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THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED IN A TRANSACTION NOT
INVOLVING ANY PUBLIC OFFERING AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
THE ACT.
AU BON PAIN CO., INC.
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STOCK PURCHASE WARRANT
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Right to Purchase up to Certificate No.
_______ shares of Common Stock Dated as of July __, 1996
(subject to adjustment as provided herein)
1. GRANT. For consideration of $_______ and other value received, AU BON
PAIN CO., INC., a Delaware corporation (the "Company"), hereby grants to Allied
Capital Corporation, a Maryland corporation, or its registered assigns (the
"Holder"), at the exercise price set forth in Section 3 below, the right to
purchase up to _____________ shares of the Company's Class A Common Stock (the
"Warrant Shares"). This Warrant is one of six issued pursuant to the terms of an
investment agreement dated as of the date hereof (the "Investment Agreement") by
and among the Company, the Holder and certain other parties named therein. (The
other five Warrants issued pursuant to the Investment Agreement are hereinafter
collectively referred to as the "Other Warrants".)
2. EXERCISE PERIOD. Subject to Section 5, the right to exercise this
Warrant, in whole or in part, shall commence as follows: (i) with respect to
____________ of the Warrant Shares, as of March 31, 1998; and (ii) with respect
to the remaining ________________ of the Warrant Shares, as of March 31, 1999.
The right to exercise this Warrant shall expire on that date (the "Expiration
Date") which is three years from the date of the payment in full of all
obligations related to those certain senior subordinated debentures issued under
the Investment Agreement (collectively, the "Debentures").
3. EXERCISE PRICE. The exercise price of this Warrant shall be $____ per
share (the "Exercise Price").
4. ANTI-DILUTION ADJUSTMENT OF EXERCISE PRICE. The Exercise Price shall be
subject to adjustment from time to time as follows:
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(a) If the Company shall issue, or be deemed to have issued (pursuant to
subsection (3) of Section 4(b)), any Common Stock, (other than "Excluded Stock"
(as defined below), or stock dividends, subdivisions, split-ups or combinations,
which are covered by Sections 4(d) and 4(e) hereof), for a consideration
(determined in the manner provided in subsections (1), (2) and (3) of Section
4(b)) per share less than the Exercise Price, the Exercise Price shall forthwith
be adjusted to a price equal to the consideration paid or payable to the Company
with respect to such issuance or deemed issuance.
(b) For the purposes of Section 4(a), the following provisions shall be
applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor without
deducting any discounts, commissions or expenses paid or incurred by the Company
in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall be
deemed to be the fair value thereof as determined in good faith by the Board of
Directors, in accordance with GAAP; provided, however, that if, at the time of
such determination, the Company's Common Stock is traded in the over-the-counter
market or on a national or regional securities exchange, such fair market value
as determined by the Board of Directors shall not exceed the aggregate "fair
market value" (as defined in Section 11(b) below) of the shares of Common Stock
being issued.
(3) In the case of the issuance of (i) options to purchase or rights
to subscribe for Common Stock (other than Excluded Stock), (ii) securities by
their terms convertible into or exchangeable for Common Stock (other than
Excluded Stock), or (iii) options to purchase or rights to subscribe for
securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded Stock):
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections (1) and (2) of this Section
4(b)), if any, received by the Company upon the issuance of such options or
rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities, or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof, shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration received by the Company for any such
securities and related options or rights (excluding any cash received on account
of accrued interest or
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accrued dividends), plus the minimum additional consideration, if any, to be
received by the Company upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in each case to
be determined in the manner provided in subsections (1) and (2) of this Section
4(b)); and
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options or rights or conversion of or
exchange for such convertible or exchangeable securities, or on any change in
the minimum purchase price of such options, rights or securities (other than a
change resulting from the anti-dilution provisions, if any, of such options,
rights or securities, unless there is not simultaneously an adjustment in the
Exercise Price pursuant to the terms of this Section 4), then the Exercise Price
shall forthwith be readjusted to such Exercise Price as would have been obtained
had the adjustment made upon (x) the issuance of such options, rights or
securities not exercised, converted or exchanged prior to such change, as the
case may be, been made upon the basis of such change or (y) the options or
rights related to such securities not converted or exchanged prior to such
change, as the case may be, been made upon the basis of such change.
