EXHIBIT B-1
FORM OF COMMON WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE
WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND THE REGISTRATION OR
QUALIFICATION REQUIREMENTS OF SUCH STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION.
WARRANT NO. LL-1 ____________, 2000
THE QUIZNO'S CORPORATION
WARRANT TO PURCHASE ___ SHARES OF COMMON STOCK
FOR VALUE RECEIVED, THE QUIZNO'S CORPORATION, a Colorado corporation
(the "Company"), hereby certifies that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Capital Partners II,
L.P., a California limited partnership, or its assigns (the "Holder"), is
entitled to purchase, on the terms and subject to the conditions contained
herein, ___________ shares (the "Warrant Shares") of the Company's common stock,
$.01 par value per share ("Common Stock"), at the exercise price of $.01 per
Warrant Share (the "Warrant Purchase Price") at any time and from time to time
during the Exercise Period (as such term is defined below), which, together with
the Warrant Shares purchasable under all of the Warrants exercisable for Common
Stock, represent 14.0% of the Common Stock of the Company on a Fully Diluted
Basis as of the date of issuance of this Warrant (not including Preferred Stock
unless the Preferred Stock is converted into Common Stock). To the extent that
Preferred Stock is converted into Common Stock, the number of Warrant Shares
shall be increased to represent 14.0% of such Common Stock on a Fully Diluted
Basis, as adjusted pursuant to the terms hereof. The number of Warrant Shares
and the Warrant Purchase Price are subject to adjustment as provided in Section
4. This Warrant is being issued in connection with the consummation of the
transactions contemplated by the Securities Purchase Agreement dated of even
date herewith among the Company, the initial Holder, The Quizno's Licensing
Company, The Quizno's Acquisition Company, The Quizno's Realty Company, The
Quizno's Operating Company, Quiz-DIA, Inc., S&S Company, Quizno's Kansas, LLC,
Ciao B Management, Inc., American Food Distributors, Inc. and The Quizno's
Franchise Company (as it
may be amended, supplemented or otherwise modified and in effect from time to
time, the "Securities Purchase Agreement").
This Warrant is subject to the following terms and conditions:
1. DEFINITIONS. Unless otherwise indicated in this Warrant, capitalized
terms used and not otherwise defined in this Warrant have the meanings set forth
in the Securities Purchase Agreement. In addition, the following capitalized
terms have the following meanings:
"Common Stock" has the meaning set forth in the preamble.
"Company" has the meaning set forth in the preamble.
"Convertible Securities" means, when used in this Agreement,
any securities or other obligations issued or issuable by the Company
or any other Person that are exercisable or exchangeable for, or
convertible into, any Capital Stock of the Company.
"Current Market Price" per share of Common Stock means, as of
any specified date on which the Common Stock is publicly traded, the
average of the daily market prices of the Common Stock over the twenty
(20) consecutive trading days immediately preceding (and not including)
such date. The 'daily market price' for each such trading day shall be
(i) the closing sales price on such day on the principal securities
exchange on which the Common Stock is then listed or admitted to
trading or on Nasdaq, as applicable, (ii) if no sale takes place on
such day on any such securities exchange or system, the average of the
closing bid and asked prices, regular way, on such day for the Common
Stock as officially quoted on any such securities exchange or system,
(iii) if the Common Stock is not then listed or admitted to trading on
any securities exchange or system, the last reported sale price,
regular way, on such day for the Common Stock, or if no sale takes
place on such day, the average of the closing bid and asked prices for
the Common Stock on such day, as reported by Nasdaq or the National
Quotation Bureau, and (iv) if the Common Stock is not then listed or
admitted to trading on any securities exchange and if no such reported
sale price or bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a
reputable quotation service, or a newspaper of general circulation in
the City of Denver, State of Colorado, customarily published on each
Business Day. If the daily market price cannot be determined for the
twenty (20) consecutive trading days immediately preceding such date in
the manner specified in the foregoing sentence, then the Common Stock
shall not be deemed to be publicly traded as of such date. For purposes
of Section 3 and Section 4, the Common Stock shall not be deemed to be
publicly traded unless it is listed or admitted for trading on the New
York Stock Exchange, the American Stock Exchange or Nasdaq.
2
"Designated Office" has the meaning set forth in Section 2.1.
"DOJ" has the meaning set forth in Section 2.3.
"Effective Date" means the issue date of this Warrant.
"Excluded Shares" means, collectively, (i) shares of Common
Stock or Option Rights issued in any of the transactions described in
Sections 4.1, 4.2, 4.4 or 4.5, (ii) shares of Common Stock issued after
the date hereof upon exercise, exchange or conversion of (A) Option
Rights outstanding on the date hereof or (B) Option Rights issued after
the date hereof for which an adjustment was made pursuant to Section
4.3 or for which no adjustment is required under Section 4.3, (iii) the
issuance of this Warrant or any Warrant Shares, (iv) shares of Capital
Stock issued to employees of the Company as part the Stock Appreciation
Rights Plan and (v) shares of Common Stock issued pursuant to a bona
fide public offering pursuant to an effective registration statement
declared effective by the Commission under the Securities Act.
"Exercise Notice" has the meaning set forth in Section 2.1.
"Exercise Period" means the period commencing nine (9) months
from the Effective Date and ending on (and including) the Expiration
Date, unless there is a Change of Control OR THE NOTE HAS BEEN
INDEFEASIBLY PAID IN FULL OR OTHERWISE SATISFIED IN FULL prior to such
nine (9) month period, in which case this Warrant shall be immediately
exercisable.
"Expiration Date" means ___________, 2010 or the date on which
this Warrant has been exercised in whole (whichever is earlier).
"Fair Market Value" per share of Common Stock means, as of any
specified date:
(i) if the Common Stock is publicly traded on such
date, the Current Market Price per share; or
(ii) if the Common Stock is not publicly traded (or
deemed not to be publicly traded) on such date, the fair
market value per share of Common Stock as determined by an
independent valuation of the Company, its Subsidiaries and
their respective businesses conducted by an investment banking
firm of recognized national standing selected by the mutual
written agreement of the Company and the Holder; provided,
however, that if the Company and the Holder are unable to
mutually agree on any such investment banking firm within ten
(10) days after the date upon which the right or obligation to
select an investment
3
banking firm arises, each of the Holder and the Company
shall, within three (3) Business Days thereafter, select one
investment banking firm, and the two (2) selected firms
shall, within three (3) Business Days of their selection,
select a third investment banking firm which shall make the
relevant determination (which determination shall be final
and binding) within ten (10) Business Days of the submission
of this matter to such third firm; and provided further,
however, that, in determining the fair market value per
share of Common Stock, such investment banking firm shall
not give effect or take into account any "minority discount"
but shall value the Company in its entirety on an enterprise
basis using any variety of industry recognized valuation
techniques commonly used to value businesses.
