STOCK OPTION AGREEMENT
THIS AGREEMENT is dated this 21 day of May, 1996, between BAB Holdings,
Inc., an Illinois corporation (the "Company") and Strathmore Bagels Franchise
Corp. ("Optionee").
WITNESSETH, THAT:
WHEREAS, the Company has agreed to grant this stock option to Optionee
pursuant to that certain Asset Purchase Agreement dated April 24, 1996 by and
between the Company and Strathmore Bagels Franchise Corp.;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee an option to
purchase from the Company all or any part of an aggregate amount of 625,000
shares of the common stock of the Company at an option price of $6.17 per share,
subject to adjustment pursuant to the provisions set forth on Appendix A
attached hereto.
2. Exercise Period. This option shall be exercisable on and after the
dates and for the numbers of shares indicated below, subject to adjustment
pursuant to the provisions set forth on Appendix A attached hereto, until May
21, 1999, at which time this option shall expire:
Shares Exercisable
Date (Cumulative)
May 21, 1997 312,500
May 21, 1998 625,000
3. Exercise of Option. This option may be exercised only by submitting
written notice of intent to exercise to the Company at its office at 8501 W.
Higgins Road, Suite 320, Chicago, IL. Such notice shall state the number of
shares in respect of which the option is being exercised and shall be
accompanied by payment for such shares in cash, certified or cashier's check or
by personal check, or other form of payment acceptable to the Company.
4. Exercise Upon Death or Termination of Service. In the event that
Optionee shall die (if Optionee is a natural person), or be legally dissolved
(if Optionee is a legal entity) during the term of this Agreement, this option
may be exercised to the extent that the Optionee was entitled to do so at the
date of death or dissolution, as applicable, by the person or persons to whom
Optionee's rights under this option pass by will or applicable law, until the
earlier of: (i) the expiration of ninety (90) days from the date of Optionee's
death or dissolution, as applicable; or (ii) the expiration date specified in
Section 2 above.
5. No Right to Continued Compensation. Nothing contained in this
Agreement shall obligate the Company to continue to accept and pay for any
products or services of Optionee, nor shall anything contained in this Agreement
interfere with the right of the Company to terminate any contract or
relationship with Optionee.
6. No Shareholder Rights. Optionee shall have no rights as a
shareholder with respect to any shares of common stock subject to this option
prior to the date of issuance of a certificate or certificates for such shares.
7. Investment Representation. Notice of the exercise of this option
shall include a representation that any option shares purchased shall be
acquired as an investment and not with a view to, or for sale in connection
with, any subsequent distribution. The Company and Optionee acknowledge that the
shares which may be acquired upon exercise hereof are the subject of a
Registration Rights Agreement dated May 21, 1996 by and between the Company and
Strathmore Bagel Franchise Corporation, whereby said shares may be included for
resale by Optionee in certain registrations of securities under the Securities
Act of 1933, as amended, which may be undertaken by the Company.
8. Compliance with Law and Regulations. The Optionee acknowledges that
this option may not be exercised until the Company has taken all actions then
required to comply with all applicable federal and state laws, rules and
regulations and any exchange on which the stock may then be listed. The
certificates representing the shares purchased upon the exercise of this option
shall bear a legend in substantially the following form:
These shares have not been registered pursuant to the Securities Act of
1933, as amended, or any regulations promulgated thereunder or any
applicable state securities laws or regulations. No sale, offer to
sell, or transfer of these shares shall be made unless a registration
statement under the Securities Act of 1933, as amended, with respect to
such shares is then in effect or an exemption from the registration
requirements thereof is available.
9. Non-Transferability. This option shall be exercisable only by the
Optionee and shall not be transferable except as set forth in Section 4 hereof;
except that this Option may be transferred to one or more of the six
shareholders of Optionee as of the date hereof.
10. Dispute or Disagreement. As a condition of the granting of this
option, the Optionee agrees that any dispute or disagreement which may arise
under or as a result of or pursuant to this Agreement shall be settled by the
Board of Directors of the Company in its sole discretion, and that any
interpretation by the Board of Directors of the Company of the terms of this
Agreement shall be final, binding and conclusive.
11. Other Assistance. Upon the exercise of this option the Optionee or
other person exercising the option agrees to execute any document or make any
representation or give any commitment which the Board of Directors, in its
discretion, deems necessary or advisable by reason of the securities laws of the
United States or any state, and execute any document for the purpose of
restricting the transfer of stock to third parties, or pay any sum of money in
respect of taxes or undertake to pay or have paid any such sum which the Board
of Directors, in its discretion, deems necessary by reason of the Internal
Revenue Code or any rule or regulation promulgated thereunder, or by reason of
the tax laws of any state or any contracts or agreements in effect at such time.
12. Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the legal representatives, executors, administrators,
successors and assigns of each parties to this Agreement.
13. Complete Agreement. This Agreement sets forth the entire
understanding of the parties hereto and shall not be amended, changed or
terminated except by an instrument in writing signed by the parties to this
Agreement.
14. Counterparts and Governing Law. This Agreement may be executed in
counterparts, and its validity, construction and performance, shall be governed
by the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have executed this Agreement the date
first above written.
BAB HOLDINGS, INC.
By: MICHAEL K. MURTAUGH
Its: VICE PRESIDENT/GENERAL COUNSEL
ACCEPTED:
STRATHMORE BAGELS FRANCHISE CORP.
By: GLEN STEUERMAN
Its: PRESIDENT