(c) "Excluded Stock" shall mean:
(1) all shares of capital stock issued and outstanding on the
effective date hereof;
(2) all shares of Common Stock into which securities issued and
outstanding on the date hereof are convertible; and
(3) subject to adjustment pursuant to stock splits, stock dividends
and the like, up to an aggregate of 3,450,000 shares of Common Stock or other
securities issued or issuable to employees, officers, consultants or directors
of the Company; provided, however, that (A) no such shares of Common Stock or
other securities shall be issued, or shall be deemed to have been issued, for
consideration (determined in the manner provided in subsections (1), (2) and (3)
of Section 4(b)) less than the fair market value thereof on the date of
issuance, or the deemed date of issuance, thereof; and (B) such aggregate number
shall consist of (i) up to 2,500,000 shares currently authorized under the
Parent's 1992 Equity Incentive Plan; (ii) up to 500,000 additional shares to be
authorized under the Parent's 1992 Equity Incentive Plan (except that, in the
event any such shares are issued to either Louis Kane or Ron Shaich, such shares
shall not be included in this definition of Excluded Stock); (iii) up to 150,000
shares authorized under the Parent's Employee Stock Option Plan; (iv) up to
150,000 shares authorized under the Parent's Director Stock Option Plan; and (v)
up to 150,000 shares authorized under the Department Manager Stock Option Plan.
(d) If the number of shares of Common Stock outstanding at any time after
the date hereof is increased by a stock dividend payable in shares of Common
Stock or by a subdivision or split-up of shares of Common Stock, then, on the
date such payment is made or such change is effective, the Exercise Price in
effect immediately prior to such event shall be proportionately decreased, and
the number of Warrant Shares shall be proportionately increased.
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(e) If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding shares of
Common Stock, then, on the effective date of such combination, the Exercise
Price in effect immediately prior to such event shall be proportionately
increased, and the number of Warrant Shares shall be proportionately decreased.
(f) In case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the Company (other than
a change in par value or as a result of a stock dividend or subdivision,
split-up or combination of shares), or of the consolidation or merger of the
Company with or into another person, or of the sale or other disposition of all
or substantially all the properties and assets of the Company as an entirety to
any other person, the Warrant Shares shall, after such reorganization,
reclassification, consolidation, merger, sale or other disposition, receive upon
conversion of the Warrant Shares, the number of shares of stock or other
securities or property or cash of the Company or of the entity resulting from
such consolidation or surviving such merger or to which such properties and
assets shall have been sold or otherwise disposed to which a holder of Common
Stock deliverable upon conversion would have been entitled on such
reorganization, reclassification, consolidation, merger, sale or other
disposition. The provisions of this Section 4(f) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(g) All calculations under this Section 4 shall be made to the nearest
cent.
(h) Upon any adjustment of the Exercise Price, then and in each such case
the Company shall give written notice thereof, by first class mail, postage
prepaid, addressed to the holder of this Warrant at the last registered address
of such holder as shown on the books of the Company, which notice shall state
the facts leading to, and the Exercise Price resulting from, such adjustment.
5. Adjustment in Number of Shares Issuable Hereunder.
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(a) PAYMENT OF DEBENTURES. In the event the obligations under the
Debentures are fully paid on or before that date which is 90 days following
December 26, 1998, the number of Warrant Shares issuable hereunder shall be
reduced in accordance with the following chart:
Date of Full Payment Number of Warrant Shares
of Debentures Issuable Hereunder
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On or before that date which is 90
days following December 27, 1997
(the "1997 Audit Due Date")
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After the 1997 Audit Due Date and
on or before that date which is 90 days
following December 26, 1998
(the "1998 Audit Due Date")
After the 1998 Audit Due Date and
thereafter
(b) Financial Model Targets.
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(i) For the fiscal year ending December 27, 1997, in the event the sum
of net income plus interest expense, taxes, depreciation, amortization, and
other non-cash charges, all determined in accordance with GAAP ("EBITDA"), as
derived from the audited financial statements for the Company ("Actual EBITDA"),
meets or exceeds targeted EBITDA as set forth in the Financial Model ("Targeted
EBITDA"), the number of Warrants issuable hereunder shall be reduced by
________.
(ii) For the fiscal year ending December 26, 1998, in the event Actual
EBITDA meets or exceeds Targeted EBITDA, the number of Warrants issuable
hereunder shall be reduced by ____________.
(iii) In addition to any other reductions in the number of shares
issuable hereunder for which the Company may qualify, for the combined fiscal
years ending December 27, 1997, and December 26, 1998, in the event Actual
EBITDA meets or exceeds Targeted EBITDA for such combined fiscal years, the
number of shares issuable hereunder shall be reduced by ___________.
(c) ANTI-DILUTION ADJUSTMENTS. The numbers of Warrant Shares issuable
hereunder shall be subject to increase or decrease to account for all
anti-dilution adjustments occurring from the date hereof until the Expiration
Date.
