THE QUIZNO'S CORPORATION, INC.
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT is entered into as of the ___th day of
November 2000 (this "Agreement"), by and among XXXXXXX X. XXXXXXX, an
individual, XXXXXXX X. XXXXXXX, an individual, and Xxxxxxx X. Xxxxxxx and
Xxxxxxx X. Xxxxxxx, as Co-Trustees under a certain Voting Trust Agreement, dated
as of July 14, 1994, as amended (the "Voting Trust") (collectively, the
"Principal Shareholders"), THE QUIZNO'S CORPORATION, a Colorado corporation (the
"Company"), and XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., a California limited
partnership ("LLCP").
R E C I T A L S
A. The Company Parties and LLCP are parties to that certain Securities
Purchase Agreement dated of even date herewith (as amended, supplemented or
otherwise modified from time to time, the "Securities Purchase Agreement")
pursuant to which, on the date hereof, the Company Parties are issuing and
selling to LLCP, and LLCP is purchasing from the Company, the Note, and the
Company is issuing and selling to LLCP, and LLCP is purchasing from the Company,
the Warrants, all on the terms and subject to the conditions set forth in the
Securities Purchase Agreement. Unless otherwise indicated, capitalized terms
used and not otherwise defined in this Agreement shall have the meanings set
forth in the Securities Purchase Agreement.
B. The execution of this Agreement by the Company and the Principal
Shareholders is a condition precedent to the obligation of LLCP to consummate
the transactions contemplated by the Securities Purchase Agreement.
C. In addition, in consideration of the substantial direct and indirect
benefits which the Company and the Principal Shareholders will realize from the
consummation of the transactions contemplated by the Securities Purchase
Agreement, the Company and the Principal Shareholders have agreed to grant to
LLCP the investment monitoring and other rights set forth in this Agreement,
respectively.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. INVESTMENT MONITORING RIGHTS.
1.1 Agreement to Vote. Each Principal Shareholder, as a holder of
Common Stock of the Company, hereby agrees on behalf of itself and any
transferee or assignee of any such shares of Common Stock, to hold any and all
of such shares of Common Stock and any and all other voting securities of the
Company acquired by such Principal Shareholder on or after the date hereof (and
any securities of the Company issued with respect to, upon conversion of, or in
exchange or substitution for such securities) (the "Principal Shareholder
Shares") subject to, and to vote the Principal Shareholder Shares in accordance
with, the provisions of this Agreement.
(a) Election of LLCP Representative as Director. If LLCP
determines, based on advice of counsel, that it is required to maintain a
representative of LLCP on the Board of Directors of the Company (the "Board") in
order to qualify as a "venture capital operating company" for purposes of ERISA
compliance, then LLCP shall have the right to require the Principal Shareholders
to vote all of the Principal Shareholder Shares then owned by them (or as to
which they then have voting power) to duly elect or appoint to the Board an
individual designated by LLCP in an LLCP Representative Request (as such term is
defined below (the "LLCP Representative") furnished to the Principal
Shareholders, in accordance with the following terms:
(i) Within five (5) Business Days after the Company's
receipt of an LLCP Representative Request, the Company and the
Principal Shareholders shall take or cause to be taken as soon as
practicable such actions (including, without limitation, creating a
vacancy or adding an additional Board seat) as may be necessary or
advisable to cause the LLCP Representative to be elected or appointed
to the Board and to remain a duly elected or appointed member of the
Board; and
(ii) In connection with any such election or
appointment of the LLCP Representative to the Board pursuant to this
Section 1.1, each Principal Shareholder agrees that he will vote (or
cause to be voted) all of the Principal Shareholder Shares then owned
beneficially and of record by him, directly or indirectly, so that the
LLCP Representative shall be duly elected or appointed to the Board.
For purposes of this Agreement, the term "LLCP Representative Request"
shall mean a written request delivered by or on behalf of LLCP to the Company
notifying the Company of LLCP's election under this Section 1.1 to have an LLCP
Representative elected or appointed to the Board and naming the individual who
has been so designated.
(b) Removal. The Principal Shareholders shall not vote to
remove the LLCP Representative designated above without the affirmative vote or
prior written consent of LLCP.
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(c) Vacancy. In the event of the death or resignation, or
removal by LLCP, of the LLCP Representative at any time, or in the event the
LLCP Representative shall not be elected to the Board at any election of
directors for any reason, or if the LLCP Representative is removed from the
Board, the Company and the Principal Shareholders shall, upon the request of
LLCP, promptly (and in any event within five (5) days of such request) take such
steps as may be necessary or appropriate to cause another Person designated by
LLCP to become the LLCP Representative on the Board, including increasing the
size of the Board and/or filling the resulting vacancy with an LLCP
Representative. Such steps may include calling and holding, in accordance with
the Bylaws of the Company and Applicable Laws, a special meeting of the Board or
the shareholders of the Company or circulating a written consent for execution
by members of the Board and/or the shareholders.
(d) To the extent that the Board delegates any of its duties
to an executive committee or other committee, the LLCP Representative shall,
upon the request of LLCP, be appointed to such committee.