Notwithstanding the foregoing, the Fair Market Value
per share of Common Stock shall be increased by an amount
equal to the sum of: (A) the largest outstanding balance owed
at any time to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ pursuant to the terms of the
Subordinated Indebtedness (or the original aggregate
liquidation preference, if preferred stock is issued) plus (B)
the aggregate amount of all interest paid or accrued on the
Subordinated Indebtedness from the date of issuance of this
Warrant through and including the date of the determination of
Fair Market Value (or the aggregate amount of all dividends
paid or accrued, if preferred stock is issued), which interest
payments and accrued amounts shall be compounded annually at a
rate of five percent (5.0%) (or ten percent (10.0%), if
preferred stock is issued), which aggregate sum shall then be
divided by the number of shares of Common Stock outstanding on
a Fully Divided Basis, and the resulting number shall be added
to the per share Fair Market Value. The intent of this
provision is to provide Purchaser with 14% of the sum of (A)
plus (B) above in the aggregate, after the adjustments
provided for in Section 4.4(c) and subject to Section 4.
"FTC" has the meaning set forth in Section 2.3.
"Holder" has the meaning set forth in the preamble.
"HSR Act" has the meaning set forth in Section 2.3.
"Notice of Redemption" has the meaning set forth in Section
3.1.
"Option Rights" means, when used in this Warrant, any
warrants, options or other rights to subscribe for or purchase, or
obligations to issue, any Capital Stock of the Company, or any
Convertible Securities, including, without limitation, any options or
similar rights issued or issuable under any employee stock option plan,
pension plan or
4
other employee benefit plan of the Company of the Company in existence
on the date of the issuance of this Warrant.
"Other Property" has the meaning set forth in Section 4.5.
"Put Option" has the meaning set forth in Section 3.1.
"Put Option Price" has the meaning set forth in Section 3.1.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder, all as
the same shall be in effect at the time.
"Securities Purchase Agreement" has the meaning set forth in
the preamble of this Warrant.
"Warrant Purchase Price" has the meaning set forth in the
preamble of this Warrant (as adjusted in accordance with the terms of
this Warrant).
"Warrant" means this Warrant, any amendment or other
modification of this Warrant, and any warrants issued upon transfer,
division or combination of, or in substitution for, this Warrant or any
other such warrant. All such warrants shall at all times be identical
as to terms and conditions and date, except as to the number of Warrant
Shares for which they may be exercised.
"Warrant Shares" has the meaning set forth in the preamble.
2. EXERCISE.
2.1 Exercise; Delivery of Certificates. Subject to the
provisions of Section 2.3, this Warrant may be exercised at the option of the
Holder, in whole or in part, at any time and from time to time during the
Exercise Period, by (a) delivering to the Company at its principal executive
office (the "Designated Office") (i) a notice of exercise, in substantially the
form attached hereto (the "Exercise Notice"), duly completed and signed by the
Holder, and (ii) this Warrant, and (b) paying the Warrant Purchase Price
pursuant to Section 2.2 for the number of Warrant Shares being purchased. The
Warrant Shares being purchased under this Warrant will be deemed to have been
issued to the Holder, as the record owner of such Warrant Shares, as of the
close of business on the date on which payment therefor is made by the Holder
pursuant to Section 2.2. Stock certificates representing the Warrant Shares so
purchased shall be delivered to the Holder within three (3) Business Days after
this Warrant has been exercised (or, if applicable, after the conditions set
forth in Section 2.3 have been satisfied); provided, however, that in the
5
case of a purchase of less than all of the Warrant Shares issuable upon exercise
of this Warrant, the Company shall cancel this Warrant and, within three (3)
Business Days after this Warrant has been surrendered, execute and deliver to
the Holder a new Warrant of like tenor representing the number of unexercised
Warrant Shares. Each stock certificate representing the number of Warrant Shares
purchased or purchasable under this Warrant shall be registered in the name of
the Holder or, subject to compliance with Applicable Law, such other name as
shall be designated by the Holder.
2.2 Payment of Warrant Purchase Price. Payment of the Warrant
Purchase Price may be made, at the option of the Holder, by (i) check from
Holder, (ii) wire transfer, (iii) instructing the Company to withhold and cancel
a number of Warrant Shares then issuable upon exercise of this Warrant with
respect to which the excess of the Fair Market Value over the Warrant Purchase
Price for such canceled Warrant Shares is at least equal to the Warrant Purchase
Price for the shares being purchased, (iv) surrender to the Company of shares of
Common Stock previously acquired by the Holder with a Fair Market Value equal to
the Warrant Purchase Price for the shares then being purchased or (v) any
combination of the foregoing. No fractional shares shall be issued upon exercise
of this Warrant, and the number of shares of Common Stock to be issued shall be
rounded up to the nearest whole share.
2.3 Antitrust Notification. If the Holder determines, in its
sole judgment upon the advice of counsel, that an exercise of this Warrant
pursuant to the terms hereof would be subject to the provisions of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Company shall, within seven (7) Business Days after receiving notice
from the Holder of the applicability of the HSR Act, file with the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
(the "DOJ") the notification and report form and any supplemental information
required to be filed by it pursuant to the HSR Act in connection with the
exercise of this Warrant. Any such notification and report form and supplemental
information will be in full compliance with the requirements of the HSR Act. The
Company will furnish to the Holder promptly (but in no event more than two (2)
Business Days) such information and assistance as the Holder may reasonably
request in connection with the preparation of any filing or submission required
to be filed by the Holder under the HSR Act. The Company shall respond promptly
after receiving any inquiries or requests for additional information from the
FTC or the DOJ (and in no event more than three (3) Business Days after receipt
of such inquiry or request). The Company shall keep the Holder apprised
periodically and at the Holder's request of the status of any communications
with, and any inquiries or requests for additional information from, the FTC or
the DOJ. The Company shall bear all filing or other fees required to be paid by
the Company and the Holder (or the "ultimate parent entity" of the Holder, if
any) under the HSR Act or any other Applicable Law in connection with such
filings and all costs and expenses (including, without limitation, attorneys'
fees and expenses) incurred by the Company and the Holder in connection with the
preparation of such filings and responses to inquiries or requests. In the event
that this Section 2.3 is
6
applicable to any exercise of this Warrant, the purchase by the Holder of the
Warrant Shares subject to the Exercise Notice, and the payment by the Holder of
the Warrant Purchase Price, shall be subject to the expiration or earlier
termination of the waiting period under the HSR Act.
