THE SECURITIES REPRESENTED HEREBY AND THE UNDERLYING SHARES OF COMMON STOCK HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SALE OF SUCH SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT") is made as of the 20th day of
December, 2000 between Chicago Pizza & Brewery, Inc. (the "COMPANY") and ASSI,
Inc. ("OPTIONEE").
The Company hereby grants to Optionee options to purchase shares of
Common Stock of the Company, as follows:
Section 1. NUMBER OF OPTIONS.
----------- --------------------
Optionee is hereby entitled to purchase (the "OPTIONS") up to 200,000
shares of the Company's authorized but unissued Common Stock (the "SHARES"), all
of which have been reserved for issuance pursuant to the Options. Each Option
shall represent the right to purchase one Share, subject to adjustment as
provided in Section 6 hereof.
Section 2. EXERCISE PRICE.
----------- ----------------
The exercise price for the Shares shall be $4.00 per share ( the
"OPTION PRICE"), subject to adjustment as provided in Section 6 hereof. The
Company and Optionee hereby acknowledge that the Option Price is greater than
the fair market value of one share of Common Stock of the Company as of the date
of this Agreement.
Section 3. WHEN OPTIONS MAY BE EXERCISED.
----------- ----------------------------------
The Options issued pursuant to Section 1 shall be exercisable
commencing upon the date of issuance and terminating at 5:00 P.M. Los Angeles
time on December 31, 2005.
Section 4. INVESTMENT REPRESENTATION OF OPTIONEE.
----------- -----------------------------------------
Optionee acknowledges that the Options and the Shares issuable upon
exercise of the Options (the "RESTRICTED SECURITIES") have not been registered
under the Securities Act of 1933, as amended (the "ACT") or applicable state
securities laws. Optionee acknowledges that the offer, sale and delivery of the
Restricted Securities to Optionee is made in reliance upon Optionee's
representations, warranties, agreements and undertakings reflected herein.
Optionee represents and warrants that Optionee is acquiring the Restricted
Securities solely for Optionee's own account and interest and not with a view to
distribute them to the public. Optionee understands and agrees that unless the
Restricted Securities either are registered under the Act or are disposed of in
transactions for which exemptions from such registration are available, Optionee
must continue to own and hold the Restricted Securities for Optionee's own
account and interest indefinitely. Optionee further understands that whether an
exemption from the registration requirements of the Act will be available for
such future transactions as Optionee may propose will depend upon the nature of
each such transaction, the pertinent surrounding facts and circumstances then
extant, and the then applicable law.
Any certificate evidencing the Restricted Securities shall bear a
legend substantially in the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW.
Any certificate evidencing the Restricted Securities shall bear any
additional legend required under state or Federal securities laws, by contract,
or otherwise.
Section 5. EXERCISE OF OPTIONS.
----------- ----------------------
The Options, or any portion of the Options, may be exercised from time
to time, in whole or in part, in accordance with the provisions of Section 3
above, which exercise shall be effective immediately upon written notice to the
Company at its principal offices, setting forth the number of Options being
exercised, accompanied by the full amount of the purchase price for such Shares.
Payment of the Option Price of the Shares shall be made by means of cash or
check made payable to the Company. Upon receipt of notice and payment, the
Company shall promptly make arrangements for the issuance to Optionee of the
number of Shares as to which the Options were exercised. Upon exercise of the
Options, the number of Shares subject to this Agreement shall be automatically
reduced to the extent of the number of Shares as to which Options are exercised,
and this Agreement shall remain in effect as to the remaining number of Options
and Shares. The Company reserves the right to require Optionee, before receipt
of the Shares, to represent and warrant in writing, in form and substance
reasonably satisfactory to the Company, that the Shares purchased are being
acquired without any view to distribution and to agree in writing to the
imposition of legends on the share certificates setting forth any restrictions
upon disposition required by applicable federal or state securities laws.
Section 6. ADJUSTMENTS.
----------- ------------
The number of Shares purchasable upon the exercise of an Option and
the Option Price shall be subject to adjustment as follows:
6.1 Whenever the number of Shares purchasable upon the exercise of
each Option or the Option Price is adjusted, as herein provided, the Company
shall promptly mail by first class mail, postage prepaid, to Optionee, notice of
such adjustment or adjustments setting forth the number of Shares purchasable
upon the exercise of each Option and the Option Price after such adjustment, a
brief statement of the facts requiring such adjustment, and the computation by
which such adjustment was made.