(e) The agreements set forth in this Section 1.1 are intended
to constitute enforceable voting agreements within the scope of Section
0-000-000 of the Colorado Business Corporation Act.
1.2 Observation Rights. Without limiting any of the rights of LLCP in
this Section 1, and whether or not any LLCP Representative is then serving on
the Board, the Company shall invite two (2) representatives of LLCP or one (1)
representative of LLCP plus one (1) advisor to attend in a non-voting observer
capacity all meetings of the Board and the committees thereof and at all
meetings of the shareholders of the Company. Notice of such meetings shall be
given to LLCP in the same manner and at the same time as to the members of the
Board or such committees or such shareholders, as the case may be (which in any
event shall not be less then forty-eight (48) hours prior to such meeting unless
otherwise agreed to by LLCP in advance and in writing). LLCP shall be provided
with copies of (a) a meeting agenda, if any is prepared, (b) all information
that is provided to the members of the Board or such committees or such
shareholders (whether prior to, at, or subsequent to any such meetings), as the
case may be, at the same time as such materials are provided to the members of
the Board or such committee or such shareholders, as the case may be, and (c)
copies of the minutes of all meetings of the Board and such committees or such
shareholders concurrently with the distribution of such minutes to one or more
members of the Board or such committees or such shareholders, as the case may
be, but in no event later than forty-five (45) days after each such meeting.
1.3 Monthly Operating Meetings. In each calendar month after the date
hereof, representatives of LLCP and of the Company shall meet to review the
financial condition of the Company and its Subsidiaries as reflected in the
financial information furnished pursuant to Section 9.3 of the Securities
Purchase Agreement. Each meeting shall at all times be comprised
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of at least two (2) members of senior management of the Company, who initially
shall be Xxxxxxx X. Xxxxxxx and Xxxx Xxxxxxxx and two (2) individuals designated
by LLCP (who shall be representatives of Xxxxxx Xxxxxxxxx Capital Partners, Inc.
("LLCP Inc."), an Affiliate of LLCP). The financial officers and other members
of senior management of the Company shall be available at each meeting to review
financial information and discuss other matters. LLCP and the Company shall
mutually agree in each calendar month on the date and time for the meeting to be
held in the immediately succeeding calendar month (provided that the failure to
agree on such date and time in any month shall not be construed as an agreement
not to hold a meeting in the immediately succeeding month). Meetings may be
conducted by telephone so long as each of the persons attending can hear each of
the other persons attending the meeting. The Company's financial officers shall
prepare a financial package for delivery to LLCP at least forty-eight hours (48)
hours prior to each regularly scheduled monthly meeting. The financial package
shall include, among other things, (i) the Monthly Reporting Package and (ii)
such other information regarding the Company and its subsidiaries as LLCP may
from time to time request. The provisions of this Section 1.3 shall apply on a
quarterly basis instead of a monthly basis after the date on which the Note has
been indefeasibly paid in full or otherwise satisfied in full.
2. INDEMNIFICATION AND INSURANCE.
2.1 The Company shall, to the maximum extent permitted by law,
indemnify, defend and hold harmless the LLCP Representative, LLCP and the
employees, partners, principals, agents, attorneys, accountants, representatives
and other Affiliates of LLCP (including, without limitation, LLCP, Inc.)
(collectively, the "LLCP Parties"), from and against all costs, expenses,
liabilities, claims, judgments, damages and losses, including, without
limitation, all reasonable attorneys' fees and expenses and the cost of any
investigation and preparation incurred in connection therewith, incurred in
connection with any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (collectively,
"Liabilities and Costs"), arising out of or in any way related to the fact that
any LLCP Party is or was a director, officer, employee or other agent of the
Company or any subsidiary of the Company, is or was serving as an observer of
the Board, or is or was serving at the request of the Company as a director,
officer, employee, trustee, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise
and, in connection with any LLCP Party serving as such director, officer,
employee or other agent, provided that such LLCP Party acted in good faith and
in a manner he or she reasonably believed to be in the best interests of the
Company.
2.2 Upon request by any LLCP Party, the Company, shall advance (within
five (5) Business Days of such request) any and all expenses, including, without
limitation, any and all reasonable attorneys' fees and the cost of any
investigation and preparation incurred in connection with any matter for which
such LLCP Party is or may be entitled to indemnification hereunder. The Company
shall also indemnify each LLCP Party from and against any and all
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Liabilities and Costs incurred in connection with any claim or action brought to
enforce such LLCP Party's rights under this Section 2, or under Applicable Law
or the Company's charter or bylaws now or hereafter in effect relating to
indemnification, or for recovery under directors' and officers' liability
insurance policies maintained by the Company, regardless of whether such LLCP
Party is ultimately determined to be entitled to such indemnification or
insurance recovery, as the case may be. If, for any reason, the foregoing
indemnification is not available for any reason or is not sufficient to
indemnify and hold the LLCP Parties harmless from all such Liabilities and
Costs, then the Company shall contribute to the amount of all such Liabilities
and Costs paid or payable by any LLCP Party in such proportion as is appropriate
to reflect not only the relative benefits received by the Company, on the one
hand, and LLCP, on the other hand, but also the relative fault of each, as well
as any other equitable considerations. The Company's reimbursement, indemnity
and contribution obligations shall be in addition to any liability the Company
may otherwise have at law or under any other agreement, including, without
limitation, the Securities Purchase Agreement, and such obligations shall
extend, upon the same terms, to all LLCP Parties. This Section 2 shall survive
indefinitely the termination of this Agreement.