6. EFFECT OF REORGANIZATION OR RECLASSIFICATION. If, at any time while
this Warrant is outstanding, there is any reorganization or reclassification of
the capital stock of the Company other than a subdivision or combination of
shares, the Holder shall thereafter, upon exercise of this Warrant, be entitled
to receive the number of shares of stock or other securities or property of the
Company to which a holder of the Common Stock (and any other securities and
property) of the Company, deliverable upon the exercise of this Warrant, would
have been entitled upon such reorganization or reclassification of capital stock
if this Warrant had been exercised immediately prior to such reorganization or
reclassification of capital stock. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company and approved by the Holder)
shall be made in the application of the provisions set forth in this Warrant
with respect to the rights and interests thereafter of the Holder to the end
that the provisions set forth in this Warrant shall thereafter be applicable, as
near as reasonably may be, in relation to any shares or other property
thereafter deliverable upon the exercise hereof as if this
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Warrant had been exercised immediately prior to such reorganization or
reclassification of capital stock and the Holder had carried out the terms of
the exchange as provided for by such reorganization or reclassification of
capital stock.
7. PRIOR NOTICE AS TO CERTAIN EVENTS. Subject to the limitations set
forth in the Investment Agreement, if, at any time:
(a) the Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than cash dividends) to the holders
of its Common Stock;
(b) the Company shall offer for subscription PRO RATA to the holders
of its Common Stock any additional shares of stock of any class or any other
rights;
(c) there shall be any reorganization or reclassification of the
capital stock of the Company, or a consolidation or merger of the Company with,
or a sale of all or substantially all its assets to, another entity; or
(d) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in each such case, the Company shall give prior written notice, by
first class mail, postage prepaid, addressed to the Holder at its address shown
on the books of the Company, of the date on which (i) the books of the Company
shall close or a record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, dissolution, liquidation or winding up, as the
case may be. Such written notice shall be given at least 30 days prior to the
action in question and not less than 30 days prior to the record date or the
date on which the Company's transfer books are closed in respect thereto.
8. RESERVATION OF COMMON STOCK. The Company shall, at all times,
reserve and keep available for issuance upon the exercise of this Warrant and
the Other Warrants such number of its authorized but unissued shares of Common
Stock as will be sufficient to permit the exercise in full of all of the
outstanding Warrants and, upon such issuance, all such shares of Common Stock
will be validly issued, fully paid and nonassessable.
9. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. Prior to exercise, this
Warrant will not entitle the Holder to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Holder to exercise this Warrant, and no enumeration in
this Warrant of the rights or privileges of the Holder, will give rise to any
liability of such Holder for the Exercise Price.
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10. EXERCISE PROCEDURE. This Warrant may be exercised by presenting it
and tendering the Exercise Price, at the option of the Holder (i) in legal
tender, (ii) by bank cashier's or certified check, or (iii) by cancellation of
indebtedness owing under the Debenture held by Holder, at the principal office
of the Company along with written subscription substantially in the form of
Exhibit "A" attached hereto. The date on which this Warrant is thus surrendered,
accompanied by tender or payment as hereinbefore or hereinafter provided, is
referred to herein as the "Exercise Date." The Company shall forthwith at its
sole expense (including the payment of issue taxes), issue and deliver to Holder
certificates for the proper number of Warrant Shares upon exercise of this
Warrant within 10 days after the Exercise Date, and such Warrant Shares shall be
deemed issued for all purposes as of the opening of business on the Exercise
Date, notwithstanding any delay in the actual issuance.
11. NET ISSUE ELECTION.
(a) RIGHT TO CONVERT. The Holder shall have the right at any time
prior to its expiration to convert this Warrant into shares of Common Stock (the
"Conversion Right"). Upon exercise of the Conversion Right, the Company shall
deliver to the Holder (without payment by the Holder of any Exercise Price or of
any other cash or other consideration) that number of fully paid and
nonassessable shares of Common Stock as is computed using the following formula:
X = Y(A-B)
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A
where: X = the number of shares to be issued to the Holder pursuant to this
Section 11;
Y = the number of shares covered by this Warrant in respect of
which the net issue election is made pursuant to this Section
11;
A = the fair market value of one share of Common Stock, as
determined in accordance with Section 11(b) below;
B = the Exercise Price in effect under this Warrant at the
time the net issue election is made pursuant to this Section
11.
(b) FAIR MARKET VALUE. For purposes hereof, the fair market value of a
share of Common Stock is determined as follows:
(i) If the Common Stock of the Company is listed on a national
securities exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on the Nasdaq Stock Market (National Market), the fair
market value shall be the last reported sale price of the Common Stock on such
exchange or system on the last business day prior to the date of exercise of
this Warrant or if no such sale is made on such day, the average closing bid and
asked prices for such day on such exchange or system.
(ii) If the Common Stock of the Company is not so listed or
admitted to unlisted trading privileges, the fair market value shall be the mean
of the last reported bid and
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asked prices reported by the National Quotation Bureau, Inc.,
on the last business day prior to the date of the exercise of this Warrant.
