THIS WARRANT AND THE SHARES OF COMMON STOCK OF GRILL CONCEPTS, INC. TO BE ISSUED
UPON ANY EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS
WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED UNLESS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
WARRANT
to Purchase Shares
of
Common Stock (.00004 par value per share)
of
GRILL CONCEPTS, INC.
Dated as of June ___, 2001
Common Stock Warrants
This certifies that, for value received, STARWOOD HOTELS AND RESORTS WORLDWIDE,
INC. or its registered assigns ("Holder"), is entitled to purchase, subject to
the provisions of this Warrant, from Grill Concepts, Inc., a Delaware
corporation (the "Issuer"), at any time or from time to time on or before 5:00
p.m. New York time on the fifth (5th) anniversary of the date first above
written (the "Expiration Date"), 666,667 fully paid and nonassessable shares of
common stock, $.00004 par value per share (the "Common Stock") of the Issuer at
an exercise price equal to $2.00 per share, subject to adjustment pursuant to
the terms hereunder (the "Exercise Price") (such shares of Common Stock and
other securities issued and issuable upon exercise of this Warrant, the "Warrant
Shares"). Capitalized terms not defined herein shall have the meanings ascribed
to such terms in the subscription agreement, dated as of May 16, 2001, between
the Issuer and the Holder (the "Subscription Agreement").
SECTION 1. Exercise of Warrant. (a) Subject to the provisions
hereof, this Warrant may be exercised, in whole or in part, but not as to a
fractional share, at any time or from time to time on or after the date hereof
and on or before the Expiration Date, by presentation and surrender hereof to
the Issuer at the address which, in accordance with the notice provisions of
Section 10 hereof, is then effective for notices to the Issuer, with the
Election to Purchase Form annexed hereto as Schedule I, duly executed, for the
account of the Issuer, of the Exercise Price for the number of Warrant Shares
specified in such form. If this Warrant should be exercised in part only, the
Issuer shall, upon surrender of this Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder. The Issuer shall maintain at its principal
place of business a register (the "Register") for the registration of this
Warrant and registration of any transfer or assignment in whole or in part of
the Warrant.
(b) The Exercise Price for the number of Warrant Shares
specified in the Election to Purchase Form shall be payable in United States
Dollars by (i) certified or official bank check payable to the order of the
Issuer or by wire transfer of immediately available funds to an account
specified by the Issuer for that purpose, (ii) an election by the Holder to have
the Issuer withhold shares of Common Stock issuable upon exercise (a "Cashless
Exercise"), (iii) certificates representing shares of Common Stock theretofore
owned by the Holder duly endorsed for transfer to the Issuer, or (iv) any
combination of the preceding, equal in value to the aggregate Exercise Price.
For purposes hereof, a Cashless Exercise shall be effected by surrendering the
Warrant, in part or in whole, for such number of Warrant Shares as is determined
by dividing (A) the total Exercise Price payable in respect of the number of
Warrant Shares being purchased upon such exercise by (B) the amount by which the
Fair Market Value per share of Common Stock as of the Exercise Date exceeds the
Exercise Price per share.
(c) Certificates representing Warrant Shares shall bear the
following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN
THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION STATEMENT FOR THESE
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN OPINION OF
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
SECTION 2. Reservation of Shares; Preservation of Rights of
Holder. The Issuer hereby agrees that there shall be reserved for issuance
and/or delivery upon exercise of this Warrant, such number of Warrant Shares as
shall be required for issuance or delivery upon exercise of this Warrant. The
Warrant surrendered upon exercise shall be canceled by the Issuer. After the
Expiration Date no shares of Common Stock shall be subject to reservation in
respect of this Warrant. The Issuer further agrees (a) that it will not, by
amendment of its Certificate of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observation or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Issuer, and (b) promptly to take all action as may from time to time be
required in order to permit the Holder to exercise this Warrant and the Issuer
duly and effectively to issue shares of its Common Stock or other securities as
provided herein upon the exercise hereof. Without limiting the generality of the
foregoing, should the Warrant Shares at any time consist in whole or in part of
shares of capital stock having a par value, the Issuer agrees that before taking
any action which would cause an adjustment of the Exercise Price so that the
same would be less than the then par value of such Warrant Shares, the Issuer
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Issuer may validly and legally issue fully paid and
nonassessable shares of such Common Stock at the Exercise Price as so adjusted.
The Issuer further agrees that it will not establish a par value for its Common
Stock while this Warrant is outstanding in an amount greater than the Exercise
Price.
SECTION 3. Exchange, Transfer, Assignment or Loss of Warrant.