2.3 At any time that an LLCP Representative is serving on the Board and
continuing for as long as any claim may be made against the LLCP Representative
during any applicable statute of limitations periods, the Company shall have in
place and shall maintain in force and effect one or more directors and officers
liability insurance policies providing at least $10,000,000 in insurance
coverage for director liability, including coverage for claims under federal and
state securities laws under terms and conditions generally included in such
policies and so long as the Company can obtain such a policy under commercially
reasonable terms (including the premium amount), provided, that if the Company
is unable to obtain at least $10,000,000 in insurance coverage on commercially
reasonable terms, it will obtain such lesser amount as is commercially
reasonable.
3. CO-SALE AGREEMENT.
3.1 If one or more Principal Shareholders or any of their Affiliates
proposes to sell or transfer any shares of equity securities of the Company now
owned or held, directly or indirectly, by it or them ("Co-Sale Shares") in any
transaction (or series of related transactions) that does not constitute a
Public Sale (as such term is defined below) or a Permitted Transfer (as such
term is defined below), such Principal Shareholder or Principal Shareholders
shall promptly notify the Company and LLCP in writing (the "Co-Sale Notice") at
least twenty (20) days prior to the closing of such proposed sale or transfer.
The Co-Sale Notice shall describe in reasonable detail the proposed sale or
transfer, including, without limitation, the number of Co-Sale Shares proposed
to be sold or transferred, the nature of such sale or transfer, the
consideration to be paid and the name and address of each prospective purchaser
or transferee. In the event that the sale or transfer is being made pursuant to
the provisions of Section 3.8, the Notice shall state under which paragraph and
subparagraph the sale or transfer is being made. For purposes of this
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Agreement, (a) the term "Public Sale" shall mean a sale, transfer or other
disposition of Common Stock into the public market in a broker's transaction
within the meaning of Section 4(4) of the Securities Act or in a transaction
directly with a market maker as that term is defined in Section 3(a)(38) of the
Exchange Act in the manner provided for in Rule 144 promulgated under the
Securities Act or in a public offering pursuant to an effective registration
statement under the Securities Act and (b) the term "Permitted Transfer" shall
mean (i) a sale, transfer or series of sales or transfers by Xxxxxxx X. Xxxxxxx
or any of his Affiliates (but this exception shall not apply to the sale,
transfer or series of sales or transfers by Xxxxxxx X. Xxxxxxx of shares held by
Xxxxxxx X. Xxxxxxx and his Affiliates) of up to 15% of the equity securities of
the Company held by Xxxxxxx X. Xxxxxxx or any of his Affiliates on a Fully
Diluted Basis (but this exception shall not apply to shares sold on behalf of
Xxxxxxx X. Xxxxxxx and his Affiliates) on the date of this Agreement, resulting
in gross proceeds to Xxxxxxx X. Xxxxxxx or any of his Affiliates of less than
$2,000,001, (ii) a sale, transfer, or series of sales or transfers by Xxxxxxx X.
Xxxxxxx or any of his Affiliates to the Company in compliance with the terms of
the Subordinated Indebtedness set forth in Sections 10.1 and 10.4 of the
Securities Purchase Agreement or to Xxxxxxx X. Xxxxxxx or any of his
wholly-owned Affiliates or (iii) the sale of shares by Xxxxxxx X. Xxxxxxx
pursuant to the terms of Section 4 of that certain Stock Purchase Agreement
dated as of July 14, 1994 by and between Xxxxxxx X. Xxxxxxx and Xxxxxxx X.
Xxxxxxx (the "Stock Purchase Agreement") in effect on the date hereof or the
sale of shares by Xxxxxxx X. Xxxxxxx to Xxxxxxx X. Xxxxxxx pursuant to the Stock
Purchase Agreement.
3.2 LLCP shall have the right, exercisable upon written notice to the
Principal Shareholder(s) within twenty-five (25) days after receipt of the
Co-Sale Notice, to participate in such sale or transfer on the same terms and
conditions as specified in the Co-Sale Notice. To the extent that LLCP exercises
such right of participation in accordance with the terms and conditions set
forth in this Section 3, the number of Co-Sale Shares that the Principal
Shareholder(s) may sell or transfer in the transaction(s) shall be
correspondingly reduced.
3.3 If there shall be a decrease in the price to be paid by the
proposed purchaser or transferee for the Co-Sale Shares to be purchased from the
price set forth in the Co-Sale Notice, which decrease is acceptable to the
Principal Shareholder(s), or any other material change in the terms or
conditions set forth in the Co-Sale Notice which are less favorable to the
Principal Shareholder(s) but which are acceptable to the Principal
Shareholder(s), the Principal Shareholder(s) shall immediately notify LLCP in
writing of such decrease or other change, and LLCP shall have ten (10) Business
Days from the date of receipt of such written notice to modify the number of
equity securities of the Company it will sell to the purchaser or transferee, as
previously indicated in the written notice delivered by LLCP pursuant to Section
3.2.
