Exhibit 2
FORM OF WARRANT
THIS SENIOR SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE
144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION.
COSI, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
Date of Issuance: November 7, 2001 Certificate No. MW-1
FOR VALUE RECEIVED, Cosi, Inc., a Delaware corporation (the
"Company"), hereby grants to ZAM HOLDINGS, L.P. or its registered assigns (the
"Registered Holder") the right to purchase from the Company 87,853 shares of
Warrant Stock at a price per share of $0.01 (as adjusted from time to time
hereunder, the "Exercise Price"). This Warrant is one of several warrants
(collectively, the "Warrants") issued pursuant to the terms of the Senior
Subordinated Note and Warrant Purchase Agreement, dated as of November 7, 2001
(the "Purchase Agreement"), between the Company and certain investors. Certain
capitalized terms used herein are defined in Section 4 hereof. The amount and
kind of securities obtainable pursuant to the rights granted hereunder and the
purchase price for such securities are subject to adjustment pursuant to the
provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
(a) Exercise Period. Subject to paragraph 1(b) hereof, the
Registered Holder may exercise, in whole or in part (but not as to a
fractional share of Warrant Stock), the purchase rights represented by this
Warrant at any time and from time to time after the Date of Issuance to and
including November 6, 2006 (the "Exercise Period"). The Company shall give the
Registered Holder written notice of the expiration of the Exercise Period at
least 30 days but not more than 90 days prior to the end of the Exercise
Period.
(b) Mandatory Exercise.
(i) The Company may at any time require the
exercise of all of the purchase rights represented by this Warrant if
the Company is at such time effecting a Qualified Public Offering (as
such term is defined in paragraph 6H of the Company's Certificate of
Incorporation).
(ii) Notwithstanding any other provision hereof, if
a mandatory exercise of the purchase rights represented by this
Warrant is to be made in connection with a Qualified Public Offering,
such exercise shall be conditioned upon the consummation of such
transaction.
(iii) The Company shall deliver written notice of
any such mandatory exercise no later than 30 days prior to the
Qualified Public Offering. At any time prior to the consummation of
any such Qualified Public Offering, the Registered Holder may, by
delivery of written notice to the Company, elect to permit the
purchase rights represented by this Warrant to lapse, and as a result
of any such written notice, the purchase rights represented by this
Warrant shall be deemed to be extinguished and no such mandatory
exercise shall be deemed to have occurred.
(c) Exercise Procedure.
(i) This Warrant shall be deemed to have been
exercised when the Company has received all of the following items
(the "Exercise Time")
(1) a completed Exercise Agreement, as
described in paragraph 1(d) below, executed by the Person exercising
all or part of the purchase rights represented by this Warrant (the
"Purchaser");
(2) this Warrant; and
(3) either (1) a check payable to the Company
in an amount equal to the product of the Exercise Price multiplied by
the number of shares of Warrant Stock being purchased upon such
exercise (the "Aggregate Exercise Price"), (2) the surrender to the
Company of debt or equity securities of the Company or any of its
wholly-owned Subsidiaries having a Market Price equal to the
Aggregate Exercise Price of the Warrant Stock being purchased upon
such exercise (provided that for purposes of this subparagraph, the
Market Price of any note or other debt security or any preferred
stock shall be deemed to be equal to the aggregate outstanding
principal amount or liquidation value thereof plus all accrued and
unpaid interest thereon or accrued or declared and unpaid dividends
thereon) or (3) a written notice to the Company that the Purchaser is
exercising the Warrant (or a portion thereof) by authorizing the
Company to withhold from issuance a number of shares of Warrant Stock
issuable upon such exercise of the Warrant which when multiplied by
the Market Price of the Warrant Stock is equal to the Aggregate
Exercise Price (and such withheld shares shall no longer be issuable
under this Warrant).
(ii) Certificates for shares of Warrant Stock
purchased upon exercise of this Warrant shall be delivered by the
Company to the Purchaser within five business days after the date of
the Exercise Time. Unless this Warrant has expired or all of the
purchase rights represented hereby have been exercised, the Company
shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which
have not expired or been exercised and shall, within such five-day
period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Warrant Stock issuable upon the exercise
of this Warrant shall be deemed to have been issued to the Purchaser
at the Exercise Time, and the Purchaser shall be deemed for all
purposes to have become the record holder of such Warrant Stock at
the Exercise Time.
