THIS WARRANT (AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT) AND THE
COMMON SHARES INTO WHICH SUCH SECURITIES ARE CONVERTIBLE ARE SUBJECT TO AN
INVESTMENT AGREEMENT DATED DECEMBER 31, 1996, AND A STOCKHOLDERS AGREEMENT DATED
AS OF DECEMBER 31, 1996, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF
THE CORPORATION AND WILL BE FURNISHED TO THE HOLDER ON REQUEST TO THE SECRETARY
OF THE CORPORATION. SUCH INVESTMENT AGREEMENT AND STOCKHOLDERS AGREEMENT
PROVIDE, AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON VOTING, SALE, TRANSFER,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY THIS
WARRANT AND THAT THE HOLDER HAS RIGHTS TO REQUIRE REPURCHASE BY THE CORPORATION
UPON THE OCCURRENCE OF CERTAIN EVENTS. THE SECURITIES EVIDENCED BY THIS WET HAVE
NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND
QUALIFIED IN ACCORDANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION, SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
WARRANT TO PURCHASE SHARES
OF COMMON STOCK OF THE QUIZNO'S CORPORATION
Issued Date: December 31, 1998
THIS CERTIFIES THAT, for value received, Retail & Restaurant Growth
Capital, L.P., a Delaware limited partnership ("Holder"), is entitled, subject
to the provisions and upon the terms and conditions hereinafter set forth, to
subscribe for and purchase up to Three Hundred Seventy-Two Thousand Eight
Hundred Forty Seven (372,847) shares (as adjusted pursuant to the provisions
hereof), (the "Number") of the fully paid and nonassessable Common Stock, par
value $.001, of THE QUIZNO'S CORPORATION, a Colorado corporation (the "Company"
or the "Corporation"), for a price per share (the "Warrant Price") equal to
$3.10 (as adjusted, pursuant to the provisions hereof).
As used herein, the term "Shares" shall mean the Company's presently
authorized Common Stock, or any stock into or for which such Common Stock shall
have been or may hereafter be converted or exchanged pursuant to the Amended and
Restated Articles of Incorporation of the Company as from time to time amended
as provided by law and in such Articles (hereinafter the "Charter"), the term
"Note" shall mean that certain Amended and Restated Senior Subordinated
Convertible Note due 2001 issued by the Corporation to Retail & Restaurant
Growth Capital, L.P. on December 31, 1996, and the term "Grant Date" shall mean
December 31, 1998. Capitalized terms used and not defined herein shall have the
meanings set forth in a certain Investment Agreement dated as of December 31,
1996 by and between the Company and Retail & Restaurant Growth Capital, L.P.
(the "Investment Agreement").
1. Term.Subject to the provisions of this Warrant the purchase right
represented by this Warrant is exercisable, in whole or in part, at any time and
from time to time prior to 5:00 p.m. (Dallas time) on the earlier of (a)
December 31, 2004, or (b) six years after prepayment in full of the Note.
2. Method of Exercise
2.1 Standard Method. The purchase right represented by this Warrant
may be exercised by the holder hereof, in whole or in part and from time to
time, by either, at the election of the Holder hereof, (a) the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A-1 duly
executed) at the principal office of the Company and by the payment to the
Company, by check or by wire transfer, of an amount equal to the then applicable
Warrant Price per share multiplied by the number of Shares then being purchased
or (b) if in connection with a registered public offering of the Company's
securities (provided that such offering includes Shares and that the holder
shall have elected to participate therein pursuant to the exercise of the
registration rights referred to in Section 6 hereof), the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A-2 duly
executed) at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company and any underwriter, in the
case of an underwritten registered public offering, for payment to the Company
either by certified or bank check or by wire transfer from the proceeds of the
sale of Shares to be sold by the holder in such public offering of an amount
equal to the then applicable Warrant Price per Share multiplied by the number of
Shares then being purchased; however, notwithstanding the cash payment
requirements set forth in this Section 2.1, the Holder shall be entitled to use
the net issue exercise option as hereinafter provided in Section 2.2. The person
or persons in whose names) any certificates) representing Shares shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the Shares represented thereby (and such Shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised and the then applicable Warrant Price
paid. In the event of any exercise of the rights represented by this Warrant,
certificates for the Shares of stock so purchased shall be delivered to the
holder hereof as soon as possible and in any event within ten days of receipt of
such notice and payment of the then applicable Warrant Price and, unless this
Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not then
have been exercised and containing the same terms and conditions of this Warrant
shall also be issued to the holder hereof as soon as possible and in any event
within such ten-day period.