(a) During the one-year period commencing on the date first above written and
ending immediately prior to the first anniversary thereof (the "Restricted
Period"), this Warrant is not transferable or assignable by the Holder except
with the prior written consent of the Issuer. Notwithstanding the foregoing, (i)
the Holder may at any time prior to the expiration of this Warrant transfer or
assign this Warrant in whole or in part to any Permitted Transferee, and (ii)
upon expiration of the Restricted Period, the Holder may freely transfer or
assign this Warrant in whole or in part to any third party without the prior
consent of the Issuer. Issuer shall register any such transfer or assignment in
the Register upon surrender of this Warrant, with the Form of Assignment
attached as Schedule II hereto duly filled in and signed, to the Issuer at the
office of Issuer specified in Section 1(a). Upon any such registration of
transfer or assignment, a new Warrant, in substantially the form of this
Warrant, evidencing the rights of the Holder so transferred shall be issued to
the transferee and a new Warrant, in similar form, evidencing the rights of the
Holder to purchase the balance of the Warrant Shares purchasable hereunder, if
any, shall be issued to the Holder.
(b) Upon receipt by the Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Issuer will execute and deliver a new Warrant of like
tenor and date. Any such new Warrant executed and delivered shall constitute a
separate contractual obligation on the part of the Issuer, whether or not the
Warrant so lost, stolen, destroyed or mutilated shall be at any time enforceable
by anyone.
SECTION 4. Rights of Holder. Neither a Holder nor any
transferee or assignee thereof shall be, or have any rights or privileges of, a
stockholder of the Issuer with respect to any Warrant Shares, unless and until
this Warrant has been exercised.
SECTION 5. Adjustments in Exercise Price and Warrant Shares.
The Exercise Price and Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 5.
(a) If the Issuer is recapitalized through the subdivision or
combination of its outstanding shares of Common Stock into a larger or smaller
number of shares, the number of shares of Common Stock for which this Warrant
may be exercised shall be increased or reduced, as of the record date for such
recapitalization, in the same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all Warrant Shares
issuable hereunder immediately after the record date for such recapitalization
shall equal the aggregate amount so payable immediately before such record date.
(b) If the Issuer declares a dividend on Common Stock, or
makes a distribution to holders of Common Stock, and such dividend or
distribution is payable or made in Common Stock or securities convertible into
or exchangeable for Common Stock, or rights to purchase Common Stock or
securities convertible into or exchangeable for Common Stock, the number of
shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common Stock
shall be entitled to receive such dividend or distribution, in proportion to the
increase in the number of outstanding shares (and shares of Common Stock
issuable upon conversion of all such securities convertible into Common Stock)
of Common Stock as a result of such dividend or distribution, and the Exercise
Price shall be adjusted so that the aggregate Exercise Price for the purchase of
all the Warrant Shares issuable hereunder immediately after the record date for
such dividend or distribution shall equal the aggregate Exercise Price so
payable immediately before such record date.
(c) If the Issuer declares a dividend on Common Stock (other
than a dividend covered by subsection (b) above) or distributes to holders of
its Common Stock, other than as part of its dissolution or liquidation or the
winding up of its affairs, any shares of its capital stock, any evidence of
indebtedness or any cash or other of its assets (other than for Common Stock),
the Holder shall receive notice of such event as set forth in Section 7 below.
(d) In case of any consolidation of the Issuer with, or merger
of the Issuer into, any other corporation (other than a consolidation or merger
in which the Issuer is the continuing corporation and in which no change occurs
in its outstanding Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Issuer, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Issuer, except where
the Issuer is the surviving entity and no change occurs in its outstanding
Common Stock), the corporation formed by such consolidation or the corporation
resulting from such merger or the corporation which shall have acquired such
assets or securities of the Issuer, as the case may be, shall execute and
deliver to the Holder simultaneously therewith a new Warrant, satisfactory in
form and substance to the Holder, together with such other documents as the
Holder may reasonably request, entitling the Holder thereof to receive upon
exercise of such Warrant the kind and amount of shares of stock and other
securities and property receivable upon such consolidation, merger, sale,
transfer, or exchange of securities, or upon the dissolution following such sale
or other transfer, by a holder of the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such
consolidation, merger, sale, transfer, or exchange. Such new Warrant shall
contain the same basic other terms and conditions as this Warrant and shall
provide for adjustments which, for events subsequent to the effective date of
such written instrument, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 5. The above provisions of this
paragraph (d) shall similarly apply to successive consolidations, mergers,
exchanges, sales or other transfers covered hereby.
