reproduced. If and when so directed by the Board
of Directors, a duplicate of the seal may be kept and be used by any officer of
the Corporation designated by the Board of Directors.
ARTICLE VII
Indemnification
SECTION 1. Right to Indemnification. The Company shall indemnify any
person who was or is party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
fact that such person is or was a director or officer of the Company or a
constituent corporation absorbed in a consolidation or merger, or is or was
serving at the request of the Company or a constituent corporation absorbed in a
consolidation or merger, as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or is or was a director
or officer of the Company serving at its request as an administrator, trustee or
other fiduciary of one or more of the employee benefit plans of the Company or
other enterprise, against expenses (including attorneys' fees), liability and
loss actually and reasonably incurred or suffered by such person in connection
with such proceeding, whether or not the indemnified liability arises
9
or arose from any threatened, pending or completed proceeding by or in the right
of the Company, except to the extent that such indemnification is prohibited by
applicable law.
SECTION 2. Advance of Expenses. Expenses incurred by a director or
officer of the Company in defending a proceeding shall be paid by the Company
in advance of the final disposition of such proceeding subject to the provisions
of any applicable statute.
SECTION 3. Procedure for Determining Permissibility. To determine
whether any indemnification or advance of expenses under this Article IV is
permissible, the Board of Directors by a majority vote of a quorum consisting of
directors not parties to such proceeding may, and on request of any person
seeking indemnification or advance of expenses shall be required to, determine
in each case whether the applicable standards in any applicable statute have
been met, or such determination shall be made by independent legal counsel if
such quorum is not obtainable, or, even if obtainable, a majority vote of a
quorum of disinterested directors so directs, provided that, if there has been a
change in control of the Company between the time of the action or failure to
act giving rise to the claim for indemnification or advance of expenses and the
time such claim is made, at the option of the person seeking indemnification or
advance of expenses, the permissibility of indemnification or advance of
expenses shall be determined by independent legal counsel. The reasonable
expenses of any director or officer in prosecuting a successful claim for
indemnification, and the fees and expenses of any special legal counsel engaged
to determine permissibility of indemnification or advance of expenses, shall be
borne by the Company.
SECTION 4. Contractual Obligation. The obligations of the Company to
indemnify a director or officer under this Article IV, including the duty to
advance expenses, shall be considered a contract between the Company and such
director or officer, and no modification or repeal of any provision of this
Article IV shall affect, to the detriment of the director or officer, such
obligations of the Company in connection with a claim based on any act or
failure to act occurring before such modification or repeal.
SECTION 5. Indemnification Not Exclusive: Inuring of Benefit. The
indemnification and advance of expenses provided by this Article IV shall not be
deemed exclusive of any other right to which one indemnified may be entitled
under any statute, provision of the Articles of Incorporation, these Bylaws,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office, and shall inure to the benefit of the heirs,
executors and administrators of any such person.
SECTION 6. Insurance and Other Indemnification. The Board of Directors
shall have the power to (i) authorize the Company to purchase and maintain, at
the Company's expense, insurance on behalf of the Company and on behalf of
others to the extent that power to do so has not been prohibited by statute,
(ii) create any fund of any nature, whether or not under the control of a
trustee, or otherwise secure any of its indemnification obligations, and (iii)
give other indemnification to the extent permitted by statute.
10
SECTION 7. Additional Indemnification. The Board of Directors of this
Corporation is authorized to enter into an agreement or agreements with any
agent or agents of the corporation, providing for or permitting indemnification
in excess of that permitted under Section 317 of the Corporations Code, subject
to the limitations of Section 204 of the Corporations Code.
ARTICLE VIII
Miscellaneous Provisions
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall end
on such date in each year as shall be determined by resolution of the Board of
Directors of the Corporation.
SECTION 2. Waivers of Notice. Whenever any notice of any nature is
required to be given by law, the provisions of the Articles of Incorporation or
these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
SECTION 3. Qualifying in Foreign Jurisdictions. The Board of Directors
shall have the power at any time and from time to time to take or cause to be
taken any and all measures which it may deem necessary for qualification to do
business as a foreign corporation in any one or more foreign jurisdictions and
for withdrawal therefrom.
ARTICLE IX
Amendments
These Bylaws of the Corporation shall be subject to alteration or
repeal, and new Bylaws not inconsistent with any provision of the Articles of
Incorporation of the Corporation or any provision of applicable law may be made,
either by the affirmative vote of the holders of record of a majority of the
outstanding voting stock of the Corporation or, except in the case of Article
II, Section 2 hereof, by the affirmative vote of the Board of Directors.
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EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT FOR COMMON STOCK
This Registration Rights Agreement for Common Stock (the "Agreement")
is made and entered into September 30, 1997, by and among California Pizza
Kitchen, Inc., a California corporation (the "Company"), Bruckmann, Rosser,
Sherrill & Co., L.P., a Delaware limited partnership ("BRS"), the individuals
and entities set forth on Exhibit A hereto (the "Additional Investors"), and
Richard L. Rosenfield and Larry S. Flax (the "Founding Investors"). BRS, the
Additional Investors and the Founding Investors, each of whom in their
individual capacity and as Trustee under the California Pizza Kitchen, Inc.
Voting Trust Agreement, dated March 1, 1990, as amended March 2, 1990 (the
"Voting Trust Agreement"), with respect to the shares of stock subject thereto,
are sometimes referred to hereinafter individually as an "Investor" and
collectively as the "Investors."
This Agreement is made pursuant to the Securities Holders Agreement
(as hereinafter defined). In order to induce the Investors to enter into the
Securities Holders Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following capitalized terms shall have
the following meanings:
"Affiliate" has the meaning set forth in Rule 12b-2 of the Rules
promulgated under the Exchange Act.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company as adjusted for
any stock dividend or distribution payable thereon or stock split, reverse stock
split, recapitalization, reclassification, reorganization, exchange, subdivision
or combination thereof.
"Demand Registration" has the meaning set forth is Section 4(a) of
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference in such Prospectus.
"Registration Expenses" means the costs and expenses of all
registrations and qualifications under the Securities Act, and of all other
actions the Company is required to take in order to effect the registration of
Registrable Securities under the Securities Act pursuant to this Agreement
(including all federal and state registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company and the fees and
expenses of the Company's independent public accountants (including the expenses
of any special audit and "cold comfort" letters required by or incident to such
registration)) other than the costs and expenses of any Investors whose
Registrable Securities are to be registered pursuant to this Agreement
comprising underwriters' commissions, brokerage fees, transfer taxes or the fees
and expenses of any accountants or other representatives retained by any
Investor.
"Registration Statement" means any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.
"Registrable Securities" has the meaning set forth in Section 2 of
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Securities Holders Agreement" means the Securities Holders Agreement
dated as of the date hereof among the Company and the Investors.
"Special Registration Statement" means a registration statement on
Forms S-8 or S-4 or any similar or successor form or any other registration
statement relating to an exchange offer or an offering of securities solely to
the Company's employees or security holders or used in connection with the
acquisition of the business of another person or entity or used to offer or sell
a combination of debt and equity securities of the Company in which (i) not more
than 10% of the gross proceeds from such offering is attributable to the equity
securities and (ii) after giving effect to such offering, the Company does not
have a class of equity securities required to be registered under the Securities
Exchange Act of 1934, as amended.
"Underwritten registration" or "Underwritten offering" means a
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2. Registrable Securities. The securities entitled to the benefits of
this Agreement are the Registrable Securities. As used herein, "Registrable
Securities" means the shares of Common Stock that are issued and outstanding on
the date hereof and the shares of Common Stock that become issued and
outstanding after the date hereof, in each case to the extent subject to the
Securities Holders Agreement; provided that each share of Common Stock shall
cease to be a Registrable Security when (i) it has been effectively registered
under the Securities Act and disposed of in accordance with the registration
statement covering it; (ii) it is distributed to the public pursuant to Rule 144
(or any similar provisions then in force) under the Securities Act; or (iii) it
has otherwise been transferred and a new certificate or other evidence of
ownership for it not bearing a legend as set forth in Section 2.2 of the
Securities Holders Agreement (or other legend of similar import) and not subject
to any stop transfer order has been delivered by or on behalf of the Company and
no other restriction on transfer exists under the Securities Act.
-2-
3. Incidental Registration.
(a) Right to Include Common Stock. If the Company at any time proposes
to register any of its Common Stock under the Securities Act (other than on a
Special Registration Statement, but expressly including a Demand Registration
pursuant to Section 4(a) hereof), whether or not for sale for its own account,
it will each such time give at least 30 days prior written notice (the "Notice")
to all holders of Registrable Securities of its intention to file a registration
statement under the Securities Act and of such holders' rights under this
Section 3. Upon the written request of any such holders of Registrable
Securities made within 15 days of the date of the Notice (which request shall
specify the aggregate number of the Registrable Securities to be registered and
will also specify the intended method of disposition thereof), the Company will
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the holders thereof (an
"Incidental Registration"), to the extent required to permit the public
disposition (in accordance with such intended methods thereof) of the
Registrable Securities to be so registered; provided, that (i) if, any time
after giving written notice of its intention to register shares of Common Stock
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register the Company's Common Stock, the Company shall give written
notice of such determination to each holder of Registrable Securities and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith); (ii) if a registration
requested pursuant to this Section 3 shall involve an underwritten public
offering, any holder of Registrable Securities requesting to be included in such
registration may elect, in writing at least 20 days prior to the effective date
of the registration statement filed in connection with such registration, not to
register such securities in connection with such registration; and (iii) if, at
any time after the 180-day or shorter period specified in Section 5(b), the sale
of the securities has not been completed, the Company may withdraw from the
registration on a pro rata basis (based on the number of Registrable Securities
requested by each holder of Registrable Securities to be so registered) the
Registrable Securities which the Company has been requested to register and
which have not been sold.
(b) Priority in Incidental Registrations. If a registration pursuant
to Section 3(a) involves an underwritten offering and the managing underwriter
advises the Company in writing that, in its opinion, the total number of shares
of Common Stock to be included in such registration, including the Registrable
Securities requested to be included pursuant to this Section 3, exceeds the
maximum number of shares of Common Stock specified by the managing underwriter
that may be distributed without adversely affecting the price, timing or
distribution of such shares of Common Stock, then the Company shall include in
such registration only such maximum number of Registrable Securities which, in
the reasonable opinion of such underwriter or underwriters, can be sold in the
following order of priority: (i) first, all of the shares of Common Stock that
the Company proposes to sell for its own account, if any, and (ii) second, the
Registrable Securities of BRS, the Additional Investors and the Founding
Investors requested to be included in such Incidental Registration. To the
extent that shares of Common Stock to be included in the Incidental Registration
must be allocated among the holders(s) of Registrable Securities pursuant to
clause (ii) above, such shares shall be allocated pro rata among the holders(s)
of Registrable Securities based on the number of shares of Common Stock that
such holders(s) of Registrable Securities shall have requested to be included
therein.
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(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration of Registrable Securities requested pursuant to
this Section 3.
(d) Liability for Delay. The Company shall not be held
responsible for any delay in the filing or processing of a registration
statement which includes any Registrable Securities due to requests by holders
of Registrable Securities pursuant to this Section 3 nor for any delay in
requesting the effectiveness of such registration statement.
(e) Participation in Underwritten Registrations. No holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such holder (i) agrees to sell his or its Common Stock on the
basis provided in any underwriting arrangements approved by the persons who have
selected the underwriter and (ii) accurately completes in a timely manner and
executes all questionnaires, powers of attorney, underwriting agreements and
other documents customarily required under the terms of such underwriting
arrangements.
4. Demand Registration
(a) Right to Demand Registration. Subject to Section 4(b) below,
BRS shall be entitled to make a written request ("Demand Registration Request")
to the Company for registration with the Commission under and in accordance with
the provisions of the Securities Act of all or part of the Registrable
Securities owned by it (a "Demand Registration") (which Demand Registration
Request shall specify the intended number of Registrable Securities to be
disposed of by such holder and the intended method of disposition thereof);
provided, that (i) the Company may, if the Board of Directors so determines in
the exercise of its reasonable judgment that due to a pending or contemplated
acquisition or disposition or public offering or other similar occurrence it
would be inadvisable to effect such Demand Registration at such time, defer such
Demand Registration for a single period not to exceed 180 days, and (ii) if the
Company elects not to effect the Demand Registration pursuant to the terms of
this sentence, no Demand Registration shall be deemed to have occurred for
purposes of this Agreement.
(b) Number of Demand Registrations. BRS shall be entitled to
make one or more Demand Registration Requests at any time and from time to time
provided that the aggregate proceeds reasonably expected from the sale of
Registrable Securities (including Registrable Securities being sold by holders
of Registrable Securities other than BRS) pursuant to a Demand Registration are
$5 million or more. The Registration Expenses shall be borne by the Company.
(c) Priority on Demand Registration. If any of the Registrable
Securities proposed to be registered pursuant to a Demand Registration are to be
sold in a firm commitment underwritten offering and the managing underwriter or
underwriters of a Demand Registration advise the Company and the holders of such
Registrable Securities in writing that in its or their reasonable opinion the
number of shares of Common Stock proposed to be sold in such Demand Registration
exceeds the maximum number of shares specified by the managing underwriter that
may be distributed without adversely affecting the price, timing or distribution
of the Common Stock, the Company shall include in such registration only such
maximum number of Registrable Securities which, in the reasonable opinion of
such underwriter or underwriters can be sold in the following order of priority:
(i) first, the Registrable Securities requested to be included in such Demand
Registration held by BRS, the Additional Investors and the Founding Investors,
provided that such
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amount shall be allocated among such other holders on a pro rata basis based
upon their respective percentage of ownership of the total number of shares of
Common Stock then outstanding and (ii) second, shares of Common Stock to be
offered by the Company in such Demand Registration.
5. Registration Procedures. If and whenever the Company is required
to effect or cause the registration of any Registrable Securities under the
Securities Act as provided in this Agreement, the Company will, as expeditiously
as reasonably possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities, and use its best efforts
to cause such registration statement to become effective, provided, however,
that the Company may discontinue any registration of its securities which is
being effected pursuant to Sections 3 or 4 herein at any time prior to the
effective date of the registration statement relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 180 days or such shorter period which will terminate
when all Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the 90-day period referred to in Section
4(3) of the Securities Act and Rule 174 thereunder, if applicable) and comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each such amendment and
supplement thereof (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus and summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as each seller shall request, and do any and
all other acts and things which may be necessary or advisable to enable such
seller to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; provided, however, that the Company shall not
be required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action which would subject it to general
service of process in any such jurisdiction where it is not then so subject or
subject itself to general taxation in any jurisdiction where it is not then so
subject;
(e) immediately notify each seller of any Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Act within the appropriate period
mentioned in clause (b) of this Section 5, of the Company becoming aware that
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and within ten
days prepare and furnish to all sellers a reasonable number of copies of an
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amended or supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(f) use its best efforts to list such Registrable
Securities on any securities exchange on which the Common Stock is then listed
or NASDAQ if the Common Stock is then quoted on NASDAQ, if such Registrable
Securities are not already so listed or quoted and if such listing is then
permitted under the rules of such exchange or NASDAQ, and provide an independent
transfer agent and registrar for such Registrable Securities covered by such
registration statement not later than the effective date of such registration
statement;
(g) furnish to each seller of Registrable Securities
covered by such registration statement a signed counterpart, addressed to such
seller (and the underwriters, if any) of:
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if such registration
involves an underwritten public offering, dated the date of the closing
under the underwriting agreement), reasonably satisfactory in form and
substance to the sellers of not less than 50% of such Registrable
Securities (and the managing underwriter, if any); and
(ii) a "comfort" letter, dated the effective date of
such registration statement (or, if such registration involves an
underwritten public offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants who
have certified the Company's financial statements included in such
registration statement, covering such matters with respect to such
registration statement as are customarily covered in accountants' letters
delivered to the underwriters in underwritten offerings of securities as
may reasonably be requested by the sellers of not less than 50% of such
Registrable Securities (and the managing underwriter, if any); and
(h) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such seller or any such underwriter (individually, an "Inspector" and
collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility (collectively, the "Records"), and cause all of the Company's
officers, directors and employees to supply all information reasonably requested
by any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement; provided that any Records that are designated
by the Company in writing as confidential shall be kept confidential by the
Inspectors unless (A) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such registration statement or (B) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction or by any regulatory authority having
jurisdiction. Each Investor agrees that non-public information obtained by it as
a result of such Inspections shall be deemed confidential and acknowledges its
obligations under the Federal securities laws not to trade any securities of the
Company on the basis of material non-public information.
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The Company may require each seller of Registrable Securities as
to which any registration is being effected promptly to furnish to the Company
(i) an opinion of counsel for such seller dated the effective date of the
registration statement relating to such seller's Registrable Securities (or, if
such registration involves an underwritten public offering, dated the date of
the closing under the underwriting agreement), reasonably satisfactory in form
and substance to the Company (and the managing underwriter, if any) and (ii)
such information regarding the distribution of such Registrable Securities as
may be legally required. Such information shall be furnished in writing and
shall state that it is being furnished for use in the registration statement.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in clause (e) of this Section
5, such holder will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by clause (e) of this Section 5, and, if so directed by
the Company, such holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such holder's possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of the Company's notice. In the event the Company shall give any such
notice, the period mentioned in clause (b) of this Section 5 shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to clause (e) of this Section 5 and including the
date when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by clause (e) of this Section 5.
6. Indemnification.
(a) Indemnification by the Company. The Company hereby
agrees to indemnify and hold harmless each holder of Registrable Securities
which shall have been registered under the Securities Act, and such holder's
officers, directors and agents and each other Person, if any, who controls such
holder within the meaning of the Securities Act and each other Person (including
underwriters) who participates in the offering of such Registrable Securities
against any losses, claims, damages, liabilities, reasonable attorneys' fees,
costs or expenses (collectively, the "Damages"), joint or several, to which such
holder or controlling Person or participating Person may become subject under
the Securities Act or otherwise, insofar as such Damages (or proceedings in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact made by the Company or its agents
contained in any registration statement under which such Registrable Securities
are registered under the Securities Act, in any preliminary prospectus or final
prospectus contained therein, or in any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such holder of Registrable
Securities or such controlling Person or participating Person in connection with
investigating or defending any such Damages or proceeding; provided, however,
that the Company will not be liable in any such case to the extent that any such
Damages arise out of or are based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
said preliminary or final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by such
holder or such controlling or participating Person, as the case may be,
specifically for use in the preparation thereof; or (ii) an untrue statement or
alleged untrue statement, omission or alleged omission in a prospectus if such
untrue statement or alleged untrue statement, omission or alleged omission is
-7-
corrected in an amendment or supplement to the prospectus which amendment or
supplement is delivered to such holder in a timely manner and such holder
thereafter fails to deliver such prospectus as so amended or supplemented prior
to or concurrently with the sale of such Registrable Securities to the Person
asserting such Damages.
(b) Indemnification by the Holders of Registrable Securities
Which Are Registered. It shall be a condition of the Company's obligations under
this Agreement to effect any registration under the Securities Act that there
shall have been delivered to the Company an agreement or agreements duly
executed by each holder of Registrable Securities to be so registered, whereby
such holder agrees to indemnify and hold harmless the Company, its directors,
officers and agents and each other Person, if any, which controls the Company
within the meaning of the Securities Act against any Damages, joint or several,
to which the Company, or such other Person or such Person controlling the
Company may become subject under the Securities Act or otherwise, but only to
the extent that such Damages (or proceedings in respect thereof) arise out of or
are based upon any untrue statements or alleged untrue statement of any material
fact contained, on the effective date thereof, in any registration statement
under which such Registrable Securities are registered under the Securities Act,
in any preliminary prospectus or final prospectus contained therein or in any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, which, in
each such case, has been made in or omitted from such registration statement,
said preliminary or final prospectus or said amendment or supplement in reliance
upon, and in conformity with, written information furnished to the Company by
such holder of Registrable Securities specifically for use in the preparation
thereof. The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above, with
respect to information furnished in writing by such Persons specifically for
inclusion in any prospectus or registration statement.
(c) Conduct of Indemnification Proceedings. Any Person entitled
to indemnification hereunder shall (i) give prompt written notice to the
indemnifying party of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 6; and (ii) unless
the indemnified party has been advised by its counsel that a conflict of
interest exists between such indemnified and indemnifying parties under
applicable standards of professional responsibility, with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Whether or not such defense is
assumed by the indemnifying party, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). No indemnifying party will consent to the entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation; provided, however, that no indemnifying party will consent to the
entry of any judgment or enter into any settlement (other than for the payment
of money only) without the consent of the indemnified party (which consent will
not be unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of the claim, will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other such indemnified parties with respect to such
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claim, in which event the indemnifying party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the indemnification
provided for in the preceding Sections 6(a) or 6(b) is unavailable to an
indemnified party in respect of any Damages referred to therein, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such Damages in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action; provided,
however, that in no event shall the liability of any selling holder of
Registrable Securities hereunder be greater in amount than the difference
between the dollar amount of the proceeds received by such holder upon the sale
of the Registrable Securities giving rise to such contribution obligation and
all amounts previously contributed by such holder with respect to such Damages.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of fraudulent misrepresentation.
7. Hold-Back Agreements
(a) Restrictions on Public Sale by Holder of Registrable
Securities. Each holder of Registrable Securities whose Registrable Securities
are eligible for inclusion in a Registration Statement filed pursuant to
Sections 3 or 4 agrees, if requested by the managing underwriter or underwriters
in an underwritten offering of any Registrable Securities, not to effect any
public sale or distribution of Registrable Securities, including a sale pursuant
to Rule 144 (or any similar provision then in force) under the Securities Act
(except as part of such underwritten registration), during the 10-day period
prior to, and during the 90-day period (or such shorter period as may be agreed
to by the parties hereto) beginning on the effective date of such Registration
Statement, to the extent timely notified in writing by the Company or the
managing underwriter or underwriters.
The foregoing provisions shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable statute or regulation from
entering into any such agreement; provided, however, that any such holder shall
undertake, in its request to participate in any such underwritten offering, not
to effect any public sale or distribution of Registrable Securities (except as
part of such underwritten registration) during such period unless it has
provided 45 days prior written notice of such sale or distribution to the
managing underwriter or underwriter.
(b) Restrictions on Public Sale by the Company and Others. The
Company shall (i) not effect any public sale or distribution of any of its
Common Stock for its own account during the 10-day period prior to, and during
the 90-day period beginning on, the effective date of a Registration Statement
filed pursuant to Sections 3 or 4 (except as part of a Special Registration
Statement), and (ii) use reasonable efforts to cause each holder of Common Stock
purchased from the Company at any time after the date of this Agreement (other
than in a registered
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public offering) to agree not to effect any public sale or distribution of any
such securities during such period, including a sale pursuant to Rule 144 under
the Securities Act (except as part of such underwritten registration, if
permitted).
8. Underwritten Registration
If any of the Registrable Securities covered by any Incidental
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the Company and, in the case of a Demand Registration,
reasonably acceptable to BRS.
Notwithstanding anything herein to the contrary, no Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwritten arrangements approved by the Persons entitled hereunder to approve
such arrangement and (b) accurately completes and executes all questionnaires,
powers of attorney, indemnities, custody agreements, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
9. Miscellaneous
(a) Amendment and Modification. This Agreement may be amended
or modified, or any provision hereof may be waived, provided that such amendment
or waiver is set forth in a writing executed by (i) the Company, (ii) BRS (so
long as BRS and its Affiliates own in the aggregate at least 25% of the
outstanding Common Stock on a fully diluted basis), (iii) the holders of a
majority of the shares of the Registrable Securities held by Investors other
than BRS, and (iv) in the case of any amendment which materially and adversely
affects any Investor differently from any other Investor, such Investor. No
course of dealing between or among any persons having any interest in this
Agreement will be deemed effective to modify, amend or discharge any part of
this Agreement or any rights or obligations of any person under or by reason of
this Agreement.
(b) Survival of Representations and Warranties. All
representations, warranties, covenants and agreements set forth in this
Agreement will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by an Investor or on its behalf.
(c) Successors and Assigns: Entire Agreement. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns and
executors, administrators and heirs. This Agreement sets forth the entire
agreement and understandings among the parties as to the subject matter hereof
and merges and supersedes all prior discussions and understandings of any and
every nature among them.
(d) Separability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless that provision
held invalid shall substantially impair the benefits of the remaining portions
of this Agreement.
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(e) Notices. All notices provided for or permitted hereunder
shall be made in writing by hand-delivery, registered or certified first-class
mail, telex, telecopier or air courier guaranteeing overnight delivery to the
other party at the following addresses (or at such other address as shall be
given in writing by any party to the others):
If to the Company:
California Pizza Kitchen, Inc.
6053 West Century Blvd., 11th Floor
Los Angeles, California 90045-6442
Attention: President
Fax: (310) 575-5750
Confirm: (310) 575-3000
with a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: G. Daniel O'Donnell, Esq.
Fax: (215) 994-2222
Confirm: (215) 994-2762
If to BRS:
Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street, 29th Floor
New York, New York 10022
Attention: Harold 0. Rosser II
Fax: (212) 521-3799
Confirm: (212) 521-3707
with a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: G. Daniel O'Donnell, Esq.
Fax: (215) 994-2222
Confirm: (215) 994-2762
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If to Richard L. Rosenfield or Larry S. Flax:
c/o California Pizza Kitchen, Inc.
6053 West Century Blvd., 11th Floor
Los Angeles, California 90045-6442
Fax: (310) 575-5750
Confirm: (310) 575-3000
in each case, with a required copy to:
Stein & Kahan
1299 Ocean Avenue, 4th Floor
Santa Monica, California 90401
Attention: Robert Kahan
Fax: (310) 394-4759
Confirm: (310) 458-6900
All such notices shall be deemed to have been duly given: when
delivered by hand, if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
(f) Governing Law. The validity, performance, construction and
effect of this Agreement shall be governed by and construed in accordance with
the internal law of California, without giving effect to principles of conflicts
of law.
(g) Headings. The headings in this Agreement are for convenience
of reference only and shall not constitute a part of this Agreement, nor shall
they affect their meaning, construction or effect.
(h) Counterparts. This Agreement may be executed in two or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same instrument.
(i) Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
(j) Termination. Unless sooner terminated in accordance with its
terms, this Agreement shall terminate on the fifteenth anniversary of the date
of this Agreement; provided that the indemnification rights and obligations set
forth in Section 6 hereof shall survive the termination of this Agreement.
(k) Remedies. In the event of a breach or a threatened breach by
any party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement, it being
agreed
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by the parties that the remedy at law, including monetary damages, for breach of
such provision will be inadequate compensation for any loss and that any defense
in any action for specific performance that a remedy at law would be adequate is
waived.
(l) Party No Longer Owning Securities. If a party hereto ceases
to own any Securities, such party will no longer be deemed to be an Investor for
purposes of this Agreement; provided that the indemnification rights and
obligations set forth in Section 6 hereof shall survive any such cessation of
ownership.
(m) Pronouns. Whenever the context may require, any pronouns
used herein shall be deemed also to include the corresponding neuter, masculine
or feminine forms.
(n) No Effect on Employment. Nothing herein contained shall
confer on any Investor the right to remain in the employ of the Company or any
of its subsidiaries or Affiliates.
(o) Attorneys' Fees. In the event any party hereto commences any
action to enforce any rights of such party hereunder, the prevailing party in
such action shall be entitled to recover such party's costs and expenses
incurred in such action, including, without limitation, reasonable attorneys'
fees.
-13-
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
CALIFORNIA PIZZA KITCHEN, INC.
By: /s/ Richard C. Stockinger
--------------------------------------
Name: Richard C. Stockinger
Title: Vice President
|
BRUCKMANN, ROSSER, SHERRILL & CO., L.P.
By BRS Partners, Limited Partnership, its general
partner,
By BRSE Associates, Inc., its general partner
By: /s/ Harold O. Rosser
-------------------------------------
Name: Harold O. Rosser
Title: Managing Director
/s/ Larry S. Flax
-----------------------------------------
Larry S. Flax
Individually and as trustee under the Voting Trust
Agreement
/s/ Richard L. Rosenfield
-----------------------------------------
Richard L. Rosenfield
Individually and as trustee under the Voting Trust
Agreement
/s/ Bruce C. Bruckmann *
-----------------------------------------
Bruce C. Bruckmann
Address: 125 East 84th Street, Apt. 5A
New York, NY 10028
|
BCB FAMILY PARTNERS
By Bruce C. Bruckmann, General Partner
By: /s/ Bruce C. Bruckmann *
-----------------------------------------
Name:
Title:
|
-14-
/s/ Donald Bruckmann *
---------------------------------------
Donald Bruckmann
Address: 66 East 79th Street
New York, NY 10021
|
NAZ FAMILY PARTNERS
By Nancy A. Zweng, General Partner
By: /s/ Nancy A. Zweng *
-----------------------------------
Name:
Title:
/s/ Nancy A. Zweng *
---------------------------------------
Nancy A. Zweng
Address: 125 East 84th Street, Apt. 5A
New York, NY 10028
/s/ H. Virgil Sherrill *
---------------------------------------
H. Virgil Sherrill
Address: One Sutton Place South
New York, NY 10022
/s/ Stephen C. Sherrill *
---------------------------------------
Stephen C. Sherrill
Address: 765 Park Avenue, Apt. 4B
New York, NY 10021
/s/ Harold O. Rosser
---------------------------------------
Harold O. Rosser
Address: 499 Silvermine Road
New Canaan, CT 06840
/s/ Paul D. Kaminski *
---------------------------------------
Paul D. Kaminski
Address: 54 W. 9th Street
New York, NY 10011
|
-15-
/s/ J. Rice Edmonds*
--------------------------------------
J. Rice Edmonds
Address:
/s/ Marilena Tibrea*
--------------------------------------
Marilena Tibrea
Address:
|
FURMAN SELZ SBIC, L.P.
By Furman Selz SBIC Investments L.L.C.
By: /s/ James L. Luikart
-----------------------------------
James L. Luikart
Title: EUD
230 Park Avenue
New York, NY 10169
/s/ Roy Furman
--------------------------------------
Roy Furman
Address: 230 Park Avenue
New York, NY 10169
/s/ David Harris
--------------------------------------
David Harris
Address: 230 Park Avenue
New York, NY 10169
|
BANCBOSTON INVESTMENTS INC.
By: /s/ Theresa A. Nibi
----------------------------------
Name: Theresa A. Nibi
Title: Vice President
/s/ Eric Gleacher
--------------------------------------
Eric Gleacher
Address: 1133 Fifth Avenue
New York, NY 10128
|
-16-
/s/ Robert Engel
--------------------------------------
Robert Engel
Address: 425 West End Avenue, #7B
New York, NY 10024
/s/ James Goodwin
--------------------------------------
James Goodwin
Address: 39 East 79th St.
New York, NY 10021
/s/ Emil Henry
--------------------------------------
Emil Henry
Address: 654 Guard Hill Rd.
Bedford, NY 10506
/s/ Roger Hoit
--------------------------------------
Roger Hoit
Address: 83 Blackburn Rd.
Summit, NJ 07901
/s/ H. Conrad Meyer III
--------------------------------------
H. Conrad Meyer III
Address: 1 Woodland Ave.
Bronxville, NY 10708
/s/ David W. Mills
--------------------------------------
David Mills
Address: 16 Highland Park Place
Rye, NY 10580
/s/ Charles Phillips
--------------------------------------
Charles Phillips
Address: 775 Park Avenue
New York, NY 10021
/s/ Clayton J. Rohrbach, III
--------------------------------------
Clayton J. Rohrbach, III
Address: 21 Clapboard Ridge Road
Greenwich, CT 06830
|
-17-
/s/ Jeffrey Tepper
--------------------------------
Jeffrey Tepper
Address: 40 East 88th St., #5A
New York, NY 10128
|
GLEACHER IV, L.P.
By: /s/ Robert A. Engel
-----------------------------
Robert A. Engel
General Partner
c/o Gleacher Natwest, Inc.
660 Madison Ave.
New York, NY 10021
|
* By Harold O. Rosser, as attorney-in-fact.
-18-
EXHIBIT 9.1
VOTING TRUST AGREEMENT
THIS IS A VOTING TRUST AGREEMENT, dated as of September 30, 1997,
among the entities and individuals listed on Exhibit A attached hereto
(individually, a "Shareholder" and collectively, the "Shareholders"), and Harold
0. Rosser II and Stephen F. Edwards, and their successors appointed as provided
in this Agreement, as Voting Trustees (the "Voting Trustees").
Background
A. California Pizza Kitchen, Inc., a California corporation (the
"Company"), is duly organized and validly existing under the laws of the State
of California. Pursuant to an Agreement and Plan of Merger, dated as of July 1,
1997, as amended (the "Merger Agreement"), among the Company, Bruckmann, Rosser,
Sherrill & Co., L.P. ("BRS"), C.P. Kitchen Acquisition Corp., CPK Acquisition
Corp. and Richard L. Rosenfield and Larry S. Flax, the Shareholders will acquire
an aggregate of 1,887,200 shares of Class A Common Stock, par value $.01 per
share ("Class A Common Stock"), or Class B Common Stock, par value $.01 per
share ("Class B Common Stock" and, together with Class A Common Stock, "Common
Stock"), of the Company.
B. The Voting Trustees are representatives of BRS.
C. In consideration of the premises and of the mutual undertakings of the
parties hereinafter set forth, a voting trust (the "Trust") in respect of the
shares of Common Stock of the Company owned by the Shareholders is hereby
created and established, subject to the following terms and conditions, to all
and every one of which the parties hereto expressly assent and agree.
Terms
In consideration of the mutual agreements contained herein, and
intending to be legally bound hereby, the parties agree as follows:
1. Deposit of Common Stock.
(a) Transfer of Shares. Each Shareholder agrees that, immediately
following the merger contemplated under the Merger Agreement, he or it will
transfer and assign, or cause to be transferred and assigned, to the Voting
Trustees all of the shares of Common Stock of the Company then owned by him or
it (the "Shares") and will deposit or cause to be deposited hereunder, with the
Voting Trustees, the certificates for such Shares, all of which certificates, if
not registered in the name of the Voting Trustees at the time of such deposit,
shall be duly endorsed in blank or accompanied by proper instruments of
assignment and transfer thereof duly executed in blank.
(b) All Shares of Common Stock. The provisions of this Agreement shall
apply to any and all shares of Common Stock of the Company that (i) may be
issued in respect of, in exchange for, or in substitution of any Shares
transferred to the Voting Trustees pursuant to
paragraph (a) hereof, or (ii) are hereafter acquired by any Shareholder at any
time, whether upon exercise of options, warrants or rights or upon conversion of
securities or otherwise, and each Shareholder agrees that until the termination
of this Agreement, no shares of Common Stock of the Company shall be held by
such Shareholder, but all such shares shall be deposited with the Voting
Trustees in accordance with the terms and conditions of this Agreement.
2. Voting Trust Certificates.
(a) Issue of Certificates. The Voting Trustees shall from time to
time issue to each Shareholder, with respect to the shares of Common Stock of
the Company owned by such Shareholder and so deposited hereunder, a Voting Trust
Certificate or Voting Trust Certificates, each in the form of Exhibit B hereto,
for the number of shares of Common Stock equal to that deposited hereunder by
such Shareholder, which Certificate(s) shall refer to the provisions of this
Agreement and be registered on the books of the Trust in such Shareholder's
name.
(b) Transfer of Certificates. No Shareholder shall, directly or
indirectly, except pursuant to the terms of this Agreement and the Securities
Holders Agreement, dated as of the date hereof (the "Securities Purchase
Agreement"), among the Company, BRS, Richard L. Rosenfield and Larry S. Flax,
enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition ("Transfer") of, any or all of such
Shareholder's Shares or any interest therein or any Voting Trust Certificates or
interest therein; provided, however, that in any event no Shareholder shall
Transfer any Shares or Voting Trust Certificates unless the transferee is a
signatory to this Agreement or the transferee executes an instrument reasonably
satisfactory to the Voting Trustees whereby such transferee becomes a signatory
to, and bound by, this Agreement.
3. Replacement of Certificates.
(a) Issue of Replacement Certificates. In case any Voting Trust
Certificate shall be mutilated, lost, destroyed or stolen, the Voting Trustees
may issue and deliver in exchange therefor and upon cancellation of the
mutilated Voting Trust Certificate, or in lieu of the lost, destroyed or stolen
Voting Trust Certificate, a new Voting Trust Certificate or Voting Trust
Certificates representing a like number of shares of Common Stock, upon the
production of evidence of such loss, destruction or theft, satisfactory to the
Voting Trustees, and upon receipt of an indemnity satisfactory to the Voting
Trustees, and upon compliance also with such other reasonable conditions as the
Voting Trustees may prescribe.
4. Certificates for Securities held by Voting Trustees.
(a) Surrender of Certificates. The certificates for Common Stock of
the Company deposited with the Voting Trustees shall, if not registered in the
name of the Voting Trustees at the time of deposit, be surrendered to the
Company and cancelled and new certificates therefor issued to and in the name of
the Voting Trustees. Notation shall be made on the face of all certificates
issued in the name of the Voting Trustees that they are issued pursuant
-2-
to this Agreement, and such fact shall also be noted in the records of stock
ownership of the Company.
(b) Securities Held in Trust. All shares of Common Stock deposited
with the Voting Trustees hereunder shall be held in trust for the Shareholders
and their respective heirs, executors, administrators and assigns, and used and
applied by the Voting Trustees and its successors in office for the purposes of
and in accordance with this Agreement and shall remain subject to the Securities
Purchase Agreement.
(c) Transfer of Shares. The Voting Trustees may cause any shares of
Common Stock at any time held by them under this Agreement to be transferred to
any name or names other than the name of the Voting Trustees herein named, if
such transfer becomes necessary by reason of any change in the person holding
the office of Voting Trustees as hereinafter provided.
5. Dividends: Subscription Rights.
(a) Dividends. The Company is hereby authorized and directed, and the
Company hereby agrees, to pay all distributions and dividends that are paid in
cash, stock (other than voting stock) or other property directly to the
registered holder of the Voting Trust Certificate evidencing the shares of
Common Stock of the Company on which such distributions or dividends are
declared. All shares of voting stock issued as dividends on shares of Common
Stock of the Company that are subject to this Agreement shall also be subject to
this Agreement. The stock certificates for such shares shall be issued in the
name of and delivered to the Voting Trustees to be held hereunder, subject to
all of the provisions hereof, and the Voting Trustees shall issue additional
Voting Trust Certificates in respect of such shares to the Shareholders entitled
thereto.
(b) Distributions of Capital Stock. In case the Company shall at any
time issue any stock or other securities to which the holders of the capital
stock of the Company shall be entitled to subscribe by way of preemptive right
or otherwise, or any Shareholder shall be otherwise entitled to purchase any
shares of capital stock of the Company, the Voting Trustees shall promptly give
notice of such right so to subscribe or purchase and of the terms thereof to
such Shareholder at his or its address registered with the Voting Trustees; and
such Shareholder upon providing the Voting Trustees with funds in the requisite
amount, shall have the right, subject to such reasonable regulations as may be
prescribed by the Voting Trustees, to instruct the Voting Trustees to subscribe
for or purchase such stock or other securities, or any part thereof; and to the
extent that such Shareholder shall fail to exercise such rights the Voting
Trustees shall be entitled, in their absolute discretion, to permit such rights
so to subscribe or purchase to lapse. Upon receiving proper instructions in
writing, the Voting Trustees shall subscribe for or purchase such stock or other
securities (but only out of funds provided by such Shareholder for the purpose)
and shall distribute the same to such Shareholder, except that any shares of
voting stock of the Company, when so subscribed for or purchased and received by
the Voting Trustees, shall not be distributed but shall be held hereunder,
subject to all the provisions hereof, and the Voting Trustees shall issue new or
additional Voting Trust Certificates in respect of such shares to such
Shareholder.
-3-
6. Actions by Voting Trustees.
(a) Proxy. A proxy may not be given with respect to the shares
of stock subject hereto to any person other than the Voting Trustees, unless the
Voting Trustees consent in writing to such proxy.
(b) Agents. The Voting Trustees may at any time or from time to
time appoint an agent or agents and may delegate to such agent or agents the
performance of any administrative duty of the Voting Trustees, including,
without limitation, the appointment of a domestic bank or other institution to
act as custodian of the shares of Common Stock of the Company held by it
hereunder. The fees of such agent or agents shall constitute an expense of the
Voting Trustees.
7. Liability of Voting Trustees: Indemnification.
(a) No Liability. The Voting Trustees assume no liability as a
shareholder, their interest hereunder being that of trustee only. In voting the
stock represented by the stock certificates deposited hereunder (which they may
do either in person or by proxy as aforesaid), the Voting Trustees will vote and
act in all matters in accordance with their good faith judgment and the terms of
this Agreement; but they assume no responsibility or liability in respect of any
action taken by them or taken in pursuance of their vote so cast, and the Voting
Trustees shall not incur any responsibility or liability as trustee or otherwise
by reason of any error of fact or law, mistake of judgment, or of any matter or
thing done or suffered or omitted to be done under this Agreement, except for
their own individual willful misconduct.
(b) Agents. The Voting Trustees shall not be answerable for the
default or misconduct of any agent or attorney appointed by them in pursuance
hereof if such agent or attorney shall have been selected with reasonable care.
(c) Expenses. The Voting Trustees shall not be entitled to any
compensation for their services hereunder.
(d) Indemnity. The Shareholders hereby jointly and severally
agree that they will at all times protect, indemnify and save harmless the
Voting Trustees from any loss, cost or expense of any kind or character
whatsoever incurred in connection with this Trust except those, if any, arising
from the willful misconduct of the Voting Trustees, and will at all times
themselves undertake, assume full responsibility for, and pay all costs and
expenses of any suit or litigation of any character, including any proceedings
before any governmental agency, with respect to the Shares of Common Stock or
this Agreement and, if the Voting Trustees shall be made a party thereto, the
shareholders will pay all costs and expenses, including counsel fees, to which
the Voting Trustees may be subject by reason thereof. The Voting Trustees may
consult with counsel and other advisors, and the opinions of such counsel and
advisors shall be full and complete authorization and protection in respect of
any action taken or omitted or suffered by the Voting Trustees hereunder in good
faith and in accordance with such opinions.