(iv) The issuance of certificates for shares of
Warrant Stock upon exercise of this Warrant shall be made without
charge to the Registered Holder or the Purchaser for any issuance tax
in respect thereof or other cost incurred by the Company in
connection with such exercise and the related issuance of shares of
Warrant Stock. Each share of Warrant Stock issuable upon exercise of
this Warrant shall, upon payment of the Exercise Price therefor, be
fully paid and nonassessable and free from all liens and charges with
respect to the issuance thereof.
(v) The Company shall not close its books against
the transfer of this Warrant or of any share of Warrant Stock issued
or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company
shall from time to time take all such action as may be necessary to
assure that the par value per share of the unissued Warrant Stock
acquirable upon exercise of this Warrant is at all times equal to or
less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with
any Registered Holder or Purchaser required to make any governmental
filings or obtain any governmental approvals prior to or in
connection with any exercise of this Warrant (including, without
limitation, making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof,
if an exercise of any portion of this Warrant is to be made in
connection with a registered public offering or the sale of the
Company, the exercise of any portion of this Warrant may, at the
election of the holder hereof, be conditioned upon the consummation
of the public offering or the sale of the Company in which case such
exercise shall not be deemed to be effective until the consummation
of such transaction.
(viii) The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Warrant
Stock solely for the purpose of issuance upon the exercise of the
Warrants, such number of shares of Warrant Stock issuable upon the
exercise of all outstanding Warrants. The Company shall take all such
actions as may be necessary to assure that all such shares of Warrant
Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Warrant Stock may be listed
(except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance). The Company shall
not take any action which would cause the number of authorized but
unissued shares of Warrant Stock to be less than the number of such
shares required to be reserved hereunder for issuance upon exercise
of the Warrants.
(d) Exercise Agreement. Upon any exercise of this Warrant,
the Exercise Agreement shall be substantially in the form set forth in Annex I
hereto, except that if the shares of Warrant Stock are not to be issued in the
name of the Person in whose name this Warrant is registered, the Exercise
Agreement shall also state the name of the Person to whom the certificates for
the shares of Warrant Stock are to be issued, and if the number of shares of
Warrant Stock to be issued does not include all the shares of Warrant Stock
purchasable hereunder, it shall also state the name of the Person to whom a
new Warrant for the unexercised portion of the rights hereunder is to be
delivered. Such Exercise Agreement shall be dated the actual date of execution
thereof.
(e) Fractional Shares. If a fractional share of Warrant
Stock would, but for the provisions of paragraph 1(a), be issuable upon
exercise of the rights represented by this Warrant, the Company shall, within
five business days after the date of the Exercise Time, deliver to the
Purchaser a check payable to the Purchaser in lieu of such fractional share in
an amount equal to the difference between the Market Price of such fractional
share as of the date of the Exercise Time and the Exercise Price of such
fractional share.
Section 2. Adjustment of Exercise Price and Number of Shares. In
order to prevent dilution of the rights granted under this Warrant, the
Exercise Price shall be subject to adjustment from time to time as provided in
this Section 2, and the number of shares of Warrant Stock obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time as
provided in this Section 2.
(a) Adjustment of Exercise Price and Number of Shares upon
Issuance of Common Stock.
(i) If and whenever the Company issues or sells, or
in accordance with paragraph 2(b) is deemed to have issued or sold,
any shares of Common Stock for a consideration per share less than
(A) $0.01 (as such amount is Proportionately adjusted for stock
splits, stock combinations, stock dividends and recapitalizations
affecting the Common Stock after the Date of Issuance, the "Base
Price") or (B) the Market Price of the Common Stock determined as of
the date of such issue or sale, then immediately upon such issue or
sale or deemed issue or sale the Exercise Price shall be reduced to
whichever of the following Exercise Prices is lower:
(1) the Exercise Price determined by multiplying
the Exercise Price in effect immediately prior to such issue or sale
by a fraction, the numerator of which shall be the sum of (1) the
number of shares of Common Stock Deemed Outstanding immediately prior
to such issue or sale multiplied by the Base Price of the Common
Stock determined as of the date of such issue or sale, plus (2) the
consideration, if any, received by the Company upon such issue or
sale, and the denominator of which shall be the product derived by
multiplying the Base Price of the Common Stock determined as of the
date of such issue or sale by the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale; or
(2) the Exercise Price determined by multiplying
the Exercise Price in effect immediately prior to such issue or sale
by a fraction, the numerator of which shall be the sum of (1) the
number of shares of Common Stock Deemed Outstanding immediately prior
to such issue or sale multiplied by the Market Price of the Common
Stock determined as of the date of such issuance of sale, plus (2)
the consideration, if any, received by the Company upon such issue or
sale, and the denominator of which shall be the product derived by
multiplying the Market Price of the Common Stock determined as of the
date of such issue or sale by the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale.
