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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 28, 2004
or,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-26396
Benihana Inc.
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(Exact name of registrant as specified in its charter)
Delaware 65-0538630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8685 Northwest 53rd Terrace, Miami, Florida 33166
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (305) 593-0770
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Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.10 per share
Class A Common Stock, par value $.10 per share
Preferred Share Purchase Right
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes X No
--- ---
As of June 7, 2004, 3,018,979 shares of Common Stock and 6,134,225 shares of
Class A Common Stock were outstanding, and the aggregate market value of the
common equity of Benihana Inc. held by non-affiliates based upon the closing
sale price on The Nasdaq Stock Market of $14.58 and $14.61, respectively, was
approximately $106,152,000. As of October 12, 2003, the last day of our second
fiscal quarter, the aggregate market value of common equity held by non-
affiliates was $69,949,000.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's Annual Report to Stockholders for the year ended
March 28, 2004 are incorporated by reference in Parts I and II.
Portions of the Registrant's Proxy Statement for the Annual Meeting to be held
August 19, 2004 are incorporated by reference in Part III.
Item 1. General
We have operated teppanyaki-style Japanese restaurants in the United States for
over 39 years, and we believe we are the largest operator of teppanyaki-style
restaurants in the country. Our core concept, the traditional Benihana
restaurant, offers teppanyaki-style Japanese cooking in which fresh steak,
chicken and seafood is prepared by a Benihana chef on a grill which forms a part
of the table on which the food is served. Our Haru concept offers an extensive
menu of Japanese fusion dishes in a high energy, urban atmosphere. In addition
to traditional, high quality sushi and sashimi creations, Haru offers raw bar
items and Japanese cuisine, including New York strip steak with wasabi
croquette, spicy shallots and ginger sauce, garlic shrimp and crispy duck. Our
RA Sushi concept offers sushi and a full menu of Pacific-Rim dishes in a high
energy environment featuring upbeat design elements and music.
At June 11, 2004 we:
o own and operate 56 Benihana teppanyaki-style Japanese dinnerhouse
restaurants, including one restaurant under the name Samurai;
o franchise others to operate 22 additional Benihana restaurants;
o own and operate five Haru restaurants in New York City;
o own and operate seven RA Sushi restaurants primarily in the southwest; and
o own and operate one Doraku restaurant in Miami Beach, Florida.
We own the related United States trademarks and service marks to the names
"Benihana", "Benihana of Tokyo" and the "red flower" symbol and we have the
exclusive rights to own, develop and license Benihana and Benihana Grill
restaurants in the United States, Central and South America and the islands of
the Caribbean. We also own the United States trademarks to the names "Haru", "RA
Sushi" and "Doraku".
Sales by our owned restaurants were approximately $201.3 million for the fiscal
year ended March 28, 2004, as compared to approximately $187.9 million for the
prior fiscal year. Our net income for the fiscal year ended March 28, 2004 was
approximately $9.2 million, as compared to approximately $9.5 million for the
prior fiscal year.
Our principal executive offices are located at 8685 Northwest 53rd Terrace,
Miami, Florida 33166 (telephone number 305-593-0770) and our corporate website
address is http://www.benihana.com. We make our electronic filings with the
Securities and Exchange Commission, including annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
these reports available on the corporate website free of charge as soon as
practicable after filing with or furnishing to the SEC.
Strategy
The critical elements of our growth strategy are as follows:
Selectively Pursue Restaurant Growth. We believe that our Benihana concept has
broad appeal and that, as a result, we have significant opportunities to expand
our business selectively. We plan to continue to capitalize on our broad
customer appeal and strong brand recognition within the casual dining segment by
opening new restaurants, selectively acquiring existing Asian-theme restaurants
in major U.S. markets and franchising new restaurant locations. In 2004, we
opened four Benihana restaurants in Scottsdale, Arizona; Alpharetta, Georgia;
Bethesda, Maryland and Westbury, New York and three RA Sushi restaurants in
Tucson, Arizona; San Diego, California and Chicago, Illinois.
Design Initiative. We have undertaken a design imitative to develop a prototype
teppanyaki restaurant to improve unit-level economics while shortening
construction time and improving decor. This program will also assist us in
restaurant refurbishing.
Maintain Strong Unit Economics. Our experienced management team intends to
maintain and improve where necessary attractive store margins due to sustained
sales growth and effective cost controls.
Continue To Build Brand Awareness And Customer Loyalty. We will continue to
provide marketing and promotional support to sustain and grow our reputation for
distinctive value, quality food and customer satisfaction.
Provide Strong Management Support. Our senior management team has an average of
over 16 years with our company and is experienced in developing and operating
distinctive, high-volume casual dining establishments.
The Benihana Concept
The Benihana concept offers casual dining in a distinctive Japanese atmosphere
enhanced by the unique entertainment provided by our highly-skilled Benihana
chefs who prepare fresh steak, chicken and seafood in traditional Japanese style
at the customer's table. Most of our Benihana restaurants are open for both
lunch and dinner and have a limited menu offering a full course meal consisting
of an appetizer, soup, salad, tea, rice, vegetable, an entree of steak, seafood,
chicken or any combination of them and a dessert.
Specific menu items may be different in the various restaurants depending upon
the local geographic market. The servings prepared at the teppanyaki grill are
portion controlled to provide consistency in quantities served to each customer.
Alcoholic beverages, including specialty mixed drinks, wines and beers and soft
drinks are available. During fiscal 2004, beverage sales in both the lounges and
dining rooms accounted for approximately 19.8% of total restaurant sales. The
average check size per person was $23.61 in fiscal 2004. Sushi is offered at all
of our traditional restaurants at either separate sushi bars or at the
teppanyaki grills.
Each of our teppan tables generally seats eight customers. The chef is assisted
in the service of the meal by the waitress or waiter who takes beverage and food
orders. An entire dinnertime meal takes approximately one hour and thirty
minutes.
Of the 56 Benihana restaurants we operate:
o 39 are located in freestanding, special use restaurant buildings usually on
leased land;
o 6 are located in shopping centers; and
o 11 are located in office or hotel building complexes.
The freestanding restaurants were built to our specifications as to size, style
and interior and exterior decor. The other locations were adapted to the
Benihana interior decor. The freestanding, traditional Benihana restaurant
units, which are generally one story buildings, average approximately 8,000
square feet and are constructed on a lot of approximately 1.25 to 1.50 acres.
The shopping center, office building and hotel-based Benihana restaurants are of
similar size, but differ somewhat in appearance from location to location in
order to conform to the appearance of the buildings in which they are located. A
typical Benihana restaurant has 18 teppan tables and seats from 86 to 178
customers in the dining rooms and 8 to 120 customers in the bar, lounge and
sushi bar areas.
We anticipate opening a new Benihana restaurant in Carlsbad, California and a
replacement for the Kendall teppanyaki in nearby Coral Gables, Florida in fiscal
2005.
The Haru Concept
The Haru concept offers an extensive menu of distinctive Japanese fusion dishes
in a high energy, urban atmosphere. In addition to traditional, high quality
sushi and sashimi creations, Haru offers raw bar items and Japanese cuisine,
including New York strip steak with wasabi croquette, spicy shallots and ginger
sauce, garlic shrimp and crispy duck. Haru also offers delivery and take-out.
The average check size per person was $27.15 in fiscal 2004. Delivery and
take-out sales account for 35% of total sales. We own 80% of the subsidiary that
operates the Haru restaurants. The remaining 20% interest is owned by the
originator of the concept and is subject to a mutual put/call arrangement
exercisable in fiscal 2006.
We currently operate five Haru restaurants in New York City and are developing
two new Haru restaurants in Philadelphia, Pennsylvania and one in the Gramercy
Park section of New York City.
The RA Sushi Concept
The RA Sushi concept offers sushi and Pacific-Rim dishes in a fun-filled, high
energy environment. The average check size per person was $19.06 for fiscal 2004
and beverage sales in both the lounges and dining rooms accounted for
approximately 34% of total sales.
We currently operate seven RA Sushi restaurants and are developing one new RA
Sushi restaurant in Las Vegas, Nevada and have a signed lease for another RA
Sushi restaurant to open in Huntington Beach, California in fiscal 2006.
The Doraku Concept
We have one Doraku restaurant in operation and we do not currently have plans
for expansion. The Doraku concept offers sushi as well as other Japanese dishes.
The average check size per person was $22.29 in fiscal 2004.
Restaurant Operations
Our Benihana and Doraku restaurants are under the direction of our Executive
Vice President-Restaurant Operations and are divided among eight geographic
regions, each managed by a regional manager. Food preparation in the teppanyaki
restaurants is supervised by nine regional chefs. Our Haru restaurants are
locally managed in New York under the direction of Haru's Vice President of
Operations and our RA Sushi restaurants are managed in Phoenix, the direction RA
Sushi's Vice President of Operations.
Each restaurant has a manager and one or more assistant managers responsible for
the operation of the restaurant, including personnel matters, local inventory
purchasing, maintenance of quality control standards, cleanliness and service.
Strict guidelines as documented in our restaurant operations manuals are
followed to assure consistently high quality in customer service and food
quality from location to location. Specifications are used for quality of
ingredients, preparation of food, maintenance of premises and employee conduct
and are incorporated in manuals used by the managers, assistant managers and
head chefs. Food products and portion size are regularly and systematically
tested for quality and compliance with our standards. Certain seafood items are
purchased in bulk for most of the restaurants under which a certain quantity is
purchased at a specific price. Most of the other food products are purchased in
local markets. Substantially all of our restaurant operating supplies are
purchased centrally and distributed to the restaurants from our warehouse or a
bonded warehouse.
Our chefs are trained in the teppanyaki or sushi style of cooking and customer
service in training programs lasting from eight to twelve weeks. A portion of
the training is spent working in a restaurant under the direct supervision of an
experienced head chef. The program includes lectures on our method of restaurant
operations and training in both tableside and kitchen food preparation as
applied in our restaurants. Manager training is similar except that the manager
trainee is given in-depth exposure to each position in the restaurant. Other
categories of employees are trained by the manager and assistant manager at the
restaurant. Ongoing continuing education programs and seminars are provided to
restaurant managers and chefs to improve restaurant quality and implement
changes in operating policy or menu listings.
We use various incentive compensation plans pursuant to which key restaurant
personnel share in the results of operations at both a local and company-wide
level.
Marketing
We utilize television, radio, billboard and print media to promote our
restaurants; strengthen our brand identity; and maintain high name recognition.
The advertising programs are tailored to each local market and to print media
focused on the business traveler. The advertising program is designed to
emphasize the inherently fresh aspects of a Benihana meal and the entertainment
value of the chef cooking at the customer's table. In fiscal year 2004, we
expended approximately $6.7 million on advertising and other marketing,
approximately 3.3% of our net sales. The entertainment component of the Benihana
method of food preparation and service is emphasized to distinguish Benihana
from other restaurant concepts.
Franchising
We have, from time to time, franchised restaurant operators in markets in which
we consider expansion to be of benefit to the Benihana system. We continue to
selectively pursue franchising opportunities, particularly in Central and South
America and the islands of the Caribbean where we own the rights to the Benihana
trademarks and system.
Franchisees bear all direct costs involved in the development, construction and
operation of their restaurants. We provide franchisee support for:
o site selection;
o prototypical architectural plans;
o interior and exterior design and layout;
o training, marketing and sales techniques; and
o opening assistance.
All franchisees are required to operate their restaurants in accordance with
Benihana standards and specifications including menu offerings, food quality and
preparation.
The current standard franchise agreement provides for payment to us of a
non-refundable franchise fee of from $30,000 to $50,000 per restaurant and
royalties of from 3% to 6% of gross sales. In fiscal year 2004, revenues from
franchising were approximately $1,628,000.
To comply with the terms of the franchise agreements, we are prohibited from
opening additional restaurants within certain areas in which our existing
franchisees have the exclusive right to open additional restaurants and operate
their existing Benihana restaurants. In general, such franchise agreements
currently provide for an initial payment to us with respect to each new
restaurant opened by a franchisee and continuing royalty payments to us based
upon a percentage of a franchisee's gross sales throughout the term of the
franchise.
Trade Names and Service Marks
Benihana is a Japanese word meaning "red flower". In the United States and
certain foreign countries, we own the "Benihana", "Benihana of Tokyo", "Haru"
and "RA" names and related trademarks and "red flower" symbol, which we believe
to be of material importance to our business and are registered in the United
States Patent and Trademark Office. We also own registered trademarks for the
Doraku concept.
Benihana of Tokyo, Inc., a privately held company and our largest stockholder
and originator of the Benihana concept, continues to own the rights to the
Benihana name and trademarks outside of the United States, Central and South
America and the islands of the Caribbean. Benihana of Tokyo, Inc. is also the
operator of a Benihana restaurant in Honolulu under an exclusive, royalty-free
franchise. We have no financial interest in any restaurant operated or
franchised by Benihana of Tokyo, Inc.
Employees
At March 28, 2004, we employed 4,091 people, of which 4,018 were restaurant
employees and 73 were corporate personnel. Most employees, except restaurant
management and corporate management personnel, are paid on an hourly basis. We
also employ some restaurant personnel on a part-time basis to provide the
services necessary during the peak periods of restaurant operations. We believe
our relationship with our employees is good.
Competition
The casual dining segment of the restaurant industry is intensely competitive
with respect to price, service, location, and the type and quality of food. Each
of our restaurants competes directly or indirectly with locally owned
restaurants as well as regional and national chains, and several of our
significant competitors are larger or more diversified and have substantially
greater resources than the Company. It is also anticipated that growth in the
industry will result in continuing competition for available restaurant sites as
well as continued competition in attracting and retaining qualified
management-level operating personnel. We believe that our competitive position
is enhanced by offering quality food selections at an appropriate price with the
unique entertainment provided by our chefs in an attractive, relaxed atmosphere.
Government Regulation
Each of our restaurants is subject to licensing and regulation by the health,
sanitation, safety standards, fire department and the alcoholic beverage control
authorities in the state or municipality where it is located. Difficulties or
failure in obtaining the required licensing or requisite approvals could result
in delays or cancellations in the opening of new restaurants; termination of the
liquor license for any Benihana restaurant would adversely affect the revenues
for the restaurant. While to date we have not experienced any material
difficulties in obtaining and maintaining necessary governmental approvals, the
failure to obtain or retain, or a delay in obtaining food and liquor licenses or
any other governmental approvals could have a material adverse effect on our
operating results. Federal and state environmental regulations have not had a
material effect on our operations, but more stringent and varied requirements of
local governmental bodies with respect to zoning, land use and environmental
factors could delay construction of new restaurants.
We are also subject to federal and state regulations regarding franchise
offering and sales. Such laws impose registration and disclosure requirements on
franchisors in the offer and sale of franchises, or impose substantive standards
on the relationship between franchisee and franchisor.
The Americans with Disabilities Act (the "ADA") prohibits discrimination on the
basis of disability in public accommodations and employment. The ADA, which
mandates accessibility standards for individuals with physical disabilities,
increases the cost of construction of new restaurants and of remodeling older
restaurants.
We are also subject to the Fair Labor Standards Act, which governs such matters
as minimum wages, overtime, and other working conditions. A significant portion
of our food service personnel are paid at rates related to federal or state
minimum wage rates, and accordingly, increases in any such minimum wage will
increase our labor costs.
Management Information Systems
We provide restaurant managers with centralized financial and management control
systems through use of data processing information systems and prescribed
reporting procedures.
Each restaurant transmits sales, purchasing, payroll and other operational data
to the home office on a weekly and four-week period basis. This data is used to
record sales, product, labor and other costs and to prepare periodic financial
and management reports. We believe that our centralized accounting, payroll and
human resources, cash management and information systems improve management's
ability to control and manage its operations efficiently.
Item 2. Properties
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Of the 69 restaurants in operation at June 11, 2004, 11 are located on owned
real estate and 58 are leased pursuant to land or land and building leases,
which require either a specific monthly rental, or a minimum rent and additional
rent based upon a percentage of gross sales. In addition, there are two Benihana
restaurants under development in Carlsbad, California and Coral Gables, Florida,
two RA Sushi restaurants in Las Vegas, Nevada and Huntington Beach, California
and two Haru restaurants in Philadelphia, Pennsylvania and New York City, New
York, all of which will be pursuant to land leases. Generally, these leases are
"triple net" leases which pass increases in property operating expenses, such as
real estate taxes and utilities, through to the Company as tenant. Expiration
dates of these leases, including renewal options, range from June 2004 to March
2027.
Item 3. Legal Proceedings
See Note 16 to the Notes to Consolidated Financial Statements incorporated by
reference to Item 8 and included in Exhibit 13.01 filed with this Report for a
description of a claim which has been threatened against the Company and certain
of its directors in connection with the equity financing descrived in such Note.
The following table sets forth the location of our directly owned restaurants:
Benihana, Haru, Approx.
RA Sushi or Square Interior Date
Doraku Location Address Footage Seating Opened
- --------------- ------- ------- -------- ------
ARIZONA:
RA Sushi 2905 E. Skyline Drive, Suite 289, Tucson (1) 3,900 176 November, 2003
RA Sushi 4921 E. Ray Road, Suite B-1, Phoenix (2) 6,200 255 December, 2002
RA Sushi 3815 N. Scottsdale Road, Scottsdale (2) 5,000 156 December, 2002
RA Sushi 411 S. Mill Avenue, Tempe (1) 3,500 204 December, 2002
RA Sushi 7012 E. Greenway Parkway, Scottsdale (2) 4,200 155 December, 2002
Benihana 16403 N. Scottsdale Road, Scottsdale (1) 8,600 234 November, 2003
CALIFORNIA:
Benihana 2100 E. Ball Road, Anaheim (1) 8,710 263 March, 1980
Benihana 1496 Old Bayshore Hwy., Burlingame (1) 8,740 286 February, 1978
Benihana 755 Raintree Drive, Carlsbad (1) 9,200 -0- Under development
Benihana 17877 Gale Avenue, City of Industry (1) 8,000 224 November, 1988
Benihana 1989 Diamond Blvd., Concord (1) 8,250 246 February, 1980
Benihana 2074 Vallco Fashion Park, Cupertino (1) 7,937 197 July, 1980
Benihana 16226 Ventura Blvd., Encino (2) 7,790 216 October, 1970
Benihana 136 Olivier Street, Monterey (2) 4,856 154 June, 2000
Benihana 4250 Birch Street, Newport Beach (2) 8,275 242 March, 1978
Benihana 3760 E. Inland Empire Blvd., Ontario (1) 7,433 172 December, 1998
Benihana 5489F Sunrise Blvd., Citrus Heights (1) 3,798 101 October, 1995
Benihana 477 Camino Del Rio So., San Diego (1) 7,981 235 May, 1977
RA Sushi 474 Broadway, Suite 110, San Diego (1) 4,676 156 December, 2003
Benihana 1737 Post Street, San Francisco (1) 7,990 185 December, 1980
Benihana 1447 4th Street, Santa Monica (1) 7,500 197 September, 2001
Benihana 21327 Hawthorne Blvd., Torrance (1) 7,430 219 May, 1980
RA Sushi Huntington Beach (1) 4,535 -0- Under development
COLORADO:
Benihana 3295 S. Tamarac Drive, Denver (1) 7,572 220 February, 1977
(1) Lease provides for minimum rent, plus additional rent based upon a percentage of gross sales.
(2) Lease provides for fixed rent.
(3) Owned.
Benihana, Haru, Approx.
RA Sushi or Square Interior Date
Doraku Location Address Footage Seating Opened
- --------------- ------- ------- -------- ------
DISTRICT OF
COLUMBIA:
Benihana 3222 M Street, NW, Washington (2) 7,761 164 May, 1982
FLORIDA:
Doraku 1104 Lincoln Road, Miami Beach (1) 3,900 64 June, 2000
Samurai 8717 S.W. 136th Street, Miami (1) 8,162 218 October, 1981
Benihana 8727 South Dixie Hwy., Miami (2) 8,700 203 March, 1989
Benihana 276 E. Commercial Blvd., Ft. Lauderdale (3) 8,965 230 June, 1970
Benihana 1665 N.E. 79th Street, Miami (3) 8,938 306 September, 1973
Benihana 1751 Hotel Plaza Blvd., Lake Buena Vista (1) 8,145 220 October, 1988
Benihana 3602 S.E. Ocean Blvd., Stuart (3) 8,485 286 February, 1977
Benihana 242 Miracle Mile, Coral Gables (2) -0- Under development
GEORGIA:
Benihana 2365 Mansell Road, Alpharetta (3) 8,600 234 October, 2003
Benihana 2143 Peachtree Road, NE, Atlanta I (2) 8,244 217 May, 1974
Benihana 229 Peachtree Street NE, Atlanta II (2) 6,372 160 April, 1981
ILLINOIS:
RA Sushi 1139 N. State Street, Chicago (1) 4,500 74 January, 2004
Benihana 166 East Superior Street, Chicago (1) 7,288 198 April, 1968
Benihana 747 E. Butterfield Road, Lombard (3) 9,200 219 April, 1985
Benihana 1200 E. Higgins Road, Schaumburg (3) 8,388 208 July, 1992
Benihana 150 N. Milwaukee Avenue, Wheeling (3) 8,500 199 June, 2001
INDIANA:
Benihana 8830 Keystone Crossing Road, Indianapolis (1) 8,460 237 February, 1979
MARYLAND:
Benihana 7935 Wisconsin Avenue, Bethesda (1) 9,300 254 October, 2003
MICHIGAN:
Benihana 18601 Hubbard Drive, Dearborn (1) 7,500 222 March, 1977
Benihana 21150 Haggerty Road, Northville (3) 8,000 184 May, 1989
Benihana 1985 W. Big Beaver Road, Troy (1) 8,600 231 February, 1996
(1) Lease provides for minimum rent, plus additional rent based upon a percentage of gross sales.
(2) Lease provides for fixed rent.
(3) Owned.
Benihana, Haru, Approx.
RA Sushi or Square Interior Date
Doraku Location Address Footage Seating Opened
- --------------- ------- ------- -------- ------
MINNESOTA:
Benihana 850 Louisiana Avenue So., Golden Valley (3) 10,400 237 September, 1980
NEVADA:
RA Sushi 3200 Las Vegas Blvd. South, Las Vegas (2) -0- Under development
NEW JERSEY:
Benihana 840 Morris Turnpike, Short Hills (2) 11,500 256 October, 1976
Benihana 5255 Marlton Pike, Pennsauken (1) 7,000 239 February, 1978
NEW YORK:
Benihana 120 East 56th Street, New York (2) 3,859 110 May, 1966
Benihana 47 West 56th Street, New York (2) 7,340 171 June, 1973
Benihana 2105 Northern Blvd., Munsey Park (1) 8,252 307 December, 1978
Benihana 920 Merchant's Concourse, Westbury (1) 7,400 173 April, 2003
Haru 205 West 43rd Street, New York (2) 4,400 119 May, 2001
Haru 1327 Third Avenue, New York (2) 2,200 46 September, 2001
Haru 1329 Third Avenue, New York (2) 4,000 78 December, 1999
Haru 433 Amsterdam Avenue, New York (2) 4,000 74 December, 1999
Haru 280 Park Avenue, New York (2) 6,350 132 August, 2001
Haru 220 Park Avenue South, New York (2) -0- Under development
OHIO:
Benihana 50 Tri-County Parkway, Cincinnati I (1) 7,669 235 June, 1978
Benihana 126 East 6th Street, Cincinnati II (1) 5,800 142 August, 1979
Benihana 23611 Chagrin Blvd., Beachwood (1) 10,393 273 May, 1973
OREGON:
Benihana 9205 S.W. Cascade Avenue, Beaverton (1) 6,077 200 August, 1986
PENNSYLVANIA
Benihana 2100 Greentree Road, Pittsburgh (1) 8,000 234 May, 1971
Haru 241-243 Chestnut Street, Philadelphia (1) 6,000 -0- Under development
TENNESSEE:
Benihana 912 Ridgelake Blvd., Memphis (1) 8,680 233 October, 1979
TEXAS:
Benihana 7775 Banner Drive, Dallas (3) 8,007 307 January, 1976
(1) Lease provides for minimum rent, plus additional rent based upon a percentage of gross sales.
(2) Lease provides for fixed rent.
(3) Owned.
Benihana, Haru, Approx.
RA Sushi or Square Interior Date
Doraku Location Address Footage Seating Opened
- --------------- ------- ------- -------- ------
Benihana 3848 Oak Lawn Avenue, Dallas (1) 3.998 106 June, 1997
Benihana 1318 Louisiana Street, Houston I (2) 6,938 200 May, 1975
Benihana 1720 Lake Woodlands Drive, The Woodlands (3) 8,728 203 April, 2002
Benihana 5400 Whitehall Street, Irving (2) 8,565 172 May, 2002
Benihana 9707 Westheimer Road, Houston II (1) 7,669 274 November, 1977
Benihana 2579 Town Center Blvd., Sugar Land (1) 5,000 152 July, 1997
UTAH:
Benihana 165 S.W. Temple, Bldg. 1, Salt Lake City (1) 7,530 202 April, 1977
(1) Lease provides for minimum rent, plus additional rent based upon a percentage of gross sales.
(2) Lease provides for fixed rent.
(3) Owned.
The Company leases approximately 14,100 square feet of space for its general
administrative offices in Miami, Florida at an annual rental of $232,000 and
8,000 square feet for a warehouse in Miami, Florida at an annual rental of
$38,000. The leases expire May 31, 2013 and October 31, 2004, respectively. The
Company anticipates renewing the warehouse lease upon expiration.
Item 3. Legal Proceedings
-----------------
The Company is not a party to any litigation other than routine claims which are
incidental to its business.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
There were no matters submitted to a vote of security holders during the fourth
quarter.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
----------------------------------------------------------------
The information required by this Item is incorporated herein by reference to
Page 29 of the Company's 2004 Annual Report to Shareholders.
Item 6. Selected Financial Data
-----------------------
The information required by this Item is incorporated herein by reference to
Page 1 of the Company's 2004 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
The information required by this Item is incorporated herein by reference to
Pages 4 through 11 of the Company's 2004 Annual Report to Shareholders.
Item 7.A. Quantitative and Qualitative Disclosures About Market Risks
-----------------------------------------------------------
The information required by this Item is incorporated herein by reference to
Pages 7 through 9 of the Company's 2004 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
The information required by this Item is incorporated herein by reference to
Pages 12 through 27 of the Company's 2004 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
---------------------------------------------------------------
None.
Item 9.A. Controls and Procedures
-----------------------
We carried out an evaluation, under the supervision and with the participation
of our management, including our principal executive officer and principal
financial officer, of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this Annual Report. Based upon
that evaluation, our President and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of the end of the period
covered by this Annual Report in timely alerting them as to material information
relating to our company (including our consolidated subsidiaries) required to be
included in this Annual Report.
There has been no change in our internal control over financial reporting during
the quarter ended March 28, 2004, identified in connection with the evaluation
referred to above, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART III
Item 10. Directors and Executive Officers of the Company
-----------------------------------------------
The information appearing under the caption "Election of Directors" on Pages 7
through 10 of the Company's Proxy Statement for its Annual Meeting of
Stockholders to be held on August 19, 2004 (the "Proxy Statement") is
incorporated herein by reference.
We have adopted a written code of business conduct and ethics that applies to
our Chief Executive Officer, Chief Financial Officer and all of our officers and
directors and can be found on our website, which is located at www.benihana.com.
We intend to make all required disclosures concerning any amendments to, or
waivers from, our code of business conduct and ethics on our website.
Item 11. Executive Compensation
----------------------
The information appearing under the caption "Executive Compensation" commencing
on Page 14 of the Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The information required by Sections A through C of this Item is incorporated by
reference to the information appearing under the caption "Security Ownership of
Certain Beneficial Owners of Management" on Pages 3 through 7 of the Proxy
Statement.
The following is the information required by Section D of this Item:
Equity Compensation Plan Information
------------------------------------
Number of securities
remaining available
Number of securities to Weighted average for future issuance
be issued upon exercise exercise price of under equity compensation
of outstanding options outstanding options plans (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
- ------------- ----------------------- ------------------- ------------------------
(a) (b) (c)
Equity compensation
plans approved by 1,699,629 $11.25 1,591,493
security holders
Equity compensation
plans not approved by 27,825 9.64 -0-
security holders
Total 1,727,453 11.07 1,591,493
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information appearing under the captions "Certain Relationships and Related
Transactions" commencing on Page 19 of the Proxy Statement is incorporated
herein by reference.
Item 14. Principal Accountant Fees and Services
--------------------------------------
The information required by this item is incorporated herein by reference to the
Company's Proxy Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a) 1. Financial Statements:
The following consolidated financial statements of the Company
and its subsidiaries, which are set forth on Pages 12 through 27
of the Company's 2004 Annual Report to Shareholders included
herein as Exhibit 13, are incorporated herein by reference as
part of this report.