3. PUT OPTION.
3.1 Put Option. Upon the earlier to occur of (a) the Maturity
Date of the Note or (b) the repayment in full of all principal of, premium, if
any, accrued and unpaid interest on and other amounts owing under the Note, the
Holder shall have the right (the "Put Option"), exercisable at its sole option,
to require the Company to purchase the Warrant Shares at the Fair Market Value
thereof (the "Put Option Price"); provided, however, that any exercise of the
Put Option must be for at least twenty-five (25%) of the then-outstanding
Warrant Shares (as such number may be adjusted from time to time pursuant to
this Warrant). If the Holder wishes to exercise the Put Option, it shall furnish
to the Company a written notice notifying the Company of its election to
exercise the Put Option and specifying a Business Day within thirty (30) days of
the date of delivery of such notice as the date of purchase. Upon the receipt by
the Company of such written notice, the Company shall be obligated to purchase
from the Holder, on such specified date of purchase, such Warrant Shares at the
Put Option Price, regardless of whether this Warrant is exercised at such time;
provided, however, that if this Warrant has not been fully exercised prior to
receipt by the Company of such written notice, then the Put Option Price shall
be reduced by the Warrant Purchase Price, but only to the extent that this
Warrant has not been exercised. Notwithstanding the foregoing, if the Company
repays in full all principal of, premium, if any, accrued and unpaid interest on
and other amounts owing under the Note on or before the date that is three (3)
years from the issue original date of this Warrant, the Holder shall not
exercise the Put Option until the date that is no earlier than the day after the
date that is three (3) years from the issue date of this Warrant. The Company
shall bear all costs and expenses incurred in connection with the determination
of the Fair Market Value for purposes of the Put Option Price, including,
without limitation, all fees and expenses of any investment banking firm,
valuation or accounting firm(s) engaged in connection with such determination
and any legal fees and expenses incurred by the Holder in connection with such
determination. In connection with the exercise of the Put Option, the Per Share
Schaden Purchase Amount (as defined in Section 3.3) will be paid in connection
0with the determination of Fair Market Value, pursuant to the last paragraph of
the definition of Fair Market Value, and will not be paid pursuant to Section
3.3.
3.2 No Representations. In no event shall the Holder be
obligated to make any representations or warranties as to this Warrant or the
Warrant Shares with respect to the transactions contemplated by this Section 3
or this Warrant other than with respect to the Holder's organization, good
standing and authority, investment intent, title to this Warrant, no consents
and no conflicts with organizational documents and material agreements.
7
3.3 Sale of Warrant Shares. Upon any sale (whether by stock
sale, merger, consolidation or otherwise) of this Warrant or Warrant Shares by
the Holder, the Company shall pay in cash, within three (3) Business Days of
receipt of a notice of sale from the Holder, an amount per Warrant Share
underlying this Warrant or per Warrant Share equal to the Per Share Schaden
Purchase Amount (as defined below); provided that such transferee of this
Warrant or Warrant Shares shall not have any right to receive any Per Share
Schaden Purchase Amount, INCLUDING PURSUANT TO THE LAST PARAGRAPH OF THE
DEFINITION OF FAIR MARKET VALUE. In the event of the sale of all or
substantially all of the assets of the Company, the Company shall pay the Per
Share Schaden Purchase Amount as to each Warrant Share underlying this Warrant
or as to each Warrant Share. Any disputes regarding the Per Share Schaden
Purchase Amount shall be resolved by the Holder and the Company in good faith.
For purposes of this Section 3.3, the "Per Share Schaden Purchase Amount" is an
amount equal to the sum of: (A) the largest outstanding balance owed at any time
to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ pursuant to the terms of the Subordinated Indebtedness
(or the original aggregate liquidation preference, if preferred stock is
issued) plus (B) the aggregate amount of all interest paid or accrued on the
Subordinated Indebtedness (or the aggregate amount of all dividends paid or
accrued, if preferred stock is issued), from the date of issuance of this
Warrant through and including the date of the determination of Fair Market
Value, which interest payments and accrued amounts shall be compounded annually
at a rate of five percent (5.0%) (or ten percent (10%) if preferred stock is
issued), which sum shall then be divided by the sum of number of shares of
Common Stock outstanding on a Fully Diluted Basis. The intent of this
provision is to provide Purchaser with 14% of the sum of (A) plus (B) above in
the aggregate, after the adjustments provided for in Section 4.
4. ADJUSTMENTS TO THE NUMBER OF WARRANT SHARES AND TO THE WARRANT
PURCHASE PRICE. The number of Warrant Shares for which this Warrant is
exercisable and the Warrant Purchase Price shall be subject to adjustment from
time to time as set forth in this Section 4.
4.1 Stock Dividends, Subdivisions and Combinations. If at any
time the Company:
(a) pays a dividend or other distribution on its
Common Stock in shares of Common Stock or shares of any other class or series of
Capital Stock,
(b) subdivides its outstanding shares of Common Stock
into a larger number of shares of Common Stock, or
(c) combines its outstanding shares of Common Stock
into a smaller number of shares of Common Stock,
then the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior to the record date for such dividend or distribution or the
effective date of such subdivision or combination shall be adjusted so that the
Holder shall thereafter be entitled to receive upon
8
exercise of this Warrant the kind and number of shares of Common Stock that the
Holder would have owned or have been entitled to receive immediately after such
record date or effective date had this Warrant been exercised immediately prior
to such record date or effective date. Any adjustment made pursuant to this
Section 4.1 shall become effective immediately after the effective date of such
event, but be retroactive to the record date, if any, for such event.
Upon any adjustment of the number of Warrant Shares
purchasable upon the exercise of this Warrant as herein provided, the Warrant
Purchase Price per share shall be adjusted by multiplying the Warrant Purchase
Price immediately prior to such adjustment by a fraction, the numerator of which
shall be the number of Warrant Shares purchasable upon the exercise of this
Warrant immediately prior to such adjustment and the denominator of which shall
be the number of Warrant Shares so purchasable immediately thereafter.
4.2 Issuance of Option Rights; Distribution of Assets or
Securities.