-4-
(e) Notwithstanding any other provision hereof, the provisions of
this Section 7 shall survive the termination of this Agreement.
8. Voting Discretion.
(a) Voting Discretion. Except as otherwise provided herein, until the
termination of this Agreement and the actual delivery to the Shareholders of
certificates for shares of Common Stock in exchange for Voting Trust
Certificates hereunder, the Voting Trustees shall possess and shall be entitled
in their discretion, not subject to any review, to exercise in person or by
proxy, in respect of any and all shares of Common Stock at any time deposited
under this Agreement, all rights and powers of every name and nature, including
the right to vote thereon or to consent to any and every act of the Company, in
the same manner and to the same extent as if the Voting Trustees were the
absolute owner of such stock in their own right.
(b) Permitted Actions. Without limiting the generality of the
foregoing paragraph (a), the Voting Trustees are, among other things,
specifically authorized to vote for, consent to or authorize any of the
following:
(i) the election, removal or replacement of directors of the
Company,
(ii) the sale or disposal in the normal course of business of
any part or parts of the property, assets or business of the Company;
(iii) any changes or amendments in or to the Articles of
Incorporation or Bylaws of the Company;
(iv) any loans to officers, directors or shareholders of the
Company;
(v) any indemnification of officers, directors or agents of
the Company;
(vi) the entering into or submitting of a bid in connection
with the negotiation of or application for any contract that the Company may not
enter into or submit without the approval of the shareholders;
(vii) any other action that, by the terms of the General
Corporation Law of the State of California or the Articles of Incorporation or
Bylaws of the Company, permits or requires a vote of the holders of the capital
stock of the Company, and
(viii) any action with respect to any of the foregoing that any
shareholder might lawfully take.
9. Termination of this Agreement.
(a) Termination. This Agreement shall terminate with respect to any
shares of Common Stock of the Company (i) as to which a registration statement
shall have been filed
-5-
pursuant to the Securities Act promptly upon the effectiveness thereof or (ii)
upon the Voting Trustees' delivery of written notice of termination to the
Shareholders. In addition, this Agreement shall terminate in the event of a sale
by the Company, pursuant to an effective registration statement (other than a
registration statement on Form S-4 or S-8 or their successor forms) under the
Securities Act of 1933, as amended, of any stock for gross offering proceeds of
at least $20 million.
(b) Irrevocable. Subject to paragraph (a) hereof, during the term of
this Agreement, the Trust hereby created shall be irrevocable and no shares of
Common Stock of the Company held by the Voting Trustees pursuant to the terms
of this Agreement shall be transferred to or upon the order of the holder of a
Voting Trust Certificate evidencing the beneficial ownership thereof prior to
the termination of this Agreement.
(c) Termination By Law. Unless terminated sooner (i) pursuant to
paragraph (a) hereof as to all shares of Common Stock held by the Voting
Trustees, or (ii) by operation of law, this Agreement shall terminate without
any action of or notice by or to the Voting Trustees, the Company or the
Shareholders ten years from the day preceding the date hereof.
10. Delivery of Certificates for Common Stock upon Termination of this
Agreement.
(a) Certificates. Upon termination of this Agreement, the Voting
Trustees, in exchange for and upon surrender of any Voting Trust Certificates
then outstanding, shall, in accordance with the terms hereof, deliver
certificates for shares of Common Stock in the amount called for by such Voting
Trust Certificate and either registered in the name of the holder thereof or
duly endorsed in blank or accompanied by proper instruments of assignment and
transfer thereof duly executed in blank to the holder thereof, and the Voting
Trustees may require the holder of such Voting Trust Certificate to surrender
the same for such exchange.
(b) Obligations of Trustee. After any termination of this Agreement
as above provided with respect to all shares of Common Stock, and delivery by
the Voting Trustees of any stock or other property then held hereunder in
exchange for outstanding Voting Trust Certificates as provided in this Section
10, all further obligations or duties of the Voting Trustees under this
Agreement or any provision hereof shall cease.
11. Resignation: Successor Trustee.
The Voting Trustees may resign at any time by providing the Company
and each Shareholder with written notice to such effect. If for any reason
either of Harold 0. Rosser or Stephen F. Edwards shall cease to serve as Voting
Trustees hereunder, his immediate successor in such capacity shall be an officer
of Bruckmann, Rosser, Sherrill & Co., Inc. as is designated by BRS. Each such
successive designated person shall, upon assuming the duties hereunder upon a
vacancy occurring in the office of any of the Voting Trustees, be a Voting
Trustee.
-6-
12. Interests Allowed as Voting Trustees.
The Voting Trustees may be a creditor or shareholder of the Company
and may act as a director, officer or employee of, or consultant or advisor to,
the Company and receive compensation therefor. In addition, the Voting Trustees
and any firm of which they may be a member, and any of their affiliates, may
contract with the Company or have a pecuniary interest in any matter or
transaction to which the Company may be a party, or in which the Company may be
in any way concerned.
13. Effect of Agreement upon Representatives, Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
Voting Trustees and each Shareholder and their respective legal representatives,
successors and assigns.
14. Miscellaneous.
(a) Notices. All notices to be given to the owners of Voting Trust
Certificates shall be given by mailing the same in a sealed postpaid envelope to
the registered owners of Voting Trust Certificates addressed to their respective
addresses as shown on the books of the Trust, and any notice whatsoever when
mailed by or on behalf of the Voting Trustees to such registered owners of
Voting Trust Certificates as herein provided shall have the same effect as
though personally served on all holders of Voting Trust Certificates. All
notices to be given to the Voting Trustees shall be given by serving a copy
thereof upon them personally or by mailing the same in a sealed postpaid
envelope addressed to them at the address set forth below or to such other
address as they shall from time to time in writing designate.
(b) Filing of Agreement. Until the termination of this Agreement, one
original counterpart hereof shall be filed with the Secretary of the Company at
the principal office of the Company and such counterpart shall be open to the
inspection of any holder of any Voting Trust Certificate or any shareholder of
the Company daily during business hours.
(c) Amendment. If at any time it is deemed advisable for the parties
hereto to amend or revoke this Agreement, it may be amended or revoked by an
agreement executed by the Voting Trustees, the Company and the holder or holders
of all of the Voting Trust Certificates.
(d) Acknowledgment of Obligations. The Voting Trustees accept the
trust created hereby subject to all the terms and conditions herein contained.
(e) Entire Agreement. This Agreement contains the entire agreement
among the parties hereto and supersedes all prior agreements and understandings,
oral and written, among the parties hereto with respect to the subject matter
hereof.
(f) Section Headings. The section headings contained herein are
included for convenience of reference only and shall not constitute a part of
this Agreement for any purpose.
-7-
(g) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
(h) Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts to be performed entirely within such State, except to the extent that
the laws of the State of California apply mandatorily hereto.
(i) Severability. Any section, clause, sentence, provision,
subparagraph or paragraph of this Agreement held by a court of competent
jurisdiction to be invalid, illegal or ineffective shall not impair, invalidate
or nullify the remainder of this Agreement, but the effect thereof shall be
confined to the section, clause, sentence, provision, subparagraph, or paragraph
so held to be invalid, illegal or ineffective.
-8-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
VOTING TRUSTEES
/s/ Harold O. Rosser
-----------------------
Harold O. Rosser
/s/ Stephen F. Edwards*
------------------------
Stephen F. Edwards
|
Address: c/o Bruckmann, Rosser, Sherrill & Co., L.P.
126 East 56th Street
New York, New York 10022
FURMAN SELZ SBIC, L.P.
By Furman Selz SBIC Investments L.L.C.
By /s/ [ILLEGIBLE]
--------------------------
Name:
Title:
/s/ Roy L. Furman
_______________________________
Roy L. Furman
/s/ David S. Harris
_______________________________
David S. Harris
|
-9-
/s/ Eric Gleacher
-------------------------
Eric Gleacher
/s/ Robert Engel
-------------------------
Robert Engel
/s/ James Goodwin
-------------------------
James Goodwin
/s/ Emil Henry
-------------------------
Emil Henry
/s/ Roger Hoit
-------------------------
Roger Hoit
/s/ H. Conrad Meyer III
-------------------------
H. Conrad Meyer III
/s/ David W. Mills
-------------------------
David Mills
/s/ Charles Phillips
-------------------------
Charles Phillips
/s/ Clayton Rohrbach, III
-------------------------
Clayton J. Rohrbach, III
|
-10-
/s/ Jeffrey Tepper
--------------------------
Jeffrey Tepper
|
GLEACHER IV, L.P.
By /s/ Robert A. Engel
-----------------------
Name: Robert Engel
Title: General Partner
|
*By Harold O. Rosser, as attorney-in-fact.
-11-
Exhibit A
Shareholders
Furman Selz SBIC, L.P.
Roy L. Furman
David S. Harris
Eric Gleacher
Robert Engel
James Goodwin
Emil Henry
Roger Hoit
Conrad Meyer
David Mills
Charles Phillips
Clay Rohrbach
Jeffrey Tepper
Gleacher IV, L.P.
-12-
Exhibit B
THIS VOTING TRUST CERTIFICATE HAS BEEN ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND NO INTEREST THEREIN MAY BE TRANSFERRED
EXCEPT IN COMPLIANCE, ESTABLISHED TO SATISFACTION OF THE ISSUER, WITH SAID ACT
AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER BY THE SECURITIES AND
EXCHANGE COMMISSION.
THIS VOTING TRUST CERTIFICATE AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT
TO THE PROVISIONS OF A SECURITIES HOLDERS AGREEMENT ON FILE WITH THE COMPANY.
VOTING TRUST CERTIFICATE
CALIFORNIA PIZZA KITCHEN, INC.
No._____
Class:______
Shares:_____
This certificate is evidence that _____________
has deposited _______ ( ) shares of [Class A] Common Stock of California Pizza
Kitchen, Inc., a California corporation (the "Company"), with the Voting
Trustees hereinafter named in accordance with the terms of the Voting Trust
Agreement (the "Agreement") dated as of September __, 1997, among the Company,
each of the Shareholders listed on the signature pages thereof and the person
whose name appears below as Voting Trustees (the "Trustees").
This certificate and the interest represented hereby
is transferable on the books of the Trust only in accordance with the terms of
the Agreement and any holder of this Certificate takes the same subject to all
of the terms and conditions of such Agreement.
IN WITNESS WHEREOF, the Trustees have signed this
certificate as of this ___th day of____________.
VOTING TRUSTEES
Name:
Name:
EXHIBIT 10.1
MEMORANDUM OF UNDERSTANDING REGARDING
FORM OF AGREEMENT
This Memorandum of Understanding ("MOU" or "Agreement") is made and entered
into effective the 12/th/ day of May, 1998 by and between California Pizza
Kitchen, Inc., a California corporation having an address at 6053 West Century
Boulevard, Suite 1100, Los Angeles, California 90045-6442 ("Licensor") and Host
International, Inc., having an address at Third Floor (Mail Stop 177), 6600
Rockledge Drive, Third Floor, Bethesda, Maryland 20817, Attn: Chief Counsel,
Development, Dept. 72/928.83 ("Licensee").
RECITALS:
WHEREAS, Licensor represents that it has the right and authority to license
the use of the name California Pizza Kitchen, CPK, CPK ASAP and the other
licensed marks of Licensor, service marks, copyrights, interior and exterior
designs and specifications ("Marks"); and
WHEREAS, Licensee is in the business of conducting food and beverage and
merchandise concessions at domestic and international airports, tollroads,
enclosed malls, stadiums & arenas, and other off-airport locations; and
WHEREAS, Licensor and Licensee are parties to a certain Trademark License
Agreement dated as of the 31st day of July, 1996, for the operation of
trademarked locations at Los Angeles International Airport (referred to herein
as the "Existing License Agreement"); and
WHEREAS, the parties desire to enter into this MOU for the purpose of
creating a binding obligation on each party with respect to future development
opportunities for California Pizza Kitchen ASAP and the form of agreement with
addendum to be executed for any and all future locations developed during the
term of this MOU (the "Form Agreement" attached hereto as Exhibit "A").
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth in this MOU and for other good and valuable consideration, the parties
hereby contract as follows:
1. Form Agreement.
a. Licensor and Licensee are parties to the Existing License Agreement
with respect to Los Angeles International Airport ("LAX"). The
Existing License Agreement for LAX remains in full force and effect
with respect to LAX; however, the additional terms of this MOU shall
apply to the relationship of the parties with respect to San Diego
International Airport, Dulles International Airport, and all other
Locations (as defined below) developed during the term of this MOU.
b. Licensee and Licensor will consider development of additional licensed
sites for California Pizza Kitchen ASAP restaurants in Licensee's
domestic and international airport concessions ("Airport Locations"),
tollroad concessions ("Tollroad Locations"), malls where the
landlord/owner/developerseeks a master concessionaire for a food court
or other multiple concept area ("Mall Locations") and other locations
in addition to the LAX site. The Airport Locations, Tollroad Locations
and Mall Locations are collectively referred to herein as the
"Locations," except that the Locations set forth in Exhibit D are
excluded from the terms of this Agreement.
c. The parties hereby agree that the Form Agreement (with addendum)
attached hereto as Exhibit A, and by this reference incorporated
herein, shall be used to document the agreement of the parties for
each California Pizza Kitchen ASAP site developed during the term of
this MOU, subject to compliance with applicable law. California Pizza
Kitchen ASAP restaurants are generally smaller in size, have a more
limited menu and more limited service than the full service California
Pizza Kitchen, because the full service CPK is a unit offering the
full CPK menu (the current version of which is attached as Exhibit B,
but is subject to change), providing full waiter/waitress table
service and full bar, and operating in a restaurant space of generally
2,500 or more square feet (the "Full Service CPK Restaurant").
d. Licensee may, in its sole discretion, designate an affiliate of
Licensee to hold or be transferred the site-specific Form Agreement,
so that the entity which holds the California Pizza Kitchen ASAP
license will be the same entity which holds the rights to concession
space under the ground lease or master concession agreement for the
Location. By way of example and not by way of limitation, Licensee and
Licensor acknowledge that the Form Agreement for Mall Locations would
ordinarily be entered into in the name of Host Marriott Services USA,
Inc., while Host Marriott Tollroads, Inc. may be the entity which
holds or is transferred the rights to operate a California Pizza
Kitchen ASAP facility at certain Tollroad Locations.
e. The Franchise Fee (as defined in the Form Agreement) shall be Twenty
Thousand ($20,000), or Ten Thousand Dollars ($10,000) if such Form
Agreement is executed in connection with an additional California
Pizza Kitchen restaurant at any Location. The level of support
provided by Licensor for any initial openings shall be the same as
that provided in the opening at LAX (including but not limited to
three of Licensor's trainers for 21 days each; plus two directors, one
of whom will stay for ten days and the other shall stay for four days;
at least one quality insurance inspection; and two mystery shoppers
within six weeks of restaurant opening). Such Twenty Thousand Dollar
($20,000) Franchise Fee shall remain in effect during the five-year
initial term of this MOU, and shall be adjusted every five years
(i.e., upon each renewal of this MOU) to reflect the percentage
increase, if any in the Consumer Price Index.
2
f. The level of support provided by Licensor for any California
Pizza Kitchen restaurant which has a Ten Thousand Dollar ($10,000)
Franchise Fee shall be less than that provided for a first unit at a
Location, and the parties' goal shall be to manage such support so
that overall costs for subsequent units are lower.
2. Inclusion in Portfolio: Renewal Rights: Exclusivity.
a. Inclusion in Portfolio. Licensee and Licensor hereby agree that
Licensor is an authorized member of Licensee's portfolio of
approved branded products for use in its concession operations,
including but not limited to prospective Locations. Each Licensed
site shall be documented by the Form Agreement, subject to
compliance with applicable law.
b. Limited Exclusivity. Except as otherwise expressly provided
herein, this Agreement shall not affect Licensor's right to
operate and license others to operate a Full Service CPK
Restaurant and shall apply only to California Pizza Kitchen ASAP
(or other later version of smaller limited square footage or
limited service or menu version of California Pizza Kitchen
differing from the Full Service CPK Restaurant concept) for all
Locations (except that Mall Locations are also subject to the
additional provisions of Subsection 2(b)(vi) below):
i. Extension Rights for Locations. Licensee's and its
affiliates' right to extend the term of any of the
individual Form Agreements shall be governed by the terms of
the applicable Form Agreement for the Location, which term
shall correspond to the term of Licensee's lease for the
premises at the applicable Location.
ii. Bids and Proposals Where Licensee Holds a Form Agreement.
Licensee and its affiliates shall have the right to include
Licensor in their proposals or bids for extension or renewal
of the ground lease or master concession agreement for the
Locations where Licensee or its subsidiary or affiliate then
holds a Form Agreement; provided however, that Licensee
shall notify Licensor of Licensee's intention to include
Licensor in a proposal or bid (the lesser of: two months
prior to the bid/proposal submission date; or one-half the
number of days between release of a request for proposals or
invitation to bid and the submission date, so as to allow
Licensor sufficient time to comply with the requirements of
applicable law); and provided, further, that Licensee shall
provide Licensor with the information described in Paragraph
2(b)(iii)(B) below. In such event, Licensor agrees that it
shall bid with Licensee or its affiliates and shall not
3
(directly or indirectly, neither as a California Pizza
Kitchen ASAP nor as a Full Service CPK Restaurant) bid
against Licensee or its subsidiaries or affiliates for any
Location where Licensee or its subsidiary or affiliate then
holds a Form Agreement, except as follows:
A. Notification Procedure Where Licensee Holds a Franchise
Agreement. Licensee shall inform Licensor of whether or
not Licensee intends to submit a bid or proposal for a
particular Location, and whether or not Licensee
intends to include Licensor in such bid or proposal at
the lesser of two months prior to the submission date,
or a date which is one-half the number of days between
the public release of the request for proposals and the
proposal/bid submission date. In the event that
Licensee does not intend to submit a bid or proposal,
or does not intend to include Licensor in a bid or
proposal for a particular Location, then Licensor shall
be free to itself bid or propose for such Location, or
to enter into an agreement with another party to
include Licensor in such other party's bid or proposal.
Notwithstanding the foregoing, nothing contained in
this Agreement is intended to negate any radius
restriction granted to Licensee by Licensor in the Form
Agreement (e.g., Licensor will not grant a new CPK ASAP
or Full Service CPK Restaurant to a third party, or
itself operate a CPK ASAP of Full Service CPK
Restaurant, in the same Airport Location or Tollroad
Location where such new facility would serve the same
customer already being served by Licensee's existing
facility).
B. Set-Aside Locations. Notwithstanding anything to the
contrary herein contained, in the event that a lessor
releases a request for a bid or proposal for which
Licensee is ineligible (e.g. a set-aside contract for a
minority business), Licensee and Licensor will
consult with one another as to a qualified candidate
for the bid or proposal. Licensor shall not bid or
propose for such set-aside contract unless Licensee has
affirmatively indicated, within the time periods set
forth above, that Licensor will not be a part of
Licensee's bid or proposal for the non set-aside
Locations in the same facility. Notwithstanding the
foregoing, nothing contained in this Agreement is
intended to negate any radius restriction granted to
Licensee by Licensor in the Form Agreement (e.g.,
Licensor will not grant a new CPK ASAP or Full Service
4
CPK Restaurant to a third party, or itself operate a
CPK ASAP of Full Service CPK Restaurant, in the same
Airport Location or Tollroad Location where such new
facility would serve the same customer).
iii. Locations Where Licensee Does Not Hold a Form Agreement.
With respect to Locations in which Licensee or its
subsidiary or affiliate does not then hold a Form Agreement,
the following Procedure shall apply:
A. Notice Procedure Where Licensee Does Not Hold a Form
Agreement. At the lesser of two (2) months prior to the
submission date, or a date which is one-half the number
of days between the public release of the request for
proposals and the proposal/bid submission date,
Licensee shall notify Licensor of whether or not
Licensee intends to submit a bid or proposal for a
particular Location, and whether or not Licensee
intends to include Licensor in such bid or proposal.
B. Licensor Option to be a part of any bid that Licensee
brings to Licensor. In the event that Licensee intends
to provide Licensor the option to be a part of such bid
or proposal for a new Location, Licensee shall also
notify Licensor of the projected date of commencement
of construction, the projected opening date, and a site
plan of the particular Location, which site plan shall
include the proposed location of the restaurant and the
lessor's then-proposed location of other spaces
available for food and beverage development. In the
case of Airport Locations, Licensee shall, in addition
to the information above, provide Licensor with any
government-supplied: layout of the airport terminals;
list or diagram from the request for proposals
reflecting other then-contemplated real estate in the
airport for food service concepts; and any government-
supplied data concerning enplanement and deplanement.
Licensor shall notify Licensee within five (5) business
days of whether or not Licensor in its sole and
absolute discretion, accepts the option to have CPK
ASAP included in Licensee's bid or proposal, and
subject to the provisions of Para. 2(b)(vi) below, in
the event that Licensor has declined the option to have
CPK ASAP included in Licensee's bid or proposal,
Licensor will not pursue such Location with another
party or on its own, or
5
otherwise permit California Pizza Kitchen ASAP or a
Full Service CPK Restaurant, in any other bid or
proposal for concessions at such Location (except that
in malls there shall be no restriction on Licensor's
freedom to grant a Full Service CPK Restaurant to a
third party, or itself operate such Full Service CPK
Restaurant).
C. Acceptance of Option. If Licensor accepts the option to
become part of the bid or proposal for a Location by
Licensee or its affiliates, Licensee shall promptly
notify Licensor of whether or not the proposal was
awarded to Host.
iv. Restrictions After Inclusion of CPK ASAP in a bid or
proposal. In any Location where Licensor has agreed to
become part of the bid or proposal for such Location by
Licensee or its affiliates, Licensor shall not itself or
through any third party, directly or indirectly (neither as
a California Pizza Kitchen ASAP nor as a Full Service CPK
Restaurant), bid or submit a proposal for any lease,
sublease, concession agreement or permit rights for such
Location; and shall not be the subtenant of any party other
than Licensee (except that in malls there shall be no
restriction on Licensor's freedom to grant a Full Service
CPK Restaurant to a third party, or itself operate such Full
Service CPK Restaurant). Otherwise, except as provided in
Para. 2(b)(vi) below, if Licensee elects not to offer
Licensor an opportunity to be in Licensee's bid or proposal,
Licensor shall then have the right to pursue the
bid/proposal for the Location.
v. Airport and Tollroad Opportunities Not Awarded in a Bid or
Proposal Process. If Licensor has an opportunity to develop
a California Pizza Kitchen ASAP or a Full Service CPK
Restaurant at an Airport Location or Tollroad Location where
neither Licensee nor its affiliates currently has a Form
Agreement, and Licensor in its sole and absolute discretion,
elects to do so, and such opportunity is not offered
pursuant to a public bid or award process for which Licensee
is eligible, Licensor shall notify Licensee of the
opportunity and shall offer Licensee a right of first
refusal to act as Licensor's licensee/franchisee for such
Airport Location or Tollroad Location, subject to compliance
with applicable law, and further subject to any agreements
entered into by Licensor prior to the effective date of this
Agreement. Licensee shall have thirty (30) days following
receipt of all relevant information regarding such potential
site, to accept or reject development of such site under
the same terms and conditions as the Form Agreement. If,
after Licensee declines such opportunity,
6
Licensor desires to grant a California Pizza Kitchen
license to a party other than Licensee or its
affiliates under terms more favorable than those in the
Form Agreement, Licensor shall first offer such
improved terms to Licensee, and Licensee shall have
thirty (30) days to accept or reject such Location.
vi. Additional Mall Provisions. With regard to Mall
Locations, in addition to other rights and restrictions
contained herein, the parties agree that:
A. If Licensee becomes aware of an opportunity for
development of a California Pizza Kitchen ASAP or
a Full Service CPK restaurant for a Mall Location,
and the landlord/developer for such development
opportunity has declared that the opportunity is
not part of a master concessionaire for the food
court/mall, Licensee shall notify Licensor or such
opportunity.
B. Subject to the provisions of this Agreement, if
Licensor becomes aware of an opportunity for a
master lease to develop food and beverage
facilities in a Mall Location, Licensor shall
notify Licensee of such opportunity pursuant to
the notice provision of this Agreement.
C. Licensor continues to have the right to operate
and to license a third party to operate a
California Pizza Kitchen ASAP Restaurant in a
mall, so long as the site was not then being
developed or leased by a master
concessionaire/master lessee of a mall food
court/mall at the time Licensor began operations,
or at the time Licensor licenses the third party.
In Mall Locations (i.e. where the
landlord/owner/developer seeks a master
concessionaire for a food court or other multiple
concept area, or where there is a master
concessionaire of the mall food court(s) or other
multiple concept area), Licensee shall have the
same limited exclusivity for California Pizza
Kitchen ASAP as it has in Airport Locations or
Tollroad Locations pursuant to this subsection
2(b), above, subject to territorial rights as set
forth in the list attached hereto as Exhibit C and
by this reference incorporated herein.
3. Term. The term of this MOU shall commence effective as of the date first
above written and shall terminate March 31, 2003; except that Licensee
shall have the option to extend this
7
MOU for three (3) additional terms of five (5) years each upon written
notice not less than thirty (30) days prior to the expiration of the
then-current term. Notwithstanding the foregoing, in the event that
Licensee and its affiliates have failed to execute a total of at least
twenty-five (25) franchise agreements with Licensor for CPK ASAP
Restaurants within five (5) years following the date of execution of this
MOU, then Licensor shall have the option to revoke the extension options
and by exercising such revocation shall cause this Agreement to terminate
as of its fifth anniversary. If Licensee operates two (or more) CPK ASAP
facilities under any one franchise agreement, such franchise agreement
shall be counted as two (or more) franchise agreements for the purpose of
determining whether or not Licensee and its affiliates have met or exceed
such twenty-five (25) site agreement threshold requirement. Licensor
acknowledges that the twenty-five (25) site agreement requirement shall be
met by Licensee's execution of the form agreements, and there is no
requirement that all twenty-five (25) CPK ASAP restaurants still be open
and operating at the end of such five-year period. The Form Agreements
shall continue in full force and effect for their individual terms under
each Form Agreement, notwithstanding any termination of this MOU.
4. Other Terms. Notwithstanding any other provision of this MOU, or any
provision of the Form Agreement, the parties agree that:
a. Licensee and its subsidiaries and affiliates are experienced licensees
of food and beverage concessions, and Licensee is the holder of
numerous competing licenses (e.g., Pizza Hut, Sbarro, California Pizza
Kitchen etc...). Licensor acknowledges and agrees that Licensee
shall not be prohibited from developing its own pizza concepts,
operating other such concepts, or granting others the right to operate
pizza concepts; provided, however, that Licensee shall in no event use
Licensor's trademarks, trade dress, franchise systems, trade secrets
or any proprietary information in connection with the development or
operation of such other concepts.
b. At Licensee's option, Licensee may designate a minority business
enterprise ("MBE") to operate a Location in which Licensor has been
included in Licensee's bid in accordance with the terms hereof or
Licensee's concept plan as provided herein, and in such event,
Licensor shall, subject to compliance with applicable law and the
conditions described below, take all steps necessary to assure that
such MBE is provided a California Pizza Kitchen Form Agreement, as
attached hereto. In the alternative, Licensee may assign any such Form
Agreement, subject to compliance with applicable law and the
conditions described below, to any of Licensee's MBE subtenants.
Licensee shall provide all relevant information concerning the MBE to
Licensor and Licensor shall have the opportunity to perform Licensor's
normal approval and due diligence investigation with regard to such
MBE, in accordance with Licensor's standard policies and practices.
Licensor shall not be required to enter into the Form Agreement with a
proposed MBE unless the MBE meets Licensor's then-current criteria for
new owners of California Pizza Kitchen restaurants, as determined by
Licensor in its sole discretion. Notwithstanding the
8
foregoing, Host may assign or transfer any Form Agreement to joint venture
or other entity, such as a joint venture with a DBE, so long as Host
retains at least fifty and one-tenth percent (50.1%) ownership of
assignee or transferee.
c. Licensee acknowledges that Licensor is currently a party to or may shortly
become party to contracts with third parties for the inclusion of Licensor
or its other licensees in bids or proposals in the Austin, Texas airport.
d. There shall be no press releases without the mutual written agreement of
the parties.
e. Notices issued hereunder shall be by certified or registered mail, return
receipt requested, to the addresses first listed above. Notices sent in
accordance with this Section shall be deemed effective on the date of
dispatch, and an affidavit of mailing or dispatch, executed under penalty
of perjury, shall be deemed presumptive evidence of the date of dispatch.
f. The parties agree that the interpretation of this Agreement and the rights
and liabilities of the parties hereto shall be governed by the laws of the
state of Delaware. The prevailing party in any litigation, arbitration or
other proceeding shall be ensiled to payment of its reasonable costs,
including attorney's fees.
g. The rights and remedies of either party hereunder shall not be mutually
exclusive (i.e., the exercise of one or more of the provisions hereof
shall not preclude the exercise of any other provisions hereof). Each
party confirms that damages at law will be an inadequate remedy for a
breach or threatened breach of this Agreement and agree that, in the event
of a breach or threatened breach of any provision hereof, the respective
rights and obligations hereunder shall be enforceable by specific
performance, injunction or other equitable remedy, but nothing herein
contained is intended to, nor shall it, limit or affect any rights of law
or by statute or otherwise of any party aggrieved as against the other for
a breach or threatened breach of any provision hereof, it being the intent
of the parties that the respective rights and obligations of the parties
be enforceable in equity as well as at law.
h. Except as otherwise expressly provided herein, Licensee and Licensor
shall use their best efforts to resolve any differences which may arise
between them by discussion and negotiation rather than litigation. If
these methods fail, either party may refer the matter to non-binding
mediation to be conducted under the Procedure for Resolution of Franchise
Disputes of the Center for Public Resources, Inc. of New York, New York.
Mediation shall take place in mutually agreed upon location, and each
party shall bear their own costs and one-half (1/2) of the costs of the
mediator and the Center for Public Resources, Inc.
9
5. Entire Agreement. This MOU and the exhibits attached hereto, the Existing
License Agreement, and the Form Agreement (with form addendum) attached
hereto, constitute the entire agreement between the parties, superseding
any other written and oral agreements between the parties. If any article,
section, provision, term or condition of the Agreement is held to be
invalid by a court of competent jurisdiction, such article, section,
provision term or condition shall be reformed to the extent necessary to
be held valid, and the parties agree that the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding the day and year first above written.
CALIFORNIA PIZZA KITCHEN, INC.
Attest:_________________ By: /s/ Frederick R. Hipp
----------------------
Title: PRESIDENT
-------------------
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HOST INTERNATIONAL, INC.
Attest: /s/ Jon W. Stentz By: /s/ J.A. Boragno
------------------ ----------------------
JON W. STENTZ
ASSISTANT SECRETARY Title: SVP - CONCEPTS
-------------------
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10
Exhibit A
CPK ASAP Franchise Agreement and Addendum
11
EXHIBIT 10.2
Credit Agreement
Dated as of October 29, 1999
among
California Pizza Kitchen, Inc.,
The Financial
Institutions Party Hereto,
Bank of America, N.A.,
as Administrative Agent, Swing Line Lender
and
Letter of Credit Issuing Lender,
Banc of America Securities LLC,
as Sole Arranger and Sole Book Manager
and Bankers Trust Company, as Documentation Agent
[LOGO of Bank of America]
TABLE OF CONTENTS
Section Page
------- ----
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS 1
1.01 Defined Terms.................................................................... 1
1.02 Use of Certain Terms............................................................. 24
1.03 Accounting Terms................................................................. 24
1.04 Rounding......................................................................... 24
1.05 Exhibits and Schedules........................................................... 25
1.06 References to Agreements and Laws................................................ 25
SECTION 2. THE COMMITMENTS AND EXTENSIONS OF CREDIT.......................................... 25
2.01 Amount and Terms of Commitments.................................................. 25
2.02 Borrowings, Conversions and Continuations of Loans............................... 26
2.03 Letters of Credit................................................................ 27
2.04 Swing Line Loans................................................................. 31
2.05 Prepayments...................................................................... 33
2.06 Reduction or Termination of Revolving Commitments................................ 34
2.07 Principal and Interest........................................................... 34
2.08 Fees............................................................................. 35
2.09 Computation of Interest and Fees................................................. 35
2.10 Making Payments.................................................................. 35
2.11 Funding Sources.................................................................. 37
2.12 Master Subsidiary Guaranty and Collateral........................................ 37
SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY............................................ 37
3.01 Taxes............................................................................ 37
3.02 Illegality....................................................................... 38
3.03 Inability to Determine Rates..................................................... 38
3.04 Increased Cost and Reduced Return; Capital Adequacy.............................. 39
3.05 Breakfunding Costs............................................................... 39
3.06 Matters Applicable to all Requests for Compensation.............................. 40
3.07 Survival......................................................................... 41
SECTION 4. CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT...................................... 41
4.01 Conditions of Initial Extension of Credit........................................ 41
4.02 Conditions to all Extensions of Credit........................................... 43
SECTION 5. REPRESENTATIONS AND WARRANTIES.................................................... 44
5.01 Existence and Qualification; Power; Compliance with Laws......................... 44
5.02 Power; Authorization; Enforceable Obligations.................................... 44
5.03 No Legal Bar..................................................................... 45
5.04 Financial Statements; No Material Adverse Effect................................. 45
5.05 Litigation....................................................................... 45
5.06 No Default....................................................................... 45
5.07 Ownership of Property; Liens..................................................... 46
5.08 Taxes............................................................................ 46
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5.09 Margin Regulations; Investment Company Act; Public Utility Holding Company Act... 46
5.10 No ERISA Plans................................................................... 46
5.11 Intangible Assets................................................................ 46
5.12 Compliance With Laws............................................................. 47
5.13 Environmental Compliance......................................................... 47
5.14 Insurance........................................................................ 47
5.15 Subsidiaries..................................................................... 47
5.16 Year 2000........................................................................ 47
5.17 Collateral....................................................................... 48
5.18 Projections and Operating Budgets................................................ 48
5.19 Disclosure....................................................................... 48
SECTION 6. AFFIRMATIVE COVENANTS............................................................. 48
6.01 Financial Statements............................................................. 49
6.02 Certificates, Notices and Other Information...................................... 49
6.03 Payment of Taxes................................................................. 51
6.04 Preservation of Existence........................................................ 51
6.05 Maintenance of Properties........................................................ 51
6.06 Maintenance of Insurance......................................................... 51
6.07 Compliance With Laws............................................................. 51
6.08 Inspection Rights................................................................ 52
6.09 Keeping of Records and Books of Account.......................................... 52
6.10 Compliance With Agreements....................................................... 52
6.11 Use of Proceeds.................................................................. 52
6.12 Additional Guarantors, Debtors and Collateral.................................... 52
6.13 Further Assurances............................................................... 53
SECTION 7. NEGATIVE COVENANTS................................................................ 53
7.01 Indebtedness..................................................................... 54
7.02 Liens and Negative Pledges....................................................... 54
7.03 Fundamental Changes.............................................................. 54
7.04 Dispositions..................................................................... 55
7.05 Investments...................................................................... 55
7.06 Lease Obligations................................................................ 55
7.07 Restricted Payments.............................................................. 56
7.08 ERISA............................................................................ 56
7.09 Change in Nature of Business..................................................... 56
7.10 Transactions with Affiliates..................................................... 56
7.11 Capital Expenditures............................................................. 56
7.12 Financial Covenants.............................................................. 56
7.13 Change in Auditors............................................................... 57
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.................................................... 58
8.01 Events of Default................................................................ 58
8.02 Remedies Upon Event of Default................................................... 60
SECTION 9. ADMINISTRATIVE AGENT.............................................................. 61
9.01 Appointment and Authorization of Administrative Agent............................ 61
9.02 Delegation of Duties............................................................. 62
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9.03 Liability of Administrative Agent................................................ 62
9.04 Reliance by Administrative Agent................................................. 62
9.05 Notice of Default................................................................ 63
9.06 Credit Decision; Disclosure of Information by Administrative Agent............... 63
9.07 Indemnification of Administrative Agent.......................................... 64
9.08 Administrative Agent in Individual Capacity...................................... 64
9.09 Successor Administrative Agent................................................... 64
9.10 Proportionate Interest in any Collateral......................................... 65
9.11 Documentation Agent.............................................................. 65
SECTION 10. MISCELLANEOUS.................................................................... 65
10.01 Amendments; Consents............................................................. 65
10.02 Transmission and Effectiveness of Communications and Signatures.................. 66
10.03 Attorney Costs, Expenses and Taxes............................................... 67
10.04 Binding Effect; Assignment....................................................... 68
10.05 Set-off.......................................................................... 69
10.06 Sharing of Payments.............................................................. 70
10.07 No Waiver; Cumulative Remedies................................................... 70
10.08 Usury............................................................................ 71
10.09 Counterparts..................................................................... 71
10.10 Integration...................................................................... 71
10.11 Nature of Lenders' Obligations................................................... 71
10.12 Survival of Representations and Warranties....................................... 72
10.13 Indemnity by Borrower............................................................ 72
10.14 Nonliability of Lenders.......................................................... 72
10.15 No Third Parties Benefited....................................................... 73
10.16 Severability..................................................................... 73
10.17 Confidentiality.................................................................. 73
10.18 Further Assurances............................................................... 74
10.19 Headings......................................................................... 74
10.20 Time of the Essence.............................................................. 74
10.21 Foreign Lenders and Participants................................................. 74
10.22 Governing Law.................................................................... 75
10.23 Waiver of Right to Trial by Jury................................................. 76
10.24 Entire Agreement................................................................. 76
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EXHIBITS
Form of
A Request for Extension of Credit
B Compliance Certificate
C-1 Revolving Note
C-2 Term Note
D Notice of Assignment and Acceptance
E Master Subsidiary Guaranty
F Security Agreement
G Pledge Agreement
H Joinder Agreement
SCHEDULES
2.01 Commitments and Pro Rata Shares
5.05 Material Litigation
5.11 Trademarks, Patents, Copyrights
5.15 Subsidiaries
7.01 Existing Indebtedness, Liens and Negative Pledges
10.02 Offshore and Domestic Lending Offices, Addresses for Notices
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-iv-
CREDIT AGREEMENT
This CREDIT AGREEMENT ("Agreement") is entered into as of October 29, 1999
by and among CALIFORNIA PIZZA KITCHEN, INC., a California corporation
("Borrower"), each lender from time to time party hereto (collectively,
"Lenders" and individually, a "Lender"), and BANK OF AMERICA, N.A., as
Administrative Agent and Issuing Lender and BANKERS TRUST COMPANY, as
Documentation Agent.
RECITAL
Borrower has requested that Lenders and Issuing Lender provide a revolving
line of credit and term loans, and Lenders, Issuing Lender and Administrative
Agent are willing to do so on the terms and conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained,
the parties hereto covenant and agree as follows:
SECTION 1.
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Administrative Agent" means Bank of America, N.A., in its capacity as
Administrative agent under any of the Loan Documents, or any successor
administrative agent.
"Administrative Agent's Office" means Administrative Agent's address and,
as appropriate, account as set forth on Schedule 10.02, or such other address or
account as Administrative Agent hereafter may designate by written notice to
Borrower and Lenders.
"Administrative Agent-Related Persons" means Administrative Agent
(including any successor agent), together with its Affiliates (including, in the
case of Administrative Agent, the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.
"Affiliate" means any Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, another Person. A Person
shall be deemed to be "controlled by" any other Person if such other Person
possesses, directly or indirectly, power (a) to vote 25% or more of the
securities (on a fully diluted basis) having ordinary voting power for the
election of directors or managing general partners; or (b) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.
"Agreement" means this Credit Agreement, as amended, restated, extended,
supplemented or otherwise modified in writing from time to time.
-1-
"Applicable Amount" means the following amounts per annum, based upon the
Leverage Ratio as set forth in the most recent Compliance Certificate received
by Administrative Agent pursuant to Section 6.02(b); provided, however, that,
until Administrative Agent receives the first Compliance Certificate after the
Closing Date, such amounts shall be those indicated for Pricing Level 2 set
forth below:
Applicable Amount
Offshore
Revolving Rate +
----------
Pricing Commitment Letters of Base Rate
Level Leverage Ratio fee Credit +
--------------------------------------------------------------------------------
1 *2.00:1 but **2.50:1 0.375 1.75 0.50
2 *1.50:1 but **2.00:1 0.375 1.50 0.25
3 **1.50:1 0.250 1.25 None
|
* Greater than or equal to
** Less than
The Applicable Amount shall be in effect from the date the most recent
Compliance Certificate is received by Administrative Agent to but excluding the
date the next Compliance Certificate is received; provided, however, that if
Borrower fails to timely deliver the next Compliance Certificate, the Applicable
Amount from the date such Compliance Certificate was due to but excluding the
date such Compliance Certificate is received by Administrative Agent shall be
the highest pricing level set forth above, and, thereafter, the pricing level
indicated by such Compliance Certificate when received.
"Applicable Payment Date" means, (a) as to any Offshore Rate Loan, the last
day of the relevant Interest Period and any date that such Loan is prepaid or
converted in whole or in part and the Maturity Date; provided, however, that if
any Interest Period for an Offshore Rate Loan exceeds three months, interest
shall also be paid on the date which falls every three months after the
beginning of such Interest Period, and (b) as to any other amount, the last
Business Day of each calendar quarter and the Maturity Date; provided, further,
that interest accruing at the Default Rate shall be payable from time to time
upon demand of Administrative Agent.
"Arranger" means Banc of America Securities LLC, in its capacity as sole
arranger and sole book manager.
"Attorney Costs" means and includes all reasonable fees and disbursements
of any law firm or other external counsel and the reasonable allocated cost of
internal legal services and all reasonable disbursements of internal counsel.
"Audited Financial Statements" means the audited consolidated balance sheet
of Borrower and its Subsidiaries for the fiscal year ended January 3, 1999, and
the related consolidated statements of income and cash flows for such fiscal
year of Borrower.
"Bank of America" means Bank of America, N.A.