Consolidated Balance Sheets as of March 28, 2004 and March 30,
2003.
Consolidated Statements of Earnings for the years ended March
28, 2004, March 30, 2003 and March 31, 2002.
Consolidated Statements of Stockholders' Equity for the years ended
March 28, 2004, March 30, 2003 and March 31, 2002.
Consolidated Statements of Cash Flows for the years ended March
28, 2004, March 30, 2003 and March 31, 2002.
Notes to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
2. Financial Statement Schedules:
None
3. Exhibits:
2.01 Amended and Restated Agreement and Plan of
Reorganization dated as of December 29, 1994 and
amended as of March 17, 1995 among BNC, BOT, the
Company and BNC Merger Corp. Incorporated by
reference to Exhibit 2.01 to the Company's
Registration Statement on Form S-4, Registration
No. 33-88295, made effective March 23, 1995 (the
"S-4").
3.01 Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit 3.01 to the
S-4 and to Exhibit 1 on Form 8-A dated February
12, 1997.
3.02 By-Laws of the Company. Incorporated by reference
to Exhibit 3.02 to the S-4.
4.01 Certificate of Designation of Rights, Preferences
and Terms for the Series A Convertible Preferred
Stock of the Company. Incorporated by reference
to Exhibit 4.01 to the Company's Current Report
on Form 8-K dated May 15, 1995.
4.02 Form of Certificate representing shares of the
Company's Common Stock. Incorporated by reference
to Exhibit 4.02 to the S-4.
4.03 Form of Certificate representing shares of the
Company's Class A Common Stock. Incorporated by
reference to Exhibit 4.03 to the S-4.
10.01 License Agreement, dated as of May 15, 1995
between BNC and BOT. Incorporated by reference
to Exhibit 10.01 to the S-4.
10.02 Directors' Stock Option Plan. Incorporated by
reference to Exhibit 10.08 to the S-4.
10.03 1996 Class A Stock Option Plan. Incorporated by
reference to Exhibit A to Benihana Inc. Proxy
Statement for its Annual Meeting of Stockholders
held on July 19, 1996.
10.04 1997 Class A Stock Option Plan. Incorporated by
reference to Exhibit A to Benihana Inc. Proxy
Statement for its Annual Meeting of Stockholders
held on August 27, 1998 (the "1998 Proxy
Statement").
10.05 Amendments to the Directors' Stock Option Plan.
Incorporated by reference to Exhibit B to the
1998 Proxy Statement.
10.06 2000 Employees' Class A Common Stock Option Plan.
Incorporated by reference to Exhibit A to
Benihana Inc. Proxy Statement for its Annual
Meeting of Stockholders held on August 3, 2000.
10.07 Restated Credit Agreement dated December 3, 2002
(the "Credit Agreement") by and among Benihana
Inc., the Guarantors (as listed and defined
therein), and Wachovia Bank, National
Association, as Agent and Lender.
10.08 Stockholders Agreement dated as of December 6,
1999 by and among Haru Holding Corp., BNC, Mei
Ping Matsumura and the Estate of Arthur Cutler.
Incorporated by reference to Exhibit 10.10 to the
Company's Registration Statement on Form S-2,
Registration Number 333-68946.
10.09 Benihana Incentive Compensation Plan.
Incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
10.10 Employment Agreement dated April 1, 2001 between
Joel A. Schwartz and the Company. Incorporated by
reference to Exhibit 10.07 of the 2001 10-K.
10.11 Employment Agreement dated April 1, 2001 between
Taka Yoshimoto and the Company. Incorporated by
reference to Exhibit 10.12 of the 2001 10-K.
10.12 Employment Agreement dated October 19, 1998
between Kevin Aoki and the Company. Incorporated
by reference to Exhibit 10.19 of the Company's
Annual Report on Form 10-K for the fiscal year
ended March 26, 2000 (the "2000 10-K").
10.13 Employment Agreement dated September 1, 2000
between Juan C. Garcia and the Company.
Incorporated by reference to Exhibit 10.15 of
the 2001 10-K.
10.14 Consulting Agreement dated April 1, 2001 between
Rocky H. Aoki and the Company. Incorporated by
reference to Exhibit 10.23 of the 2001 10-K.
10.15 Amendment No. 1 dated January 25, 2000 to
Employment Agreement dated October 19, 1998
between Kevin Aoki and the Company. Incorporated
by reference to Exhibit 10.20 to the 2000 10-K.
10.16 Amendment No. 2 dated April 1, 2001 to Employment
Agreement dated October 19, 1998 between Kevin
Aoki and the Company. Incorporated by reference
to Exhibit 10.14 to the 2001 10-K.
10.17 Amendment No. 2 dated April 1, 2001 to Employment
Agreement dated September 1, 2000 between Juan C.
Garcia and the Company. Incorporated by
reference to Exhibit 10.22 to the 2001 10-K.
10.18 Amendment No. 1 dated May 27, 2004 to Employment
Agreement dated April 1, 2001 between Joel A.
Schwartz and the Company.
10.19 Preferred Stock Purchase Agreement between
Benihana Inc. and BFC Financial Corporation dated
June 8, 2004.
13.01 Portions of Annual Report to Stockholders for the
year ended March 28, 2004.
23.01 Consent of Deloitte & Touche LLP, Independent
Registered Public Accounting Firm.
23.02 Consent of Deloitte & Touche LLP, Independent
Registered Public Accounting Firm.
31.1 Chief Executive Officer's certification pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Chief Financial Officer's certification pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer's certification pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Chief Financial Officer's certification pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
(i) On April 15, 2004, the Registrant issued a press release
announcing its fourth quarter sales and comparable sales
results for the fiscal quarter ended March 28, 2004.
(ii) On May 25, 2004, the Registrant issued a press release
announcing its fourth quarter and year end operating for
the fiscal quarter and year ended March 28, 2004.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: June 11, 2004 BENIHANA INC.
By: /s/ Joel A. Schwartz
-----------------------------------
Joel A. Schwartz, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on the date indicated above by the following persons on behalf
of the registrant and in the capacities indicated.
Signature Title Date
- --------- ----- ----
/s/ Joel A. Schwartz President and June 11, 2004
- --------------------------------
Joel A. Schwartz Director (Principal
Executive Officer)
/s/ Taka Yoshimoto Executive Vice President - June 11, 2004
- --------------------------------
Taka Yoshimoto Restaurant Operations
and Director
/s/ Michael R. Burris Senior Vice President of June 11, 2004
- ---------------------------------
Michael R. Burris Finance and Treasurer -
Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Kevin Y. Aoki Vice President - June 11, 2004
- ----------------------------------
Kevin Y. Aoki Marketing and Director
/s/ Juan C. Garcia Vice President - Controller June 11, 2004
- ----------------------------------
Juan C. Garcia
/s/ Darwin C. Dornbush Secretary and Director June 11, 2004
- ----------------------------------
Darwin C. Dornbush
/s/ John E. Abdo Director June 11, 2004
- -----------------------------------
John E. Abdo
/s/ Norman Becker Director June 11, 2004
- -----------------------------------
Norman Becker
/s/ Max Pine Director June 11, 2004
- -----------------------------------
Max Pine
/s/ Robert B. Sturges Director June 11, 2004
- -----------------------------------
Robert B. Sturges
/s/ Yoshihiro Sano Director June 11, 2004
- -----------------------------------
Yoshihiro Sano
Exhibit 10.18
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
Amendment No. 1 dated May 27, 2004 to Employment Agreement
dated April 1, 2001 (the "Agreement") by and between Benihana Inc.
and Joel A. Schwartz.
Unless otherwise defined herein, capitalized terms shall
have the respective meanings assigned to them in the agreement.
The parties agree that the Agreement shall be amended as
follows:
Section 1.1 of the Agreement is amended by modifying the
first sentence of that section to read in its entirety as follows:
1.1 The Company will employ the Executive in its
business and the Executive will continue to work for the
Company as President and Chief Executive Officer for a term
commencing the Effective Date and continuing until March
31, 2009.
Except as modified herein, the Agreement remains in full
force and effect in accordance with its terms without revocation or
change.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment No. 3 as of the date and year first above written.
BENIHANA INC.
/s/ Taka Yoshimoto
---------------------------------------
Taka Yoshimoto
Executive Vice President
/s/ Joel A. Schwartz
---------------------------------------
Joel A. Schwartz
President and
Chief Executive Officer
Exhibit 10.19
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of
June 8, 2004, by and between Benihana Inc., a Delaware corporation, with
headquarters located at 8685 Northwest 53rd Terrace, Miami, Florida 33166 (the
"Company"), and BFC Financial Corporation with headquarters located at 1750 East
Sunrise Boulevard, Ft. Lauderdale, Florida 33304 ("Purchaser").
RECITALS
The Board of Directors of the Company has approved the creation of a
series of the Company's preferred stock, par value $1.00 per share, denominated
as the Company's Series B Convertible Preferred Stock (the "Series B Preferred
Stock"), which shall be convertible into shares of the Company's Common Stock,
par value $0.10 per share (the "Common Stock"), in accordance with the terms of
the Company's Certificate of Designations, Preferences and Rights of Series B
Convertible Preferred Stock, substantially in the form attached hereto as
Exhibit A (the "Certificate of Designations").
Subject to the terms and conditions set forth in this Agreement, the
Purchaser agrees to purchase from the Company and the Company agrees to sell to
the Purchaser, an aggregate of 800,000 shares of the Series B Preferred Stock
(the "Preferred Shares"), at a purchase price per share of $25 (the "Purchase
Price"). All of the shares of Common Stock which are issuable upon conversion of
the Preferred Shares or PIK Shares (as defined herein) are referred to herein as
the "Conversion Shares." The Preferred Shares, the Conversion Shares, and,
unless the context otherwise requires, all Common Stock and Preferred Stock, as
applicable, issuable by the Company under the provisions of Section 1(d) of this
Agreement or under the Certificate of Designations, are hereinafter sometimes
referred to collectively as the "Securities". The shares of Preferred Stock
issuable b the Company under Section 4 of the Certificate of Designations are
hereinafter referred to as the "PIK Shares."
The Company is issuing the Preferred Shares in reliance upon the
exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act").
NOW THEREFORE, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
--------------------------------------
(a) Serial Purchases of Preferred Shares. Subject to the terms and
------------------------------------
conditions of this Agreement, the Company shall issue and sell to Purchaser, and
Purchaser shall purchase from the Company, from time to time in accordance with
the provisions of Section 1(b) below, and at a purchase price per share equal to
the Purchase Price, an aggregate of 800,000 Preferred Shares.
(b) (i) Initial Funding. The purchase and sale of the first 400,000
---------------
Preferred Shares (the "First Funding") shall take place at the offices of the
Company at 10:00 am, Eastern Time, on July 6, 2004 (the "First Funding Closing")
or at such other time and place as may be mutually agreed to by the parties.
(ii) Additional Fundings. The purchase and sale of the remaining
-------------------
400,000 Preferred Shares (each such purchase being referred to herein as an
"Additional Funding") shall take place at the offices of the
Company at 10:00 a.m., Eastern Time, on the date so specified by the Company in
its Funding Notice (as hereinafter defined) (provided that if such date is not a
Business Day, the closing shall take place on the next Business Day thereafter),
subject to the satisfaction (or waiver) of the conditions applicable to each
Additional Funding as set forth in Sections 5 and 6 below. The Company shall
specify the date of each Additional Funding and the number of Preferred Shares
to be purchased or sold thereat, on not less than ninety (90) days prior written
notice to the other party (each a "Funding Notice"); provided, however, that no
Additional Funding shall occur prior to the first, or later than the third
anniversary of the date hereof (provided, however, that a purchase and funding
can occur after the third anniversary if a Funding Notice is duly given prior to
the third anniversary); and provided, further, that no fewer than 100,000
Preferred Shares may be sold at any Additional Funding (unless the number of
Preferred Shares sold thereat constitutes all of the remaining Preferred Shares
required to be sold pursuant to the terms of this Agreement); and provided,
further, that in the event that the Company shall fail to give Funding Notices
with respect to all of the 400,000 Preferred Shares remaining for sale hereunder
on or prior to the third anniversary of the date hereof, the Purchaser may elect
to purchase such remaining Preferred Shares by providing notice of such election
to the Company within ten (10) days after the third anniversary of the date
hereof (and such notice shall also set forth the date of the closing of such
purchase, which shall be a Business Day within ninety (90) days of such third
anniversary).
(c) Form of Payment. At the First Funding Closing and at the closing
---------------
of each Additional Funding (each, an "Additional Funding Closing"), (i)
Purchaser shall pay the Purchase Price to the Company for the number of
Preferred Shares being purchased by wire transfer of immediately available funds
in accordance with the Company's written wire instructions (to be delivered not
less than two (2) Business Days prior to such closing), and (ii) the Company
shall deliver to Purchaser stock certificates (in such denominations as
Purchaser shall request) (the "Preferred Stock Certificates") representing such
number of the Preferred Shares which Purchaser is then purchasing hereunder,
duly executed on behalf of the Company and registered in the name of Purchaser
or its designee, together with any accrued and unpaid stand by fee payable with
respect to the Preferred Shares being purchased pursuant to Section 1(d) below.
(d) Stand By Fee. The Company shall pay to the Purchaser a stand by
------------
fee at the rate of $0.25 per share per year for each of the additional 400,000
Preferred Shares to be sold pursuant to this Agreement which shall accrue from
the date hereof until each such share is issued and sold in accordance with the
terms of this Agreement. The stand by fee shall be payable on the last day of
each calendar quarter commencing with the calendar quarter ending on September
30, 2004 (with any accrued and unpaid stand-by fee payable with respect to the
shares sold at any Additional Funding to be paid at the applicable Additional
Funding Closing). At the option of the Company, the stand by fee may be paid in
cash or in Common Stock having an equivalent market value. For these purposes,
the market value of any Common Stock issued in payment of the stand by fee shall
be its VWAP (as such term is defined in the Certificate of Designations) for the
thirty (30) day period immediately preceding the date of payment.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
------------------------------------------
Purchaser represents and warrants that:
(a) Investment Purpose. All of the Securities acquired or to be
------------------
acquired by it hereunder have been or will be acquired for its own account and
not with a view towards, or for resale in connection with, the distribution
thereof, except for sales registered or exempted under the Securities Act.
(b) Accredited Investor Status. Purchaser is an "accredited investor"
--------------------------
as that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
(c) Reliance on Exemptions. Purchaser understands that the Securities
----------------------
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of the United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and
Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Securities.
(d) Information. Purchaser and its advisors, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by Purchaser. Purchaser and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Purchaser
understands that its investment in the Securities involves a high degree of
risk. Purchaser has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
(e) No Governmental Review. Purchaser understands that no court,
----------------------
administrative agency or commission or other governmental or quasi-governmental
authority or instrumentality, domestic or foreign, Federal, state, county or
local (each a "Governmental Entity") has passed on or made any recommendation or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer or Resale. Purchaser understands that except as provided
------------------
in the Registration Rights Agreement: (i) the sale of the Securities has not
been and will not be registered under the Securities Act or any state securities
laws, and that the Securities may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, (B) the Purchaser
shall have delivered to the Company an opinion of counsel (or such other
evidence reasonably acceptable to the Company), in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) the Purchaser provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule
144A promulgated under the Securities Act, as amended (or a successor rule
thereto) (collectively, "Rule 144"); and (ii) neither the Company nor any other
person is under any obligation to register the Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder.
(g) Legends. Purchaser understands that all stock certificates
-------
representing the Securities shall bear a restrictive legend in substantially the
following form (in addition to any legend required under applicable state
securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS OR (B) AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the Securities upon
which it is stamped, if, unless otherwise required by state securities laws, (i)
such Securities are registered for resale under the Securities Act, (ii) in
connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public
sale, assignment or transfer of the Securities may be made without registration
under the Securities Act, or (iii) such holder provides the Company with
reasonable assurances that the Securities can be sold pursuant to Rule 144
without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold.
(h) Organization and Qualification. The Purchaser is a corporation
------------------------------
duly organized and validly existing in good standing under the laws of the
jurisdiction in which it is incorporated or formed, and has the requisite
corporate power and authorization to own its properties and to carry on its
business as now being conducted.
(i) Authorization; Enforcement; Validity. The Purchaser has the
------------------------------------
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and the Registration Rights Agreement (as
hereinafter defined) (collectively, the " Transaction Documents"). The execution
and delivery of the Transaction Documents by the Purchaser and the consummation
by it of the transactions contemplated hereby and thereby, including, without
limitation, the purchase of the Preferred Shares, have been duly authorized by
the Purchaser's Board of Directors and no further consent or authorization is
required by the Purchaser, its Board of Directors or its stockholders. This
Agreement has been, and upon its execution and delivery, the Registration Rights
Agreement will be, duly executed and delivered by the Purchaser, and (subject to
the due execution and delivery thereof by the Company) constitute the valid and
binding obligations of the Purchaser enforceable against it in accordance with
their terms.
(j) Residency. Purchaser has its principal executive offices located
---------
in the State of Florida.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to the Purchaser as follows in
this Section 3:
(a) Organization and Qualification. The Company and its
------------------------------
"Subsidiaries" (which for purposes of this Agreement means any Person in which
the Company, directly or indirectly, owns securities representing fifty percent
(50%) or more of the outstanding voting power of all voting securities of such
Person) are corporations, limited partnerships, or limited liability companies
duly organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated or formed, as applicable, and have
the requisite corporate, limited partnership, or limited liability company power
and authorization to own their respective properties and to carry on their
respective business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect. As used in this Agreement, "Material Adverse Effect" means any
material adverse effect on the business, properties, assets, operations,
prospects, results of operations or financial condition of the Company and its
Subsidiaries taken as a whole, or on the authority or ability of the Company to
perform its obligations under the Transaction Documents (as hereinafter defined)
or the Certificate of Designations.
(b) Authorization; Enforcement; Validity. The Company has the
------------------------------------
requisite corporate power and authority to enter into and perform its
obligations under the Transaction Documents, to execute and file the Certificate
of Designations, and to issue the Securities in accordance with the terms hereof
and thereof. The execution and delivery of the Transaction Documents by the
Company and the execution and filing of the Certificate of Designations by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Preferred Shares and
the reservation for issuance and the issuance of all Conversion Shares, have
been duly authorized by the Company's Board of Directors and except as otherwise
expressly provided herein, no further consent or authorization is required by
the Company, its Board of Directors or its stockholders. Additionally, the
issuance of the PIK Shares and any shares of Common Stock issuable under this
Agreement does not and will not require the approval of the Company's
stockholders. This Agreement has been, and upon its due execution and delivery
the Registration Rights Agreement will be, duly executed and delivered by the
Company, and (subject to the due execution and delivery thereof by the
Purchaser) constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms. The Certificate
of Designations will be filed with the Secretary of State of the State of
Delaware prior to the First Funding Closing and will be in full force and effect
on the First Funding Closing, enforceable against the Company in accordance with
its terms.
(c) Capitalization.
--------------
(i) The authorized capital stock of the Company consists of
(A) 12,000,000 shares of Common Stock, 20,000,000 shares of Class A
Common Stock, and 5,000,000 shares of Preferred Stock of which 40,000 shares
have been designated Series A-1 Junior Participating Preferred Stock and 30,000
shares have been designated as Series A-2 Junior Participating Preferred Stock)
and as of the close of business on June 7, 2004, 3,018,979 shares of Common
Stock are issued and outstanding and 23,575 shares thereof are reserved for
issuance under the Company's equity compensation plans and upon the exercise or
conversion of outstanding warrants, options or other convertible securities or
pursuant to other contractual obligations of the Company; 6,134,225 shares of
Class A Common Stock are issued and outstanding and 2,754,925 shares thereof are
reserved for issuance under the Company's equity compensation plans and upon the
exercise or conversion of outstanding warrants, options or other convertible
securities or pursuant to other contractual obligations of the Company; and no
shares of Preferred Stock are issued and outstanding. All of the shares of the
Company's capital stock that are issued and outstanding or reserved for issuance
have been, or upon issuance in accordance with the terms of the instruments
pursuant to which they may be issued, will be, validly issued and fully paid and
non-assessable and were or will be offered, sold and issued in compliance with
all applicable federal and state securities laws.
(ii) No shares of the Company's capital stock are subject
or entitled to preemptive rights or any other similar rights except to the
extent provided in this Agreement. Except as set forth herein or otherwise
disclosed in Section 3(c)(i) above, or as provided in this Agreement, there are
(A) no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of capital stock of the Company
or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable for, any shares of capital stock of the Company
or any of its Subsidiaries; (B) no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (C) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement; and (D) no stock option, stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement of the Company.
(iii) The Company has furnished or made available to
Purchaser true and correct copies of the Company's Certificate of Incorporation,
as amended and as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's Amended and Restated Bylaws, as amended and
as in effect on the date hereof (the "Bylaws").
(d) Issuance of Securities. The Securities have been duly authorized
----------------------
and, upon issuance in accordance with the terms hereof (or in the case of the
Conversion Shares and the PIK Shares, in accordance with the terms of the
Certificate of Designations), will be validly issued, fully paid and
non-assessable and will be free of any liens, claims, charges or encumbrances
and not subject to any preemptive rights. Subject only to the accuracy of the
representations set forth in Section 2, the issuance by the Company of the
Securities is exempt from registration under the Securities Act and all
applicable state securities laws.
(e) No Conflicts.
------------
(i) The execution, delivery and performance of the
Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Designations and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Conversion Shares
and issuance of the PIK Shares) will not: (A) result in a violation of the
Certificate of Incorporation or the Bylaws; (B) conflict with, result in a
breach of, or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or incremental,
additional or varied rights under, any material agreement, indenture or
instrument (including, without limitation, any stock option, employee stock
purchase or similar plan or any employment or similar agreement) to which the
Company or any of its Subsidiaries is a party (including, without limitation,
triggering the application of any change of control or similar provision) or to
which any property or assets of the Company or any of its Subsidiaries is bound
or affected; (C) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations
and the rules and regulations of the Principal Market (as hereinafter defined))
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected; or (d)
result in the creation or imposition of any liens, claims, charges or
encumbrances upon any of the properties or assets of the Company or any of its
Subsidiaries.
(ii) Neither the Company nor its Subsidiaries is in
violation of any term of its Certificate of Incorporation or Bylaws or, in the
case of Subsidiaries, their organizational charter or bylaws, respectively.
(iii) The business of the Company and its Subsidiaries is
not being conducted, and shall not be conducted, in violation of any law,
ordinance or regulation of any Governmental Entity, including, without
limitation, those related to employment, employment practices, labor, building,
zoning and safety and health, except where such violations would not result,
either individually or in the aggregate, in a Material Adverse Effect.
(iv) Except for the filing of the Certificate of
Designations with the Secretary of State of the State of Delaware, the filing of
appropriate notices to various state liquor authorities, and the securing of the
consent of Wachovia Bank, N.A., the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
Governmental Entity in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents or to perform its
obligations under the Certificate of Designations, in each case in accordance
with the terms hereof or thereof. All consents, authorizations, orders, filings
and registrations which the Company is required to obtain or make as described
in the preceding sentence shall have been obtained or made on or prior to the
First Funding (to the extent required to be made prior thereto) and shall remain
in effect through each Additional Funding and shall not be the subject of any
pending or, to the knowledge of the Company, threatened attack by appeal, direct
proceeding or otherwise. The Company is not, and as of the First Funding and
each Additional Funding will not be, in violation of the listing requirements of
the Principal Market, and the Conversion Shares and all other shares of the
Company's Common Stock issuable pursuant to the terms of this Agreement and the
Certificate of Designations are, and shall be authorized for listing thereon.
(f) Compliance with Laws, Regulations. The Company and each of its Subsidiaries
---------------------------------
has all permits, licenses, certificates of authority, orders and approvals of,
and has made all filings, applications and registrations with applicable
Governmental Entities that are required in order to permit each to carry on its
business as presently conducted and the absence of which could have a Material
Adverse Affect on the Company. All such permits, licenses, certificates of
authority, orders and approvals the absence of which could have a Material
Adverse Effect are in full force and effect and no suspension or cancellation of
any of them is threatened; and all such filings, applications and registrations
are current. The Company knows of no facts which could result in its loss of any
permits, licenses, certificates of authority, orders, approvals or registrations
the loss of which could have a Material Adverse Effect.
(g) SEC Documents; Financial Statements.
-----------------------------------
(i) Since March 30, 2003, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be
filed by it with the United States Securities Commission (the "SEC") pursuant to
the reporting requirements of the Securities Act and the Exchange Act (all of
the foregoing (including all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference therein) and all
forms, documents and instruments filed by the Company with the SEC pursuant to
the Securities Act (including all exhibits included therein and financial
statements and schedules thereto and documents incorporated by reference
therein) being hereinafter referred to as the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents. None of the
SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(ii) As of their respective dates, the financial statements
of the Company included in the SEC Documents complied as to form in all
material respects with U.S. generally accepted accounting principles ("GAAP")
and the published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with GAAP, consistently
applied, during the periods involved (except (A) as may be otherwise
specifically indicated in such financial statements or the notes thereto, or (B)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements or as otherwise, in each
case, may be permitted by the SEC on Form 10-Q under the Exchange Act) and
fairly present in all material respects the consolidated financial position of
the Company as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments) and are consistent
with the books and records of the Company. Deloitte & Touche, LLP, which has
examined certain of such financial statements, is an independent certified
public accounting firm within the meaning of the Securities Act. As of the date
of this Agreement, the Company meets the requirements for use of Form S-3 for
registration of the resale of Registrable Securities (as defined in the
Registration Rights Agreement). The Company has no liabilities or obligations
(whether accrued, absolute, contingent or otherwise, and whether known or
unknown), except (i) liabilities and obligations reflected on or reserved
against in the financial statements included in the SEC Documents, or (ii)
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since March 31, 2004, which individually or in the
aggregate do not have a Material Adverse Effect, or (iii) obligations under
executory contracts not required to be disclosed in the Company's financial
statements under GAAP.
(h) Absence of Certain Changes. Except as otherwise described in the
--------------------------
SEC Documents, since March 31, 2003, there has been no event constituting, or
which could reasonably be expected to cause or give rise to, a material adverse
change or material adverse development in the business, properties, assets,
operations, prospects, results of operations or financial conditions of the
Company and its Subsidiaries taken as a whole. Neither the Company nor any of
its Subsidiaries has taken any steps, and does not expect to take any steps, to
seek protection pursuant to any bankruptcy law. Except as otherwise described in
the SEC Documents, since January 1, 2004, the business of the Company and its
Subsidiaries has been conducted in the ordinary course consistent with past
practice and, without limiting the generality of the foregoing, neither the
Company nor any of its Subsidiaries has taken or agreed or committed to take any
of the actions specified in Section 7 of the Certificate of Designations
requiring a class vote by the holders of the Series B Preferred Stock had such
shares been outstanding during such period.
(i) Absence of Litigation. There is no action, suit, proceeding,
---------------------
inquiry or investigation before or by any court, public board, Governmental
Entity or self-regulatory organization or body pending or, to the knowledge of
the Company or any of its Subsidiaries, threatened against or affecting the
Company, the Common Stock or any of its Subsidiaries, nor is the Company or any
of its Subsidiaries subject to any order, writ, injunction or decree of any
court, public board Governmental Entity or self-regulatory organization or body,
except where any of the foregoing could not reasonably be expected to result,
either individually or in the aggregate, in a Material Adverse Effect.
(j) Insurance. The Company and each of its Subsidiaries carry, or are
---------
covered by, insurance in such amounts and covering such risks as is customary
for companies engaged in similar businesses in similar industries.
(k) Patents and Other Proprietary Rights. The Company and each of its
------------------------------------
Subsidiaries own or possess adequate rights to use all material patents, patent
applications, trademarks, service marks, trade names, trademark registrations,
service mark registrations, copyrights and licenses necessary for the conduct of
their respective businesses and the conduct of their respective businesses does
not and would not conflict with or constitute an infringement on the material
rights of others.
(l) Labor Relations. Neither the Company nor any of its Subsidiaries
---------------
has been or is a party to any collective bargaining or other labor agreement.
There is not presently pending or existing and, to the knowledge of the Company,
there is not threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any proceeding against or affecting the Company
or any of its Subsidiaries relating to the alleged violation of any legal
requirements pertaining to labor relations or employment matters or other labor
disturbance, or (c) any application for certification of a collective bargaining
agent, in each case, to the extent that any of the same could reasonably be
expected to result in a Material Adverse Effect.