(a) If at any time the Company issues (without payment of
any consideration) to all holders of outstanding Common Stock any Option Rights,
then the Company shall also distribute such Option Rights to the Holder as if
this Warrant had been exercised immediately prior to the record date for such
issuance. Any reduction by the Company in the exercise price of any existing
Option Rights shall be treated as a new issuance of Option Rights and the
provisions of this Section 4.2(a) shall apply.
(b) If at any time the Company makes a distribution (a
"Distribution") to its stockholders (other than in connection with the
liquidation, dissolution or winding up of the Company) of any asset (including
cash) or security (the total of the assets or securities so distributed, the
"Distribution Amount") other than those referred to in Section 4.1 or Section
4.3 or Section 4.4, then, at the Holder's option (provided that if the
Distribution is in cash, the adjustment described in Section 4.2(b)(ii) below
shall not apply):
(i) the Holder shall have the right to receive the
portion of the Distribution Amount which a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
Distribution would have owned or received immediately after and as a result of
such Distribution. Upon the closing of the Distribution, the Company shall
distribute such portion of the Distribution Amount to the Holder; or
(ii) the Warrant Purchase Price shall be adjusted and
shall be equal to the Warrant Purchase Price in effect immediately prior to the
close of business on the date fixed for the determination of stockholders
entitled to receive such distribution, multiplied by a fraction (which shall not
be less than zero), the numerator of which shall be the Fair Market Value per
share of Common Stock on the date fixed for such determination, less the
then-fair market value of the portion of the assets, or the fair market value of
the portion of the securities,
9
as the case may be, so distributed applicable to one share of Common Stock, and
the denominator of which shall be the Fair Market Value per share of Common
Stock. Such adjustment to the Warrant Purchase Price shall become effective
immediately prior to the opening of business on the day immediately following
the date fixed for the determination of stockholders entitled to receive such
distribution. Upon any adjustment to the Warrant Purchase Price as provided for
in this Section 4.2(b)(ii), the number of shares of Common Stock issuable upon
the exercise of this Warrant shall also be adjusted and shall be equal to the
number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such adjustment multiplied by a fraction, the numerator of which is the
Warrant Purchase Price in effect immediately prior to such adjustment and the
denominator of which is the Warrant Purchase Price as so adjusted.
4.3 Issuance of Equity Securities Under Certain Circumstances.
(a) If, at any time after the date hereof, the Company
shall issue or sell (or, in accordance with Section 4.3(b), shall be deemed
to have issued or sold) any shares of Common Stock (other than Excluded
Securities) without consideration or for a consideration per share that is less
than the Fair Market Value per share of Common Stock as determined as of the
date of such issuance or sale, then, effective immediately upon such issuance or
sale, the Warrant Purchase Price shall be reduced (calculated to the nearest
$.001 and without regard to any other provisions of this Section 4) to an amount
equal to the product obtained by multiplying (i) the Warrant Purchase Price in
effect immediately prior to such issuance or sale, by (ii) a fraction, the
numerator of which shall be the sum of (A) the product obtained by multiplying
(1) the number of shares of Common Stock outstanding (on a Fully Diluted Basis)
immediately prior to such issuance or sale by (2) the Fair Market Value per
share of Common Stock as of the date of such issuance or sale, plus (B) the cash
consideration, if any, received by the Company upon such issuance or sale, and
the denominator of which shall be the product obtained by multiplying (C) the
number of shares of Common Stock outstanding (on a Fully Diluted Basis)
immediately after such sale or issuance, by (D) the Fair Market Value per share
of Common Stock as of the date of such issuance or sale. Upon each such
adjustment of the Warrant Purchase Price hereunder, the number of Warrant Shares
which may be obtained upon exercise of this Warrant shall be increased to the
number of shares determined by multiplying (x) the number of Warrant Shares
which could be obtained upon exercise of such Warrant immediately prior to such
adjustment by (y) a fraction, the numerator of which shall be the Warrant
Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Warrant Purchase Price in effect immediately
after such adjustment. Adjustments shall be made successively whenever such an
issuance or sale is made.
(b) For the purpose of determining the adjusted Warrant
Purchase Price under Section 4.3(a), the following shall be applicable:
10
(i) Issuance of Option Rights. If the
Company in any manner issues or grants any Option Rights or Convertible
Securities and the price per share for which Common Stock is issuable
upon the exercise of such Option Rights or upon conversion or exchange
of such Convertible Securities is less than the Fair Market Value per
share of Common Stock determined as of the date of such issuance or
grant of such Option Rights, then the total maximum number of shares of
Common Stock issuable upon the exercise of such Option Rights (or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Option Rights) shall be
deemed to be outstanding and to have been issued and sold by the
Company for such lower price per share. For purposes of this paragraph,
the price per share for which Common Stock is issuable upon exercise of
Option Rights or upon conversion or exchange of Convertible Securities
issuable upon exercise of Option Rights shall be determined by dividing
(A) the total amount, if any, received or receivable by the Company as
consideration for the issuing or granting of such Option Rights, plus
the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Option Rights, plus in the case
of such Option Rights which relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable
to the Company upon the issuance or sale of such Convertible Securities
and the conversion or exchange thereof, by (B) the total maximum number
of shares of Common Stock issuable upon exercise of such Option Rights
or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options.
(ii) Issuance of Convertible Securities. If
the Company in any manner issues or grants any Convertible Securities
having an exercise or conversion or exchange price per share of Common
Stock which is less than the Fair Market Value per share of Common
Stock determined as of the date of issuance or sale, then the maximum
number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company for such
lower price per share. For purposes of this paragraph, the price per
share for which Common Stock is issuable upon conversion or exchange of
Convertible Securities is determined by dividing (A) the total amount
received by the Company as consideration for the issuance or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities.
(iii) Change in Equity Price or Conversion
Rate. If the purchase price provided for in any Option Rights, the
additional consideration, if any, payable upon the issuance, conversion
or exchange of any Convertible Securities or the rate at which any
Convertible Securities are convertible into or exchangeable for Common
Stock
11
decreases at any time, then the Warrant Purchase Price in effect at the
time of such decrease shall be readjusted to the Warrant Purchase Price
which would have been in effect at such time had such Option Rights or
Convertible Securities still outstanding provided for such decreased
purchase price, additional consideration or changed conversion rate, as
the case may be, at the time initially granted, issued or sold and the
number of Warrant Shares shall be correspondingly readjusted, by taking
the number of shares of Common Stock issuable upon the exercise of this
Warrant immediately prior to such adjustment multiplied by a fraction,
the numerator of which is the Warrant Purchase Price in effect
immediately prior to such adjustment and the denominator of which is
the Warrant Purchase Price as so adjusted.