2.2 Net Issue Exercise. In lieu of exercising this Warrant for cash,
holder may elect to receive Shares equal to the value of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with notice of s,.lch election in which event the
Company shall issue to Holder that number of Shares computed using the following
formula:
- 2 -
X=Y(A-B)
A
Where
X = the number of Shares to be issued to Holder.
Y = the number of Shares purchasable under this Warrant (or
such lesser amount as equals the number of Shares which
could be purchased with the portion of this Warrant being
cancelled).
A = the Current Market Price (as defined below) of one Share.
B = the Warrant Price (as adjusted to the date of such
calculations).
3. Stock Fully Paid. Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant, and all shares into
which such Shares are convertible will, upon issuance, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by the
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of Shares to provide for the
exercise of the unexercised rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows: The "Warrant Price" shall initially be $3.10 and
shall be adjusted and readjusted from time to time as provided in this Warrant.
(a) Adjustments to Warrant Price.
(i) Stock Dividends. Subdivisions and Combinations. Non Pro-Rata
Repurchases. In case at any time or from time to time the Corporation shall:
(A) take a record of the holders of its Other Stock (as defined below)
for the purpose of entitling them to receive a dividend payable in, or other
distribution of, Other Stock (other than Common Stock), or
(B) subdivide its outstanding shares of Other Stock into a larger
number of shares of Other Stock, or
(C) combine its outstanding shares of Other Stock into a smaller
number of shares of Other Stock,
then the Warrant Price in effect immediately after the happening of any such
event shall be proportionately decreased, in case of the happening of events
described in subparagraphs A or B above, or proportionately increased, in case
of the happening of events described in subparagraph C above. "Other Stock"
shall mean the Common Stock and shall also include all other stock of the
Corporation of any other class other than Convertible Stock. A reclassification
of the Other Stock into shares of Other Stock and shares of any other class of
stock shall be deemed a distribution by the Corporation to the holders of its
Other Stock of such shares of such other class of stock within the meaning of
this Subsection and, if the outstanding shares of Other Stock shall be changed
into a larger or smaller number of shares of Other Stock as a part of such
reclassification, shall be deemed a subdivision or combination, as the case may
be, of the outstanding shares of Other Stock within the meaning of this
Subsection a(i).
(ii) Repurchase of Other Stock. In case at any time or from time to time,
the Corporation shall (except as hereinafter provided) repurchase any Other
Stock (the "Repurchased Stock"), then upon the consummation of such repurchase
the Warrant Price then in effect shall be decreased to an amount determined by
multiplying the Warrant Price in effect immediately prior to such adjustment by
a fraction, (x) the numerator of which is the Current Market Price (as defined
below) per share of Common Stock as determined on the date on which such
repurchase is made, and (y) the denominator of which is the Current Market Price
per share of Common Stock on the date immediately prior to such repurchase
(after giving effect to any stock splits, stock dividends or other stock
repurchases between the date of such repurchase and the date on which such
calculation is made); provided, however, that if the numerator of such fraction
is greater than the denominator of such fraction, then no adjustment to the
Warrant Price shall be made. No adjustment of the Warrant Price shall be made
under this Subsection upon the repurchase of the Repurchased Stock if such
repurchase, together with all repurchases during the previous twelve (12)
calendar months, is a repurchase of less than the sum of (1) 5% of the issued
and outstanding Other Stock determined as of the date of such repurchase, lua
(2) repurchases of stock options and Other Stock underlying such stock options
in a transaction or series of transactions during such twelve (12) month period
not exceeding $50,000 in the aggregate.