(m) Employee Benefits. The Company and its Subsidiaries are in
-----------------
compliance in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder ("ERISA"); no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company would have any material liability; the
Company has not incurred and does not expect to incur liability under (i) Title
IV of ERISA with respect to termination of, or withdrawal from, any "pension
plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and, to the best of the Company's knowledge,
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(n) Taxes. The Company and its Subsidiaries have filed all federal,
-----
state and local income and franchise tax returns required to be filed through
the date hereof. All such tax returns are true, complete and correct in all
material respects. All taxes due and payable by the Company and its Subsidiaries
have been paid or accrued on the balance sheet included in the latest filed SEC
Document. No tax deficiency has been determined adversely to the Company or any
of its Subsidiaries which has had (nor does the Company have any knowledge of
any tax deficiency which, if determined adversely to the Company or any of its
subsidiaries, would reasonably be expected to have) a Material Adverse Effect.
(o) Environmental Matters. There has been no storage, disposal,
---------------------
generation, manufacture, refinement, transportation, handling or treatment of
toxic wastes, medical wastes, hazardous wastes or hazardous substances by the
Company or any of its Subsidiaries (or, to the knowledge of the Company, any of
their predecessors in interest) at, upon or from any of the property now or
previously owned, leased or used by the Company or its Subsidiaries in violation
of any applicable law, ordinance, rule, regulation, order, judgment, decree or
permit or which would require remedial action under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit, except for any
violation or remedial action which could not have, or would not be reasonably
expected to have, singularly or in the aggregate with all such violations and
remedial actions, a Material Adverse Effect; there has been no material spill,
discharge, leak, emission, injection, escape, dumping or release of any kind
onto such property or into the environment surrounding such property of any
toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous
substances due to or caused by the Company or any of its Subsidiaries or with
respect to which the Company or any of its Subsidiaries have knowledge, except
for any such spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to have,
singularly or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a Material Adverse
Effect; and the terms "hazardous wastes", "toxic wastes", "hazardous substances"
and "medical wastes" shall have the meanings specified in any applicable local,
state, federal and foreign laws or regulations with respect to environmental
protection.
(p) No General Solicitation. Neither the Company, nor any of its
-----------------------
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities.
(q) No Integrated Offering. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the Securities Act or cause this offering of the Securities
to be integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of any Principal Market on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps (other than by
compliance with the Registration Rights Agreement) that would require
registration of any of the Securities under the Securities Act or cause the
offering of the Securities to be integrated with other offerings.
(r) Application of Takeover Protections. The Company and its Board of
-----------------------------------
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under any agreement binding upon the Company or under
the Certificate of Incorporation or the laws of the State of Delaware or the
State of Florida which is or could become applicable to Purchaser or any of its
affiliates as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities, the
Purchaser's ownership or voting of the Securities or the Purchaser's conversion
of the Series B Preferred Stock.
(s) Investment Company. The Company is not, and after giving effect
------------------
to the offering and sale of the Securities hereunder and the application of the
proceeds thereof as described in this Agreement will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940, as
amended.
(t) No Market Manipulation. Neither the Company nor its Subsidiaries
----------------------
nor, to the knowledge of the Company, any of such entities' directors, officers,
employees, agents or controlling persons have taken, directly or indirectly, any
action designed, or that might reasonably be expected, to cause or result, under
the Securities Act or otherwise, in, or that has constituted, stabilization or
manipulation of the price of the Common Stock.
(u) Full Disclosure. Neither the representations and warranties of
---------------
the Company in this Agreement nor any certificate, instrument or statement
furnished or made to Purchaser by or on behalf of the Company in connection with
the Transaction Documents contains a misstatement of material fact or omit to
state a material fact necessary to make the statements herein, in light of the
circumstances under which they were made, not misleading.
4. COVENANTS.
---------
(a) Operate in Ordinary Course. From the date of execution of this
--------------------------
Agreement until the First Funding, the businesses of the Company and its
Subsidiaries shall be conducted in the ordinary course consistent with past
practice and further, without the written consent of the Purchaser, the Company
shall not, and shall cause its Subsidiaries not to, take or agree or commit to
take any of the actions specified in Section 7 of the Certificate of
Designations that would have required a class vote thereunder by the holders of
the Series B Preferred Stock if such shares had been outstanding. Since the
close of b usiness on June 7, 2004 and until First Funding, the Company shall
not take or agree to commit to take, and shall not have taken or agreed or
committed to take, any action that would have resulted in an adjustment of the
Conversion Price (as defined in the Certificate of Designations) under Section
6(d) of the Certificate of Designations if the Shares of Series B Preferred
Stock had been outstanding as of that date.
(b) Form D and Blue Sky. The Company agrees to file a Form D with
-------------------
respect to the Securities as required under Regulation D. The Company shall, on
or before the First Funding and each Additional Funding, take such action as the
Company shall reasonably determine is necessary in order to obtain an exemption
for or to qualify the Securities for sale to the Purchaser at the First Funding
and each Additional Funding pursuant to this Agreement under applicable
securities or "Blue Sky" laws of Florida, and shall provide evidence of any such
action so taken to the Purchaser on or prior to the First Funding Closing and
each Additional Funding Closing. The Company shall make all filings and reports
relating to the offer and sale of the Securities to the Purchaser required under
applicable securities or "Blue Sky" laws of the states of the United States
following the First Funding and each Additional Funding.
(c) Reporting Status. So long as the Preferred Shares are outstanding
----------------
(the "Reporting Period"), the Company shall file all reports required to be
filed with the SEC pursuant to the Securities Act and the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination, other than as the result of
a merger or consolidation or sale or transfer of all or substantially all of the
Company's assets in compliance with the Certificate of Designations.
(d) Use of Proceeds. The Company will use the proceeds from the sale
---------------
of the Preferred Shares for the repayment of outstanding indebtedness, capital
expenditures, and general working capital. No portion of the proceeds from the
issuance of Preferred Shares shall be used in any manner which would violate
Regulation U, T or X of the Board of Governors of the Federal Reserve System or
any other regulation of such Board or to violate the Exchange Act, as in effect
on the First Funding Closing or any Additional Funding Closing on which such
proceeds were received.
(e) Financial Information. The Company agrees to send the following
---------------------
to the Purchaser during the Reporting Period (A) unless the following are filed
with the SEC through EDGAR and are available to the public through EDGAR, within
two (2) Business Days after the filing thereof with the SEC: a copy of its
Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the Securities Act; (B) on the same day as the
release thereof, copies of any notices and other information made available or
given to the stockholders of the Company generally, contemporaneously with the
making available or giving thereof to the stockholders; and (C) from time to
time, such other financial data and information relating to the Company and its
Subsidiaries as Purchaser may reasonably request (subject to appropriate
confidentiality procedures).
(f) Reservation of Shares. The Company shall take all action
---------------------
necessary to at all times have authorized, and reserved for the purpose of
issuance, the number of shares of Common Stock needed to provide for the
issuance of the Conversion Shares.
(g) Listing. The Company shall file an application for the listing of
-------
the Conversion Shares on the Principal Market and shall use it best efforts to
cause such listing to be approved prior to the First Funding Closing. The
Company shall use its best efforts to maintain the Common Stock's authorization
for quotation of the Common Stock on NASDAQ or to obtain and maintain a listing
on The New York Stock Exchange, Inc. or another national securities exchange
(collectively, as applicable, the "Principal Market"). The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 4(g).
(h) Access to Records. Subject to appropriate agreements of
-----------------
confidentiality and limitations of interference, the Company shall afford
Purchaser and its employees, counsel and other authorized representatives full
access, during normal business hours, upon reasonable advance notice, with due
regard to its ongoing operations, to the assets, properties, offices and other
facilities, books and records of the Company and its Subsidiaries, and to the
outside auditors of the Company and their work papers relating thereto, in each
case, as Purchaser may from time to time reasonably request. The parties hereto
agree that no investigation by Purchaser or their representatives shall affect
or limit the scope of the representations and warranties of the Company
contained herein or in any Transaction Document delivered pursuant hereto or
limit liability for breach of any such representation or warranty.
(i) Board of Director Resolutions. The Board of Directors shall not
-----------------------------
amend, rescind or repeal the resolutions authorizing the issuance of the Series
B Preferred Stock, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
(j) Deferral of Right to Elect Additional Director. So long as
----------------------------------------------
Purchaser (or any of its Affiliates) is the holder of a majority of the
outstanding Preferred Shares, Purchaser will not (and Purchaser will cause any
such Affiliate not to) exercise its right to elect a director of the Company
pursuant to the first sentence of Section 7(d) of the Certificate of
Designations if, at the time, John E. Abdo (i) is serving as an officer or
director of Purchaser, and (ii) has been elected as a director by the holders of
the Company's Common Stock or Class A Common Stock and is serving as such.
(k) Right to Purchase Securities.
----------------------------
(i) Except as provided in Section 4(k)(iv) below, the
Company shall not issue, sell or transfer any of its equity securities or
any options, warrants or other rights to purchase or subscribe for its equity
securities, including without limitation any securities convertible into or
exchangeable for equity securities (the "Offered Shares") unless the Company
provides the Purchaser written notice (the "Sale Notice") at least thirty (30)
days prior to the proposed issuance date specifying the prices at which the
Offered Shares are proposed to be issued and sold and all other material terms
of the issuance. The restrictions set forth in the preceding sentence shall
terminate and be of no further force and effect upon the Termination Date (as
defined below).
(ii) Purchaser shall have the right to purchase, during the
period set forth in this Section, at the prices and on the terms
specified in the Sale Notice, up to the number or amount of the Offered Shares
(together, the "Maintenance Securities") as are necessary for the Purchaser to
maintain its Percentage Ownership in the Company as it existed immediately prior
to such issuance. As used in this Section 4(k): (A) "Percentage Ownership"
means, at any time, (i) the Base Number divided by (ii) the total number of
shares of the Company's Common Stock and Class A Stock then outstanding or
reserved for issuance pursuant to any then outstanding securities or other
contractual obligations of the Company (including the Conversion Shares), (B)
"Base Number" means the sum of the number of shares of Common Stock issued or
issuable upon conversion of the 800,000 Preferred Shares subject to the
provisions of this Agreement (assuming for these purposes that all of such
Preferred Shares had been issued and were outstanding) plus the number of shares
of Common Stock issued or issuable upon the conversion of any PIK Shares then
outstanding or previously issued; provided, however, that there shall be
excluded from the foregoing calculation any shares of Common Stock previously
issued to Purchaser and which are not then beneficially owned by Purchaser and
(C) "Termination Date" means the date on which the Purchaser and its Affiliates
cease to own at least 25% of the total number of Preferred Shares outstanding.
(iii) Purchaser may exercise its right to purchase
Maintenance Securities by delivering written notice of acceptance of any offer
made in a Sale Notice within thirty (30) days after its receipt thereof. A
delivery of such a written notice of acceptance, which shall specify the number
of shares (or amount) of Maintenance Securities that Purchaser desires to so
purchase, shall constitute a binding agreement by Purchaser to purchase such
Maintenance Securities specified in such written acceptance notice, at the
prices and on substantially the same terms and conditions as set forth in the
Sale Notice. The Company shall have ninety (90) days from the date it sends the
Sale Notice to consummate the proposed issuance of Maintenance Securities. On
the date of such consummation, the Company shall issue certificates representing
the Maintenance Securities to be purchased, registered in the names and in the
denominations as specified by the Purchaser in its applicable written acceptance
notice, against payment of the purchase price for such Maintenance Securities by
Purchaser as provided in the Sale Notice. If the Company proposes to issue
Offered Shares after such 90-day period, it shall again comply with the
foregoing procedures.
(iv) Notwithstanding the foregoing, Purchaser shall not be
entitled to purchase Maintenance Securities as contemplated by this
Section 4 (and no Sale Notice shall be required in connection with) the
Company's issuance of securities that are (i) Excluded Securities as such term
is defined in the Certificate of Designations or (ii) issued pursuant to an
underwritten public offering, or (iii) issued pursuant to any stock split, stock
dividend or other similar stock recapitalization.
(v) If Offered Shares are being issued by the Company in
connection with the issuance of other securities of the Company, then
Purchaser may only exercise its rights under this Section 4(k) by purchasing a
pro rata share of both the Offered Shares, and the other securities being
issued. The foregoing terms and conditions applicable to the purchase of
Maintenance Securities shall also apply to the purchase of such other
securities.
(l) Certificate of Designations. The Company shall file the
---------------------------
Certificate of Designations with the Secretary of State of the State of
Delaware.
(m) Consents and Approvals. The Company shall use its reasonable best
----------------------
efforts to obtain all consents and approvals and to file all notices, necessary
to consummate the transactions contemplated hereby, including but not limited to
obtaining Wachovia Bank, N.A.'s consent and the filing of all notices with the
various state liquor licensing authorities.
5. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
---------------------------------------
(a) Conditions to the Company's Obligations at the First Funding. The
------------------------------------------------------------
obligation of the Company to issue and sell the applicable Preferred Shares to
Purchaser at the First Funding is subject to the satisfaction, at or before the
First Funding Closing, of each of the following conditions, it being understood
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion by providing Purchaser with prior
written notice thereof:
(i) Purchaser shall have executed and delivered this
Agreement and a Registration Rights Agreement substantially in the form of
that attached hereto as Exhibit B.
(ii) Purchaser shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by Purchaser on the
First Funding Closing by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.
(iii) The representations and warranties of Purchaser
contained herein shall be true and correct in all material respects as of the
date when made and as of the First Funding Closing as though made at that time,
and Purchaser shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the Purchaser
Transaction Documents to be performed, satisfied or complied with by Purchaser
at or prior to that date.
(iv) No statute, rule, regulation, order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed
or otherwise be in effect by any Governmental Entity of competent jurisdiction
which enjoins, restricts, or prohibits the consummation of any of the
transactions contemplated by this Agreement or any other Transaction Documents.
(v) The Conversion Shares shall have been approved for listing on the
Principal Market, upon official notice of issuance.
(vi) Wachovia Bank, N.A. shall have consented to the
Company's execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, which consent shall not be subject to any
unduly burdensome conditions.
(b) Conditions to Company's Obligations at Additional Fundings. The
----------------------------------------------------------
obligation of the Company to issue and sell the applicable Preferred Shares to
Purchaser at any Additional Funding is subject to the satisfaction, at or before
such Additional Funding Closing, of each of the following conditions, it being
understood that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing Purchaser
with prior written notice thereof:
(i) Purchaser shall have delivered to the Company the
Purchase Price for the Preferred Shares being purchased by such Purchaser
at the Additional Funding by wire transfer of immediately available funds
pursuant to wire instructions provided by the Company.
(ii) The representations and warranties of Purchaser
contained herein shall be true and correct in all material respects as of the
date when made and as of such Additional Funding Closing as though made at that
time, and such Purchaser shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by Purchaser
at or prior to that date.
(iii) No statute, rule, regulation, order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed
or otherwise be in effect by any Governmental Entity of competent jurisdiction
which enjoins, restricts, or prohibits the consummation of any of the
transactions contemplated by this Agreement or any other Transaction Documents.
6. CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE.
------------------------------------------------
(a) Conditions to Purchaser's Obligations at First Funding. The
------------------------------------------------------
obligation of Purchaser hereunder to purchase the applicable Preferred Shares
from the Company at the First Funding Closing is subject to the satisfaction, at
or before the First Funding Closing, of each of the following conditions. These
conditions are for Purchaser's sole benefit and may be waived by Purchaser at
any time in its sole discretion.
(i) The Company shall have delivered:
(A) an executed counterpart of this Agreement and
the Registration Rights Agreement.
(B) the opinion of Dornbush Mensch Mandelstam &
Schaeffer, LLP counsel to the Company, dated as of the date of the
First Funding Closing, in form, scope and substance reasonably satisfactory to
such Purchaser.
(C) a copy of resolutions adopted by Board of
Directors of the Company in a form reasonably acceptable to Purchaser
(the "Resolutions") authorizing the transactions contemplated by the Transaction
Documents.
(D) a certificate evidencing the incorporation
and good standing of the Company in Delaware issued by the Secretary of
State of the State of Delaware as of a date within five (5) days of the First
Funding Closing, together with a certificate evidencing the good standing of the
Company as a foreign corporation in the State of Florida issued by the Secretary
of State of the State of Florida.
(E) A secretary's certificate, dated as of the
First Funding Closing, certifying as to (A) the Resolutions, (B) the
Certificate of Incorporation and (C) the Bylaws, each as in effect as at the
date of the First Funding Closing.
(F) A certificate executed by the Company's chief
executive officer certifying as to the satisfaction of the conditions
set forth in Section 6(a)(ii) - (vii).
(G) Preferred Stock Certificates (in such
denominations as Purchaser may request) representing the Preferred Shares
purchased by Purchaser on the date hereof.
(ii) The Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware.
(iii) The representations and warranties of the Company shall be true
and correct in all material respects (except for representations and warranties
which are qualified by materiality or Material Adverse Effect, which shall be
true and correct in all respects) as of the date when made and as of the First
Funding Closing as though made at that time.
(iv) The Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to such First Funding Closing.
(v) No statute, rule, regulation, order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed
or otherwise be in effect by any Governmental Entity of competent jurisdiction
which enjoins, restricts, or prohibits the consummation of any of the
transactions contemplated by this Agreement or any other Transaction Documents.
(vi) The Conversion Shares shall have been approved for listing on
the Principal Market, upon official notice of issuance and the Company shall
provide to Purchaser upon written request evidence of such listing.
(vii) No event or condition constituting, or which could reasonably
be expected to cause or give rise to, a material adverse change or material
adverse development in the business, properties, assets, operations, prospects,
results of operations or financial condition of the Company and its Subsidiaries
taken as a whole shall have occurred.
(b) Conditions to the Purchaser's Obligations at Additional Fundings.
----------------------------------------------------------------
The obligation of the Purchaser hereunder to purchase the applicable Preferred
Shares from the Company at the Additional Fundings is subject to the
satisfaction, at or before the each Additional Funding Closing, of each of the
following conditions. These conditions are for Purchaser's sole benefit and may
be waived by the Purchaser at any time in its sole discretion.
(i) (A) The representations and warranties of the Company
shall be true and correct in all material respects (except for
representations and warranties which are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of such Additional Funding Closing as though made at that time.
(B) The Company shall have performed, satisfied
and complied in all material respects with the covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to such Additional Funding Closing.
(ii) The Purchaser shall have received the updated opinion
of Dornbush Mensch Mandelstam & Schaeffer, LLP, counsel to the Company,
dated as of such Additional Funding Closing, in form, scope and substance
reasonably satisfactory to such Purchaser.
(iii) The Company shall have executed and delivered to the
Purchaser the Preferred Stock Certificates (in such denominations as
such Purchaser shall request) for the Preferred Shares being purchased by such
Purchaser at such Additional Funding Closing.
(iv) The Board of Directors of the Company shall not have
amended or rescinded the Resolutions.
(v) The Company shall have delivered to Purchaser a
certificate evidencing the incorporation and good standing of the Company in
Delaware issued by the Secretary of State of the State of Delaware as of a date
within five (5) days of such Additional Funding Closing.
(vi) The Company shall have delivered to Purchaser a
secretary's certificate certifying as to any amendment or modification since
the Initial Funding to (A) the Resolutions, (B) the Certificate of
Incorporation, or (C) the Bylaws.
(vii) No statute, rule, regulation, order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed
or otherwise be in effect by any Governmental Entity of competent jurisdiction
which enjoins, restricts, or prohibits the consummation of any of the
transactions contemplated by this Agreement or any other Transaction Documents.
(viii) A certificate executed by the Company's chief
executive officer certifying as to the satisfaction of the conditions set forth
in Section 6(b)(i) and (iv) through (vii) and (ix).
(ix) No event or condition constituting, or which could
reasonably be expected to cause or give rise to, a material adverse change
or material adverse development in the business, properties, assets, operations,
prospects, results of operations or financial conditions of the Company and its
Subsidiaries taken as a whole shall have occurred.
7. TERMINATION.
-----------
(a) Termination.
-----------
(i) This Agreement may be terminated by mutual consent of the
parties.
(ii) The Purchaser may terminate its obligation under this
Agreement to purchase the Preferred Shares at the First Funding and/or to
purchase the applicable Preferred Shares at any Additional Funding by giving
written notice to the Company at any time:
(A) in the event that the Company has breached any
representation, warranty, or covenant contained in this Agreement or in
any other Transaction Document in any material respect, the Purchaser has
notified the Company of the breach, and the breach has continued without cure
for fifteen (15) days after the notice of breach, or
(B) If Purchaser has failed to purchase all of the Preferred
Shares by the third anniversary of the date hereof by reason of the failure of
any condition precedent under Section 6(b) hereof or if satisfaction of any
such condition by such date is or becomes impossible (unless the failure results
primarily from any Purchaser itself breaching in any material respect any
representation, warranty, or covenant contained in this Agreement or any other
Transaction Document).
(iii) The Company may terminate its obligation under this
Agreement to sell the Preferred Shares at the First Funding and/or to
sell any additional Preferred Shares hereunder at any time:
(A) in the event that Purchaser has breached any
representation, warranty, or covenant contained in this Agreement in
any material respect, the Company has notified the Purchaser of the breach, and
the breach has continued without cure for fifteen (15) days after the notice of
breach, or
(B) if the Purchaser has not purchased all of the
Preferred Shares by the third anniversary of the date hereof by the
outside date, by reason of the failure of any condition precedent under Section
5(b) hereof or if satisfaction of any such condition by such date is or becomes
impossible (unless the failure results primarily from the Company breaching in
any material respect any representation, warranty, or covenant contained in this
Agreement or any other Transaction Document).
(b) Effect of Termination. Each party's right of termination under
---------------------
Section 7(a) is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of such right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to Sections
7(a)(i) or (ii) or (iii) the Purchaser's obligation to purchase and the
Company's obligation to sell any additional Preferred Shares hereunder shall
also terminate.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
(a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of
---------------------------------------
the State of Delaware shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of Delaware, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the State of Florida for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more
------------
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective, with respect to a particular party, when
counterparts have been signed by such party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.
(c) Headings. The headings of this Agreement are for convenience of
--------
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
------------
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement and the other
----------------------------
Transaction Documents and the instruments referenced herein or therein
supersedes all other prior oral or written agreements, negotiations or
correspondence between Purchaser, the Company, their affiliates and persons
acting on their behalf with respect to the matters discussed herein (including
the term sheet related hereto), and this Agreement and the other Transaction
Documents and the instruments referenced herein or therein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Purchaser makes any representation, warranty, covenant or
undertaking with respect to such matters. This Agreement may only be amended,
waived or modified by an instrument in writing signed by the Company and the
Purchaser.
(f) Notices. Any notices, consents, waivers or other communications
-------
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same; or (iv) five (5) days after deposit
in the U.S. Mail. The addresses and facsimile numbers for such communications
shall be:
If to Purchaser: BFC Financial Corporation
1750 East Sunrise Boulevard
Ft. Lauderdale, Florida
33304 Attention: Chief
Executive Officer Facsimile:
(954) 760-5210
With a copy to: Stearns, Weaver Miller Weissler
Alhadeff & Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Attention: Alison W. Miller, Esq.
Facsimile: (305) 789-3395
If to the Company: Benihana Inc.
8685 Northwest 53rd Terrace
Miami, Florida 33166
Attention: Chief Executive Officer
Facsimile: (305) 592-6371
With a copy to: Dornbush Mensch Mandelstam & Schaeffer, LLP
747 Third Avenue
New York, New York 10017
Attention: Landey Strongin, Esq.
Facsimile: (212) 753-7673
(g) Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Preferred Shares. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Purchaser. The Purchaser shall not assign this Agreement or any
of its rights hereunder including its rights to purchase Preferred Shares, to
any third party without the prior written consent of the Company; provided,
however, that Purchaser may assign any or all of its rights hereunder to an
affiliate, including the right to purchase the Preferred Shares.
(h) No Third Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Survival; Indemnification.
-------------------------
(i) The representations and warranties of the Company and
the Purchaser contained in Sections 2 and 3, and the agreements and covenants
set forth in Sections 4 and 8 shall survive any termination of this Agreement.
(ii) The Company agrees to indemnify, defend and hold
Purchaser and the officers, directors, employees, agents and affiliates of
Purchaser (collectively, a "Purchaser Indemnitee") harmless from and against,
for and in respect of any and all damages, losses, obligations, liabilities,
claims, actions or causes of action, encumbrances, costs, or expenses, including
without limitation reasonable costs and expenses of investigation, expenses and
disbursements of counsel, consultants and other experts, and interest and
penalties (collectively, "Losses") suffered, sustained, incurred or required to
be paid by a Purchaser Indemnitee arising out of or in connection with or as a
result of (i) the breach by the Company of any representation, warranty,
covenant or agreement made by it contained in this Agreement or any other
Transaction Document and (ii) any third party claim made or asserted against a
Purchaser Indemnitee in whole or in part in respect of any of the transactions
contemplated by this Agreement or any of the other Transaction Documents
(regardless of whether such claim is made or asserted before or after the First
Funding Closing).
(iii) The Purchaser agrees to indemnify, defend and hold
the Company harmless from and against, for and in respect of any and all
actions or losses suffered, sustained, incurred or required to be paid by the
Company arising out of or in connection with or as a result of the breach by the
Purchaser of any representation, warranty, covenant or agreement made by it
contained in this Agreement or any other Transaction Document.
(iv) Any party (the "Indemnified Party") entitled to
indemnity from any other party (the "Indemnifying Party") shall give the
Indemnifying Party prompt written notice of the assertion of any third party
claim (a "Third Party Claim") that may serve as a basis for indemnity hereunder;
provided, however, that failure to notify the Indemnifying Party will not
relieve the Indemnifying Party of any liability that it may have to any
Indemnified Party, except to the extent that the Indemnifying Party demonstrates
that the defense of such action is materially prejudiced by the Indemnified
Party's failure to so notify. The Indemnifying Party shall be entitled to assume
the defense of any such Third Party Claim by providing written notice no later
than ten (10) days from receipt of notice of the assertion of any Third Party
Claim unless the Indemnified Party shall in good faith determine that such
representation would result in a conflict of interest. In the event, the
Indemnifying Party shall fail to assume the defense of the Third Party Claim
within the ten-day period set forth above or the defense by the Indemnifying
Party would result in a conflict of interest, the Indemnifying Party shall be
entitled to retain its own counsel, at the Indemnifying Party's expense, and to
control the defense of any Third Party Claim. If the Indemnifying Party shall
assume the defense, it shall not compromise or settle any Third Party Claim
without the Indemnified Party's consent unless (A) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party and (B) the
Indemnified Party receives an unconditional full release.
(j) Publicity. The Company and the Purchaser shall have the right to
---------
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that either
party shall be entitled, without the prior approval of the other party, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although the non-disclosing
party shall be consulted by the other party and given a reasonable opportunity
to comment in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).
(k) Further Assurances. Each party shall do and perform, or cause to
------------------
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) Placement Agent. The Company has engaged Morgan Joseph & Co. as
---------------
its placement agent or broker in connection with the sale of the Preferred
Shares. The Company shall be solely responsible for the payment of any placement
agent's fees or broker's commissions payable to that firm relating to or arising
out of the transactions contemplated hereby.
(m) Form, Registration, Transfer and Exchange of Preferred Stock;
------------------------------------------------------------
Lost Preferred Stock. The Company shall keep at its principal office a register
in which the Company shall provide for the registration of Series B Preferred
Stock and of transfers of Series B Preferred Stock. Upon surrender for
registration of transfer of any share of Series B Preferred Stock at the
principal office of the Company, the Company shall, at its expense, promptly
execute and deliver one or more new shares of Series B Preferred Stock of the
like tenor and number, registered in the name of such transferee or transferees.
At the option of the holder of any share of Series B Preferred Stock, such share
may be exchanged for other Series B Preferred Stock of like tenor and of a like
number, upon surrender of the share of Series B Preferred Stock to be exchanged
at the principal office of the Company. Whenever any shares of Series B
Preferred Stock are so surrendered for exchange, the Company shall, at its
expense, execute and deliver the shares of Series B Preferred Stock which the
holder making the exchange is entitled to receive. Every share of Series B
Preferred Stock surrendered for registration of transfer or exchange shall be
duly endorsed, or be accompanied by a written instrument of transfer duly
executed by the holder of such share of Series B Preferred Stock or such
holder's attorney duly authorized in writing. Any share of Series B Preferred
Stock issued in exchange for any share of Series B Preferred Stock or upon
transfer thereof shall carry the rights to unpaid dividends to accrue which were
carried by the share of Series B Preferred Stock so exchanged or transferred, so
that neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any share of Series
B Preferred Stock of the loss, theft, destruction or mutilation of such share of
Series B Preferred Stock and, in the case of any such loss, theft or
destruction, upon receipt of such holder's unsecured indemnity agreement, or in
the case of any such mutilation upon surrender and cancellation of such share of
Series B Preferred Stock, the Company will make and deliver a new share of
Series B Preferred Stock, of like tenor, in lieu of the lost, stolen, destroyed
or mutilated share of Series B Preferred Stock.