-2-
"Base Rate" means a fluctuating rate per annum equal to the higher of (a)
the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for
such day as publicly announced from time to time by Bank of America as its
"prime rate." Such rate is a rate set by Bank of America based upon various
factors including Bank of America's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in such rate announced by Bank of America shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Base Rate Loan" means a Loan which bears interest based on the Base Rate.
"Borrower" has the meaning set forth in the introductory paragraph hereto.
"Borrower Party" means Borrower or any Person other than Lenders and any
Affiliates of Lenders, Administrative Agent, Issuing Lender and Documentation
Agent from time to time party to a Loan Document.
"Borrowing" and "Borrow" each mean, a borrowing hereunder consisting of
Loans of the same type made on the same day and, other than in the case of Base
Rate Loans, having the same Interest Period.
"Borrowing Date" means the date that a Loan is made, which shall be a
Business Day.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where Administrative Agent's Office is located and, if such
day relates to any Offshore Rate Loan, means any such day on which dealings in
Dollar deposits are conducted by and between banks in the offshore Dollar
interbank market.
"Cash Equivalents" means, when used in connection with any Person, that
Person's Investments in:
(a) Government Securities due within one year after the date of the
making of the Investment;
(b) readily marketable direct obligations of any State of the United
States of America or any political subdivision of any such State or any
public agency or instrumentality thereof given on the date of such
Investment a credit rating of at least Aa by Moody's Investors Service,
Inc. or AA by Standard & Poor's Corporation, in each case due within one
year from the making of the Investment;
(c) certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by any Lender or any bank
incorporated under the Laws of the United States of America, any State
thereof or the District of Columbia and having on the date of such
Investment combined capital, surplus and undivided profits of at least
$250,000,000,
-3-
or total assets of at least $5,000,000,000, in each case due within one
year after the date of the making of the Investment;
(d) certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by any Lender or any branch or
office located in the United States of America of a bank incorporated under
the Laws of any jurisdiction outside the United States of America having on
the date of such Investment combined capital, surplus and undivided profits
of at least $500,000,000, or total assets of at least $15,000,000,000, in
each case due within one year after the date of the making of the
Investment;
(e) repurchase agreements covering Government Securities executed by a
broker or dealer registered under Section 15(b) of the Securities Exchange
Act of 1934, as amended, having on the date of the Investment capital of at
least $50,000,000, due within 90 days after the date of the making of the
Investment; provided that the maker of the Investment receives written
confirmation of the transfer to it of record ownership of the Government
Securities on the books of a "primary dealer" in such Government Securities
or on the books of such registered broker or dealer, as soon as practicable
after the making of the Investment;
(f) readily marketable commercial paper or other debt securities
issued by corporations doing business in and incorporated under the Laws of
the United States of America or any State thereof or of any corporation
that is the holding company for a bank described in clause (c) or (d) above
given on the date of such Investment a credit rating of at least P-1 by
Moody's Investors Service, Inc. or A-1 by Standard & Poor's Corporation, in
each case due within one year after the date of the making of the
Investment;
(g) "money market preferred stock" issued by a corporation
incorporated under the Laws of the United States of America or any State
thereof (i) given on the date of such Investment a credit rating of at
least Aa by Moody's Investors Service, Inc. and AA by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc., in each
case having an investment period not exceeding 50 days or (ii) to the
extent that investors therein have the benefit of a standby letter of
credit issued by a Lender or a bank described in clauses (c) or (d) above;
provided that (y) the amount of all such Investments issued by the same
issuer does not exceed $5,000,000 and (z) the aggregate amount of all such
Investments does not exceed $15,000,000;
(h) a readily redeemable "money market mutual fund" sponsored by a
bank described in clause (c) or (d) hereof, or a registered broker or
dealer described in clause (e) hereof, that has and maintains an investment
policy limiting its investments primarily to instruments of the types
described in clauses (a) through (g) hereof and given on the date of such
Investment a credit rating of at least Aa by Moody's Investors Service,
Inc. and AA by Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.; and
-4-
(i) corporate notes or bonds having an original term to maturity of
not more than one year issued by a corporation incorporated under the Laws
of the United States of America, or a participation interest therein;
provided that (i) commercial paper issued by such corporation is given on
the date of such Investment a credit rating of at least Aa by Moody's
Investors Service, Inc. and AA by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., (ii) the amount of all such
Investments issued by the same issuer does not exceed $5,000,000 and (iii)
the aggregate amount of all such Investments does not exceed $15,000,000.
"Cash Flow Coverage Ratio" means, as of any date of determination, for
Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) (i)
Consolidated EBITDA for the period of the four prior fiscal quarters ending on
such date less (ii) capital expenditures made during such period less (iii) cash
taxes paid during such period to (b) the sum of (i) Consolidated Interest
Charges for such period plus (ii) scheduled principal payments of Indebtedness
for such period (unless renewable or extendible at the option of the obligor
beyond such period).
"Change in Control" means Richard L. Rosenfield, Rosenfield Children Trust,
Larry S. Flax, Bruckmann, Rosser, Sherrill & Co., L.P., Furman Selz SBIC, L.P.,
Roy L. Furman, David S. Harris, Eric Gleacher, Robert A. Engel, James Goodwin,
Emil Henry, Roger Hoit, H. Conrad Meyer III, David Mills, Charles Phillips,
Clayton J. Rohrbach III, Jeffrey Tepper, Gleacher IV, L.P., BancBoston
Investments, Inc., Bruce C. Bruckmann, BCB Family Partners, NAZ Family Partners,
Nancy A. Zweng, H. Virgil Sherrill, Harold O. Rosser, Paul D. Kaminski, J. Rice
Edmonds, and Marilena Tibrea ceasing, as a group, to have beneficial ownership
and control of at least 51% of the total voting power of all classes of capital
stock of Borrower entitled to vote generally in the election of directors.
"Closing Date" means the date all the conditions precedent in Section 4.01
------------ ------------
are satisfied or waived in accordance with Section 4.01.
------------
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time.
|
"Collateral Documents" means, collectively, the Security Agreement, any
Supplemental Security Agreements, the Pledge Agreement, any Joinder Agreement
and any other security agreements, pledge agreements, deeds of trust, mortgages,
collateral security agreements, supplements, financing statements (or comparable
documents now or hereafter filed in accordance with the Uniform Commercial Code
or comparable law), filings, recordings, consents and other documents from time
to time executed, delivered, filed or recorded in connection with perfecting,
effecting, facilitating, consenting to, providing notice of or otherwise
evidencing Liens to secure the Obligations, in each case either as originally
executed or as from time to time supplemented, modified, amended, extended or
supplanted.
"Commitments" means the Revolving Commitments and the Term Commitments.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit B, properly completed and signed by a Responsible Officer of Borrower.
-5-
"Consolidated EBIRT" means, for any period, for Borrower and its
Subsidiaries on a consolidated basis, an amount equal to the sum of (a)
Consolidated Net Income, (b) Consolidated Interest Charges, (c) lease and rental
expense, (d) the amount of taxes, based on or measured by income, used or
included in the determination of such Consolidated Net Income and (e) non-cash
charges which will not result in a cash expense, including, without limitation,
such charges resulting from compliance with FASB 121, compensation expense
relating to variable plan accounting and write-offs of unamortized cost relating
the Existing Credit Facility.
"Consolidated EBITDA" means, for any period, for Borrower and its
Subsidiaries on a consolidated basis, an amount equal to the sum of (a)
Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of
taxes, based on or measured by income, used or included in the determination of
such Consolidated Net Income, (d) the amount of depreciation and non-cash
amortization expense deducted in determining such Consolidated Net Income, and
(e) non-cash charges which will not result in a cash expense, including, without
limitation, such charges resulting from compliance with FASB 121, compensation
expense relating to variable plan accounting and write-offs of unamortized cost
relating the Existing Credit Facility.
"Consolidated Funded Indebtedness" means, as of any date of determination,
for Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the
outstanding principal amount of all obligations and liabilities, whether current
or long-term, for borrowed money (including Obligations hereunder), (b) that
portion of obligations with respect to capital leases that are capitalized in
the consolidated balance sheet of Borrower and its Subsidiaries, and (c) without
duplication, all Guaranty Obligations with respect to Indebtedness of the type
specified in subsections (a) and (b) above of Persons other than Borrower or any
of its Subsidiaries.
"Consolidated Interest Charges" means, for any period, for Borrower and its
Subsidiaries on a consolidated basis, the sum of (a) all interest, premium
payments, fees, charges and related expenses payable by Borrower and its
Subsidiaries in connection with borrowed money (including capitalized interest)
or in connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP, and (b) the portion of rent
payable by Borrower and its Subsidiaries with respect to such period under
capital leases that is treated as interest in accordance with GAAP.
"Consolidated Net Income" means, for any period, for Borrower and its
Subsidiaries on a consolidated basis, the net income of Borrower and its
Subsidiaries from continuing operations for that period excluding extraordinary
items, gains or losses from Dispositions of assets and non-cash gains.
"Consolidated Net Worth" means, as of any date of determination, for
Borrower and its Subsidiaries on a consolidated basis, Shareholders' Equity of
Borrower and its Subsidiaries on that date.
"Continuation" and "Continue" mean, with respect to any Offshore Rate Loan,
the continuation of such Offshore Rate Loan as an Offshore Rate Loan on the last
day of the Interest Period for such Loan.
-6-
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Conversion" and "Convert" mean, with respect to any Loan, the conversion
of such Loan from or into another type of Loan.
"Debtor" means a Person pledging Collateral under the Security Agreement or
the Pledge Agreement.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
America, and all other liquidation, conservatorship, bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States of America or
other applicable jurisdictions from time to time in effect affecting the rights
of creditors generally.
"Default" means any event that, with the giving of any notice, the passage
of time, or both, would be an Event of Default.
"Default Rate" means an interest rate equal to the Base Rate plus the
Applicable Amount, if any, applicable to Base Rate Loans plus 2% per annum, to
the fullest extent permitted by applicable Laws; provided, however, that with
respect to an Offshore Rate Loan, the Default Rate shall be an interest rate
equal to the interest rate (including any Applicable Amount) otherwise
applicable to such Loan plus 2% per annum.
"Designated Deposit Account" means a deposit account maintained by Borrower
with Bank of America, as from time to time designated by Borrower to
Administrative Agent.
"Disposition" or "Dispose" means the sale, transfer, license or other
disposition (including any sale and leaseback transaction) of any property by
any Person, including any sale, assignment, transfer or other disposal with or
without recourse of any notes or accounts receivable or any rights and claims
associated therewith.
"Dollar" and "$" means lawful money of the United States of America.
"Documentation Agent" means Bankers Trust Company in its capacity as
documentation agent hereunder.
"Domestic Subsidiary" means a Subsidiary of Borrower which is incorporated
under the laws of any State of the United States, other than such a Subsidiary
which is a Subsidiary of a Foreign Subsidiary (collectively, the "Domestic
Subsidiaries").
"Eligible Assignee" means (a) a financial institution organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political
-7-
subdivision of any such country, and having a combined capital and surplus of at
least $100,000,000, provided that such bank is acting through a branch or agency
located in the United States; (c) a Person that is primarily engaged in the
business of commercial banking that is (i) a Subsidiary of a Lender, (ii) a
Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of
which a Lender is a Subsidiary; (d) another Lender and (e) any other entity
which is an "accredited investor" (as defined in Regulation D under the
Securities Act of 1933, as amended) which extends credit or buys loans as one of
its businesses, including but not limited to, insurance companies, mutual funds
and lease financing companies. No Borrower Party or any Affiliate of a Borrower
Party shall be an Eligible Assignee.
"Environmental Laws" means all Laws relating to environmental, health,
safety and land use matters applicable to any property.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
regulations issued pursuant thereto, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with Borrower within the meaning of Sections 414(b) or (c)
of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).
"Event of Default" means any of the events specified in Section 8.
"Existing Credit Facility" means that certain Credit Agreement dated as of
September 30, 1997, as amended, among Borrower, Union Bank of California, as
agent and a syndicate of lenders.
"Extension of Credit" means (a) a Borrowing, Conversion or Continuation of
Loans or (b) a Letter of Credit Action which has the effect of increasing the
amount of a Letter of Credit, extending the maturity of a Letter of Credit or
making any material modification to a Letter of Credit or the reimbursement of
drawings under a Letter of Credit (collectively, the "Extensions of Credit").
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank on the Business Day next succeeding such day; provided that
(a) if such day is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate charged to Bank of America on such day on such
transactions as determined by Administrative Agent.
"Fixed Charge Coverage Ratio" means, as of any date of determination, for
Borrower and its Subsidiaries on a consolidated basis, the ratio of (a)
Consolidated EBIRT for the period of the
-8-
four prior fiscal quarters ending on such date to (b) the sum of (i)
Consolidated Interest Charges for such period plus (ii) lease and rental expense
during such period.
"Foreign Subsidiary" means a Subsidiary of Borrower which is not a Domestic
Subsidiary (collectively, the "Foreign Subsidiaries").
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or such other principles as may be
approved by a significant segment of the accounting profession, that are
applicable to the circumstances as of the date of determination, consistently
applied. If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in any Loan Document, and either
Borrower or the Requisite Lenders shall so request: (a) Administrative Agent,
Lenders and Borrower shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP (subject to the approval of the Requisite Lenders), and (b) until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) Borrower shall
provide to Administrative Agent, and Lenders financial statements and other
documents required under this Agreement or as reasonably requested hereunder
setting forth a reconciliation between calculations of such ratio or requirement
made before and after giving effect to such change in GAAP.
"Governmental Authority" means (a) any international, foreign, federal,
state, county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality, central bank or public body, or (c) any court,
administrative tribunal or public utility.
"Government Securities" means readily marketable (a) direct full faith and
credit obligations of the United States of America or obligations guaranteed by
the full faith and credit of the United States of America and (b) obligations of
an agency or instrumentality of, or corporation owned, controlled or sponsored
by, the United States of America that are generally considered in the securities
industry to be implicit obligations of the United States of America.
"Guarantor" means each Person from time to time a guarantor under the
Master Subsidiary Guaranty (collectively, the "Guarantors").
"Guaranty Obligation" means, as to any Person, any (a) guaranty by that
Person of Indebtedness of, or other obligation payable or performable by, any
other Person or (b) assurance, agreement, letter of responsibility, letter of
awareness, undertaking or arrangement given by that Person to an obligee of any
other Person with respect to the payment or performance of an obligation by, or
the financial condition of, such other Person, whether direct, indirect or
contingent, including any purchase or repurchase agreement covering such
obligation or any collateral security therefor, any agreement to provide funds
(by means of loans, capital contributions or otherwise) to such other Person,
any agreement to support the solvency or level of any balance sheet item of such
other Person or any "keep-well" or other arrangement of whatever nature given
for the purpose of assuring or holding harmless such obligee against loss
-9-
with respect to any obligation of such other Person; provided, however, that the
term Guaranty Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guaranty Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof,
covered by such Guaranty Obligation or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by the
Person in good faith.
"Indebtedness" means as to any Person at a particular time, all items which
would, in conformity with GAAP, be classified as liabilities on a balance sheet
of such Person as at such time (excluding trade and other accounts payable in
the ordinary course of business in accordance with customary trade terms and
which are not overdue for a period of more than 60 days and excluding deferred
taxes), but in any event including, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(b) any direct or contingent obligations of such Person arising under
letters of credit (including standby and commercial), banker's acceptances,
bank guaranties, surety bonds and similar instruments;
(c) net obligations under any Swap Contract in an amount equal to (i)
if such Swap Contract has been closed out, the termination value thereof,
or (ii) if such Swap Contract has not been closed out, the mark-to-market
value thereof determined on the basis of readily available quotations
provided by any recognized dealer in such Swap Contract;
(d) whether or not so included as liabilities in accordance with GAAP,
all obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest thereon)
secured by a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or other title
retention agreements), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;
(e) lease payment obligations under capital leases or Synthetic Lease
Obligations; and
(f) all Guaranty Obligations of such Person in respect of any of the
foregoing; provided, however, that Indebtedness shall not include redeemable
preferred stock.
For all purposes of this Agreement, the Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer, unless such Indebtedness is
expressly made non-recourse to such Person except for customary exceptions
acceptable to the Requisite Lenders.
"Indemnified Liabilities" has the meaning set forth in Section 10.13.
-10-
"Initial Projections" means those certain projections dated September 23,
1999, as amended by a letter dated October 26, 1999.
"Interest Period" means, for each Offshore Rate Loan as requested by
Borrower, (a) initially, the period commencing on the date such Offshore Rate
Loan is disbursed, Continued as, or Converted into, an Offshore Rate Loan and
(b) thereafter, the period commencing on the last day of the preceding Interest
Period, and ending, in each case, on the earlier of (x) the scheduled Maturity
Date, or (y) one, two, three or six months thereafter (or such other period
consented to by Lenders); provided that:
(i) any Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Business Day;
(ii) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period;
(iii) No Interest Period applicable to any Term Loan shall extend
beyond the next Principal Payment Date unless, on that Principal Payment
Date, the sum of (A) the aggregate principal amount of Term Loans which are
Base Rate Loans plus (B) the aggregate principal amount of Term Loans which
are Offshore Rate Loans with an Interest Period ending on that Principal
Payment Date is at least equal to the Principal Payment Amount due on that
Principal Payment Date; and
(iv) unless Administrative Agent otherwise consents, there may not be
more than six Interest Periods in effect at any time.
"Interim Financial Statements" means the company-prepared consolidated
balance sheet of Borrower and its Subsidiaries for the 39-weeks ended October 3,
1999, and the related consolidated statements of income and cash flows for such
fiscal year of Borrower.
"Investment" means, as to any Person, any acquisition or any investment by
such Person, whether by means of the purchase or other acquisition of stock or
other securities of any other Person or by means of a loan, creating a debt,
capital contribution, guaranty or other debt or equity participation or interest
in any other Person, including any partnership and joint venture interests in
such other Person. For purposes of covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.
"IRS" means the Internal Revenue Service.
"Issuing Lender" means Bank of America, or any successor issuing lender
hereunder.
-11-
"Joinder Agreement" means a Joinder Agreement substantially in the form of
Exhibit H, either as originally executed or as it may from time to time be
supplemented, modified, amended, extended or supplanted.
"Laws" or "Law" means all international, foreign, federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.
"Lender" means each lender from time to time party hereto and, as the
context requires, Issuing Lender and Swing Line Lender.
"Lending Office" means, as to any Lender, the office or offices of such
Lender described as such on Schedule 10.02, or such other office or offices as
such Lender may from time to time notify Administrative Agent.
"Letter of Credit" means any standby letter of credit issued or outstanding
hereunder.
"Letter of Credit Action" means the issuance, supplement, amendment,
renewal, extension, modification or other action relating to a Letter of Credit
hereunder.
"Letter of Credit Application" means an application for a Letter of Credit
Action as from time to time in use by Issuing Lender.
"Letter of Credit Cash Collateral Account" means a blocked deposit account
at Bank of America with respect to which Borrower hereby grants a security
interest in such account to Bank of America as security for Letter of Credit
Usage and with respect to which Borrower agrees to execute and deliver from time
to time such documentation as Bank of America or Administrative Agent may
reasonably request to further assure and confirm such security interest.
"Letter of Credit Sublimit" means an amount equal to the lesser of the
combined Revolving Commitments and $2,000,000. The Letter of Credit Sublimit is
part of the Revolving Commitments and is not in addition to the Revolving
Commitments or the Term Commitments.
"Letter of Credit Usage" means, as at any date of determination, the
aggregate undrawn face amount of outstanding Letters of Credit plus the
aggregate amount of all drawings under the Letters of Credit not reimbursed to
Issuing Lender by Borrower or converted into Loans.
"Leverage Ratio" means, as of any date of determination, for Borrower and
its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Funded
Indebtedness as of such date to (b) Consolidated EBITDA for the period of the
four fiscal quarters ending on that date.
-12-
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement (in the nature of compensating balances, cash collateral accounts or
security interests), encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable Laws of any jurisdiction), including
the interest of a purchaser of accounts receivable.
"Loan" means any advance made by any Lender to Borrower as provided in
Section 2 (collectively, the "Loans").
"Loan Documents" means this Agreement, the Master Subsidiary Guaranty, the
Collateral Documents, any Letter of Credit Application, any Request for
Extension of Credit and any Note, certificate, any fee letter, and other
instrument, document or agreement from time to time delivered in connection with
this Agreement.
"Master Subsidiary Guaranty" means the Master Subsidiary Guaranty
substantially in the form of Exhibit E hereto, either as originally executed or
as it may from time to time be supplemented, modified, amended, extended or
supplanted.
"Material Adverse Effect" means any set of circumstances or events which
(a) has or would reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of any Principal Loan Document or
the perfection or priority of any Lien on any material Collateral under any
Collateral Document, (b) is or would reasonably be expected to be material and
adverse to the condition (financial or otherwise), business, assets, operations
or prospects of Borrower and its Subsidiaries, taken as a whole, or (c)
materially impairs or would reasonably be expected to materially impair the
ability of any Borrower Party to perform a material portion of the Obligations,
in each case as reasonably determined by Requisite Lenders.
"Maturity Date" means October 31, 2004, as such date may be earlier
terminated or extended in accordance with the terms hereof.
-13-
"Minimum Amount" means, with respect to each of the following actions, the
minimum amount and any multiples in excess thereof set forth opposite such
action:
Multiples in
Minimum excess
Type of Action Amount/1/ thereof/1/
--------------------------------------------------------------------------------
Borrowing or prepayment of, or Conversion $ 500,000 $100,000
into, Base Rate Loans
Borrowing, prepayment or Continuation of, or $ 500,000 $100,000
Conversion into, Offshore Rate Loans
Borrowing or prepayment of Swing Line Loans $ 100,000 None
Letter of Credit Action $ 25,000 None
Reduction in Commitments $1,000,000 $500,000
Assignments $5,000,000 None
|
"Negative Pledge" means a Contractual Obligation that restricts Liens on a
material portion of property.
"Net Cash Proceeds" means the gross proceeds received by Borrower and its
Subsidiaries from any applicable transaction in Cash, net of brokerage
commissions, legal expenses and other transactional costs payable by Borrower
and its Subsidiaries in connection therewith and net of an amount determined in
good faith by Borrower to be the estimated amount of income, sales and uses
taxes payable by Borrower attributable to such transaction.
"Note" means a Revolving Note or a Term Note (collectively, the "Notes").
"Notice of Assignment and Acceptance" means a Notice of Assignment and
Acceptance substantially in the form of Exhibit D.
"Obligations" means all advances to, and debts, liabilities, obligations,
covenants and duties of, any Borrower Party arising under any Loan Document,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and
including interest that accrues after the commencement of any proceeding under
any Debtor Relief Laws by or against any Borrower Party or any Subsidiary or
Affiliate of any Borrower Party.
/1/ Or such lesser amount as may be required to facilitate the payment of
the Principal Payment Amount payable on any Principal Payment Date.
-14-
"Offshore Base Rate" has the meaning set forth in the definition of
Offshore Rate.
"Offshore Rate" means for any Interest Period with respect to any Offshore
Rate Loan, a rate per annum determined by Administrative Agent pursuant to the
following formula:
Offshore Rate = Offshore Base Rate
1.00 - Eurodollar Reserve Percentage
Where,
"Offshore Base Rate" means, for such Interest Period:
(a) the rate per annum equal to the rate determined by Administrative
Agent to be the offered rate that appears on the page of the Telerate
Screen that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, or
(b) in the event the rate referenced in the preceding subsection (a)
does not appear on such page or service or such page or service shall cease
to be available, the rate per annum equal to the rate determined by
Administrative Agent to be the offered rate on such other page or other
service that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, or
(c) in the event the rates referenced in the preceding subsections (a)
and (b) are not available, the rate per annum determined by Administrative
Agent as the rate of interest (rounded up to the nearest 1/100% of 1%) at
which Dollar deposits (for delivery on the first day of such Interest
Period) in same day funds in the approximate amount of the applicable
Offshore Rate Loan and with a term equivalent to such Interest Period would
be offered by its London Branch to major banks in the offshore Dollar
market at their request at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period.
"Eurodollar Reserve Percentage" means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, rounded upward to
the next 1/100th of 1%) in effect on such day, whether or not applicable to
any Lender, under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"). The Offshore Rate for each
outstanding Offshore Rate Loan shall be adjusted automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.
-15-
"Offshore Rate Loan" means a Loan bearing interest based on the Offshore
Rate.
"Ordinary Course Dispositions" means:
(a) Dispositions of obsolete or worn out property, whether now owned
or hereafter acquired, in the ordinary course of business;
(b) Dispositions of cash, cash equivalents, inventory and other
property in the ordinary course of business;
(c) Dispositions of property to the extent that such property is
exchanged for credit against the purchase price of similar replacement
property, or the proceeds of such sale are reasonably promptly applied to
the purchase price of such replacement property or where Borrower or its
Subsidiary determine in good faith that the failure to replace such
property will not be detrimental to the business of Borrower or such
Subsidiary provided, further, that no such Disposition shall be for less
than the fair market value of the property being disposed of; and
(d) Dispositions of assets or property by any Subsidiary of Borrower
to Borrower or another wholly-owned Subsidiary of Borrower; provided,
however, that if any asset so Disposed of is subject to a Lien under the
Collateral Documents, such asset shall remain subject to such Lien, and if
the transferor Subsidiary is a Guarantor or had its equity interests
pledged under the Pledge Agreement, the transferee Subsidiary shall also be
a Guarantor or have its equity interests pledged under the Pledge
Agreement, and in each such case Borrower shall promptly notify
Administrative Agent of such Disposition;
(e) the grant of licenses to use Trademark Collateral and Trade Secret
Collateral (as defined in the Security Agreement) in the ordinary course of
business.
"Ordinary Course Indebtedness" means:
(a) Indebtedness under the Loan Documents;
(b) intercompany Guaranty Obligations of Borrower or any of its
Subsidiaries guarantying Indebtedness otherwise permitted hereunder of
Borrower or any wholly-owned Subsidiary of Borrower;
(c) Indebtedness arising from the honoring of a check, draft or
similar instrument against insufficient funds; and
(d) Ordinary Course Swap Obligations.
"Ordinary Course Investments" means Investments consisting of:
(a) cash and Cash Equivalents;
-16-
(b) advances to officers, directors and employees of Borrower and its
Subsidiaries for travel, entertainment, relocation and analogous ordinary
business purposes;
(c) other advances to officers, directors and employees of Borrower
and its Subsidiaries not exceeding $500,000 in the aggregate outstanding at
any time;
(d) Investments of Borrower in any of its Subsidiaries and Investments
of any Subsidiary of Borrower in Borrower or another Subsidiary of
Borrower;
(e) extensions of credit to customers or suppliers of Borrower and its
Subsidiaries in the ordinary course of business and any Investments
received in satisfaction or partial satisfaction thereof; and
(f) Guaranty Obligations permitted by Section 7.01;
provided, however, that for purposes of this definition, Subsidiaries shall
not include CPK Beverage, Inc., CPK I, Limited Partnership or CPK Water
Tower Limited Partnership.
"Ordinary Course Liens" means:
(a) Liens pursuant to any Loan Document;
(b) Liens for taxes not yet due or which are being contested in good
faith and by appropriate proceedings, if adequate reserves with respect
thereto are maintained on the books of the applicable Person in accordance
with GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith and by appropriate proceedings, if adequate reserves with
respect thereto are maintained on the books of the applicable Person;
(d) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from
the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of any Person; and
-17-
(g) attachment, judgment or other similar Liens arising in connection
with litigation or other legal proceedings (and not otherwise a Default
hereunder) in the ordinary course of business that is currently being
contested in good faith by appropriate proceedings provided that such Lien
is junior to the Lien of the Collateral Documents, adequate reserves have
been set aside and no material property is subject to a material risk of
loss or forfeiture and the claims in respect of such Liens are fully
covered by insurance (subject to ordinary and customary deductibles).
"Ordinary Course Swap Obligations" means all obligations (contingent or
otherwise) of Borrower or any Subsidiary existing or arising under any Swap
Contract, provided that each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
liabilities, commitments or property held or reasonably anticipated by such
Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;" and
(b) such Swap Contracts do not contain (i) any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party, or (ii) any provision creating
or permitting the declaration of an event of default, termination event or
similar event upon the occurrence of an Event of Default hereunder (other than
an Event of Default referred to in Section 8.01(f)(ii)).
"Organization Documents" means, (a) with respect to any corporation, the
certificate or articles of incorporation and the bylaws; (b) with respect to any
limited liability company, the articles of formation and operating agreement;
and (c) with respect to any partnership, joint venture, trust or other form of
business entity, the partnership or joint venture agreement and any agreement,
instrument, filing or notice with respect thereto filed in connection with its
formation with the secretary of state or other department in the state of its
formation, in each case as amended from time to time.
"Outstanding Obligations" means the Outstanding Revolving Obligations and
the Outstanding Term Obligations.
"Outstanding Revolving Obligations" means, as of any date, and giving
effect to making any Extensions of Credit requested on such date and all
payments, repayments and prepayments made on such date, (a) when reference is
made to all Lenders, the sum of (i) the aggregate outstanding principal amount
of all Revolving Loans and Swing Line Loans, and (ii) all Letter of Credit
Usage, and (b) when reference is made to one Lender the sum of (i) the aggregate
outstanding principal amount of all Revolving Loans made by such Lender
(excluding, in the case of the Swing Line Lender, its Swing Line Loans except to
the extent provided in clause (iii) below), (ii) such Lender's ratable risk
participation in all Letter of Credit Usage, and (iii) such Lender's ratable
risk participation in all outstanding Swing Line Loans.
"Outstanding Term Obligations" means, as of any date, and giving effect to
making any Extensions of Credit requested on such date and all payments,
repayments and prepayments made on such date, (a) when reference is made to all
Lenders, the aggregate outstanding principal amount
-18-
of all Term Loans, and (b) when reference is made to one Lender the aggregate
outstanding principal amount of all Term Loans made by such Lender.
"Person" means any individual, trustee, corporation, general partnership,
limited partnership, limited liability company, joint stock company, trust,
unincorporated organization, bank, business association, firm, joint venture,
Governmental Authority, or otherwise.
"Pledge Agreement" means the pledge agreement substantially in the form of
Exhibit G, either as originally executed or as it may from time to time be
supplemented, modified, amended, extended or supplanted.
"Pledged Collateral" means all certificates or instruments representing or
evidencing the Collateral pledged or to be pledged under the Pledge Agreement.
"Principal Loan Documents" means this Agreement, the Master Subsidiary
Guaranty, the Security Agreement, the Pledge Agreement, any Supplemental
Security Agreements, any Note and any other principal agreement delivered from
time to time in connection with this Agreement.
"Principal Payment Amount" means, with respect to any Principal Payment
Date, the amount set forth below opposite that Principal Payment Date:
Principal Principal
Principal Payment Payment Principal Payment Payment
Date Amount Date Amount
----------------------------------------------------------------------------------------------------
September 30, 2000 $ 750,000 March 31, 2002 $1,250,000
December 31, 2000 $ 750,000 June 30, 2002 $1,250,000
Total for year $1,500,000 September 30, 2002 $1,250,000
December 31, 2002 $1,250,000
Total for year $5,000,000
March 31, 2001 $ 750,000 March 31, 2003 $1,500,000
June 30, 2001 $ 750,000 June 30, 2003 $1,500,000
September 30, 2001 $ 750,000 September 30, 2003 $1,500,000
December 31, 2001 $ 750,000 December 31, 2003 $1,500,000
Total for year $3,000,000 Total for year $6,000,000
March 31, 2004 $3,167,000
June 30, 2004 $3,167,000
September 30, 2004 $3,166,000
Maturity Date Remaining
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"Principal Payment Date" means each of the dates set forth under "Principal
Payment Date" in the definition of "Principal Payment Amount."
-19-
"Pro Rata Share" means, with respect to each Lender, the percentage of the
combined Commitments set forth opposite the name of that Lender on Schedule
2.01.
"Request for Extension of Credit" means a written request substantially in
the form of Exhibit A duly completed and signed by a Responsible Officer of
Borrower and delivered by Requisite Notice. In the case of a Letter of Credit
Action, the Letter of Credit Application shall be deemed to be the Request for
Extension of Credit.
"Requisite Lenders" means, as of any date of determination: (a) if the
Commitments are then in effect, at least two Lenders (excluding any Lenders not
funding when required to do so hereunder) having in the aggregate more than 66-
2/3% of the combined Commitments then in effect and (b) if the Commitments have
then been terminated and there are Outstanding Obligations, at least two Lenders
holding Obligations aggregating more than 66-2/3% of such Outstanding
Obligations.
"Requisite Notice" means, unless otherwise provided herein, (a) irrevocable
written notice to the intended recipient or (b) except with respect to Letter of
Credit Actions (which must be in writing), irrevocable telephonic notice to the
intended recipient, promptly followed by a written notice to such recipient.
Such notices shall be (i) delivered to such recipient at the address or
telephone number specified on Schedule 10.02 or as otherwise designated by such
recipient by Requisite Notice to Administrative Agent, and (ii) if made by any
Borrower Party, given or made by a Responsible Officer of such Borrower Party.
Any written notice delivered in connection with any Loan Document shall be in
the form, if any, prescribed herein or therein and may be delivered as provided
in Section 10.02. Any notice sent by other than hardcopy shall be promptly
confirmed by a telephone call to the recipient and, if requested by
Administrative Agent, by a manually-signed hardcopy thereof.
"Requisite Time" means, with respect to any of the actions listed below,
not later than the time and date set forth below opposite such action (all times
are California time):
-20-
Type of Action Time Date of Action
---------------------------------------------------------------------------------------------------
Delivery of Request for Extension of Credit
for, or notice for:
. Borrowing or prepayment of, or Conversion 8:30 a.m. Same date as such Borrowing,
into, Base Rate Loans prepayment or Conversion
. Borrowing, prepayment or Continuation of, or 10:00 a.m. 3 Business Days prior to such
Conversion into, Offshore Rate Loans Borrowing, prepayment,
Continuation, or Conversion
. Borrowing or prepayment of Swing Line Loans 1:00 p.m. Same date as such Borrowing or
prepayment
. Letter of Credit Action 10:00 a.m. 2 Business Days prior to such
action (or such lesser time which
is acceptable to Issuing Lender)
. Voluntary reduction in or termination of 10:00 a.m. 2 Business Days prior to such
Commitments reduction or termination
Payments by Lenders or Borrower to 11:00 a.m. On date payment is due
Administrative Agent
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"Responsible Officer" means the president, chief financial officer or
controller of a Borrower Party. Any document or certificate hereunder that is
signed by a Responsible Officer of a Borrower Party shall be conclusively
presumed to have been authorized by all necessary corporate, partnership and/or
other action on the part of such Borrower Party and such Responsible Officer
shall be conclusively presumed to have acted on behalf of such Borrower Party.
"Restricted Payment" means:
(a) the declaration or payment of any dividend or distribution by
Borrower or any of its Subsidiaries, either in cash or property, on any
shares of the capital stock of any class of Borrower or any of its
Subsidiaries (except dividends or other distributions payable solely in
shares of capital stock of Borrower or any of its Subsidiaries or payable
by a Subsidiary to Borrower or another wholly-owned Subsidiary of
Borrower);
(b) the purchase, redemption or retirement by Borrower or any of its
Subsidiaries of any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of its
capital stock, whether directly or indirectly;
(c) any other payment or distribution by Borrower or any of its
Subsidiaries in respect of its capital stock, either directly or
indirectly;
-21-
(d) any Investment other than an Investment otherwise permitted under
any Loan Document; and
(e) the payment or prepayments of any principal (including sinking
fund payments) or any other amount (other than scheduled interest payments)
with respect to any Indebtedness (including the payment of cash in
connection with such a conversion thereof), or the purchase or redemption
of (or offer to purchase or redeem) any Indebtedness, or the deposit of any
monies, securities or other property with any trustee or other Person to
provide assurance that the principal or any portion thereof of any
Indebtedness will be paid when due or any other provision for the
defeasance of any Indebtedness.
"Revolving Commitment" means, as to any Lender, the amount set forth
opposite such Lender's name on Schedule 2.01 hereto under the heading Revolving
Commitments, as such amount may be reduced from time to time in accordance with
this Agreement (collectively, the "combined Revolving Commitments").
"Revolving Loan" has the meaning specified in Section 2.01(a).
"Revolving Note" means a promissory note made by Borrower in favor of a
Lender evidencing Revolving Loans made by such Lender, substantially in the form
of Exhibit C-1 (collectively, the "Revolving Notes").
"Security Agreement" means the security agreement substantially in the form
of Exhibit F, either as originally executed or as it may from time to time be
supplemented, modified, amended, extended or supplanted.
"Shareholders' Equity" means, as of any date of determination for Borrower
and its Subsidiaries on a consolidated basis, shareholders' equity, including
redeemable preferred stock, as of that date determined in accordance with GAAP.
"Subsidiary" means a corporation, partnership, joint venture, limited
liability company or other business entity of which a majority of the shares of
securities or other interests having ordinary voting power for the election of
directors or other governing body (other than securities or interests having
such power only by reason of the happening of a contingency) are at the time
beneficially owned, or the management of which is otherwise controlled,
directly, or indirectly through one or more intermediaries, or both, by
Borrower.
"Supplemental Security Agreement" means a duly executed, delivered and
completed Supplemental Security Agreements (Trademarks) substantially in the
form of Exhibit A to the Security Agreement.
"Swap Contract" means (a) any and all rate swap transactions, basis swaps,
forward rate transactions, commodity swaps, commodity options, forward commodity
contracts, equity or equity index swaps or options, bond or bond price or bond
index swaps or options or forward bond or forward bond price or forward bond
index transactions, interest rate options, forward
-22-
foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions,
currency options, or any other similar transactions or any combination of any of
the foregoing (including any options to enter into any of the foregoing),
whether or not any such transaction is governed by or subject to any master
agreement, and (b) any and all transactions of any kind, and the related
confirmations, which are subject to the terms and conditions of, or governed by,
any form of master agreement published by the International Swaps and
Derivatives Association, Inc., or any other master agreement (any such master
agreement, together with any related schedules, as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, a "Master
Agreement"), including any such obligations or liabilities under any Master
Agreement.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include any Lender).
"Swing Line" means the revolving line of credit established by Swing Line
Lender in favor of Borrower pursuant to Section 2.04.
"Swing Line Lender" means Bank of America, or any successor swing line
Lender hereunder.
"Swing Line Loan" means a loan which bears interest at a rate per annum
equal to interest payable on a Base Rate Loan (plus the Applicable Amount, if
any) and made by Swing Line Lender to Borrower under the Swing Line.
"Swing Line Sublimit" means an amount equal to the lesser of (a) $5,000,000
and (b) the combined Revolving Commitments. The Swing Line Sublimit is part of
the Revolving Commitments and is not in addition to the Revolving Commitments or
the Term Commitments.
"Synthetic Lease Obligations" means all monetary obligations of a Person
under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property creating obligations
which do not appear on the balance sheet of such Person but which, upon the
insolvency or bankruptcy of such Person, would be characterized as the
Indebtedness of such Person (without regard to accounting treatment).
"Term Commitment" means, as to any Lender, the amount set forth opposite
such Lender's name on Schedule 2.01 hereto under the heading Term Commitments,
as such amount may be reduced from time to time in accordance with this
Agreement (collectively, the "combined Commitments").
"Term Loan" has the meaning specified in Section 2.01(b).
-23-
"Term Note" means a promissory note made by Borrower in favor of a Lender
evidencing Term Loans made by such Lender, substantially in the form of Exhibit
C-2 (collectively, the "Term Notes").
--- ----------
"to the best knowledge of" means, when modifying a representation, warranty
------------------------
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or other statement of any Person, that the fact or situation described therein
is known by such Person (or, in the case of a Person other than a natural
Person, known by a Responsible Officer of such Person) making the
representation, warranty or other statement, or with the exercise of reasonable
due diligence under the circumstances (in accordance with the standard of what a
reasonable Person in similar circumstances would have done) would have been
known by such Person (or, in the case of a Person other than a natural Person,
would have been known by a Responsible Officer of such Person).
"type" of Loan means (a) a Base Rate Loan, (b) an Offshore Rate Loan or (c)
a Swing Line Loan.
1.02 Use of Certain Terms.
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
or thereto, unless otherwise defined therein.
(b) As used herein, unless the context requires otherwise, the masculine,
feminine and neuter genders and the singular and plural include one another.
(c) The words "herein" and "hereunder" and words of similar import when
used in any Loan Document shall refer to the Loan Documents as a whole and not
to any particular provision thereof. The term "including" is by way of example
and not limitation. References herein to a Section, subsection or clause shall,
unless the context otherwise requires, refer to the appropriate Section,
subsection or clause in this Agreement.
(d) The term "or" is disjunctive; the term "and" is conjunctive. The term
-- ---
"shall" is mandatory; the term "may" is permissive. Masculine terms also apply
----- ---
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to females; feminine terms also apply to males.
1.03 Accounting Terms. All accounting terms not specifically or completely
defined in this Agreement shall be construed in conformity with, and all
financial data required to be submitted by this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to
time, applied in a manner consistent with that used in preparing the Audited
Financial Statements, except as otherwise specifically prescribed herein.
1.04 Rounding. Any financial ratios required to be maintained by Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed in this Agreement and rounding
the result up or down to the nearest number (with a
-24-
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.
1.05 Exhibits and Schedules. All exhibits and schedules to this Agreement,
either as originally existing or as the same may from time to time be
supplemented, modified or amended, are incorporated herein by this reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
1.06 References to Agreements and Laws. Unless otherwise expressly provided
herein, (a) references to agreements (including the Loan Documents) and other
contractual instruments shall include all amendments, restatements, extensions,
supplements and other modifications thereto (unless prohibited by any Loan
Document), and (b) references to any Law shall include all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting such Law.
SECTION 2.