6.2 For the purpose of this Section 6, the term "shares of Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company as of the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to Section 6.3 below, the Holders shall become entitled
to purchase any shares of the Company other than shares of Common Stock,
thereafter the number of such other shares so purchasable upon exercise of each
Option and the Option Price of such shares shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions relating to the Shares contained in this Section 6.
6.3 In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution to all holders of shares of Common Stock in
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue by reclassification of its shares of Common
Stock other securities of the Company, the number of Shares purchasable upon
exercise of each Option immediately prior thereto shall be adjusted so that
Optionee shall be entitled to receive the kind and number of Shares or other
securities of the Company which Optionee would have owned or would have been
entitled to receive after the happening of any of the events described above,
had the Option been exercised immediately prior to the happening of such event
or any record date with respect thereto. An adjustment made pursuant to this
Section 6.3 shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
6.4 In case of any consolidation of the Company with or merger of
the Company into another corporation or in case of any sale or conveyance to
another entity of the property of the Company as an entirety or substantially as
an entirety, the Company or such successor or purchasing entity, as the case may
be, shall be obligated to issue to Optionee, upon exercise of each Option, the
same consideration as Optionee would have owned or would have been entitled to
receive after the happening of such consolidation, merger, sale or conveyance
had such Option been exercised immediately prior to such action. If the action
involves two or more transactions involving different consideration to holders
of Common Stock, Optionee may elect which consideration to receive pursuant to
this Section 6.4.
6.5 In case the Company shall distribute to all holders of its
shares of Common Stock a stock dividend, evidence of its indebtedness or assets
(excluding regular and ordinary cash dividends) or rights, options or warrants
or convertible securities containing the right to subscribe for or purchase
shares of Common Stock, then in each case the Option Price shall be adjusted to
a price determined by multiplying the Option Price in effect immediately prior
to such distribution by a fraction, of which the numerator shall be the then
current market price per share of Common Stock (as defined in Section 6.7 below)
on the date of such distribution, less the then fair value (as determined in
good faith by the Board of Directors of the Company) of the portion of the stock
dividend, assets or evidence of indebtedness so distributed or of such rights,
options, options or convertible securities applicable to one share of Common
Stock, and of which the denominator shall be such then current market price per
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of stockholders entitled to
receive such distribution.
6.6 No adjustment in the number of Shares purchasable hereunder
shall be required unless such adjustment would require an increase or decrease
in the number of Shares purchasable upon the exercise of each Option of at least
One (1) Share; provided, however, that any adjustments which by reason of this
Section 6.6 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment.
6.7 Whenever the number of Shares purchasable upon the exercise of
each Option is adjusted, as herein provided, the Option Price per Share payable
upon exercise of each Option shall be adjusted (to the nearest cent) by
multiplying such Option Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Shares purchasable upon
the exercise of each Option immediately prior to such adjustment, and of which
the denominator shall be the number of Shares so purchasable immediately
thereafter.
6.8 For the purpose of any computation pursuant to this Section 6,
the current or closing market price per share of Common Stock at any date shall
be deemed to be (i) the average of the mean between the bid and asked prices, as
reported by the National Association of Securities Dealers, Inc., if the shares
of Common Stock are traded on the National Market System, the SmallCap Market or
the OTC Bulletin Board, or, (ii) if the shares of Common Stock are traded on a
national securities exchange, the average daily closing price on the New York
Stock Exchange, Inc., or, if such shares are not listed on such exchange, then
on any other national securities exchange on which they are so listed, or (iii)
the average daily closing price as reported by any foreign exchange on which the
shares of Common Stock are traded, on the last ten (10) trading days before the
day in question. If the shares are not traded as provided in clauses (i) or
(ii) or (iii) above, then the current market price shall be determined in good
faith by the Board of Directors of the Company, which determination shall be
final absent clear and convincing evidence of bad faith by the Board. The
closing price referred to in clause (ii) and (iii) above shall be the last
reported sales price or in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices, in either case on the
aforesaid securities exchange.