(iii) Issuance of Additional Shares of Other Stock. "Additional Shares
of Other Stock" shall mean all shares of Other Stock issued by the Corporation
after the date of this Warrant other than (i) the shares of Common Stock issued
to a holder of Convertible Stock upon conversion of such Convertible Stock, and
(ii) Permitted Common Stock Issuances. In case at any time or from time to time,
the Corporation shall (except as hereinafter provided) issue, whether in
connection with the merger of a corporation into the Corporation or otherwise,
any Additional Shares of Other Stock for a consideration per share less than the
Warrant Price then in effect (as so adjusted from time to time for additional
issuances, reductions and other adjustments to the number of shares of Common
Stock outstanding, including without limitation stock splits, stock dividends,
reverse stock splits, pro rata repurchases, and any other good faith transfer
of securities or other transaction which results in an increase or decrease in
the number of shares of Common Stock outstanding, (such amount per share, the
"Minimum Issue Price") on the Computation Date (determined as set forth below),
then the Warrant Price shall be adjusted to be that number determined by
multiplying the Warrant Price in effect immediately prior to such adjustment by
a fraction (x) the numerator of which shall be the number of shares of Other
Stock then outstanding, plus the number of shares of Other Stock which the
aggregate consideration for the total number of such Additional Shares of Other
Stock so issued would purchase at the Minimum Issue Price per share of Common
Stock and (y) the denominator of which shall be the number of shares of Other
Stock then outstanding plus the number of such Additional Shares of Other Stock
so issued. The provisions of this Subsection shall not apply to any issuance of
Additional Shares of Other Stock for which an adjustment is provided under
Subsection 4(a)(i). No adjustment of the Warrant Price shall be made under this
Subsection upon the issuance of any Additional Shares of Other Stock which are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights or pursuant to the exercise of any conversion or exchange
rights in any Convertible Securities, if any such adjustment shall previously
have been made upon the issuance of such warrants, options or other rights or
upon the issuance of such Convertible Securities (or upon the issuance of any
warrant or other rights therefor) pursuant to Subsection (iv) or (v) of
Subsection 4(a). "Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities, including additional Performance Shares,
which are convertible into or exchangeable for Additional Shares of Other Stock,
either immediately or upon the arrival of a specified date or the happening of
a specified event. For purposes of this Subsection, the "Computation Date" shall
be the earlier of (x) the date on which the Corporation shall enter into a firm
contract for the issuance of such Additional Shares of Other Stock, or (y) the
date of actual issuance of such Additional Shares of Other Stock.
(iv) Issuance of Warrants. Options or Other Rights. In case at any time
or from time to time, the Corporation shall take a record of the holders of its
Other Stock for the purpose of entitling them to receive a distribution of, or
shall otherwise issue, any warrants, options or other rights to subscribe for
or purchase any Additional Shares of Other Stock or any Convertible Securities
(other than Permitted Common Stock Issuances and Common Stock issuable upon
conversion of Convertible Stock), and the consideration per share for which
Additional Shares of Other Stock may at any time thereafter be issuable pursuant
to such warrants, options or other rights or pursuant to the terms of such
Convertible Securities shall be less than the Minimum Issue Price then in effect
on the Computation Date (as determined below), then the Warrant Price shall be
adjusted as provided in the second sentence of Subsection 4(a)(iii).
Such adjustment shall be made on the basis that (i) the consideration per share
for which such Additional Shares of Other Stock may be issued equals a fraction,
(x) the denominator of which is the maximum number of Additional Shares of
Other Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities, and (y) the numerator of which is the minimum consideration received
and receivable by the Corporation for such Additional Shares of Other Stock
pursuant to such warrants, options or other rights or pursuant to the terms of
such Convertible Securities, (ii) the maximum number of Additional Shares of
Other Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the Computation Date
(determined as set forth in the last sentence of this Subsection), and (iii)
the aggregate consideration for such maximum number of Additional Shares of
Other Stock shall be deemed to be the minimum consideration received and
receivable by the Corporation for the issuance of such Additional Shares of
Other Stock pursuant to such warrants, options or other rights or pursuant to
the terms of such Convertible Securities.
For purposes of this Subsection, the "Computation Date" shall be the
earliest of (a) the date on which the Corporation shall take a record of the
holders of its Other Stock for the purpose of entitling them to receive any such
warrants, options or other rights, (b) the date on which the Corporation shall
enter into a firm contract for the issuance of such warrants, options or other
rights, and (c) the date of actual issuance of such warrants, options or other
rights.