THE COMMITMENTS AND EXTENSIONS OF CREDIT
2.01 Amount and Terms of Commitments.
(a) The Revolving Commitments. Subject to the terms and conditions set
forth in this Agreement, each Lender severally agrees until the Maturity Date to
(i) make, Convert and Continue revolving loans (each such loan, a "Revolving
Loan") as Borrower may from time to time request; and (ii) purchase risk
participations in outstanding Letter of Credit Usage and Swing Line Loans;
provided, however, that the Outstanding Revolving Obligations of each Lender
shall not exceed such Lender's Revolving Commitment, and the Outstanding
Revolving Obligations of all Lenders shall not exceed the combined Revolving
Commitments at any time. Subject to the foregoing and the other terms and
conditions hereof, Borrower may borrow, Convert, Continue, prepay and reborrow
Revolving Loans as set forth herein without premium or penalty.
(b) The Term Commitments. Subject to the terms and conditions set forth in
this Agreement, each Lender severally agrees to make a single term loan (each
such loan, a "Term Loan") on the Closing Date and thereafter Convert and
Continue such Term Loan as Term Loans hereunder as Borrower may from time to
time request; provided, however, that the aggregate principal amount of each
Lender's Term Loans shall not exceed such Lender's Term Commitment, and the
aggregate principal amount of all Lenders' Term Loans shall not exceed the
combined Term Commitments at any time. The Term Commitments are not revolving,
and except as provided in Section 2.05, Term Loans which are repaid or prepaid
may not be reborrowed.
(c) Loans made by each Lender shall be evidenced by one or more loan
accounts or records maintained by such Lender in the ordinary course of
business. Upon the request of any Lender made through Administrative Agent,
such Lender's Revolving Loans may be evidenced by one or
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more Revolving Notes, and such Lender's Term Loans may be evidenced by one or
more Term Notes, instead of or in addition to loan accounts. Each such Lender
may attach schedules to its Notes and endorse on its Revolving Note the date,
amount and maturity of its Revolving Loans and payments with respect thereto and
endorse on its Term Note the date, amount and maturity of its Term Loans and
payments with respect thereto. Such loan accounts, records or Notes shall be
conclusive absent manifest error of the amount of such Loans and payments
thereon. Any failure so to record or any error in doing so shall not, however,
limit or otherwise affect the obligation of Borrower to pay any amount owing
with respect to the Loans.
2.02 Borrowings, Conversions and Continuations of Loans.
(a) Borrower may irrevocably request a Borrowing, Conversion or
Continuation of Loans in a Minimum Amount therefor by delivering a Request for
Extension of Credit therefor by Requisite Notice to Administrative Agent not
later than the Requisite Time therefor. All Borrowings, Conversions and
Continuations shall constitute Base Rate Loans unless properly and timely
otherwise designated as set forth in the prior sentence.
(b) Following receipt of a Request for Extension of Credit, Administrative
Agent shall promptly notify each Lender of its Pro Rata Share thereof by
Requisite Notice. In the case of a Borrowing of Loans, each Lender shall make
the funds for its Loan available to Administrative Agent at Administrative
Agent's Office not later than the Requisite Time therefor on the Business Day
specified in such Request for Extension of Credit. Upon satisfaction of the
applicable conditions set forth in Section 4.02 (and, in the case of the initial
Extension of Credit hereunder, Section 4.01), all funds so received shall be
made available to Borrower in like funds received. Administrative Agent shall
promptly notify Borrower and Lenders of the interest rate applicable to any Loan
other than a Base Rate Loan upon determination of same.
(c) Except as otherwise provided herein, an Offshore Rate Loan may be
Continued or Converted only on the last day of the Interest Period for such
Offshore Rate Loan. During the existence of a Default or Event of Default, no
Loans may be requested as, Converted into or Continued as Offshore Rate Loans if
so determined by Requisite Lenders, and Requisite Lenders may demand that any or
all of the then outstanding Offshore Rate Loans be Converted immediately into
Base Rate Loans. Such Conversion shall be effective upon notice to Borrower and
shall continue so long as such Default or Event of Default continues to exist.
(d) If a Loan is to be made on the same date that another Loan is due and
payable, Borrower or Lenders, as the case may be, shall, unless Administrative
Agent otherwise requests, make available to Administrative Agent the net amount
of funds giving effect to both such Loans and the effect for purposes of this
Agreement shall be the same as if separate transfers of funds had been made with
respect to each such Loan.
(e) The failure of any Lender to make any Loan on any date shall not
relieve any other Lender of any obligation to make a Loan on such date, but no
Lender shall be responsible for the failure of any other Lender to so make its
Loan.
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2.03 Letters of Credit.
(a) The Letter of Credit Sublimit. Subject to the terms and conditions set
forth in this Agreement, until the Maturity Date, Issuing Lender shall take such
Letter of Credit Actions under the Revolving Commitments as Borrower may from
time to time request; provided, however, that (i) the aggregate outstanding
Letter of Credit Usage shall not exceed the Letter of Credit Sublimit at any
time and (ii) the Outstanding Obligations of each Lender shall not exceed such
Lender's Revolving Commitment and the Outstanding Obligations of all Lenders
shall not exceed the combined Revolving Commitments at any time. Each Letter of
Credit Action shall be in a form acceptable to Issuing Lender. Unless consented
to by the Issuing Lender and the Requisite Lenders, no Letter of Credit may
expire more than 12 months after the date of its issuance or last renewal;
provided, however, that no Letter of Credit shall expire after the Maturity
Date. If any Letter of Credit Usage remains outstanding after the Maturity
Date, Borrower shall deposit cash in an amount equal to such Letter of Credit
Usage in a Letter of Credit Cash Collateral Account not later than the Maturity
Date.
(b) Requesting Letter of Credit Actions. Borrower may irrevocably request
a Letter of Credit Action in a Minimum Amount therefor by delivering a Letter of
Credit Application therefor to Issuing Lender, with a copy to Administrative
Agent (who shall notify Lenders), by Requisite Notice not later than the
Requisite Time therefor. Unless Administrative Agent notifies Issuing Lender
that such Letter of Credit Action is not permitted hereunder or Issuing Lender
notifies Administrative Agent that it has determined that such Letter of Credit
Action is contrary to any Laws or policies of Issuing Lender, Issuing Lender
shall, upon satisfaction of the applicable conditions set forth in Section 4.02
with respect to any Letter of Credit Action constituting an Extension of Credit,
effect such Letter of Credit Action. This Agreement shall control in the event
of any conflict with any Letter of Credit Application. Upon the issuance of a
Letter of Credit, each Lender shall be deemed to have purchased a pro rata
participation in such Letter of Credit from Issuing Lender in an amount equal to
that Lender's Pro Rata Share thereof.
(c) Reimbursement of Payments Under Letters of Credit. Borrower shall
reimburse Issuing Lender through Administrative Agent for any payment that
Issuing Lender makes under a Letter of Credit on or before the date of such
payment; provided, however, that if the conditions precedent set forth in
Section 4.02 can be satisfied, Borrower may request a Borrowing of Loans to
reimburse Issuing Lender for such payment pursuant to Section 2.02, or, failing
to make such request, Borrower shall be deemed to have requested a Borrowing of
Base Rate Loans on such payment date pursuant to subsection (e) below.
(d) Funding by Lenders When Issuing Lender Not Reimbursed. Upon any
drawing under a Letter of Credit, Issuing Lender shall notify Administrative
Agent and Borrower. If Borrower fails to timely make the payment required
pursuant to subsection (c) above, Issuing Lender shall notify Administrative
Agent of such fact and the amount of such unreimbursed payment. Administrative
Agent shall promptly notify each Lender of its Pro Rata Share of such amount by
Requisite Notice. Each Lender shall make funds in an amount equal its Pro Rata
Share of such amount available to Administrative Agent at Administrative Agent's
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Office not later than the Requisite Time therefor on the Business Day specified
by Administrative Agent. Administrative Agent shall remit the funds so received
to Issuing Lender. The obligation of each Lender to so reimburse Issuing Lender
shall be absolute and unconditional and shall not be affected by the occurrence
of a Default or Event of Default or any other occurrence or event. Any such
reimbursement shall not relieve or otherwise impair the obligation of Borrower
to reimburse Issuing Lender for the amount of any payment made by Issuing Lender
under any Letter of Credit, together with interest as provided herein.
(e) Nature of Lenders' Funding. If the conditions precedent set forth in
Section 4.02 can be satisfied (except for the giving of a Request for Extension
of Credit) on the date Borrower is obligated to make, but fails to make, a
reimbursement of a payment under a Letter of Credit, the funding by Lenders
pursuant to subsection (d) above shall be deemed to be a Borrowing of Base Rate
Loans (without regard to the Minimum Amount therefor) deemed requested by
Borrower. If the conditions precedent set forth in Section 4.02 cannot be
satisfied on the date Borrower is obligated to make, but fails to make, a
reimbursement of a payment under a Letter of Credit, the funding by Lenders
pursuant to subsection (d) above shall be deemed to be a funding by each Lender
of its risk participation in such Letter of Credit, and each Lender making such
funding shall thereupon acquire a pro rata participation, to the extent of its
reimbursement, in the claim of Issuing Lender against Borrower in respect of
such payment and shall share, in accordance with that pro rata participation, in
any payment made by Borrower with respect to such claim. Such funds shall be
payable by Borrower upon demand of Administrative Agent and shall bear interest
at the Default Rate payable on demand.
(f) Special Provisions Relating to Evergreen Letters of Credit. Borrower
may request Letters of Credit that have automatic extension or renewal
provisions ("evergreen" Letters of Credit) so long as Issuing Lender has the
right not to permit any such extension or renewal at least annually within a
notice period to be agreed upon at the time each such Letter of Credit is
issued. If the conditions set forth in Section 4.02 could be satisfied within
such notice period, an evergreen Letter of Credit shall be permitted to
automatically extend or renew in accordance with its terms for the period(s)
specified therein (but not to a date later than the Maturity Date). If the
conditions set forth in Section 4.02 could not be satisfied within such notice
period, Administrative Agent shall notify Borrower, Issuing Lender and each
Lender of such fact. Unless Requisite Lenders (with the consent of Issuing
Lender given in its sole and absolute discretion) decide to allow such Letter of
Credit to nonetheless automatically extend or renew, Issuing Lender shall notify
the beneficiary of such non-extension or nonrenewal.
(g) Obligations Absolute. The obligation of Borrower to pay to Issuing
Lender the amount of any payment made by Issuing Lender under any Letter of
Credit shall be absolute, unconditional, and irrevocable. Without limiting the
foregoing or limiting Borrower's rights to pursue such rights and remedies as it
may have against Issuing Lender, Administrative Agent or any Lender or
beneficiaries of a Letter of Credit, Borrower's obligation shall not be affected
by any of the following circumstances:
(i) any lack of validity or enforceability of the Letter of Credit,
this Agreement, or any other agreement or instrument relating thereto;
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(ii) any amendment or waiver of or any consent to departure by
Borrower from the Letter of Credit, this Agreement, or any other agreement
or instrument relating hereto or thereto;
(iii) the existence of any claim, setoff, defense, or other rights
which Borrower may have at any time against Issuing Lender, Administrative
Agent or any Lender, any beneficiary of the Letter of Credit (or any
persons or entities for whom any such beneficiary may be acting) or any
other Person, whether in connection with the Letter of Credit, this
Agreement, or any other agreement or instrument relating thereto, or any
unrelated transactions;
(iv) any demand, statement, or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid, or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever so long as any such document appeared
to comply with the terms of the Letter of Credit;
(v) payment by Issuing Lender in good faith under the Letter of
Credit against presentation of a draft or any accompanying document which
does not strictly comply with the terms of the Letter of Credit; or any
payment made by Issuing Lender under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other representative
of or successor to any beneficiary or any transferee of any Letter of
Credit, including any arising in connection with any proceeding under any
Debtor Relief Laws;
(vi) the existence, character, quality, quantity, condition,
packing, value or delivery of any property purported to be represented by
documents presented in connection with any Letter of Credit or for any
difference between any such property and the character, quality, quantity,
condition, or value of such property as described in such documents;
(vii) the time, place, manner, order or contents of shipments or
deliveries of property as described in documents presented in connection
with any Letter of Credit or the existence, nature and extent of any
insurance relative thereto;
(viii) the solvency or financial responsibility of any party issuing
any documents in connection with a Letter of Credit;
(ix) any failure or delay in notice of shipments or arrival of any
property;
(x) any error in the transmission of any message relating to a
Letter of Credit not caused by Issuing Lender, or any delay or interruption
in any such message;
(xi) any error, neglect or default of any correspondent of Issuing
Lender in connection with a Letter of Credit;
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(xii) any consequence arising from acts of God, wars, insurrections,
civil unrest, disturbances, labor disputes, emergency conditions or other
causes beyond the control of Issuing Lender;
(xiii) so long as Issuing Lender in good faith determines that the
document appears to comply with the terms of the Letter of Credit, the
form, accuracy, genuineness or legal effect of any contract or document
referred to in any document submitted to Issuing Lender in connection with
a Letter of Credit; and
(xiv) where Issuing Lender has acted in good faith under any other
circumstances whatsoever.
In addition, Issuing Lender shall deliver the form of any proposed Letter
of Credit or amendment thereto to Borrower prior to issuing the same to any
beneficiary. Upon Borrower affirmatively notifying Issuing Lender that the same
is acceptable, Issuing Bank shall thereupon issue it to the beneficiary thereof.
After giving any such notice of acceptance, Borrower shall be conclusively
deemed to have waived any claim of noncompliance with Borrower's instructions or
other irregularity in the Letter of Credit against Issuing Lender and its
correspondents with respect to such Letter of Credit or amendment.
(h) Role of Issuing Lender. Each Lender and Borrower Party agree that, in
paying any drawing under a Letter of Credit, Issuing Lender shall not have any
responsibility to obtain any document (other than any sight draft, certificates
and documents expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document. No Administrative Agent-
Related Person nor any of the respective correspondents, participants or
assignees of Issuing Lender shall be liable to any Lender for any action taken
or omitted in connection herewith at the request or with the approval of Lenders
or the Requisite Lenders, as applicable; any action taken or omitted in the
absence of gross negligence or willful misconduct; or the due execution,
effectiveness, validity or enforceability of any document or instrument related
to any Letter of Credit. Borrower hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided, however, that this assumption is not intended to, and shall
not, preclude Borrower's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Administrative Agent-Related Person, nor any of the respective correspondents,
participants or assignees of Issuing Lender, shall be liable or responsible for
any of the matters described in subsection (g) above. In furtherance and not in
limitation of the foregoing, Issuing Lender may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary, and Issuing Lender
shall not be responsible for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter of Credit
or the rights or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason.
(i) Applicability of ISP98 and UCP. Unless otherwise expressly agreed by
the Issuing Lender and Borrower when a Letter of Credit is issued, performance
under Letters of
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Credit by the Issuing Lender, its correspondents, and beneficiaries will be
governed by the rules of the "International Standby Practices 1998" (ISP98) or
such later revision as may be published by the International Chamber of Commerce
(the "ICC").
(j) Letter of Credit Fee. On each Applicable Payment Date, Borrower shall
pay to Administrative Agent in arrears, for the account of each Lender in
accordance with its Pro Rata Share, a Letter of Credit fee in an amount equal to
the indicated Applicable Amount for Letters of Credit times the actual daily
maximum amount available to be drawn under each Letter of Credit since the later
of the Closing Date and the previous Applicable Payment Date. If there is any
change in the Applicable Amount during any quarter, the actual daily amount
shall be computed and multiplied by the Applicable Amount separately for each
period during such quarter that such Applicable Amount was in effect. The
minimum fee for any single Letter of Credit shall be $150 per annum.
(k) Fronting Fee and Documentary and Processing Charges Payable to Issuing
Lender. On each Applicable Payment Date, Borrower shall pay to Administrative
Agent for the sole account of Issuing Lender a fronting fee in an amount equal
to 1/4 of 1% per annum on the actual daily maximum amount available to be drawn
under each Letter of Credit since the later of the Closing Date and the previous
Applicable Payment Date. In addition, Borrower shall pay directly to Issuing
Lender, upon demand, for its sole account its customary documentary and
processing charges in accordance with its standard schedule, as from time to
time in effect, for any Letter of Credit Action or other occurrence relating to
a Letter of Credit for which such charges are customarily made. Such fees and
charges are nonrefundable.
2.04 Swing Line Loans.
(a) Subject to the terms and conditions set forth in this Agreement, Swing
Line Lender agrees to make Swing Line Loans until the Maturity Date in such
amounts as Borrower may from time to time request; provided, however, that (i)
the aggregate principal amount of all Swing Line Loans shall not exceed the
Swing Line Sublimit at any time, and (ii) the Outstanding Revolving Obligations
of each Lender shall not exceed such Lender's Revolving Commitment and the
Outstanding Revolving Obligations of all Lenders shall not exceed the combined
Revolving Commitments at any time. Swing Line Lender may terminate or suspend
the Swing Line at any time in its sole discretion upon Requisite Notice to
Borrower. Without the consent of all Requisite Lenders and Swing Line Lender,
no Swing Line Loan shall be made during the continuation of a Default or Event
of Default. Borrower may borrow, repay and reborrow under this Section;
provided, however, that Swing Line Lender may terminate or suspend its
commitment to make new Swing Line Loans at any time in its sole discretion upon
at least 24 hours Requisite Notice to Borrower.
(b) Unless notified to the contrary by Swing Line Lender, Borrower may
request Swing Line Loans in the Minimum Amount therefor upon Requisite Notice
made to Swing Line Lender not later than the Requisite Time therefor. Each such
request for a Swing Line Loan shall constitute a representation and warranty by
Borrower that the conditions set forth in Sections 4.02(a) and (b) are
satisfied. Promptly after receipt of such request, Swing Line Lender
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shall obtain telephonic verification from the Administrative Agent that there is
availability for such Swing Line Loan under the Revolving Commitments. Upon
receiving such verification, Swing Line Lender shall make such Swing Line Loan
available to Borrower. Upon the making of a Swing Line Loan, each Lender shall
be deemed to have purchased from Swing Line Lender a risk participation therein
in an amount equal to that Lender's Pro Rata Share times the amount of such
Swing Line Loan.
(c) Swing Line Loans shall bear interest at a fluctuating rate per annum
equal to the rate of interest payable on Base Rate Loans (plus the Applicable
Amount, if any) upon demand of Swing Line Lender and on the Maturity Date.
Swing Line Lender shall be responsible for invoicing Borrower (or notifying
Administrative Agent to so invoice Borrower) for such interest. The interest
payable on Swing Line Loans is solely for the account of Swing Line Lender.
(d) Borrower shall repay each Swing Line Loan on the earliest of (i) the
fifth Business Day after it is made and (ii) the Maturity Date. Borrower shall
repay the principal amount of each Swing Line Loan by payment directly to Swing
Line Lender or by debit at a demand deposit account at the Swing Line Lender not
later than the Requisite Time for payments hereunder. If the conditions
precedent set forth in Section 4.02 can be satisfied, Borrower may request a
Borrowing of Loans to repay Swing Line Lender pursuant to Section 2.02, or,
failing to make such request, Borrower shall be deemed to have requested a
Borrowing of Base Rate Loans on such payment date pursuant to subsection (e)
below.
(e) If Borrower fails to timely make any principal of or interest payment
on Swing Line Loans, Swing Line Lender shall notify the Administrative Agent of
such fact and the unpaid amount. The Administrative Agent shall promptly notify
each Lender of its Pro Rata Share of such amount by Requisite Notice. Each
Lender shall make funds in an amount equal its Pro Rata Share of such amount
available to the Administrative Agent at the Administrative Agent's Office not
later than the Requisite Time for payments hereunder on the following Business
Day. The obligation of each Lender to make such payment shall be absolute and
unconditional and shall not be affected by the occurrence of an Event of Default
or any other occurrence or event. Any such payment shall not relieve or
otherwise impair the obligation of Borrower to repay Swing Line Lender for any
amount of Swing Line Loans, together with interest as provided herein.
(f) If the conditions precedent set forth in Section 4.02 can be satisfied
(except for the giving of a Request for Extension of Credit) on any date
Borrower is obligated to make, but fails to make, a repayment of Swing Line
Loans, the funding by the Lenders pursuant to subsection (d) above shall be
deemed to be part of a Borrowing of Base Rate Loans (without regard to the
Minimum Amount therefor) requested by Borrower. If the conditions precedent set
forth in Section 4.02 cannot be satisfied on the date Borrower is obligated to
make, but fails to make, such payment, the funding by the Lenders pursuant to
subsection (d) above shall be deemed to be a funding by each Lender of its
participation in such Swing Line Loans, and such funds shall be payable by
Borrower upon demand and shall bear interest at the Default Rate, and each
Lender making such funding shall thereupon acquire a pro rata participation, to
the extent of such payment, in the claim of Swing Line Lender against Borrower
in respect of such payment and
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shall share, in accordance with that pro rata participation, in any payment made
by Borrower with respect to such claim.
2.05 Prepayments.
(a) Optional Prepayments. Upon Requisite Notice to Administrative Agent
not later than the Requisite Time therefor, Borrower may from time to time
voluntarily prepay Loans in part in the Minimum Amount therefor or in full
without premium or penalty. All voluntary prepayments of Term Loans shall be
applied ratably against all remaining Principal Payment Amounts and except as
aforesaid shall be subject to subsection (g) below.
(b) Mandatory Prepayments of Term Loans from Proceeds of Dispositions.
Upon the receipt of any Net Cash Proceeds of any Disposition (other than
Ordinary Course Dispositions) by Borrower or any Subsidiary in excess of
$1,000,000 in the aggregate in any calendar year, Borrower shall promptly prepay
outstanding Term Loans in an amount equal to 100% of such Net Cash Proceeds
(excluding the first $1,000,000). Such prepayments shall be subject to
subsections (f) and (g) below.
(c) Mandatory Prepayments of Term Loans from Proceeds of Insurance. Upon
the receipt of any insurance proceeds by Borrower or any Subsidiary in excess of
$2,000,000 in the aggregate in any calendar year, Borrower shall promptly prepay
outstanding Term Loans in an amount equal to 100% of such proceeds (excluding
the first $2,000,000). Such prepayments shall be subject to subsections (f) and
(g) below.
(d) Mandatory Prepayments of Term Loans from Proceeds of Additional
Equity. Until the Term Loans are paid in full, upon the receipt Borrower or any
Subsidiary of any Net Cash Proceeds of any additional equity issued by Borrower
after the Closing Date (other than Net Cash Proceeds up to $500,000 in any
fiscal year from the exercise of stock options by employees, directors and
consultants of Borrower and its Subsidiaries), Borrower shall prepay the Term
Loans in an amount equal to 100% of the Net Cash Proceeds thereof. Such
prepayments shall be subject to subsection (g) below.
(e) Outstandings in Excess of Commitments. If for any reason the
Outstanding Revolving Obligations exceed the combined Revolving Commitments or
the Outstanding Term Obligations exceed the combined Term Commitments, in each
case as in effect or as reduced or because of any limitation set forth in this
Agreement or otherwise, Borrower shall immediately prepay Loans and/or deposit
cash in a Letter of Credit Cash Collateral Account in an aggregate amount equal
to such excess. Such prepayments shall be subject to subsection (g) below.
(f) Reinvestment of Certain Term Loan Prepayments. So long as no Default
or Event of Default shall have occurred and be continuing, Borrower may, within
120 days after any prepayment pursuant to subsection (b) or (c) above, deliver
to Administrative Agent (who shall promptly deliver the same to each Lender) a
good faith plan for reinvesting such prepaid amounts in capital expenditures and
Investments otherwise permitted hereunder. Such plans shall specify the
amounts, timing and purposes of such expenditures in reasonable detail and
include a schedule for the reborrowings of Term Loans contemplated by such plan.
Upon
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satisfaction of the applicable conditions set forth in Section 4.02 at each
borrowing, Borrower may thereafter reborrow Term Loans in the amounts, at the
times and for the purposes specified in such plans; provided, however, that the
aggregate principal amount so reborrowed shall not exceed the aggregate
principal amount of all Term Loan prepayments under such subsections to such
date. Borrower may from time to time revise in good faith any plan theretofore
delivered under this subsection.
(g) Provisions Applicable to all Prepayments. Administrative Agent will
promptly notify each Lender of any prepayment hereunder and such Lender's Pro
Rata Share thereof. Any prepayment of Offshore Rate Loans shall be accompanied
by all accrued interest thereon, together with the costs set forth in Section
3.05. All mandatory prepayments of Term Loans shall be applied against
remaining Principal Payment Amounts in inverse order of Principal Payment Dates.
Upon any reborrowing of Term Loans permitted by subsection (f) above, the
Principal Payment Amounts previously deemed prepaid shall be reinstated in
scheduled order of Principal Payment Dates to the extent of such reborrowings.
2.06 Reduction or Termination of Revolving Commitments. Upon Requisite
Notice to Administrative Agent not later than the Requisite Time therefor,
Borrower may from time to time, without premium or penalty, permanently and
irrevocably reduce the Revolving Commitments in a Minimum Amount therefor to an
amount not less than the Outstanding Revolving Obligations at such time or
terminate the Revolving Commitments. Any such reduction or termination of the
Revolving Commitment shall be accompanied by payment of all accrued and unpaid
commitment fees with respect to the portion of the Commitments being reduced or
terminated. Administrative Agent shall promptly notify Lenders of any such
request for reduction or termination of the Revolving Commitments. Each Lender's
Commitment(s) shall be reduced by an amount equal to such Lender's Pro Rata
Share thereof times the amount of such reduction.
2.07 Principal and Interest.
(a) Revolving Loans. If not sooner paid, Borrower agrees to pay the
outstanding principal amount of each Revolving Loan on the Maturity Date.
(b) The Term Loans. Borrower agrees to repay the Term Loans in
installments on each Principal Payment Date in an aggregate principal amount
equal to the applicable Principal Payment Amount due on such Principal Payment
Date. The remaining aggregate principal amount of all Term Loans shall be
repaid in full on the Maturity Date.
(c) Interest. Subject to subsection (d) below, Borrower shall pay interest
on the unpaid principal amount of each Loan (before and after default, before
and after maturity, before and after judgment, and before and after the
commencement of any proceeding under any Debtor Relief Laws) from the date
borrowed until paid in full (whether by acceleration or otherwise) on each
Applicable Payment Date at a rate per annum equal to the interest rate
determined in accordance with the definition of such type of Loan, plus, to the
extent applicable in each case, the Applicable Amount.
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(d) Default Rate. If any amount payable by any Borrower Party under any
Loan Document is not paid when due (after giving effect to any applicable grace
periods), it shall thereafter bear interest (after as well as before entry of
judgment thereon to the extent permitted by law) at a fluctuating interest rate
per annum at all times equal to the Default Rate to the fullest extent permitted
by applicable Law. Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be payable upon demand.
2.08 Fees.
(a) Revolving Commitment Fee. Borrower shall pay to Administrative Agent
for the account of each Lender pro rata according to its Pro Rata Share, a
Commitment fee equal to the Applicable Amount times the actual daily amount by
which the combined Revolving Commitments exceed the Outstanding Revolving
Obligations (excluding Swing Line Loans). The commitment fee shall accrue at
all times from the Closing Date until the Maturity Date and shall be payable
quarterly in arrears on each Applicable Payment Date. The commitment fee shall
be calculated quarterly in arrears, and if there is any change in the Applicable
Amount during any quarter, the actual daily amount shall be computed and
multiplied by the Applicable Amount separately for each period during such
quarter that such Applicable Amount was in effect. The commitment fee shall
accrue at all times, including at any time during which one or more conditions
in Section 4 are not met.
(b) Agency Fees. Borrower shall pay to Administrative Agent an agency fee
in such amounts and at such times as set forth in a separate letter agreement
between Borrower and Administrative Agent. The agency fee is for the services
to be performed by Administrative Agent in acting as Administrative Agent and is
fully earned on the date paid. The agency fee paid to Administrative Agent is
solely for its own account and is nonrefundable.
2.09 Computation of Interest and Fees. Computation of interest on Base Rate
Loans when the Base Rate is determined by Bank of America's "prime rate" shall
be calculated on the basis of a year of 365 or 366 days, as the case may be, and
the actual number of days elapsed. Computation of all other types of interest
and all fees shall be calculated on the basis of a year of 360 days and the
actual number of days elapsed, which results in a higher yield to Lenders than a
method based on a year of 365 or 366 days. Interest shall accrue on each Loan
for the day on which the Loan is made, and shall not accrue on a Loan, or any
portion thereof, for the day on which the Loan or such portion is paid, provided
that any Loan that is repaid on the same day on which it is made shall bear
interest for one day.
2.10 Making Payments.
(a) Except as otherwise provided herein, all payments by Borrower or any
Lender shall be made to Administrative Agent at Administrative Agent's Office
not later than the Requisite Time for such type of payment. All payments
received after such Requisite Time shall be deemed received on the next
succeeding Business Day. All payments shall be made in immediately available
funds in lawful money of the United States of America. All payments by Borrower
shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff.
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(b) Upon satisfaction of any applicable terms and conditions set forth
herein, Administrative Agent shall promptly make any amounts received in
accordance with the prior subsection available in like funds received as
follows: (i) if payable to Borrower, by crediting the Designated Deposit
Account, and (ii) if payable to any Lender, by wire transfer to such Lender at
the address specified in Schedule 10.02.
(c) Subject to the definition of "Interest Period," if any payment to be
made by any Borrower Party shall come due on a day other than a Business Day,
payment shall instead be considered due on the next succeeding Business Day, and
such extension of time shall be reflected in computing interest and fees.
(d) Unless Borrower or any Lender has notified Administrative Agent prior
to the date any payment to be made by it is due, that it does not intend to
remit such payment, Administrative Agent may, in its sole and absolute
discretion, assume that Borrower or Lender, as the case may be, has timely
remitted such payment and may, in its sole and absolute discretion and in
reliance thereon, make available such payment to the Person entitled thereto.
If such payment was not in fact remitted to Administrative Agent in immediately
available funds, then:
(i) if Borrower failed to make such payment, each Lender shall
forthwith on demand repay to Administrative Agent the amount of such
assumed payment made available to such Lender, together with interest
thereon in respect of each day from and including the date such amount was
made available by Administrative Agent to such Lender to the date such
amount is repaid to Administrative Agent at the Federal Funds Rate; and
(ii) if any Lender failed to make such payment, Administrative Agent
shall be entitled to recover such corresponding amount on demand from such
Lender. If such Lender does not pay such corresponding amount forthwith
upon Administrative Agent's demand therefor, Administrative Agent promptly
shall notify Borrower, and Borrower shall pay such corresponding amount to
Administrative Agent in an amount not exceeding any such amount made
available to Borrower. Administrative Agent also shall be entitled to
recover interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by Administrative
Agent to Borrower to the date such corresponding amount is recovered by
Administrative Agent, (A) from such Lender at a rate per annum equal to the
daily Federal Funds Rate and (B) from Borrower, at a rate per annum equal
to the interest rate applicable to such Borrowing. Nothing herein shall be
deemed to relieve any Lender from its obligation to fulfill its Commitments
or to prejudice any rights which Administrative Agent or Borrower may have
against any Lender as a result of any default by such Lender hereunder.
(e) If Administrative Agent or any Lender is required at any time to
return to Borrower, or to a trustee, receiver, liquidator, custodian, or any
official under any proceeding under Debtor Relief Laws, any portion of a
payments made by Borrower, each Lender shall, on demand of Administrative Agent,
return its share of the amount to be returned, plus interest
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thereon from the date of such demand to the date such payment is made at a rate
per annum equal to the daily Federal Funds Rate.
2.11 Funding Sources. Nothing in this Agreement shall be deemed to obligate
any Lender to obtain the funds for any Loan in any particular place or manner or
to constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.
2.12 Master Subsidiary Guaranty and Collateral. The Obligations shall be
guarantied under the Master Subsidiary Guaranty and secured by the Collateral
pursuant to the Collateral Documents.
SECTION 3.
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Any and all payments by Borrower to or for the account of
Administrative Agent or any Lender under any Loan Document shall be made free
and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, assessments, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the case of
Administrative Agent and any Lender, taxes imposed on or measured by its net
income, and franchise taxes imposed on it (in lieu of net income taxes), by the
jurisdiction (or any political subdivision thereof) under the Laws of which
Administrative Agent or such Lender (or its lending office), as the case may be,
is organized (all such non-excluded taxes, duties, levies, imposts, deductions,
assessments, fees, withholdings or similar charges, and liabilities being
hereinafter referred to as "Taxes"). If Borrower shall be required by any Laws
to deduct any Taxes from or in respect of any sum payable under any Loan
Document to Administrative Agent or any Lender, (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section),
Administrative Agent and such Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) Borrower shall make
such deductions, (iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
Laws, and (iv) within 30 days after the date of such payment, Borrower shall
furnish to Administrative Agent (who shall forward the same to such Lender) the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or future
stamp, court or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under any Loan
Document or from the execution, delivery, performance, enforcement or
registration of, or otherwise with respect to, any Loan Document (hereinafter
referred to as "Other Taxes").
(c) If Borrower shall be required by the Laws of any jurisdiction outside
the United States to deduct any Taxes from or in respect of any sum payable
under any Loan Document to
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Administrative Agent or any Lender, Borrower shall also pay to such Lender or
Administrative Agent (for the account of such Lender), at the time interest is
paid, such additional amount that the respective Lender specifies as necessary
to preserve the after-tax yield (after factoring in United States (federal and
state) taxes imposed on or measured by net income) the Lender would have
received if such deductions (including deductions applicable to additional sums
payable under this Section) had not been made.
(d) Borrower agrees to indemnify Administrative Agent and each Lender for
the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable under this Section)
paid by Administrative Agent and such Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto
(provided that Administrative Agent or such Lender shall have notified Borrower
as soon as practicable after having made any such payment).
3.02 Illegality. If any Lender determines that any Laws have made it
unlawful, or that any Governmental Authority has asserted that it is unlawful,
for any Lender or its applicable Lending Office to make, maintain or fund
Offshore Rate Loans, or materially restricts the authority of such Lender to
purchase or sell, or to take deposits of, Dollars in the applicable offshore
Dollar market, or to determine or charge interest rates based upon the Offshore
Rate, then, on notice thereof by Lender to Borrower through Administrative
Agent, any obligation of that Lender to make Offshore Rate Loans shall be
suspended until Lender notifies Administrative Agent and Borrower that the
circumstances giving rise to such determination no longer exist. Upon receipt of
such notice, Borrower shall, upon demand from such Lender (with a copy to
Administrative Agent), prepay or Convert all Offshore Rate Loans of that Lender,
either on the last day of the Interest Period thereof, if Lender may lawfully
continue to maintain such Offshore Rate Loans to such day, or immediately, if
Lender may not lawfully continue to maintain such Offshore Rate Loans. Each
Lender agrees to designate a different Lending Office if such designation will
avoid the need for such notice and will not, in the good faith judgment of such
Lender, otherwise be disadvantageous to such Lender.
3.03 Inability to Determine Rates. If, in connection with any Request for
Extension of Credit involving any Offshore Rate Loan, Administrative Agent
determines that (a) Dollar deposits are not being offered to banks in the
applicable offshore Dollar market for the applicable amount and Interest Period
of the requested Offshore Rate Loan, (b) adequate and reasonable means do not
exist for determining the underlying interest rate for such Offshore Rate Loan,
or (c) such underlying interest rate does not adequately and fairly reflect the
cost to Lender of funding such Offshore Rate Loan, Administrative Agent will
promptly notify Borrower and all Lenders. Thereafter, the obligation of all
Lenders to make or maintain such Offshore Rate Loan shall be suspended until
Administrative Agent revokes such notice. Upon receipt of such notice, Borrower
may revoke any pending request for a Borrowing of Offshore Rate Loans or,
failing that, be deemed to have converted such request into a request for a
Borrowing of Base Rate Loans in the amount specified therein.
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3.04 Increased Cost and Reduced Return; Capital Adequacy.
(a) If any Lender determines that any Laws:
(i) subject such Lender to any Tax, duty, or other charge with
respect to any Offshore Rate Loans or its obligation to make Offshore Rate
Loans, or change the basis on which taxes are imposed on any amounts
payable to such Lender under this Agreement in respect of any Offshore Rate
Loans;
(ii) shall impose or modify any reserve, special deposit, or similar
requirement (other than the reserve requirement utilized in the
determination of the Offshore Rate) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities or commitments
of, such Lender (including its Commitments); or
(iii) shall impose on such Lender or on the offshore Dollar interbank
market any other condition affecting this Agreement or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such Lender of
making, Converting into, Continuing, or maintaining any Offshore Rate Loans or
to reduce any sum received or receivable by such Lender under this Agreement
with respect to any Offshore Rate Loans, then from time to time upon demand of
Lender (with a copy of such demand to Administrative Agent), Borrower shall pay
to such Lender such additional amounts as will compensate such Lender for such
increased cost or reduction.
(b) If after the date hereof, any Lender determines that any change in or
the interpretation of any Laws of general application relating to capital
adequacy requirements have the effect of reducing the rate of return on the
capital of such Lender or compliance by such Lender (or its Lending Office) or
any corporation controlling such Lender as a consequence of such Lender's
obligations hereunder (taking into consideration its policies with respect to
capital adequacy and such Lender's desired return on capital), then from time to
time upon demand of such Lender (with a copy to Administrative Agent), Borrower
shall pay to such Lender such additional amounts as will compensate such Lender
for such reduction. Borrower shall not have any obligation under this Section
3.04(b) to the extent any reduction in the rate of return on capital of a Lender
or any increased requirements regarding capital adequacy applicable to such
Lender are directly or indirectly attributable to any willful misconduct of such
Lender or any alleged unsafe, unsound or illegal practice engaged in by such
Lender.
3.05 Breakfunding Costs. Upon demand of any Lender (with a copy to
Administrative Agent) from time to time, Borrower shall promptly compensate such
Lender for and hold such Lender harmless from any loss, cost or expense incurred
by it as a result of:
(a) any Continuation, Conversion, payment or prepayment of any Loan other
than a Base Rate Loan on a day other than the last day of the Interest Period
for such Loan (whether voluntary, mandatory, automatic, by reason of
acceleration, or otherwise); or
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(b) any failure by Borrower (for a reason other than the failure of such
Lender to make a Loan) to prepay, borrow, Continue or Convert any Loan other
than a Base Rate Loan on the date or in the amount notified by Borrower;
including any loss of anticipated profits and any loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain such Loan or
from fees payable to terminate the deposits from which such funds were obtained.
Borrower shall also pay any customary administrative fees charged by such Lender
in connection with the foregoing.
3.06 Matters Applicable to all Requests for Compensation.
(a) Any Lender claiming compensation under this Section 3 shall furnish to
Borrower and Administrative Agent a statement setting forth (with an explanation
in reasonable detail) the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error. In
determining such amount, such Lender may use any reasonable averaging and
attribution methods. Each Lender shall give Borrower as much advance notice as
is reasonably practical of its intention to make a claim for payment under this
Section 3 (with a demand for such additional costs to be sent to Borrower as
soon as reasonably practical thereafter), and no Lender shall be entitled to
compensation for any such additional amounts relating to a period more than 90
days prior to the giving of such notice by such Lender (except to the extent
that such additional costs were retroactively applied against such Lender beyond
a period of 90 days). For purposes of this Section 3, a Lender shall be deemed
to have funded each Offshore Rate Loan at the Offshore Base Rate used in
determining the Offshore Rate for such Loan by a matching deposit or other
borrowing in the offshore Dollar interbank market, whether or not such Offshore
Rate Loan was in fact so funded.
(b) Upon any Lender making a claim for compensation under Sections 3.01 or
3.04, Borrower may, upon notice to such Lender and Administrative Agent, remove
such Lender by (i) non ratably terminating such Lender's Commitment and/or (ii)
causing such Lender to assign its Commitment to one or more other Lenders or
Eligible Assignees acceptable to Borrower, Administrative Agent and Issuing
Lender. Any removed or replaced Lender shall be entitled to (x) payment in full
of all principal, interest, fees and other amounts owing to such Lender through
the date of termination or assignment (including any amounts payable pursuant to
Section 3.05), (y) appropriate assurances and indemnities (which may include
letters of credit) as such Lender may reasonably require with respect to its
participation interest in any Letters of Credit or any Swing Line Loans then
outstanding and (z) a release of such Lender from its obligations under the Loan
Documents. Any Lender being replaced shall execute and deliver a Notice of
Assignment and Acceptance covering that Lender's Commitment. Administrative
Agent shall distribute an amended Schedule 2.01, which shall thereafter be
incorporated into this Agreement, to reflect adjustments to Lenders and their
Commitments. In order to make all Lender's interests in any outstanding
Extensions of Credit ratable in accordance with any revised Pro Rata Shares
after giving effect to the removal or replacement of a Lender, Borrower shall
pay or prepay, if necessary, on the effective date thereof, all outstanding
Extensions of Credit of all Lenders, together with any amounts due under Section
3.05. Borrower may concurrently request
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Extensions of Credit from Lenders in accordance with their revised Pro Rata
Shares without regard to the Minimum Amount otherwise applicable.
3.07 Survival. All of Borrower's obligations under this Section 3 shall
survive termination of the Commitments and payment in full of all Obligations.
SECTION 4.
CONDITIONS PRECEDENT TO EXTENSIONS OF CREDIT
4.01 Conditions of Initial Extension of Credit. The obligation of each
Lender to make the initial Extension of Credit is subject to satisfaction of the
following conditions precedent:
(a) Unless waived by all Lenders (or by Administrative Agent with respect
to immaterial matters or items specified in subsections (iv) or (v) below with
respect to which Borrower has given assurances satisfactory to Administrative
Agent that they will be delivered promptly following the Closing Date),
Administrative Agent's receipt of the following, each of which shall be
originals or facsimiles (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the signing
Borrower Party, each dated on, or in the case of third-party certificates,
recently before the Closing Date and each in form and substance satisfactory to
Administrative Agent and its legal counsel:
(i) executed counterparts of this Agreement, sufficient in number
for distribution to Administrative Agent, Lenders and Borrower;
(ii) A Revolving Note and a Term Note executed by Borrower in favor
of each Lender requesting Notes, in a principal amount equal to that
Lender's Revolving Commitment and Term Commitment, respectively;
(iii) such certificates of resolutions or other action, incumbency
certificates and/or other certificates of Responsible Officers of each
Borrower Party as Administrative Agent may require to establish the
identities of and verify the authority and capacity of each Responsible
Officer thereof authorized to act as a Responsible Officer thereof;
(iv) the articles or certificate of incorporation or organization of
Borrower and CPK Management Company as in effect on the Closing Date,
certified by the Secretary of State of California as of a recent date and
the bylaws of Borrower and CPK Management Company, Inc as in effect on the
Closing Date, certified by the Secretary or Assistant Secretary of Borrower
and CPK Management Company, Inc, respectively, as of the Closing Date; and
(v) a good standing certificate for Borrower and CPK Management
Company, Inc from the Secretary of State of California as of a recent date.