(iv) Calculation of Consideration Received.
If any Common Stock, Option Rights or Convertible Securities are issued
or sold or deemed to have been issued or sold for cash, then the
consideration received therefor shall be deemed to be the net amount
received by the Company therefor. If any Common Stock, Option Rights or
Convertible Securities are issued or sold for consideration other than
cash, then the amount of consideration received by the Company shall be
the fair value of such consideration determined in good faith by the
Board of Directors of the Company, subject to the Holder's rights under
Section 4.7(e).
(v) Intentionally omitted.
(vi) Record Date. If the Company takes a
record of the holders of Common Stock for the purpose of entitling them
(A) to receive a dividend or other distribution payable in Common
Stock, Option Rights or Convertible Securities or (B) to subscribe for
or purchase Common Stock, Option Rights or Convertible Securities, then
such record date shall be deemed to be the date of the issuance or sale
of the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such distribution or
the date of the granting or such right of subscription or purchase, as
the case may be.
(c) No adjustment shall be made pursuant to this
Section 4.3 with respect to the issuance of Excluded Shares.
4.4 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets.
(a) If at any time prior to the Expiration Date, the
Company reorganizes its capital, reclassifies its capital stock, consolidates,
merges or combines with or into another Person (where the Company is not the
surviving corporation or where there is any change whatsoever in, or
distribution with respect to, the outstanding Common Stock), or the Company
12
sells, transfers or otherwise disposes of all or substantially all of its
property, assets or business to another Person, other than in a transaction
provided for in Sections 4.1, 4.2, 4.3, 4.5 or 4.6, or other than the Tender
Offer Merger, and, pursuant to the terms of such reorganization,
reclassification, consolidation, merger, combination, sale, transfer or other
disposition of assets, (i) shares of common stock of the successor or acquiring
Person or of the Company (if it is the surviving corporation) or (ii) any cash,
shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring Person or the Company
("Other Property") are to be received by or distributed to the holders of Common
Stock who are holders immediately prior to such transaction, then the Holder
shall have the right thereafter to receive, upon exercise of this Warrant, the
number of shares of Common Stock, common stock of the successor or acquiring
Person, and/or Other Property which holder of the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such event
would have owned or received immediately after and as a result of such event. In
such event, the aggregate Warrant Purchase Price otherwise payable for the
Warrant Shares issuable upon exercise of this Warrant shall be allocated among
such securities and Other Property in proportion to the respective fair market
values of such securities and Other Property as determined in good faith by the
Board of Directors of the Company, subject to the Holder's rights under Section
4.7(e). If, in connection with the Tender Offer Merger, the Company creates a
new entity ("Newco") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ exchange the
Capital Stock held by them for equity securities of Newco, the Company shall not
participate in the formation of Newco without the express written consent of
LLCP in its sole discretion unless (i) this Warrant is exchanged for a like
warrant of Newco and the capital structure of Newco is identical to the capital
structure of the Company with respect to Capital Stock held by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and LLCP has the right to exchange this Warrant
and any shares of Common Stock or Preferred Stock it holds on the same basis as
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, (ii) the exchange of this Warrant for
a like warrant of Newco is tax-free to the Holder, as determined by LLCP in its
discretion, (iii) a new warrant for common stock of Newco is issued to the
Holder that is identical to this Warrant and such warrant shall preserve the
rights and privileges of this Warrant and (iv) after such exchange, the number
of equity securities owned by the Holder in relationship to the number of equity
securities owned by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ is not diminished
in any way.
(b) In case of any such event, the successor or
acquiring Person (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and liabilities hereunder, subject to such modifications as the Holder may
approve in writing (and memorialized by resolutions of the Board of Directors of
the Company) in order to provide for adjustments of any shares of common stock
of such successor or acquiring Person for which this Warrant thus becomes
exercisable, which modifications shall be as equivalent as practicable to the
adjustments provided for in this
13
Section 4.4. For purposes of this Section 4, "common stock of the successor or
acquiring Person" shall include stock or other equity securities, or securities
that are exercisable or exchangeable for or convertible into equity securities,
of such corporation, or other securities if such Person is not a corporation, of
any class that is not preferred as to dividends or assets over any other class
of stock of such corporation or Person and that is not subject to redemption and
shall also include any evidences of indebtedness, shares of stock or other
securities that are convertible into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.4 shall similarly
apply to successive reorganizations, reclassifications, consolidations, mergers,
sales, transfers and other dispositions of assets.
(c) If the number of shares of Common Stock held by
shareholders of the Company other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
is reduced within nine (9) months of the date hereof due to (i) the consummation
of the Tender Offer or the Tender Offer Merger; (ii) purchases by the Company of
its Common Stock pursuant to Rule 10b-18 of the Exchange Act other than from
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; (iii) private purchases by the Company
of its Common Stock from shareholders other than ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇; or (iv) whether before or after nine (9) months from the date
hereof, purchases of Common Stock by the Company from ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in
compliance with the terms of the Subordinated Indebtedness set forth in Sections
10.1 and 10.4 of the Securities Purchase Agreement, and such reduced shares are
retired or otherwise no longer outstanding after such merger or repurchase, the
number of Warrant Shares purchasable upon exercise of this Warrant and the other
Warrants exercisable for Common Stock shall be reduced so that the number of
Warrant Shares represent 14.0% of the Common Stock of the Company on a Fully
Diluted Basis (not including Preferred Stock outstanding after such event unless
such Preferred Stock has been converted into Common Stock), after giving effect
to the events described in this Section 4.4(c), which will be reflected on an
addendum to this Warrant that the Company will provide as provided in the next
sentence. Each month beginning on the date that is one month after the date
hereof, and on the date that is nine (9) months from the date hereof, the
Company shall deliver to the Holder a statement setting forth the capital
structure of the Company on such date and a description of all of the events
requiring an adjustment or recalculation to this Warrant pursuant to this
Section 4.4(c) and the method by which each such adjustment or recalculation was
calculated which statement shall be certified by the Company's Chief Financial
Officer and Chief Executive Officer.
(d) In the event any amounts owing under the Note are
repaid within nine (9) months of the Closing Date pursuant to Section 4(c) of
the Note, the number of Warrant Shares represented by this Warrant shall be
adjusted on the date that is nine (9) months from the date hereof, by
multiplying the number of Warrant Shares by a fraction, the numerator of which
14
is the amount repaid pursuant to Section 4(c) of the Note, and the denominator
of which is 12,000,000. The resulting number shall be the adjusted number of
Warrant Shares.