(v) Issuance of Convertible Securities. In case at any time or from time
to time, the Corporation shall take a record of holders of the Other Stock for
the purpose of entitling them to receive a distribution of, or shall otherwise
issue, any Convertible Securities (other than Permitted Common Stock Issuances,
and Convertible Stock) and the consideration per share for which additional
shares of other stock may at any time thereafter be issuable pursuant to the
terms of such Convertible Securities shall be less than the Minimum Issue Price
then in effect on the Computation Date (as determined below), then the Warrant
Price shall be adjusted as provided in the second sentence of Subsection 4(a)
(iii). Such adjustment shall be made on the basis that (i) the amount of
consideration per share for which such Additional Shares of Other Stock may be
issued equals a fraction (x) the denominator of which is the maximum number of
Additional Shares of Other Stock necessary to effect the conversion or exchange
of all such Convertible Securities, and (y) the numerator of which shall be the
minimum consideration received and receivable by the Corporation for the
issuance of such Additional Shares of Other Stock pursuant to the terms of such
Convertible Securities, (ii) the maximum number of Additional Shares of Other
Stock necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the Computation Date
(determined as set forth in the penultimate sentence of this Subsection), and
(iii) the aggregate consideration for such maximum number of Additional Shares
of Other Stock shall be deemed to be the minimum consideration received and
receivable by the Corporation for issuance of such Additional Shares of Other
Stock pursuant to the terms of such Convertible Securities.
For purposes of this Subsection, the "Computation Date" shall be the
earliest of (a) the date on which the Corporation shall take a record of the
holders of its Other Stock for the purpose of entitling them to receive any such
Convertible Securities, (b) the date on which the Corporation shall enter into a
firm contract for the issuance of such Convertible Securities, and (c) the date
of actual issuance of such Convertible Securities. No adjustment of the Warrant
Price shall be made under this Subsection upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants, options or
other subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights pursuant to Subsection 4(a)(iv).
(vi) Superseding Adjustment of Warrant Price. If at any time after any
adjustment of the Warrant Price shall have been made pursuant to the foregoing
Subsections 4(a)(iv) or 4(a)(v) on the basis of the issuance of warrants,
options or other rights or the issuance of other Convertible Securities or
after any new adjustment of the Warrant Price shall have been made pursuant to
this Subsection 4(a)(vi),
(A) such warrants, options or other rights or the right of conversion
or exchange in such other Convertible Securities shall expire, and a portion of
such warrants, options or rights, or the right of conversion or exchange in
respect of a portion of such other Convertible Securities, as the case may be,
shall not have been exercised, or
(B) the consideration per share for which Additional Shares of Other
Stock are issuable pursuant to such warrants, options, or rights or the terms of
such other Convertible Securities, shall be increased solely by virtue of
provisions therein contained for an automatic increase in such consideration per
share upon the arrival of a specified date or the happening of a specified
event, such previous adjustment shall be rescinded and annulled and the
Additional Shares of Other Stock which were deemed to have been issued by virtue
of the computation made in connection with the adjustment so rescinded and
annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
warrants, options or other rights, or other Convertible Securities on the basis
of:
(1) treating the number of Additional Shares of Other Stock, if
any, theretofore actually issued or issuable pursuant to the previous exercise
of such warrants, options or other rights or such right of conversion or
exchange, as having been issued on the date or dates of such issuance as
determined for purposes of such previous adjustment and for the consideration
actually received therefor, and
(2) treating any such warrants, options or other rights or any
such other Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for such Additional Shares of Other Stock issuable under
such warrants, options or other rights or other Convertible Securities,
and, if and to the extent called for by the foregoing provisions of this
Subsection 4(a) on the basis aforesaid, a new adjustment of the Warrant Price
shall be made, and such new adjustment shall supersede the previous adjustment
so rescinded and annulled. If any such superseding adjustment of the Warrant
Price is made after the exercise of this Warrant by a former Holder of this
Warrant, in lieu of such adjustment, if, and only if, such former Holder owns
shares of Common Stock of the Corporation obtained upon exercise of this
Warrant, the Corporation shall have the option to purchase the number of shares
of Common Stock from such former Holder equal to the difference between (x) the
number of shares of Common Stock which such former Holder received upon exercise
prior to the adjustment, and (y) the number of shares of Common Stock which such
former Holder would have received on exercise had such adjustment been made
prior to exercise. The purchase price per share of such stock shall be $0.01 per
share.
(vii) Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the making of adjustments of
the Warrant Price hereinbefore provided for in this Subsection 4(a):
(A) Treasury Stock. The sale or other disposition of any issued
shares of Other Stock owned or held by or for the account of the Corporation
shall be deemed an issuance thereof for purposes of this Subsection 4(a).