Section 7. ASSIGNABILITY OF OPTIONS.
----------- ---------------------------
The Options may be assigned, transferred, pledged, hypothecated, sold
or otherwise disposed of (collectively, a "Transfer"), in whole or in part,
either voluntarily or involuntarily, provided that in the opinion of the
Company's counsel or counsel to the Optionee (in either case at the expense of
Optionee) such Transfer may be made in compliance with applicable federal,
state, or other securities laws.
Section 8. RESERVATION OF SHARES; PAYMENT IN FULL
----------- -------------------------------------------
The Company will at all times reserve and keep available out of its
authorized capital stock, solely for issuance upon the exercise of this Option,
such number of shares of Common Stock as shall be issuable upon the exercise of
this Option. Such Common Stock, when issued pursuant to this Agreement, shall
be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof.
Section 9. REGISTRATION RIGHTS.
----------- ---------------------
The Company covenants and agrees to provide the following registration
rights at any time from and after the date of this Agreement to Optionee:
9.1 Whenever the Company proposes to file a registration statement
relating to any of its capital stock under the Act, other than a registration
statement required to be filed in respect of employee benefit plans on Form S-8
or similar form or any registration statement on Form S-4 or similar form
relating to securities issued in connection with a reorganization, the Company
shall, at least seven business days prior to such filing, give written notice
thereof to Optionee. Upon receipt by the Company, not more than four business
days after receipt of such notice by Optionee, of a written request by Optionee
for registration of all or a portion of the Shares of the Common Stock of the
Company issued or issuable upon exercise of the Option ("Registrable Shares")
------------------
then owned by Optionee, the Company shall include such Registrable Shares in
such registration statement or in a separate registration statement concurrently
filed, and shall use all reasonable efforts to cause such registration statement
to become effective with respect to such Registrable Shares, unless the managing
underwriter therefor concludes in its reasonable good faith judgment that
compliance with this Section 9.1 would materially adversely affect such
offering. If the managing underwriter determines in good faith that a portion
but not all of such Registrable Shares may be included, then only such portion
shall be included.
9.2 The Company will use all reasonable efforts to cause such registration
statement to remain effective until the earlier of 45 days from the effective
date of the registration statement or the date that Optionee completes his
distribution of the Registrable Shares. The Company will use all reasonable
efforts to effect such qualifications under applicable blue sky or other state
securities laws as may be reasonably requested by Optionee to permit or
facilitate such sale or other distribution. The Company will cause the
Registrable Shares for which the registration statement is effected to be listed
on any national securities exchange or quoted on any stock quotation system on
which the shares of Common Stock are listed or quoted.
9.3 Optionee shall furnish to the Company such information as the Company
may reasonably request and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 9. The
Company agrees to furnish to Optionee the number of prospectuses, offering
circulars or other documents, or any amendments or supplements thereto, incident
to any registration, qualification or compliance referred to in this Section 9
as Optionee from time to time may reasonably request.
9.4 The Company will bear all expenses of registrations, qualifications or
compliance pursuant to this Section 9 (other than underwriting discounts and
commissions and brokerage commissions and fees, if any, payable with respect to
the Registrable Shares or the cost of counsel for Optionee), including, without
limitation, registration fees, printing expenses, expenses of blue sky or other
state securities law registration or compliance, and legal and auditing fees
incurred by the Company in connection therewith.
9.5 During the effectiveness of a registration statement in which
Registrable Shares are included pursuant to this Section 9, the Company will
notify Optionee promptly of any notice from a regulatory authority affecting the
sale of the Registrable Shares and of any event or facts that, in the reasonable
judgment of the Company, should be set forth in such registration statement.
The Company will, as promptly as practicable, take such action as may be
necessary to amend or supplement such registration statement in order to set
forth or reflect such event or facts.