4.5 Dissolution, Total Liquidation or Winding-Up. If at any
time there is a voluntary or involuntary dissolution, total liquidation or
winding-up of the Company, other than as contemplated by Section 4.4, then the
Company shall cause to be mailed (by registered or certified mail, return
receipt requested, postage prepaid) to the Holder at the Holder's address as
shown on the Warrant register, at the earliest practicable time (and, in any
event, not less than thirty (30) calendar days before any date set for
definitive action) written notice of the date on which such dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the record holders of shares of Common
Stock shall be entitled to exchange their shares for securities, money or other
property deliverable upon such dissolution, liquidation or winding-up, as the
case may be. On such date, the Holder shall be entitled to receive upon
surrender of this Warrant the cash or other property, less the Warrant Purchase
Price for this Warrant then in effect, that the Holder would have been entitled
to receive had this Warrant been exercised immediately prior to such
dissolution, liquidation or winding-up. Upon receipt of the cash or other
property, any and all rights of the Holder to exercise this Warrant shall
terminate in their entirety. If the cash or other property distributable in the
dissolution, liquidation or winding-up has a fair market value which is less
than the Warrant Purchase Price for this Warrant then in effect, this Warrant
shall terminate and be of no further force or effect upon the dissolution,
liquidation or winding-up.
4.6 Other Dilutive Events. If any event occurs as to which the
other provisions of this Section 4 are not strictly applicable but as to which
the failure to make any adjustment would not protect the purchase rights
represented by this Warrant in accordance with the intent and principles hereof,
then, in each such case, the Holder (or if this Warrant has been divided up, the
Holders of Warrants exercisable for the purchase of more than fifty percent
(50%) of the aggregate number of Warrant Shares then issuable upon exercise of
all of the then exercisable Warrants) may demand that the Company engage, and
the Company shall engage within fifteen (15) days of such demand, an investment
banking or accounting firm of recognized national standing which shall give its
opinion as to the adjustment, if any, on a basis consistent with the intent and
principles established herein, necessary to preserve the purchase rights
represented by this Warrant (or such Warrants). Upon receipt of such opinion,
the Company will mail (by registered or certified mail, return receipt
requested, postage prepaid) a copy thereof to the Holder within three (3)
Business Days and shall make the adjustments described therein. The fees and
expenses of such investment banking or accounting firm shall be borne by the
Company.
4.7 Other Provisions Applicable to Adjustments Under this
Section. The following provisions shall be applicable to the adjustments
provided for pursuant to this Section 4:
15
(a) When Adjustments To Be Made. The adjustments
required by this Section 4 shall be made whenever and as often as any specified
event requiring such an adjustment shall occur. For the purpose of any such
adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(b) Record Date. If the Company fixes a record date
of the holders of Common Stock for the purpose of entitling them to (i) receive
a dividend or other distribution payable in shares of Common Stock or in shares
of any other class or series of capital stock or securities convertible into or
exchangeable for Common Stock or shares of any other class or series of capital
stock or (ii) subscribe for or purchase shares of Common Stock or such other
shares or securities, then all references in this Section 4 to the date of the
issuance or sale of such shares of Common Stock or such other shares or
securities shall be deemed to be references to that record date.
(c) When Adjustment Not Required. If the Company
fixes a record date of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription or purchase
rights to which the provisions of Section 4.1 would apply, but shall, thereafter
and before the distribution to stockholders, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) Notice of Adjustments. Whenever the number of
shares of Common Stock for which this Warrant is exercisable or the Warrant
Purchase Price shall be adjusted or recalculated pursuant to this Section 4, the
Company shall immediately, but in no event in more than two (2) business days,
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
or recalculation and the method by which such adjustment or recalculation was
calculated, specifying the number of shares of Common Stock for which this
Warrant is exercisable and (if such adjustment was made pursuant to Section 4.4)
describing the number and kind of any other shares of stock or Other Property
for which this Warrant is exercisable, and any related change in the Warrant
Purchase Price, after giving effect to such adjustment, recalculation or change.
The Company shall mail (by registered or certified mail, return receipt
requested, postage prepaid) a signed copy of the certificate to be delivered to
the Holder within three (3) Business Days of the event which caused the
adjustment or recalculation. The Company shall keep at the Designated Office
copies of all such certificates and cause them to be available for inspection at
the Designated Office during normal business hours by the Holder or any
prospective transferee of this Warrant designated by the Holder.
(e) Challenge to Good Faith Determination. Whenever
the Board of Directors of the Company is required to make a determination in
good faith of the Fair Market
16
Value of this Warrant or the Warrant Shares under this Section 4, such
determination may be challenged or disputed by the Holder (or if the Warrant has
been divided up, the Holders of Warrants exercisable for more than fifty percent
(50%) of the aggregate number of Warrant Shares then issuable upon exercise of
all of the then exercisable Warrants). If the Holder (or such Holders, as the
case may be) wishes to challenge or dispute any such fair market value
determination, it (or they) shall furnish written notice to the Company of its
(or their) intention to challenge the same. If the Company and the Holder (or
such Holders, as the case may be) cannot resolve the dispute between or among
themselves, then such dispute shall be submitted for final determination to an
investment banking or accounting firm of recognized national standing pursuant
to the valuation procedures set forth in clause (ii) under the definition of
Fair Market Value. The Company shall bear any and all fees, costs and expenses
incurred by the Company and the Holder (or such Holders, as the case may be) in
connection with such dispute and determination, including, without limitation,
fees and expenses of any investment banking, valuation or accounting firm(s)
engaged by the Company or the Holder (or Holders, as the case may be) and of
attorneys in connection with such dispute and determination.
(f) Independent Application. Except as otherwise
provided herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If an event occurs that
requires the application of more than one subsection, all applicable subsections
shall be given independent effect without duplication.
(g) Other Anti-Dilution Provisions. To the extent
that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Capital Partners II, L.P. or any of its Affiliates
(collectively, "LLCP") continues to hold this Warrant, in whole or in part, at
any time at which the Company takes any action which would have resulted in an
adjustment to the exercise price of, and the number of shares of Common Stock
issuable pursuant to, this Warrant (a "Dilutive Issuance"), then, to the extent
that LLCP has exercised all or any portion of this Warrant prior to such time,
the Company shall immediately issue to LLCP upon such Dilutive Issuance, without
the payment of any further consideration of any kind, such number of additional
shares of Common Stock as shall equal the difference between (i) the number of
shares of Common Stock issuable upon the exercise of this Warrant to the extent
held unexercised by LLCP at such time after giving effect to the adjustment
thereto resulting from such Dilutive Issuance and (ii) the number of shares of
Common Stock which would have been issuable upon exercise of this Warrant after
giving effect to such Dilutive Issuance if this Warrant had not been exercised
in any part.