(B) Computation of Consideration. To the extent that any Additional
Shares of Other Stock or any Convertible Securities or any warrants, options or
other rights to subscribe for or purchase any Additional Shares of Other Stock
or any Convertible Securities shall be issued solely for cash consideration,
the consideration received by the Corporation therefor shall be deemed to be the
amount of cash received by the Corporation therefor, or, if such Additional
Shares of Other Stock or Convertible Securities are offered by the Corporation
for subscription, the subscription price, or, if such Additional Shares of
Other Stock or Convertible Securities are sold to underwriters or dealers for
public offering without a subscription offering, the initial public offering
price, in any such case excluding any amounts paid or receivable for accrued
interest or accrued dividends, and after deductions for any compensation,
underwriting discounts, placement fees or funding or financing commitment fees
(but before deduction for any other expenses) paid or incurred by the
Corporation for and in the underwriting of, or otherwise in connection with,
the issue thereof. To the extent that such issuance shall be for a consideration
other than solely for cash, then, except as herein otherwise expressly provided,
the amount of such consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith by the
Corporation's Board of Directors. The consideration for any Additional Shares of
Other Stock issuable pursuant to any warrants, options or other rights to
subscribe for or purchase the same shall be the consideration received or
receivable by the Corporation for issuing such warrant, options or other
rights, plus the additional consideration payable to the Corporation upon the
exercise of such warrants, options or other rights. The consideration for any
Additional Shares of Other Stock issuable pursuant to the terms of any
Convertible Securities shall be the consideration received or receivable by the
Corporation for issuing any warrants, options or other rights to subscribe for
or purchase such Convertible Securities, plus the consideration paid or payable
to the Corporation in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any, payable to
the Corporation upon the exercise of the right of conversion or exchange in such
Convertible Securities.
(C) When Adjustments to be Made. The adjustments required by the
preceding Subsections of this Subsection 4(a) shall be made whenever and as
often as any specified event requiring an adjustment shall occur, except that
no adjustment of the Warrant Price that would otherwise be required shall be
made (except in the case of a subdivision or combination of shares of the Other
Stock, as provided for in Subsection 4(a)(i)) unless and until such adjustment,
either by itself or with other adjustments not previously made, adds or
subtracts at least 1 % to the Warrant Price, as determined in good faith by the
Board of Directors of the Corporation. Any adjustment representing a change of
less than such minimum amount shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Subsection 4(a)
and not previously made, would result in a minimum adjustment. For the purpose
of any adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence, All calculations made under
this Subsection shall be made to the nearest cent. Notwithstanding any other
provision of this Warrant, and except for a combination of shares or other
adjustment pursuant to Section 4(a)(i), no adjustment to the Warrant Price
shall be made which causes the Warrant Price to be increased; and once the
Warrant Price is adjusted downward, it shall not be readjusted upward except as
provided in Section 4(a)(vi).
(D) Fractional Interests. In computing adjustments under this
Subsection 4(a), fractional interests in Other Stock shall be taken into account
to the nearest one thousandth of a share.
(E) When Adjustment not Required. If the Corporation shall take a
record of the Holders of its Other Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution thereof to shareholders, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then (i) 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, or (ii) in the event that any such adjustment
previously made in respect of such taking of record cannot be rescinded or
annulled as a result of the conversion of this Warrant after the taking of such
record occurs, in lieu of such recision or annulment of the adjustment, if the
Warrant was exercised by a former Holder of this Warrant, and if such former
Holder owns shares of Common Stock of the Corporation obtained upon exercise of
this Warrant, the Corporation shall have the option to purchase the number of
shares of Common Stock from such former Holder equal to the difference between
(x) the number of shares of Common Stock which such former Holder had received
upon conversion after such record date, and (y) the number of shares of Common
Stock which such former Holder would have received on conversion had such
adjustment been annulled or rescinded prior to conversion. The purchase price
per share of such Common Stock shall be $.01 per share.