(ii) Upon each such adjustment of the Exercise
Price hereunder, the number of shares of Warrant Stock acquirable
upon exercise of this Warrant shall be adjusted to the number of
shares determined by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of
Warrant Stock acquirable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(iii) Notwithstanding the foregoing, there shall be
no adjustment to the Exercise Price or the number of shares of
Warrant Stock obtainable upon exercise of this Warrant as a result of
(A) any issue or sale (or deemed issue or sale) of shares of Common
Stock to employees, directors or consultants of the Company and its
Subsidiaries pursuant to stock option plans and stock ownership plans
approved by the Company's board of directors (including all such
stock options and other purchase rights outstanding as of the date of
the Purchase Agreement); or (B) with respect to any of the
Corporation's stock options outstanding as of the date of the
Purchase Agreement, any reduction of the exercise prices thereof to
an exercise price per share of Common Stock not less than $0.01 per
share (as such per share price is proportionately adjusted for
subsequent stock splits, combinations and dividends affecting the
Common Stock); or (C) any issue or sale (or deemed issue or sale) of
shares of Common Stock approved by the Company's board of directors
and in accordance with the Series C Covenants (including all Common
Stock Deemed Outstanding as of the date of the Purchase Agreement).
(b) Effect on Exercise Price of Certain Events. For purposes
of determining the adjusted Exercise Price under paragraph 2(a), the following
shall be applicable:
(i) Issuance of Rights or Options. If the Company
in any manner grants or sells any Options and the price per share for
which Common Stock is issuable upon the exercise of such Options, or
upon conversion or exchange of any Convertible Securities issuable
upon exercise of such Options, is less than (a) the Base Price in
effect immediately prior to the time of the granting or sale of such
Options or (b) the Market Price determined as of such time, then the
total maximum number of shares of Common Stock issuable upon the
exercise of such Options, or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the
exercise of such Options, shall be deemed to be outstanding and to
have been issued and sold by the Company at such time for such price
per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities" is determined
by dividing (A) the total amount, if any, received or receivable by
the Company as consideration for the granting or sale of such
Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such
Options, plus in the case of such Options which are exercisable into
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the issuance or
sale of such Convertible Securities and the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the
exercise of such Options. No further adjustment of the Exercise Price
shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon the exercise of such Options or upon
the actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities and
the price per share for which Common Stock is issuable upon
conversion or exchange thereof is less than (a) the Base Price in
effect immediately prior to the time of such issue or sale or (b) the
Market Price determined as of such time, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For the
purposes of this paragraph, the "price per share for which Common
Stock is issuable upon conversion or exchange thereof" is determined
by dividing (A) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment of the Exercise Price
shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and if any
such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Exercise Price
had been or are to be made pursuant to other provisions of this
paragraph (ii), no further adjustment of the Exercise Price shall be
made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If
any of (a) the purchase price provided for in any Options, (b) the
additional consideration, if any, payable upon the issue, conversion
or exchange of any Convertible Securities, or (c) the rate at which
any Convertible Securities are convertible into or exchangeable for
Common Stock changes at any time, then the Exercise Price in effect
at the time of such change shall be adjusted immediately to the
Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of shares of Warrant Stock shall be
correspondingly adjusted. For purposes of this paragraph 2(b), if the
terms of any Option or Convertible Security which was outstanding as
of the date of issuance of this Warrant are changed in the manner
described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon
exercise, conversion or exchange thereof shall be deemed to have been
issued as of the date of such change; provided that no such change
shall at any time cause the Exercise Price hereunder to be increased.
(iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the
termination of any right to convert or exchange any Convertible
Securities without the exercise of such Option or right, the Exercise
Price then in effect and the number of shares of Warrant Stock
acquirable hereunder shall be adjusted immediately to the Exercise
Price and the number of shares which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued. For purposes of this
paragraph 2(b), the expiration or termination of any Option or
Convertible Security which was outstanding as of the date of issuance
of this Warrant shall not cause the Exercise Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms
of such Option or Convertible Security caused it to be deemed to have
been issued after the date of issuance of this Warrant.
(v) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or sold or
deemed to have been issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the
Company therefor (net of non-customary discounts, commissions and
related expenses). In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount
of consideration received by the Company shall be the Market Price
thereof as of the date of receipt. In case any Common Stock, Options
or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the
Company is the surviving entity the amount of consideration therefor
shall be deemed to be the fair value of such portion of the net
assets and business of the non-surviving entity as is attributable to
such Common Stock, Options or Convertible Securities, as the case may
be. The fair value of any consideration other than cash or securities
shall be determined jointly by the Company and the Registered Holders
of Warrants representing a majority of the shares of Warrant Stock
obtainable upon exercise of such Warrants. If such parties are unable
to reach agreement within a reasonable period of time, such fair
value shall be determined by an appraiser selected by the Company and
approved by the Registered Holders of Warrants representing a
majority of the shares of Warrant Stock obtainable upon exercise of
such Warrants (such approval not to be unreasonably withheld). The
determination of such appraiser shall be final and binding on the
Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid by the Company.
(vi) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of
the Company, together comprising one integrated transaction in which
no specific consideration is allocated to such Options by the parties
thereto, the Options shall be deemed to have been issued without
consideration.
(vii) Treasury Shares. The number of shares of
Common Stock outstanding at any given time does not include shares
owned or held by or for the account of the Company or any Subsidiary,
and the disposition of any shares so owned or held shall be
considered an issue or sale of Common Stock.
(viii) Record Date. If the Company takes a record
of the holders of Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (B) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(c) Subdivision or Combination of Common Stock. If the
Company at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares
of Common Stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of shares of Warrant Stock obtainable upon exercise of this Warrant
shall be proportionately increased. If the Company at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately
increased and the number of shares of Warrant Stock obtainable upon exercise
of this Warrant shall be proportionately decreased.
(d) Reorganization, Reclassification, Consolidation, Merger
or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, which in each case is effected in such a way that
the holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change." Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance satisfactory to the Registered Holders of the
Warrants representing a majority of the Warrant Stock obtainable upon exercise
of all Warrants then outstanding) to insure that each of the Registered
Holders of the Warrants shall thereafter have the right to acquire and
receive, in lieu of or addition to (as the case may be) the shares of Warrant
Stock immediately theretofore acquirable and receivable upon the exercise of
such holder's Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Warrant Stock immediately theretofore acquirable and receivable upon exercise
of such holder's Warrant had such Organic Change not taken place. In any such
case, the Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants representing a majority
of the Warrant Stock obtainable upon exercise of all Warrants then
outstanding) with respect to such holders' rights and interests to insure that
the provisions of this Section 2 and Section 3 hereof shall thereafter be
applicable to the Warrants (including, in the case of any such consolidation,
merger or sale in which the successor entity or purchasing entity is other
than the Company, an immediate adjustment of the Exercise Price to the value
for the Common Stock reflected by the terms of such consolidation, merger or
sale, and a corresponding immediate adjustment in the number of shares of
Warrant Stock acquirable and receivable upon exercise of the Warrants, if the
value so reflected is less than the Exercise Price in effect immediately prior
to such consolidation, merger or sale). The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor entity (if other than the Company) resulting from consolidation or
merger or the entity purchasing such assets assumes by written instrument (in
form and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Warrant Stock obtainable upon exercise of all
of the Warrants then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.
(e) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided
for by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Company's board of directors shall make an appropriate
adjustment in the Exercise Price and the number of shares of Warrant Stock
obtainable upon exercise of this Warrant so as to protect the rights of the
holders of the Warrants; provided that no such adjustment shall increase the
Exercise Price or decrease the number of shares of Warrant Stock obtainable as
otherwise determined pursuant to this Section 2.
(f) Notices.
(i) Immediately upon any adjustment of the Exercise
Price, the Company shall give written notice thereof to the
Registered Holder, setting forth in reasonable detail and certifying
the calculation of such adjustment.