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(vi) a certificate signed by a Responsible Officer of Borrower
certifying (A) that the conditions specified in Sections 4.01(c) and
4.01(d) have been satisfied, and (B) that there has been no event or
circumstance since the date of the Audited Financial Statements which has a
Material Adverse Effect;
(vii) an opinion of counsel to Borrower in form and substance
satisfactory to Administrative Agent and Lenders;
(viii) the Master Subsidiary Guaranty executed by each Domestic
Subsidiary;
(ix) the Collateral Documents, executed by Borrower and each
applicable Domestic Subsidiary, in appropriate form for filing or recording
where necessary, together with:
(A) the Pledge Agreement, and all Pledged Collateral, together
with, as applicable, undated stock transfer powers executed in blank
for each certificate representing Pledged Collateral so delivered;
(B) the Security Agreement, and all Collateral and transfer
instruments required to be delivered thereunder;
(C) such financing statements on Form UCC-1 executed by Borrower
and each Subsidiary as Administrative Agent may request;
(D) such Security Agreement Supplements as Administrative Agent
may request; and
(E) evidence that all other actions necessary or, in the
reasonable opinion of Administrative Agent, desirable to perfect and
protect the Lien created by the Collateral Documents, and to enhance
Administrative Agent's ability to preserve and protect its interests
in and access to the Collateral, have been taken;
(x) written evidence that the Existing Credit Agreement has been or
concurrently is being terminated and all Liens securing such facility have
been or concurrently are being released;
(xi) evidence of insurance coverage required under Section 6.06; and
(xii) such other assurances, certificates, documents, consents or
opinions as Administrative Agent, Issuing Lender or the Requisite Lenders
reasonably may require.
(b) Any fees required to be paid on or before the Closing Date shall have
been paid.
(c) The representations and warranties made by Borrower herein, or which
are contained in any certificate, document or financial or other statement
furnished at any time under or in connection herewith or therewith, shall be
correct in all material respects on and as of the Closing Date.
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(d) Each Borrower Party shall be in compliance with all the terms and
provisions of the Loan Documents to which it is a party, and no Default or Event
of Default shall have occurred and be continuing.
(e) Other than litigation described on Schedule 5.05 hereto, the absence of
any action, suit, investigation or proceeding pending or threatened in any court
or before any arbitrator or governmental authority that purports (i) to
materially and adversely affect Borrower or its Subsidiaries, or (ii) to affect
any transaction contemplated hereby or the ability of Borrower and its
Subsidiaries under the Loan Documents to perform their respective obligations
thereunder.
(f) Receipt and review, with results satisfactory to Administrative Agent
and its counsel, of information regarding litigation, tax, accounting, labor,
insurance, pension liabilities (actual or contingent), real estate leases,
material contracts, debt agreements, property ownership, environmental matters,
contingent liabilities and management of Borrower and its Subsidiaries.
(g) Receipt and review, with results satisfactory to Administrative Agent
and Lenders, of information confirming that (i) Borrower and its Subsidiaries
are taking all necessary and appropriate steps to ascertain the extent of, and
to quantify and successfully address, business and financial risks facing
Borrower and its subsidiaries as a result of what is commonly referred to as the
"Year 2000 problem" (i.e., the inability of certain computer applications to
recognize correctly and perform date-sensitive functions involving certain dates
prior to and after December 31, 1999), including risks resulting from the
failure of key vendors and customers of Borrower and its Subsidiaries to
successfully address the Year 2000 problem, and (b) Borrower's and its
Subsidiaries' material computer applications and those of its key vendors and
customers will, on a timely basis, adequately address the Year 2000 problem in
all material respects.
(h) The absence of any material disruption of or a material adverse change
in conditions in the financial, banking or capital markets which Administrative
Agent and Arranger in their sole discretion, deem material in connection with
the syndication of the Loan Documentation.
(i) Unless waived by Administrative Agent, Borrower shall have paid all
Attorney Costs of Administrative Agent to the extent invoiced prior to or on the
Closing Date, plus such additional amounts of Attorney Costs as shall constitute
its reasonable estimate of Attorney Costs incurred or to be incurred by it
through the closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between Borrower and
Administrative Agent).
4.02 Conditions to all Extensions of Credit. In addition to any applicable
conditions precedent set forth elsewhere in this Section 4 or in Section 2, the
obligation of each Lender to honor any Request for Extension of Credit is
subject to the following conditions precedent:
(a) the representations and warranties of Borrower contained in Section 5,
or which are contained in any certificate, document or financial or other
statement furnished at any time under or in connection herewith or therewith,
shall be correct on and as of the date of such
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Extension of Credit, except to the extent that such representations and
warranties specifically refer to an earlier date.
(b) no Default or Event of Default exists, or would result from such
proposed Extension of Credit.
(c) Administrative Agent shall have timely received a Request for Extension
of Credit by Requisite Notice by the Requisite Time therefor.
(d) Administrative Agent shall have received, in form and substance
satisfactory to it, such other assurances, certificates, documents or consents
related to the foregoing as Administrative Agent or Requisite Lenders reasonably
may require.
Each Request for Extension of Credit by Borrower shall be deemed to be a
representation and warranty that the conditions specified in Sections 4.02(a)
and (b) have been satisfied and on and as of the date of such Extension of
Credit.
SECTION 5.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and Lenders that:
5.01 Existence and Qualification; Power; Compliance with Laws. Each
Borrower Party is a corporation or partnership duly organized or formed, validly
existing and in good standing under the Laws of the state of its incorporation
or organization, has the power and authority and the legal right to own and
operate its properties, to lease the properties it operates and to conduct its
business, is duly qualified and in good standing under the Laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, and is in compliance with
all Laws except to the extent that noncompliance does not have a Material
Adverse Effect.
5.02 Power; Authorization; Enforceable Obligations. Each Borrower Party
has the power and authority and the legal right to make, deliver and perform
each Loan Document to which it is a party and Borrower has power and authority
to borrow hereunder and has taken all necessary action to authorize the
borrowings on the terms and conditions of this Agreement and to authorize the
execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party. No consent or authorization of, filing with,
or other act by or in respect of any Governmental Authority, is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement or any of the other
Loan Documents except for filings or recordings required to be obtained to
perfect the Liens created by the Collateral Documents. The Loan Documents have
been duly executed and delivered by each Borrower Party, and constitute a legal,
valid and binding obligation of each Borrower Party, enforceable against each
Borrower Party in accordance with their respective terms, except as
enforceability may be limited by applicable
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Debtor Relief Laws affecting the enforcement of creditors' rights generally or
by equitable principles relating to enforceability.
5.03 No Legal Bar. The execution, delivery, and performance by each
Borrower Party of the Loan Documents to which it is a party and compliance with
the provisions thereof have been duly authorized by all requisite action on the
part of such Borrower Party and do not and will not (a) violate or conflict
with, or result in a breach of, or require any consent, except where such
violation, conflict, breach or failure to obtain consent would not have a
Material Adverse Effect, under (i) any Organization Documents of such Borrower
Party or any of its Subsidiaries, (ii) any applicable Laws, rules, or
regulations or any order, writ, injunction, or decree of any Governmental
Authority or arbitrator, or (iii) any Contractual Obligation of such Borrower
Party or any of its Subsidiaries or by which any of them or any of their
property is bound or subject, (b) constitute a default under any such agreement
or instrument, except where such default would not have a Material Adverse
Effect, or (c) result in, or require, the creation or imposition of any Lien on
any material portion of the properties of such Borrower Party or any of its
Subsidiaries except for the Liens in favor of Administrative Agent required
pursuant to the terms hereof and of the Collateral Documents.
5.04 Financial Statements; No Material Adverse Effect.
(a) The Audited Financial Statements and the Interim Financial Statements
(i) were prepared in accordance with GAAP (excluding, in the case of the Interim
Financial Statements, footnotes) consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein; (ii) fairly
present the financial condition of Borrower and its Subsidiaries as of the date
thereof and their results of operations for the period covered thereby in
accordance with GAAP consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein (and, in the case of the Interim
Financial Statements, year-end audit adjustments); and (iii) show all material
indebtedness and other liabilities, direct or contingent, of Borrower and its
Subsidiaries as of the date thereof, including liabilities for taxes, material
commitments and Indebtedness in accordance with GAAP consistently applied
throughout the period covered thereby.
(b) Since the date of the Audited Financial Statements, there has been no
event or circumstance which has a Material Adverse Effect.
5.05 Litigation. Except as described on Schedule 5.05 hereto, no
litigation, investigation or proceeding of or before an arbitrator or
Governmental Authority is pending or, to the best knowledge of Borrower,
threatened by or against any Borrower Party or any of its Subsidiaries or
against any of their properties or revenues which, if determined adversely,
could have a Material Adverse Effect.
5.06 No Default. Neither any Borrower Party nor any of its Subsidiaries
are in default under or with respect to any Contractual Obligation which could
have a Material Adverse Effect, and no Default or Event of Default has occurred
and is continuing or will result from the consummation of this Agreement or any
of the other Loan Documents, or the making of the Extensions of Credit
hereunder.
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5.07 Ownership of Property; Liens. Each Borrower Party and its
Subsidiaries have valid fee or leasehold interests in all real property which
they use in their respective businesses, and each Borrower Party and their
respective Subsidiaries have good and marketable title to all their other
material property, and none of such property is subject to any Lien, except as
permitted in Section 7.02.
5.08 Taxes. Each Borrower Party and its Subsidiaries have filed all tax
returns which are required to be filed, and have paid, or made provision for the
payment of, all taxes with respect to the periods, property or transactions
covered by said returns, or pursuant to any assessment received by such Borrower
Party or its respective Subsidiaries, except (a) such taxes, if any, as are
being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established and maintained, and (b) immaterial
taxes; provided, however, that in each case no material item or portion of
property of any Borrower Party or any of its Subsidiaries is in jeopardy of
being seized, levied upon or forfeited.
5.09 Margin Regulations; Investment Company Act; Public Utility Holding
Company Act.
(a) No Borrower Party is engaged or will engage, principally or as one of
its important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" "margin stock" within the respective meanings of each
of the quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. No part of the
proceeds of any Extensions of Credit hereunder will be used for "purchasing" or
"carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of Regulations U or X of such
Board of Governors.
(b) No Borrower Party or any of its Subsidiaries (i) is a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, or (ii) is or is
required to be registered as an "investment company" under the Investment
Company Act of 1940.
5.10 No ERISA Plans. No Borrower Party or any ERISA Affiliate of any
Borrower Party sponsors or maintains or contributes (or has an obligation to
contribute) to any employee pension benefit plan or employee benefit plan (both
as defined in ERISA) insured by the Pension Benefit Guaranty Corporation or
subject to Title IV of ERISA, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five plan years.
5.11 Intangible Assets. Each Borrower Party and its Subsidiaries own, or
possess the right to use, all trademarks, trade names, servicemarks, franchises,
licenses and other intangible assets that are used in the conduct of their
respective businesses as now operated, and none of such items, to the best
knowledge of Borrower, conflicts with the valid trademark, trade name or
intangible asset of any other Person to the extent that such conflict has a
Material Adverse Effect.
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Schedule 5.11 sets forth all servicemarks, trademarks, and trade names currently
used by Borrower or any of its Subsidiaries.
5.12 Compliance With Laws. Each Borrower Party and its Subsidiaries are in
compliance with all Laws that are applicable to it except for such noncompliance
which would not have a Material Adverse Effect.
5.13 Environmental Compliance. To the best knowledge of Borrower, there
are no violations of Environmental Laws or claims alleging potential liability
or responsibility for violation of any Environmental Law which, individually or
in the aggregate, would have a Material Adverse Effect.
5.14 Insurance. The properties of each Borrower Party and its Subsidiaries
are insured with financially sound and reputable insurance companies not
Affiliates of Borrower, in such amounts, with such deductibles and covering such
risks as are customarily carried by companies engaged in similar businesses and
owning similar properties in localities where Borrower or such Subsidiary
operates.
5.15 Subsidiaries. Schedule 5.15 correctly sets forth for each direct or
indirect Subsidiary of Borrower, as of the Closing Date, its name, jurisdiction
of formation, type of legal entity and the amount, type and ownership of all
issued and outstanding equity interests and specifies which Subsidiaries are, as
of the Closing Date, Domestic Subsidiaries and Foreign Subsidiaries. Except as
described in Schedule 5.15, Borrower does not, as of the Closing Date, own
directly or indirectly any capital stock, partnership or other equity interest
or debt security which is convertible, or exchangeable, for capital stock or
partnership or other equity interests in any Person which, if fully or partially
exercised by any party, would be a Subsidiary. Unless otherwise indicated on in
Schedule 5.15, all outstanding equity interests in each Subsidiary as of the
Closing Date are owned of record and beneficially by Person specified thereon,
there are no outstanding options, warrants or other rights to purchase capital
stock of any such Subsidiary, and all such equity interests so owned are duly
authorized, validly issued, fully paid and non-assessable, and were issued in
compliance with all applicable state and federal securities and other Laws, and
are free and clear of all Liens except for Ordinary Course Liens.
5.16 Year 2000. Borrower has conducted a comprehensive review and
assessment of Borrower's systems and equipment applications and made inquiry of
the Borrower's key suppliers, vendors and customers with respect to the "year
2000 problem" (that is, the inability of computers, as well as embedded
microchips in non-computing devices, to properly perform date-sensitive
functions with respect to certain dates prior to and after December 31, 1999).
Based on that review and inquiry, the Borrower does not believe the year 2000
problem, including costs of remediation, will have a Material Adverse Effect.
Borrower has developed adequate contingency plans to ensure uninterrupted and
unimpaired business operation in the event of a failure of its own or a third
party's systems or equipment due to the year 2000 problem, including those of
vendors, customers, and suppliers, as well as a general failure of or
interruption in its communications and delivery infrastructure.
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5.17 Collateral. Upon the execution and delivery of the Security
Agreement, the Security Agreement will create a valid first priority security
interest in the Collateral described therein securing the Obligations (subject
only to Ordinary Course Liens and to such qualifications and exceptions as are
contained in the Uniform Commercial Code with respect to the priority of
security interests perfected by means other than the filing of a financing
statement or with respect to the creation of security interests in Property to
which Division 9 of the Uniform Commercial Code does not apply) and all action
necessary to perfect the security interests so created, other than filing of the
UCC-1 financing statements delivered to Lender with the appropriate Governmental
Authority have been taken and completed. Upon the execution and delivery of any
Supplemental Security Agreements, such agreement will create a valid first
priority collateral assignment of the Collateral described therein securing the
Obligations and all action necessary to perfect the collateral assignment so
created, other than the filing thereof with the United States Patent and
Trademark Office, will have been taken and completed. Upon the execution and
delivery of the Pledge Agreement, the Pledge Agreement will create a valid first
priority security interest in the Collateral described therein and upon delivery
of the Pledged Collateral to Administrative Agent, all action necessary to
perfect the security interest so created has been taken and completed. The
Pledge Agreement creates a valid first priority security interest in 100% of all
equity in all Domestic Subsidiaries and not less than 65% of all equity in all
Foreign Subsidiaries. All representations and warranties of the Debtors in the
Collateral Documents are true and correct.
5.18 Projections and Operating Budgets As of the Closing Date, to the best
knowledge of Borrower, the assumptions set forth in the Initial Projections are
reasonable and consistent with each other and with all facts known to Borrower,
and the Initial Projections are reasonably based on such assumptions. As of each
date when delivered, to the best knowledge of Borrower, the assumptions used in
the operating budgets delivered pursuant to Section 6.02(d) are reasonable and
consistent with each other and with all relevant facts known to Borrower, and
such operating budget is reasonably based on such assumptions. Nothing in this
Section shall be construed as a representation or covenant that the Initial
Projections or any such operating budget delivered from time to time hereunder
in fact will be achieved.
5.19 Disclosure. No statement, information, report, representation, or
warranty made by any Borrower Party in any Loan Document or furnished to
Administrative Agent or any Lender from time to time in connection with any Loan
Document contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein not misleading
on and as of the date so made or furnished.
SECTION 6.
AFFIRMATIVE COVENANTS
So long as any Obligation remains unpaid or unperformed, or any portion of
the Commitments remains outstanding, Borrower shall, and shall (except in the
case of Borrower's reporting covenants), cause each of its Subsidiaries, to:
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6.01 Financial Statements. Deliver to Administrative Agent in form and
detail satisfactory to Administrative Agent and the Requisite Lenders, with
sufficient copies for each Lender:
(a) as soon as available, but in any event within 120 days after the end
of each fiscal year of Borrower, a consolidated balance sheet of Borrower and
its Subsidiaries as at the end of such fiscal year, and the related consolidated
statements of income and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail, audited and accompanied by a report and opinion of Ernst &
Young or another of the "big five" nationally recognized independent certified
public accountants, which report and opinion shall be prepared in accordance
with GAAP and shall not be subject to any qualifications or exceptions as to the
scope of the audit nor to any qualifications and exceptions (including possible
errors generated by financial reporting and related systems due to the Year 2000
Problem) not reasonably acceptable to the Requisite Lenders; and
(b) as soon as available, but in any event within 45 days after the end
of each of the first three fiscal quarters of each fiscal year of Borrower, a
consolidated balance sheet of Borrower and its Subsidiaries as at the end of
such fiscal quarter, and the related consolidated statements of income and cash
flows for such fiscal quarter and for the portion of Borrower's fiscal year then
ended, setting forth in each case in comparative form the figures for the
corresponding fiscal quarter of the previous fiscal year and the corresponding
portion of the previous fiscal year, all in reasonable detail and certified by a
Responsible Officer of Borrower as fairly presenting the financial condition,
results of operations and cash flows of Borrower and its Subsidiaries in
accordance with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes.
6.02 Certificates, Notices and Other Information. Deliver to
Administrative Agent in form and detail satisfactory to Administrative Agent and
the Requisite Lenders, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial statements referred
to in Section 6.01(a), a certificate of its independent certified public
accountants certifying such financial statement and stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default hereunder or, if any such Default or Event of Default shall exist,
stating the nature and status of such event;
(b) concurrently with the delivery of the financial statements referred
to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed
by a Responsible Officer of Borrower;
(c) concurrently with the delivery of each Compliance Certificate
delivered in connection with the financial statement referred to in Sections
6.01(a) and (b), a schedule showing, by location, (i) all lease commitments for
new, but unopened restaurants, (ii) the date the leasehold for each such
restaurant is anticipated to be available for occupancy by Borrower to commence
construction of tenant improvements , and (iii) Borrower's estimate of all
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construction costs for tenant improvements and all furniture, fixtures and
equipment costs for each such restaurant less tenant improvement allowances, if
any;
(d) concurrently with the delivery of each Compliance Certificate delivered
in connection with the financial statement referred to in Section 6.01(b), a
certification signed by the chief financial officer of Borrower certifying that
the aggregate of all capital expenditures made in such fiscal year through the
date of such certificate, together with all capital expenditures which Borrower
and its Subsidiaries are committed or planning to make during the remainder of
such fiscal year, have not resulted, and will not result. in a violation under
Section 7.11 of the Agreement as of the end of such calendar year;
(e) concurrently with the delivery of the financial statements referred to
in Sections 6.01(b), (i) a report signed by a Responsible Officer of Borrower in
a format satisfactory to Requisite Lenders detailing the revenue and the portion
of Consolidated EBITDA attributable to each store and (ii) a quarterly store
comparison report in the form previously delivered to Administrative Agent;
(f) as soon as practicable, and in any event within 90 days after the end
of each fiscal year of Borrower, an operating budget by fiscal quarter for the
next fiscal year, including projected consolidated balance sheets, statements of
operations and statements of cash flow, all in reasonable detail and in a format
acceptable to Requisite Lenders, signed by a Responsible Officer of Borrower;
(g) promptly after request by Administrative Agent or any Lender, copies of
any detailed audit reports, management letters or recommendations submitted to
the board of directors (or the audit committee of the board of directors) of
Borrower by independent accountants in connection with the accounts or books of
Borrower or any of its Subsidiaries, or any audit of any of them;
(h) promptly after the same are available, copies of each annual report,
proxy or financial statement or other report or communication, if any, sent to
the stockholders of Borrower, and copies of all annual, regular, periodic and
special reports and registration statements, if any, which Borrower may file or
be required to file with the Securities and Exchange Commission under Sections
13 or 15(d) of the Securities Exchange Act of 1934, as amended, and not
otherwise required to be delivered to Administrative Agent pursuant hereto;
(i) promptly after the occurrence thereof, notice of any Default or Event
of Default;
(j) notice of any material change in accounting policies or financial
reporting practices by Borrower or any of its Subsidiaries;
(k) promptly after the commencement thereof, notice of any litigation,
investigation, proceeding or judgment affecting any Borrower Party where the
amount involved exceeds $2,000,000, or in which injunctive relief or similar
relief is sought, which relief, if granted, would have a Material Adverse
Effect;
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(l) promptly of any discovery or determination that any computer
application (including those of its suppliers and vendors) that is material to
any Borrower Parties' or any of their Subsidiaries' business and operations will
not be Year 2000 Compliant on a timely basis, except to the extent that such
failure could not reasonably be expected to have a Material Adverse Effect; and
(m) promptly, such other data and information as from time to time may be
reasonably requested by Administrative Agent, or, through Administrative Agent
or any Lender.
Each notice pursuant to this Section shall be accompanied by a statement of
a Responsible Officer of Borrower setting forth details of the occurrence
referred to therein and stating what action Borrower has taken and proposes to
take with respect thereto.
6.03 Payment of Taxes. Pay and discharge when due all taxes, assessments,
and governmental charges, Ordinary Course Liens or levies imposed on any
Borrower Party or its Subsidiaries or on its income or profits or any of its
property, except for any such tax, assessment, charge, or levy which is an
Ordinary Course Lien under subsection (b) of the definition of such
term.
6.04 Preservation of Existence. Preserve and maintain its existence,
licenses, permits, rights, franchises and privileges necessary or desirable in
the normal conduct of its business, except where failure to do so does not have
a Material Adverse Effect.
6.05 Maintenance of Properties. Except as permitted by Section 7.04,
maintain, preserve and protect all of its material properties and equipment
necessary in the operation of its business in good order and condition, subject
to wear and tear in the ordinary course of business, and not permit any waste of
its properties.
6.06 Maintenance of Insurance. Maintain liability and casualty insurance
with responsible insurance companies satisfactory to Lenders in such amounts and
against such risks not less than those specified in a certificate furnished to
Administrative Agent on or prior to the Closing Date and maintain all risk
property damage insurance policies with responsible insurance companies
satisfactory to Lenders covering the tangible property comprising the
Collateral. Each insurance policy must be for the full replacement cost of the
Collateral and include a replacement cost endorsement. All liability insurance
shall name Administrative Agent and Lenders as additional insureds and all
casualty insurance must include a lender's loss payable endorsement consistent
with Section 2.05(c) in favor of Administrative Agent on behalf of Lenders, in
each case in a form acceptable to Administrative Agent. Upon the request of any
Lender, Borrower shall deliver to such Lender a copy of each insurance policy,
or, if permitted by such Lender, a certificate of insurance listing all
insurance in force.
6.07 Compliance With Laws.
(a) Comply with the requirements of all applicable Laws and orders of any
Governmental Authority, noncompliance with which has a Material Adverse Effect.
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(b) Conduct its operations and keep and maintain its property in material
compliance with all Environmental Laws.
6.08 Inspection Rights. Not more than once each fiscal quarter (or, during
the existence of a Default or Event of Default, as often as requested) and upon
reasonable notice and during regular business hours, permit Administrative Agent
or any Lender, or any employee, agent or representative thereof, to examine,
audit and make copies and abstracts from the Borrower Parties' records and books
of account and to visit and inspect their properties and to discuss their
affairs, finances and accounts with any of their officers and key employees,
and, upon request, furnish promptly to Administrative Agent or any Lender true
copies of all financial information made available to their senior management.
6.09 Keeping of Records and Books of Account. Keep adequate records and
books of account reflecting all financial transactions in conformity with GAAP,
consistently applied, and in material conformity with all applicable
requirements of any Governmental Authority having regulatory jurisdiction over
Borrower or any of its Subsidiaries.
6.10 Compliance With Agreements. Promptly and fully comply with all
Contractual Obligations to which any one or more of them is a party, except for
any such Contractual Obligations (a) where nonperformance would not cause a
Default or Event of Default, (b) then being contested by any of them in good
faith by appropriate proceedings, or (c) where the failure to comply therewith
does not have a Material Adverse Effect.
6.11 Use of Proceeds. Use the proceeds of Extensions of Credit to finance
tenant improvements, to finance the acquisition of furniture, fixtures and
equipment, to refinance existing bank debt, to make Investments and for working
capital, in each case not otherwise in contravention of this Agreement.
6.12 Additional Guarantors, Debtors and Collateral. Upon any Person
becoming a direct or indirect Subsidiary of Borrower (excluding existing
inactive Subsidiaries), Borrower shall, within 60 days of such Person becoming a
Subsidiary, do the following, each in form and substance satisfactory to
Administrative Agent:
(a) if such Subsidiary is a Domestic Subsidiary, cause such Subsidiary to
become a Guarantor under the Master Subsidiary Guaranty by executing and
delivering a Joinder Agreement with respect thereto;
(b) pledge or cause to be pledged, all equity interests in any Domestic
Subsidiary and not less than 65% of the equity interests in any Foreign
Subsidiary by executing and delivering, or causing the execution and delivery
of, as applicable, a pledge agreement supplement or Joinder Agreement, and the
applicable items required by Section 4.01(a)(ix);
(c) if such Subsidiary is a Domestic Subsidiary, cause such Subsidiary to
become a Debtor under the Security Agreement by causing the execution and
delivery of, as applicable, a Joinder Agreement with respect thereto and the
applicable items required by Section 4.01(a)(ix);
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(d) with respect to any Subsidiary executing and delivering any Loan
Document, cause to be delivered, to the extent not previously delivered to
Administrative Agent, documents of the type specified in Section 4.01(a)(iii)
and, with respect to a Subsidiary representing more than 10% of Shareholder's
Equity, in Section 4.01(a)(iv); and
(e) deliver an officer's certificate signed by a Responsible Officer of
Borrower certifying to the effect that, among other things, (i) with respect to
any additional Collateral, Administrative Agent's security interest therein is
duly perfected, (ii) any Subsidiary's obligations under the Loan Documents to
which it is a party are legal, valid, binding and enforceable against such
Subsidiary, (iii) the execution, delivery and performance of the Loan Documents
by each Subsidiary will not violate any law, decree or judgment to which such
Subsidiary is a party or by which its assets are bound and (iv) except as may
otherwise be required to perfect any security interest, no government approvals,
consents, registrations or filings, are required by any Subsidiary; and
(f) such other assurances, certificates, documents, consents or opinions
as Administrative Agent, Issuing Lender or the Requisite Lenders reasonably may
require.
Notwithstanding Section 4.01(a)(ix) and this Section 6.12, California Pizza
Kitchen of Annapolis, Inc., CPK I, Limited Partnership, an Illinois limited
partnership and CPK Water Tower Limited Partnership, an Illinois limited
partnership, shall not be required to execute or deliver any Loan Documents or
otherwise comply with this Section 6.12; provided, however, that within 30 days
after the Closing Date, Borrower shall cause California Pizza Kitchen of
Annapolis, Inc. to provide a good standing certificate from the Secretary of
State of Maryland, and to comply with subsections (a), (c), (d) and (e) above.
6.13 Further Assurances. Promptly upon request by Administrative Agent,
Borrower shall, and shall cause each other Borrower Party to, do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreements, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and other
instruments that Administrative Agent may reasonably require from time to time
in order (a) to carry out more effectively the purposes of the Loan Documents,
(b) to subject to the Liens created by any of the Collateral Documents any of
the properties, rights or interests covered by any of the Collateral Documents,
(c) to perfect and maintain the validity, effectiveness and priority of any of
the Collateral Documents and the Liens intended to be created thereby, and (d)
to better assure, convey, grant, assign, transfer, preserve, protect and confirm
to Administrative Agent the rights granted or now or hereafter intended to be
granted to Administrative Agent under any Loan Document or under any other
document executed in connection therewith.
SECTION 7.
NEGATIVE COVENANTS
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So long as any Obligations remain unpaid or unperformed, or any portion of
the Commitments remains outstanding, Borrower shall not, nor shall it permit any
of its Subsidiaries to, directly or indirectly:
7.01 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness outstanding on the date hereof and listed on Schedule
7.01 and any refinancings, refundings, renewals or extensions thereof, provided
that the amount of such Indebtedness is not increased at the time of such
refinancing, refunding, renewal or extension except by an amount equal to the
premium or other amount paid, and fees and expenses incurred, in connection with
such refinancing and by an amount equal to any utilized commitments thereunder;
and
(b) Ordinary Course Indebtedness;
(c) secured purchase money Indebtedness, including Capitalized Lease
Obligations, relating to the acquisition of personal property, provided that
such Indebtedness (i) does not exceed, together with Indebtedness permitted by
subsection (d) below, $3,000,000 in the aggregate at any time, (ii) does not
exceed the cost to Borrower or its Subsidiary of the personal property acquired
with the proceeds of such Indebtedness and (iii) is incurred within 12 months
following the date of the acquisition of such personal property; and
(d) unsecured Indebtedness not exceeding, together with Indebtedness
permitted by subsection (c) above, $3,000,000 in the aggregate at any time.
7.02 Liens and Negative Pledges. Incur, assume or suffer to exist, any Lien
or Negative Pledge upon any of its property, assets or revenues, whether now
owned or hereafter acquired, except:
(a) Liens and Negative Pledges existing on the date hereof and listed on
Schedule 7.01 and any renewals or extensions thereof, provided that the property
covered thereby is not increased and any renewal or extension of the obligations
secured or benefited thereby is permitted by Section 7.01(a);
(b) Ordinary Course Liens; and
(c) Liens on assets securing Indebtedness permitted under Section 7.01(c),
including any interest or title of a lessor under any Capitalized Lease,
provided that any such Lien does not encumber any property other than assets
constructed or acquired with the proceeds of such Indebtedness.
7.03 Fundamental Changes. Merge or consolidate with or into any Person or
liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or
dissolution or sell all or substantially all of its assets, except, that so long
as no Default or Event of Default exists or would result therefrom:
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(a) any Subsidiary of Borrower may merge (i) with Borrower provided that
Borrower shall be the continuing or surviving corporation, (ii) with any one or
more Subsidiaries of Borrower, and (iii) with any joint ventures, partnerships
and other Persons, so long as such joint ventures, partnerships and other
Persons will, as a result of making such merger and all other contemporaneous
related transactions, become a Subsidiary of Borrower; provided that when any
wholly-owned Subsidiary of Borrower is merging into another Subsidiary of
Borrower, the wholly-owned Subsidiary of Borrower shall be the continuing or
surviving Person;
(b) any Subsidiary of Borrower may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise), to Borrower or any of its
Subsidiaries; provided that when any wholly-owned Subsidiary of Borrower is
selling all or substantially all of its assets to another Subsidiary of
Borrower, the Subsidiary acquiring such assets shall be a wholly-owned
Subsidiary of Borrower; and
(c) to the extent permitted by Section 7.05(d), Borrower may liquidate one
limited partnership of which it is the general partner, as disclosed to Lenders
prior to the Closing Date;
provided, however, that Borrower shall provide advance written notice to
Administrative Agent of any transaction pursuant to this Section that affects
any Lien under the Collateral Documents.
7.04 Dispositions. Make any Dispositions, except:
(a) Ordinary Course Dispositions;
(b) Dispositions permitted by Section 7.03; and
(c) Other Dispositions so long as no Default or Event of Default exists or
would result therefrom and Borrower complies with Section 2.05(b) to the extent
applicable;
provided, however, that Borrower shall provide advance written notice to
Administrative Agent of any transaction pursuant to this Section that affects
any Lien under the Collateral Documents.
7.05 Investments. Make any Investments, except:
(a) Investments existing on the date hereof;
(b) Ordinary Course Investments;
(c) Investments permitted by Section 7.03(a) and (b); and
(d) additional Investments after the Closing Date which, together with
the costs incurred in liquidating the limited partnership permitted by
Section 7.03(c), do not exceed $2,000,000 in the aggregate.
7.06 Lease Obligations. Create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except:
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(a) leases in existence on the date hereof and any renewal, extension or
refinancing thereof; and
(b) leases (other than Capitalized Lease Obligations permitted by Section
7.01(c)) entered into or assumed by Borrower or any of its Subsidiaries after
the date hereof in the ordinary course of business;
7.07 Restricted Payments. Make any Restricted Payments, except purchases
by Borrower of capital stock owned by employees upon their termination.
7.08 ERISA. Together with any ERISA Affiliate of any Borrower Party,
sponsor or maintain or contribute (or have or incur any obligation to
contribute) to any employee pension benefit plan or employee benefit plan (both
as defined in ERISA) insured by the Pension Benefit Guaranty Corporation or
subject to Title IV of ERISA, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) have made contributions at any time
during the immediately preceding five plan years.
7.09 Change in Nature of Business. Make any fundamental change in the
nature of the business of any Borrower Party as conducted and as proposed to be
conducted as of the date hereof.
7.10 Transactions with Affiliates. Enter into any transaction of any kind
with any Affiliate of Borrower which is not a Guarantor other than arm's-length
transactions which are otherwise permitted hereunder.
7.11 Capital Expenditures. Make, or become legally obligated to make, in
any calendar year, capital expenditures in excess of the amount set forth below
opposite such year
Maximum
Calendar Capital
Year Expenditures
---------------------------------------------
1999 $19,000,000
2000 $19,500,000
2001 $20,500,000
Thereafter No limit
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For purpose of this covenant, capital expenditures shall exclude all
"Investments" otherwise permitted hereunder and Borrower's purchase of any
assets of CAH Restaurants of California, LLC.
7.12 Financial Covenants.
(a) Consolidated Net Worth. Permit Consolidated Net Worth at any time to
be less than the sum of (a) $22,668,000, (b) an amount equal to 75% of the Net
Income earned in each
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fiscal quarter ending after January 3, 1999 (with no deduction for a net loss in
any such fiscal quarter) and (c) an amount equal to (i) until all Term Loans are
repaid or prepaid in full, 100% of the aggregate increases in Shareholders'
Equity of Borrower and its Subsidiaries after the date hereof by reason of the
issuance and sale of capital stock of Borrower (including upon any conversion of
debt securities of Borrower into such capital stock, but excluding up to an
aggregate of $500,000 received by Borrower upon the exercise of stock options by
employees, directors and consultants) and (ii) thereafter, 50% of such
increases.
(b) Cash Flow Coverage Ratio. Commencing with Borrower's fiscal quarter
ending March 31, 2002, permit the Cash Flow Coverage Ratio as of the end of any
fiscal quarter of Borrower to be less than 1.00 to 1.
(c) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as
of the end of any fiscal quarter of Borrower to be less than the ratio set forth
below opposite such fiscal quarter:
Minimum Fixed
Fiscal Quarters Ending Charge Ratio
----------------------------------------------------------
Fourth fiscal quarter of 1999 through 1.35 to 1
third fiscal quarter of 2000
Fourth fiscal quarter of 2000 through 1.45 to 1
third fiscal quarter of 2001
Fourth fiscal quarter of 2001 and 1.60 to 1
thereafter
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(d) Leverage Ratio. Permit the Leverage Ratio as of the end of any fiscal
quarter of Borrower to be greater than the ratio set forth below opposite such
fiscal quarter:
Maximum
Fiscal Quarters Ending Leverage Ratio
----------------------------------------------------------
Fourth fiscal quarter of 1999 through 2.50 to 1
third fiscal quarter of 2000
Fourth fiscal quarter of 2000 through 2.25 to 1
third fiscal quarter of 2001
Fourth fiscal quarter of 2001 through 2.00 to 1
third fiscal quarter of 2002
Fourth fiscal quarter of 2002 and 1.75 to 1
thereafter
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7.13 Change in Auditors. Change the certified public accountants auditing
the books of Borrower except to another of the "big five" nationally recognized
independent certified public accountants.
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SECTION 8.
EVENTS OF DEFAULT AND REMEDIES
8.01 Events of Default. Any one or more of the following events shall
constitute an Event of Default:
(a) Borrower fails to pay any principal on any Outstanding Obligation
(other than fees) as and on the date when due; or
(b) Borrower fails to pay any interest on any Outstanding Obligation, or
any commitment fees due hereunder within three days after the date when due; or
fails to pay any other fees or amount payable to Administrative Agent or any
Lender under any Loan Document within five days after the date due; or
(c) Any default occurs in the observance or performance of any agreement
contained in Sections 6.01, 6.02, 6.08 or 7; provided, however, that with
respect to a default under Section 7.02 which is capable of being cured, such
default remains uncured after 60 days; or
(d) The occurrence of an Event of Default (as such term is or may
hereafter be specifically defined in any other Loan Document) under any other
Loan Document; or any Borrower Party fails to perform or observe any other
covenant or agreement (not specified in subsections (a), (b) or (c) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 30 days; or
(e) Any representation or warranty in any Loan Document or in any
certificate, agreement, instrument or other document made or delivered by any
Borrower Party pursuant to or in connection with any Loan Document proves to
have been incorrect in any material respect when made or deemed made; or
(f) (i) (x) any Borrower Party defaults in any payment when due of
principal of or interest on any Indebtedness (other than Indebtedness
hereunder), (y) any Borrower Party defaults in the observance or performance of
any other agreement or condition relating to any Indebtedness (other than
Indebtedness hereunder) or contained in any instrument or agreement evidencing,
securing or relating thereto, or (z) any other event shall occur, in each case,
the effect of which default or other event is to cause, or to permit the holder
or holders of such Indebtedness (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of notice
if required, Indebtedness having an aggregate principal amount in excess of
$2,000,000 to be demanded or become due (automatically or otherwise) prior to
its stated maturity, or any Guaranty Obligation in such amount to become payable
or cash collateral in respect thereof to be demanded, or any Borrower Party is
unable or admits in writing its inability to pay its debts as they mature; or
(ii) the occurrence under any Swap Contract of an Early Termination Date (as
defined in such Swap Contract) resulting from (x) any event of default under
such Swap Contract as to which Borrower or any Subsidiary is the Defaulting
Party (as defined in such Swap Contract) or (y) any Termination Event occurs
under any Swap Contract (as defined therein) as to which Borrower or any
Subsidiary is an Affected
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Party (as so defined), which, in either event, the Swap Termination Value owed
by Borrower or such Subsidiary as a result thereof is greater than $2,000,000;
or
(g) Any Principal Loan Document, at any time after its execution and
delivery and for any reason other than the agreement of all Lenders or
satisfaction in full of all the Obligations, ceases to be in full force and
effect or is declared by a court of competent jurisdiction to be null and void,
invalid or unenforceable in any material respect; or any Borrower Party denies
that it has any or further liability or obligation under any Principal Loan
Document, or purports to revoke, terminate or rescind any Principal Loan
Document; or
(h) (i) any material provision of any Collateral Document shall for any
reason cease to be valid and binding on or enforceable (except to the extent
caused by a Lender or Administrative Agent) against any Borrower Party, or any
Borrower Party shall so state in writing or bring an action to limit its
obligations or liabilities thereunder; or (ii) any Collateral Document shall for
any reason (other than pursuant to the terms thereof) cease to create a valid
security interest in a material portion of the Collateral purported to be
covered thereby or such security interest shall for any reason cease to be a
perfected and first priority security interest in a material portion of such
Collateral; or
(i) Any final judgments or arbitration awards are entered against Borrower
or any of its Subsidiaries, or Borrower or any of its Subsidiaries enters into
any settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of $2,000,000 or more in excess of any insurance coverage,
provided that the insurer has issued a letter of responsibility for payment up
to the amount of insurance coverage; or
(j) A final judgment against any Borrower Party is entered for the payment
of money in excess of $1,000,000, or any non-monetary final judgment is entered
against any Borrower Party which has a Material Adverse Effect and, in each case
if such judgment remains unsatisfied without procurement of a stay of execution
within 30 calendar days after the date of entry of judgment or, if earlier, five
days prior to the date of any proposed sale, or any writ or warrant of
attachment or execution or similar process is issued or levied against all or
any material part of the property of any such Person and is not released,
vacated or fully bonded within 30 calendar days after its issue or levy; or
(k) Any Borrower Party or any of its Subsidiaries institutes or consents
to the institution of any proceeding under Debtor Relief Laws, or makes an
assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer for it or for all or any material part of its
property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator or similar officer is appointed without the application or consent
of that Person and the appointment continues undischarged or unstayed for 60
calendar days; or any proceeding under Debtor Relief Laws relating to any such
Person or to all or any part of its property is instituted without the consent
of that Person and continues undismissed or unstayed for 60 calendar days, or an
order for relief is entered in any such proceeding; or
(l) Any event occurs which has a Material Adverse Effect.
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8.02 Remedies Upon Event of Default. Without limiting any other rights or
remedies of Administrative Agent or Lenders provided for elsewhere in this
Agreement, or the other Loan Documents, or by applicable Law, or in equity, or
otherwise:
(a) Upon the occurrence, and during the continuance, of any Event of
Default other than an Event of Default described in Section 8.01(k):
(i) the Requisite Lenders may request Administrative Agent to, and
Administrative Agent thereupon shall, terminate the Commitments and/or
declare all or any part of the unpaid principal of all Loans, all interest
accrued and unpaid thereon and all other amounts payable under the Loan
Documents to be immediately due and payable, whereupon the same shall
become and be immediately due and payable, without protest, presentment,
notice of dishonor, demand or further notice of any kind, all of which are
expressly waived by Borrower; and
(ii) Issuing Lender may, with the approval of Administrative Agent on
behalf of the Requisite Lenders, demand immediate payment by Borrower of an
amount equal to the aggregate amount of all outstanding Letters of Credit
Usage to be held in a Letter of Credit Cash Collateral Account.