(e) If the Issuer shall, at any time before the expiration of
this Warrant, dissolve, liquidate or wind up its affairs other than as covered
by Section 5(d), the Holder shall, upon exercise of this Warrant have the right
to receive, in lieu of the shares of Common Stock of the Issuer that the Holder
otherwise would have been entitled to receive, the same kind and amount of
assets as would have been issued, distributed or paid to the Holder upon any
such dissolution, liquidation or winding up with respect to such shares of
Common Stock of the Issuer had the Holder been the holder of record of such
shares of Common Stock receivable upon exercise of this Warrant on the date for
determining those entitled to receive any such distribution. If any such
dissolution, liquidation or winding up results in any cash distribution in
excess of the aggregate Exercise Price provided by this Warrant for the shares
of Common Stock receivable upon exercise of this Warrant, the Holder may, at the
Holder's option, exercise this Warrant without making payment of the Exercise
Price and, in such case, the Issuer shall, upon distribution to the Holder,
consider the Exercise Price to have been paid in full and, in making settlement
to the Holder, shall obtain receipt of the Exercise Price by deducting an amount
equal to the Exercise Price for the shares of Common Stock receivable upon
exercise of this Warrant from the amount payable to the Holder. For purposes of
this paragraph, at Holder's option, the sale of all or substantially all of the
assets of the Issuer and distribution of the proceeds thereof to the Issuer's
shareholders shall be deemed liquidation.
(f) If the Issuer sells or issues on or prior to the first
anniversary of the date hereof any shares of Common Stock (or options, warrants,
or other securities convertible, exercisable, or exchangeable for shares of
Common Stock, excluding options in an amount not to exceed in the aggregate
fifteen percent (15%) of the Fully-Diluted Shares issued to employees of Issuer
at an exercise price equal to or greater than the Fair Market Value as of the
date of grant) for consideration per share (in the case of options, warrants, or
other securities convertible, exercisable, or exchangeable for shares of Common
Stock, on an as-converted basis) less than the Exercise Price then in effect
immediately prior to the issuance of such additional Common Stock (the "New
Issuance Price"), then upon consummation of such sale or issuance (a "Triggering
Transaction"), the Exercise Price shall automatically be decreased by an amount
equal to the difference between (i) the Exercise Price in effect immediately
prior to such Triggering Transaction; and (ii) the New Issuance Price.
(g) If an event occurs which is similar in nature to the
events described in this Section 5, but is not expressly covered hereby, the
Board of Directors of the Issuer shall make or arrange for an equitable
adjustment to the number of Warrant Shares and the Exercise Price.
(h) The term "Common Stock" shall mean the Common Stock,
$.00004 par value, of the Issuer as the same exists at the date of issuance of
this Warrant or as such stock may be constituted from time to time, except that
for the purpose of this Section 5, the term "Common Stock" shall include any
stock of any class of the Issuer which has no preference in respect of dividends
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Issuer and which is not subject to redemption
by the Issuer.
(i) The Issuer shall retain a firm of independent public
accountants of recognized standing (who may be any such firm regularly employed
by the Issuer) to make any computation required under this Section 5, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this Section 5 absent manifest error.
(j) Whenever the number of Warrant Shares or the Exercise
Price shall be adjusted as required by the provisions of this Section 5, the
Issuer forthwith shall file in the custody of its secretary or an assistant
secretary, at its principal office, and furnish to each Holder hereof, a
certificate prepared in accordance with paragraph (h) above, showing the
adjusted number of Warrant Shares and the Exercise Price and setting forth in
reasonable detail the circumstances requiring the adjustments.
(k) Notwithstanding any other provision, this Warrant shall be
binding upon and inure to the benefit of any successors and assigns of the
Issuer.
(l) No adjustment in the Exercise Price in accordance with the
provisions of this Section 5 need be made if such adjustment would amount to a
change in such Exercise Price of less than $.01 provided however, that the
amount by which any adjustment is not made by reason of the provisions of this
paragraph (l) shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
(m) If an adjustment is made under this Section 5 and the
event to which the adjustment relates does not occur, then any adjustments in
accordance with this Section 5 shall be readjusted to the Exercise Price and the
number of Warrant Shares which would be in effect had the earlier adjustment not
been made.
SECTION 6. Taxes on Issue or Transfer of Common Stock and
Warrant. The Issuer shall pay any and all documentary stamp or similar issue or
transfer taxes payable solely in respect of the issue or delivery of shares of
Common Stock or other securities on the exercise of this Warrant. The Issuer
shall not be required to pay any tax which may be payable in respect of any
transfer of this Warrant or in respect of any transfers involved in the issue or
delivery of shares or the exercise of this Warrant in a name other than that of
the Holder and the person requesting such transfer, issue or delivery shall be
responsible for the payment of any such tax (and the Issuer shall not be
required to issue or deliver said shares until such tax has been paid or
provided for).