(ii) The Company shall give written notice to the
Registered Holder at least 20 days prior to the date on which the
Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to
any pro rata subscription offer to holders of Common Stock or (C) for
determining rights to vote with respect to any Organic Change,
dissolution or liquidation.
(iii) The Company shall also give written notice to
the Registered Holders at least 20 days prior to the date on which
any Organic Change, dissolution or liquidation shall take place.
Section 3. Participating Dividends. If the Company declares or pays
any dividends upon the Common Stock (whether payable in cash, securities or
other property) other than dividends payable solely in shares of Common Stock,
the Company shall also declare and pay to the Registered Holder of this
Warrant at the same time that it declares and pays such dividends to the
holders of the Common Stock, the dividends which would have been declared and
paid with respect to the Common Stock issuable upon exercise of this Warrant
had this Warrant been fully exercised immediately prior to the record date for
such dividend, or if no record date is fixed, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined.
Section 4. Definitions. The following terms have meanings set forth
below:
"Common Stock" means, collectively, the Company's Common
Stock and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Common Stock Deemed Outstanding" means, at any given time,
without duplication, the number of shares of Common Stock actually outstanding
at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to paragraphs 2(b)(i) and 2(b)(ii) hereof regardless of
whether the Options or Convertible Securities are actually exercisable at such
time, plus the number of shares of Common Stock issuable upon conversion of
the outstanding Series A Preferred, plus the number of shares of Common Stock
issuable upon conversion of the outstanding Series C Preferred, plus the
number of shares of Common Stock issuable upon conversion of the outstanding
shares of Preferred Stock to be designated by the Board of Directors of the
Company from time to time, plus the number of shares of Common Stock issuable
upon exercise of options granted to employees and directors of the Corporation
and its Subsidiaries as such number of shares is proportionately adjusted for
stock splits, stock dividends, stock combinations and other recapitalizations,
plus the number of shares of Common Stock issuable upon exercise of the
Warrants.
"Convertible Securities" means any stock or securities
(directly or indirectly) convertible into or exchangeable for Common Stock.
"Market Price" means as to any security the average of the
closing prices of such security's sales on all domestic securities exchanges
on which such security may at the time be listed, or, if there have been no
sales on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
on such day, or, if on any day such security is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such
day; provided that if such security is listed on any domestic securities
exchange the term "business days" as used in this sentence means business days
on which such exchange is open for trading. If at any time such security is
not listed on any domestic securities exchange or quoted in the NASDAQ System
or the domestic over-the-counter market, the "Market Price" shall be the fair
value thereof determined jointly by the Company and the Registered Holders of
Warrants representing a majority of the Warrant Stock purchasable upon
exercise of all the Warrants then outstanding; provided that if such parties
are unable to reach agreement within a reasonable period of time, such fair
value shall be determined by an appraiser selected by the Company and approved
by the Registered Holders of Warrants representing a majority of the Warrant
Stock purchasable upon exercise of all the Warrants then outstanding (such
approval not to be unreasonably withheld). The determination of such appraiser
shall be final and binding on the Company and the Registered Holders of the
Warrants, and the fees and expenses of such appraiser shall be paid by the
Company.
"Notes" means the senior subordinated notes issued pursuant
the terms of the Purchase Agreement.
"Options" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"Person" means an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"Series A Preferred" means the Company's Series A Preferred
Stock, par value $0.01 per share.
"Series C Covenants" means the covenants contained in the
Series C Preferred Stock Purchase Agreement dated March 30, 1999, as amended,
which the Company hereby incorporates by reference. The Company shall provide
a copy of such covenants to the Registered Holder upon request.
"Series C Preferred" means the Company's Series C Preferred
Stock, par value $0.01 per share.
"Warrant Stock" means the Company's Common Stock, par value
$0.01 per share; provided that if there is a change such that the securities
issuable upon exercise of the Warrants are issued by an entity other than the
Company or there is a change in the type or class of securities so issuable,
then the term "Warrant Stock" shall mean one share of the security issuable
upon exercise of the Warrants if such security is issuable in shares, or shall
mean the smallest unit in which such security is issuable if such security is
not issuable in shares.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
Section 5. No Voting Rights; Limitations of Liability. Except as
otherwise set forth in this Warrant, this Warrant shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company.