(b) Upon the occurrence of any Event of Default described in Section
8.01(k):
(i) the Commitments and all other obligations of Administrative
Agent or Lenders shall automatically terminate without notice to or demand
upon Borrower, which are expressly waived by Borrower;
(ii) the unpaid principal of all Loans, all interest accrued and
unpaid thereon and all other amounts payable under the Loan Documents shall
be immediately due and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind, all of which are expressly
waived by Borrower; and
(iii) an amount equal to the aggregate amount of all outstanding
Letters of Credit Usage shall be immediately due and payable to Issuing
Lender without notice to or demand upon Borrower, which are expressly
waived by Borrower, to be held in a Letter of Credit Cash Collateral
Account.
(c) Upon the occurrence of any Event of Default, Lenders and
Administrative Agent, or any of them, without notice to (except as expressly
provided for in any Loan Document) or demand upon Borrower, which are expressly
waived by Borrower (except as to demands and notices expressly provided for in
any Loan Document), may proceed to (but only with the consent of the Requisite
Lenders) protect, exercise and enforce their rights and remedies under the Loan
Documents against any Borrower Party and such other rights and remedies as are
provided by Law or equity.
(d) The order and manner in which Administrative Agent's rights and
remedies are to be exercised shall be determined by the Requisite Lenders in
their sole and absolute discretion.
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Regardless of how a Lender may treat payments for the purpose of its own
accounting, for the purpose of computing the Obligations hereunder, payments
shall be applied first, to costs and expenses (including Attorney Costs)
incurred by Administrative Agent and each Lender, second, to the payment of
accrued and unpaid interest on the Loans to and including the date of such
application, third, to the payment of the unpaid principal of the Loans, and
fourth, to the payment of all other amounts (including fees) then owing to
Administrative Agent and Lenders under the Loan Documents, in each case paid pro
rata to each Lender in the same proportions that the aggregate Obligations owed
to each Lender under the Loan Documents bear to the aggregate Obligations owed
under the Loan Documents to all Lenders, without priority or preference among
Lenders. No application of payments will cure any Event of Default, or prevent
acceleration, or continued acceleration, of amounts payable under the Loan
Documents, or prevent the exercise, or continued exercise, of rights or remedies
of Administrative Agent and Lenders hereunder or thereunder or at Law or in
equity except upon payment in full in of all Obligations.
SECTION 9.
ADMINISTRATIVE AGENT
9.01 Appointment and Authorization of Administrative Agent.
(a) Each Lender hereby irrevocably (subject to Section 9.09) appoints,
designates and authorizes Administrative Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, Administrative Agent shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall Administrative Agent have or
be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Administrative Agent. Without limiting the generality of the foregoing
sentence, the use of the term "agent" in this Agreement with reference to
Administrative Agent is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) Issuing Lender shall act on behalf of Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith until such
time and except for so long as Administrative Agent may agree at the request of
the Requisite Lenders to act for such Issuing Lender with respect thereto;
provided, however, that Issuing Lender shall have all of the benefits and
immunities (i) provided to Administrative Agent in this Section 9 with respect
to any acts taken or omissions suffered by Issuing Lender in connection with
Letters of Credit issued by it or proposed to be issued by it and the
application and agreements for letters of credit pertaining to
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the Letters of Credit as fully as if the term "Administrative Agent" as used in
this Section 9 included Issuing Lender with respect to such acts or omissions,
and (ii) as additionally provided in this Agreement with respect to Issuing
Lender.
9.02 Delegation of Duties. Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Administrative Agent shall not
be responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
9.03 Liability of Administrative Agent. None of Administrative Agent-
Related Persons shall (i) be liable for any action taken or omitted to be taken
by any of them under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of Lenders for any recital, statement, representation or warranty made by
Borrower or any Subsidiary or Affiliate of Borrower, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Administrative Agent under or in connection with, this Agreement
or any other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of Borrower or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Administrative Agent-Related Person
shall be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties, any
Collateral, books or records of Borrower or any of Borrower's Subsidiaries or
Affiliates.
9.04 Reliance by Administrative Agent.
(a) Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, representation, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrower), independent accountants and other experts selected by
Administrative Agent. Administrative Agent shall be fully justified in failing
or refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Requisite
Lenders as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. Administrative Agent shall in all cases be fully protected as
to Lenders in acting, or in refraining from acting, under any Loan Document in
accordance with a request or consent of the Requisite Lenders or all Lenders, if
required hereunder, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of Lenders. Where this Agreement
expressly permits or prohibits an action unless the Requisite Lenders otherwise
determine, and in all other instances, Administrative
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Agent may, but shall not be required to, initiate any solicitation for the
consent or a vote of Lenders.
(b) For purposes of determining compliance with the conditions specified
in Section 4.01, each Lender that has executed this Agreement shall be deemed to
have consented to, approved or accepted or to be satisfied with, each document
or other matter either sent by Administrative Agent to such Lender for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to such Lender.
9.05 Notice of Default. Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to Administrative Agent for the account of Lenders, unless
Administrative Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". Administrative
Agent will notify Lenders of its receipt of any such notice. Administrative
Agent shall take such action with respect to such Default or Event of Default as
may be directed by the Requisite Lenders in accordance with Section 8; provided,
however, that unless and until Administrative Agent has received any such
direction, Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable or in the best interest of Lenders.
9.06 Credit Decision; Disclosure of Information by Administrative Agent.
Each Lender acknowledges that none of Administrative Agent-Related Persons
has made any representation or warranty to it, and that no act by Administrative
Agent hereinafter taken, including any consent to and acceptance of any
assignment or review of the affairs of Borrower and its Subsidiaries, shall be
deemed to constitute any representation or warranty by any Administrative
Agent-Related Person to any Lender as to any matter, including whether
Administrative Agent-Related Persons have disclosed material information in
their possession. Each Lender, including any Lender by assignment, represents to
Administrative Agent that it has, independently and without reliance upon any
Administrative Agent-Related Person and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to Borrower
hereunder. Each Lender also represents that it will, independently and without
reliance upon any Administrative Agent-Related Person and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower. Except for notices, reports and other documents
expressly required to be furnished to Lenders by Administrative Agent herein,
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information
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concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Borrower or any of its Subsidiaries which may
come into the possession of any of Administrative Agent-Related Persons.
9.07 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, Lenders shall indemnify upon
demand each Administrative Agent-Related Person (to the extent not reimbursed by
or on behalf of Borrower and without limiting the obligation of Borrower to do
so), pro rata, and hold harmless each Administrative Agent-Related Person from
and against any and all Indemnified Liabilities incurred by it; provided,
however, that no Lender shall be liable for the payment to any Administrative
Agent-Related Person of any portion of such Indemnified Liabilities resulting
from such Person's gross negligence or willful misconduct; provided, however,
that no action taken in accordance with the directions of the Requisite Lenders
shall be deemed to constitute gross negligence or willful misconduct for
purposes of this Section. Without limitation of the foregoing, each Lender shall
reimburse Administrative Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by Administrative
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Administrative Agent
is not reimbursed for such expenses by or on behalf of Borrower. The undertaking
in this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Administrative Agent.
9.08 Administrative Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates as though Bank of America were not
Administrative Agent or Issuing Lender hereunder and without notice to or
consent of Lenders. Lenders acknowledge that, pursuant to such activities, Bank
of America or its Affiliates may receive information regarding Borrower or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of Borrower or such Affiliate) and acknowledge that
Administrative Agent shall be under no obligation to provide such information to
them. With respect to its Loans, Bank of America shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not Administrative Agent or Issuing Lender.
9.09 Successor Administrative Agent. The Administrative Agent may, and at
the request of the Requisite Lenders shall, resign as Administrative Agent upon
30 days' notice to the Lenders. If the Administrative Agent resigns under this
Agreement, the Requisite Lenders shall appoint from among the Lenders a
successor administrative agent for the Lenders which successor administrative
agent shall be approved by Borrower. If no successor administrative agent is
appointed prior to the effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after consulting with the Lenders
and Borrower, a successor administrative agent from among the Lenders. Upon the
acceptance of its appointment as
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successor administrative agent hereunder, such successor administrative agent
shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term "Administrative Agent" shall mean such
successor administrative agent and the retiring Administrative Agent's
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 9 and Sections 10.03 and
10.13 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
administrative agent has accepted appointment as Administrative Agent by the
date which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the duties of
the Administrative Agent hereunder until such time, if any, as the Requisite
Lenders appoint a successor agent as provided for above. Notwithstanding the
foregoing, however, Bank of America may not be removed as the Administrative
Agent at the request of the Requisite Lenders unless Bank of America shall also
simultaneously be replaced as "Issuing Lender" and "Swing Line Lender" hereunder
pursuant to documentation in form and substance reasonably satisfactory to Bank
of America.
9.10 Proportionate Interest in any Collateral. Administrative Agent, on behalf
of all Lenders, shall hold in accordance with the Loan Documents all items of
any Collateral or interests therein received or held by Administrative Agent.
Subject to Administrative Agent's and Lenders' rights to reimbursement for their
costs and expenses hereunder (including reasonable attorneys' fees and
disbursements and other professional services and the reasonably allocated costs
of attorneys employed by Administrative Agent or a Lender), each Lender shall
have an interest in Lenders' interest in the Collateral or interests therein in
the same proportions that the aggregate Obligations owed such Lender under the
Loan Documents bear to the aggregate Obligations owed under the Loan Documents
to all Lenders, without priority or preference among Lenders.
9.11 Documentation Agent. The Lender identified on the facing page or
signature pages of this Agreement as "Documentation Agent" shall have no right,
power, obligation, liability, responsibility or duty under this Agreement other
than those applicable to all Lenders as such. Without limiting the foregoing,
the Documentation Agent shall not have nor be deemed to have any fiduciary
relationship with any Lender. Each Lender acknowledges that it has not relied,
and will not rely, on any of Lenders so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.
SECTION 10.
MISCELLANEOUS
10.01 Amendments; Consents. No amendment, modification, supplement, extension,
termination or waiver of any provision of this Agreement or any other Loan
Document, no approval or consent thereunder, and no consent to any departure by
any Borrower Party therefrom shall be effective unless in writing signed by the
Requisite Lenders and acknowledged by Administrative Agent, and each such waiver
or consent shall be effective only in the specific
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instance and for the specific purpose for which given. Except as otherwise
expressly provided herein, without the approval in writing of Administrative
Agent and all Lenders, no amendment, modification, supplement, termination,
waiver or consent shall be effective:
(a) To reduce the amount of principal, principal prepayments or the rate
of interest payable on, any Loan, or the amount of any fee or other amount
payable to any Lender under the Loan Documents (unless such modification is
consented to by each Lender entitled to receive such fee ) or to waive an Event
of Default consisting of the failure of Borrower to pay when due principal,
interest or any commitment fee;
(b) To postpone any date fixed for any payment of principal of,
prepayment of principal of, or any installment of interest on, any Loan or any
installment of any commitment fee, to extend the term of, or increase the amount
of, any Lender's Commitment (it being understood that a waiver of an Event of
Default or covenant shall not constitute an extension or increase in the
Commitment of any Lender) or modify the Pro Rata Share of any Lender;
(c) Release any Guarantor;
(d) to release any material portion of the Collateral (except as
otherwise expressly provided in any Loan Document);
(e) To amend the provisions of the definition of "Requisite Lenders",
Sections 4, 9, this Section 10.01 or Section 10.06; or
(f) To amend any provision of this Agreement that expressly requires the
consent or approval of all Lenders;
provided, however, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Lender in addition to the Requisite Lenders or
all the Lenders, as the case may be, affect the rights or duties of the Issuing
Lender under any Loan Document relating to Letters of Credit, (ii) no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent in addition to the Requisite Lenders or all the Lenders, as the case may
be, affect the rights or duties of the Administrative Agent under any Loan
Document, (iii) no amendment, waiver or consent shall, unless in writing and
signed by Swing Line Lender in addition to the Requisite Lenders or all the
Lenders, as the case may be, affect the rights or duties of Swing Line Lender
under any Loan Document, and (iv) any fee letters may be amended, or rights or
privileges thereunder waived, in a writing executed by the parties thereto. Any
amendment, modification, supplement, termination, waiver or consent pursuant to
this Section shall apply equally to, and shall be binding upon, all the Lenders
and the Administrative Agent.
10.02 Transmission and Effectiveness of Communications and Signatures.
(a) Modes of Delivery. Except as otherwise provided in any Loan Document,
notices, requests, demands, directions, agreements and documents delivered in
connection with the Loan Documents (collectively, "communications") shall be
transmitted by Requisite Notice
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to the number and address set forth on Schedule 10.02, may be delivered by the
following modes of delivery, and shall be effective as follows:
Mode of Delivery Effective on earlier of actual receipt and:
-----------------------------------------------------------------------
Courier Scheduled delivery date
Facsimile When transmission in legible form complete
Mail Fourth Business Day after deposit in U.S.
mail first class postage pre-paid
Personal delivery When received
Telephone When conversation completed
|
provided, however, that communications delivered to Administrative Agent
pursuant to Section 2 shall not be effective until actually received by
Administrative Agent; provided, further, that any notice received on other than
a Business Day shall not be effective until the next succeeding Business Day.
(b) Reliance by Administrative Agent and Lenders. Administrative Agent
and Lenders shall be entitled to rely and act in good faith on any
communications purportedly given by or on behalf of any Borrower Party even if
such communications (i) were not made in a manner specified herein, (ii) were
incomplete, or (iii) were not preceded or followed by any other notice specified
herein. Borrower shall indemnify Administrative Agent and Lenders from any loss,
cost, expense or liability as a result of relying on any communications
permitted herein.
(c) Effectiveness of Facsimile Documents and Signatures. Documents and
signatures on communications may be transmitted by facsimile unless
Administrative Agent in its sole and absolute discretion otherwise notifies the
sending party. The effectiveness of any such signatures accepted by
Administrative Agent shall, subject to applicable Law, have the same force and
effect as manual signatures and shall be binding on all Borrower Parties and
Administrative Agent and Lenders. Administrative Agent may also require that any
such signature be confirmed by a manually-signed hardcopy thereof; provided,
however, that the failure to deliver or request any such manually-signed
hardcopy confirmation shall not affect the effectiveness of any facsimile
signatures.
10.03 Attorney Costs, Expenses and Taxes. Borrower agrees (a) to pay or
reimburse Administrative Agent for all reasonable costs and expenses incurred in
connection with the development, preparation, negotiation and execution of the
Loan Documents, and the development, preparation, negotiation and execution of
any amendment, waiver, consent, supplement or modification to, any Loan
Documents, and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including all Attorney Costs, and (b) to pay or reimburse
Administrative Agent and each Lender for all reasonable costs and expenses
incurred in connection with any refinancing, restructuring, reorganization
(including a bankruptcy reorganization) and enforcement or attempted
enforcement, or preservation of any rights under
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any Loan Documents, and any other documents prepared in connection herewith or
therewith, or in connection with any refinancing, or restructuring of any such
documents in the nature of a "workout" or of any insolvency or bankruptcy
proceeding, including Attorney Costs. Following the occurrence and during the
continuance of any Default or Event of Default, the foregoing costs and expenses
shall include all search, filing, recording and appraisal charges and fees and
taxes related thereto, and other out-of-pocket expenses incurred by
Administrative Agent and the cost of independent public accountants and other
outside experts retained by Administrative Agent or any Lender. Such costs and
expenses shall also include out of pocket costs of Administrative Agent
reasonably attributable to the administration of the Loan Documents. Any amount
payable by Borrower under this Section shall bear interest from the 30th day
following the date of demand for payment at the Default Rate, unless waived by
Administrative Agent. The agreements in this Section shall survive repayment of
all Obligations.
10.04 Binding Effect; Assignment.
(a) This Agreement and the other Loan Documents to which Borrower is a
party will be binding upon and inure to the benefit of Borrower, Administrative
Agent, Lenders and their respective successors and assigns, except that,
Borrower may not assign its rights hereunder or thereunder or any interest
herein or therein without the prior written consent of all Lenders and any such
attempted assignment shall be void. Any Lender may at any time pledge its Notes
or any other instrument evidencing its rights as a Lender under this Agreement
to a Federal Reserve Lender, but no such pledge shall release that Lender from
its obligations hereunder or grant to such Federal Reserve Lender the rights of
a Lender hereunder absent foreclosure of such pledge.
(b) From time to time following the Closing Date, each Lender may, at
its sole cost and expense, assign to one or more Eligible Assignees all or any
portion of its Pro Rata Share of its Commitments and/or Extensions of Credit;
provided that (i) such assignment, if not to a Lender or an Affiliate of the
assigning Lender, must be consented to by Borrower at all times other than
during the existence of a Default or Event of Default and Administrative Agent
and Issuing Lender (which approvals shall not be unreasonably withheld or
delayed), (ii) a copy of a duly signed and completed Notice of Assignment and
Acceptance shall be delivered to Administrative Agent, (iii) except in the case
of an assignment to an Affiliate of the assigning Lender, to another Lender or
of the entire remaining Commitments of the assigning Lender, the assignment
shall not assign a Pro Rata Share equivalent to less than the Minimum Amount
therefor, (iv) each assignment shall be of a constant, and not a varying,
portion of such Lender's Revolving Commitment and Term Commitment, and (v) the
effective date of any such assignment shall be as specified in the Notice of
Assignment and Acceptance, but not earlier than the date which is five Business
Days after the date Administrative Agent has received the Notice of Assignment
and Acceptance. Upon acceptance by Administrative Agent of such Notice of
Assignment and Acceptance and consent thereto by Administrative Agent, Issuing
Lender and Borrower and payment of the requisite fee described below, the
Eligible Assignee named therein shall be a Lender for all purposes of this
Agreement, with the Pro Rata Share therein set forth and, to the extent of such
Pro Rata Share, the assigning Lender shall be released from its further
obligations under this Agreement. Borrower agrees that it shall execute and
deliver upon request (against delivery by the assigning Lender to Borrower of
any Notes) to such assignee Lender,
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one or more Notes evidencing that assignee Lender's Pro Rata Share, and to the
assigning Lender if requested, one or more Notes evidencing the remaining
balance Pro Rata Share retained by the assigning Lender. Administrative Agent's
consent to and acceptance of any assignment shall not be deemed to constitute
any representation or warranty by any Administrative Agent-Related Person as to
any matter.
(c) After receipt of a completed Notice of Assignment and Acceptance,
and receipt of an assignment fee of $3,500 from such Eligible Assignee
(including Affiliates of assigning Lenders), Administrative Agent shall,
promptly following the effective date thereof, provide to Borrower and Lenders a
revised Schedule 10.02 giving effect thereto.
(d) Each Lender may, at its sole cost and expense, from time to time
grant participations to one or more other Person (including another Lender) all
or any portion of its Pro Rata Share of its Commitments and/or Extensions of
Credit; provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other financial institutions shall not be a
Lender hereunder for any purpose except, if the participation agreement so
provides, for the purposes of Section 3 (but only to the extent that the cost of
such benefits to Borrower does not exceed the cost which Borrower would have
incurred in respect of such Lender absent the participation) and subject to
Sections 10.05 and 10.06, (iv) Borrower, Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, (v)
the participation shall not restrict an increase in the Commitments or in the
granting Lender's Pro Rata Share, so long as the amount of the participation
interest is not affected thereby, and (vi) the consent of the holder of such
participation interest shall not be required for amendments or waivers of
provisions of the Loan Documents; provided, however, that the assigning Lender
may, in any agreement with a participant, give such participant the right to
consent to any matter which (A) extends the Maturity Date as to such participant
or any other date upon which any payment of money is due to such participant,
(B) reduces the rate of interest, any fee or any other monetary amount owing to
such participant, (C) reduces the amount of any installment of principal owing
to such participant or (D) releases any material portion of the Collateral.
10.05 Set-off. In addition to any rights and remedies of Administrative
Agent and Lenders or any assignee or participant of Lenders or any Affiliates
thereof (each, a "Proceeding Party") provided by law, upon the occurrence and
during the continuance of any Event of Default under Section 8.01(k) or
following acceleration of the Obligations, each Proceeding Party is authorized
from time to time, without prior notice to Borrower, any such notice being
waived by Borrower to the fullest extent permitted by law, to proceed directly,
by right of set-off, banker's lien, or otherwise, against any assets of the
Borrower Parties which may be in the hands of such Proceeding Party (including
all general or special, time or demand, provisional or other deposits and other
indebtedness owing by such Proceeding Party to or for the credit or the account
of Borrower) and apply such assets against the Obligations, irrespective of
whether such Proceeding Party shall have made any demand therefor and although
such Obligations may be unmatured. Each Lender agrees promptly to notify
Borrower and Administrative Agent after any such set-off
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and application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
10.06 Sharing of Payments. Each Lender severally agrees that if it,
through the exercise of any right of setoff, banker's lien or counterclaim
against Borrower, or otherwise, receives payment of the Obligations held by it
that is ratably more than any other Lender, through any means, receives in
payment of the Obligations held by that Lender, then, subject to applicable
Laws: (a) Lender exercising the right of setoff, banker's lien or counterclaim
or otherwise receiving such payment shall purchase, and shall be deemed to have
simultaneously purchased, from the other Lender a participation in the
Obligations held by the other Lender and shall pay to the other Lender a
purchase price in an amount so that the share of the Obligations held by each
Lender after the exercise of the right of setoff, banker's lien or counterclaim
or receipt of payment shall be in the same proportion that existed prior to the
exercise of the right of setoff, banker's lien or counterclaim or receipt of
payment; and (b) such other adjustments and purchases of participations shall be
made from time to time as shall be equitable to ensure that all of Lenders share
any payment obtained in respect of the Obligations ratably in accordance with
each Lender's share of the Obligations immediately prior to, and without taking
into account, the payment; provided that, if all or any portion of a
disproportionate payment obtained as a result of the exercise of the right of
setoff, banker's lien, counterclaim or otherwise is thereafter recovered from
the purchasing Lender by Borrower or any Person claiming through or succeeding
to the rights of Borrower, the purchase of a participation shall be rescinded
and the purchase price thereof shall be restored to the extent of the recovery,
but without interest. Each Lender that purchases a participation in the
Obligations pursuant to this Section shall from and after the purchase have the
right to give all notices, requests, demands, directions and other
communications under this Agreement with respect to the portion of the
Obligations purchased to the same extent as though the purchasing Lender were
the original owner of the Obligations purchased. Borrower expressly consents to
the foregoing arrangements and agrees that any Lender holding a participation in
an Obligation so purchased may exercise any and all rights of setoff, banker's
lien or counterclaim with respect to the participation as fully as if Lender
were the original owner of the Obligation purchased.
10.07 No Waiver; Cumulative Remedies.
(a) No failure by any Lender or Administrative Agent to exercise, and no
delay by any Lender or Administrative Agent in exercising, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege under any
Loan Document preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege.
(b) The rights, remedies, powers and privileges herein or therein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by Law. Any decision by Administrative Agent or any Lender
not to require payment of any interest (including Default Interest), fee, cost
or other amount payable under any Loan Document or to calculate any amount
payable by a particular method on any occasion shall in no way limit or be
deemed a waiver of Administrative Agent's or such Lender's right to require full
payment
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thereof, or to calculate an amount payable by another method that is not
inconsistent with this Agreement, on any other or subsequent occasion.
(c) The terms and conditions of Section 9 are inserted for the sole
benefit of Administrative Agent and Lenders; the same may be waived in whole or
in part, with or without terms or conditions, in respect of any Extension of
Credit without prejudicing Administrative Agent's or Lenders' rights to assert
them in whole or in part in respect of any other Loan.
10.08 Usury. Notwithstanding anything to the contrary contained in any
Loan Document, the interest and fees paid or agreed to be paid under the Loan
Documents shall not exceed the maximum rate of non-usurious interest permitted
by applicable Law (the "Maximum Rate"). If Administrative Agent or any Lender
shall receive interest or a fee in an amount that exceeds the Maximum Rate, the
excessive interest or fee shall be applied to the principal of the Outstanding
Obligations or, if it exceeds the unpaid principal, refunded to Borrower. In
determining whether the interest or a fee contracted for, charged, or received
by Administrative Agent or a Lender exceeds the Maximum Rate, such Person may,
to the extent permitted by applicable Law, (a) characterize any payment that is
not principal as an expense, fee, or premium rather than interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of interest
throughout the contemplated term of the Obligations.
10.09 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Integration. This Agreement, together with the other Loan Documents
and any letter agreements referred to herein, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. In the
event of any conflict between the provisions of this Agreement and those of any
other Loan Document, the provisions of this Agreement shall control and govern;
provided that the inclusion of supplemental rights or remedies in favor of
Administrative Agent or Lenders in any other Loan Document shall not be deemed a
conflict with this Agreement. Each Loan Document was drafted with the joint
participation of the respective parties thereto and shall be construed neither
against nor in favor of any party, but rather in accordance with the fair
meaning thereof.
10.11 Nature of Lenders' Obligations. The obligations of Lenders hereunder
are several and not joint or joint and several. Nothing contained in this
Agreement or any other Loan Document and no action taken by Administrative Agent
or Lenders or any of them pursuant hereto or thereto may, or may be deemed to,
make Lenders a partnership, an association, a joint venture or other entity,
either among themselves or with Borrower or any Affiliate of Borrower. Each
Lender's obligation to make any Loan pursuant hereto is several and not joint or
joint and several, and in the case of the initial Loan only is conditioned upon
the performance by all other Lenders of their obligations to make initial Loans.
A default by any Lender will not increase the Pro Rata Share attributable to any
other Lender.
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10.12 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any Loan Document, certificate or statement
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery thereof but shall terminate the later
of (a) when the Commitments are terminated and (b) when no Obligations remain
outstanding under any Loan Document. Such representations and warranties have
been or will be relied upon by Administrative Agent and each Lender,
notwithstanding any investigation made by Administrative Agent or any Lender or
on their behalf.
10.13 Indemnity by Borrower. Borrower agrees to indemnify, save and hold
harmless each Administrative Agent-Related Person and each Lender and their
respective Affiliates, directors, officers, agents, attorneys and employees
(collectively the "Indemnitees") from and against: (a) any and all claims,
demands, actions or causes of action that are asserted against any Indemnitee by
any Person (other than Administrative Agent or any Lender) relating directly or
indirectly to a claim, demand, action or cause of action that such Person
asserts or may assert against any Borrower Party, any of their Affiliates or any
of their officers or directors; (b) any and all claims, demands, actions or
causes of action arising out of or relating to, the Loan Documents, any
predecessor loan documents, the Commitments, the use or contemplated use of the
proceeds of any Loan, or the relationship of any Borrower Party, Administrative
Agent and Lenders under this Agreement; (c) any administrative or investigative
proceeding by any Governmental Authority arising out of or related to a claim,
demand, action or cause of action described in subsection (a) or (b) above; and
(d) any and all liabilities, losses, costs or expenses (including Attorney
Costs) that any Indemnitee suffers or incurs as a result of the assertion of any
foregoing claim, demand, action, cause of action or proceeding, or as a result
of the preparation of any defense in connection with any foregoing claim,
demand, action, cause of action or proceeding, in all cases, whether or not an
Indemnitee is a party to such claim, demand, action, cause of action or
proceeding, including those liabilities caused by an Indemnitee's own negligence
(all the foregoing, collectively, the "Indemnified Liabilities") net, in each
case, of insurance proceeds received by such Indemnitee; provided that no
Indemnitee shall be entitled to indemnification for any loss caused by its own
gross negligence or willful misconduct or for any loss or claim asserted against
it by another Indemnitee.
10.14 Nonliability of Lenders.
Borrower acknowledges and agrees that:
(a) Any inspections of any property of Borrower made by or through
Administrative Agent or Lenders are for purposes of administration of the Loan
Documents only, and Borrower is not entitled to rely upon the same (whether or
not such inspections are at the expense of Borrower);
(b) By accepting or approving anything required to be observed,
performed, fulfilled or given to Administrative Agent or Lenders pursuant to the
Loan Documents, neither Administrative Agent nor Lenders shall be deemed to have
warranted or represented the sufficiency, legality, effectiveness or legal
effect of the same, or of any term, provision or
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condition thereof, and such acceptance or approval thereof shall not constitute
a warranty or representation to anyone with respect thereto by Administrative
Agent or Lenders;
(c) The relationship between Borrower and Administrative Agent and
Lenders is, and shall at all times remain, solely that of borrowers and lenders;
neither Administrative Agent nor Lenders shall under any circumstance be
construed to be partners or joint venturers of Borrower or their Affiliates;
neither Administrative Agent nor Lenders shall under any circumstance be deemed
to be in a relationship of confidence or trust or a fiduciary relationship with
Borrower or their Affiliates, or to owe any fiduciary duty to Borrower or their
Affiliates; neither Administrative Agent nor Lenders undertake or assume any
responsibility or duty to Borrower or their Affiliates to select, review,
inspect, supervise, pass judgment upon or inform Borrower or their Affiliates of
any matter in connection with their property or the operations of Borrower or
their Affiliates; Borrower and their Affiliates shall rely entirely upon their
own judgment with respect to such matters; and any review, inspection,
supervision, exercise of judgment or supply of information undertaken or assumed
by Administrative Agent or Lenders in connection with such matters is solely for
the protection of Administrative Agent and Lenders and neither Borrower nor any
other Person is entitled to rely thereon; and
(d) Administrative Agent and Lenders shall not be responsible or liable
to any Person for any loss, damage, liability or claim of any kind relating to
injury or death to Persons or damage to property caused by the actions, inaction
or negligence of Borrower and/or its Affiliates and Borrower hereby indemnifies
and holds Administrative Agent and Lenders harmless from any such loss, damage,
liability or claim to the extent not caused by the gross negligence or willful
misconduct of the Person seeking indemnification.
10.15 No Third Parties Benefited. This Agreement is made for the purpose
of defining and setting forth certain obligations, rights and duties of
Borrower, Administrative Agent and Lenders in connection with the Loans, and is
made for the sole benefit of Borrower, Administrative Agent and Lenders, and
Administrative Agent's and Lenders' successors and assigns. Except as provided
in Sections 10.04 and 10.13, no other Person shall have any rights of any nature
hereunder or by reason hereof.
10.16 Severability. Any provision of the Loan Documents that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.17 Confidentiality. Administrative Agent and each Lender shall use any
confidential non-public information concerning the Borrower Parties and their
Subsidiaries that is furnished to Administrative Agent or such Lender by or on
behalf of the Borrower Parties and their Subsidiaries in connection with the
Loan Documents (collectively, "Confidential Information") solely for the purpose
of evaluating and providing products and services to them and administering and
enforcing the Loan Documents, and it will hold the Confidential Information in
confidence. Notwithstanding the foregoing, Administrative Agent and each
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Lender may disclose Confidential Information (a) to their affiliates or any of
their or their affiliates' directors, officers, employees, advisors, or
representatives (collectively, the "Representatives") whom it determines need to
know such information for the purposes set forth in this Section; (b) to any
bank or financial institution or other entity to which such Lender has assigned
or desires to assign an interest or participation in the Loan Documents or the
Obligations, provided that any such foregoing recipient of such Confidential
Information agrees to keep such Confidential Information confidential as
specified herein; (c) to any governmental agency or regulatory body having or
claiming to have authority to regulate or oversee any aspect of Administrative
Agent's or such Lender's business or that of their Representatives in connection
with the exercise of such authority or claimed authority; (d) to the extent
necessary or appropriate to effect or preserve Administrative Agent's or such
Lender's or any of their Affiliates' security (if any) for any Obligation or to
enforce any right or remedy or in connection with any claims asserted by or
against Administrative Agent or such Lender or any of their Representatives; and
(e) pursuant to any subpoena or any similar legal process. For purposes hereof,
the term "Confidential Information" shall not include information that (x) is in
Administrative Agent's or a Lender's possession prior to its being provided by
or on behalf of the Borrower Parties, provided that such information is not
known by Administrative Agent or such Lender to be subject to another
confidentiality agreement with, or other legal or contractual obligation of
confidentiality to, a Borrower Party, (y) is or becomes publicly available
(other than through a breach hereof by Administrative Agent or such Lender), or
(z) becomes available to Administrative Agent or such Lender on a
nonconfidential basis, provided that the source of such information was not
known by Administrative Agent or such Lender to be bound by a confidentiality
agreement or other legal or contractual obligation of confidentiality with
respect to such information.
10.18 Further Assurances. Borrower and its Subsidiaries shall, at their
expense and without expense to Lenders or Administrative Agent, do, execute and
deliver such further acts and documents as any Lender or Administrative Agent
from time to time reasonably requires for the assuring and confirming unto
Lenders or Administrative Agent of the rights hereby created or intended now or
hereafter so to be, or for carrying out the intention or facilitating the
performance of the terms of any Loan Document.
10.19 Headings. Section headings in this Agreement and the other Loan
Documents are included for convenience of reference only and are not part of
this Agreement or the other Loan Documents for any other purpose.
10.20 Time of the Essence. Time is of the essence of the Loan Documents.
10.21 Foreign Lenders and Participants. Each Lender, and each holder of a
participation interest herein, that is a "foreign corporation, partnership or
trust" within the meaning of the Code shall deliver to Administrative Agent,
prior to receipt of any payment subject to withholding (or after accepting an
assignment or receiving a participation interest herein), two duly signed
completed copies of either Form W-8BEN or any successor thereto (relating to
such Person and entitling it to a complete exemption from withholding on all
payments to be made to such Person by Borrower pursuant to this Agreement) or
Form W-8ECI
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or any successor thereto (relating to all payments to be made to such Person by
Borrower pursuant to this Agreement) of the United States Internal Revenue
Service or such other evidence satisfactory to Borrower and Administrative Agent
that no withholding under the federal income tax laws is required with respect
to such Person. Thereafter and from time to time, each such Person shall (a)
promptly submit to Administrative Agent such additional duly completed and
signed copies of one of such forms (or such successor forms as shall be adopted
from time to time by the relevant United States taxing authorities) as may then
be available under then current United States laws and regulations to avoid, or
such evidence as is satisfactory to Borrower and Administrative Agent of any
available exemption from, United States withholding taxes in respect of all
payments to be made to such Person by Borrower pursuant to this Agreement, and
(b) take such steps as shall not be disadvantageous to it, in the reasonable
judgment of such Lender, and as may be reasonably necessary (including the re-
designation of its Lending Office, if any) to avoid any requirement of
applicable Laws that Borrower make any deduction or withholding for taxes from
amounts payable to such Person. If such Persons fails to deliver the above forms
or other documentation, then Administrative Agent may withhold from any interest
payment to such Person an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Code, without reduction. If any
Governmental Authority asserts that Administrative Agent did not properly
withhold any tax or other amount from payments made in respect of such Person,
such Person shall indemnify Administrative Agent therefor, including all
penalties and interest and costs and expenses (including Attorney Costs) of
Administrative Agent. The obligation of Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
Administrative Agent.
10.22 Governing Law.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT ADMINISTRATIVE AGENT AND
EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR
OF THE UNITED STATES FOR THE CENTRAL DISTRICT OF CALIFORNIA, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH BORROWER PARTY, ADMINISTRATIVE AGENT AND
EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-
EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH BORROWER PARTY, ADMINISTRATIVE
AGENT AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED HERETO.
EACH BORROWER PARTY, ADMINISTRATIVE AGENT AND EACH LENDER WAIVES PERSONAL
SERVICE OF ANY SUMMONS, COMPLAINT OR
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OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF
CALIFORNIA.
10.23 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
10.24 Entire Agreement. This Agreement and the other Loan Documents
represent the final agreement between the parties and may not be contradicted by
evidence of prior, contemporaneous, or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CALIFORNIA PIZZA KITCHEN, INC.
By /s/ H. G. Carrington, Jr.
-----------------------------------------
H. G. Carrington, Jr.
Executive Vice President and Chief
Financial Officer and Secretary
|
BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Patrick W. Zetzman
-----------------------------------------
Patrick W. Zetzman
Vice President
|
BANK OF AMERICA, N.A., as Issuing Lender,
a Lender and Swing Line Lender
By: /s/ David J. Stassel
-----------------------------------------
David J. Stassel
Vice President
|
BANKERS TRUST COMPANY, as Documentation
Agent and a Lender
By: /s/ David Bell
-----------------------------------------
Name: David Bell
---------------------------------------
Title: Principal
--------------------------------------
|
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EXHIBIT 10.3
SECURITY AGREEMENT
This SECURITY AGREEMENT (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, this "Agreement"), dated as of
October 29, 1999 is made by the signatories hereto and each Person becoming a
party hereto identified as a "Debtor" (each, a "Debtor" and collectively,
"Debtors"), in favor of Bank of America, N.A. in its capacity as administrative
agent (in such capacity, "Administrative Agent") or Lenders, Issuing Lender,
Indemnitees and itself (collectively, the "Secured Parties") under the Credit
Agreement referred to below.
RECITALS
A. Pursuant to that certain Credit Agreement dated as of October 29, 1999
among California Pizza Kitchen, Inc., a California corporation ("Borrower"),
Lenders from time to time party thereto, Bank of America, N.A., as
Administrative Agent, Swing Line Lender and Issuing Lender and Bankers Trust
Company, as Documentation Agent (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the "Credit Agreement;" the
terms defined therein being used herein as therein defined), Lenders and the
Issuing Lender are making certain credit facilities available to Borrower.
B. Concurrently herewith, certain Debtors are executing and delivering to
Administrative Agent a Master Subsidiary Guaranty dated as of even date herewith
(as amended from time to time, the "Master Subsidiary Guaranty") guarantying the
Obligations.
C. It is a requirement of the Credit Agreement that Debtors enter into
this Agreement, and that if any Person becomes a Domestic Subsidiary of Borrower
after the date hereof, such Person shall enter into a joinder and become a party
hereto.
D. Each Debtor expects to realize direct and indirect benefits as a
result of the availability of the aforementioned credit facilities.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Grant of Security Interest. Each Debtor hereby pledges, assigns and
grants to Administrative Agent, for the benefit of the Secured Parties, a
security interest in the property described in Paragraph 2 below (collectively
and severally, the "Collateral") to secure payment and performance of the
Obligations.
2. Collateral. The Collateral shall consist of all right, title and
interest of each Debtor in and to the following, but only to the extent that,
except in the case of Trademark Collateral, a security interest therein can be
perfected by a filing of a financing statement with a secretary of state or
county:
(a) All now existing and hereafter arising receivables, accounts,
contracts, contract rights, chattel paper, documents, instruments, investment
property, and general intangibles of
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each Debtor, whether or not arising out of or in connection with the sale or
lease of goods or the rendering of services, and all rights of each Debtor now
and hereafter arising in and to all security agreements, guaranties, leases and
other writings securing or otherwise relating to any such receivables, accounts,
contracts, contract rights, chattel paper, documents, instruments and general
intangibles, except, in every case, such receivables, accounts, contracts,
contract rights, chattel paper, documents, instruments, investment property, and
general intangibles with respect to which a breach or default would occur upon
the granting of a security interest hereunder and except, in every case, any
nontransferable liquor licenses;
(b) All inventory of each Debtor, now owned and hereafter acquired,
wherever located, including, without limitation, all merchandise, goods and
other personal property which are held for sale or lease, all raw materials,
work in process, materials used or consumed in each Debtor's business and
finished goods, all goods in which each Debtor has an interest in mass or a
joint or other interest or gifts of any kind (including goods in which each
Debtor has an interest or right as consignee), and all goods which are returned
to or repossessed by each Debtor, together with all additions and accessions
thereto and replacements therefor and products thereof and documents therefor;
(c) All equipment of each Debtor, now owned and hereafter acquired,
wherever located, and all parts thereof and all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefor,
including, without limitation, all machinery, tools, dies, blueprints,
catalogues, computer hardware and software, furniture, furnishings and fixtures;
(d) All now existing and hereafter acquired Computer Hardware and Software
Collateral, Trademark Collateral and Trade Secrets Collateral (as those terms
are defined in Paragraph 20 below) (collectively, the "Intellectual Property
Collateral");
(e) All now existing and hereafter acquired books, records, writings, data
bases, information and other property relating to, used or useful in connection
with, embodying, incorporating or referring to, any of the foregoing Collateral;
(f) All other property of each Debtor now or hereafter in the possession,
custody or control of Administrative Agent, and all property of each Debtor in
which Administrative Agent now has or hereafter acquires a security interest for
the benefit of the Secured Parties;
(g) Rights under insurance policies, letter of credit rights, and
supporting obligations, including without limitation guaranties;
(h) All now existing and hereafter acquired cash and cash equivalents held
by each Debtor not otherwise included in the foregoing Collateral; and
(i) All products and proceeds of the foregoing Collateral. Collateral
shall not include leasehold interests or any other interests in real property.
For purposes of this Agreement, the term "proceeds" includes whatever is
receivable or received when Collateral or proceeds thereof is sold, collected,
exchanged or otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes, without limitation, all rights to payment, including
return premiums, with respect to any insurance relating thereto.
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3. Obligations. The Obligations secured by this Agreement shall consist
of all Obligations of each Debtor under the Loan Documents to which it is a
party whether now existing or hereafter arising, voluntary or involuntary,
whether or not jointly owed with others, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or incurred.
4. Representations and Warranties. In addition to all representations
and warranties of each Debtor set forth in the Guaranty and any other Loan
Document to which such Debtor may be a party, which are incorporated herein by
this reference, each Debtor hereby represents and warrants for itself that:
(a) Except for the Lien in favor of Administrative Agent for the benefit
of the Secured Parties granted hereunder, Liens on new property permitted by
Section 7.02(c) of the Credit Agreement and Ordinary Course Liens, no Person has
(or, in the case of after-acquired Collateral, at the time Debtor acquires
rights therein, will have) any right, title, claim or interest (by way of
security interest or other Lien or charge) in, against or to the Collateral.
(b) All information heretofore, herein or hereafter supplied to
Administrative Agent or any Secured Party by or on behalf of Debtor with respect
to the Collateral is accurate and complete in all material respects.