9.6 The Company shall indemnify and hold harmless Optionee and its
respective officers, directors, affiliates, successors and assigns from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in any registration statement filed by
the Company under the Securities Act by reason of this Agreement, any
post-effective amendment to such registration statements, or any prospectus
included therein, or caused by any omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission based upon information furnished
or required to be furnished in writing to the Company by Optionee (or the
authorized representatives or agents of Optionee) expressly for use therein,
which indemnification shall include each person, if any, who controls Optionee
within the meaning of the Securities Act and each officer, director, employee
and agent of Optionee; provided, however, that the indemnification in this
Section 9.6 with respect to any prospectus shall not inure to the benefit of the
Optionee (or to the benefit of any person controlling the Optionee) on account
of any such loss, claim, damage or liability arising from the sale of Shares, if
a copy of a subsequent prospectus correcting the untrue statement or omission in
such earlier prospectus was provided to Optionee by the Company prior to the
subject sale and the subsequent prospectus was not delivered or sent by Optionee
to the purchaser of such securities prior to such sale; and provided further,
that the Company shall not be obligated to so indemnify Optionee or any other
person referred to above unless Optionee or such other person, as the case may
be, shall at the same time indemnify the Company, its directors, each officer
signing the Registration Statement and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in any registration statement or any prospectus required
to be filed or furnished by reason of this Agreement or caused by any omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission based upon
information furnished in writing to the Company by Optionee expressly for use
therein. If for any reason the indemnification provided for in this
subparagraph is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, claim, damage, liability or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the indemnified party and the indemnifying party,
but also the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.
Section 10. GENERAL PROVISIONS.
------------ --------------------
10.1 Execution of the Company. The Options have been duly
----------------------------
authorized, executed, and delivered by and on behalf of the Company.
10.2 Arbitration. Any controversy or claim arising out of or
-----------
relating to the terms of these Options, or otherwise related to the compliance
by the Company with its obligations hereunder, shall be settled by binding
arbitration in Los Angeles County, California. The arbitration shall be
conducted by the American Arbitration Association, whose rules applicable to
commercial disputes shall be in force, and judgment on the award rendered by the
arbitrator(s) may be entered by any court having jurisdiction thereof; provided,
however, that if the controversy or claim also relates to an employment or other
agreement between the Company and Optionee, then the Company shall have the
right, at its sole election, to require the controversy or claim to be resolved
pursuant to any arbitration procedure set forth in such other agreement. Either
the Company or Optionee may submit to arbitration any controversy or claim
hereunder. The parties hereto agree that Los Angeles County, California is the
proper venue for the arbitration of any dispute among the parties hereto. If
the arbitration relates to "fair market value," the arbitrators will be
instructed to value the Company as it would be valued by a willing strategic
purchaser and that there will be no discount for illiquidity or for minority
interest.
10.3 Choice of Law and Venue. These Options shall be deemed to be
-----------------------
a contract made under the laws of the State of California and for all purposes
it shall be construed in accordance with and governed by the laws of the State
of California. Proper venue of any action or arbitration shall be exclusively
in the County of Los Angeles, State of California.
10.4 Severability. If a court or an arbitrator of competent
------------
jurisdiction holds any provision of these Options to be illegal, unenforceable
or invalid in whole or in part for any reason, such provision shall be adjusted
rather than voided, if possible to achieve the intent of the parties to the
extent possible, and in any event the validity and enforceability of the
remaining sections shall not be affected unless an essential purpose of these
Options would be defeated by the loss of the illegal, unenforceable, or invalid
provision.
10.5 Amendment, Modification or Waiver. The terms of these
------------------------------------
Options may not be and shall not be deemed or construed to have been modified,
amended, rescinded, canceled or waived, in whole or in part, except by written
instrument signed by the Company and Optionee.
10.6 Headings and Language. The various headings herein are
-----------------------
inserted for convenience only and shall not be deemed a part of or in any manner
affect the terms of the Options or their provisions. As used in this Agreement,
the masculine, feminine or neuter gender and the singular and plural shall be
deemed to include the other whenever the context so indicates.
10.7 Rights Of Optionee. Prior to the exercise of these Options,
-------------------
except as otherwise provided herein, Optionee shall not be entitled to any
rights of a shareholder of the Company, including without limitation the right
to vote, to receive dividends or other distributions or to exercise any
preemptive rights, and shall not be entitled to receive notice of any
proceedings of the Company.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the day and year first above written.
CHICAGO PIZZA & BREWERY, INC.
By /s/ XXXX X. XXXXXXX
----------------------
ASSI, INC.
By /s/ XXXXX XXXXXX
----------------------