(n) Definitions. In addition to the words and terms defined elsewhere
in this Agreement, the following words and terms shall have the following
meanings, respectively, unless the context clearly requires otherwise:
"Business Day" means any day other than Saturday, Sunday or
another day on which commercial banks in the State of Florida are authorized
or required by law to remain closed.
"NASDAQ" means The Nasdaq Stock Market, Inc.
"Person" means any partnership, corporation, association,
joint stock company, trust, limited liability company, joint venture or
unincorporated organization.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Stock Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
Benihana Inc.
By: ----------------------------
Name: Joel Schwartz
Title: President
PURCHASER:
BFC Financial Corporation
By: ----------------------------
Name: John E. Abdo
Title: Vice Chairman
EXHIBIT A
PROPOSED CERTIFICATE OF DESIGNATIONS
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES B CONVERTIBLE PREFERRED STOCK
of
BENIHANA INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, the undersigned, President of Benihana Inc., a Delaware
corporation (hereinafter called the "Corporation"), pursuant to the provisions
of Sections 103 and 151 of the General Corporation Law of the State of Delaware,
do hereby make this Certificate of Designations and do hereby state and certify
that pursuant to the authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation, as amended,
the Board of Directors duly adopted the following resolutions:
RESOLVED, that, pursuant to Article V of the Amended and Restated
Certificate of Incorporation of the Corporation, as amended (which authorizes an
aggregate of 5,000,000 shares of preferred stock, $1.00 par value ("Preferred
Stock")), the Board of Directors hereby fixes the powers, designations,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions, of a series of Preferred
Stock.
RESOLVED, that each share of such series of Preferred Stock shall
rank equally in all respects and shall be subject to the following provisions:
1. Number and Designation. 800,000 shares of the Preferred Stock of the
----------------------
Corporation shall be designated as Series B Convertible Preferred Stock (the
"Series B Preferred Stock").
2. Definitions. In addition to the capitalized terms elsewhere defined herein,
-----------
the following terms, when used herein, shall have the meanings indicated, unless
the context otherwise requires.
"Additional Funding" has the meaning specified in the Stock Purchase
Agreement.
"Adjusted Conversion Price" means, with respect to any share of
Series B Preferred Stock, at any time, the Initial Conversion Price of such
share of Series B Preferred Stock, as adjusted from time to time pursuant to
Section 6(d) hereof.
"Affiliate" means, with respect to any specified Person, any other
Person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified Person. For the purposes
of this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "affiliated," "controlling," and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in Miami,
Florida generally are authorized or required by law or other governmental
actions to close.
"Class A Common Stock" means the Corporation's Class A Common Stock,
par value $0.10 per share.
"Common Stock" means the Corporation's Common Stock, par value $0.10
per share and unless otherwise expressly provided, excludes reference to the
Corporation's Class A Common Stock.
"Common Stock Equivalent" means any security or obligation which is
by its terms convertible, exchangeable or exercisable into or for shares of
Common Stock or Class A Common Stock, including, without limitation, the Series
B Preferred Stock and any option, warrant or subscription right with respect to
any Common Stock, Class A Common Stock or Common Stock Equivalent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
"Excluded Securities" means Common Stock, Class A Common Stock or
Common Stock Equivalents issued:
(i) pursuant to the Corporation's stock option plans (or any options
issued thereunder) or pursuant to any other stock related employee compensation
or equity incentive plans or arrangements of the Corporation approved by the
Corporation's Board of Directors or its predecessors (including such plans under
Section 423 of the Internal Revenue Code of 1986, as amended),
(ii) pursuant to (A) the conversion of convertible notes or other
debt instruments outstanding as of the date of the Stock Purchase Agreement, (B)
the exercise of options or warrants outstanding (or reserved for issuance under
the Corporation's equity incentive plans in effect) as of the date of the Stock
Purchase Agreement and (C) other obligations of the Corporation which are
existing as of the date of the Stock Purchase Agreement, provided that with
respect to (A), (B) and (C) all of which shall have been disclosed in the Stock
Purchase Agreement,
(iii) as consideration in connection with (A) acquisitions by the
Corporation or its subsidiaries of a business enterprise or (B) mergers,
consolidations, joint ventures or other business combinations by the Corporation
with third Persons, provided that with respect to (A) and (B) any such
acquisitions, mergers, consolidations, joint ventures or other business
combinations are approved by the holders of a majority of the Series B Preferred
Stock pursuant to Section 7 hereof (to the extent any such approval is required
thereunder),
(iv) upon exercise or conversion of any security the issuance of
which caused an adjustment under Section 6(d)(v) or 6(d)(vi) hereof), or
"First Funding" has the meaning specified in the Stock Purchase
Agreement.
"Initial Conversion Price" means $19.00 per share, subject to
adjustment from time to time pursuant to Section 6(d) hereof.
"Liquidation Preference" means, with respect to each share of Series
B Preferred Stock, the sum of (i) $25.00 per whole share of Series B Preferred
Stock (as adjusted for stock splits, reverse stock splits, stock dividends and
similar transactions with respect to the Series B Preferred Stock) plus (ii)
accrued and unpaid dividends on such share of Series B Preferred Stock through
the date of determination or payment.
"Market Price" means, with respect to the Common Stock, on any given
day, (i) the closing price per share on the principal securities exchange on
which the Common Stock may at the time be listed, or (ii) the price of the last
trade, as reported on the Nasdaq National Market, not identified as having been
reported late to such system, or (iii) if the Common Stock is so quoted, but not
so traded, the average of the last bid and ask prices, as those prices are
reported on the Nasdaq National Market, or (iv) if the Common Stock is not
listed or authorized for trading on the Nasdaq National Market or any comparable
system, the average of the closing bid and asked prices as furnished by two
members of the National Association of Securities Dealers, Inc. selected from
time to time by the Corporation for that purpose and reasonably acceptable to
the holders of a majority of the outstanding Series B Preferred Stock. If the
Common Stock is not listed on any securities exchange or listed and traded in a
manner that the prices or quotations referred to above are available for the
period required hereunder, the Market Price per share of Common Stock shall be
deemed to be the fair value per share of such security as mutually agreed upon
by the Corporation and the holders of a majority of the outstanding Series B
Preferred Stock.
"Outstanding", when used with reference to shares of stock, means
issued and outstanding shares, excluding shares held by the Corporation or a
subsidiary.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust and any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Principal Market" means the principal securities exchange on which
the Common Stock may at the time be listed, or if at such time the Common Stock
is not so listed, the Nasdaq National Market, or if the Common Stock is not
traded on the Nasdaq National Market, then the principal securities exchange or
trading market for the Common Stock.
"Purchaser" means BFC Financial Corporation or any other Person who,
at the time, is the beneficial owner of 50% or more of the then outstanding
Series B Preferred Stock.
"Significant Assets" means assets having a value of more than 25% of
the total consolidated assets of the Corporation and its subsidiaries.
"Stated Value" means, with respect to each share of Series B
Preferred Stock, an amount equal to $25.00 per whole share of Series B Preferred
Stock (as adjusted for stock splits, reverse stock splits, stock dividends and
similar transactions with respect to the Series B Preferred Stock).
"Stock Purchase Agreement" means that certain Preferred Stock
Purchase Agreement, dated _____ __, 2004 between the Corporation and the
Purchaser as in effect from time to time in accordance with its terms.
"Voting Percentage" means the number of votes entitled to be cast at
any time by the holders of the Series B Preferred Stock divided by the total
number of votes then entitled to be cast by the holders of all outstanding
shares of the Company's Common Stock, Class A Common Stock and Series B
Preferred Stock, in each case, with respect to matters on which all such classes
vote together as a single class.
"VWAP" means, for any security, the dollar volume-weighted average
price for such security on the Principal Market during any specified period
beginning at 9:30 a.m., New York City Time, on the first trading day of the
applicable period and ending at 4:00 p.m., New York City Time, on the last
trading day in the applicable period as reported by Bloomberg Financial Markets,
or any successor thereto ("Bloomberg"), through its "Volume at Price" functions
or, if the foregoing does not apply, the dollar volume-weighted average price of
such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30 a.m., New York City Time,
on the first trading day of the applicable period and ending at 4:00 p.m., New
York City Time, on the last trading day of the applicable period, as reported by
Bloomberg. If the VWAP cannot be calculated for such security on any of the
foregoing bases, the VWAP of such security shall be the Market Price on the last
day in the applicable period. All such determinations shall be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period.
3. Rank. The Series B Preferred Stock shall, with respect to dividend rights and
----
rights on liquidation, winding-up and dissolution, rank senior to all classes of
common equity of the Corporation and to all other classes of equity securities
of the Corporation, including any other class or series of any class of
Preferred Stock of the Corporation, whether now outstanding or issued hereafter.
Other than as permitted by Section 7(b) hereof, the Corporation shall not create
any class or series of preferred stock or any convertible debt securities
ranking pari passu with or senior to the Series B Preferred Stock with respect
to dividend rights or rights on liquidation, winding-up and dissolution without
the approval of holders of a majority of the outstanding shares of Series B
Preferred Stock.
4. Dividends.
---------
(a) The holders of outstanding shares of Series B Preferred Stock
shall receive cumulative quarterly dividends, out of the assets of the
Corporation legally available therefor, prior and in preference to any
declaration or payment of any dividend on the Common Stock, Class A Common Stock
or any other equity securities of the Corporation (including other Preferred
Stock), at an annual rate equal to $1.25 per share, payable on the last day of
each calendar quarter commencing September 30, 2004, whether or not declared.
Such dividends shall accumulate from the date of original issuance. With the
consent of both the Corporation and the holders of a majority of the then
outstanding shares of the Series B Preferred Stock, dividends may be paid in a
number of additional shares of Series B Preferred Stock calculated by dividing
the amount of the cash dividends which would be otherwise payable by the Stated
Value of the Series B Preferred Stock. To the extent that the foregoing
calculation of the number of shares payable in respect of a dividend would,
after aggregating all such dividends payable to a holder of Series B Preferred
Stock, result in the payment of a fractional share to such holder, cash in an
amount equal to the Stated Value multiplied by such fractional portion shall be
paid to such holder in lieu thereof.
(b) In the event that the Corporation, with the consent of the
holders of a majority of the then outstanding shares of the Series B Preferred
Stock, determines to pay dividends in additional shares of Series B Preferred
Stock, the Corporation shall take all such actions as may be reasonably
necessary or required to authorize the issuance of such additional shares and
all shares of Common Stock issuable upon conversion thereof, including but not
limited to the amendment of this Certificate of Designation to increase the
authorized number of shares of Series B Preferred Stock, and, if required, the
listing of shares of Common Stock issuable upon conversion thereof on the
Principal Market.
(c) So long as any shares of Series B Preferred Stock shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on the Common Stock, Class A
Common Stock or any other equity securities (including other Preferred Stock) of
the Corporation nor shall the Corporation, directly or indirectly, purchase,
redeem or otherwise acquire any Common Stock, Class A Common Stock or any other
equity securities (including other Preferred Stock) of the Corporation, until
all dividends (set forth in Section 4(a) above) on the Series B Preferred Stock
shall have been paid or declared and set apart.
5. Liquidation Preference and Redemption.
-------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), before any
payment or distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of the Common Stock,
Class A Common Stock or any other equity securities (including other Preferred
Stock) of the Corporation, the holders of the shares of Series B Preferred Stock
shall be entitled to receive with respect to each share of Series B Preferred
Stock held thereby an amount in cash equal to the Liquidation Preference of such
share of Series B Preferred Stock. If, upon any Liquidation of the Corporation,
the assets of the Corporation, or proceeds thereof, distributable among the
holders of the shares of Series B Preferred Stock shall be insufficient to pay
in full the preferential amount aforesaid, then such assets, or the proceeds
thereof, shall be distributed among the holders of shares of Series B Preferred
Stock ratably in accordance with the respective amounts that would be payable on
such shares of Series B Preferred Stock if all amounts payable thereon were paid
in full.
(b) Upon the completion of the distribution required by Section 5(a)
and any other distribution that may be required with respect to any other series
of Preferred Stock that may from time to time come into existence, subject to
the rights of any other series of Preferred Stock that may from time to time
come into existence, if assets remain in the Corporation, the holders of the
Common Stock and the Class A Common Stock of the Corporation shall receive the
distribution of the remaining assets, or the proceeds thereof.
(c) Notwithstanding anything else in this Certificate of
Designations, a Liquidation of the Corporation shall also be deemed to include
the acquisition of the Corporation by another Person or Persons who are not
Affiliates of the Corporation by means of any transaction or series of related
transactions, including, without limitation, any reorganization, merger,
consolidation or similar transaction, whether of the Corporation with or into
any other Person or Persons or of any other Person or Persons with or into the
Corporation, or a sale of all or substantially all of the assets of the
Corporation; provided that a consolidation or merger as a result of which the
holders of capital stock of the Corporation immediately prior to such merger or
consolidation possess (by reason of such holdings) 50% or more of the voting
power of the corporation surviving such merger, consolidation or similar
transaction (or other Person which is the issuer of the capital stock into which
the capital stock of the Corporation is converted or exchanged in such merger or
consolidation) shall not be treated as a Liquidation of the Corporation within
the meaning of this Section 5,
(d) (i) The Corporation shall redeem all shares of Series B Preferred
Stock outstanding on the Redemption Date (and may so redeem all shares of Series
B Preferred stock outstanding on the Early Redemption Date, if any, as such term
is defined below) at an amount per share (the "Redemption Price") equal to the
Liquidation Preference of such Share. The Redemption Date shall be_____________,
2014 or such later date as may be specified by the holders of more than 50% of
the then outstanding shares of Series B Preferred Stock by written notice given
to the Corporation not more than sixty (60) nor less than thirty (30)days prior
to such tenth anniversary, but in no event shall the Redemption Date be later
than __________, 2024.
(ii) The Early Redemption Date shall be the date specified in
a notice (the "Early Redemption Notice") given to the holders of the Series B
Preferred Stock by the Corporation. The Early Redemption Notice may be given by
the Corporation (i) only if at any time on or after _______, 2007, the VWAP of
the Common Stock for a sixty (60) consecutive trading day period (the "Measuring
Period") exceeds $38.00 per share (subject to adjustment for stock splits,
reverse stock splits, stock dividends and similar transactions with respect to
the Common Stock), and (ii) only within sixty (60) days after the end of the
first Measuring Period after ________, 2007 where the VWAP exceeds $38.00 per
share, and if not given within such sixty-day period, the Corporation shall no
longer have a right to redeem the Series B Preferred Stock under the provisions
of this Section (d)(ii). In no event shall the Early Redemption Date be more
than sixty (60) or less than thirty (30) days after the date of such notice.
(iii) On the Redemption Date or the Early Redemption Date, as
the case may be, the Corporation shall deposit the Redemption Price (in cash or,
in the case of the Redemption Date and at the election of the Corporation,
shares of the Corporation's Common Stock as hereinafter provided) of all shares
of Series B Preferred Stock then outstanding, with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000 as a trust fund
for the benefit of the respective holders of the shares to be redeemed and not
yet redeemed, with irrevocable instructions and authority to the bank or trust
corporation to pay the Redemption Price for such shares to their respective
holders on or after the Redemption Date or the Early Redemption Date, as the
case may be, upon receipt of notification from the Corporation that such holder
has surrendered his share certificate to the Corporation. From and after the
Redemption Date, or the Early Redemption Date, as the case may be, the shares so
called for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no rights with respect thereto except the rights
to receive the Redemption Price of the shares, without interest, upon surrender
of their certificates therefor. Such instructions shall also provide that any
moneys or other property deposited by the Corporation for the redemption of
shares which shares are thereafter converted into shares of the Corporation's
Common Stock prior to the Redemption Date shall be returned to the Corporation
forthwith upon such conversion. The balance of any moneys or property deposited
by the Corporation pursuant to this Section 5(d) remaining unclaimed at the
expiration of two (2) years following the Redemption Date, or the Early
Redemption Date, as the case may be, shall thereafter be returned to the
Corporation upon its request expressed in a resolution of its Board of
Directors.
(iv) The Redemption Price payable on the Redemption Date shall
be paid in cash or, at the election of the Corporation, in shares of Common
Stock which for these purposes shall be deemed to have a value per share equal
to the VWAP of a share of Common Stock during the twenty (20) consecutive
trading days immediately preceding the Redemption Date; provided, however, that
the Corporation may only elect to pay the Redemption Price in shares of Common
Stock if (i) the Common Stock are at the Redemption Date traded on a national
securities exchange or the Nasdaq National Market and (ii) the aggregate market
value of the Common Stock and any other common equity of the Corporation so
traded or quoted (including for this purpose the Conversion Shares) exceeds $75
million. The Redemption Price payable on any Early Redemption Date must be paid
entirely in cash.
(v) Any shares of Series B Preferred Stock redeemed pursuant
to this Section or otherwise acquired by the Corporation in any manner
whatsoever shall be canceled and shall not under any circumstances be reissued;
the Corporation may from time to time take such appropriate corporate action as
may be necessary to reduce accordingly the number of authorized shares of the
Corporation's capital stock.
(vi) The Corporation will not, and will not permit any
subsidiary of the Corporation to, purchase or acquire any shares of Series B
Preferred Stock otherwise than pursuant to (1) the terms of this Section 5(d),
or (2) an offer made on the same terms to all holders of Series B Preferred
Stock at the time outstanding.
(vii) Anything contained in this Section 5(d) to the contrary
notwithstanding, the holders of shares of Series B Preferred Stock to be
redeemed in accordance with this Section shall have the right, exercisable at
any time up to the close of business on the Redemption Date (or any Early
Redemption Date) to convert all or any part of such shares to be redeemed as
herein provided into shares of Common Stock pursuant to Section 6 of this
Certificate of Designations; provided, however, that if the Corporation defaults
on the payment of the Redemption Price thereof, and without prejudicing any
other rights or remedies that the holders of Series B Preferred Stock may have,
the holders of Series B Preferred Stock shall have the right to convert all or
any part of such shares to be redeemed up to the date upon which the Corporation
duly pays the Redemption Price.
(viii) There shall be no sinking fund for the payment of
dividends, or liquidation preferences on the Series B Preferred Stock or the
redemption of any shares thereof.
6. Conversion.
----------
(a) (i) Shares of Series B Preferred Stock shall be convertible
into Common Stock on the terms and conditions set forth in this Section 6.
(ii) Subject to the provisions of this Section 6, each
holder of outstanding shares of Series B Preferred Stock shall have the right,
at any time, at such holder's option, to convert any or all outstanding shares
(and fractional shares) of Series B Preferred Stock, in whole or in part, into
fully paid and non-assessable shares of Common Stock.
(iii) The number of shares of Common Stock deliverable upon
the conversion hereunder of a share of Series B Preferred Stock as of any date
shall be an amount equal to (A) the Liquidation Preference divided by (B) the
Adjusted Conversion Price of such share of Series B Preferred Stock.
(b) Conversion Requirements.
-----------------------
(i) In order to exercise the conversion right, the holder of
the shares of Series B Preferred Stock to be converted shall surrender the
certificate representing such shares of Series B Preferred Stock (or a lost
stock affidavit therefor reasonably acceptable to the Corporation) at the office
of the Corporation, with a written notice of election to convert completed and
signed, specifying the number of shares of Series B Preferred Stock to be
converted. Unless the shares issuable on conversion are to be issued in the same
name as the name in which such shares of Series B Preferred Stock are
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or the holder's duly authorized attorney.
(ii) As promptly as practicable after the surrender by a
holder of certificates for shares of Series B Preferred Stock as aforesaid, the
Corporation shall issue and shall deliver to such holder, or on the holder's
written order to the holder's transferee, (w) a certificate or certificates for
the whole number of shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions of this Section 6, (x) any cash
adjustment required pursuant to Section 6(c) hereof and (y) in the event of a
conversion in part, a certificate or certificates for the whole number of shares
of Series B Preferred Stock not being so converted.
(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the certificates
for shares of Series B Preferred Stock shall have been surrendered to the
Corporation for conversion and such notice received by the Corporation as
aforesaid, and the person in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder of record of the shares of Common Stock
represented thereby at such time on such date. All shares of Common Stock
delivered upon conversion of the Series B Preferred Stock will upon delivery be
duly and validly issued and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights. Upon the surrender of
certificates representing shares of Series B Preferred Stock, such shares shall
no longer be deemed to be outstanding and all rights of a holder with respect to
such shares surrendered for conversion shall immediately terminate except the
right to receive the Common Stock and other amounts payable pursuant to this
Section 6 and a certificate or certificates representing shares of Series B
Preferred Stock not converted.
(iv) The Corporation covenants that the Corporation will at
all times reserve from its authorized and unissued Common Stock a sufficient
number of shares of Common Stock to permit conversion in full of the outstanding
shares of Series B Preferred Stock at the Adjusted Conversion Price from time to
time in effect. The Corporation agrees that its issuance of Series B Preferred
Stock shall constitute full authority to its officers and agents who are charged
with the duty of executing stock certificates to execute and issue promptly the
necessary certificates for shares of Common Stock upon the conversion of Series
B Preferred Stock.
(c) In connection with the conversion of any shares of Series B
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash payment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Market Price per share of Common Stock on the business day on which such
shares of Series B Preferred Stock are deemed to have been converted.
(d) Adjustments.
-----------
(i) If the Corporation shall at any time after the date of the
Stock Purchase Agreement (A) declare a dividend or make a distribution on Common
Stock payable in Common Stock or Class A Common Stock, (B) subdivide or split
the outstanding Common Stock, (C) combine or reclassify the outstanding Common
Stock into a smaller number of shares, or (D) issue any shares of its capital
stock in a reclassification of Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Corporation is the
continuing corporation), the Adjusted Conversion Price in effect at the time of
the record date for such dividend or distribution or of the effective date of
such subdivision, split, combination, consolidation, merger or reclassification
shall be proportionately adjusted so that the conversion of the Series B
Preferred Stock after such time shall entitle the holder to receive the
aggregate number of shares of Common Stock or other securities of the
Corporation (or shares of any security into which such shares of Common Stock
have been combined, consolidated, merged or reclassified pursuant to clause
(d)(i)(C), or (d)(i)(D) above of this Section 6) which, if the Series B
Preferred Stock had been converted immediately prior to such time, such holder
would have owned upon such conversion and been entitled to receive by virtue of
such dividend, distribution, subdivision, split, combination, consolidation,
merger or reclassification.
(ii) If the Corporation shall issue or sell any Common Stock
or Class A Common Stock (other than Excluded Securities) at any time without
consideration or for a consideration per share less than the Adjusted Conversion
Price then in effect, then the Adjusted Conversion Price to be in effect after
such issuance or sale shall be determined by multiplying the Adjusted Conversion
Price in effect immediately prior to such issuance or sale by a fraction, (A)
the numerator of which shall be the aggregate number of shares of Common Stock
and Class A Common Stock outstanding or reserved for issuance immediately before
such issuance or sale, plus the aggregate number of shares of Common Stock that
the aggregate consideration received by the Corporation upon such issuance or
sale would purchase at the Adjusted Conversion Price then in effect and (B) the
denominator of which shall be the aggregate number of shares of Common Stock and
Class A Common Stock outstanding or reserved for issuance immediately before
such issuance or sale, plus the aggregate number of shares of Common Stock and
Class A Common Stock so issued or sold.
(iii) For purposes of making any adjustment required under
Sections 6(d)(ii), the value of the consideration received by the Corporation
for any issuance or sale of securities shall:
(A) insofar as it consists of cash, be computed as
the aggregate of cash received by the Corporation;
(B) insofar as it consists of property other than
cash (subject to clause (C) below), be computed at the fair market value
thereof at the time of such issue, as agreed upon in good faith by the Board of
Directors and the holders of a majority of the outstanding shares of Series B
Preferred Stock;
(C) insofar as it consists of securities, be
computed as follows:
(1) the market price thereof (computed in a
manner similar to the definition of "Market Price" of Common Stock) averaged
over a period of fifteen (15) consecutive trading days consisting of the day as
of which the current fair market value of such securities is being determined
(or if such day is not a trading day, the trading day next preceding such
day) and the fourteen (14) consecutive trading days prior to such day, or
(2) if on the date for which the current fair market value is to be determined
such securities are not listed on any securities exchange or quoted on the
Nasdaq National Market or the over-the-counter market, the current fair market
value of such securities shall be as agreed upon in good faith by the Board of
Directors and the holders of a majority of the outstanding shares of Series B
Preferred Stock; or
(D) if shares of Common Stock or Class A Common
Stock are issued together with other shares or securities or other assets of
the Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) through (C)
above, as determined in good faith by the Board of Directors; provided, however,
that in the case of (B), (C) and (D) if the holders of a majority of the
then-outstanding shares of Series B Preferred Stock shall object to any such
determination (or the Board of Directors and the holder of a majority of the
outstanding shares of Series B Preferred Stock shall be unable to agree on a
fair market value determination), the Board of Directors shall retain an
independent appraiser reasonably satisfactory to such holders to determine such
fair market value. The holders shall be notified promptly of any consideration
other than cash to be received by the Corporation and furnished with a
description of the consideration and the fair market value thereof, as
determined by the Board of Directors.
(iv) Except for and with respect to Excluded Securities, in
the event that the Corporation fixes a record date for the issuance of rights,
options or warrants to the holders of its Common Stock or Class A Common Stock
or other securities entitling such holders to subscribe for or purchase shares
of Common Stock or Class A Common Stock (or securities convertible or
exchangeable into shares thereof) at a price per share (or having a conversion
or exercise price per share) less than the Adjusted Conversion Price in effect
on such record date, the maximum number of shares of Common Stock or Class A
Common Stock issuable upon exercise of such rights, options or warrants (or
conversion or exchange of such convertible securities) shall be deemed to have
been issued and outstanding as of such record date and the Adjusted Conversion
Price then in effect shall be adjusted pursuant to Section 6(d)(ii) hereof, as
though such maximum number of shares had been so issued for the aggregate
consideration payable by the holders of such rights, options, warrants or
convertible securities upon the exercise, conversion or exchange thereof. In
case any portion of such consideration shall be in a form other than cash, the
fair market value of such noncash consideration shall be determined as set forth
in Section 6(d)(iii) hereof. Such adjustment shall be made successively whenever
such record date is fixed; and in the event that such rights, options or
warrants are not so issued or expire unexercised, or in the event of a change in
the number of shares of Common Stock or Class A Common Stock to which the
holders of such rights, options or warrants are entitled (other than pursuant to
adjustment provisions therein comparable to those contained in this Section 6(d)
which adjustment is also made on the Series B Preferred Stock pursuant to this
Section 6(d)), the Adjusted Conversion Price then in effect shall again be
adjusted to be the Adjusted Conversion Price which would then be in effect if
such record date had not been fixed, in the former event, or the Adjusted
Conversion Price which would then be in effect if such holder had initially been
entitled to such changed number of shares of Common Stock, in the latter event.
(v) Except for and with respect to Excluded Securities, in the
event that the Corporation issues rights, options or warrants entitling the
holders thereof to subscribe for or purchase Common Stock or Class A Common
Stock (or securities convertible or exchangeable into shares thereof) or shall
issue securities that are convertible or exchangeable, directly or indirectly,
into Common Stock or Class A Common Stock, and the price per share of Common
Stock or Class A Common Stock payable upon the exercise, conversion or exchange
thereof of such rights, options, warrants or convertible securities (including
the price paid for such rights, options, warrants or convertible securities
attributable to a share of Common Stock or Class A Common Stock, as applicable)
is less than the Adjusted Conversion Price then in effect, the maximum number of
shares of Common Stock or Class A Common Stock issuable upon exercise of such
rights, options or warrants or upon conversion or exchange of such convertible
securities shall be deemed to have been issued and outstanding as of the date of
such sale or issuance, and the Adjusted Conversion Price shall be adjusted
pursuant to Section 6(d)(ii) hereof, as though such maximum number of shares of
Common Stock or Class A Common Stock had been so issued for an aggregate
consideration equal to the aggregate consideration paid for such rights,
options, warrants or convertible securities and the aggregate consideration
payable by the holders of such rights, options warrants or convertible
securities upon the exercise, conversion or exchange thereof. In case any
portion of such consideration shall be in a form other than cash, the fair
market value of such noncash consideration shall be determined as set forth in
Section 6(d)(iii) hereof. Such adjustment shall be made successively whenever
such rights, options, warrants or convertible securities are issued; and in the
event that such rights, options or warrants expire unexercised, or in the event
of a change in the number of shares of Common Stock or Class A Common Stock to
which the holders of such rights, options, warrants or convertible securities
are entitled (other than pursuant to adjustment provisions therein comparable to
those contained in this Section 6(d) which adjustment is also made on the Series
B Preferred Stock pursuant to this Section 6(d)), the Adjusted Conversion Price
shall again be adjusted to be the Adjusted Conversion Price which would then be
in effect if such rights, options, warrants or convertible securities had not
been issued, in the former event, or the Adjusted Conversion Price which would
then be in effect if such holders had initially been entitled to such changed
number of shares of Common Stock or Class A Common Stock, in the latter event.
