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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 AGREEMENTAGREEMENT
This Option Agreement (the "AGREEMENT") is made as of the 20th day of
December, 2000 between Chicago Pizza & Brewery, Inc. (the "COMPANY") and Paul A.
Motenko ("OPTIONEE").
The Company hereby grants to Optionee options to purchase shares of Common
Stock of the Company, as follows:
Section 1. NUMBER OF OPTIONS.
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Optionee is hereby entitled to purchase (the "OPTIONS") up to 330,679
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.
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The exercise price for the Shares shall be $2.75 per share ( the "OPTION
PRICE"), subject to adjustment as provided in Section 6 hereof.
Section 3. WHEN OPTIONS MAY BE EXERCISED.
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The Options issued pursuant to Section 1 shall be exercisable commencing
upon the date of issuance and terminating on the later of (i) December 31, 2006
or (ii) ninety (90) days after the termination of Optionee's employment with the
Company. The term of the Options prior to December 31, 2006 shall not be
subject to reduction as a result of any termination of Optionee's employment
with the Company, whether by the Company or by Optionee, for any reason.
Section 4. INVESTMENT REPRESENTATION OF OPTIONEE.
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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.
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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 any one or
combination of the following, at the election of Optionee: (i) cash or check
made payable to the Company, (ii) shares of Common Stock of the Company having a
fair market value, as determined in good faith by the Board of Directors of the
Company, equal to the Option Price, or (iii) Options having a fair market value,
as determined in good faith by the Board of Directors of the Company, equal to
the Option Price. Fair market value shall be as of the exercise date and shall
be determined without regard to any restriction on resale. 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.
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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.
6.9 The Company may, at its option, at any time while any Options are
outstanding, reduce the then current Option Price to any amount deemed
appropriate by the Board of Directors of the Company.
Section 7. ASSIGNABILITY OF OPTIONS.
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The Options may not be assigned, transferred, pledged, hypothecated, sold
or otherwise disposed of, in whole or in part, either voluntarily or
involuntarily, except with the prior written consent of the Company.
Section 8. RESERVATION OF SHARES; PAYMENT IN FULL; LISTING
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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.
The Company will use its reasonable best efforts to have the shares of
Common Stock which are issuable upon exercise of Options listed on the
securities exchange or exchanges, if any, on which its then outstanding Common
Stock is listed, or on NASDAQ if its Common Stock is then listed thereon.
Section 9. REGISTRATION RIGHTS.
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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 In connection with any registration of Registrable Shares pursuant to
this Section 9, the Company agrees to provide reasonable cooperation to Optionee
and any underwriters participating in such offering, including, without
limitation, entering into such customary underwriting or other agreements (which
may contain customary representations and warranties by the Company and
indemnification provisions); furnishing a customary comfort letter or letters,
dated the date of the final prospectus with respect to the Registrable Shares,
from the independent certified public accountants of the Company and addressed
to Optionee and any such underwriters; furnishing an opinion of counsel for the
Company, dated the date of the closing of the sale of the Registrable Shares,
with respect to such matters as may be reasonably requested; and making
available for inspection by Optionee and his agents all financial and other
records, corporate documents and properties of the Company as shall be
reasonably requested.
9.6 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.
9.7 In the event of the registration of any Registrable Shares pursuant to
this Section 9, each party hereto (the "INDEMNIFYING PARTY"), to the extent
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permitted by law, shall indemnify and hold harmless the other party hereto and
its officers, directors, employees and agents (collectively, the "INDEMNIFIED
PARTIES") against any losses, claims, damages or liabilities, joint or several
(collectively, "CLAIMS"), to which any of the Indemnified Parties may become
subject under the Act or otherwise, insofar as such Claims (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of material fact contained in the registration statement (or
any document contained in or incorporated by reference in the registration
statement) relating to the Registrable Shares, or arise out of or are based upon
any omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Indemnified Party for any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any Claims; provided however, that the Indemnifying Party will not be liable in
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any such case to the extent that any such Claim arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made or incorporated by reference in such registration statement in reliance
upon and in conformity with written information provided by such Indemnified
Party specifically for use in the preparation thereof. The indemnity provided
by this Section 9.7 shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Party. If the
indemnification provided for by this Section 9.7 is unavailable to a party that
would have been an Indemnified Party in respect of any Claims, then each party
that would have been an Indemnifying Party shall, in lieu of indemnifying such
Indemnified Party, contribute to the extent permitted by law to the amount paid
or payable by such Indemnified Party as a result of such Claims in such
proportion as is appropriate on an equitable basis to reflect the relative fault
of the Indemnifying Party on the one hand and such Indemnified Party on the
other hand in connection with the statement or omission which resulted in such
Claims; provided, however, that no person guilty of fraudulent misrepresentation
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within the meaning of Section 11(f) of the Act shall be entitled to contribution
from any person who was not found guilty of such fraudulent misrepresentation.
9.8 Additional Registration Rights. In addition to the registration
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rights provided in this Agreement, the Optionee shall be entitled to register
the shares underlying this Option under the terms of the Optionee's Employment
Agreement with Company dated as of December 20, 2000.
Section 10. PUBLIC MARKET FOR COMMON STOCK
If at any time prior to the exercise of all Options which are the subject
of this Agreement, there ceases to be a Public Market (as hereinafter defined)
for the Company's Common Stock, then the Optionee shall have the right, at his
sole election, for a period of thirty (30) days thereafter, to surrender to the
Company all unexercised Options then held by Optionee and to receive from the
Company in consideration therefore an amount equal to the number of Shares
subject to such unexercised Options times the amount obtained by subtracting the
Option Price per share then in effect from the greater of $4.00 or the highest
sales price on a Public Market during the preceding six months. By way of
example, if the exercise price at the time of surrender was $2.75 per share and
the highest sales price on a Public Market during the preceding six months was
$4.25 per share, then the number of unexercised Options surrendered would be
multiplied by $1.50 to determine the consideration to be paid by the Company
upon such surrender. The amount payable by the Company shall be paid promptly
after such surrender, and in no event later than twenty (20) days after such
surrender. Any surrender pursuant to this Section 10 shall be delivered to the
Company at its principal executive offices and shall be accompanied by written
notice signed by Optionee indicating his election to surrender the unexercised
Options pursuant to this Section 10.
For purposes of this Section 10, a Public Market shall mean that the
Company's Common Stock is listed for trading on one or more of a national
securities exchange, as that term is defined under the Securities Exchange Act
of 1934, the Nasdaq National Market, or the Nasdaq Smallcap Market.
Section 11. GENERAL PROVISIONS.
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11.1 Execution of the Company. The Options have been duly authorized,
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executed, and delivered by and on behalf of the Company.