3.4 LLCP may sell or transfer all or any portion of equity securities
of the Company acquired from the Company equal to the product of (a) the
aggregate amount of equity securities of the Company covered by the Co-Sale
Notice, multiplied by (b) a fraction, the numerator of
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which is equal to the number of shares of Common Stock, Warrant Shares or other
equity securities acquired from the Company, as applicable, owned by LLCP at the
time of the sale or transfer (collectively, the "LLCP Shares"), and the
denominator of which is the total number of issued and outstanding shares of
Common Stock and LLCP Shares owned by the Principal Shareholders in the
aggregate and LLCP, respectively, immediately prior to the time of the sale or
transfer. In no event shall LLCP be required to make any representation or
warranty in connection with the sale to any prospective purchaser or transferee
other than as to the organization and authority of LLCP and title to the equity
securities to be sold by LLCP.
3.5 LLCP shall effect its participation in the proposed sale or
transfer by promptly delivering to the Principal Shareholder(s) for transfer to
the prospective purchaser or transferee one or more stock certificates, properly
endorsed for transfer, which represent:
(a) the type and number of equity securities acquired from the
Company which LLCP elects to sell; or
(b) that number of Warrant Shares or other equity securities
acquired from the Company held by LLCP which is at such time convertible into
the equity securities which LLCP elects to sell; provided, however, that if the
prospective purchaser or transferee objects to the delivery of Warrant Shares or
other equity securities held by LLCP in lieu of Common Stock, LLCP shall convert
(if convertible in accordance with their terms) such Warrant Shares or other
equity securities held by LLCP into Common Stock and deliver Common Stock. The
Company agrees to make any such conversion concurrent with the actual transfer
of such shares to the purchaser or transferee.
3.6 The stock certificate or certificates that LLCP delivers to the
Principal Shareholder(s) pursuant to this Section 3.5 shall be transferred to
the prospective purchaser or transferee in connection with the consummation of
the sale of the equity securities of the Company pursuant to the terms and
conditions specified in the Co-Sale Notice (as such terms and conditions may be
modified and accepted pursuant to Section 3.3), and the Principal Shareholders
shall concurrently therewith remit to LLCP by wire transfer in immediately
available funds that portion of the sale proceeds to which LLCP is entitled by
reason of LLCP's participation in such sale. To the extent that any prospective
purchaser or transferee prohibits such assignment or otherwise refuses to
purchase shares or other securities from LLCP, the Principal Shareholder(s)
shall not sell to such prospective purchaser or transferee any equity securities
of the Company unless and until, simultaneously with such sale, the Principal
Shareholder(s) shall purchase such shares or other securities from LLCP on terms
and conditions identical to those under which the Principal Shareholder(s) sold
his or its shares (as such terms and conditions may be modified and accepted
pursuant to Section 3.3). Subject to the foregoing sentence, if the Principal
Shareholder(s) do not complete the proposed sale or transfer for any reason, the
Principal Shareholder(s) shall immediately, but in no event in more than two (2)
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business days, return to LLCP all documents (including, without limitation, the
Warrant and all stock certificates, stock assignments and/or powers of attorney)
which LLCP delivered to the Principal Shareholder(s) pursuant to this Section 3
or otherwise in connection with such sale or other transfer.
3.7 The exercise or non-exercise of the rights of LLCP hereunder to
participate in one or more sales of Co-Sale Shares by the Principal
Shareholder(s) shall not adversely affect its rights to participate in
subsequent sales of Co-Sale Shares by the Principal Shareholder(s).
3.8 Prohibited Transfers.
(a) In the event of any purported or actual sale or transfer
(including, without limitation, the entering into of any agreement, arrangement
or understanding to sell) of Co-Sale Shares by any Principal Shareholder in
contravention of the co-sale rights of LLCP hereunder (a "Prohibited Transfer"),
LLCP shall have, in addition to all other rights, powers or remedies available
at law, in equity, under this Agreement or any other Investment Document or
under Applicable Law, the right to exercise the Prohibited Transfer Put (as such
term is defined below), and such Principal Shareholder agrees that he or it
shall be bound by the applicable provisions hereof, to require the party that
entered into such sale or transfer to purchase a number of shares of equity
securities of the Company equal to the number of shares of equity securities
that LLCP would have been entitled to sell under Section 3.4, had the Prohibited
Transfer been effective in accordance and in compliance with the terms of
Section 3.1 through Section 3.6.