4.8 Fiduciary Duties of Company. The Company and its directors
shall owe the Holder the same fiduciary duties that the Company and its
directors would owe to the Warrant Shares underlying the Warrant.
5. MISCELLANEOUS.
17
5.1 Restrictive Legend. This Warrant, any Warrant issued upon
transfer of this Warrant and, unless registered under the Securities Act, any
Warrant Shares issued upon exercise of this Warrant or any portion thereof shall
be imprinted with the following legend, in addition to any legend required under
applicable state securities laws:
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY APPLICABLE STATE
SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT IN COMPLIANCE WITH
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND THE REGISTRATION
OR QUALIFICATION REQUIREMENTS OF SUCH STATE SECURITIES LAWS OR
PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION.
The legend shall be appropriately modified upon issuance of
certificates for shares of Common Stock.
Upon request of the holder of a Common Stock certificate, the
Company shall issue to that holder a new certificate free of the foregoing
legend, if, with such request, such holder provides the Company with an opinion
of counsel reasonably acceptable to the Company (provided that ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, A Professional Law Corporation, shall be deemed to be acceptable to
the Company) to the effect that the securities evidenced by such certificate may
be sold without restriction under Rule 144 (or any other rule permitting resales
of securities without restriction) promulgated under the Securities Act.
5.2 Holder Entitled to Benefits Under Other Agreements. The
Holder of this Warrant (or, if the Warrant has been divided up, the Holders) is
entitled to certain rights, benefits and privileges with respect to this Warrant
and the Warrant Shares pursuant to the terms of the Securities Purchase
Agreement, the Registration Rights Agreement (it being understood that the
Warrant Shares constitute "Registrable Securities" thereunder), the Investor
Rights Agreement and certain other Investment Documents. Without limiting the
generality of the foregoing, the payment and performance of the Put Option is
secured by a Lien on the Collateral pursuant to the Collateral Documents.
5.3 Other Covenants. Without limiting the generality of
Section 5.2, the Company covenants and agrees that, as long as this Warrant
remains outstanding or any Warrant Shares are issuable with respect to this
Warrant, the Company will perform all of the following covenants for the express
benefit of the Holder: (a) the Warrant Shares shall, upon issuance, be
18
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock; (b) each Holder shall, upon the exercise thereof in accordance with the
terms hereof, receive good and marketable title to the Warrant Shares, free and
clear of all voting and other trust arrangements to which the Company is a party
or by which it is bound, preemptive rights of any stockholder, liens,
encumbrances, equities and claims whatsoever, including, but not limited to, all
Taxes, Liens and other charges with respect to the issuance thereof, other than
as provided in the Securities Purchase Agreement and related documents; (c) at
all times prior to the Expiration Date, the Company shall have reserved for
issuance a sufficient number of authorized but unissued shares of Common Stock,
or other securities or property for which this Warrant may then be exercisable,
to permit this Warrant (or if this Warrant has been divided, all outstanding
Warrants) to be exercised in full; (d) the Company shall deliver to each Holder
the information and reports described in Section 9 of the Securities Purchase
Agreement as contemplated therein; (e) the Company shall extend to the initial
Holder the management rights set forth in the Investor Rights Agreement; and (f)
the Company shall provide each Holder with notice of all corporate actions in
the same manner and to the same extent as the shareholders of the Company.
5.4 Issue Tax. The issuance of shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder for any
issue tax in respect thereof.
5.5 Closing Of Books. The Company will at no time close its
transfer books against the transfer of this Warrant or of any Warrant Shares in
any manner which interferes with the timely exercise hereof.
5.6 No Voting Rights; Limitation Of Liability. Except as
expressly set forth in this Warrant, nothing contained in this Warrant shall be
construed as conferring upon the Holder (a) the right to vote or consent as a
stockholder in respect of meetings of stockholders for the election of directors
of the Company or any other matter, (b) the right to receive dividends, except
as set forth in Section 4 or (c) any other rights as a stockholder of the
Company, except as set forth in Section 4 and in the Investor Rights Agreement.
No provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the Holder for the
Warrant Purchase Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by its creditors.
5.7 Modification And Waiver. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement is sought.
5.8 Notices. All notices, requests, demands and other
communications which are required or may be given under this Warrant shall be in
writing and shall be deemed to have been duly given if transmitted by telecopier
with receipt acknowledged, or upon delivery, if
19
delivered personally or by recognized commercial courier with receipt
acknowledged, or upon the expiration of seventy-two (72) hours after mailing, if
mailed by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
20
(a) If to the Holder, at:
c/o Levine ▇▇▇▇▇▇▇▇▇ Capital Partners, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to any other Holder, at:
such ▇▇▇▇▇▇'s address as shown on the books
of the Company.
(c) If to the Company, at:
The Quizno's Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or addresses as the Holder or the Company, as the case
may be, may specify by written notice given in accordance with this Section 5.8.
5.9 Successors and Assigns. The Company may not assign any of
its rights, or delegate any of its obligations, under this Warrant without the
prior written consent of the Holder (which consent may be withheld for any
reason or no reason at all). Subject to the requirements of Applicable Laws, the
Holder may assign this Warrant, or delegate its obligations under this Warrant,
in whole or in part, at any time or from time to time, without the consent of
the Company; provided, however, that the Holder may not assign or transfer all
or any portion of this Warrant to a Competitor. Each such assignment of this
Warrant, in whole or in part, shall be
21
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the Designated Office, together with appropriate
instruments of assignment, ▇▇▇▇ completed and executed. Upon such surrender, the
Company shall, at its own expense, within three (3) Business Days of surrender,
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees specified in such assignment and in the denominations specified
therein and this Warrant shall promptly be canceled. If any portion of this
Warrant is not being assigned, the Company shall, at its own expense, within
three (3) Business Days issue to the Holder a new Warrant evidencing the portion
not so assigned. If the Holder assigns this Warrant to one or more Persons, any
decisions that the Holder is entitled to make at any time hereunder shall be
made by the Holders holding more than fifty percent (50%) of the aggregate
number of Warrant Shares issuable upon exercise of all of the then exercisable
Warrants.