SECTION 7. Notice of Adjustment. . In case at any time: (a)
the Issuer shall declare any cash dividend on its Common Stock; (b) the Issuer
shall pay any dividend payable in stock upon its Common Stock or make any
distribution (other than regular cash dividends) to the holders of its Common
Stock; (c) the Issuer shall offer for subscription pro rata to the holders of
its Common Stock any additional shares of stock of any class or other rights;
(d) the Issuer shall authorize the distribution to all holders of its Common
Stock of evidences of its indebtedness or assets (other than cash dividends or
cash distributions payable out of current earnings or dividends payable in
Common Stock); (e) the Issuer shall issue shares of its capital stock at a price
per share less than the Exercise Price in effect as of the date of such
issuance; (f) there shall be any capital reorganization, or reclassification of
the capital stock of the Issuer, or consolidation or merger of the Issuer with
another corporation (other than a subsidiary of the Issuer in which the Issuer
is the surviving or continuing corporation and no change occurs in the Issuer's
Common Stock), or sale of all or substantially all of its assets to, another
corporation; (g) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or winding up
of the Issuer; or (h) the Issuer proposes to take any other action or an event
occurs which would require an adjustment pursuant to subsection (i) of this
Section 7; then, in any one or more of said cases, the Issuer shall give at
least fifteen days' prior written notice, addressed to Holder at the address of
Holder as shown on the books of the Issuer, of (i) the date on which the books
of the Issuer shall close or a record shall be taken for such dividend,
distribution or subscription rights, or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up; (ii) in the case of any issuance
of capital at a price per share less than the then applicable Exercise Price,
the date of such issuance and the number of shares issued; and (iii) in the case
of any reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, bankruptcy, assignment for the benefit of creditors,
winding up or other action, as the case may be, the date (or, if not then known,
a reasonable approximation thereof by the Issuer) when same shall take place.
Such notice shall also specify (or, if not then known, reasonably approximate),
if applicable, the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, bankruptcy, assignment for the benefit of
creditors, winding up, or other action, as the case may be.
SECTION 8. No Dilution or Impairment. The Issuer shall not, by
amendment of its charter or through reorganization, consolidation, merger,
dissolution, sale of assets 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 action as may be necessary or appropriate in order to
protect the rights of Holder against dilution or other impairment. Without
limiting the generality of the foregoing, the Issuer will not increase the par
value, if any, of any shares of stock receivable upon the exercise of any
Warrant above the amount payable therefor upon such exercise, and at all times
will take all such action as may be necessary or appropriate in order that the
Issuer may validly and legally issue fully paid and non-assessable stock upon
the exercise of each Warrant.
SECTION 9. Registration Rights. Section 3 of the investor
rights agreement, dated as of March __, 2001, between the Issuer and the Holder
(the "Investor Rights Agreement") is incorporated herein by reference and made a
part hereof mutatis mutandis.
SECTION 10. Representations and Warranties of the Issuer;
Indemnity; Miscellaneous. Sections 5, 16 and 17 of the Subscription Agreement
are incorporated herein by reference and made a part hereof mutatis mutandis.
GRILL CONCEPTS, INC.
By:
----------------------------
Name:
Title:
SCHEDULE I
FORM OF ELECTION TO PURCHASE
To: [ ]
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, [_____] shares of Grill Concepts, Inc. Common
Stock issuable upon the exercise of this Warrant for an aggregate exercise price
of $_______ payable in [cash][cashless exercise][shares], and requests that
certificates for such shares be issued in the name of:
(Name)
(Address)
(United States Social Security or other taxpayer
identifying number, if applicable)
and, if different from above, be delivered to:
(Name)
(Address)
and, if the number of Warrant Shares so purchased are not all of the Warrant
Shares issuable upon exercise of this Warrant, that a Warrant to purchase the
balance of such Warrant Shares be registered in the name of, and delivered to,
the undersigned at the address stated below.
Date: , 200
--------------- --
Name of Registered Owner:
-------------------------------------------------------
Address:
----------------------------------------------------------------------
Signature:
--------------------------------------------------------------------
SCHEDULE II
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ______________________ the right represented by the within
Warrant to purchase the _______ shares of the _________ Common Stock of Grill
Concepts, Inc., to which the within Warrant relates, and appoints
___________________ attorney to transfer said right on the books of Grill
Concepts, Inc., with full power of substitution in the premises.
Dated: ___________________________
--------------------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