(b) In the event of any Prohibited Transfer by a Principal
Shareholder:
(i) The Company shall, upon the request of LLCP,
instruct the Company's transfer agent not to enter such Prohibited
Transfer on the stock ledger or other similar records of the Company;
and
(ii) LLCP may exercise a right (the "Prohibited
Transfer Put") to require such Principal Shareholder to purchase a
number of shares of equity securities of the Company equal to the
number of shares LLCP would have been entitled to sell to the purchaser
under this Section 3 had the Prohibited Transfer been effected pursuant
to and in compliance with the terms hereof. Such sale shall be made on
the following terms and conditions:
(A) The price per share at which shares are
to be sold to such Principal Shareholder shall be equal to the
price per share paid by the purchaser to such Principal
Shareholder in the Prohibited Transfer. Such Principal
Shareholder shall also reimburse LLCP for any and all fees and
expenses, including attorneys,
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accountants and other expenses, incurred pursuant to the
exercise or attempted exercise of LLCP's rights under
Section 3;
(B) Within thirty (30) days after the later
of the dates on which LLCP (x) received notice of the
Prohibited Transfer or (y) otherwise became aware of the
Prohibited Transfer, LLCP shall, if exercising the Prohibited
Transfer Put, deliver to such Principal Shareholder the
certificate or certificates representing the shares to be
sold, each certificate to be properly endorsed for transfer;
(C) Such Principal Shareholder shall,
immediately upon receipt of the certificate or certificates
(but no later than one (1) day after receipt of such
certificate or certificates) representing the shares to be
sold by LLCP, pay to LLCP the aggregate purchase price
therefor and the amount of reimbursable fees and expenses, as
specified in Section 3.9(b)(ii)(A), by wire transfer in
immediately available funds; and
(D) Notwithstanding the foregoing, the
Company agrees that it will not effect such a transfer nor
will it treat any alleged transferee as the holder of such
shares without the prior written consent of LLCP.
4. PREEMPTIVE RIGHTS.
4.1 The Company hereby grants to LLCP the right to purchase up to
LLCP's pro rata share of any New Securities (as such term is defined below)
which the Company may from time to time propose to sell and issue, and the
Company shall not issue or sell any New Securities without first complying with
the provisions of this Section 4. For purposes of this Section 4.1, LLCP's pro
rata share shall be equal to a percentage based on a fraction, (a) the numerator
of which is equal to the number of shares of Common Stock held by LLCP or
issuable upon the exercise of the Warrants (including conversion of Preferred
Stock issuable upon exercise of the Warrants) or other Equity Rights of the
Company acquired from the Company owned or held by LLCP immediately prior to the
issuance of the New Securities, and (b) the denominator of which is equal to the
sum of the total number of shares of Common Stock (including shares of Common
Stock issuable upon conversion of the Preferred Stock) outstanding immediately
prior to the issuance of the New Securities.
4.2 The term "New Securities" shall mean any Capital Stock (including
Common Stock or preferred stock) of the Company whether now authorized or not,
and any Equity Rights of the Company, including the issuance of any treasury
stock of the Company or any Common Stock repurchased by the Company pursuant to
the Tender Offer; provided, however, that the term New Securities does not
include (a) any securities issued in a public offering pursuant to an
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effective registration statement under the Securities Act, so long as the
Company receives proceeds in such public offering (net of selling commissions
and underwriting discounts) of at least $20,000,000 and so long as the
securities sold in such public offering are listed on Nasdaq or any other
national securities exchange, (b) shares of Common Stock or Option Rights
outstanding on the date hereof issued to employees of the Company as part of an
employee incentive plan approved by the majority of the shareholders of the
Company; or (c) securities issued pursuant to the Stock Appreciation Rights
Plan, provided, that such securities are issued pursuant to all of the
requirements in the definition of Stock Appreciation Rights Plan as set forth in
Section 1.1 of the Securities Purchase Agreement. Notwithstanding the foregoing,
the exemption described in Section 4.2(b) above shall not apply to any shares
issued, issuable, reserved for issuance or otherwise committed to be issued
under the Stock Appreciation Rights Plan to Xxxxxxx X. Xxxxxxx or any of his
Affiliates, unless (A) such issuance, reservation or other commitment meets the
requirements of the definition of Stock Appreciation Rights Plan and (B) the
Company issues to, or otherwise offers LLCP the same economic
benefit/opportunity offered to Xxxxxxx X. Xxxxxxx or any of his Affiliates,
including the same number and type of securities upon the same terms and
conditions as those offered to Xxxxxxx X. Xxxxxxx or any of his Affiliates.
4.3 If the Company proposes to undertake an issuance of New Securities,
it shall give LLCP written notice (an "Issuance Notice") of its intention,
describing the number and type of New Securities, and their proposed offer price
and the general terms upon which the Company proposes to issue the same. LLCP
shall have thirty (30) days after its receipt of the Issuance Notice to agree to
purchase up to LLCP's pro rata share of such New Securities for the price and
upon the terms specified in the notice by giving written notice to the Company
(the "Acceptance Notice") and indicating therein the number of New Securities to
be purchased. The Company shall, at the closing of the issuance of the New
Securities, sell to LLCP such number of New Securities as LLCP shall have agreed
to purchase in the Acceptance Notice.
5. Certain Transfers.
5.1 Transfers by Xxxxxxx X. Xxxxxxx. At any time prior to June 30,
2001, Xxxxxxx X. Xxxxxxx shall comply with the terms of Section 5.7 of the
Securities Purchase Agreement. At any time after June 30, 2001, Xxxxxxx X.