(c) Debtor is lawfully possessed of ownership of the Collateral which
exists on the date hereof and has full right, title and interest in all rights
purported to be granted by it hereunder, and has full power and lawful authority
to grant the liens in and on the Collateral hereunder.
(d) This Agreement creates in favor of the Secured Parties a valid and
enforceable lien on the Collateral, securing the payment and performance of all
Obligations. Upon the filing of financing statement(s) covering the Collateral
with the appropriate filing offices, all filings and recordings necessary to
perfect such lien will have been duly made or taken.
(e) Debtor is a corporation duly organized, validly existing and in good
standing under the Laws of the state of its incorporation, has the power and
authority and the legal right to own and operate its properties, to lease the
properties it operates and to conduct its business, is duly qualified and in
good standing under the Laws of each jurisdiction where its ownership, lease or
operation of properties or the conduct of its business requires such
qualification, and is in compliance with all Laws except to the extent that
noncompliance does not have a Material Adverse Effect.
(f) Debtor has the power and authority and the legal right to make,
deliver and perform this Agreement and to authorize the execution, delivery and
performance of this Agreement. Except as contemplated herein, no consent or
authorization of, filing with, or other act by or in respect of any Governmental
Authority, is required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement. This Agreement has been duly
executed and delivered by Debtor, and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Debtor in accordance with its
terms, except as enforceability may be limited by applicable Debtor Relief Laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
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(g) The execution, delivery, and performance by Debtor of this Agreement
and compliance with the provisions hereof have been duly authorized by all
requisite action on the part of Debtor and do not and will not (i) violate or
conflict with, or result in a breach of, or require any consent, except where
such violation, conflict, breach or failure to obtain consent would not have a
Material Adverse Effect, under (A) any Organization Documents of Debtor or any
of its Subsidiaries, (B) any applicable Laws, rules, or regulations or any
order, writ, injunction, or decree of any Governmental Authority or arbitrator,
or (C) any Contractual Obligation of Debtor or any of its Subsidiaries or by
which any of them or any of their property is bound or subject, (ii) constitute
a default under any such agreement or instrument, except where such default
would not have a Material Adverse Effect, or (iii) result in, or require, the
creation or imposition of any Lien on any material portion of the properties of
Debtor or any of its Subsidiaries other than pursuant hereto.
(h) No litigation, investigation or proceeding of or before an arbitrator
or Governmental Authority is pending or, to the best knowledge of Debtor,
threatened by or against Debtor or any of its Subsidiaries or against any of
their properties or revenues which, if determined adversely, could have a
Material Adverse Effect.
(i) The execution, delivery and performance by Debtor of this Agreement
does not constitute, to the best knowledge of Debtor, a "fraudulent conveyance,"
"fraudulent obligation" or "fraudulent transfer" within the meanings of the
Uniform Fraudulent Conveyances Act or Uniform Fraudulent Transfer Act, as
enacted in California.
(j) The offices where Debtors keep their records concerning the Collateral
("Records") are located at the addresses set forth on Schedule 1 hereto.
5. Covenants and Agreements of Each Debtor. In addition to all covenants
and agreements of each Debtor set forth in any other Loan Document to which it
may be a party, which are incorporated herein by this reference, each Debtor
hereby agrees, at no cost or expense to Administrative Agent or any of the
Secured Parties:
(a) Subject to Debtor's right to make Dispositions of the type permitted
under Section 7.04 of the Credit Agreement, to do all acts that may be necessary
to maintain, preserve and protect the Collateral and the priority and perfected
nature of the security interest of Administrative Agent for the benefit of the
Secured Parties therein.
(b) Not to use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement, any other agreement with
Administrative Agent and/or the Secured Parties related hereto, or any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
each Debtor or affecting any of the Collateral or any contractual obligation
affecting any of the Collateral, except, in each case, where such unlawful use
or violations would not cause a Material Adverse Effect.
(c) Except as permitted in the definition of Ordinary Course Liens in the
Credit Agreement with respect to contested Liens, to pay promptly when due all
taxes, assessments, charges, encumbrances and obligations secured by Liens now
or hereafter imposed upon or affecting any Collateral.
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(d) To appear in and defend any action or proceeding which may affect its
title to or Administrative Agent's interest on behalf of the Secured Parties in
the Collateral.
(e) Not to surrender or lose possession of (other than to Administrative
Agent), sell, encumber, lease, rent, or otherwise dispose of or transfer any
Collateral or right or interest therein except as permitted herein or in the
other Loan Documents, and to keep the Collateral free of all levies and
security interests or other Liens or charges except as permitted by the Credit
Agreement; provided, however, that, unless an Event of Default shall have
occurred and be continuing, each Debtor may, in the ordinary course of business,
sell or lease any Collateral consisting of Inventory and any other Collateral as
permitted under Section 7.04 of the Credit Agreement.
(f) After the occurrence and during the continuance of an Event of
Default, to account fully for and promptly deliver to Administrative Agent, in
the form received, all proceeds of the Collateral received, all endorsed to
Administrative Agent or in blank, as requested by Administrative Agent, and
until so delivered all such documents, instruments, agreements and proceeds
shall be held by each Debtor in trust for Administrative Agent for the benefit
of the Secured Parties, separate from all other property of each Debtor.
(g) To keep records of the Collateral which are accurate and complete in
all material respects and to provide Administrative Agent and each of the
Secured Parties with such records and such other reports and information
relating to the Collateral as Administrative Agent or any Secured Party may
reasonably request from time to time.
(h) To give Administrative Agent 30 days prior written notice of any
change in any Debtor's chief place of business, any Debtor's state of
incorporation or legal name or trade name(s) or style(s) referred to in
Paragraph 10 below.
(i) To keep the records concerning the Collateral at the location(s)
referred to in Paragraph 10 below and not to remove such records from such
location(s) without the prior written consent of Administrative Agent.
(j) To keep the Collateral in good condition and repair and not to cause
or permit any waste or unusual or unreasonable depreciation of the Collateral.
(k) To notify Administrative Agent promptly, in reasonable detail, (i) of
any material claim made or asserted against any material portion of the
Collateral by any person; and (ii) of any event not related to the Subsidiaries'
business which is reasonably expected to have a material adverse effect on the
security interest hereunder, the value of the Collateral or the ability of the
Secured Parties to dispose of the Collateral or the rights and remedies of the
Secured Parties.
(l) At the expense of each Debtor, to promptly execute and deliver all
further instruments and documents, and take all further action that may be
necessary or, in the reasonable opinion of Administrative Agent, desirable, in
order to perfect the liens granted or purported to be granted hereby or to
enable Administrative Agent to exercise and enforce its rights and remedies
hereunder and execute and file such financing or continuation statements, or
amendments thereto, and such other instruments, endorsements or notices, as may
be necessary
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or, in the reasonable opinion of Administrative Agent, desirable, in order to
perfect and preserve the Liens granted or purported to be granted hereby.
(m) To authorize Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of each Debtor where permitted by law.
(n) To pay all filing, registration and recording fees or refiling, re-
registration and re-recording fees, and all expenses incident to the execution
and acknowledgement of this Agreement, any agreement supplemental hereto and any
instruments of further assurance, and all federal, state, county and municipal
stamp taxes and other taxes, duties, imposts, assessments and charges arising
out of or in connection with the execution and delivery of this Agreement, any
agreement supplemental hereto and any instruments of further assurance.
(p) To notify Administrative Agent upon the creation, possession or
ownership of any Collateral with respect to which the Lien of the Administrative
Agent is not automatically perfected.
(q) To keep the Collateral at the location(s) referred to in Paragraph 10
below and at new restaurants from time to time opened (provided that Borrower
shall immediately notify Administrative Agent of any new restaurant located in a
state not referred to in Paragraph 10) and, subject to Debtor's right to make
Dispositions of the type permitted under Paragraph 5(e) of this Agreement, not
to remove the Collateral from such location(s) without the prior written consent
of Administrative Agent.
6. Authorized Actions by Administrative Agent. Each Debtor hereby agrees
that:
(a) From time to time, without presentment, notice or demand, and without
affecting or impairing in any way the rights of Administrative Agent with
respect to the Collateral, the obligations of Debtors hereunder or the
Obligations, Administrative Agent may, but shall not be obligated to and shall
incur no liability to any Debtor, any Secured Party or any third party for
failure to take any action which a Debtor is obligated by this Agreement to do
and to exercise such rights and powers as a Debtor might exercise with respect
to the Collateral.
(b) To the extent permitted by applicable Law, Administrative Agent may
execute in its own name or in the name of each Debtor and file one or more
financing statements describing the Collateral in such jurisdictions as deemed
appropriate by Administrative Agent from time to time.
(c) Administrative Agent may file photostatic or other copies of financing
statements signed or authenticated by each Debtor or of this Agreement in such
jurisdictions as deemed appropriate by Administrative Agent from time to time.
(d) each Debtor hereby irrevocably appoints Administrative Agent as its
attorney-in-fact to exercise after the occurrence and during the continuance of
an Event of Default such rights and powers, including without limitation, to
collect by legal proceedings or otherwise and endorse, receive and receipt for
all dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral.
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(e) Enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for the Collateral.
(f) Insure, process and preserve the Collateral.
(g) Transfer the Collateral to its own or its nominee's name.
(h) Make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral.
(i) Subject to the provisions of Paragraph 8 below, notify any obligor on
any Collateral to make payment directly to Administrative Agent.
provided, however, that Administrative Agent may take the actions listed in
paragraphs (e) through (i), inclusive, above only after the occurrence and
during the continuance of an Event of Default.
Each Debtor hereby grants to Administrative Agent for the benefit of the
Secured Parties an exclusive, irrevocable power of attorney, with full power and
authority in the place and stead of each Debtor to take all such action
permitted under this Paragraph 6. Each Debtor agrees to reimburse
Administrative Agent upon demand for any reasonable costs and expenses,
including, without limitation, attorneys' fees, Administrative Agent may incur
while acting as each Debtor's attorney-in-fact hereunder, all of which
reasonable costs and expenses are included in the Obligations secured hereby.
It is further agreed and understood between the parties hereto that such care as
Administrative Agent gives to the safekeeping of its own property of like kind
shall constitute reasonable care of the Collateral when in Administrative
Agent's possession; provided, however, that Administrative Agent shall not be
required to make any presentment, demand or protest, or give any notice and need
not take any action to preserve any rights against any prior party or any other
person in connection with the Obligations or with respect to the Collateral.
7. Remedies. Upon the occurrence and during the continuance of an Event
of Default, Administrative Agent may, after notice to Borrower (except in the
case of paragraph (g) below) and in addition to all rights and remedies
available to Administrative Agent and the Secured Parties with respect to the
Obligations, at law, in equity or otherwise, do any one or more of the
following:
(a) Foreclose or otherwise enforce Administrative Agent's security
interest in any manner permitted by law or provided for in this Agreement.
(b) Sell, lease or otherwise dispose of any Collateral at one or more
public or private sales at Administrative Agent's place of business or any other
place or places, including, without limitation, any broker's board or securities
exchange, whether or not such Collateral is present at the place of sale, for
cash or credit or future delivery, on such terms and in such manner as
Administrative Agent may reasonably determine.
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(c) Recover from each Debtor all reasonable costs and expenses, including,
without limitation, reasonable attorneys' fees (including the allocated cost of
internal counsel), incurred or paid by Administrative Agent or any Secured Party
in exercising any right, power or remedy provided by this Agreement.
(d) Require each Debtor to assemble the Collateral and make it available
to Administrative Agent at a place to be designated by Administrative Agent.
(e) Enter onto property where any Collateral is located and take
possession thereof with or without judicial process.
(f) Prior to the disposition of the Collateral, store, process, repair or
recondition it or otherwise prepare it for disposition in any manner and to the
extent Administrative Agent deems appropriate and in connection with such
preparation and disposition, without charge, use any trademark, tradename,
copyright, patent or technical process used by each Debtor.
(g) Apply cash proceeds resulting from the collection, liquidation, sale,
lease or other disposition of the Collateral for the following purposes and in
the following order:
(i) First, to the payment of (A) all costs and expenses relating to
the sale of the Collateral and collection of amounts owing hereunder,
including reasonable attorneys' fees of the Secured Parties (including the
allocated cost of the Secured Parties' inhouse counsel), and disbursements
of the Secured Parties for services rendered in good faith in connection
therewith or in connection with any proceeding to sell if a sale if not
completed and (B) all charges, expenses and advances reasonably incurred or
made by the Secured Parties in order to protect the lien of this Agreement
or the security afforded hereby;
(ii) Second, to the payment in full of all Obligations; and
(iii) Third, the balance, if any, shall be paid to Debtors or to such
other person as shall be lawfully entitled to receive such surplus (as
determined by a court of competent jurisdiction, if such procedure is
available under applicable law).
Each Debtor shall be given ten (10) Business Days' prior notice of the time
and place of any public sale or of the time after which any private sale or
other intended disposition of Collateral is to be made, which notice each Debtor
hereby agrees shall be deemed reasonable notice thereof. Upon any sale or other
disposition pursuant to this Agreement, Administrative Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral or
portion thereof so sold or disposed of. Each purchaser at any such sale or
other disposition (including Administrative Agent) shall hold the Collateral
free from any claim or right of whatever kind, including any equity or right of
redemption of each Debtor and each Debtor specifically waives (to the extent
permitted by law) all rights of redemption, stay or appraisal which it has or
may have under any rule of law or statute now existing or hereafter adopted.
8. Collection of Collateral Payments.
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(a) Each Debtor shall, at its sole cost and expense, endeavor to obtain
payment, when due and payable, of all sums due or to become due with respect to
any Collateral ("Collateral Payments" or a "Collateral Payment"), including,
without limitation, the taking of such action with respect thereto as
Administrative Agent or any Secured Party may reasonably request, or, in the
absence of such request, as each Debtor may reasonably deem advisable; provided,
however, that each Debtor shall not, without the prior written consent of
Administrative Agent and the Secured Parties, grant or agree to any rebate,
refund, compromise or extension with respect to any Collateral Payment or accept
any prepayment on account thereof, except, in all cases referred to in this
sentence, in the ordinary course of business. After the occurrence and during
the continuance of an Event of Default, upon the request of Administrative Agent
at the direction of all the Secured Parties, each Debtor will notify and direct
any party who is or might become obligated to make any Collateral Payment, to
make payment thereof to such accounts as Administrative Agent may direct in
writing and to execute all instruments and take all action required by
Administrative Agent to ensure the rights of Administrative Agent for the
benefit of the Secured Parties in any Collateral subject to the Federal
Assignment of Claims Act of 1940, as amended.
(b) Upon the request of Administrative Agent, which request will be made
only following the occurrence and during the continuance of a Default or Event
of Default, each Debtor will, forthwith upon receipt, transmit and deliver to
Administrative Agent, in the form received, all cash, checks, drafts and other
instruments for the payment of money (properly endorsed where required so that
such items may be collected by Administrative Agent) which may be received by
each Debtor at any time as payment on account of any Collateral Payment and if
such request shall be made, until delivery to Administrative Agent, such items
will be held in trust for Administrative Agent and the Secured Parties and will
not be commingled by each Debtor with any of its other funds or property.
Thereafter, Administrative Agent is hereby authorized and empowered to endorse
the name of any Debtor on any check, draft or other instrument for the payment
of money received by Administrative Agent on account of any Collateral Payment
if Administrative Agent believes such endorsement is necessary or desirable for
purposes of collection.
(c) Each Debtor will indemnify and save harmless Administrative Agent from
and against all reasonable liabilities and expenses on account of any adverse
claim asserted against Administrative Agent relating to any moneys received by
Administrative Agent on account of any Collateral Payment except to the extent
such liabilities or expenses were caused by Administrative Agent's gross
negligence or willful misconduct, and such obligation of each Debtor shall
continue in effect after and notwithstanding the discharge of each Debtor
Obligations and the release of the security interest granted in Paragraph 2
above.
9. Additional Covenants Regarding Intellectual Property Collateral.
(a) Unless it shall either reasonably and in good faith determine that
such Collateral is of negligible economic value to each Debtor or that there is
a valid purpose to do otherwise, each Debtor will not:
(1) (i) Fail to continue to use any material portion of the
Trademark Collateral in order to maintain all of the Trademark Collateral
in full force free from any
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claim of abandonment for non-use, (ii) fail to maintain as in the past the
overall quality of products and services offered under all of the Trademark
Collateral, or (iii) do or permit any act or knowingly omit to do any act
whereby any material portion of the Trademark Collateral may lapse or
become invalid or unenforceable; or
(2) Do or permit any act or knowingly omit to do any act whereby any
material portion of the Trade Secrets Collateral may lapse or become
invalid or unenforceable or placed in the public domain except upon
expiration of the end of an unrenewable term of a registration thereof.
(b) Each Debtor shall notify Administrative Agent immediately if it knows,
or has reason to know, that any application or registration relating to any
material item of the Intellectual Property Collateral may become abandoned or
dedicated to the public or placed in the public domain or invalid or
unenforceable, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office or any court) regarding each
Debtor's ownership of any of the Intellectual Property Collateral, its right to
register the same or to keep and maintain and enforce the same.
(c) In no event shall any Debtor or any of its agents, employees,
designees or licensees file an application for the registration of any
Intellectual Property Collateral with the United States Patent and Trademark
Office, unless it promptly informs Administrative Agent, and upon request of
Administrative Agent, executes and delivers any and all agreements, instruments,
documents and papers as Administrative Agent may reasonably request to evidence
Administrative Agent's security interest in such Intellectual Property
Collateral and the goodwill and general intangibles of each Debtor relating
thereto or represented thereby.
(d) Each Debtor shall, contemporaneously herewith, execute and deliver to
Administrative Agent agreements in the form of Exhibit A hereto, and shall
execute and deliver to Administrative Agent any other document required to
acknowledge or register or perfect Administrative Agent's security interest in
any part of the Intellectual Property Collateral.
(e) Each Debtor hereby grants to the Secured Parties a present,
irrevocable, paid-up royalty-free world wide and non-exclusive license under all
Intellectual Property Collateral owned by each Debtor or licensed to each Debtor
with the right, after the occurrence and during the continuance of an Event of
Default, to sublicense to make, have made, reproduce, have reproduced, prepare
derivative works of, perform, or display (publicly or otherwise) or otherwise
use, sell, lease or distribute any products or processes, except Intellectual
Property Collateral as to which the Secured Parties have a perfected security
interest that permits exercise of the remedies set forth herein upon an Event of
Default. After the occurrence and during the continuance of an Event of
Default, the Secured Parties shall have the right to sublicense (with the right
of any sublicensee to grant further sublicenses) or unconditionally assign such
license without each Debtor's consent, limited only in the case of licenses to
each Debtor of intellectual property owned by unaffiliated third parties to the
extent permitted in the applicable license. Such license may be subject to the
payment of royalties by each Debtor to third parties.
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10. Place of Business; Collateral Location; Records Location. Borrower
represents that its chief place of business is at its address set forth on
Schedule 10.02 to the Credit Agreement. Each other Debtor represents that its
chief place of business is as set forth on Schedule 1 attached hereto. All
Debtors represent that the only trade name(s) currently used by them are set
forth on Schedule 1; and that, except as otherwise disclosed to Administrative
Agent in writing on or prior to the date hereof, the Collateral and each
Debtor's records concerning the Collateral are located at the locations listed
on Schedule 1.
11. Waiver of Hearing. Each Debtor expressly waives any constitutional or
other right to a judicial hearing prior to the time Administrative Agent takes
possession or disposes of the Collateral upon the occurrence of an Event of
Default.
12. Cumulative Rights. The rights, powers and remedies of Administrative
Agent and any of the Secured Parties under this Agreement shall be in addition
to all rights, powers and remedies given to Administrative Agent and any of the
Secured Parties by virtue of any statute or rule of law, the Credit Agreement,
the Loan Documents or any other agreement, all of which rights, powers and
remedies shall be cumulative and may be exercised successively or concurrently
without impairing Administrative Agent's and any of the Secured Parties'
security interest in the Collateral.
13. Waiver. Any forbearance or failure or delay by Administrative Agent
in exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Administrative Agent or any of the
Secured Parties shall continue in full force and effect until such right, power
or remedy is specifically waived in a writing executed by Administrative Agent
or such other Secured Party, as applicable. Each Debtor waives any right to
require any Secured Party to proceed against any person or to exhaust any
Collateral or to pursue any remedy in such Secured Party's power.
14. Setoff. Each Debtor agrees that each Secured Party may exercise its
rights of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
15. Continuing Assignment and Security Interest; Transfer of Obligations.
(a) This Agreement shall create a continuing assignment of and security
interest in the Collateral and shall remain in full force and effect until
payment in full of all Obligations, be binding upon each Debtor, their
successors and assigns, and inure, together with the rights and remedies of
Secured Parties hereunder, to the benefit of Secured Parties and their
successors, transferees and assigns.
(b) To the extent permitted in the Credit Agreement, Administrative Agent
may assign or otherwise transfer its rights and obligations under the Loan
Documents to any other person or entity, and such other person or entity shall
thereupon become vested with all the benefits in respect thereof granted to
Administrative Agent herein or otherwise, all as provided in, to the extent
provided in, and to the extent set forth in, the Credit Agreement. No Debtor
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of Administrative Agent.
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16. Attorney Costs and Expenses. Each Debtor jointly and severally agrees
(a) to pay or reimburse Administrative Agent and each other Secured Party for
all reasonable costs and expenses incurred in connection with the enforcement or
attempted enforcement, or preservation of any rights under any this Agreement,
and any other documents prepared in connection herewith or therewith, or in
connection with any refinancing, or restructuring of any such documents in the
nature of a "workout" or of any insolvency or bankruptcy proceeding, including
reasonable Attorney Costs. The foregoing costs and expenses shall include all
reasonable search, filing, recording, and appraisal charges and fees and taxes
related thereto, and other out-of-pocket expenses incurred by Secured Parties
and the cost of independent public accountants and other outside experts
retained by Secured Parties. Any amount payable by Borrower under this Section
shall bear interest from the 30th day following the date of demand for payment
at the Default Rate, unless waived by Administrative Agent. The agreements in
this Section shall survive repayment of all Obligations.
17. Appointment of Administrative Agent. Pursuant to Section 9 of the
Credit Agreement, each Secured Party has appointed Administrative Agent as its
agent under the Loan Documents (as defined in the Credit Agreement to include,
without limitation, this Agreement), and Administrative Agent has accepted such
appointment. Administrative Agent shall act as secured party, agent, bailee and
custodian for the exclusive benefit of the Secured Parties with respect to the
Collateral (as defined below). Administrative Agent agrees that Administrative
Agent will act with respect to the Collateral for the exclusive benefit of the
Secured Parties and is not, and shall not at any time in the future be, in any
manner or to any extent, subject to the direction or control of each Debtor
except as expressly permitted hereunder, under the other Loan Documents or as
required by law.
18. Additional Debtors. From time to time, additional Subsidiaries of
Borrower may become parties hereto as additional Debtors (each, an "Additional
Debtor"), by executing and delivering to the Administrative Agent a Joinder
Agreement substantially in the form of Exhibit I to the Credit Agreement,
accompanied by a supplement to Schedule 1 hereto and such other documentation as
Administrative Agent may reasonably require in connection therewith, wherein
such Additional Debtors agree to become a party hereto and to be bound hereby.
Upon delivery of such Joinder Agreement to and acceptance thereof by
Administrative Agent, notice of which is hereby waived by Debtors, each such
Additional Debtor shall be as fully a party hereto as if such Additional Debtor
were an original signatory hereto. Each Additional Debtor shall be deemed to
have made the representations and warranties set forth in Paragraph 2 of this
Agreement as of the date of its joinder. Each Debtor expressly agrees that its
Secured Obligations and the Liens upon its property granted herein shall not be
affected or diminished by the addition or release of Additional Debtors
hereunder, nor by any election of Secured Parties not to cause any other
Subsidiary of Borrower to become an Additional Debtor hereunder. This Agreement
shall be fully effective as to any Debtor who is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Debtor hereunder.
19. Extent of Obligations. Each Debtor hereby agrees that its obligations
hereunder are independent of the obligations of each other Debtor, and a
separate action or actions may be brought and prosecuted against each Debtor
whether or not action is brought against another Debtor and whether or not any
Debtor is joined in any such action or actions. Each Debtor hereby further
agrees that from time to time, without notice or demand and without affecting or
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impairing in any way the rights of the Secured Parties with respect to the
Collateral or the obligations of each Debtor hereunder, the Secured Parties may
(a) renew, compromise, extend, accelerate or change the time for payment or the
terms of the Obligations, or any part thereof, (b) exchange, enforce, waive,
release, apply and direct the order or manner of sale of any and all collateral
for the obligations, including, without limitation, the Collateral, all as
provided herein, and/or (c) release or substitute any Debtor, endorsers and
guarantors. Each Debtor waives any right to require the Secured Parties to (i)
proceed against any other Debtor, or (ii) proceed against or exhaust any
security of any other Debtor held for its obligations, or (iii) pursue any other
remedy whatsoever. Each Debtor waives any defense (other than payment in full
of the Obligations) based upon or arising out of any defense of any other
Debtor, including, without limitation, any defense based on or arising out of
the disability or the cessation of liability of any Debtor or any other person,
or the unenforceability of any other Debtor's obligations under any Loan
Document or any part thereof from any cause. Each Debtor agrees that the
Secured Parties may proceed against all or any portion of the Collateral for all
or any portion of the Obligations, as the Secured Parties may elect, without
regard to marshalling. Each Debtor acknowledges and agrees that the Secured
Parties may foreclose on any security held by it by one or more judicial or
nonjudicial sales, or exercise any right or remedy it may have against any other
Debtor or security held by it for the Obligations, without affecting or
impairing in any way the rights of the Secured Parties with respect to the
Collateral or the obligations of each Debtor hereunder. Each Debtor waives any
defense arising out of any such election by the Secured Parties, even though
such election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of each Debtor against any other Debtor or
any such security. Until all Obligations shall have been paid in full, each
Debtor shall not have any right of subrogation, and each Debtor waives any right
to enforce any remedy which the Secured Parties now have or may hereafter have
against each other Debtor and Subsidiary, and waives any benefit of, and any
right to participate in any security now or hereafter held by the Secured
Parties. Each Debtor further assumes all responsibility for being and keeping
itself informed of each other Debtor's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Obligations
and the nature, scope and extent of the risk which each Debtor assumes and
incurs hereunder, and agrees that the Secured Parties shall have no duty to
advise each Debtor of information known to them regarding such circumstances or
risks.
20. Intellectual Property Collateral. For purposes of this Agreement, the
following capitalized terms shall have the following meanings:
"Computer Hardware and Software Collateral" means all of each Debtor's
right, title and interest in all now existing and hereafter created or acquired:
(a) Computer and other electronic data processing hardware, integrated
computer systems, central processing units, memory units, display terminals,
printers, features, computer elements, card readers, tape drives, hard and soft
disk drives, cables, electrical supply hardware, generators, power equalizers,
accessories and all peripheral devices and other related computer hardware;
(b) Except to the extent that the grant of a security interest hereunder
would cause a breach or default thereunder, software programs (including both
source code, object code and all
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related applications and data files), whether owned, licensed or leased,
designed for use on the computers and electronic data processing hardware
described in subparagraph (a) above;
(c) Firmware associated therewith;
(d) Documentation (including flow charts, logic diagrams, manuals, guides
and specifications) with respect to such hardware, software and firmware
described in subparagraph (a) through (c) above; and
(e) Rights with respect to all of the foregoing, including, without
limitation, any and all of each Debtor's copyrights, licenses, options,
warranties, service contracts, program services, test rights, renewal rights and
indemnifications and any substitutions, replacements, additions or model
conversions of any of the foregoing.
"Trademark Collateral" means all of each Debtor's right, title and interest
in now existing and hereafter created or acquired:
(a) Trademarks, trade names, corporate names, business names, fictitious
business names, trade styles, service marks, certification makers, collective
marks, logos, other source of business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles of
a like nature (all of the foregoing items in this clause (a) being collectively
called a "Trademark"), now existing in the United States or hereafter adopted or
acquired, whether currently in use or not, all registrations and recordings
thereof and all applications in connection therewith, whether pending or in
preparation for filing, including registrations, recordings and applications in
the United States Patent and Trademark Office;
(b) Trademark licenses;
(c) Reissues, extensions or renewals of any of the items described in
clauses (a) and (b);
(d) The goodwill of the business of each Debtor connected with the use of,
and symbolized by the items described in, clauses (a) and (b), and
(e) Proceeds of, and rights of each Debtor associated with, the foregoing,
including any claim by each Debtor against third parties for past, present or
future infringement or dilution of any Trademark, Trademark registration or
Trademark license, or for any injury to the goodwill associated with the use of
any such Trademark or for breach or enforcement of any Trademark license.
"Trade Secrets Collateral" means common law and statutory trade secrets and
all other confidential or proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
each Debtor (all of the foregoing being collectively called a "Trade Secret"),
whether or not such Trade Secret has been reduced to a writing or other tangible
form including all documents and things embodying, incorporating or referring in
any way to such Trade Secret, all Trade Secret licenses, including the right to
sue for and to enjoin and to collect damages for the actual or threatened
misappropriation of any Trade Secret and for the breach or enforcement of any
such Trade Secret license.
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EXECUTED as of the day and year first above written.
"Debtors"
CALIFORNIA PIZZA KITCHEN, INC.
By H.G. Carrington, Jr.
---------------------------------------
H. G. Carrington, Jr.
Executive Vice President,
Chief Financial Officer and Secretary
|
CPK MANAGEMENT COMPANY
By H.G. Carrington, Jr.
---------------------------------------
H. G. Carrington, Jr.
Chief Financial Officer
and Secretary
|
CALIFORNIA PIZZA KITCHEN
OF ILLINOIS, INC.
By Larry S. Flax
---------------------------------------
Larry S. Flax
Secretary and Treasurer
|
BANK OF AMERICA, N.A.,
as Administrative Agent
By: Patrick W. Zetzman
Patrick W. Zetzman
Vice President
-15-
EXHIBIT 10.4
SUPPLEMENTAL SECURITY AGREEMENT
(TRADEMARKS)
THIS SUPPLEMENTAL SECURITY AGREEMENT (the "Supplemental Trademark
Agreement") is made and dated this 29th day of October, 1999 by and between CPK
Management Company, a California corporation (each, a "Debtor" and collectively,
"Debtors"), and BANK OF AMERICA, N.A., a national banking association, as
Administrative Agent (in such capacity, "Administrative Agent") for itself,
Issuing Lender, Lenders and Indemnitees under (and as that term and capitalized
terms not otherwise defined herein are defined in) that certain Credit Agreement
dated as of October 29, 1999 among California Pizza Kitchen, Inc., a California
corporation ("Borrower"), Lenders from time to time party thereto, Bank of
America, N.A., as Administrative Agent, Swing Line Lender and Issuing Lender and
Bankers Trust Company, as Documentation Agent (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, the
"Agreement;" the terms defined therein being used herein as therein defined).
RECITALS
A. Pursuant to that certain Security Agreement dated as of even date
herewith between each Debtor and Administrative Agent (the "Security
Agreement"), each Debtor has granted to Administrative Agent a perfected
security interest in certain assets of each Debtor, including, without
limitation, all patents, trademarks, service marks, trade names, copyrights,
goodwill, licenses and other intellectual property owned by each Debtor or used
in each Debtor's business.
B. The parties hereto desire to supplement the Security Agreement as it
relates to certain of such intellectual property consisting generally of
trademarks and to create hereby a document appropriate for recordation in the
Patent and Trademark Office of the United States (the "PTO").
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Confirmation of Grant of Security Interest. Each Debtor hereby
confirms the grant of security interest, pledge, assignment and mortgage set
forth in the Security Agreement and acknowledges that the Collateral described
therein includes, without limitation, all of each Debtor's right, title and
interest in the following (the "Trademark Collateral"):
(a) All trademarks, service marks, designs, logos, indicia, tradenames,
corporate names, company names, business names, fictitious business names trade
styles and other source, product and business identifiers pertaining to the
products, services and business of each Debtor in the United States, whether now
owned or hereafter acquired, including, without limitation, the trademarks
specifically described on Schedule I attached hereto, as the same may be amended
or replaced from time to time with the consent of Administrative Agent;
1
(b) All now existing and hereafter arising registrations and applications
for registration relating to any of the foregoing, all renewals and extensions
thereof in the United States in perpetuity, and all rights to make such
applications and to renew and extend the same;
(c) All now existing and hereafter arising rights and licenses to make,
have made, use and/or sell any items disclosed and claimed by any of the
foregoing;
(d) All now existing and hereafter arising right (but not the obligation)
to register claims under any state or federal trademark law or regulation;
(e) All now existing and hereafter arising rights, claims and interests
under licensing or other contracts pertaining to any of the foregoing to the
extent such rights are assignable;
(f) All now existing and hereafter arising documents, instruments and
agreements which reveal the name and address of sources of supply, distribution
methods and all terms of purchase, rental, license or use and delivery for all
materials, products and components used in connection with any of the foregoing;
(g) All now existing and hereafter arising specifications as to and quality
control manuals used in connection with the operations conducted under the name
of or in connection with the foregoing;
(h) All now existing and hereafter arising goodwill associated with any of
the foregoing;
(i) All now existing and hereafter arising right (but not the obligation)
to sue or bring opposition or cancellation proceedings in the name of each
Debtor or Administrative Agent for past, present and future infringements of any
of the foregoing;
(j) All products and proceeds of any of the foregoing.
2. Additional Representation and Warranty and Covenant. In addition to
all representations and warranties, covenants and agreements set forth in the
Security Agreement, each Debtor hereby:
(a) Represents and warrants that Schedule I attached hereto sets forth an
accurate and complete list of all trademarks owned by each Debtor which are
registered with the PTO as of the date hereof; and
(b) Agrees to promptly notify Administrative Agent in writing of any
additional trademarks registered with the PTO of which each Debtor becomes the
owner and to amend Schedule I accordingly.
3. No Present Assignment. Neither the Security Agreement, this
Supplemental Trademark Agreement nor any other document, instrument or agreement
creates or is intended to create a present assignment of the Trademark
Collateral. Subject to the rights of Administrative Agent under the Security
Agreement and this Supplemental Trademark Agreement, it is the intention of the
parties hereto that each Debtor continue to own the Trademark Collateral and
2
that upon the indefeasible payment and performance in full of each Debtor
Obligations, the rights of Administrative Agent under the Security Agreement and
this Supplemental Trademark Agreement in and to the Trademark Collateral shall
be released and terminated.
4. Relationship to Security Agreement. The Trademark Collateral shall
constitute Collateral for all purposes of the Security Agreement and the other
Loan Documents and after the occurrence and during the continuance of an Event
of Default Administrative Agent shall have all rights, powers and remedies with
respect to the Trademark Collateral to the same extent as they have with respect
to other Collateral. Reference is hereby made to the Security Agreement, the
terms and conditions of which are incorporated herein by this reference.
EXECUTED as of the day and year first above written.
CPK MANAGEMENT COMPANY
By /s/ H.G. Carrington, Jr.
------------------------------
H. G. Carrington, Jr.
Chief Financial Officer
and Secretary
|
BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Patrick W. Zetzman
-----------------------------
Patrick W. Zetzman
Vice President
|
3
EXHIBIT 10.5
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, this "Agreement"), dated as of
October 29, 1999 is made by the signatories hereto and each Person becoming a
party hereto identified as a "Debtor" (each, a "Debtor" and collectively,
"Debtors"), in favor of Bank of America, N.A. in its capacity as administrative
agent (in such capacity, "Administrative Agent") or Lenders, Issuing Lender,
Indemnitees and itself (collectively, the "Secured Parties") under the Credit
Agreement referred to below.
RECITALS
A. Pursuant to that certain Credit Agreement dated as of October 29, 1999
among California Pizza Kitchen, Inc., a California corporation ("Borrower"),
Lenders from time to time party thereto, Bank of America, N.A., as
Administrative Agent, Swing Line Lender and Issuing Lender and Bankers Trust
Company, as Documentation Agent (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the "Credit Agreement;" the
terms defined therein being used herein as therein defined), Lenders and Issuing
Lender are making certain credit facilities available to Borrower.
B. Concurrently herewith, certain Debtors are executing and delivering to
Administrative Agent a Master Subsidiary Guaranty dated as of even date herewith
(as amended from time to time, the "Master Subsidiary Guaranty") guarantying the
Obligations.
C. It is a requirement of the Credit Agreement that Debtors enter into
this Agreement pledging their direct and indirect beneficial ownership interests
in all of their Subsidiaries, and that if Borrower or any of its Domestic
Subsidiaries become owners of additional equity interests in new or existing
Subsidiaries after the date hereof, it pledge its equity interests therein to
the extent required herein to Administrative Agent.
D. Each Debtor expects to realize direct and indirect benefits as a result
of the availability of the aforementioned credit facilities.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Grant of Security Interest. Each Debtor hereby pledges, assigns and
grants to Administrative Agent, for the benefit of the Secured Parties, a
security interest in the property described in Paragraph 2 below (collectively
and severally, the "Collateral") to secure payment and performance of the
Obligations.
2. Collateral. The Collateral shall consist of all right, title and
interest of each Debtor in and to the following:
(a) all shares and direct or indirect partnership, membership, joint
venture and other equity and beneficial interests in the Subsidiaries
(collectively, the "Ownership Interests")
1
described in Schedule 1 and all additional Ownership Interests in Subsidiaries
now owned or from time to time hereafter acquired by such Debtor in any manner;
(b) all certificates and instruments representing or evidencing the
Ownership Interests;
(c) all rights of such Debtor now existing or from time to time arising
under any partnership, articles of organization, operating, joint venture or
other organizational agreements and instruments relating to any Subsidiaries
(collectively, the "Governing Agreements"), including without limitation, (i)
all rights as a general partner, limited partner, member, joint venturer or
other equity or beneficial holder; (ii) all right, title and interest in any
insurance, indemnity, warranty or guaranty with respect to any Governing
Agreements; (iii) all tort and other claims for damages arising out of a breach
of or default under any Governing Agreements; and (iv) all voting rights, put
rights, exchange rights, any other rights and all rights to payment of any kind,
including cash and non-cash distributions and redemptions, instruments and other
property, from time to time received, receivable or otherwise distributed on
account of, or in exchange for Ownership Interests or the Governing Agreements
(collectively, the "Rights" and individually, a "Right");
(d) All now existing and hereafter acquired books, records, writings, data
bases, information and other property relating to, used or useful in connection
with, embodying, incorporating or referring to, any of the foregoing Collateral;
and
(e) All products and proceeds of the foregoing Collateral. For purposes of
this Agreement, the term "proceeds" includes whatever is receivable or received
when Collateral or proceeds thereof is sold, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes,
without limitation, all rights to payment, including return premiums, with
respect to any insurance relating thereto.
All certificates or instruments representing or evidencing the Collateral
(collectively, the "Pledged Collateral") shall be delivered to and held by or on
behalf of Administrative Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to Administrative Agent.
3. Obligations. The Obligations secured by this Agreement shall consist
of all Obligations of each Debtor under the Loan Documents to which it is a
party whether now existing or hereafter arising, voluntary or involuntary,
whether or not jointly owed with others, direct or indirect, absolute or
contingent, liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or incurred.
4. Representations and Warranties. In addition to all representations and
warranties of each Debtor set forth in the Guaranty and any other Loan Document
to which such Debtor may be a party, which are incorporated herein by this
reference, each Debtor hereby represents and warrants that:
(a) Except as disclosed on Schedule 3 hereto, Liens in favor of
Administrative Agent for the benefit of the Secured Parties granted hereunder
and Ordinary Course Liens, no Person
2
has (or, in the case of after-acquired Collateral, at the time each Debtor
acquires rights therein, will have) any right, title, claim or interest (by way
of security interest or other Lien or charge) in, against or to the Collateral.
(b) All information heretofore, herein or hereafter supplied to
Administrative Agent or any Secured Party by or on behalf of each Debtor with
respect to the Collateral is accurate and complete in all material respects.
(c) Each Debtor is lawfully possessed of ownership of the Collateral which
exists on the date hereof and has full right, title and interest in all rights
purported to be granted by it hereunder, and has full power and lawful authority
to grant the liens in and on the Collateral hereunder.
(d) This Agreement creates in favor of the Secured Parties a valid and
enforceable lien on the Collateral, securing the payment and performance of all
Obligations. Upon Administrative Agent taking possession of all certificates or
instruments representing or evidencing the Collateral and the filing of
financing statement(s) covering the Collateral with the appropriate filing
offices, all filings and other actions necessary to perfect such lien will have
been duly made or taken.
(e) Each Debtor which is a corporation is duly organized, validly existing
and in good standing under the Laws of the state of its incorporation or
organization, has the power and authority and the legal right to own and operate
its properties, to lease the properties it operates and to conduct its business,
is duly qualified and in good standing under the Laws of each jurisdiction where
its ownership, lease or operation of properties or the conduct of its business
requires such qualification, and is in compliance with all Laws except to the
extent that noncompliance does not have a Material Adverse Effect.
(f) Debtor has the power and authority and the legal right to make, deliver
and perform this Agreement and to authorize the execution, delivery and
performance of this Agreement. Except as contemplated herein, no consent or
authorization of, filing with, or other act by or in respect of any Governmental
Authority, is required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement. This Agreement has been duly
executed and delivered by Debtor, and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Debtor in accordance with its
terms, except as enforceability may be limited by applicable Debtor Relief Laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
(g) With respect to each Debtor which is a corporation, the execution,
delivery, and performance by Debtor of this Agreement and compliance with the
provisions hereof have been duly authorized by all requisite action on the part
of Debtor and do not and will not (i) violate or conflict with, or result in a
breach of, or require any consent, except where such violation, conflict, breach
or failure to obtain consent would not have a Material Adverse Effect, under (A)
any Organization Documents of Debtor or any of its Subsidiaries, (B) any
applicable Laws, rules, or regulations or any order, writ, injunction, or decree
of any Governmental Authority or arbitrator, or (C) any Contractual Obligation
of Debtor or any of its Subsidiaries or by which any of them or any of their
property is bound or subject, (ii) constitute a default under any such
3
agreement or instrument, except where such default would not have a Material
Adverse Effect, or (iii) result in, or require, the creation or imposition of
any Lien on any material portion of the properties of Debtor or any of its
Subsidiaries other than pursuant hereto.