No adjustment of the Adjusted Conversion Price shall be made pursuant to this
Section 6(d)(v) to the extent that the Adjusted Conversion Price shall have been
adjusted pursuant to Section 6(d)(iv) hereof upon the setting of any record date
relating to such rights, options, warrants or convertible securities and such
adjustment fully reflects the number of shares of Common Stock and Class A
Common Stock to which the holders of such rights, options, warrants or
convertible securities are entitled and the price payable therefor.
(vi) If a reorganization of the Corporation or a reclassification or
recapitalization of the capital stock of the Corporation or a consolidation or
merger of the Corporation with another Person or the sale of all or
substantially all of the assets of the Corporation to another Person shall be
effected in such a manner that holders of Common Stock shall be entitled to
receive stock, securities, cash or other property with respect to or in exchange
for Common Stock, then (except a transaction for which provision for adjustment
is otherwise made in this Section 6(d)) each share of Series B Preferred Stock
shall thereafter be convertible into such shares of stock, securities, cash or
other property which, if the Series B Preferred Stock had been converted
immediately prior to such reorganization, recapitalization, reclassification,
merger, consolidation of sale, a holder of the number of shares of Common Stock
deliverable upon conversion of such Series B Preferred Stock would have been
entitled; and, in any such case, appropriate adjustment shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of the Series B Preferred Stock. The
Corporation shall not effect any such merger, consolidation or sale unless prior
to or simultaneously with the consummation thereof the successor corporation or
purchaser, as the case may be, shall assume by written instrument the obligation
to deliver to the holders of the Series B Preferred Stock such shares of stock,
securities, cash or other properties as, in accordance with the foregoing
provisions, each such holder is entitled to receive.
(vii) If the Corporation shall distribute to all holders of
Common Stock or Class A Common Stock evidences of its indebtedness or assets
(other than regular cash dividends payable out of earnings or surplus), then in
each such case the Conversion Price at which each share of Series B Preferred
Stock shall thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date fixed for
determination of shareholders entitled to receive such distribution by a
fraction, the denominator of which shall be the Conversion Price determined as
of the record date mentioned above, and the numerator of which shall be such
Conversion Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock or Class A
Common Stock, as the case may be, as determined by the Corporation's independent
certified public accountants that regularly examines the financial statements of
the Corporation.
(viii) No adjustment to the Adjusted Conversion Price pursuant to
Sections 6(d)(i), 6(d)(ii), 6(d)(iv) or 6(d)(v) hereof shall be required unless
such adjustment would require an increase or decrease of at least $.01 in the
Adjusted Conversion Price; provided however, that any adjustments which by
reason of this Section 6(d)(viii) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 6(d) shall be made to the nearest four decimal points.
(ix) In the event that, at any time as a result of the provisions of
this Section 6(d), the holder of Series B Preferred Stock upon subsequent
conversion shall become entitled to receive any shares of capital stock of the
Corporation other than Common Stock, the number of such other shares so
receivable upon conversion of Series B Preferred Stock shall thereafter be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions contained herein.
(e) Upon the occurrence of each adjustment or readjustment of the
Initial Conversion Price or any subsequent Adjusted Conversion Price pursuant to
this Section 6, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish by
certified or registered mail to each holder, if any, of Series B Preferred Stock
outstanding at such holder's address shown in the Corporation's registry, a
certificate setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is based
and shall file a copy of such certificate with its corporate records. The
Corporation shall also, upon the written request of any holder of Series B
Preferred Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Adjusted Conversion Price then in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which then would be
received upon the conversion of Series B Preferred Stock. Despite such
adjustment or readjustment, the form of each or all Series B Preferred Stock
certificates, if the same shall reflect the Initial Conversion Price or any
subsequent Adjusted Conversion Price, need not be changed in order for the
adjustments or readjustments to be valid in accordance with the provisions of
this Certificate of Designations, which shall control.
(f) The Corporation shall pay any and all documentary, stamp, issue
or transfer taxes, and any other similar taxes payable in respect of the issue
or delivery of shares of Common Stock upon conversion of shares of Series B
Preferred Stock pursuant hereto; provided, however, that the Corporation shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock in a name other than
that of the holder of the shares of Series B Preferred Stock to be converted and
no such issue or delivery shall be made unless and until the person requesting
such issue or delivery has paid to the Corporation the amount of any such tax or
has established, to the reasonable satisfaction of the Corporation, that such
tax has been paid or is not payable.
(g) No adjustment to the Initial Conversion Price or any subsequent
Adjusted Conversion Price shall reduce the Adjusted Conversion Price below the
then par value of the Common Stock.
(h) If any event occurs as to which the provisions of this Section 6
are not strictly applicable, or if strictly applicable would not fairly protect
the rights of the holders of the Series B Preferred Stock or the Corporation in
accordance with the essential intent and principles of such provisions, then the
Board of Directors shall make any adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such rights as aforesaid.
7. Voting Rights.
-------------
(a) Except as otherwise provided herein, or as otherwise provided by
applicable law, the holders of the shares of Series B Preferred Stock (i) shall
be entitled to vote with the holders of the Common Stock, as a single class, on
all matters submitted for a vote of holders of Common Stock, (ii) shall be
entitled to vote with the holders of the Common Stock and Class A Common Stock,
as a single class, on all matters on which the holders of Common Stock vote
together with the holders of Class A Common Stock as a single class and (iii)
shall be entitled to a number of votes equal to the number of shares of Common
Stock which would, at the time of any such vote, be issued to such holder if all
shares of Series B Preferred Stock then held by such holder were converted into
shares of Common Stock, and (iv) shall be entitled to notice of all
stockholders' meetings in accordance with the Certificate of Incorporation and
bylaws of the Corporation.
(b) The Corporation shall not, without first obtaining the approval
of the holders of not less than a majority of the total number of shares of
Series B Preferred Stock then outstanding, voting together as a single class:
(i) amend, add or repeal, including an amendment, addition or
repeal effected by merger, consolidation, reorganization or any other means, or
repeal any provision of, or add any provision to, the Corporation's Certificate
of Incorporation, as amended, or Bylaws if such action would alter or change
this Section 7 or otherwise adversely alter or change the preferences, rights,
privileges or powers of, or the restrictions provided for the benefit of, the
Series B Preferred Stock or otherwise adversely affect the holders of Series B
Preferred Stock as a class;
(ii) offer, sell, designate, authorize or issue, including by
merger, reclassification, consolidation, reorganization or any other means,
shares of any class or series of stock having any preference or priority as to
dividends or redemption rights, liquidation preferences, conversion rights or
voting rights, superior to or on a parity with any preference or priority of the
Series B Preferred Stock (or any options, warrants, rights, bond, debentures,
notes or other securities convertible, exchangeable or exercisable for any such
stock);
(iii) except as otherwise expressly authorized herein,
increase the number of shares of Series B Preferred Stock authorized pursuant to
this Certificate of Designations or, except upon an Additional Funding pursuant
to the Stock Purchase Agreement, issue any shares of Series B Preferred Stock;
(iv) directly or indirectly acquire or dispose of any
Significant Assets whether by purchase, sale, merger, consolidation or any other
means;
(v) merge or consolidate into or with any other Person other
than in connection with an acquisition or disposition of assets not constituting
Significant Assets or for the sole purpose of changing the Corporation's
domicile; or
(vi) cause a Liquidation of the Corporation.
(c) The consent or votes required in Section 7(b) above shall be in
addition to any approval of stockholders of the Corporation which may be
required by law or pursuant to any provision of the Corporation's Certificate of
Incorporation or Bylaws, which approval shall be obtained by vote of the
stockholders of the Corporation in the manner provided in Section 7(a) above.
(d) The holders of a majority of the outstanding Preferred Stock,
voting as a single class, shall at all times be entitled to elect one member of
the Board of Directors. In addition, at any time that the Corporation has failed
for two (2) consecutive calendar quarters, to pay any dividends required to be
paid by it pursuant to Section 4(a) of this Certificate of Designations, the
holders of a majority of the outstanding Preferred Stock, voting as a single
class, shall be entitled to elect an additional member of the Board of
Directors. In the event that the holders of a majority of the Series B Preferred
Stock elect to exercise such right, the number of directors then constituting
the Board of Directors shall be increased, if necessary, in order to provide for
a total of one (or if applicable, two) additional Board seats. Whenever a
majority of the shares of Series B Preferred Stock issued and reserved for
issuance pursuant to the Stock Purchase Agreement has been converted into Common
Stock pursuant to this Certificate of Designations, then the right of the
holders of a majority of the Series B Preferred Stock to elect such additional
directors shall cease, and the term of office of any persons elected as a
director by the holder of the Series B Preferred Stock shall forthwith terminate
and the number of the Board of Directors shall be reduced accordingly.
8. Reports. The Corporation shall mail to all holders of Series B Preferred
-------
Stock those reports, proxy statements and other materials that it mails to all
of its holders of Common Stock.
9. No Impairment. The Corporation will not, by amendment of its Certificate of
-------------
Incorporation, through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Certificate of Designations and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Series B Preferred Stock against impairment. Notwithstanding the
foregoing sentence, the Corporation shall not be prohibited from undertaking any
actions set forth in, and in strict compliance with, Section 7(b) of this
Certificate of Designations.
10. Notices of Record Date.
----------------------
(a) If the Corporation shall propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock or other equity securities, whether in cash, property, stock, or other
securities, whether or not a regular cash dividend and whether or not out of
earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reorganization, reclassification or
recapitalization of its Common Stock or other equity securities outstanding,
including any subdivision, combination or split, involving a change in the
Common Stock or other equity securities; or
(iv) to merge or consolidate with or into any other Person,
or sell, lease, or convey all or substantially all its property or
business, or to liquidate, dissolve, or wind up (as defined herein),
then, in connection with each such event, the Corporation shall provide to the
holders of the Series B Stock, at least ten (10) days' prior written notice of
the date on which a record shall be taken for such dividend, distribution, or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote in respect of
the matters referred to above.
(b) Each such written notice shall be delivered personally or given
by first class mail, postage prepaid, addressed to the holders of the Series B
Preferred Stock at the address for each such holder as shown on the books of the
Corporation.
11. No Reissuance of Stock. No share or shares of Series B Preferred Stock that
----------------------
are converted, purchased or otherwise acquired by the Corporation may be
reissued, and all such shares shall be canceled, retired and eliminated from the
shares that the Corporation is authorized to issue. The Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce the authorized number of shares of Series B Preferred Stock accordingly.
If shares of Series B Preferred Stock are not issued after the date hereof due
to the termination of the obligation of the purchasers under the Stock Purchase
Agreement to purchase shares of Series B Preferred Stock, or due to the
termination of the obligation of the Corporation to issue shares of Series B
Preferred Stock, the Corporation shall not issue any shares of Series B
Preferred Stock in excess of the number already issued, and the Corporation will
reduce the authorized number of shares of Series B Preferred Stock to the number
issued at the First Funding.
12. Headings. The headings of the Sections, subsections, clauses and subclauses
--------
of this Certificate of Designations are for convenience of reference only and
shall not define, limit or affect any of the provisions hereof.
13. Office. The Corporation will, so long as any shares of Series B Preferred
------
Stock are outstanding, maintain an office or agency where such shares may be
presented for registration and where such shares may be presented for
conversion.
IN WITNESS WHEREOF, Benihana Inc. has caused this Certificate of
Designations to be signed and attested by the undersigned this ___ day of July,
2004.
BENIHANA INC.
By: ----------------------------
Name: Joel Schwartz
Title: President
Exhibit B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
___________, 2004, is by and between BENIHANA INC. , a Delaware corporation,
with headquarters located at 8685 Northwest 53rd Terrace, Miami, Florida 33166
(the "Company"), and BFC FINANCIAL CORPORATION, with headquarters located at
1750 East Sunrise Boulevard, Ft. Lauderdale, Florida 33304 (the "Purchaser").
RECITALS
In connection with, and pursuant to, that certain Stock Purchase
Agreement between the parties hereto, dated as of ____________, 2004 (the "Stock
Purchase Agreement"), the Company has agreed, upon the terms and subject to the
conditions of the Stock Purchase Agreement, to issue and sell to the Purchaser
at the First Funding and at each Additional Funding shares of Series B
Convertible Preferred Stock, par value $1.00 per share (the "Series B Preferred
Stock"), of the Company (the "Preferred Shares"), which shall be convertible
into shares of Common Stock, par value $0.01 per share (the "Common Stock"), of
the Company in accordance with the terms of the Company's Certificate of
Designations, Preferences and Rights of Series B Convertible Preferred Stock
(the "Certificate of Designations"). Preferred Shares shall also be deemed to
include any additional shares of Series B Preferred Stock issued to Investors
thereof under the terms of the Certificate of Designations. Capitalized terms
used herein and not otherwise defined shall have the respective meanings set
forth in the Stock Purchase Agreement and the Certificate of Designations.
To induce the Purchaser to execute, deliver and perform the Stock
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
1. DEFINITIONS.
-----------
In addition to the capitalized terms elsewhere defined herein, the
following terms, when used herein, shall have the following meanings, unless the
context otherwise requires:
(a) "Agreement" has the meaning set forth in the preface above.
(b) "Allowable Grace Period" has the meaning set forth in
Section 3(m).
(c) "Certificate of Designations" has the meaning set forth in
the recitals above.
(d) "Common Stock" has the meaning set forth in the recitals
above.
(e) "Company" has the meaning set forth in the preface above.
(f) "Company Indemnified Party" has the meaning set forth in
Section 6(b).
(g) "Conversion Shares" means all of the shares of Common Stock
into which the Preferred Shares are converted or are
potentially convertible, subject to adjustment from time to
time as a result of the adjustment provisions in the
Certificate of Designations and any shares or other
securities into which any Conversion Share may be exchanged
or converted as a result of any stock split, stock
dividend, recapitalization, exchange or similar event.
(h) "Demand Registration" has the meaning set forth in Section
2(a).
(i) "Effectiveness Deadline" has the meaning set forth in
Section 2(a).
(j) "Exchange Act" has the meaning set forth in Section 3(b).
(k) "Filing Deadline" has the meaning set forth in Section
2(a).
(l) "Grace Period" has the meaning set forth in Section 3(m).
(m) "Inspectors" has the meaning set forth in Section 3(s).
(n) "Investor" or "Investors" means the Purchaser, any
transferee or assignee thereof to whom the Purchaser
assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in
accordance with Section 8(b) and any transferee or assignee
thereof to whom a transferee or assignee assigns its rights
under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section
8(b).
(o) "Investor Indemnified Person" has the meaning set forth in
Section 6(a).
(p) "Legal Counsel" has the meaning set forth in Section 2(b).
(q) "Liabilities" has the meaning set forth in Section 6(a).
(r) "Person" means any partnership, corporation, association,
joint stock company, trust, limited liability company,
joint venture or unincorporated organization.
(s) "Preferred Shares" has the meaning set forth in the
recitals above.
(t) "Purchaser" has the meaning set forth in the preface above.
(u) "Records" has the meaning set forth in Section 3(s).
(v) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more
Registration Statements in compliance with the Securities
Act and pursuant to Rule 415 under the Securities Act or
any successor rule providing for offering securities on a
continuous or delayed basis ("Rule 415"), and the
declaration or ordering of effectiveness of such
Registration Statement(s) by the SEC.
(w) "Registrable Securities" means (i) all Conversion Shares
issued or issuable upon conversion of the Preferred Shares,
(ii) any shares of capital stock issued or issuable with
respect to the Conversion Shares as a result of any stock
split, stock dividend, recapitalization, exchange or
similar event or otherwise, and (iii) any shares of Common
Stock issued or issuable to Purchaser or any Investor
pursuant to the terms of the Certificate of Designations or
the Stock Purchase Agreement other than the Conversion
Shares; provided, however, that Registrable Securities
shall not include any such shares (A) which have been
disposed of pursuant to an effective registration statement
under the Securities Act, (B) which have been sold or
otherwise transferred in a transaction in which the rights
under the provisions of this Agreement have not been
assigned, or (C) which have been sold under Rule 144.
(x) "Registration Period" has the meaning set forth in Section
3(a).
(y) "Registration Statement" means a registration statement or
registration statements of the Company filed under the
Securities Act covering the Registrable Securities.
(z) "Rule 144" means Rule 144 promulgated by the SEC.
(aa) "SEC" means the United States Securities and Exchange
Commission.
(bb) "Securities Act" has the meaning set forth in the recitals
above.
(cc) "Series B Preferred Stock" has the meaning set forth in the
recitals above.
(dd) "Stock Purchase Agreement" has the meaning set forth in the
recitals above.
2. REGISTRATION.
------------
(a) Mandatory Registration. At any time holders of not less than 50%
----------------------
of the Registrable Securities (on an as converted basis) may request the
registration of Registrable Securities under the Securities Act (a "Demand
Registration"). Notwithstanding the foregoing, but subject to Sections 2(d),
2(f) and 2(g) below, the Investor shall be entitled to request no more than one
Demand Registration. Upon the request to the Company of a Demand Registration,
the Company shall prepare and file with the SEC the Registration Statement on
Form S-3 covering the resale of all of the Registrable Securities. The Company
shall use its reasonable best efforts to file the Registration Statement as
promptly as practicable, but in no event later than ninety (90) days after the
receipt of a Demand Registration if Form S-3 is available for the Registration
Statement or one hundred twenty (120) days after receipt of a Demand
Registration if Form S-3 is unavailable for such registration.
The applicable deadline in clause (i) or (ii) is referred to herein
as the "Filing Deadline". In the event that Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available for such a
registration, subject to the provisions of Section 2(c). The Registration
Statement prepared pursuant hereto shall register for resale at least that
number of shares of Common Stock equal to the aggregate number of Registrable
Securities issued and outstanding or deemed issued and outstanding on an
as-converted basis as of the trading day immediately preceding the date the
Registration Statement is initially filed with the SEC (as if all of the
Preferred Shares then issuable under the Stock Purchase Agreement were issued
and outstanding on such date), subject to adjustment as provided in Section
2(d). The Registration Statement shall not include any provision or other
language exempting the Registration Statement from Rule 416 under the Securities
Act. The Company shall use its reasonable best efforts to have the Registration
Statement declared effective by the SEC as promptly as reasonably practicable,
but in any event no later than the date that is two hundred ten (210) days after
the receipt by the Company of a Demand Registration (the "Effectiveness
Deadline").
Upon receipt of a request for a Demand Registration, the Company
shall promptly send written notice to each Investor that has not participated in
the Demand Registration request, advising them of the Demand Registration and
inviting them to have their Registrable Securities included in the Registration
Statement.
(b) Legal Counsel. Subject to Section 5 hereof, Purchaser or
-------------
Investors holding a majority of the Registrable Securities (on an as converted
basis) shall have the right to select one legal counsel to review and oversee
any offering pursuant to this Section 2 ("Legal Counsel"), The Company shall
reasonably cooperate with Legal Counsel in performing the Company's obligations
under this Agreement.
(c) Ineligibility for Form S-3. In the event that Form S-3 is not
--------------------------
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form reasonably acceptable to the holder of a
majority of the Registrable Securities (on an as converted basis) and (ii)
undertake to register the Registrable Securities on Form S-3 as soon as such
form is available; provided that the Company shall maintain the effectiveness of
the other appropriate form used by the Company for registration pursuant to
clause (i) above then in effect until such time as a Registration Statement on
Form S-3 covering the Registrable Securities has been declared effective by the
SEC.
(d) Sufficient Number of Shares Registered. In the event that the
--------------------------------------
number of shares available under the Registration Statement filed pursuant to
Section 2(a) is, or becomes, insufficient to cover all of the Registrable
Securities required to be covered by the Registration Statement, the Company
shall file a new Registration Statement (pursuant to Rule 462 of the Securities
Act if available or otherwise) so as to cover the aggregate number of the
Registrable Securities required to be registered hereunder as of the trading day
immediately preceding the date of the filing of such new Registration Statement,
in each case, as soon as reasonably practicable, but in any event not later than
twenty (20) days after the necessity therefor arises. The Company shall use its
reasonable best efforts to cause such amendment and/or new Registration
Statement, as applicable, to become effective as soon as practicable following
the filing thereof. For purposes of this Agreement, such additional Registration
Statement shall be deemed to be the Registration Statement required to be filed
by the Company pursuant to Section 2(a) hereof (and shall not be considered an
additional Registration Statement), and the Company and the Purchaser shall have
the same rights and obligations with respect to such additional Registration
Statement as they shall have with respect to the initial Registration Statement
required to be filed by the Company pursuant to Section 2(a).
(e) Selection of Underwriters. The Investors holding a majority of
-------------------------
the Registrable Securities (on an as converted basis), in consultation with the
Company, shall have the right to elect to have an underwritten registration
hereunder and to select the managing/book-running underwriter(s), if any, for
the Registrable Securities to be registered pursuant to Section 2(a), subject to
the Company's written approval of such managing/book-running underwriter(s),
such written approval not to be unreasonably withheld or delayed.
(f) Certain Limitations. In the event that a registration (or
-------------------
portion thereof) hereunder is underwritten (at the election of the Investors as
described in Section 2(e)), and to the extent that the managing underwriter
shall be of the opinion (and shall state so in writing) that the inclusion of
all such securities would adversely affect the marketing of the securities
(including Registrable Securities) to be sold by the Company or any Investor,
then the number of securities that may be included in the underwriting shall be
allocated, first, to the Investors, allocated among the Investors on a pro rata
basis based on the total number of Registrable Securities held by the Investors
and second, only if the Investors are able to have all of their Registrable
Securities included, to the Company and other holders of registration rights to
the extent they are participating in such offering. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration. Notwithstanding any contrary provision in this
Section 2(f), in the event that there is an underwritten offering of securities
of the Company pursuant to a registration statement covering Registrable
Securities and a selling holder of Registrable Securities does not elect to sell
his, her or its Registrable Securities to the underwriters of the Company's
securities in connection with such offering, such holder shall refrain from
selling such Registrable Securities not registered pursuant to this Section 2(f)
during the period of distribution of the Company's securities by such
underwriters and the period in which the underwriting syndicate participates in
the after market; provided, however, that such holder shall, in any event, be
entitled to sell its Registrable Securities commencing on the sixtieth (60th)
day after the effective date of such registration statement. In the event that a
registration, or portion thereof, is underwritten, and the managing underwriter
shall be of the opinion (and shall so state in writing) that it is advisable
that a new registration statement be filed with respect to the Registrable
Securities to be sold in such underwritten offering, then the Company's
obligation to prepare and file such additional registration statement in
accordance with Section 2(a) and the other provisions of this Agreement shall be
in addition to, and not in lieu of, its obligations to file and maintain the
effectiveness of a Registration Statement under Section 2(a) hereof.
Notwithstanding the foregoing, the Company shall only be obligated to file one
such additional registration statement pursuant to the previous sentence.
(g) Additional Demand Registration. If (i) a Demand
------------------------------
Registration requested pursuant to Section 2(a) is deemed not to have been
effected or (ii) the Registration Statement filed pursuant to Section 2(a) does
not remain effective under the Securities Act until all Registrable Securities
requested to be registered have been sold under the Registration Statement, then
the Company shall continue to be obligated to effect an additional Demand
Registration pursuant to Section 2(a).
3. RELATED OBLIGATIONS.
-------------------
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Sections 2(a), 2(c) or 2(d), the Company will
use its reasonable best efforts to effect the registration of the Registrable
Securities covered by such Registration Statement in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
(a) The Company shall, as promptly as reasonably
practicable, prepare and file with the SEC a Registration Statement with respect
to the applicable Registrable Securities (but in no event later than the Filing
Deadline) and use its reasonable best efforts to cause such Registration
Statement relating to the applicable Registrable Securities to become effective
no later than the Effectiveness Deadline. The Company shall use its reasonable
best efforts to keep the Registration Statement continuously effective pursuant
to Rule 415 at all times until the date on which the Investors shall have sold
all the Registrable Securities covered by such Registration Statement (the
"Registration Period"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein), at the time it is
first filed with the SEC, at the time it is ordered effective by the SEC and at
all times during which it is required to be effective hereunder (and each such
amendment and supplement at the time it is filed with the SEC and at all times
during which it is available for use in connection with the offer and sale of
the Registrable Securities) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
(b) The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the Securities Act, as may be reasonably requested by an
underwriter, if any, or Investors holding Registrable Securities being
registered as required by law or as may be necessary to keep such Registration
Statement continuously effective at all times during the Registration Period, to
add Investors as selling shareholders thereunder and, during such period, comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any
analogous report under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company shall have incorporated such report by reference
into the Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the Exchange Act report is
filed which created the requirement for the Company to amend or supplement the
Registration Statement.
(c) The Company shall permit Legal Counsel to review and
comment upon (i) any Registration Statement prior to its filing with the
SEC and (ii) all other Registration Statements and all amendments and
supplements to all Registration Statements (except for Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any
similar or successor reports) prior to their filing with the SEC. The Company
shall not submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto without the prior
consent of Legal Counsel, which consent shall not be withheld unless Legal
Counsel has reasonable objections to disclosures in the Registration Statement
relating to (I) the Registrable Securities or the Preferred Shares or the means
of distribution of same or (II) the Investors. The Company shall furnish to
Legal Counsel, without charge (i) any correspondence from the SEC or the staff
of the SEC to the Company or its representatives relating to any Registration
Statement, (ii) promptly after the same is prepared and filed with the SEC, one
copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits and (iii) upon the effectiveness of any Registration
Statement, one copy of the prospectus included in such Registration Statement
and all amendments and supplements thereto. The Company shall reasonably
cooperate with Legal Counsel in performing the Company's obligations pursuant to
this Section 3.
(d) The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, such number of copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto as such Investor may reasonably request and (iii) such other
documents, including copies of any preliminary or final prospectus, as such
Investor may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
(e) The Company shall use its reasonable best efforts to
cause such Registrable Securities to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities pursuant to a
Registration Statement; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction.
(f) The Company shall notify Legal Counsel and each
Investor in writing of the happening of any event, as promptly as reasonably
practicable after becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (provided
that in no event shall such notice contain any material, nonpublic information),
and as promptly as practicable prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to Legal Counsel and each
Investor as Legal Counsel or such Investor may reasonably request. The Company
shall also as promptly as practicable notify Legal Counsel and each Investor in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to Legal Counsel and each Investor by facsimile
on the same day of such effectiveness and by overnight mail), (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
(g) The Company shall use its reasonable best efforts to
prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such
order or suspension promptly and to notify Legal Counsel and each Investor who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
(h) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legend)
representing the Registrable Securities to be offered pursuant to a Registration
Statement and enable such certificates to be in such denominations or amounts,
as the case may be, as the Investors may reasonably request and registered in
such names as the Investors may request.
(i) The Company shall maintain a transfer agent and
registrar of all such Registrable Securities.
(j) The Company shall otherwise use its reasonable best
efforts to comply in all material respects with all applicable rules and
regulations of the SEC in connection with any registration hereunder and make
available to Investors holding Registrable Securities, as soon as reasonably
practicable, earnings statements (which need not be audited) covering a period
of twelve (12) months beginning within three months after the effective date of
the Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act.
(k) Within one (1) Business Day after a Registration
Statement (including any amendments or supplements thereto and the prospectuses
contained therein) is ordered effective by the SEC, the Company shall deliver,
and shall cause legal counsel for the Company to deliver, to the transfer agent
for such Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC.
(l) The Company shall take all other actions reasonably
necessary to expedite and facilitate disposition by Investors of
Registrable Securities pursuant to a Registration Statement.
(m) Notwithstanding anything to the contrary in Section
3(g), at any time after a Registration Statement has been declared
effective by the SEC, the Company may suspend the use or effectiveness of any
Registration Statement (including any amendments or supplements thereto and the
prospectuses contained therein) (a "Grace Period") (and the Investors hereby
agree not to offer or sell any Registrable Securities pursuant to such
Registration Statement after receiving written notice thereof during such Grace
Period) if there is material, non-public information about the Company that the
Company determines would be detrimental to the Company if so disclosed or would
adversely affect a financing acquisition, disposition, merger or other material
transaction; provided, that the Company shall promptly (i) notify the Investors
in writing of such suspension and the date on which the Grace Period will begin
and (ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that no individual Grace Period shall exceed sixty
(60) consecutive days and during any twelve-month period, all such Grace Periods
shall not exceed an aggregate of one hundred twenty (120) days (an "Allowable
Grace Period"). For purposes of determining the length of a Grace Period above,
the Grace Period shall begin on and include the date the holders receive the
notice referred to in clause (i) and shall end on and include the later of the
date the holders receive the notice referred to in clause (ii) and the date
referred to in such notice. The provisions of Sections 3(b) and 3(f) hereof with
respect to the information giving rise thereto unless such material non-public
information is no longer applicable, shall not be applicable during any
Allowable Grace Period.