No provision hereof, in the absence of affirmative action by the Registered
Holder to purchase Warrant Stock, and no enumeration herein of the rights or
privileges of the Registered Holder shall give rise to any liability of such
holder for the Exercise Price of Warrant Stock acquirable by exercise hereof
or as a stockholder of the Company.
Section 6. Warrant Not Transferable. This Warrant and all rights
hereunder shall not be transferable, or assignable in any manner, and no
interest shall be pledged or otherwise encumbered by Registered Holder without
the express written consent of the Company, and any such attempted disposition
of this Note or any portion hereof shall be of no force or effect.
Section 7. Repurchase of Warrant by the Company. If within 18 months
of any Closing the Company redeems all of the Notes, the Company shall have
the right to repurchase 61.7% of the Warrants at the original nominal purchase
price of $0.01 per share, provided the Company exercises its rights pro rata
with respect to all Registered Holders of the Warrants.
Section 8. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the purchase rights hereunder, and each of such
new Warrants shall represent such portion of such rights as is designated by
the Registered Holder at the time of such surrender. The date the Company
initially issues this Warrant shall be deemed to be the "Date of Issuance"
hereof regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued. All Warrants representing portions of the rights hereunder are
referred to herein as the "Warrants."
Section 9. Registration Rights. The Warrant Stock issued by the
Company to the Registered Holder following the exercise of the Warrant shall
be considered "Investor Registrable Securities" as that term is defined in the
Amended and Restated Registration Rights Agreement made as of March 30, 1999,
by and among the Company and the signatories thereto, and the Registered
Holder shall be entitled to assert the registration rights set forth therein
with respect to the Warrant Stock.
Section 10. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation
of any certificate evidencing this Warrant, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Company (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Company
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the same rights represented by such
lost; stolen, destroyed or mutilated certificate and dated the date of such
lost, stolen, destroyed or mutilated certificate.
Section 11. Notices. Except as otherwise expressly provided herein,
all notices referred to in this Warrant shall be in writing and shall be
delivered personally or sent by reputable overnight courier service (charges
prepaid) and shall be deemed to have been given when so delivered or sent (i)
to the Company, at its principal executive offices and (ii) to the Registered
Holder of this Warrant, at such holder's address as it appears in the records
of the Company (unless otherwise indicated by any such holder).
Section 12. Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended by the Company in any
manner that does not adversely affect the right of any Registered Holder of
Warrants. The provisions of the Warrants may also be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the Registered Holders of Warrants representing a majority of the
shares of Warrant Stock obtainable upon exercise of the Warrants; provided
that no such action may change the Exercise Price of the Warrants or the
number of shares or class of stock obtainable upon exercise of each Warrant
without the written consent of the Registered Holders of Warrants representing
at least 60% of the shares of Warrant Stock obtainable upon exercise of the
Warrants.
Section 13. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted
for convenience only and do not constitute a part of this Warrant. This
Warrant shall he governed by and construed and enforced in accordance with the
laws of the State of New York, without giving effect to its conflicts of laws
principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to
be signed and attested by its duly authorized officers under its corporate
seal and to he dated the Date of Issuance hereof.
COSI, INC.
By: _____________________________________
Its:_____________________________________
Attest:
_____________________________________
Secretary
ANNEX I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. MW-_____), xxxxxx agrees to subscribe for
the purchase of ____ shares of the Warrant Stock covered by such Warrant and
makes payment herewith in full therefor at the price per share provided by
such Warrant.
Signature________________________________
Address__________________________________
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To:_______________________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, __________ (_____)1 shares of Common Stock of Cosi, Inc.
(the "Company") and herewith makes payment of __________ Dollars ($ )
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, __________ , whose address is __________.
The undersigned represents that it is acquiring such Common Stock for
its own account for investment and not with a view to or for sale in
connection with any distribution thereof and in order to induce the issuance
of such Common Stock makes to the Company the representation and warranties
set forth or the investment representation statement attached hereto.
DATED:______________________________
_________________________________________
(Signature must conform in all respects
to name of Xxxxxx as specified on the
face of the Warrant)
------------------
1 Insert here the number of shares called for on the face of the
Warrant (or, in the case of a partial exercise, the portion thereof
as to which the Warrant is being exercised), in either case without
making any adjustment for additional Common Stock or any other stock
or other securities or property or cash which, pursuant to the
adjustment provisions of the Warrant, may be deliverable upon
exercise.