(viii) Merger. Consolidation or Disposition of Assets. In case the
Corporation shall merge or consolidate into another corporation, and such
transaction does not constitute an Event of Default (or the Payee waives its
right to accelerated payment under the Investment Agreement) or shall sell,
transfer or otherwise dispose of all or substantially all of its property,
assets or business to another corporation and pursuant to the terms of such
merger, consolidation or disposition, shares of common stock of the successor or
acquiring corporation (or any parent thereof) are to be received by or
distributed to the holders of Other Stock of the Corporation, then the Holder of
this Warrant shall have the right thereafter to receive, upon conversion of this
Warrant, shares of common stock equal to the number of shares of common stock of
the successor or acquiring corporation receivable upon or as a result of such
merger, consolidation or disposition of assets had the Holder of this Warrant
converted it into Common Stock of the Corporation immediately prior to such
event. If, pursuant to the terms of such merger, consolidation or disposition of
assets, any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants, options or other subscription or purchase
rights) are to be received by or distributed to the holders of Other Stock of
the Corporation (whether in addition to common stock of the successor or
acquiring corporation, or any parent thereof, or otherwise) the Warrant Price in
effect shall be adjusted to that number determined by multiplying the Warrant
Price then in effect by a fraction (x) the numerator of which shall be the
Current Market Price per share of Common Stock immediately prior to the closing
of such merger, consolidation or disposition minus the portion applicable to one
share of Common Stock of any such cash so distributable and of the fair value of
any such shares of stock or other securities or property so received or
distributed, and (y) the denominator of which shall be the Current Market Price
per share of Common Stock immediately prior to the closing of such merger,
consolidation or disposition. The fair value of any such shares of stock or
other securities or property shall be determined pursuant to the Valuation
Procedure. In case of any such merger, consolidation or disposition of assets,
the successor or acquiring corporation shall expressly assume the due and
punctual observance and performance of each and every covenant and condition
hereof to be performed and observed by the Corporation and all of the
obligations and liabilities hereunder, subject to such modification as shall be
necessary to provide for adjustments to the Warrant Price which shall be as
nearly equivalent as practicable to the adjustments provided for in this
Subsection 4(a). For the purposes of this Subsection 4(a)(viii), "common stock
of the successor or acquiring corporation" shall include stock of such
corporation of any class, which is not preferred as to dividends or assets over
any other class of stock of such corporation and which is not subject to
redemption, and shall also include any evidences of indebtedness, shares of
stock or other securities which 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, options or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Subsection shall similarly apply to the successive mergers, consolidations or
dispositions of assets.
(ix) Sale of Stock under Section 11.1 (b) of Investment Agreement. If
the Principal Stockholders invest in the Common Stock of the Corporation under
Section 11.1(b)(ii) of the Investment Agreement, then the Warrant Price shall
be adjusted as follows: the new Warrant Price shall be equal to a fraction the
numerator of which is the Conversion Principal paid on the Note and the
denominator of which is the number of shares into which the Warrant is
exercisable immediately prior to the adjustment plus a number equal to ten
percent (10%) of the number of shares of Common Stock purchased by the Principal
Stockholders.
(b) Adjustment to Number. At the time the Warrant Price is adjusted, the
Number shall also be adjusted by multiplying the Number immediately prior to the
adjustment by a fraction the numerator of which is the Warrant Price immediately
prior to the adjustment and the denominator of which is the adjusted Warrant
Price.
(c) No Impairment. The Corporation will not through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation
but will at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
Holder of this Warrant against impairment. Without limiting the generality of
the foregoing, the Corporation (i) will not permit the par value of any shares
of stock at the time receivable upon the exercise of this Warrant to exceed the
Warrant Price then in effect, (ii) will take all such action as may be necessary
or appropriate in order that the Corporation may validly and legally issue fully
paid nonassessable shares of stock on the exercise of this Warrant, and (iii)
will not take any action which results in any adjustment of the Warrant Price if
the total number of shares of Common Stock issuable after the action upon the
exercise of this Warrant and all other warrants, options and other right to
acquire Common Stock will exceed the total number of shares of Common Stock then
authorized by the Charter and available for the purpose of issue upon such
exercise.
(d) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Warrant Price and the Number pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to the Holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the consideration received or to be received by the Corporation
for any Additional Shares of Other Stock issued or sold or deemed to have been
issued, (ii) the number of shares of Other Stock then outstanding or deemed to
be outstanding, and (iii) the Warrant Price and the Number in effect immediately
prior to such issue or sale and as adjusted and readjusted on account thereof,
showing how each was calculated. The Corporation shall, as promptly as
practicable following its receipt of the written request, but in any event
within five Business Days after receipt of such written request, of the Holder
furnish or cause to be furnished to the Holder a like certificate setting forth
(i) the Warrant Price and Number at the time in effect, showing how each was
calculated, and (ii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of this Warrant.