(n) In the event of any underwritten public offering (at
the election of the Investors, as described in Section 2(e)), the
Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form for primary underwritten offerings, with
the managing underwriter(s) of such offering. Each Investor participating in
such underwriting shall also enter into and perform its obligations pursuant to
such an agreement.
(o) The Company shall obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managing underwriters, if
any) in customary form addressed to the Investors and the underwriters, if any,
covering such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
the Investors and such underwriters (it being agreed that the matters to be
covered by such opinion or a written statement by such counsel delivered in
connection with such opinions shall include, without limitation, an opinion,
subject to reasonable and customary qualifications as of the date of the opinion
and as of the effective date of the Registration Statement relating to the
registration or most recent post-effective amendment thereto, as the case may
be, regarding the absence from such Registration Statement and the prospectus
included therein, as then amended or supplemented, including the documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading).
(p) The Company shall obtain "comfort letters" and updates
thereof from the independent public accountants of the Company (and,
if necessary, any other independent public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to the Investors and the underwriters, in
customary form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings.
(q) The Company shall deliver such other customary
documents and certificates as may be reasonably requested by the Investors and
the managing underwriters, if any, including those to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(r) The Company shall use its reasonable best efforts to
secure the listing of all of the Registrable Securities covered by such
Registration Statement upon each national securities exchange and automated
quotation system, if any, upon which shares of Common Stock shall be so listed
(subject to notice of issuance) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of such Registrable Securities.
(s) The Company shall make available for inspection by any Investor,
and any attorney (including Legal Counsel), any underwriter, accountant or other
agent retained by any such Investor (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records"), as shall be reasonably
necessary to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (i) the release of
such Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction or (ii) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(s). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at the Company's own
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, the Records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning an
Investor provided to the Company pursuant to Section 4 hereof unless (i)
disclosure of such information is necessary to comply with Federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor, at
such Investor's own expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
(t) During the period that the Company is required to maintain
effectiveness of the Registration Statement pursuant to Section 3(a), the
Company shall not bid for or purchase any Common Stock or any right to purchase
Common Stock or attempt to induce any person to purchase any such security or
right if such bid, purchase or attempt would in any way limit the right of an
Investor to sell Registrable Securities by reason of the limitations set forth
in Regulation M under the Exchange Act or otherwise.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
(a) At least ten (10) Business Days prior to the first
anticipated filing date of a Registration Statement, the Company shall
notify each Investor in writing of the information the Company reasonably
requires from each such Investor if such Investor elects to have any of such
Investor's Registrable Securities included in such Registration Statement. It
shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request.
(b) Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Investor no longer
holds any Registrable Securities or has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable Securities
from such Registration Statement.
(c) Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
Section 3(g), the first sentence of Section 3(f) or Section 3(m), such Investor
will immediately discontinue disposition of Registrable Securities pursuant to
any Registration Statement(s) covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of
notice that no supplement or amendment is required or receipt of notice pursuant
to Section 3(m) and, if so directed by the Company, such Investor shall deliver
to the Company, or destroy all copies in such Investor's possession, any
prospectus covering such Registrable Securities current at the time of receipt
of such notice. Notwithstanding anything to the contrary, the Company shall
cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Stock Purchase
Agreement in connection with any sale of Registrable Securities with respect to
which an Investor has entered into a contract for sale prior to the Investor's
receipt of a notice from the Company of the happening of any event of the kind
described in Section 3(g), the first sentence of Section 3(f) or Section 3(m)
and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts and
commissions and transfer taxes if any, relating to the sale or disposition of an
Investor's Registrable Securities pursuant to a Registration Statement, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, fees and disbursements of
Legal Counsel (up to an aggregate of $25,000) in connection with registration,
filing or qualification pursuant to Sections 2 and 3 of this Agreement and fees
and disbursements of counsel for the Company shall be paid by the Company.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
(a) Obligations of the Company to Indemnify. The Company
---------------------------------------
agrees to indemnify, defend and hold harmless to the fullest extent
permitted by law, each Investor participating in the registration, and each of
its partners, members, managers, officers and directors and each Person who
controls such holders within the meaning of the Securities Act (each an
"Investor Indemnified Person") against all losses, claims, damages, liabilities
and expenses (including without limitation, reasonable attorneys' fees, whether
arising out of disputes between the parties or with third parties)
("Liabilities") caused by (i) any untrue or alleged untrue statement of material
fact contained in any Registration Statement or any prospectus or preliminary
prospectus or amendment thereof or supplement thereto, (ii) any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
Exchange Act, or any state securities law, in each case in connection with such
registration, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Investor expressly for
use therein or by such Investor's failure to deliver a copy of the Registration
Statement or prospectus or any amendments or supplements thereof or thereto
after the Company has timely furnished such Investor with a sufficient number of
copies of the same. The payments required by this Section 6(a) will be made
periodically during the course of the investigation or defense, as and when
bills are received or expenses incurred. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Investor Indemnified Person and shall survive the transfer of the Registrable
Securities by an Investor pursuant to Section 8(b).
(b) Obligations of the Investors to Indemnify. Each
-----------------------------------------
Investor participating in the registration shall indemnify and hold harmless
the Company, its directors and officers and each Person who controls the Company
within the meaning of the Securities Act (each a "Company Indemnified Party")
against any Liabilities resulting from any untrue or alleged untrue statement of
material fact contained in such Registration Statement or any prospectus,
preliminary prospectus, amendment or supplement thereof or thereto, or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission related to such Investor and is contained
in any information or affidavit so furnished in writing by such Investor
specifically for use in such Registration Statement or any prospectus,
preliminary prospectus, amendment or supplement thereof or thereto; provided
that the obligation to indemnify hereunder will be several, not joint and
several, among the Investors holding such Registrable Securities, and the
liability of each such Investor under this Section 6 shall be limited to the net
amount received by such Investor from the sale of Registrable Securities
pursuant to such Registration Statement; provided, further, that the indemnity
agreement contained in this Section 6(b) shall not apply to amounts paid in
settlement of any Liabilities if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld.
(c) Procedure. Any Person entitled to indemnification
---------
hereunder shall (i) give prompt written notice to the indemnifying party of
any claim with respect to which it seeks indemnification, provided any such
failure shall not relieve the indemnifying party of liability hereunder, except
to the extent that the indemnifying party is prejudiced or injured by such
failure, and (ii) unless in such indemnified party's reasonable judgment an
actual or potential conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a 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 an actual or potential conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect to which (x) any indemnified party is or could
have been a party and (y) indemnity has or could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability for claims that are the subject
matter of such proceeding.
(d) Contribution. To the extent that any indemnification by
------------
an indemnifying party provided for in this Section 6 is prohibited or limited by
law, the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party
as a result of such Liabilities in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and the indemnified party in
connection with the statements or omissions which resulted in such Liabilities,
as well as any other relevant equitable considerations; provided that in no
event shall an Investor be required to contribute in excess of the net amount
received by such Investor from the sale of Registrable Securities in the
transaction or transactions at issue. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of 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
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined solely by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
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 such fraudulent misrepresentation.
(e) Survival. The indemnification and contribution provided
--------
for under this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified party or
any officer, director or controlling Person of such indemnified party and will
survive the transfer of Series B Preferred Stock or any Registrable Securities.
7. REPORTS UNDER THE EXCHANGE ACT.
------------------------------
With a view to making available to the Investors all of the benefits
of Rule 144, the Company agrees to:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144, (ii) file with the SEC in
a timely manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act and (iii) furnish to each Investor so
long as such Investor owns Registrable Securities, as promptly as reasonably
practicable upon request, (A) a written statement by the Company that it has
complied with the reporting requirements of Rule 144 and the Exchange Act, (B) a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (C) such other information as
may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
8. MISCELLANEOUS.
-------------
(a) Other Registration Rights. The Company may hereafter
-------------------------
grant to any Person or Persons the right to request the Company to
register any equity securities of the Company, or any securities convertible or
exchangeable into or exercisable for such securities, without the prior written
consent of the holders of the Registrable Securities; provided, however, that
the registration rights of the securities held by such Person or Persons may not
have priority over, or be on parity with, the registration rights of the
Registrable Securities hereunder in any respect (including under Section 2(f)).
The Company represents that no securityholder of the Company is entitled to
registration rights which are prior to, or on parity with, any rights of the
Investors hereunder (including rights under Section 2(f)).
(b) Assignment of Registration Rights. The registration
---------------------------------
rights of the Purchaser under this Agreement with respect to any
Registrable Securities may be assigned to any Person who acquires such
Registrable Securities. Upon any such assignment (i) the Investor shall give the
Company written notice at or prior to the time of such assignment stating the
name and address of the assignee and identifying the shares with respect to
which the rights under this Agreement are being assigned; (ii) such assignee
shall agree in writing, in form and substance reasonably satisfactory to the
Company, to be bound to the same extent and in the same capacity as the Investor
by the provisions of this Agreement; and (iii) such assignee acknowledges,
immediately following such assignment, the further disposition of such
securities by such assignee may be restricted under the Securities Act. In
connection with any such transfer the Company shall, at its sole cost and
expense, as promptly as reasonably practicable after such assignment take such
reasonable actions as shall be reasonably acceptable to the Investors and such
permitted transferee to assure that the Registration Statement and related
prospectus are available for use by such permitted transferee for sales of the
Registrable Securities in respect of which the rights to registration have been
so assigned.
(c) Successors and Assigns; Third Party Beneficiaries.
-------------------------------------------------
Except as otherwise expressly provided herein, all covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto will bind and inure to the benefit of the respective permitted successors
and assigns of the parties hereto, whether so expressed or not.
(d) Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(e) Descriptive Headings. The descriptive headings of this
--------------------
Agreement are inserted for convenience of reference only and do not
constitute a part of, and shall not be utilized in interpreting, this Agreement.
(f) Notices. Any notices, consents, waivers or other
-------
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); (iii) one (1) Business Day
after deposit with a nationally recognized overnight delivery service or (iv)
five (5) days after deposit in the U.S. mail, return receipt requested, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Benihana Inc.
8685 Northwest 53rd Terrace
Miami, Florida 33166
Facscimile:
Attention: President
With a copy to:
Dornbush Mensch Mandelstam & Schaeffer, LLP
747 Third Avenue - 11th Floor
New York, NY 10017
Telephone: 212-759-3300
Facsimile: 212-753-7673
Attention: Landey Strongin, Esq.
If to Purchaser:
BFC Financial Corporation
1750 East Sunrise Boulevard
Fort Lauderdale, FL 33304
Telephone: 954-
Facsimile: 954-760-5210
Attention: Chief Executive Officer
With a copy to:
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.
150 West Flagler Street - Suite 2200
Miami, FL 33130
Telephone: 305-789-3200
Facsimile: 305-789-3395
Attention: Alison W. Miller, Esq.
If to an Investor, to such address and/or facsimile number and/or to
the attention of such other person as the recipient party has specified by
written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt or deposit in the
U.S. mail, (A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the sender's
facsimile machine containing the time, date, recipient facsimile number and an
image of the first page of such transmission, (C) provided by a courier or
overnight courier service, which shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service or (D) by a signed return receipt in accordance with clause
(i), (ii), (iii), or (iv) above, respectively.
(g) Governing Law. The corporate laws of the State of
-------------
Delaware shall govern all issues concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of Florida, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Florida or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Florida. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and Federal courts
sitting in the State of Florida, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(h) Amendments and Waivers. The provisions of this
----------------------
Agreement may be amended upon the written agreement of the Company and the
Investors holding a majority of the Registrable Securities, determined as if all
of the Preferred Shares then outstanding have been converted into or exercised
for Registrable Securities without regard to any limitations on conversion of
the Preferred Shares. Any waiver, permit, consent or approval of any kind or
character on the part of any holders of any provision or condition of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in writing.
(i) Final Agreement. This Agreement constitutes the
---------------
complete and final agreement of the parties concerning the matters referred
to herein and supersedes all prior agreements and understandings.
(j) Counterparts. This Agreement may be executed in
------------
identical counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement. This Agreement, once executed
by a party, may be delivered to the other party hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.
(k) Consents. All consents and other determinations to be
--------
made by the Investors pursuant to this Agreement shall be made, unless
otherwise specified in this Agreement, by Investors holding a majority of the
Registrable Securities, determined as if all of the Preferred Shares then
outstanding have been converted into or exercised for Registrable Securities
without regard to any limitations on conversion of the Preferred Shares.
(l) Construction. The language used in this Agreement will
------------
be deemed to be the language chosen by the parties to express their
mutual intent and no rules of strict construction will be applied against any
party.
(m) Termination of Agreement. This Agreement and all
------------------------
registration rights granted to an Investor shall terminate and be of no
further force or effect with respect to that Investor if (i) after the first
anniversary of this Agreement, such Investor (together with its affiliates,
partners and former partners, member and former members) holds less than 1% of
the Company's outstanding Common Stock (treating all shares of convertible
Preferred Stock on an as converted basis), or (ii) all Registrable Securities
held by and issuable to such Investor (and its affiliates, partners and former
partners, members and former members) may be sold under Rule 144 in a single
transaction.
(n) Time of the Essence. Time is of the essence in
-------------------
connection with the Company's performance of its obligations under this
Agreement.
(o) Liability for Damages. The Company acknowledges that
---------------------
any failure by the Company to perform its obligations under this
Agreement, including, without limitation, the Company's obligations under
Sections 2 and 3, or any delay in such performance could result in damages to
the Purchaser and the Company agrees that, in addition to any other liability
the Company may have by reason of any such failure or delay, the Company shall
be liable for all damages caused by any such failure or delay (including,
without limitation, diminution in value and/or lost profits attributable to the
failure or delay, whether due to a decline in stock price, inability to sell
shares at a profit or otherwise). Notwithstanding the foregoing, in no event
shall the Company be liable under this Section 8(o) for indirect damages in the
nature of foregone profits which are specifically attributable to a Purchaser's
hypothetical inability, as a result of the failure or delay, to reinvest the
proceeds of Registrable Securities in another profit-generating investment
opportunity.
IN WITNESS WHEREOF, the Purchaser and the Company have caused this
Registration Rights Agreement to be duly executed as of the date first written
above.
COMPANY:
BENIHANA INC.
By:
-------------------------------
Name: Joel Schwartz
Title: President
PURCHASER:
BFC FINANCIAL CORPORATION
By:
------------------------------
Name:
Title:
Exhibit 13.01
Annual Report
SELECTED FINANCIAL DATA
FISCAL YEARS ENDED
March 28, March 30, March 31, April 1, March 26,
2004 2003 2002 2001 2000
---- ---- ---- ---- ----
(53 wk yr)
(In thousands, except per share information)
CONSOLIDATED STATEMENTS
OF EARNINGS DATA:
Total revenues $202,963 $189,244 $171,507 $163,243 $137,477
Cost of food and beverage sales 51,437 46,182 42,754 43,301 36,588
Restaurant operating expenses 118,015 111,725 99,707 89,427 74,088
Restaurant opening costs 1,845 485 1,228 1,453 566
Marketing, general and administrative
expenses 16,362 15,512 13,373 13,690 11,402
Impairment charge 438
Interest expense, net 457 528 990 1,233 1,297
Income before income taxes and
minority interest 14,847 14,812 13,017 14,139 13,536
Income tax provision 4,965 4,862 4,088 5,008 4,722
Income before minority interest 9,882 9,950 8,929 9,131 8,814
Minority interest 643 477 100 40 81
Net income 9,239 9,473 8,829 9,091 8,733
Basic earnings
per common share (1) 1.04 1.08 1.16 1.28 1.23
Diluted earnings
per common share (1) 1.01 1.01 1.11 1.20 1.14
CONSOLIDATED BALANCE SHEET
DATA:
Total assets $142,410 $128,481 $98,301 $85,929 $75,445
Long-term debt including
current maturities 21,500 22,000 6,000 14,645 14,646
Stockholders' equity 97,230 85,631 73,713 52,685 43,545
OTHER FINANCIAL DATA:
Capital expenditures $22,038 $27,418 $13,944 $14,611 $9,643
(1) On June 7, 2002, the Board of Directors declared a 15% stock dividend in
Class A stock on both the Class A Shares and Common Shares. The stock dividend
was paid on August 12, 2002 to holders of record July 15, 2002. As a result,
basic and diluted earnings per common share are shown as if the stock dividend
had been in existence for each fiscal year presented.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Condition and Results of Operations
Overview
- --------
Summary of results
Summary highlights of our fiscal 2004 year compared to the previous year:
o the twelfth consecutive year of total sales increases,
o opened four new Benihana teppanyaki-style restaurants in Scottsdale,
Arizona; Alpharetta, Georgia; Bethesda, Maryland and Westbury, New York,
o opened three new RA Sushi restaurants in Tucson, Arizona; San Diego,
California and Chicago, Illinois,
o earnings per diluted share of $1.01 were the same as the prior fiscal
year, and
o restaurant operating profit (restaurant sales less cost of food and
beverage sales and restaurant operating expenses) increased 6.3% to
approximately $31.9 million.
Our Business
We have operated teppanyaki-style Japanese restaurants in the United States for
over 39 years, and we believe we are the largest operator of teppanyaki-style
restaurants in the country. Our core concept, the traditional Benihana
restaurant, offers teppanyaki-style Japanese cooking in which fresh steak,
chicken and seafood is prepared by a Benihana chef on a steel grill which forms
a part of the table on which the food is served. Our Haru concept offers an
extensive menu of Japanese fusion dishes in a high energy, urban atmosphere. In
addition to traditional, high quality sushi and sashimi creations, Haru offers
raw bar items and Japanese cuisine. Our RA Sushi concept offers sushi and a full
menu of Pacific-Rim dishes in a high-energy environment featuring upbeat design
elements and music. Our one Doraku restaurant offers sushi and other Japanese
items.
At March 28, 2004 we:
o owned and operated 56 Benihana teppanyaki-style Japanese dinnerhouse
restaurants,
o franchised others to operate 22 additional Benihana restaurants,
o owned and operated five Haru restaurants in New York City,
o owned and operated seven RA Sushi restaurants, and
o owned and operated one Doraku restaurant in Miami Beach, Florida.
Outlook
- -------
We continued to grow in fiscal 2004, despite a challenging environment. We
opened four teppanyaki restaurants and three RA Sushi restaurants. We believe
that our revenues will increase next year due to the newly opened restaurants
and from continuing increases in customer counts at restaurants open for longer
than one year. Additionally, our revenues will increase from the planned
openings of two new teppanyaki restaurants in Carlsbad, California and Coral
Gables, Florida; two new Haru restaurants - one in Philadelphia, Pennsylvania
and one in the Gramercy Park section of Manhattan; and one new RA Sushi
restaurant in Las Vegas, Nevada. We also have a signed lease for another RA
Sushi restaurant to open in fiscal 2006 in Huntington Beach, California.
We have undertaken a design initiative to develop a prototype teppanyaki
restaurant to improve unit-level economics while shortening construction time
and improving decor. This program should be completed in fiscal 2005 and
implemented late in the fiscal year for new units that will be under
construction by year's end. The initiative will also assist us in restaurant
refurbishing.
We also continue to manage commodity costs and will institute a menu price
increase in the second quarter of fiscal 2005 to offset increasing beef costs.
We expect labor costs to remain constant in fiscal 2005.
Operating results
- -----------------
Revenues
Revenues consist of the sales of food and beverages at our restaurants and
royalties and licensing fees from franchised restaurants. Revenues are dependent
upon the number of patrons that visit our restaurants and franchisees'
restaurants and the average check amounts.
The following table shows revenues and percentage changes for the past three
years:
(Dollar amounts are expressed in thousands)
Fiscal year ended
----------------------------------------------------------------------------------
2004 2003 2002
----------------------------------------------------------------------------------
Percentage Percentage Percentage
change change change
from 2003 from 2002 from 2001
-----------------------------------------------------------------------------------------------------------------
Restaurant sales $201,335 7.1% $187,913 10.5% $170,051 5.1%
Franchise fees
and royalties 1,628 22.3% 1,331 (8.6%) 1,456 5.7%
-----------------------------------------------------------------------------------------------------------------
Total revenues $202,963 7.2% $189,244 10.3% $171,507 5.1%
-----------------------------------------------------------------------------------------------------------------
The table below shows the amount of the changes in restaurant sales and the
nature of the changes.
(Dollar amounts are expressed in thousands)
Fiscal year ended
-----------------------------------------------
2004 2003 2002
------------------------------------------------------------------------------------------------------------------
Amount of increase from prior year $13,422 $17,862 $8,186
Increase in sales from restaurants opened
or owned longer than one year 211 7,206 1,808
Increase from new restaurants 7,062 8,897 9,580
Increase from acquired restaurants 7,748 3,226
Increase from sales at existing units while
not comparable due to remodeling closures 497 330
Effect of additional week in fiscal 2001 (3,202)
Closed units (2,096) (1,797)
We believe that the Benihana style of presentation makes us a unique choice for
customers. We believe that customers who are seeking greater value for their
dining budget appreciate the entertainment value provided by the chef cooking
directly at their table. We continued our multi-year program to build capacity
in our existing restaurants through adding additional tables and sushi bars.
Sales over the past two years have also increased as a result of an increasing
trend for sushi as a menu item. We believe that we are the largest restaurant
chain offering sushi to consumers nationwide. Sushi bars have been added to most
of the Benihana restaurants over the past several years.
We also have three sushi concepts. The Haru concept features an extensive menu
of Japanese fusion dishes served in a high energy, urban setting. Haru's menu
offers traditional sushi and sashimi creations as well as raw bar items and
Japanese cuisine. The Haru concept generates exceptionally high volumes as a
result of customer acceptance and the high population density of the concept's
primary market, New York City. Approximately 40% of Haru's revenues are derived
from delivery and takeout sales. The RA Sushi concept is a vibrant, hip
restaurant featuring sushi and other Asian menu items in a high-energy
environment featuring upbeat design elements and music. RA Sushi's beverage
sales account for approximately 34% of restaurant sales. The RA Sushi units are
less expensive to build than the Company's other two concepts and offer the
Company a growth vehicle that can succeed in most markets. The Company's one
Doraku restaurant offers sushi and other Japanese dishes. The Company currently
does not plan to expand this concept.
2004 compared to 2003
Revenues increased 7.2% in fiscal 2004 when compared to fiscal 2003. Restaurant
sales increased $13.4 million in fiscal 2004 when compared to fiscal 2003. The
increase was mainly attributable to sales from the acquired RA Sushi restaurants
of $7.7 million and from sales of new restaurants of $7.1 million. Guest counts
increased 569,000 to 8.2 million. The average guest check amount was $23.61 in
fiscal 2004 compared to $23.45 in fiscal 2003 at the teppanyaki restaurants,
$27.15 in fiscal 2004 compared to $28.22 in fiscal 2003 at the Haru restaurants,
$22.29 in fiscal 2004 compared to $20.56 in fiscal 2003 at the Doraku restaurant
and $19.06 in fiscal 2004 compared to $19.15 in fiscal 2003 at the RA Sushi
restaurants.
Comparable restaurant sales growth for restaurants opened longer than one year
was $0.2 million in fiscal 2004. Comparable sales for the teppanyaki restaurants
decreased by 1.2%, comparable sales for the Haru restaurants increased 8.4%,
comparable sales for the RA Sushi restaurants increased 10.3% and for the one
Doraku restaurant comparable sales increased 14.5% in fiscal 2004 when compared
to fiscal 2003.
We closed the Bethesda, Maryland teppanyaki restaurant in October of 2003 and
opened at a nearby location two weeks later. In fiscal 2003 we closed two
restaurants. The Louisville restaurant closed the last week of fiscal 2003 after
its lease expired. The Chicago Doraku restaurant closed in February of 2003 and
was converted to a RA Sushi restaurant which opened in January 2004.
Franchise fees and royalties increased in fiscal 2004 when compared to fiscal
2003. The increase was mainly attributable to increased fees from the opening of
the Edison, New Jersey and Santiago, Chile franchises.
2003 compared to 2002
Revenues increased 10.3% in fiscal 2003 when compared to fiscal 2002. Restaurant
sales increased $17,862,000 in fiscal 2003 when compared to fiscal 2002. The
increase is mainly attributable to increases in comparable restaurant sales of
$7,206,000 and from increases in sales from new restaurants of $8,897,000.
Comparable restaurant sales growth for restaurants opened longer than one year
was 4.4% in fiscal 2003. Guest counts increased 9.4% to 7.6 million. The average
per guest check amount was $23.45 at the teppanyaki restaurants, $28.22 at the
Haru restaurants, $20.56 at the Doraku restaurants and $19.15 at the RA Sushi
restaurants.
Restaurant sales were positively affected by the increase in guest counts in
fiscal 2003 when compared to the 9/11 affected fiscal 2002. The increase in
customer counts was tempered by a slowing economy, the Iraqi war as well as the
inclement weather in the fourth quarter of fiscal 2003.
We closed two restaurants in fiscal 2003. The Louisville teppanyaki restaurant
closed the last week of fiscal 2003 after its lease expired. The Chicago Doraku
restaurant closed in February 2003 and was reopened as a RA Sushi restaurant in
January 2004.
Operating costs and expenses
Operating costs and expenses are largely dependent on the number of customers
that visit our restaurants and the costs commodities used in food preparation,
the number of employees that are necessary to provide a high quality of service
to our customers, rents we pay for our restaurant properties, utilities and
other necessary costs.
The following table shows the amount of change in our restaurant operating
costs, costs as a percentage of restaurant sales, and the percentages of change
from the preceding years.
Fiscal year ended
----------------------------------------------
2004 2003 2002
----------------------------------------------
Cost as a percentage of restaurant sales:
Cost of food and beverage sales 25.6% 24.6% 25.1%
Restaurant operating expenses 58.6% 59.5% 58.6%
Restaurant opening costs .9% .3% .7%
Marketing, general and administrative expenses 8.1% 8.3% 7.9%
Amount of change from prior year:
Cost of food and beverage sales $5,255 $3,428 $(547)
Restaurant operating expenses 6,290 12,018 10,280
Restaurant opening costs 1,360 (743) (225)
Marketing, general and administrative expenses 850 2,139 (317)
Interest expense, net (71) (462) (243)
Percentage increase or (decrease) from prior year:
Cost of food and beverage sales 11.4% 8.0% (1.3%)
Restaurant operating expenses 5.6% 12.1% 11.5%
Restaurant opening costs 280.4% (60.5%) (15.5%)
Marketing, general and administrative expenses 5.5% 16.0% (2.3%)
Interest expense, net (13.4%) (46.7%) (19.7%)
2004 compared to 2003
Cost of food and beverage sales increased in absolute amount and when expressed
as a percentage of sales in fiscal 2004 when compared to fiscal 2003.
The increase in absolute amount is attributable to the increase in sales. The
increase when expressed as a percentage of sales was attributable to increased
beef costs in the current fiscal year. Beef costs comprise 40% of our total
commodity costs. Average beef costs increased 9.0% in fiscal 2004 when compared
to fiscal 2003. Lobster costs which comprise 15% of our total commodity costs
increased an average of 15.5% in fiscal 2004 when compared to fiscal 2003. All
other commodity cost fluctuations were not significant.
Restaurant operating expenses increased in absolute amount but decreased when
expressed as a percentage of sales in fiscal 2004 when compared to fiscal 2003.
The increase in absolute amount was mainly attributable to the seven new
restaurants opened during fiscal 2004. The decrease when expressed as a
percentage of sales was attributable to increased labor productivity in fiscal
2004 and from stable health insurance costs in the current fiscal year compared
to increased sales. Occupancy costs and depreciation and amortization expenses
increased in both absolute amount and when expressed as a percentage of sales
primarily from the opening of the seven new restaurants. Utility costs increased
due to higher energy costs in the current fiscal year.
Restaurant opening costs increased in absolute amount and when expressed as a
percentage of sales in fiscal 2004 when compared to fiscal 2003 as a result of
the growth in restaurant development activity in the current fiscal year
compared to the prior fiscal year. The increase in restaurant opening costs such
as rent and labor and related costs was a result of opening seven restaurants
and having four other new restaurants under development in the current fiscal
year compared to opening two in the prior fiscal year.