(h) No litigation, investigation or proceeding of or before an arbitrator
or Governmental Authority is pending or, to the best knowledge of Debtor,
threatened by or against Debtor or any of its Subsidiaries or against any of
their properties or revenues which, if determined adversely, could have a
Material Adverse Effect.
(i) The execution, delivery and performance by Debtor of this Agreement
does not constitute, to the best knowledge of Debtor, a "fraudulent conveyance,"
"fraudulent obligation" or "fraudulent transfer" within the meanings of the
Uniform Fraudulent Conveyances Act or Uniform Fraudulent Transfer Act, as
enacted in California.
(j) The office where each Debtor keeps its records concerning the
Collateral ("Records") is located at the address for notices for Borrower set
forth on Schedule 10.02 to the Credit Agreement.
(k) The Collateral constituting shares has been duly authorized and validly
issued and is fully paid and nonassessable.
(l) The Collateral constitutes all of the Ownership Interests in all active
Domestic Subsidiaries held by Debtor and not less than 65% of the Ownership
Interests in Foreign Subsidiaries. Except for the intended acquisition of all
remaining general partnership interests in CPK I, Limited Partnership and up to
all partnership interests in CPK Water Tower Limited Partnership and as
disclosed on Schedule 3 hereto, there are no existing options, warrants, calls
or commitments of any character whatsoever relating to any Collateral.
5. Covenants and Agreements of Each Debtor. In addition to all covenants
and agreements of each Debtor set forth in any other Loan Document to which it
may be a party, which are incorporated herein by this reference, each Debtor
hereby agrees, at no cost or expense to Administrative Agent or any of the
Secured Parties:
(a) To do all acts that may be necessary to maintain, preserve and protect
the Collateral and the priority and perfected nature of the security interest of
Administrative Agent for the benefit of the Secured Parties therein.
(b) Not to use or permit any Collateral to be used unlawfully or in
violation of any provision of this Security Agreement, any other agreement with
Administrative Agent and/or the Secured Parties related hereto, or any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
each Debtor or affecting any of the Collateral or any contractual obligation
affecting any of the Collateral except, in each case, where such unlawful use or
violations would not cause a Material Adverse Effect.
(c) Except as permitted in the definition of Ordinary Course Liens in the
Credit Agreement with respect to contested Liens, to pay promptly when due all
taxes, assessments, charges, encumbrances and obligations secured by Liens now
or hereafter imposed upon or affecting any Collateral.
4
(d) To appear in and defend any action or proceeding which may affect its
title to or Administrative Agent's interest on behalf of the Secured Parties in
the Collateral.
(e) Not to surrender or lose possession of (other than to Administrative
Agent), sell, encumber, lease, rent, or otherwise dispose of or transfer any
Collateral or right or interest therein except as permitted herein or in the
other Loan Documents, and to keep the Collateral free of all levies and security
interests or other Liens or charges except as permitted by the Credit Agreement.
(f) To account fully for and after the occurrence and during the
continuance of an Event of Default, promptly deliver to Administrative Agent, in
the form received, all certificates and instruments constituting Collateral
hereunder and all proceeds of the Collateral received, all endorsed to
Administrative Agent or in blank, as requested by Administrative Agent, and
until so delivered all such documents, instruments, agreements and proceeds
shall be held by each Debtor in trust for Administrative Agent for the benefit
of the Secured Parties, separate from all other property of each Debtor.
(g) To keep records of the Collateral which are accurate and complete in
all material respects and to provide Administrative Agent and each of the
Secured Parties with such records and such other reports and information
relating to the Collateral as Administrative Agent or any Secured Party may
reasonably request from time to time.
(h) To give Administrative Agent 30 days prior written notice of any change
in any Debtor's chief place of business, any Debtor's state of incorporation or
legal name or trade name(s) or style(s) referred to in Paragraph 10 below.
(i) To keep the records concerning the Collateral at the location(s)
referred to in Paragraph 10 below and not to remove such records from such
location(s) without the prior written consent of Administrative Agent.
(j) To keep the Collateral in good condition and repair and not to cause or
permit any waste or unusual or unreasonable depreciation of the Collateral.
(k) To cause each Subsidiary not to issue any Ownership Interests in
addition to or in substitution for the Collateral unless pledged as Collateral
hereunder, and to not sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral subject to Debtor's right to make
Dispositions of the type permitted under Section 7.04 of the Credit Agreement.
(l) To notify Administrative Agent promptly, in reasonable detail, (i) of
any material claim made or asserted against any material portion of the
Collateral by any person; (ii) of any event not related to the Subsidiaries'
business which is reasonably expected to have a Material Adverse Effect on the
security interest hereunder, the value of the Collateral or the ability of the
Secured Parties to dispose of the Collateral or the rights and remedies of the
Secured Parties; and (iii) any distributions of material non-cash property by
any of the Debtors or their Subsidiaries.
(m) At the expense of each Debtor, to promptly execute and deliver all
further instruments and documents, and take all further action that may be
necessary, or that Administrative Agent may reasonably request, in order to
perfect the liens granted or purported
5
to be granted hereby or to enable Administrative Agent to exercise and enforce
its rights and remedies hereunder and execute and file such financing or
continuation statements, or amendments thereto, and such other instruments,
endorsements or notices, as may be necessary, or as Administrative Agent may
reasonably request, in order to perfect and preserve the Liens granted or
purported to be granted hereby.
(n) To authorize Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Collateral without the signature of each Debtor where permitted by law.
(o) To pay all filing, registration and recording fees or refiling, re-
registration and re-recording fees, and all expenses incident to the execution
and acknowledgement of this Agreement, any agreement supplemental hereto and any
instruments of further assurance, and all federal, state, county and municipal
stamp taxes and other taxes, duties, imposts, assessments and charges arising
out of or in connection with the execution and delivery of this Agreement, any
agreement supplemental hereto and any instruments of further assurance.
(p) Upon obtaining any additional Ownership Interests in any Subsidiary or
any other Collateral, to promptly deliver to Administrative Agent a duly
executed Agreement Supplement in substantially the form of Schedule 2 hereto (a
"Pledge Agreement Supplement") identifying such additional Ownership Interests;
provided, however that not more than 65% of the Ownership Interests of any
Subsidiary shall be required to be pledged hereunder. Such Debtor shall deliver
any certificates or instruments representing or evidencing such additional
Collateral, accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance reasonably satisfactory to Administrative
Agent. Each Debtor hereby authorizes Administrative Agent to attach each Pledge
Agreement Supplement to this Agreement and agrees that all shares listed on any
Agreement Supplement delivered to Administrative Agent shall for all purposes
hereunder constitute Collateral. The failure of any Debtor to comply with this
covenant or Administrative Agent to attached a Pledge Agreement Supplement shall
not limit or otherwise impair the security interest of the Secured Parties in
such additional Ownership Interests.
(q) Not to designate, or consent to the designation of, any other Person
(including, without limitation, an Affiliate) to be a successor or additional
general partner of an Subsidiary who is not a Debtor.
(r) With respect to each Debtor which is a party to a Governing Agreement:
(i) to perform and observe all material terms and provisions of each
Governing Agreement to be performed or observed by such Debtor, maintain
such Governing Agreement in full force and effect in all material respects,
enforce such Governing Agreement in accordance with its terms in all
material respects, and take all such action to such end as may be from time
to time reasonably requested by Administrative Agent;
(ii) to furnish to Administrative Agent promptly upon receipt thereof,
copies of all material notices, requests and other documents received by
any Debtor under or
6
pursuant to any Governing Agreement, and from time to time furnish to
Administrative Agent such information and reports regarding the Collateral
as Administrative Agent may reasonably request; or
(iii) not to amend or waive any material provision of any Governing
Agreements or restate or substitute any Governing Agreements with another
agreement therefor in a way inconsistent with the terms of this Agreement
or which materially adversely affects the rights of the Secured Parties in
or with respect to thereto.
6. Authorized Actions by Administrative Agent. Each Debtor hereby agrees
that:
(a) From time to time, without presentment, notice or demand, and without
affecting or impairing in any way the rights of Administrative Agent with
respect to the Collateral, the obligations of Debtors hereunder or the
Obligations, Administrative Agent may, but shall not be obligated to and shall
incur no liability to any Debtor, any Secured Party or any third party for
failure to take any action which a Debtor is obligated by this Security
Agreement to do and to exercise such rights and powers as a Debtor might
exercise with respect to the Collateral.
(b) Administrative Agent may execute in its own name or in the name of each
Debtor and file one or more financing statements describing the Collateral in
such jurisdictions as deemed appropriate by Administrative Agent from time to
time.
(c) Administrative Agent may file photostatic or other copies of financing
statements signed or authenticated by each Debtor or of this Security Agreement
in such jurisdictions as deemed appropriate by Administrative Agent from time to
time.
(d) Each Debtor hereby irrevocably appoints Administrative Agent as its
attorney-in-fact to exercise after the occurrence and during the continuance of
an Event of Default such rights and powers, including without limitation, to
collect by legal proceedings or otherwise and endorse, receive and receipt for
all dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral.
(e) Enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender, accept,
hold or apply other property in exchange for the Collateral.
(f) Insure, process and preserve the Collateral.
(g) Transfer the Collateral to its own or its nominee's name.
(h) Make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral.
provided, however, that Administrative Agent may take the actions listed in
paragraphs (e) through (h), inclusive, above only after the occurrence and
during the continuance of an Event of Default.
7
Each Debtor hereby grants to Administrative Agent for the benefit of the
Secured Parties an exclusive, irrevocable power of attorney, with full power and
authority in the place and stead of each Debtor to take all such action
permitted under this Paragraph 6. Each Debtor agrees to reimburse
Administrative Agent upon demand for any reasonable costs and expenses,
including, without limitation, attorneys' fees, Administrative Agent may incur
while acting as each Debtor's attorney-in-fact hereunder, all of which
reasonable costs and expenses are included in the Obligations secured hereby.
It is further agreed and understood between the parties hereto that such care as
Administrative Agent gives to the safekeeping of its own property of like kind
shall constitute reasonable care of the Collateral when in Administrative
Agent's possession; provided, however, that Administrative Agent shall not be
required to make any presentment, demand or protest, or give any notice and need
not take any action to preserve any rights against any prior party or any other
person in connection with the Obligations or with respect to the Collateral.
7. Remedies. Upon the occurrence and during the continuance of an Event
of Default, Administrative Agent may, after notice to Borrower (except in the
case of paragraph (g) below)and in addition to all rights and remedies available
to Administrative Agent and the Secured Parties with respect to the Obligations,
at law, in equity or otherwise, do any one or more of the following:
(a) Foreclose or otherwise enforce Administrative Agent's security interest
in any manner permitted by law or provided for in this Agreement.
(b) Sell, lease or otherwise dispose of any Collateral at one or more
public or private sales at Administrative Agent's place of business or any other
place or places, including, without limitation, any broker's board or securities
exchange, whether or not such Collateral is present at the place of sale, for
cash or credit or future delivery, on such terms and in such manner as
Administrative Agent may reasonably determine.
(c) Recover from each Debtor all reasonable costs and expenses, including,
without limitation, reasonable attorneys' fees (including the allocated cost of
internal counsel), incurred or paid by Administrative Agent or any Secured Party
in exercising any right, power or remedy provided by this Agreement.
(d) Sell the Collateral, or any part thereof subject to applicable
regulatory and legal requirements, including the requirement that any such
purchaser be entitled to beneficially own shares in a Subchapter S corporation,
if applicable.
(e) Participate in any recapitalization, reclassification, reorganization,
consolidation, redemption, stock split, merger, or liquidation of any issuer of
securities that constitute Collateral, and in connection therewith deposit or
surrender control of the Collateral, accept money or other property in exchange
for the Collateral, and take such action as deemed proper by the Secured Parties
in connection therewith, and any other money or property received in exchange
for the Collateral shall be applied to satisfy the Obligations or held by the
Secured Parties thereafter as Collateral pursuant to the provisions hereof.
8
(f) Exercise any and all rights and remedies of, as applicable, a general
partner, limited partner, member, joint venturer or other equity or beneficial
holder of the Subsidiaries or otherwise in respect of the Collateral, including,
without limitation, any and all rights to demand or otherwise require payment of
any amounts under, or performance of any provisions of, any Governing Agreement
and any and all rights to manage the operation of any Subsidiary, as the case
may be. The exercise by any Secured Party of any of the rights of a general
partner of any Subsidiary shall not cause any Secured Party to become subject to
any of the liabilities or obligations of a general partner thereof; and each
Debtor which is a general partner hereby agrees to indemnify each Secured Party
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against such
Secured Party in any way relating to or arising out of the Collateral in any
action taken by such Secured Party, with respect thereto except to the extent
caused by such Secured Party's gross negligence or willful misconduct.
(g) Apply cash proceeds resulting from the collection, liquidation, sale,
lease or other disposition of the Collateral for the following purposes and in
the following order:
(i) First, to the payment of (A) all costs and expenses relating to
the sale of the Collateral and collection of amounts owing hereunder,
including reasonable attorneys' fees of the Secured Parties (including the
allocated cost of the Secured Parties' inhouse counsel), and disbursements
of the Secured Parties for services rendered in good faith in connection
therewith or in connection with any proceeding to sell if a sale if not
completed and (B) all charges, expenses and advances reasonably incurred or
made by the Secured Parties in order to protect the lien of this Agreement
or the security afforded hereby;
(ii) Second, to the payment in full of all Obligations; and
(iii) Third, the balance, if any, shall be paid to Debtors or to such
other person as shall be lawfully entitled to receive such surplus (as
determined by a court of competent jurisdiction, if such procedure is
available under applicable law).
Each Debtor shall be given ten (10) Business Days' prior notice of the time
and place of any public sale or of the time after which any private sale or
other intended disposition of Collateral is to be made, which notice each Debtor
hereby agrees shall be deemed reasonable notice thereof. Upon any sale or other
disposition pursuant to this Agreement, Administrative Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral or
portion thereof so sold or disposed of. Each purchaser at any such sale or
other disposition (including Administrative Agent) shall hold the Collateral
free from any claim or right of whatever kind, including any equity or right of
redemption of each Debtor and each Debtor specifically waives (to the extent
permitted by law) all rights of redemption, stay or appraisal which it has or
may have under any rule of law or statute now existing or hereafter adopted.
8. Sales of Collateral. Whenever the Secured Parties are entitled to sell
Collateral:
9
(a) Each Debtor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as from time to time amended (or any
similar stature then in effect) (the "Securities Act") and applicable state
securities laws, the Secured Parties may, at their option, elect not to require
each Debtor to register all or any part of the Collateral and may therefore be
compelled, with respect to any sale of all or any part of the Collateral, to
limit purchasers to those who will agree, among other things, to acquire such
securities for their own account, for investment, and not with a view to the
distribution or resale thereof. Each Debtor acknowledges and agrees that any
such sale may result in prices and other terms less favorable to the seller than
if such sale were a public sale without such restrictions. The Secured Parties
shall be under no obligation to delay the sale of any of the Collateral for the
period of time necessary to permit each Debtor to register such securities for
public sale under the Securities Act, or under applicable state securities laws,
even if each Debtor would agree to do so.
(b) If the Secured Parties determine to exercise its right to sell any or
all of the Collateral, upon written request, each Debtor shall, and shall cause
each Subsidiary to, from time to time, furnish to Administrative Agent all such
information as it may reasonably request in order to determine the number of
shares and other instruments included in the Collateral which may be sold by
Administrative Agent as exempt transactions under the Securities Act and rules
of the SEC thereunder, as the same are from time to time in effect.
(c) Each Debtor which is an Subsidiary hereby (i) consents to the pledge to
the Secured Parties of a security interest in the Collateral, (ii) except as set
forth herein, waives any rights it may have with respect to the sale or other
transfer of all or any interests in any Subsidiary, (iii) waives any
restrictions on transfer of such interests contained in any Governing Agreement
and (iv) consents to the admission of any Person, including without limitation
any Secured Party, who purchases all or a portion of the Collateral at any sale
thereof whether as a result of a bankruptcy or otherwise and agrees to deliver
any writings or notices required to effect such admission.
(d) If requested by Administrative Agent, each Debtor shall, ratify and
confirm any sale or sales by executing and delivering to Administrative Agent,
or to such purchaser or purchasers, all such instruments as may, in the
reasonable judgment of Administrative Agent, be advisable for the purpose.
(e) The receipt by Administrative Agent of the purchase money paid at any
sale made by it shall be a sufficient discharge therefor to any purchaser of the
Collateral, or any portion thereof, sold as aforesaid; and no such purchaser (or
the representatives or assigns of such purchaser), after paying such purchase
money and receiving such receipt, shall be bound to see to the application of
such purchase money or any part thereof or in any manner whatsoever be
answerable for any loss, misapplication or nonapplication of any such purchase
money, or any part thereof, or be bound to inquire as to the authorization,
necessity, expediency or regularity of any such sale.
(f) The Secured Parties shall incur no liability as a result of the sale of
the Collateral, or any part thereof, at any private sale conducted in a
commercially reasonable manner. Each Debtor hereby waives, to the full extent
permitted by applicable law, any claims against the Secured Parties arising by
reason of the fact that the price at which the Collateral, or any part
10
thereof, may have been sold at a private sale was less than the price which
might have been obtained at a public sale or was less than the aggregate amount
of the Obligations, even if the Secured Parties accept the first offer received
which they in good faith deems to be commercially reasonable under the
circumstances and does not offer the Collateral to more than one offeree.
9. Voting Rights, Dividends, Etc.
(a) So long as no Event of Default shall have occurred and be continuing
(and, in the case of subparagraph (i) below, so long as written notice has not
been given by Administrative Agent to Debtors):
(i) Each Debtor shall be entitled to exercise any and all voting and
other consensual rights and Rights pertaining to the Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or materially adversely affect the rights of the Secured Parties in or with
respect to thereto.
(ii) Subject to Section 6.12(b) of the Credit Agreement, each Debtor
shall be entitled to receive and retain any and all dividends paid in
respect of the Collateral.
(iii) Administrative Agent shall execute and deliver (or cause to be
executed and delivered) to each Debtor all such proxies and other
instruments as each Debtor may reasonably request for the purpose of
enabling each Debtor to exercise the voting and other rights which it is
entitled to exercise pursuant to subparagraph (i) above and to receive the
dividends which it is authorized to receive and retain pursuant to
subparagraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default
and subsequent notice by Administrative Agent to Debtors of their intent to
exercise such rights:
(i) All rights of each Debtor to exercise the voting and other
consensual rights and Rights which it would otherwise be entitled to
exercise pursuant to Paragraph 5(a)(i) above shall cease, and all such
rights and Rights shall thereupon become vested in the Secured Parties who
shall thereupon have the sole right to exercise such voting and other
consensual rights and Rights.
(ii) All rights of each Debtor to receive the dividends which it would
otherwise be authorized to receive and retain pursuant to Paragraph
5(a)(ii) above shall cease, and all such rights shall thereupon become
vested in the Secured Parties who shall thereupon have the sole right to
receive and hold as Collateral such dividends.
(iii) All dividends which are received by each Debtor contrary to the
provisions of Paragraph 5(a)(ii) shall be received in trust for the benefit
of the Secured Parties, shall be segregated from other funds of each Debtor
and shall be forthwith paid over to Administrative Agent as Collateral in
the same form as so received, with any necessary endorsement.
(c) In order to permit the Secured Parties to exercise the voting and other
rights which it may be entitled to exercise pursuant to Paragraph 5(a)(i) above,
and to receive all
11
dividends and distributions which it may be entitled to receive under Paragraph
5(a)(ii) above, each Debtor shall, if necessary, upon written notice from
Administrative Agent, from time to time execute and deliver to Administrative
Agent appropriate dividend payment orders and other instruments as
Administrative Agent may reasonably request.
10. Place of Business; Collateral Location; Records Location. Each Debtor
represents that its chief place of business is as set forth on Schedule 2
attached hereto; that the only trade name(s) used by each Debtor are set forth
on said Schedule 2; and that, except as otherwise disclosed to Administrative
Agent in writing prior to the date hereof, the Collateral and each Debtor's
records concerning the Collateral are located at its chief place of business.
11. Waiver of Hearing. Each Debtor expressly waives any constitutional or
other right to a judicial hearing prior to the time Administrative Agent takes
possession or disposes of the Collateral upon the occurrence of a Default.
12. Cumulative Rights. The rights, powers and remedies of Administrative
Agent and any of the Secured Parties under this Security Agreement shall be in
addition to all rights, powers and remedies given to Administrative Agent and
any of the Secured Parties by virtue of any statute or rule of law, the Credit
Agreement, the Loan Documents or any other agreement, all of which rights,
powers and remedies shall be cumulative and may be exercised successively or
concurrently without impairing Administrative Agent's and any of the Secured
Parties' security interest in the Collateral.
13. Waiver. Any forbearance or failure or delay by Administrative Agent
in exercising any right, power or remedy shall not preclude the further exercise
thereof, and every right, power or remedy of Administrative Agent or any of the
Secured Parties shall continue in full force and effect until such right, power
or remedy is specifically waived in a writing executed by Administrative Agent
or such other Secured Party, as applicable. each Debtor waives any right to
require any Secured Party to proceed against any person or to exhaust any
Collateral or to pursue any remedy in such Secured Party's power.
14. Setoff. Each Debtor agrees that each Secured Party may exercise its
rights of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
15. Continuing Assignment and Security Interest; Transfer of Obligations.
(a) This Agreement shall create a continuing assignment of and security
interest in the Collateral and shall remain in full force and effect until
payment in full of all Obligations, be binding upon each Debtor, their
successors and assigns, and inure, together with the rights and remedies of
Secured Parties hereunder, to the benefit of Secured Parties and their
successors, transferees and assigns.
(b) To the extent permitted in the Credit Agreement, Administrative Agent
may assign or otherwise transfer its rights and obligations under the Loan
Documents to any other person or entity, and such other person or entity shall
thereupon become vested with all the benefits in respect thereof granted to
Administrative Agent herein or otherwise, all as provided in, to the extent
provided in, and to the extent set forth in, the Credit Agreement. No Debtor
may assign or
12
transfer any of its rights or obligations under this Agreement without the prior
written consent of Administrative Agent.
16. Attorney Costs and Expenses. Each Debtor jointly and severally agrees
(a) to pay or reimburse Administrative Agent and each other Secured Party for
all reasonable costs and expenses incurred in connection with the enforcement or
attempted enforcement, or preservation of any rights under any this Agreement,
and any other documents prepared in connection herewith or therewith, or in
connection with any refinancing, or restructuring of any such documents in the
nature of a "workout" or of any insolvency or bankruptcy proceeding, including
reasonable Attorney Costs. The foregoing costs and expenses shall include all
reasonable search, filing, recording, and appraisal charges and fees and taxes
related thereto, and other reasonable out-of-pocket expenses incurred by Secured
Parties and the reasonable cost of independent public accountants and other
outside experts retained by Secured Parties. Any amount payable by Borrower
under this Section shall bear interest from the 30th day following the date of
demand for payment at the Default Rate, unless waived by Administrative Agent.
The agreements in this Section shall survive repayment of all Obligations.
17. Appointment of Administrative Agent. Pursuant to Section 9 of the
Credit Agreement, each Secured Party has appointed Administrative Agent as its
agent under the Loan Documents (as defined in the Credit Agreement to include,
without limitation, this Agreement), and Administrative Agent has accepted such
appointment. Administrative Agent shall act as secured party, agent, bailee and
custodian for the exclusive benefit of the Secured Parties with respect to the
Collateral (as defined below). Administrative Agent agrees that Administrative
Agent will act with respect to the Collateral for the exclusive benefit of the
Secured Parties and is not, and shall not at any time in the future be, in any
manner or to any extent, subject to the direction or control of each Debtor
except as expressly permitted hereunder, under the other Loan Documents or as
required by law.
18. Additional Debtors. From time to time, additional Persons may become
parties hereto, as additional Debtors (each, an "Additional Debtor") by
executing and delivering to the Administrative Agent a Joinder Agreement
substantially in the form of Exhibit I to the Credit Agreement, accompanied by a
supplement in form of Schedule 2 hereto and such other such documentation as
Administrative Agent may reasonably require in connection therewith, wherein
such Additional Debtors agree to become a party hereto and to be bound hereby.
Upon execution and delivery of any such Joinder Agreement to and acceptance
thereof by Administrative Agent, notice of which is hereby waived by Debtors,
each such Additional Debtor shall be as fully a party hereto as if such
Additional Debtor were an original signatory hereto. Each Additional Debtor
shall be deemed to have made the representations and warranties set forth in
Paragraph 2 of this Agreement as of the date of its joinder. Each Debtor
expressly agrees that its Secured Obligations and the Liens upon its property
granted herein shall not be affected or diminished by the addition or release of
Additional Debtors hereunder, nor by any election of Secured Parties not to
cause any other Subsidiary of Borrower to become an Additional Debtor hereunder.
This Agreement shall be fully effective as to any Debtor that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Debtor hereunder. Each Debtor hereby authorizes
Administrative Agent to attach a Pledge Agreement Supplement (and/or produce a
composite of all such Pledge Agreement Supplements) reflecting Additional
Debtors to this Agreement and agrees that all equity interests
13
listed on any Pledge Agreement Supplement delivered to Administrative Agent
shall for all purposes hereunder constitute Collateral
19. Extent of Obligations. Each Debtor hereby agrees that its obligations
hereunder are independent of the obligations of each other Debtor, and a
separate action or actions may be brought and prosecuted against each Debtor
whether or not action is brought against another Debtor and whether or not any
Debtor is joined in any such action or actions. Each Debtor hereby further
agrees that from time to time, without notice or demand and without affecting or
impairing in any way the rights of the Secured Parties with respect to the
Collateral or the obligations of each Debtor hereunder, the Secured Parties may
(a) renew, compromise, extend, accelerate or change the time for payment or the
terms of the Obligations, or any part thereof, (b) exchange, enforce, waive,
release, apply and direct the order or manner of sale of any and all collateral
for the obligations, including, without limitation, the Collateral, all as
provided herein, and/or (c) release or substitute any Debtor, endorsers and
guarantors. Each Debtor waives any right to require the Secured Parties to (i)
proceed against any other Debtor, or (ii) proceed against or exhaust any
security of any other Debtor held for its obligations, or (iii) pursue any other
remedy whatsoever. Each Debtor waives any defense (other than payment in full
of the Obligations) based upon or arising out of any defense of any other
Debtor, including, without limitation, any defense based on or arising out of
the disability or the cessation of liability of any Debtor or any other person,
or the unenforceability of any other Debtor's obligations under any Loan
Document or any part thereof from any cause. Each Debtor agrees that the
Secured Parties may proceed against all or any portion of the Collateral for all
or any portion of the Obligations, as the Secured Parties may elect, without
regard to marshalling. Each Debtor acknowledges and agrees that the Secured
Parties may foreclose on any security held by it by one or more judicial or
nonjudicial sales, or exercise any right or remedy it may have against any other
Debtor or security held by it for the Obligations, without affecting or
impairing in any way the rights of the Secured Parties with respect to the
Collateral or the obligations of each Debtor hereunder. Each Debtor waives any
defense arising out of any such election by the Secured Parties, even though
such election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of each Debtor against any other Debtor or
any such security. Until all Obligations shall have been paid in full, each
Debtor shall not have any right of subrogation, and each Debtor waives any right
to enforce any remedy which the Secured Parties now have or may hereafter have
against each other Debtor and Subsidiary, and waives any benefit of, and any
right to participate in any security now or hereafter held by the Secured
Parties. Each Debtor further assumes all responsibility for being and keeping
itself informed of each other Debtor's financial
14
condition and assets, and of all other circumstances bearing upon the risk of
nonpayment of the Obligations and the nature, scope and extent of the risk which
each Debtor assumes and incurs hereunder, and agrees that the Secured Parties
shall have no duty to advise each Debtor of information known to them regarding
such circumstances or risks.
20. Limitation on Liability of Certain Debtors. Notwithstanding anything
contained in this Agreement to the contrary, and except for the obligation of
each Debtor to deliver the Collateral owned by such Debtor to Administrative
Agent pursuant to the provisions hereof, in no event shall any Debtor who is a
natural person have any personal liability with respect to the Obligations or
any obligations, debt or other liabilities that may arise under this Agreement
and Secured Parties recourse against such Debtor shall be limited solely to the
Collateral owned by such Debtor.
15
EXECUTED as of the day and year first above written.
"Debtors"
CALIFORNIA PIZZA KITCHEN, INC.
By /s/ H.G. Carrington, Jr.
--------------------------------------------
H. G. Carrington, Jr.
Executive Vice President, Chief Financial
Officer and Secretary
|
CALIFORNIA PIZZA KITCHEN
OF ILLINOIS, INC.
By /s/ Larry S. Flax
--------------------------------------------
Larry S. Flax
Secretary and Treasurer
/s/ H.G. Carrington, Jr.
--------------------------------------------
H. G. Carrington, Jr., an individual
/s/ Gregory S. Levin
--------------------------------------------
Gregory S. Levin, an individual
|
BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Patrick W. Zetzman
-------------------------------------------
Patrick W. Zetzman
Vice President
|
16
SCHEDULE 1 TO PLEDGE AGREEMENT
CERTAIN COLLATERAL
Corporations (All stock common unless otherwise noted)
Issuers Debtors Certificate Par No. of Percent of
Nos. Value Shares Ownership
------------------------- ----------------------------- ----------- --------- ------ ------------
CPK Management Company California Pizza Kitchen, Inc. 1 NPV 100 100%
California Pizza Kitchen California Pizza Kitchen, Inc. 4 NPV 100 100%
of Illinois, Inc.
Cpk Beverage, Inc California Pizza Kitchen, Inc. 3 NPV 490 49%
California Pizza Kitchen California Pizza Kitchen, Inc. 5 NPV 97 97%
of Annapolis, Inc.
H. G. Carrington, Jr. 6 NPV 1 1%
Gregory S. Levin 7 NPV 1 1%
|
Partnerships
(All owned by California Pizza Kitchen Of Illinois, Inc.)
Partnership Ownership interest
---------------------------------------- -----------------------------------------
CPK I, Limited Partnership, an 50% of general partnership interest
Illinois limited partnership
CPK Water Tower Limited Partnership, 50% of general partnership interest
an Illinois limited partnership
|
1
EXHIBIT 10.6
MASTER SUBSIDIARY GUARANTY
TO: Bank of America, N.A., as Administrative Agent
("Administrative Agent")
RECITALS
A. Reference is made to that certain Credit Agreement dated as of October
29, 1999 among California Pizza Kitchen, Inc., a California corporation
("Borrower"), Lenders from time to time party thereto, Bank of America, N.A., as
Administrative Agent, Swing Line Lender and Issuing Lender and Bankers Trust
Company, as Documentation Agent (as amended, restated, extended, supplemented or
otherwise modified in writing from time to time, the "Agreement;" the terms
defined therein being used herein as therein defined).
B. Each Guarantor is a direct or indirect Domestic Subsidiary of Borrower
and has derived, and expects to continuing deriving, direct and indirect
benefits from extensions of credit made to Borrower, and now desires to guaranty
the Obligations
C. It is a requirement of the Credit Agreement that each direct or
indirect Domestic Subsidiary of Borrower execute and delivery this Master
Subsidiary Guaranty or a joinder hereto (as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, this
"Guaranty").
NOW, THEREFORE, each Guarantor agrees as follows:
1. For valuable consideration, each of the undersigned (together with
Person becoming a party hereto pursuant to Paragraph 18 hereof, each, a
"Guarantor" and collectively, "Guarantors") unconditionally, absolutely and
irrevocably jointly and severally guarantees and promises to pay to
Administrative Agent, or order, on demand, in lawful money of the United States
and in immediately available funds, any and all present or future Obligations
owing to Lenders, Issuing Lender, Indemnitees and Administrative Agent
(collectively, the "Guarantied Parties"). The term Obligations has the meaning
assigned to such term under the Credit Agreement and is used herein in its most
comprehensive sense and includes any and all advances, debts, obligations, and
liabilities of all Borrower Parties, now, or hereafter made, incurred, or
created, whether voluntary or involuntarily, and however arising, including,
without limitation, any and all attorneys' fees (including the allocated cost of
inhouse counsel), costs, premiums, charges, or interest owed by any Borrower
Party to any Guarantied Party under the Loan Documents, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
whether a Borrower Party may be liable individually or jointly with others,
whether recovery upon such indebtedness may be or hereafter becomes barred by
any statute of limitations or whether such indebtedness may be or hereafter
become otherwise unenforceable.
2. This Guaranty is a continuing guaranty which relates to any
Obligations, including those which arise under successive transactions which
shall either cause a Borrower Party to incur new Obligations, continue the
Obligations from time to time, or renew them after they have been satisfied.
Each Guarantor agrees that nothing shall discharge or satisfy its
1
obligations created hereunder except for the full payment of the Obligations.
Any payment by any Guarantor shall not reduce its maximum obligation hereunder.
3. Each Guarantor agrees that it is directly and primarily liable to
Administrative Agent for the benefit of Guarantied Parties, that its obligations
hereunder are independent of the Obligations of any Borrower Party, or of any
other guarantor, and that a separate action or actions may be brought and
prosecuted against any Guarantor, whether action is brought against a Borrower
Party or whether a Borrower Party is joined in any such action or actions. Each
Guarantor agrees that any releases which may be given by Guarantied Parties to a
Borrower Party or any other guarantor shall not release it from this Guaranty.
4. The obligations of each Guarantor under this Guaranty shall not be
affected, modified or impaired upon the occurrence from time to time of any of
the following, whether or not with notice to or the consent of any Guarantor (a)
the compromise, settlement, change, modification, amendment (whether material or
otherwise) or partial termination of any or all of the Obligations; (b) the
failure to give notice to any Guarantor of the occurrence of any Event of
Default under the terms and provisions of the Agreement; (c) the waiver of the
payment, performance or observance of any of the Obligations; (d) the taking or
omitting to take any actions referred to in any Loan Document or of any action
under this Guaranty; (e) any failure, omission or delay on the part of
Administrative Agent and/or Guarantied Parties to enforce, assert or exercise
any right, power or remedy conferred in this Guaranty, the Credit Agreement, any
other Loan Document or any other indulgence or similar act on the part of
Administrative Agent and/or Guarantied Parties in good faith and in compliance
with applicable law; (f) the voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all of the assets, marshalling
of assets, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors or readjustment of, or other similar proceedings which affect any
Guarantor, any other guarantor of any of the Obligations of a Borrower Party or
any of the assets of any of them, or any allegation of invalidity or contest of
the validity of this Guaranty in any such proceeding; (g) to the extent
permitted by law, the release or discharge of any other guarantors of the
Obligations from the performance or observance of any obligation, covenant or
agreement contained in any guaranties of the Obligations by operation of law; or
(h) the default or failure of any other guarantors of the Obligations fully to
perform any of their respective obligations set forth in any such guaranties of
the Obligations. To the extent any of the foregoing refers to any actions which
Administrative Agent or Guarantied Parties may take, each Guarantor hereby
agrees that Administrative Agent and/or Guarantied Parties may take such actions
in such manner, upon such terms, and at such times as Administrative Agent or
Guarantied Parties, in their discretion, deem advisable, without, in any way or
respect, impairing, affecting, reducing or releasing any Guarantor from its
undertakings hereunder and each Guarantor hereby consents to each and all of the
foregoing actions, events and occurrences.
5. Each Guarantor hereby waives (a) any and all rights to require
Guarantied Parties to prosecute or seek to enforce any remedies against a
Borrower Party or any other party liable to Guarantied Parties on account of the
Obligations; (b) any right to assert against Guarantied Parties any defense
(legal or equitable), set-off, counterclaim, or claim which such Guarantor may
now or at any time hereafter have against a Borrower Party or any other party
liable to Administrative Agent or Guarantied Parties in any way or manner under
the Credit Agreement; (c) all defenses, counterclaims and off-sets of any kind
or nature, arising directly or indirectly
2
from the present or future lack of perfection, sufficiency, validity or
enforceability of any Loan Document and the security interest granted pursuant
thereto; (d) any defense arising by reason of any claim or defense based upon an
election of remedies by Administrative Agent or Guarantied Parties including,
without limitation, any direction to proceed by judicial or nonjudicial
foreclosure or by deed in lieu thereof, which, in any manner impairs, affects,
reduces, releases, destroys or extinguishes such Guarantor's subrogation rights,
rights to proceed against a Borrower Party for reimbursement, or any other
rights of such Guarantor to proceed against a Borrower Party, against any other
guarantor, or against any other security, with such Guarantor understanding that
the exercise by Administrative Agent and/or Guarantied Parties of certain rights
and remedies may offset or eliminate such Guarantor's right of subrogation
against a Borrower Party, and that such Guarantor may therefore incur partially
or totally non-reimbursable liability hereunder; (e) all presentments, demands
for performance, notices of non-performance, protests, notices of protest,
notices of dishonor, notices of default, notice of acceptance of this Guaranty,
and notices of the existence, creation, or incurring of new or additional
indebtedness, and all other notices or formalities to which such Guarantor may
be entitled; and (f) without limiting the generality of the foregoing, such
Guarantor hereby expressly waives any and all benefits of California Civil Code
Sections 2809, 2810, 2819, 2825, 2839 and 2845 through 2850.
6. Each Guarantor hereby agrees that unless and until all Obligations have
been paid to Guarantied Parties in full, it shall not have any rights of
subrogation, reimbursement or contribution as against a Borrower Party or any
other guarantor, if any, and shall not seek to assert or enforce the same. Each
Guarantor understands that the exercise by Administrative Agent of certain
rights and remedies contained in the Loan Documents may affect or eliminate such
Guarantor's right of subrogation if any, against a Borrower Party and that such
Guarantor may therefore incur a partially or totally non-reimbursable liability
hereunder; nevertheless, such Guarantor hereby authorizes and empowers
Guarantied Parties to exercise, in their sole discretion, any right and remedy,
or any combination thereof, which may then be available, since it is the intent
and purpose of such Guarantor that the obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances.
7. Each Guarantor is presently informed of the financial condition of each
Borrower Party and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Obligations. Each
Guarantor hereby covenants that it will continue to keep itself informed of the
financial condition of each Borrower Party, the status of other guarantors, if
any, and of all other circumstances which bear upon the risk of nonpayment.
Each Guarantor hereby waives its right, if any, to require Administrative Agent
or Guarantied Parties to disclose to it any information which Administrative
Agent or any Lender may now or hereafter acquire concerning such condition or
circumstances including, but not limited to, the release of any other guarantor.
8. Administrative Agent and each Lender's books and records evidencing the
Obligations shall be admissible in any action or proceeding and shall be binding
upon the Guarantors for the purpose of establishing the terms set forth therein
and shall constitute prima facie proof thereof.
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9. Notwithstanding anything to the contrary contained herein, the
obligations of each Guarantor hereunder shall be limited to an aggregate amount
equal to the largest amount that would not render its obligations hereunder
subject to avoidance under Section 548 of the Bankruptcy Code (Title 11, United
States Code) or any comparable provisions of any applicable state law.
10. Each Guarantor represents and warrants for and with respect to itself
that:
(a) Guarantor is a corporation duly organized, validly existing and in
good standing under the Laws of the state of its incorporation, has the
power and authority and the legal right to own and operate its properties,
to lease the properties it operates and to conduct its business, is duly
qualified and in good standing under the Laws of each jurisdiction where
its ownership, lease or operation of properties or the conduct of its
business requires such qualification, and is in compliance with all Laws
except to the extent that noncompliance does not have a Material Adverse
Effect.
(b) Guarantor has the power and authority and the legal right to make,
deliver and perform this Guaranty and to authorize the execution, delivery
and performance of this Guaranty. No consent or authorization of, filing
with, or other act by or in respect of any Governmental Authority, is
required in connection with the execution, delivery, performance, validity
or enforceability of this Guaranty. This Guaranty has been duly executed
and delivered by Guarantor, and constitutes a legal, valid and binding
obligation of Guarantor, enforceable against Guarantor in accordance with
its terms, except as enforceability may be limited by applicable Debtor
Relief Laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
(c) The execution, delivery, and performance by Guarantor of this
Guaranty and compliance with the provisions hereof have been duly
authorized by all requisite action on the part of Guarantor and do not and
will not (i) violate or conflict with, or result in a breach of, or require
any consent, except where such violation, conflict, breach or failure to
obtain consent would not have a Material Adverse Effect, under (A) any
Organization Documents of Guarantor or any of its Subsidiaries, (B) any
applicable Laws, rules, or regulations or any order, writ, injunction, or
decree of any Governmental Authority or arbitrator, or (C) any Contractual
Obligation of Guarantor or any of its Subsidiaries or by which any of them
or any of their property is bound or subject, (ii) constitute a default
under any such agreement or instrument, except where such default would not
have a Material Adverse Effect or (iii) result in, or require, the creation
or imposition of any Lien on any material portion of the properties of
Guarantor or any of its Subsidiaries.
(d) No litigation, investigation or proceeding of or before an
arbitrator or Governmental Authority is pending or, to the best knowledge
of Guarantor, threatened by or against Guarantor or any of its Subsidiaries
or against any of their properties or revenues which, if determined
adversely, could have a Material Adverse Effect.
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(e) The execution, delivery and performance by Guarantor of this
Guaranty does not constitute, to the best knowledge of Guarantor, a
"fraudulent conveyance," "fraudulent obligation" or "fraudulent transfer"
within the meanings of the Uniform Fraudulent Conveyances Act or Uniform
Fraudulent Transfer Act, as enacted in any jurisdiction.
11. All notices and other communications hereunder shall be delivered, in
the manner and with the effect provided in the Credit Agreement and, in the case
of Guarantors, in care of Borrower.
12. This Guaranty shall be binding upon the successors and assigns of each
Guarantor and shall inure to the benefit of Administrative Agent's and
Guarantied Parties' successors and assigns. This Guaranty cannot be assigned by
any Guarantor without the prior written consent of Guarantied Parties which
shall be in Guarantied Parties' sole and absolute discretion.
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