Xxxxxxx may sell up to an aggregate of up to one-third (1/3) of the equity
securities of the Company held by him on the date hereof which may be sold in a
private placement sale only, provided that such sale is approved by Xxxxxxx X.
Xxxxxxx pursuant to the Stock Purchase Agreement, subject to the right of LLCP
to participate in such sale pursuant to Section 3 of this Agreement. If Xxxxxxx
X. Xxxxxxx proposes to sell in all sales completed after the date hereof more
than one-third (1/3) of the equity securities of the Company held by him on the
date hereof which may be sold in a private placement sale only, the terms,
conditions and proposed transferee in such sale shall be subject to the approval
right of LLCP, which approval shall not be unreasonably withheld and such sale
shall be subject to the right of
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LLCP to participate in such sale pursuant to Section 3 of this Agreement.
XXXXXXX X. XXXXXXX'X OBLIGATIONS UNDER THIS SECTION 5.1 (BUT NOT SECTION 3)
SHALL TERMINATE SIX (6) MONTHS AFTER THE NOTE IS INDEFEASIBLY PAID IN FULL OR
OTHERWISE SATISFIED IN FULL.
5.2 Transfers by Xxxxxxx X. Xxxxxxx. At any time prior to June 30,
2001, Xxxxxxx X. Xxxxxxx shall comply with the terms of Section 5.7 of the
Securities Purchase Agreement. At any time after the date that is six (6) months
after the date that the Note is indefeasibly paid in full or otherwise satisfied
in full, Xxxxxxx X. Xxxxxxx may sell the equity securities of the Company then
held by him in a private placement sale OR IN A PUBLIC SALE, subject to the
right of LLCP to participate in such sale pursuant to Section 3 of this
Agreement.
6. MISCELLANEOUS.
6.1 Legends. The Company shall cause all certificates representing
shares of Capital Stock of the Company now owned or held or hereafter acquired
by the Principal Shareholders to be stamped or endorsed thereon a legend
substantially in the following form (in addition to any legends required under
applicable state securities laws or take such other actions (including without
limitation placing such stop order with the Company's transfer agent) to effect
the restrictions set forth herein with respect to such Capital Stock):
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF AN INVESTOR RIGHTS AGREEMENT DATED AS OF NOVEMBER __,
2000, BY AND AMONG THE HOLDER, THE COMPANY AND CERTAIN OTHER
PERSONS. COPIES OF SUCH AGREEMENT MAY BE OBTAINED FROM THE COMPANY
UPON WRITTEN REQUEST.
6.2 Stock Transfer Records. The Company shall make appropriate
notations in its stock transfer records of the restrictions on transfer provided
for in this Agreement and shall not record any transfers of capital stock not
made in strict compliance with the terms of this Agreement. The Company
acknowledges that any such transfer shall constitute an Event of Default under
Section 11.1 of the Securities Purchase Agreement.
6.3 Successors and Assigns. The rights and obligations of LLCP under
this Agreement shall be freely assignable in connection with any transfer of the
Warrants or any portion thereof or of any shares of Capital Stock issued upon
the exercise thereof in whole or in part; provided, however, that LLCP may not
transfer such rights and obligations to a Competitor, and may not transfer the
rights of LLCP contained in Section 1 to any assignee. Any assignee of such
rights shall be entitled to all of the benefits of this Agreement as if such
assignee were an
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original party hereto. This Agreement shall be binding upon, and shall inure to
the benefit of, each of the parties and their respective successors and
permitted assigns.
6.4 Entire Agreement. This Agreement constitutes the full and entire
agreement and understanding among the parties with respect to the subject matter
hereof and supersedes all prior oral and written, and all contemporaneous oral,
agreements and understandings relating to the subject matter hereof.
6.5 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if transmitted by telecopier with
receipt acknowledged, or upon delivery, if delivered personally or by recognized
commercial courier with receipt acknowledged, or upon the expiration of 72 hours
after mailing, if mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(1) If to LLCP, to:
Xxxxxx Xxxxxxxxx Capital Partners II, L.P.
c/o Levine Xxxxxxxxx Capital Partners, Inc.
000 Xxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, President
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxx & XxXxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(2) If to the Company or any Principal
Shareholder, at:
The Quizno's Corporation
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Legal Department
Telephone: (000) 000-0000
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Telecopier: (000) 000-0000
or at such other address or addresses as LLCP, such assignee, the Company or any
Principal Shareholder, as the case may be, may specify by written notice given
in accordance with this Section 6.5.
6.6 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.7 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be an original, but all of
which together shall constitute one instrument.
6.8 Descriptive Headings, Construction and Interpretation. The
descriptive headings of the several paragraphs of this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
are not to be considered in construing or interpreting this Agreement. All
section, preamble, recital and party references are to this Agreement unless
otherwise stated. No party, nor its counsel, shall be deemed the drafter of this
Agreement for purposes of construing the provisions of this Agreement, and all
provisions of this Agreement shall be construed in accordance with their fair
meaning, and not strictly for or against any party.