Marketing, general and administrative costs increased in absolute amount but
decreased when expressed as a percentage of sales in fiscal 2004 when compared
to fiscal 2003. The increase in absolute amount is due to increased labor and
related costs for a full year from additional management personnel who were
hired by the Company in connection with the acquisition of the RA Sushi concept.
Also contributing to the increase was an increase in planned advertising costs
in the current fiscal year compared to the prior fiscal year. The slight
decrease when expressed as a percentage of sales was immaterial.
Interest expense, net, decreased in fiscal 2004 when compared to fiscal 2003.
The decrease was a result of a decrease in the average interest rate in the
current fiscal year compared to the comparable prior fiscal year.
Our effective tax rate was 35.0% for fiscal 2004 compared to 33.9% for fiscal
2003. The increase was primarily a result of increased minority interest expense
which is not deductible for tax purposes.
2003 compared to 2002
Cost of food and beverage sales increased in absolute amount, but decreased when
expressed as a percentage of sales in fiscal 2003 when compared to fiscal 2002.
The increase in absolute amount is attributable to the increase in sales. The
decrease when expressed as a percentage of sales is attributable to lower
commodity prices, principally shrimp, in fiscal 2003.
Restaurant operating expenses increased in absolute amount and when expressed as
a percentage of sales in fiscal 2003 when compared to fiscal 2002. The increase
was attributable to increased labor and related costs, an increase in property
and liability insurance expense and increased depreciation and amortization
expenses. The increase in labor and related costs relates principally to the
increase in health care benefits costs and declining productivity coupled with
increasing overtime wages during the first two quarters of fiscal 2003 compared
to the equivalent periods of fiscal 2002. Property and liability insurance
expense increased from an increase in premiums. Lastly, depreciation and
amortization increased due to new restaurant properties placed into service and
other capital expenditures made to the existing restaurant portfolio in fiscal
2003 compared to fiscal 2002.
Restaurant opening costs decreased in fiscal 2003 when compared to fiscal year
2002 as a result of the relatively large expenses associated with the three Haru
openings in the preceding fiscal year. In fiscal year 2003, restaurant opening
costs related to the new Benihana restaurants in The Woodlands and Las Colinas,
Texas and to the new Benihana in Westbury, New York which opened during the
second week of fiscal 2004.
Marketing, general and administrative costs increased in absolute amount and
when expressed as a percentage of sales in fiscal 2003 when compared to fiscal
2002. The increase was attributable to increased salaries and benefits from
additional management personnel who were hired by the Company in connection with
the acquisition of the RA Sushi concept. Additionally, advertising expenses
increased in fiscal 2003 as a result of increased advertising expenditures.
Interest expense, net, decreased in 2003 fiscal year when compared to fiscal
2002. The decrease was a result of lower average borrowings outstanding coupled
with lower interest rates in fiscal 2003 compared to fiscal 2002.
Our effective income tax rate increased in fiscal 2003 to 33.9% from 31.6% in
fiscal 2002. The increase was due to an increase in net pre-tax income coupled
with a relatively fixed amount of Federal tax credit for FICA taxes paid on
reported tip income.
Our financial resources
We have borrowings from Wachovia Bank, National Association ("Wachovia") under a
term loan and a revolving line of credit facility, both of which were
renegotiated on December 3, 2002. The renegotiated credit agreement increased
the term loan facility to $16,000,000. The line of credit facility allows us to
borrow up to $15,000,000 through December 31, 2007. At March 28, 2004, we had
$6,500,000 available for borrowing under the revolving line of credit. The term
loan had $13,000,000 outstanding at March 28, 2004 and is payable in quarterly
installments of $750,000 through December 2004 and $833,333 thereafter until the
term loan matures in December 2007. The interest rate at March 28, 2004 of both
the line of credit and the term loan was approximately 2.10%. We have the option
to pay interest at Wachovia's prime rate plus 1% or at libor plus 1%. The
interest rate may vary depending upon the ratio that the sum of earnings before
interest, taxes, depreciation and amortization has to our total indebtedness.
The loan agreements limit our capital expenditures, require that we maintain
certain financial ratios and profitability amounts and prohibit the payment of
cash dividends on common stock.
For the quarter ended March 28, 2004, the Company was not in compliance with a
Consolidated EBITDA covenant of the Company's credit agreement with Wachovia.
The Company received a waiver from Wachovia to cure its noncompliance on May 25,
2004.There Can be no assurance that such non-compliance will not occur in
future periods or that, if it does, the Company's lender will agree to waive
any such future non-compliance
Since restaurant businesses generally do not need relatively large amounts of
inventory and accounts receivable, there is no need to finance them. As a
result, many restaurant businesses have deficiencies in working capital.
The following table summarizes the sources and uses of cash (in thousands).
Fiscal year ended
-------------------------
2004 2003
-------------------------
Cash provided by operations $20,449 $18,279
Cash (used in) investing activities (22,042) (38,782)
Cash provided by financing activities 1,490 17,740
-------------------------
Decrease in cash ($103) ($2,763)
-------------------------
The Company has entered into an agreement to sell $20,000,000 aggregate
principal amount of Convertible Preferred Stock of which $10,000,000 will be
available upon closing with the remaining $10,000,000 to be available beginning
on the anniversary date to three years from the anniversary date. The
Convertible Preferred Stock will be convertible into common shares of the
Company at a conversion price of $19.00 per share, and will carry a cash
dividend of 5.0%. The closing of the transaction, which is subject to the
execution of definitive documentation and customary closing conditions, is
expected to occur in the first quarter of fiscal 2005. We believe that the cash
to be provided under the agreement will be sufficient to cover the Company's
cash needs for planned unit growth and refurbishing existing units.
Contractual obligations and commitments (in thousands):
- -------------------------------------------------------------------------------------------------------------------------
Total 2005 2006 2007 2008 2009 Thereafter
- -------------------------------------------------------------------------------------------------------------------------
Long-term debt obligations $21,500 $3,000 $3,333 $4,167 $11,000 - -
Capital lease obligations 299 273 26 - - - -
Operating lease obligations 116,849 8,674 9,008 8,728 8,675 8,756 73,008
Other liabilities (1) 652 652 - - - - -
- --------------------------------------------------------------------------------------------------------------------------
Total $139,300 $12,599 $12,367 12,895 $19,675 $8,756 $73,008
- --------------------------------------------------------------------------------------------------------------------------
(1) Contingent payment from RA Sushi acquisition.
Operating activities
- --------------------
Cash provided by operations increased as a percentage of net income during the
year from fiscal 2003 primarily as a result of increases in noncash items such
as depreciation and amortization and deferred taxes as well as changes in
operating assets and liabilities.
Investing activities
- --------------------
Expenditures for property and equipment were $22,038,000, a decrease of
$5,380,000 from the prior fiscal year. Of the $22,038,000 capital expenditures
for fiscal 2004, $7,200,000 represented new construction for teppanyaki units,
$3,900,000 represented new construction for RA Sushi units, $400,000 represented
new construction for Haru restaurants, $2,000,000 represented the purchase of
the land and building of the Dallas teppanyaki restaurant and the balance of
approximately $8,500,000 was spent on replacements and refurbishments.
We expect to expend approximately $15 million for the development of new
restaurants during the 2005 fiscal year. We also intend to remodel several
restaurants during our 2005 fiscal year. The total costs of these renovations
are expected to be approximately $14 million.
Financing activities
- --------------------
Our total indebtedness decreased by $873,000 from the end of fiscal 2003. We had
net borrowings of $2,500,000 under the revolving line of credit. We repaid
$3,000,000 of the term loan in fiscal 2004 and $373,000 of leases that are
considered to be capital in nature. We also realized $2,198,000 from the
exercise of stock options and warrants as compared to $1,929,000 in the previous
fiscal year.
The impact of inflation
- -----------------------
The Company does not believe that inflation has had a material effect on sales
or expenses during the last three years other than labor costs. The Company's
restaurant operations are subject to federal and state minimum wage laws
governing such matters as working conditions, overtime and tip credits.
Significant numbers of the Company's food service and preparation personnel are
paid at rates related to the federal minimum wage and, accordingly, increases in
the minimum wage have increased the Company's labor costs in the last two years.
To the extent permitted by competition, the Company has mitigated increased
costs by increasing menu prices and may continue to do so if deemed necessary in
future years.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to certain risks of increasing interest rates and commodity
prices. The interest on our indebtedness is largely variable and is benchmarked
to the prime rate in the United States or to the London interbank offering rate.
We may protect ourselves from interest rate increases from time-to-time by
entering into derivative agreements that fix the interest rate at predetermined
levels. We have a policy not to use derivative agreements for trading purposes.
We purchase commodities such as chicken, beef, lobster, fish and shrimp for our
restaurants. The prices of these commodities may be volatile depending upon
market conditions. We do not purchase forward commodity contracts because the
changes in prices for them have historically been short-term in nature and, in
our view, the cost of the contracts is in excess of the benefits.
Seasonality of our business
- ---------------------------
Our business is not highly seasonal although we do have more diners coming to
our restaurants for special holidays such as Mother's Day, Valentine's Day and
New Year's. Mother's Day falls in our first fiscal quarter, New Year's in the
third fiscal quarter and Valentine's Day in the fourth fiscal quarter of each
year.
Critical accounting policies and estimates
- ------------------------------------------
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities during the reported period. (See Note 1 of
notes to consolidated financial statements included in this Annual Report).
Critical accounting policies are those that we believe are most important to
portraying our financial condition and results of operations and also require
the greatest amount of subjective or complex judgments by management. Judgments
or uncertainties regarding the application of these policies may result in
materially different amounts being reported under different conditions or using
different assumptions. We consider the following policies to be the most
critical in understanding the judgments that are involved in preparing our
consolidated financial statements.
We record all property and equipment at cost less accumulated depreciation.
Improvements are capitalized while repairs and maintenance costs are expensed as
incurred. Depreciation is calculated using the straight-line method over the
estimated useful life of the assets or the lease terms of the respective leases.
The useful life of property and equipment and the determination as to what
constitutes a capitalized cost versus a repair and maintenance expense involves
judgments by management. These judgments may produce materially different
amounts of depreciation expense and repairs and maintenance expense if different
assumptions were used.
We periodically assess the potential impairment of long-lived assets whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Recoverability of assets is measured by comparing the carrying
value of the assets to the future cash flows to be generated by the asset. If
the total future cash flows are less than the carrying amount of the asset, the
carrying amount is written down to the estimated fair value, and an impairment
charge is taken against results of operations.
We periodically review the recoverability of goodwill based primarily upon an
analysis of cash flows of the related investment assets compared to the carrying
value or whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable. The analysis involves judgments by management
which may produce materially different results if different assumptions are used
in the analysis.
We are self-insured for a significant portion of our employee health and
workers' compensation programs. The Company maintains stop-loss coverage with
third party insurers to limit its total exposure. The accrued liability
associated with these programs is based on our estimate of the ultimate costs to
be incurred to settle known claims and an estimate of claims incurred but not
reported to the Company as of the balance sheet date. Our estimated liability is
not discounted and is based on a number of assumptions and factors, including
historical trends, actuarial assumptions and economic conditions. If actual
trends, including the severity or frequency of claims, differ from our
estimates, our financial results could be impacted.
We estimate certain components of our provision for income taxes. These
estimates include, but are not limited to, effective state and local income tax
amounts, allowable tax credits for items such as FICA taxes paid on reported tip
income and estimates related to depreciation expense allowable for tax purposes.
Our estimates are made based on the best available information at the time that
we prepare the provision. We usually file our income tax returns many months
after our fiscal year-end. All tax returns are subject to audit by federal and
state governments, usually years after the returns are filed, and could be
subject to differing interpretations of the tax laws or the Company's
application of such laws to its business (see Note 11 to our consolidated
financial statements). During fiscal 2004, the Internal Revenue Service
completed an examination of the Company's fiscal 2000, 2001 and 2002 Federal
Income Tax returns. The examination did not result in any material adverse tax
or financial consequences.
New accounting pronouncements that may affect our financial reporting
- ---------------------------------------------------------------------
In December 2003, the Financial Accounting Standards Board ("FASB") revised and
re-issued FASB Interpretation ("FIN") No. 46, "Consolidation of Variable
Interest Entities, an interpretation of ARB No. 51", which was originally issued
in January 2003. FIN No. 46 provides guidance on identifying variable interest
entities ("VIE") and assessing whether or not a VIE should be consolidated.
Variable interests are contractual, ownership or other monetary interests in an
entity that change with changes in the fair value of the entity's net assets
exclusive of variable interests. An entity is considered to be a VIE when its
capital is insufficient to permit it to finance its activities without
additional subordinated financial support or its equity investors, as a group,
lack the characteristics of having a controlling financial interest. FIN No. 46
requires the consolidation of entities which are determined to be VIE's when the
reporting company determines that it will absorb a majority of the VIE's
expected losses, receive a majority of the VIE's residual returns, or both. The
company that is required to consolidate the VIE is called the primary
beneficiary. As revised, the provisions of FIN No. 46 are to be applied to
entities no later than the end of the first reporting period that ends after
March 15, 2004. The Company does not have any relationships with or interests in
entities considered to be special-purpose entities. The adoption of FIN No. 46
did not have an impact on our consolidated financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded into other contracts, and for
hedging activities under SFAS No. 133. SFAS No. 149 is generally effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The adoption of SFAS No. 149 did
not have an impact on our consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", which
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires than an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of SFAS No. 150 did not have an impact on our
consolidated financial statements.
Forward looking statements
- --------------------------
This Annual Report contains various "forward-looking statements" which represent
our expectations or beliefs concerning future events, including unit growth,
future capital expenditures, and other operating information. A number of
factors could, either individually or in combination, cause actual results to
differ materially from those included in the forward-looking statements,
including changes in consumer dining preferences, fluctuations in commodity
prices, availability of qualified employees, changes in the general economy,
industry cyclicality, and in consumer disposable income, competition within the
restaurant industry, availability of suitable restaurant locations, or
acquisition opportunities, harsh weather conditions in areas in which the
Company and its franchisees operate restaurants or plan to build new
restaurants, acceptance of the Company's concepts in new locations, changes in
governmental laws and regulations affecting labor rates, employee benefits, and
franchising, ability to complete new restaurant construction and obtain
governmental permits on a reasonably timely basis, unstable economy and
conditions in foreign countries where we franchise restaurants and other factors
that we cannot presently foresee.
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share information)
March 28, March 30, March 31,
Fiscal year ended 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues
Restaurant sales $201,335 $187,913 $170,051
Franchise fees and royalties 1,628 1,331 1,456
- -----------------------------------------------------------------------------------------------------------------------------------
Total revenues 202,963 189,244 171,507
- -----------------------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of food and beverage sales 51,437 46,182 42,754
Restaurant operating expenses 118,015 111,725 99,707
Restaurant opening costs 1,845 485 1,228
Marketing, general and administrative expenses 16,362 15,512 13,373
Impairment charge 438
- -----------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 187,659 173,904 157,500
- -----------------------------------------------------------------------------------------------------------------------------------
Income from operations 15,304 15,340 14,007
Interest expense, net 457 528 990
- -----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes and minority interest 14,847 14,812 13,017
Income tax provision 4,965 4,862 4,088
- -----------------------------------------------------------------------------------------------------------------------------------
Income before minority interest 9,882 9,950 8,929
Minority interest 643 477 100
- -----------------------------------------------------------------------------------------------------------------------------------
Net Income $9,239 $9,473 $8,829
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share
Basic earnings per common share (1) $1.04 $1.08 $1.16
Diluted earnings per common share (1) $1.01 $1.01 $1.11
- -----------------------------------------------------------------------------------------------------------------------------------
(1) On June 7, 2002, the Board of Directors declared a 15% stock dividend in
Class A stock on both the Class A Shares and Common Shares. The stock
dividend was paid on August 12, 2002 to holders of record July 15, 2002.
As a result, basic and diluted earnings per common share are shown as if
the stock dividend had been in existence for each fiscal year presented.
See notes to consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share information)
March 28, March 30,
2004 2003
- ----------------------------------------------------------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $2,196 $2.299
Receivables 882 626
Inventories 6,147 5,328
Prepaid expenses 2,426 2,236
- ----------------------------------------------------------------------------------------------------------------------------------
Total current assets 11,651 10,489
Property and equipment, net 98,219 84,482
Deferred income taxes, net 1,172
Goodwill, net 27,783 27,131
Other assets 4,757 5,207
- ----------------------------------------------------------------------------------------------------------------------------------
$142,410 $128,481
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $20,730 $19,407
Current maturity of bank debt 3,000 3,000
Current maturities of obligations
under capital leases 273 373
- ----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 24,003 22,780
Long-term debt - bank 18,500 19,000
Obligations under capital leases 26 299
Minority Interest 1,414 771
Deferred income taxes, net 1,237
Commitments and Contingencies (Notes 9 and 12)
Stockholders' Equity:
Common stock - $.10 par value; convertible into Class
A Common stock; authorized - 12,000,000 shares;
issued and outstanding - 3,134,979 and 3,184,479
shares in 2004 and 2003, respectively 313 318
Class A Common stock - $.10 par value; authorized -
20,000,000 shares; issued and outstanding -
5,967,527 and 5,595,084 shares in 2004 and 2003,
respectively 597 560
Additional paid-in capital 50,772 48,444
Retained earnings 45,691 36,452
Treasury stock - 10,828 shares of Common stock
at cost (143) (143)
- ----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 97,230 85,631
- ----------------------------------------------------------------------------------------------------------------------------------
$142,410 $128,481
- ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share information)
Class A Additional Total
Preferred Common Common Paid-in Retained Treasury Stockholders'
Stock Stock Stock Capital Earnings Stock Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, April 1, 2001 $1 $358 $259 $14,847 $37,336 (116) $52,685
Net income 8,829 8,829
Tax benefit from stock options 352 352
Dividend on preferred stock (5) (5)
Conversion of 700 shares of preferred stock
into 105,267 shares of Class A common stock (1) 11 (10)
Conversion of 316,937 shares of common
stock into Class A common stock (31) 31
Issuance of 1,000,000 shares of Class A common
stock, net of offering costs 100 10,517 10,617
Issuance of 14,000 shares of common stock
under exercise of options 1 39 40
Issuance of 139,406 shares of Class A
common stock under exercise of options 14 1,181 1,195
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2002 328 415 26,926 46,160 (116) 73,713
Net income 9,473 9,473
Tax benefit from stock options 517 517
Issuance of 1,141,050 shares of Class A
common stock for stock dividend 115 19,089 (19,181) (23)
Conversion of 100,700 shares of common
stock into Class A common stock (10) 10
Purchase of treasury stock (4) (4)
Issuance of 9,000 shares of common stock
under exercise of options 43 43
Issuance of 178,865 shares of Class A
common stock under exercise of options 18 1,708 1,726
Issuance of 150 shares of Class A common
stock for incentive compensation 3 3
Issuance of 23,000 shares of Class A common
stock under exercise of warrant 2 158 160
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, March 30, 2003 318 560 48,444 36,452 (143) 85,631
Net income 9,239 9,239
Tax benefit from stock options 162 162
Conversion of 79,500 shares of common
stock into Class A common stock (8) 8
Issuance of 30,000 shares of common stock
under exercise of options 3 214 217
Issuance of 207,000 shares of Class A
common stock under exercise of warrants 21 1,420 1,441
Issuance of 85,943 shares of Class A
common stock under exercise of options 8 532 540
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, March 28, 2004 $313 $597 $50,772 $45,691 $(143) $97,230
- -----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
BENIHANA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share information) March 28, March 30, March 31,
Fiscal year ended 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Activities:
Net income $9,239 $9,473 $8,829
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,657 7,375 5,898
Minority interest 643 477 100
Deferred income taxes 2,409 791 1,010
Issuance of Common stock for incentive compensation 3
Loss on disposal of assets 154 120 207
Write-down of impaired assets 438
Change in operating assets and liabilities that provided
(used) cash:
Receivables (256) 364 (256)
Inventories (819) (1,085) 52
Prepaid expenses (190) 351 (1,408)
Other assets (59) (431) (228)
Accounts payable and accrued expenses 671 841 589
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 20,449 18,279 15,231
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Business acquisition, net of cash acquired (11,353)
Expenditures for property and equipment (22,038) (27,418) (13,944)
Other (4) (11) (15)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (22,042) (38,782) (13,959)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Dividends paid on preferred stock (5)
Proceeds from issuance of long-term debt 17,400 34,800 15,000
Repayment of long-term debt and obligations under capital leases (18,270) (19,502) (24,344)
Proceeds from issuance of Class A Common stock 10,617
Proceeds from issuance of Common stock and Class A
Common stock under exercise of options and warrants 2,198 1,929 1,235
Tax benefit from stock option and warrant exercise 162 517 352
Purchase of treasury stock (4)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 1,490 17,740 2,855
- -----------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (103) (2,763) 4,127
Cash and cash equivalents, beginning of year 2,299 5,062 935
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $2,196 $2,299 $5,062
- -----------------------------------------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information
Cash paid during the fiscal year for:
Interest $484 $423 $1,030
Income taxes $2,305 $3,055 $3,831
Business acquisitions, net of cash acquired:
Fair value of assets acquired, other than cash $2,346
Liabilities assumed (1,646)
Purchase price in excess of the net assets acquired 10,653
- -----------------------------------------------------------------------------------------------------------------------------------
$11,353
- -----------------------------------------------------------------------------------------------------------------------------------
During fiscal 2004, $652,000 of goodwill was recorded related to contingent
payments accrued for the RA Sushi acquisition.
During fiscal 2004, 79,500 shares
of common stock were converted into 79,500 shares of Class A common stock.
During fiscal 2003, 100,700 shares of common stock were converted into 100,700
shares of Class A common stock.
During fiscal 2003, a stock dividend of
1,141,050 shares of Class A common stock was paid.
During fiscal 2002, 316,937 shares of common stock were converted into 316,937
shares of Class A common stock.
During fiscal 2002, 700 shares of preferred stock were converted into
105,267 shares of Class A common stock.
See notes to consolidated financial statements.
BENIHANA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 28, 2004, MARCH 30, 2003 AND MARCH 31, 2002
- -------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations - Benihana Inc., including its majority owned subsidiaries
(the "Company"), owned and operated 56 teppanyaki style and 13 sushi
restaurants and franchised 22 others as of March 28, 2004. The
Company has the rights to open, license and develop Benihana
restaurants in the United States, Central and South America and the
Caribbean islands.
Basis of Presentation - The consolidated financial statements include
the assets, liabilities and results of operations of the Company's
majority-owned subsidiaries. The ownership of other interest holders
including attributable income is reflected as minority interest. All
intercompany accounts and transactions have been eliminated in
consolidation. The Company operates within only one reportable
operating segment.
The Company has a 52/53-week fiscal year. All fiscal years presented
consisted of 52 weeks. The Company's first fiscal quarter consists of
16 weeks and the remaining three quarters are 12 weeks each, except
in the event of a fifty-three week year with the final quarter
composed of 13 weeks. Because of the differences in length of these
accounting periods, results of operations between the first quarter
and the later quarters of a fiscal year are not comparable.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
("generally accepted accounting principles") requires that management
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting
period. Actual amounts could differ from those estimates.
Certain prior year amounts in the accompanying consolidated financial
statements have been reclassified to conform with fiscal 2004
classifications.
Franchise and Royalties Revenue Recognition - The Company recognizes
initial franchise fees as income when substantially all of its
obligations are satisfied, which generally coincides with the opening
of the franchised restaurants. The Company also receives continuing
royalties based upon a percentage of each franchised restaurant's
gross revenues. Royalties are recognized as income when earned.
Cash and Cash Equivalents - The Company considers all highly liquid
investment instruments purchased with an initial maturity of three
months or less to be cash equivalents.
Inventories - Inventories, which consist principally of restaurant
operating supplies and food and beverage, are stated at the lower of
cost (first-in, first-out method) or market.
Depreciation and Amortization - Depreciation and amortization are
computed by the straight-line method over the estimated useful life
(buildings - 30 years; restaurant furniture, fixtures and equipment -
8 years; office equipment - 8 years; personal computers, software and
related equipment - 3 years; and leaseholds - lesser of the lease
terms, including renewal options, or useful life).
The Company capitalizes all direct costs incurred to construct
restaurants. Upon opening, these costs are depreciated and charged to
expense based upon their useful life classification. The amount of
interest capitalized in connection with restaurant construction was
approximately $92,000 in fiscal 2004, $0 in fiscal year 2003 and
$12,000 in fiscal year 2002.
Accounting for Long-Lived Assets - The Company periodically evaluates
its net investment in restaurant properties for impairment for events
or changes in circumstances that indicate the carrying amounts of an
asset may not be recoverable. During fiscal 2002, the Company
recorded an impairment charge of $438,000 for the write-down to fair
value of property and equipment at a Doraku restaurant. No
impairments occurred in fiscal years 2004 and 2003.
Accounting for Goodwill - The Company periodically reviews goodwill
for impairment and writes-down the carrying amount of goodwill to
results of operations when the recorded value of goodwill is
determined to be more than its fair value. The Company reviewed
goodwill for possible impairment during fiscal 2004, 2003 and 2002
and determined that there was no impairment.
Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use - The Company capitalizes and records in other
assets the cost of computer software obtained for internal use and
amortizes such costs over a three-year period.
Income Taxes - The Company uses the asset and liability method which
recognizes the amount of current and deferred taxes payable or
refundable at the date of the financial statements as a result of all
events that have been recognized in the consolidated financial
statements as measured by the provisions of enacted law.
Derivative Instruments - The Company does not currently utilize
interest rate swap agreements to hedge exposure to fluctuations in
variable interest rates. The Company had entered into an interest
swap agreement which expired on May 1, 2002.
Stock-Based Compensation - The Company accounts for stock-based
compensation under the intrinsic value method of accounting for
stock-based compensation. Therefore, the Company generally recognizes
no compensation expense with respect to such awards because options
are generally granted at the fair market value of the underlying
shares on the date of the grant. The Company has disclosed pro forma
net income and earnings per share amounts using the fair value
method.
Had the Company accounted for its stock-based awards under the fair
value method, the table below shows the pro forma effect on net
income and earnings per share for the three most recent fiscal years.
March 28, March 30, March 31,
2004 2003 2002
---------------- ---------------- --------------
Net Income
As reported $9,239 $9,473 $8,829
Total stock based employee
compensation expense
determined under fair value
based method for all awards 564 754 606
---------------- ---------------- --------------
Pro forma $8,675 $8,719 $8,223
================ ================ ==============
Basic earnings per share
As reported $1.04 $1.08 $1.16
================ ================ ==============
Pro forma $ .98 $1.00 $1.08
================ ================ ==============
Diluted earnings per share
As reported $1.01 $1.01 $1.11
================ ================ ==============
Pro forma $.95 $ .93 $1.03
================ ================ ==============
The following weighted average assumptions were used in the
Black-Scholes option-pricing model used in developing the above pro
forma information: a risk-free interest rate of 1.9% for fiscal year
2004, 1.8% for fiscal year 2003 and 3.8% for fiscal year 2002,
respectively, an expected life of three years, no expected dividend
yield and a volatility factor of 50% for fiscal years 2004, 2003 and
2002.
Segment Reporting - Reportable operating segments are components of
an enterprise about which separate financial information is available
that is evaluated by the chief operating decision maker in deciding
how to allocate resources and in evaluating performance. The Company
believes its restaurants meet the criteria supporting aggregation of
all restaurants into one operating segment.
Earnings Per Share - Basic earnings per common share is computed by
dividing net income available to common shareholders by the weighted
average number of common shares outstanding during each period. The
diluted earnings per common share computation includes dilutive
common share equivalents issued under the Company's various stock
option plans and the dilutive convertible preferred stock outstanding
only in fiscal 2002.
The computation of basic earnings per common share and diluted
earnings per common share for each fiscal year is shown below (in thousands):
March 28, March 30, March 31,
2004 2003 2002
---------------- ---------------- --------------
Net income $9,239 $9,473 $8,829
Less preferred dividends (5)
---------------- ---------------- --------------
Income for computation of basic
earnings per common share 9,239 9,473 8,824
Convertible preferred dividends (See Note 13) 5
---------------- ---------------- --------------
Income for computation of diluted
earnings per common share $9,239 $9,473 $8,829
================ ================ ==============
Weighted average number of common
shares in basic earnings per share 8,887 8,739 7,596
Effect of dilutive securities:
stock options and warrants 268 670 336
convertible preferred shares 14
---------------- ---------------- --------------
Weighted average number of common
shares and dilutive potential common
shares used in diluted earnings per share 9,155 9,409 7,946
================ ================ ==============
During fiscal years 2004, 2003 and 2002, stock options and warrants
to purchase 1,502,000, 1,020,000 and 1,424,000 shares, respectively,
of common stock were excluded from the calculation of diluted
earnings per share since the effect would be considered antidilutive.