This Warrant shall be binding upon and inure to the benefit of
the Company, the Holder and their respective successors and permitted assigns,
and shall include, with respect to the Company, any Person succeeding the
Company by merger, consolidation, combination or acquisition of all or
substantially all of the Company's assets, and in such case, except as expressly
provided herein and in the Securities Purchase Agreement, all of the obligations
of the Company hereunder shall survive such merger, consolidation, combination
or acquisition.
In the event that the Holder assigns a portion of its rights
under this Warrant, the rights with respect to determining Fair Market Value, as
well as the rights under Section 4.6 and Section 4.7(e) will be exercised by the
Holders of Warrants exercisable for more than fifty percent (50%) of the
aggregate number of Warrant Shares issuable upon exercise of all of the then
exercisable Warrants, who will act as the representative of all Holders (the
"Representative Holder"). The Representative ▇▇▇▇▇▇ will represent all Holders
in any meetings or negotiations related to the events giving rise to a fair
market valuation or determinations under Section 4.6 or Section 4.7(e). The
Company will not be liable for expenses incurred by the Holders other than the
Representative Holder (including, without limitation, expenses associated with
additional investment banking firms or accountants engaged by or at the request
of Holders other than the Representative Holder).
5.10 Captions; Construction and Interpretation. The captions
in this Warrant are for convenience of reference only, do not constitute a part
of this Agreement and are not to be considered in construing or interpreting
this Warrant. All section, preamble, recital, exhibit, schedule, disclosure
schedule, annex, clause and party references are to this Warrant unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of this
Warrant for purposes of construing the provisions of this Warrant, and all
provisions of this Warrant shall be construed in accordance with their fair
meaning, and not strictly for or against any party.
5.11 Lost Warrant or Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant or of a
22
stock certificate evidencing Warrant Shares and, in the case of any such loss,
theft or destruction, upon receipt of an indemnity reasonably satisfactory to
the Company or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant or stock certificate, the Company shall make and
deliver to the Holder, within three (3) Business Days of receipt by the Company
of such documentation, a new Warrant or stock certificate, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.
5.12 No Impairment. The Company shall not by any action,
including, without limitation, amending its charter documents or regulations or
through any reorganization, reclassification, 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 of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company will (i) not increase the
par value (if any) of any shares of Common Stock receivable upon the exercise of
this Warrant above the amount payable therefor upon such exercise immediately
prior to such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant, free and clear of all liens, encumbrances, equities and claims, and
(iii) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
5.13 GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE RIGHTS AND
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES
THEREOF REGARDING CONFLICTS OF LAWS OR CHOICE OF LAW, AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA.
5.14 Remedies. If the Company fails to perform, comply with or
observe any covenant or agreement to be performed, complied with or observed by
it under this Warrant, the Holder may proceed to protect and enforce its rights
by suit in equity or action at law, whether for specific performance of any term
contained in this Warrant or for an injunction against the breach of any such
term or in aid of the exercise of any power granted in this Warrant or to
enforce any other legal or equitable right, or to take any one or more of such
actions. The Company hereby agrees that the Holder shall not be required or
otherwise obligated to, and hereby waives any right to demand that the Holder,
post any performance or other bond in connection with the enforcement of its
rights and remedies hereunder. The Company agrees to
23
pay all fees, costs, and expenses, including, without limitation, fees and
expenses of attorneys, accountants and other experts retained by the Holder, and
all fees, costs and expenses of appeals, incurred or expended by the Holder in
connection with the enforcement of this Warrant or the collection of any sums
due hereunder, whether or not suit is commenced. None of the rights, powers or
remedies conferred under this Warrant shall be mutually exclusive, and each
right, power or remedy shall be cumulative and in addition to any other right,
power or remedy whether conferred by this Warrant or now or hereafter available
at law, in equity, by statute or otherwise.
5.15 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE COMPANY AND THE HOLDER WISH
APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
COMPANY AND THE HOLDER DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, AND UNDERSTANDING THEY ARE
WAIVING A CONSTITUTIONAL RIGHT, THE COMPANY AND THE HOLDER (BY ACCEPTANCE
HEREOF) WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE, ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS WARRANT, THE WARRANT
SHARES, THE SECURITIES PURCHASE AGREEMENT AND/OR ANY OTHER INVESTMENT DOCUMENT,
OR THE TRANSACTIONS COMPLETED HEREBY OR THEREBY.
24
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
and issued by its duly authorized representatives on the date first above
written.
THE QUIZNO'S CORPORATION, a Colorado corporation
By:_____________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
By:_____________________________________________
Name:
Title:
25
THE QUIZNO'S CORPORATION
FORM OF EXERCISE SUBSCRIPTION
(To be signed only upon exercise of this Warrant)
The undersigned hereby irrevocably elects to exercise its Warrant to
purchase __________________________________________________ (_______) shares of
Common Stock for an aggregate Warrant Purchase Price of_______________________
Dollars ($______).
If the Holder has determined upon advice of counsel that compliance
with the HSR Act is required, include the following sentences: "The undersigned
has determined that this exercise is subject to the HSR Act and requests that
the Company file the requisite notification and report form with, and pay all
requisite filing fees to, the FTC and the DOJ as promptly as possible. The
purchase of the shares described above and the payment of the Warrant Purchase
Price are subject to the expiration or earlier termination of the waiting period
under the HSR Act."
The Warrant Purchase Price to be paid as follows (check as applicable):
___ Company check in the amount of $_________;
___ Wire transfer in the amount of $_________;
___ Cancellation of _________________ Warrant Shares; or
___ Surrender of _______________ shares of Common Stock.
The undersigned hereby requests that if the Holder has determined upon
advice of counsel that compliance with the HSR Act is required, include the
following phrase: "upon the expiration or earlier termination of the waiting
period under the HSR Act" a certificate(s) for the shares of Common Stock be
issued in the name of_________________________, and delivered to,
____________________, whose address is ______________________________.
The undersigned represents that it is acquiring such shares of Common
Stock for its own account for investment purposes only and not with a view to or
for sale in connection with any distribution thereof, and, as to the
undersigned, the representations and warranties of the Purchaser set forth in
Section 4 of the Securities Purchase Agreement are true and correct on the date
hereof as if made by the undersigned on this date.
Dated: _______________ ____________________________________________________
Name of the Holder (must conform precisely to the
name specified on the face of the Warrant)
____________________________________________________
Signature of authorized representative of the Holder
____________________________________________________
Print or type name of authorized representative
Social Security Number or Employer
Tax Identification Number of the Holder:____________
Address of the Holder:______________________________
______________________________
______________________________
26