(e) Notices of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall mail to the
Holder at least thirty days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such divide-.(I or distribution.
(f) Common Stock Reserved. The Corporation shall at all times reserve
and keep available out of its authorized but unissued Common Stock such number
of shares of Common Stock as shall from time to time be sufficient to effect
conversion of this Warrant.
(g) Closing of Books. The Corporation will not close its books against the
permitted transfer of this Warrant or its exercise.
(h) Registration: Transfer Taxes. The Corporation shall keep at its
principal office (or such other place as the Corporation reasonably designates)
a register for the registration of this Warrant. Upon the surrender of this
Warrant at such place, the Corporation shall, at the request of the Holder
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the amount of this Warrant represented by the
surrendered Warrant (and the Corporation forthwith shall cancel such surrendered
Warrant), subject to the requirements of applicable securities laws. Each such
new Warrant shall be registered in such name and shall represent such amount as
shall be requested by the Holder and shall be substantially identical in form to
this Warrant. The issuance of new Warrants shall be made without charge to the
Holder for any issuance tax in respect of any transfer involved in the issuance
and delivery of any Warrant in a name of (i) the Holder, or (ii) any affiliate
of the Holder. ,
(i) Definitions. The following terms shall have the following meanings,
which meanings shall be equally applicable to the singular and plural forms of
such terms:
"Business Day" means any day which is not a Saturday or a Sunday or a public
holiday or a day on which banks are required or permitted to close under the
laws of the State of California.
"Common Stock" means the Common Stock of the Corporation, par value
$0.001.
"Convertible Stock" means the Corporation's Class A Cumulative Convertible
Preferred Stock, par value $0.001 per share, outstanding on the date of this
Note.
"Current Market Price" per share of Common Stock at the date herein specified,
shall be deemed to be the average of the Closing Prices for ten consecutive
Business Days immediately prior to the day in question or, if no Closing Price
is reported, the average of the closing bid and asked prices. "Closing Prices"
for each such Business Day shall be the last sale price reported on the National
Association of Securities Dealers Automated Quotations System ("NASDAQ") on the
preceding Business Day or, if the Common Stock is an issue for which last sale
prices are not reported on NASDAQ, the closing bid quotation on such day (the
closing bid quotation for a given day shall be the highest bid quotation as
quoted in any of The Wall Street Journal, the national Quotation Bureau pink
sheets, quotation sheets of registered marketmakers and, if necessary, dealer's
telephone quotations), but, in each of the preceding two cases, if the relevant
NASDAQ price or quotation did not exist on such day, then the price or quotation
on the next preceding Business Day in which there was such a price or quotation.
"Other Stock" shall have the meaning assigned to it in Section 4(a)(i).
"Permitted Common Stock Issuances" means (i) shares of Common Stock or options
issuable under the Corporation's existing stock option plans and 401 (k) plans,
so long as such shares issued and outstanding under these plans do not exceed
fifteen percent (15%) issued and outstanding of the capital stock of the
Corporation on a fully diluted basis; (ii) shares of Common Stock issuable upon
conversion of this Note, (iii) warrants issuable upon prepayment of the Note and
Common Stock issuable upon exercise thereof; (iv) shares of Common Stock
issuable upon conversion of the Convertible Stock, and (v) shares of Common
Stock issuable upon exercise of warrants of the Corporation outstanding on
December 31, 1996.
"Principal Stockholders" shall mean each of the Corporation's Stockholders
owning five percent (5%) or more of the Corporation's issued and outstanding
capital stock on a fully diluted basis.
"Qualified Public Offering" means a secondary public offering of the
Corporation's stock which results in net proceeds to the Corporation of at
least $15,000,00
"Warrants" means the warrants issued upon payment of the Note.
5. Fractional Shares. No fractional Shares will be issued in connection
with any exercise hereunder, but in lieu of such fractional shares the Company
shall make a cash payment therefor upon the basis of the Warrant Price then
in effect.