(iii) If the Common Stock of the Company is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the fair market value shall be an amount reasonably determined in such
reasonable manner as may be prescribed by the Board of Directors of the Company.
(c) METHOD OF EXERCISE. The Conversion Right may be exercised by the
Holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the Holder thereby intends to
exercise the Conversion Right. Certificates for the shares of Common Stock
issuable upon exercise of the Conversion Right shall be delivered to the Holder
within 10 days following the Company's receipt of this Warrant together with the
aforesaid written statement.
12. TRANSFER OF BORROWERS' BUSINESS. If, prior to the issuance of the
Warrant Shares hereunder, a "Transfer of Borrowers' Business" (as defined in
Article I of the Investment Agreement) shall occur, the Holder, at its option,
may receive, in lieu of the Warrant Shares otherwise issuable hereunder, such
money or property as it would have been entitled to receive if this Warrant had
been exercised immediately prior to the Transfer of Borrowers' Business.
13. SALE OF WARRANT OR SHARES. Neither this Warrant nor any of the
Warrant Shares have been registered under the Act or under the securities laws
of any state. Neither this Warrant nor any of the Warrant Shares (when issued)
may be sold, assigned, transferred, pledged or hypothecated or otherwise
disposed of in the absence of: (a) an effective registration statement for this
Warrant or the Warrant Shares, as the case may be, under the Act and such
registration or qualification as may be necessary under the securities laws of
any state, or (b) an opinion of counsel reasonably satisfactory to the Company
that such registration or qualification is not required. The Company shall cause
a certificate or certificates evidencing all or any of the Warrant Shares issued
upon exercise of the purchase rights herein prior to said registration and
qualification of such shares to bear the following legend:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE. THE SHARES MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND SUCH REGISTRATION OR QUALIFICATION AS MAY
BE NECESSARY UNDER THE SECURITIES LAWS OF ANY STATE, OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED
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14. TRANSFER. This Warrant shall be registered on the books of the
Company which shall be kept at the offices of the Company for that purpose, and
shall be transferable in whole or in part, but only on such books by the Holder
in person or by duly authorized attorney with written notice substantially in
the form of Exhibit "B" attached hereto, and only in compliance with the
preceding paragraph. The Company may issue appropriate stop orders to its
transfer agent to prevent a transfer in violation of the preceding paragraph.
15. REPLACEMENT OF WARRANT. At the request of the Holder and on
production of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and (in the case of loss, theft
or destruction) if required by the Company, upon delivery of an indemnity
agreement, the Company, at Holder's expense, will issue in lieu thereof a new
Warrant of like tenor.
16. INVESTMENT COVENANT. By its acceptance hereof, the Holder
represents and warrants that this Warrant is, and any Warrant Shares issued
hereunder will be, acquired for its own account for investment purposes, and the
Holder covenants that it will not distribute the same in violation of any state
or federal law or regulation.
17. REGISTRATION RIGHTS. The Holder has certain "piggyback"
and "demand" registration rights in regard to this Warrant and Warrant Shares
issued or issuable hereunder as set forth in the Registration Rights Agreement,
dated of even date herewith between the Company, the Holder, and certain other
parties thereto.
18. GOVERNING LAW. This Warrant shall be construed according to the
laws of Delaware (other than its conflict of law rules).
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
on its behalf, in its corporate name, by its President, and its corporate seal
to be hereunto affixed and the said seal to be attested by its Secretary, as of
the ____ day of July, 1996.
AU BON PAIN CO., INC.
a Delaware corporation
Attest: By: [Seal]
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President
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EXHIBIT A
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IRREVOCABLE SUBSCRIPTION
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To: AU BON PAIN CO., INC.
The undersigned hereby elects to exercise its right under the attached
Warrant by purchasing ________________ shares of the Common Stock of AU BON PAIN
CO., INC., and hereby irrevocably subscribes to such issue. The certificates for
such shares shall be issued in the name of:
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(Name)
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(Address)
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(Taxpayer Number)
and delivered to:
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(Name)
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(Address)
The Exercise Price of $______ is enclosed.
or
In lieu of payment of the Exercise Price, the undersigned hereby
invokes the provisions of Section 11 of the Warrant.
Date:_______________
Signed: ________________________________________
(Name of Holder, Please Print)
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(Address)
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(Signature)
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EXHIBIT B
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ASSIGNMENT
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FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
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(Name)
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(Address)
the attached Warrant, together with all right, title and interest
therein to purchase _____________ shares of the Common Stock of AU BON PAIN CO.,
INC., and does hereby irrevocably appoint _______________________ as
attorney-in-fact to transfer said Warrant on the books of AU BON PAIN CO., INC.,
with full power of substitution in the premises.
Done this ______ day of ____________ 19____.
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(Signature)
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(Name and title)
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(Address)
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