6.9 Waivers and Amendments. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally or by course of
dealing, but only by a statement in writing signed by all of the parties.
6.10 Remedies. In the event that the Company or any Principal
Shareholder fails to observe or perform any covenant or agreement to be observed
or performed under this Agreement, LLCP 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 Agreement or for an injunction against the breach of
any such term or in aid of the exercise of any power granted in this Agreement
or to enforce any other legal or equitable right of LLCP, or to take any one or
more of such actions. The Company and the Principal Shareholders hereby agree
that LLCP shall not be required or otherwise obligated to, and hereby waive any
right to demand that LLCP, post any performance or other bond in connection with
the enforcement of its rights and remedies hereunder. The Company agrees to pay
all fees, costs, and expenses, including, without limitation, fees and expenses
of attorneys, accountants and other experts retained by LLCP, and all fees,
costs and expenses of appeals, incurred or expended by LLCP in connection with
the enforcement of this Agreement or the collection of any sums due hereunder,
whether or not suit is commenced. None of the rights, powers or remedies
conferred under this Agreement shall be
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mutually exclusive, and each such right, power or remedy shall be cumulative and
in addition to any other right, power or remedy whether conferred by this
Agreement or now or hereafter available at law, in equity, by statute or
otherwise.
6.11 Principal Shareholders.
(a) Representations and Covenants. Each Principal Shareholder
hereby represents and warrants to LLCP that (a) he has the sole power and
authority to execute, deliver and perform his obligations under this Agreement,
without obtaining the Consent of any other Person, (b) this Agreement has been
duly executed and delivered by such Principal Shareholder and constitutes the
legal, valid and binding obligation of such Principal Shareholder, enforceable
against such Principal Shareholder in accordance with its terms, and (c) the
execution and delivery of this Agreement by such Principal Shareholder, and the
performance by such Principal Shareholder of his obligations hereunder, does not
and will not breach or violate any agreement, instrument or other document to
which such Principal Shareholder is a party or to which such Principal
Shareholder's assets are bound or any Applicable Laws. In addition, each
Principal Shareholder hereby represents and warrants to LLCP that he has
carefully read this Agreement and has had sufficient time and opportunity to
consider its terms and to obtain legal advice, if desired, and he fully
understands the final and binding effect of this Agreement. Each Principal
Shareholder hereby covenants and agrees with LLCP that he will not sell,
transfer or otherwise dispose of in any transaction which does not constitute a
Permitted Transfer of any shares of Capital Stock of the Company beneficially
owned or held by him without the prior written consent of LLCP, other than
transfers permitted by Section 5 of this Agreement, and other than in a Public
Sale completed after consummation of a public offering by the Company pursuant
to a Registration Statement (as defined in the Registration Rights Agreement) OR
IN A PUBLIC SALE COMPLETED SIX (6) MONTHS AFTER THE NOTE IS INDEFEASIBLY PAID IN
FULL OR OTHERWISE SATISFIED IN FULL. Each Principal Shareholder hereby covenants
and agrees with LLCP that he shall not exchange his shares of Capital Stock for
equity securities of an entity formed by the Company in connection with the
Tender Offer Merger unless such exchange complies with the requirements set
forth in Section 4.4(a) of the Warrants. In addition, each Principal Shareholder
hereby covenants and agrees with LLCP that, at such time as the Warrant Shares
represent more than 19.9% of the outstanding Common Stock or more than 19.9% of
the outstanding voting power of the Company, and if required by Applicable Laws
and NASD Rules or rules of the New York Stock Exchange, American Stock Exchange
or other securities exchange or system, as applicable, he will vote his shares
to approve the issuance of the Warrant Shares to LLCP in accordance with the
provisions of such Applicable Laws and NASD Rules or rules of the New York Stock
Exchange, American Stock Exchange or other securities exchange or system, as
applicable.
(b) Capacities. Notwithstanding anything to the contrary
contained in this Agreement, the parties acknowledge that the Principal
Shareholders have signed this Agreement
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in their individual capacities, and not as representatives of the Company,
solely for the purposes of the provisions of Section 1.1 regarding their
agreement to vote, Section 3 regarding Co-Sale and other matters, for the
purposes of making the representations and warranties set forth in this Section
6.11 and for the purposes of the applicable miscellaneous provisions set forth
in this Section 6, and shall have no personal liability for any other provisions
contained herein.
(c) Exception. The representations and covenants made by
Xxxxxxx X. Xxxxxxx in this Section 6.11, and the provisions of this Agreement
with respect to the Common Stock or other equity securities or options
convertible into Common Stock owned by Xxxxxxx X. Xxxxxxx shall be subject and
subordinate to (i) the Margin Agreement between Xxxxxxx X. Xxxxxxx and Xxxxxx
Xxxxx Xxxxx dated August [8], 2000, (ii) any successor margin agreement,
provided, however, that the loan amount of such successor margin agreement shall
not exceed the loan amount of the original margin agreement, or (iii) the
Separation Agreement dated on or about August 16, 2000 between Xxxxxxx X.