6. Other Agreements. This Warrant and the Shares, when issued, are subject
to the terms and conditions of an Investment Agreement and a Stockholders
Agreement and a Registration Rights Agreement, each dated as of December 31,
1996, among the Company and the "Holders" identified therein, and the holder of
this Warrant and the Shares into which it is exercisable is entitled to the
benefits and is subject to the obligations set forth therein which may limit
the right of the holder to transfer this Warrant and such Shares, entitle the
holder to receive certain information from the Company, entitle the holder to
certain registration rights and other rights concerning the sale of the Warrant
or Shares in certain transactions and contain certain other rights and
restrictions.
7. Representations and Warranties. This Warrant is issued and delivered on
the basis of the following representations and warranties of the Company:
7.1 Authorization and Delivery. This Warrant has been duly authorized
and executed by the Company and when delivered will be the valid and binding
obligation of the Company enforceable in accordance with its terms;
7.2 Warrant Shares. The Warrant Shares have been duly authorized and
reserved for issuance by the Company and, when issued and paid for in accordance
with the terms hereof, will be validly issued, fully paid and nonassessable;
7.3 Rights and Privileges. The rights, preferences, privileges and
restrictions granted to or imposed upon the Shares and the holders thereof are
as set forth herein and in the Company's Charter are true and complete copies
of which have been delivered to the original warrant holder; and
7.4 No Inconsistency. The execution and delivery of this Warrant are
not, and the issuance of the Warrant upon exercise of this Warrant in accordance
with the terms hereof will not be, inconsistent with the Company's Charter or
by-laws, do not and will not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company, and do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration with or the taking of any action in respect of or by, any
Federal, state or local government authority or agency or other person.
8. 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 of the same is sought.
9. Notice of Expiration. The Company shall give notice of expiration of
this Warrant to Holder sixty (60) days prior to the end of the term.
10. Notices. Any notice which is required or permitted to be given pursuant
hereto shall be given in the manner provided in the Investment Agreement.
11. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger or consolidation, and all of the
obligations of the Company relating to the Shares issuable upon the exercise of
this Warrant shall be as set forth in the Company's Charter and the Company's
by-laws (each as amended from time to time) and shall survive the exercise and
termination of this Warrant and all of the covenants and agreements herein and
in such other documents and instruments of the Company shall inure to the
benefit of the successors and assigns of the holder hereof. The Company will, at
the time of the exercise of this Warrant, in whole or in part, upon request of
the holder hereof but at the Company's expense, acknowledge in writing its
continuing obligation to the holder hereof in respect of any rights (including,
without limitation, any right to registration of the Shares issuable upon
exercise of this Warrant) to which the holder hereof shall continue to been
titled after such exercise in accordance with this Warrant; provided, that the
failure of the holder hereof to make any such request shall not affect the
continuing obligation of the Company to the holder hereof in respect of such
rights.
12. Descriptive Headings. The descriptive headings of the several paragraphs
of this Warrant are inserted for convenience only and do not constitute a part
of this Warrant.
13. Governing Law. This warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the state of Texas
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
and delivered this Warrant as of this day and year set forth at the beginning
of this Warrant.
THE QUIZNO'S CORPORATION, a
Colorado Corporation
By:
----------------------
Its: Vice President/General Counsel
EXHIBIT A-1
Notice of Exercise
To: The Quizno's Corporation
1. The undersigned hereby elects to purchase - shares of Common Stock
of THE QUIZNO'S CORPORATION pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or, subject to compliance with the restrictions on
transfer set forth in Section 7 of the Warrant, in such other name or names as
are specified below:
___________________________________
(Name)
___________________________________
(Address)
3. The undersigned represents that the aforesaid shares being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned
has no present intention of distributing or reselling such shares.
Signature
_______________________________
(Name of Signatory)
By:____________________________
Its:___________________________
Date:__________________________
EXHIBIT A-2
Notice of Exercise
To: The Quizno's Corporation
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S_, filed ____________, _____, the undersigned hereby elects
to purchase ______ shares of Common Stock of the Company (or such lesser number
of shares as may be sold on behalf of the undersigned at the Closing) pursuant
to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such shares.
3.The undersigned has instructed the custodian for the selling shareholders
to deliver to the Company $_________or, if less, the net proceeds due the
undersigned from the sale of shares in the aforesaid public offering. If such
net proceeds are less than the purchase price for such shares, the undersigned
agrees to deliver the difference to the Company prior to the Closing.
Signature
________________________________
(Name of Signatory)
By:_____________________________
Its:____________________________
Date:___________________________