New accounting pronouncements that may affect our financial reporting
- In December 2003, the Financial Accounting Standards Board ("FASB")
revised and re-issued FASB Interpretation ("FIN") No. 46,
"Consolidation of Variable Interest Entities, an interpretation of
ARB No. 51", which was originally issued in January 2003. FIN No. 46
provides guidance on identifying variable interest entities ("VIE")
and assessing whether or not a VIE should be consolidated. Variable
interests are contractual, ownership or other monetary interests in
an entity that change with changes in the fair value of the entity's
net assets exclusive of variable interests. An entity is considered
to be a VIE when its capital is insufficient to permit it to finance
its activities without additional subordinated financial support or
its equity investors, as a group, lack the characteristics of having
a controlling financial interest. FIN No. 46 requires the
consolidation of entities which are determined to be VIE's when the
reporting company determines that it will absorb a majority of the
VIE's expected losses, receive a majority of the VIE's residual
returns, or both. The company that is required to consolidate the VIE
is called the primary beneficiary. As revised, the provisions of FIN
No. 46 are to be applied to entities no later than the end of the
first reporting period that ends after March 15, 2004. The Company
does not have any relationships with or interests in entities
considered to be special-purpose entities. The adoption of FIN No. 46
did not have an impact on our consolidated financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities". SFAS No. 149
amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments
embedded into other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is generally effective for contracts entered
into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. The adoption of SFAS No. 149 did not
have an impact on our consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity", which establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires than an issuer classify a
financial instrument that is within its scope as a liability (or an
asset in some circumstances). SFAS No. 150 is effective for financial
instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS No. 150 did not
have an impact on our consolidated financial statements.
2. ACQUISITION
The Company's financial statements and the discussion below reflect
the acquisition by the Company of RA Sushi, a privately owned Arizona
chain which operated four restaurants, on December 3, 2002.
The Company acquired the RA Sushi chain because it believed that the
concept is a new and attractive one that would complement its other
Asian-themed restaurants and provide further penetration in the
market where diners seek attractively priced sushi and other entrees.
The purchase price, which was determined based upon arm's length
negotiations based principally upon a multiple of RA Sushi's earnings
before interest, taxes, depreciation and amortization, paid in cash
at closing was approximately $11.4 million, along with the assumption
of approximately $1.2 million of debt and other costs of
approximately $0.5 million. The purchase agreement also included a
contingent purchase price provision, which requires the Company to
pay the seller contingent payments based on certain operating results
of the acquired business for fiscal years ending 2004, 2005 and 2006.
The acquisition has been accounted for using the purchase method of
accounting and the operating results of RA Sushi have been included
in the Company's consolidated statements of earnings since the date
of acquisition. The Company determined that the fair value of the RA
Sushi business and its cash flows were in excess of the fair value of
the net assets acquired; accordingly, goodwill resulted from the
acquisition. The excess of the purchase price over the acquired
tangible and intangible net assets of approximately $10.7 million was
allocated to goodwill. The Company anticipates that all goodwill
recorded in connection with the RA Sushi acquisition will be
deductible for tax purposes.
In fiscal 2004, the Company recorded $652,000 as additional goodwill
for the contingent payment due for fiscal 2004. The contingent
payments that will be incurred for results of the fiscal years ending
2005 and 2006 are not estimatable.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable and payable, and
accrued liabilities approximate fair value because of the short-term
nature of the items. The carrying amounts of the Company's debt and
other payables approximate fair value either due to their short-term
nature or the variable rates associated with these debt instruments.
4. INVENTORIES
Inventories consist of (in thousands):
March 28, March 30,
2004 2003
------------------ ---------------
Food and beverage $2,090 $1,612
Supplies 4,057 3,716
------------------ ---------------
$6,147 $5,328
================== ===============
5. PROPERTY AND EQUIPMENT
Property and equipment consist of (in thousands):
March 28, March 30,
2004 2003
------------------- ----------------
Land $12,324 $ 11,159
Buildings 27,142 21,717
Leasehold improvements 79,417 66,102
Restaurant furniture, fixtures, and equipment 27,526 25,161
Restaurant facilities and equipment under
capital leases 7,040 7,040
------------------- ----------------
153,449 131,179
Less accumulated depreciation and amortization (including
accumulated amortization of restaurant facilities and
equipment under capital leases of $6,933 and $6,792 in 2004
and 2003, respectively) 59,653 53,027
------------------- ----------------
93,796 78,152
Construction in progress 4,423 6,330
------------------- ----------------
$98,219 $ 84,482
=================== ================
6. OTHER ASSETS
Other assets consist of (in thousands):
March 28, March 30,
2004 2003
------------------ ---------------
Lease acquisition costs, net $1,897 $2,137
Security deposits 815 1,031
Premium on liquor licenses 1,025 981
Computer software costs, net 359 243
Deferred financing charges, net 219 365
Cash surrender value of
life insurance policy 395 391
Long-term receivables 47 59
------------------ ---------------
$4,757 $5,207
================== ===============
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of (in thousands):
March 28, March 30,
2004 2003
------------------- -----------------
Accounts payable $ 5,298 $ 6,129
Accrued payroll, incentive
compensation and related taxes 3,864 3,867
Accrued health insurance costs 808 840
Sales taxes payable 1,138 1,178
Unredeemed gift certificates 1,383 1,161
Accrued percentage rent 1,015 1,078
Accrued property taxes 581 623
Straight-line rent accrual 1,967 1,531
Other accrued operating expenses 4,676 3,000
------------------- -----------------
$20,730 $19,407
=================== =================
8. RESTAURANT OPERATING EXPENSES
Restaurant operating expenses consist of (in thousands):
March 28, March 30, March 31
Fiscal year ended 2004 2003 2002
---------------------------------------------------------------------------------------------------------
Labor and related costs $71,812 $70,262 $62,677
Restaurant supplies 3,945 3,630 3,368
Credit card discounts 3,465 3,240 2,884
Utilities 4,854 4,262 3,890
Occupancy costs 11,742 10,342 9,822
Depreciation and amortization 8,313 7,077 5,582
Other restaurant operating expenses 13,884 12,912 11,484
------------------------------------------------------
Total restaurant operating expenses $118,015 $111,725 $99,707
======================================================
9. LEASE OBLIGATIONS
The Company generally operates its restaurants in leased
premises. The typical restaurant premises lease is for a term of
between 15 to 25 years with renewal options ranging from 5 to 25
years. The leases generally provide for the obligation to pay
property taxes, utilities, and various other use and occupancy
costs. Rentals under certain leases are based on a percentage of
sales in excess of a certain minimum level. Certain leases
provide for increases based upon the changes in the consumer
price index. The Company is also obligated under various leases
for restaurant equipment and for office space and equipment.
Minimum payments under lease commitments are summarized below
for capital and operating leases. The imputed interest rates
used in the calculations for capital leases vary from 9.75% to
12% and are equivalent to the rates which would have been
incurred at the time to borrow, over a similar term, the amounts
necessary to purchase the leased assets.
The amounts of operating and capital lease obligations are as
follows (in thousands):
Operating Capital
Leases Leases
--------------- ---------------
Fiscal year ending:
2005 $8,674 $289
2006 9,008 26
2007 8,728
2008 8,675
2009 8,756
Thereafter 73,008
--------------- ---------------
Total minimum lease payments $116,849 $315
===============
Less amount representing interest 16
---------------
Total obligations under capital leases 299
Less current maturities 273
---------------
Long-term obligations under capitalized
leases at March 28, 2004 $ 26
===============
Rental expense consists of (in thousands):
March 28, March 30, March 31,
2004 2003 2002
----------------------------------------------------
Minimum rental commitments $9,711 $ 8,191 $ 7,804
Rental based on percentage of sales 2,324 2,404 2,273
----------------------------------------------------
$12,035 $10,595 $10,077
====================================================
10. LONG-TERM DEBT
Long-term debt consists of (in thousands):
March 28, March 30,
2004 2003
------------------ -------------------
Term loan - bank $13,000 $16,000
Revolving line of credit - bank 8,500 6,000
------------------ -------------------
21,500 22,000
Less current portion 3,000 3,000
------------------
-------------------
$18,500 $19,000
================== ===================
The Company has borrowings from Wachovia Bank, National
Association ("Wachovia") under a term loan and a revolving line
of credit facility. The line of credit facility allows the
Company to borrow up to $15,000,000 through December 31, 2007.
At March 28, 2004, the Company had $6,500,000 available for
borrowing under the revolving line of credit. The term loan had
$13,000,000 outstanding at March 28, 2004 and is payable in
quarterly installments of $750,000 through December 2004 and
$833,333 thereafter until the term loan matures in December
2007. The interest rate at March 28, 2004 of both the line of
credit and the term loan was approximately 2.10%. The Company
has the option to pay interest at Wachovia's prime rate plus 1%
or libor plus 1%. The interest rate may vary depending upon the
ratio that the sum of earnings before interest, taxes,
depreciation and amortization has to the Company's total
indebtedness. The loan agreements limit the Company's capital
expenditures to certain amounts, require that the Company
maintain certain financial ratios and profitability amounts and
prohibit the payment of cash dividends on common stock.
For the quarter ended March 28, 2004, the Company was not in
compliance with a Consolidated EBITDA covenant of the Company's
credit agreement with Wachovia. The Company received a waiver
from Wachovia to cure its noncompliance on May 25, 2004.There
can be no assurance that such non-compliance will not occur in
future periods or that, if it does, the Company's lender will
agree to waive any such future non-compliance.
Principal maturities of long-term debt obligations at March 28, 2004
are as follows:
Fiscal year ending
2005 $3,000
2006 3,333
2007 4,167
2008 11,000
---------------
Total $21,500
===============
11. INCOME TAXES
Deferred tax assets and liabilities reflect the tax effect of
temporary differences between amounts of assets and liabilities for
financial reporting purposes and the amounts of such assets and
liabilities as measured by income tax law. A valuation allowance is
recognized to reduce deferred tax assets to the amounts that are more
likely than not to be realized.
The net deferred tax asset (liability) consists of (in thousands):
March 28, 2004 March 30, 2003
Assets Liabilities Total Assets Liabilities Total
------------------------------------------------------------------------------------------------------------------------
Amortization of gain $847 847 887 887
Tax loss carryforwards 301 301 733 733
Capital leases 123 46 77 309 129 180
Income tax credits 1,383 1,383 790 790
Gift certificates 554 554 464 464
Deferred compensation 296 296 241 241
Accelerated depreciation
for tax purposes 3,307 (3,307) 1,151 (1,151)
Smallware inventory 764 (764) 705 (705)
Non-compete and
severance agreement 399 (399) 361 (361)
Goodwill 379 (379) 94 (94)
Other 166 12 154 195 7 188
----------------------------------------------------------------------------
Total asset (liability) $3,670 $4,907 ($1,237) $3,619 $2,447 $1,172
============================================================================
As of March 28, 2004, the Company had available net operating loss
carryforwards as a result of a 1997 acquisition amounting to $752,000
for ordinary income tax purposes and is available to reduce future
taxable income. The net operating loss carryforwards are subject to
the change of control provisions of the Internal Revenue Code which
limit the usage of the net operating loss carryforwards to
approximately $1,100,000 per year.
The income tax provision consists of (in thousands):
March 28, March 30, March 31,
Fiscal year ended 2004 2003 2002
--------------------------------------------------------------------
Current:
Federal $1,876 $2,826 $2,069
State 680 1,245 1,009
Deferred:
Federal and State 2,409 791 1,010
------------------------------------------
Income tax provision $4,965 $4,862 $4,088
==========================================
The income tax provision differed from the amount computed at the
statutory rate as follows (in thousands):
March 28, March 30, March 31,
Fiscal year ended 2004 2003 2002
---------------------------------------------------------------------------------------------------------------
Federal income tax provision at statutory rate of 34% $5,057 $4,917 $4,421
State income taxes, net of federal benefit 899 822 663
Tax credits, net (1,026) (1,000) (893)
Other 35 123 (103)
----------------------------------------------------
Income tax provision $4,965 $4,862 $4,088
====================================================
Effective income tax rate 35.0% 33.9% 31.6%
====================================================
12. COMMITMENTS AND CONTINGENCIES
Acquisitions - In December 1999, the Company completed the
acquisition of 80% of the equity of Haru Holding Corp. ("Haru"). The
acquisition was accounted for using the purchase method of
accounting. Pursuant to the purchase agreement, at any time during
the period of July 1, 2005 through September 30, 2005, the holders of
the balance of Haru's equity (the "Minority Stockholders") shall have
a one-time option to sell their shares to the Company. Provided that
the Minority Stockholders do not exercise their right to sell their
shares, then the Company has a one-time option to purchase the shares
of the Minority Stockholders between the period of October 1, 2005
and December 31, 2005. The price for both the put and call options
will be determined based on a defined cash flow measure for the
acquired business.
In December 2002, the Company completed the acquisition of RA Sushi
restaurants. The acquisition was accounted for using the purchase
method of accounting. Pursuant to the purchase agreement, the Company
is required to pay the seller contingent payments based on certain
operating results of the acquired business for fiscal years ending
2004, 2005 and 2006. The contingent payments are based upon the
achievement of stipulated levels of operating earnings and revenues
by the acquired restaurants over a three-year period commencing with
the end of fiscal 2004 and are not contingent on the continued
employment of the sellers of the restaurants. The minimum contingent
payment levels were met in fiscal 2004 and a liability has been
recorded for $652,000, which amount is accounted for as an addition
to the purchase price. Contingent payments that will be incurred for
results for the fiscal years ending 2005 and 2006 are not
estimatable.
Litigation - The Company is not a party to any material litigation
matters other than routine claims which are incidental to its
business.
13. STOCKHOLDERS' EQUITY
Preferred Stock - The Company had a series A preferred stock which
was outstanding in fiscal 2002. The preferred stock had a liquidation
preference of $1,000 per share, carried a cumulative dividend of 6%
and entitled the holder a right to convert into shares of the
Company's Class A Common Stock. In fiscal 2002, the holder converted
all of the preferred stock to 105,267 shares of Class A Common Stock.
Common and Class A Common Stock - The Company's Common Stock is
convertible into Class A Common Stock on a one-for-one basis. The
Class A Common Stock is identical to the Common Stock except that it
gives the holder one-tenth (1/10) vote per share, voting together
with the Company's Common Stock as a single class on all matters
except the election of directors. For election of directors, the
Class A Common Stockholders vote as a class to elect 25% of the
members of the Board of Directors.
Stock Dividend - On June 7, 2002, the Board of Directors declared a
15% stock dividend in Class A stock on both the Class A shares and
Common shares. The stock dividend was paid on August 12, 2002 to
holders of record July 15, 2002.
Stock Options - The Company has various stock option plans: a 1996
Class A Stock Option Plan (1996 Plan), a 1997 Class A Stock Option
Plan (1997 Plan), a 2000 Class A Stock Option Plan (2000 Plan), a
Directors' Stock Option Plan (Directors' Plan), Directors' Class A
Stock Option Plan (Directors' Class A Plan) and a 2003 Directors'
Stock Option Plan (2003 Directors' Plan), under all of which a
maximum of 3,085,000 shares of the Company's Common Stock and Class A
Common Stock were authorized for grant and for all of which options
for 1,101,493 shares remain available for grant.
Options granted under the 1996, 1997 and 2000 Plans have a term of
ten years from date of issuance, and are exercisable ratably over a
three-year period commencing with the date of the grant. Options
granted under these plans require that the exercise price be at
market value on the date of the grant, or for optionees that own more
than 10% of the combined voting rights of the Company, at 110% of
market value for incentive stock options.
There are 17,500 shares of Common stock available for grant under the
Directors Plan. There are no shares available for grant under the
Directors Class A Plan. Under the 2003 Directors' Plan, options to
purchase 10,000 shares of Class A Common Stock are automatically
granted to each of the Company's non-employee directors on the date
of the Company's annual meeting. Options granted under the 2003
Directors' Plan are exercisable ratably as to one-third of the shares
on the date which is six months after the date of grant, one-third of
the shares on the first anniversary of the grant of such option and
as to the balance of such shares on the second anniversary of grant
of such option.
The following table summarizes information about fixed-price stock
options outstanding at March 28, 2004:
Options Outstanding Options Exercisable
------------------------------------------- -------------------------------
Weighted-
Average Weighted Weighted
Ranges of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Number Life Price Number Price
----------------------------------------------------------------------------------------------------------------------
$6.14 - $7.44 344,021 5.8 $7.07 344,021 $7.07
7.83 - 8.31 73,564 2.9 7.96 73,564 7.96
9.89 - 10.65 456,071 4.0 10.35 456,071 10.35
11.03 - 16.78 853,797 7.2 13.34 687,880 13.13
------------ ------------
1,727,453 1,561,536
============ ============
Transactions under the above plans for the years ended are as
follows:
March 28, March 30, March 31,
2004 2003 2002
---------------------------------------------------------------------------------------------------------
Balance, beginning of year 1,762,709 1,435,046 1,426,938
Issued from stock dividend 216,028
Granted 85,000 300,000 220,000
Canceled (28,813)
Expired (4,313) (500) (29,673)
Exercised (115,943) (187,865) (153,406)
------------------------------------------------------
Balance, end of year 1,727,453 1,762,709 1,435,046
======================================================
Weighted average fair value of
options granted during year $4.15 $5.47 $2.48
Stock Rights - The Company has a Shareholder Rights Plan under which
a Preferred Share Purchase Right (Right) is represented by
outstanding shares of the Company's Common and Class A Common Stock.
The Rights operate to create substantial dilution to a potential
acquirer who seeks to make an acquisition, the terms of which the
Company's Board of Directors believes is inadequate or structured in
a coercive manner.
The Rights become exercisable on the tenth day (or such later date as
the Board of Directors may determine) after public announcement that
a person or a group (subject to certain exceptions) has acquired 20%
or more of the outstanding Common Stock or an announcement of a
tender offer that would result in beneficial ownership by a person or
a group of 20% or more of the Common Stock.
14. INCENTIVE AND DEFERRED COMPENSATION PLANS
The Company has an incentive compensation plan whereby bonus awards
are made if the Company attains a certain targeted return on its
opening equity or at the discretion of the Compensation Committee.
The purpose of the plan is to improve the long-term sustainable
results of operations of the Company by more fully aligning the
interests of management and key employees with the shareholders of
the Company. One-third of the amounts awarded are immediately made
available to the employee and the remaining two-thirds become
available ratably over the succeeding two years. Amounts allocated
under the Plan may be taken in cash or deferred in a non-qualified
deferred compensation plan. The target rate, which was 15.0% for
2004, 15.0% for 2003 and 15.5% for 2002, is approved annually based
upon a review of the rates of return on equity of other publicly
traded restaurant businesses by the Compensation Committee of the
Board of Directors. The amount of the awards is capped at 50% of the
eligible salary of the employee. The Company recorded $125,000,
$350,000 and $300,000 of incentive compensation expense for fiscal
years 2004, 2003 and 2002, respectively.
The Company has an executive retirement plan whereby certain key
employees may elect to defer up to 20% of their salary and 100% of
their bonus until retirement or age 55, whichever is later, or due to
disability or death. Employees may select from various investment
options for their available account balances. Investment earnings are
credited to their accounts.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Fiscal quarter ended (in thousands except for per share information)
March 28, 2004 March 30, 2003
------------------------------------------------------------------------------------------------------------------------
Fourth Third Second First Fourth Third Second First
Revenues $50,654 $46,972 $44,235 $61,102 $46,305 $43,822 $41,958 $57,159
Gross profit 37,723 34,511 32,693 44,971 34,693 32,952 31,353 42,733
Net income 2,915 1,910 1,462 2,952 3,063 2,168 1,452 2,790
Basic earnings
per share $ .32 $ .21 $ .17 $ .34 $ .35 $ .25 $ .17 $ .32
Diluted earnings
per share $ .31 $ .21 $ .16 $ .33 $ .33 $ .24 $ .16 $ .30
16. SUBSEQUENT EVENTS
The Company has entered into an agreement to sell $20,000,000
aggregate principal amount of Convertible Preferred Stock
("Convertible Preferred Stock") to BFC Financial Corporation ("BFC")
in a private placement. BFC is a diversified holding company with
operations in banking, real estate and other industries. A director
of the Company is also Vice Chairman, a director and a significant
shareholder of BFC.
The Convertible Preferred Stock will be convertible into common
shares of the Company at a conversion price of $19.00 per share, will
carry a cash dividend of 5.0% and will vote on an "as if converted"
basis together with the Company's Common stock on all matters put to
a vote of the holders of Common Shares. In addition, under certain
circumstances, the approval of the holders of a majority of the
Convertible Preferred Stock will be required for certain events
outside the ordinary course of business.
The closing of the transaction, which is subject to the execution of
definitive documentation and customary closing conditions, is
expected to occur in the first quarter of fiscal 2005. The Company
expects to receive $10,000,000 of this financing at the closing, with
the balance to be provided from time to time during the two-year
period commencing on the first anniversary of the closing.
The holders of the Convertible Preferred Stock will be entitled to
nominate one director at all times and one additional director in the
event that dividends are not paid for two consecutive quarters.
The Convertible Preferred Stock will be subject to redemption at its
original issue price ten years from the date of closing and, at the
Company's option, may be redeemed for cash or common shares valued at
then-current market prices. In addition, the Convertible Preferred
Stock may be redeemed at any time beginning three years from the date
of issue if the price of the common shares is at least $38.00 for
sixty consecutive trading days.
The Company has been advised that on or about June 10, 2004, three of
the four trustees of the trust which owns Benihana of Tokyo, Inc.
("BOT"), a privately held company which owns 50.9% of the Company's
outstanding Common Stock, intend to cause BOT to adopt resolutions
declaring that this equity financing transaction is not in the best
interest of BOT and authorizing BOT to commence a lawsuit against the
Company and certain members of its Board of Directors with respect to
the financing. The Company believes that the financing complies with
all applicable legal and regulatory requirements and believes there
is no basis for the threatened suit. However, there can be no
assurance that such claim might not frustrate or delay the
consummation of such financing or result in a claim for damages.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Benihana Inc.:
We have audited the accompanying consolidated balance sheets of Benihana Inc.
and subsidiaries ("Benihana") as of March 28, 2004 and March 30, 2003, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended March 28, 2004. These
consolidated financial statements are the responsibility of Benihana'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 standards of the Public Company
Accounting Oversight Board (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, such consolidated financial statements present fairly, in all
material respects, the financial position of Benihana as of March 28, 2004 and
March 30, 2003, and the results of its operations and its cash flows for each of
the three years in the period ended March 28, 2004 in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
June 11, 2004
OFFICERS AND DIRECTORS
CORPORATE OFFICERS
Joel A. Schwartz - Chairman of the Board, President and Chief Executive Officer
Taka Yoshimoto - Executive Vice President, Operations
Michael R. Burris - Senior Vice President, Chief Financial Officer and Treasurer
Darwin C. Dornbush - Secretary
Kevin Aoki - Vice President, Marketing
Juan C. Garcia - Vice President-Controller
DIRECTORS
Kevin Aoki
Joel A. Schwartz
Taka Yoshimoto
John E. Abdo - Vice Chairman of the Board of Directors and Chairman of the
Executive Committe, BankAtlantic, FSB and BankAtlantic Bancorp., Inc.
Norman Becker - Independent Consultant, Certified Public Accountant
Darwin C. Dornbush - Partner, Dornbush Mensch Mandelstam & Schaeffer, LLP
Max Pine - Independent Consultant
Yoshihiro Sano - Independent Consultant
Robert B. Sturges - Independent Consultant
CORPORATE INFORMATION
COMMON STOCK
NASDAQ Symbols
Common Stock BNHN
Class A Common Stock BNHNA
GENERAL COUNSEL
Dornbush Mensch Mandelstam & Schaeffer, LLP
747 Third Avenue
New York, New York 10017
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
200 South Biscayne Boulevard
Miami, Florida 33131
10-K REPORT AVAILABILITY
A copy of the Benihana Inc. Form 10-K, filed with the U.S. Securities and
Exchange Commission, is available on our corporate website at www.Benihana.com
or can be obtained by writing us at:
8685 N.W. 53rd Terrace
Miami, Florida 33166
TRANSFER AGENT AND REGISTRAR
Wachovia Bank, N.A.
Shareholder Services Group
230 South Tryon Street
Charlotte, North Carolina 28288-1154
CORPORATE HEADQUARTERS
8685 Northwest 53rd Terrace
Miami, Florida 33166
(305) 593-0770
COMMON STOCK INFORMATION
The Company's Common Stock and Class A Common Stock are traded on the Nasdaq
National Market System. There were 206 holders of record of the Company's Common
Stock and 477 holders of record of the Class A Common Stock at March 28, 2004.
The table below sets forth high and low bid prices for the Company's Common
Stock and Class A Common Stock, which do not include commissions and mark-ups or
mark-downs for the periods indicated. Such bid prices reflect inter-dealer
prices without retail mark-ups, markdowns or commissions and may not necessarily
represent actual transactions.
Fiscal year ended
-----------------
March 28, 2004 March 30, 2003
----------------------------------------------------------------------------
COMMON STOCK (1) High Low High Low
--------------------------------------------------------------------------------------------------------------
1st Quarter 13.85 9.00 20.32 13.91
2nd Quarter 13.11 10.45 16.42 10.26
3rd Quarter 14.52 11.30 15.04 11.31
4th Quarter 17.08 12.80 13.31 9.36
Fiscal year ended
-----------------
CLASS A March 28, 2004 March 30, 2003
----------------------------------------------------------------------------
COMMON STOCK (1) High Low High Low
--------------------------------------------------------------------------------------------------------------
1st Quarter 13.84 8.95 19.77 13.76
2nd Quarter 13.25 10.67 16.25 10.30
3rd Quarter 14.21 10.95 14.98 11.59
4th Quarter 17.20 12.40 13.49 9.34
The Class A Common Stock is identical to the Common Stock except that it gives
the holder one-tenth (1/10) vote per share, voting together with the Company's
Common Stock as a single class on all matters except the election of directors.
For election of directors, the Class A Common stockholders vote as a class to
elect 25% of the members of the Board of Directors.
The Company has not declared or paid a cash dividend on common equity since its
organization and has no present intention of paying any such dividend in the
foreseeable future. The Company intends to retain all available cash for the
operation and expansion of its business. In addition, the Company's present loan
agreement restricts the payment of cash dividends on common stock.
On June 7, 2002, the Board of Directors declared a 15% stock dividend in Class A
stock on both the Class A shares and common shares. The stock dividend was paid
on August 12, 2002 to holders of record July 15, 2002.
(1) The high and low prices have been adjusted to reflect the aforementioned
stock dividend for all periods presented prior to the second quarter of
fiscal 2003.
Exhibit 23.01
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSENT
We consent to the incorporation by reference in Registration Statement No.'s
333-33880, 333-63783 and 333-13973 of Benihana Inc. on Forms S-8 of our report
dated June 11, 2004, incorporated by reference in the Annual Report on Form 10-K
of Benihana Inc. for the year ended March 28, 2004.
Deloitte & Touche LLP
Miami, Florida
June 11, 2004
Exhibit 23.02
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM CONSENT
We consent to the incorporation by reference in Registration Statement No.'s
333-83585 and 333-13977 of Benihana Inc. on Forms S-3 of our report dated June
11, 2004, incorporated by reference in the Annual Report on Form 10-K of
Benihana Inc. for the year ended March 28, 2004 and to the reference to us under
the heading "Experts" in such Registration Statements.
Deloitte & Touche LLP
Miami, Florida
June 11, 2004
Exhibit 31.1
CERTIFICATION
I, Joel A. Schwartz, certify that:
1. I have reviewed this Annual Report on Form 10-K of Benihana Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/ Joel A. Schwartz
- -----------------------------
Joel A. Schwartz
President and
Chief Executive Officer
June 11, 2004
Exhibit 31.2
CERTIFICATION
I, Michael R. Burris, certify that:
1. I have reviewed this Annual Report on Form 10-K of Benihana Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal control over financial reporting.
/s/ Michael R. Burris
- ------------------------------
Michael R. Burris
Chief Financial Officer
June 11, 2004
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Benihana Inc. (the "Company") on
Form 10-K for the period ended March 28, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Joel A. Schwartz,
President and Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Joel A. Schwartz
- ---------------------------
Joel A. Schwartz
President and
Chief Executive Officer
June 11, 2004
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Benihana Inc. (the "Company") on
Form 10-K for the period ended March 28, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Michael R. Burris,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Michael R. Burris
- -------------------------------
Michael R. Burris
Chief Financial Officer
June 11, 2004