Xxxxxxx and Xxxxx Xxxxxxx.
6.12 Confidentiality. LLCP acknowledges and agrees that it and its
agents and representatives, including the LLCP Representative, (a) shall keep
all information it obtains hereunder confidential, (b) shall not disclose any
such information to any of its employees or other persons, other than those who
have a need to know and are subject to confidentiality obligations substantially
similar to those provided herein, (c) shall not use any such information,
directly or indirectly, for its own benefit or the benefit of any affiliate,
including the trading of any securities or acting as a "tipper" in connection
therewith, and (d) shall take all reasonable steps necessary to prevent any
breach of the foregoing obligations by any of its affiliates, employees,
representative or agents who receive or have access to such information;
provided, however, that this Section 6.12 shall not apply to (v) information
already in the public domain, (w) disclosure at the request of any applicable
regulatory authority or in connection with an examination of the Company by that
authority, (x) pursuant to subpoena or other court process, (y) when required to
do so in accordance with any applicable law, and (z) to LLCP's limited partners,
officers, agents, representatives, independent auditors and other professional
advisors provided such persons acknowledge and are bound by LLCP's
confidentiality obligations hereunder.
6.13 Governing Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE (WITHOUT
REGARD TO THE CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
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6.14 Consent to Jurisdiction and Venue. THE COMPANY, EACH PRINCIPAL
SHAREHOLDER AND LLCP HEREBY CONSENTS AND AGREES THAT ALL ACTIONS, SUITS OR OTHER
PROCEEDINGS ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT SHALL BE TRIED AND LITIGATED IN STATE OR FEDERAL COURTS
LOCATED IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
WHICH COURTS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY AND ALL
CLAIMS, CONTROVERSIES AND DISPUTES ARISING OUT OF THIS AGREEMENT OR ANY OTHER
INVESTMENT DOCUMENT OR ANY OTHER MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OTHER INVESTMENT DOCUMENT. NOTWITHSTANDING THE FOREGOING,
NOTHING CONTAINED IN THIS SECTION 6.14 SHALL PRECLUDE LLCP FROM BRINGING ANY
ACTION, SUIT OR OTHER PROCEEDING IN THE COURTS OF ANY OTHER LOCATION WHERE THE
COMPANY OR ANY OF ITS ASSETS OR THE COLLATERAL MAY BE FOUND OR LOCATED OR TO
ENFORCE ANY JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LLCP.
THE COMPANY, EACH PRINCIPAL SHAREHOLDER AND LLCP HEREBY (A)
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION, SUIT OR OTHER PROCEEDING COMMENCED IN ANY
SUCH COURT, (B) WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR ANY OBJECTION THAT SUCH PERSON MAY HAVE BASED UPON LACK OF
PERSONAL JURISDICTION OR IMPROPER VENUE AND (C) CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. THE COMPANY,
EACH PRINCIPAL SHAREHOLDER AND LLCP HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT OR OTHER PROCESS ISSUED IN ANY SUCH ACTION, SUIT OR OTHER
PROCEEDING AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE
ADDRESS SET FORTH IN SECTION 6.5 (NOTICES) AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH PERSON'S ACTUAL RECEIPT THEREOF OR
FIVE DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.
TO THE EXTENT PERMITTED UNDER THE APPLICABLE LAWS OF ANY SUCH
JURISDICTION, THE COMPANY AND EACH PRINCIPAL SHAREHOLDER HEREBY EXPRESSLY
WAIVES, IN RESPECT OF ANY SUCH ACTION, SUIT OR OTHER PROCEEDING, THE
JURISDICTION OF ANY OTHER COURT OR COURTS THAT NOW OR HEREAFTER, BY REASON OF
SUCH
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PERSON'S PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
6.15 Term. This Agreement will be effective contemporaneous with the
Closing of the Securities Purchase Agreement. Provided the Note has been
indefeasibly paid or otherwise satisfied at such time, the rights granted to
LLCP under this Agreement shall terminate at such time as LLCP no longer owns or
holds, or has the right to acquire any shares of Common Stock of the Company,
including the right to acquire from the Company, directly or indirectly, at
least two percent (2.0%) of the Common Stock on a Fully Diluted Basis.
6.16 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.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the date
first written above.
PRINCIPAL SHAREHOLDERS
------------------------------
XXXXXXX X. XXXXXXX, INDIVIDUALLY AND AS CO-TRUSTEE
ON BEHALF OF THE VOTING TRUST
------------------------------
XXXXXXX X. XXXXXXX, INDIVIDUALLY AND AS CO-TRUSTEE
ON BEHALF OF THE VOTING TRUST
COMPANY
THE QUIZNO'S CORPORATION, a Colorado corporation
By:___________________________
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
LLCP
XXXXXX XXXXXXXXX CAPITAL PARTNERS II, L.P., a
California limited partnership
By: LLCP California Equity Partners II, L.P., a
California limited partnership, its General
Partner
By: Xxxxxx Xxxxxxxxx Capital Partners, Inc.,
a California corporation, its General
Partner
By:____________________________
Xxxxxx X. Xxxxxxxxx
Chief Executive Officer
