GRANT OF STOCK OPTIONS
Date of Xxxxx: May 19,1997
THIS GRANT of Stock Options (the "Agreement"), dated as of the Date of
Xxxxx first stated above (the "Date of Grant"), is granted and delivered by
Jreck Subs Group, Inc., a New York corporation (the "Company") to Xxxxxxxx X.
Xxx and Xxxxx X. Xxx, husband and wife (the "Grantee"), individuals residing in
the State of Washington.
RECITALS
WHEREAS, the Board of Directors of the Company approved of the purchase
of Grantee's shares of common stock in Seawest Sub Shops, Inc. pursuant to that
certain letter purchase agreement dated as of May 8, 1997 (the "Purchase
Agreement"); and
WHEREAS, pursuant to the Purchase Agreement, and as partial
consideration for certain non-competition covenants from Day, the Company is
granting Grantee irrevocable options ("Options") to purchase shares of the no
par value common voting stock of the Company (the "Stock") in accordance with
the terms and provisions hereof;
NOW, THEREFORE, the parties hereto intending to be legally bound hereby
agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the company
hereby irrevocably grants to the Grantee, as of the Date of Grant, an option to
purchase up to 100,000 shares of Stock at a price of $.001 per share. Such
option is hereinafter referred to as the "Option(s)" and the shares of Stock
purchasable upon exercise of any or all of the Options are hereinafter sometimes
referred to as the "Option Shares." The Options are fully vested as of the Date
of Grant but may only be exercised at such times and n such manner as set forth
in Section 2 below.
2. Installment Exercise.
Unless Grantee is exercising Options pursuant to a plan of merger,
reorganization, Registration pursuant to Section 6 of this Agreement, sale of
substantially all the Company's assets or voluntary liquidation, in which case
the Options shall be immediately exercisable, the Options hereby granted shall
be exercisable only as follows:
Percentage of Option
Date of Exercise Which is Exercisable
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after December 19, 1997 25%
after May 19,1998 50%
after December 19, 1998 75%
after May 19, 1999 100%
Each Option may only be exercised, in whole or in part, as et forth in
this Section 2; provided, however, that no fewer than 1000 shares (or the
remaining shares then purchasable under the Option if less than 1000 shares) may
be purchased upon any exercise of Option rights hereunder and only whole shares
will be issued pursuant to the exercise of any Option.
The notice of exercise shall specify the number of Option Shares as to
which the Option is to be exercised and the date of exercise thereof, which date
shall be at least five days after the giving of such notice unless an earlier
time shall have been mutually agreed upon. Full payment (in U.S. dollars) by the
Grantee at the Option price for the Option Shares purchased shall be made on or
before the exercise shall be, in substance, in substantially the form of the
notice attached hereto as Exhibit A.
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee a certificate or certificates for the Option Shares then being purchased
upon full payment fort such Option Shares. If, at any time, the Company shall
determine, in its discretion, that the listing, registration or qualification of
the Options or the Option Shares upon any securities exchange or under any state
or federal law with the consent or approval of any governmental regulatory body
as necessary or desirable as a condition of or in connection with the Options or
the issuance or purchase of Stock thereunder, the Company shall undertake such
listing, registration of qualification so the Options may be exercised by the
Grantee as provided herein.
The date specified in the Grantee's notice as the dare of exercise
shall be deemed the date of exercise of the Option provided that payment in full
for the Option Shares to be purchased upon such exercise shall have been
received by such date.
3. termination of Option.
a. The Option, and all rights hereunder with respect thereto,
to the extent such rights shall not have been exercised, shall terminate and
become null and void after the expiration of fifteen (15) years from the Date of
Grant (the "Option Term").
b. In the event of the death of the Grantee, the Option
may be exercised by the
Grantee's legal representative, but only to the extent that the Option would
otherwise have been
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S1-510098.1
exercisable by the Grantee.
4. Right to Require Repurchased.
a. Any time after Grantee has exercised any of Grantee's Options to
purchase Stock, in whole or in part, Grantee may require the Company to
repurchase the Stock at the greater of the Fair Market Value (as defined below)
or $3.25/share. Without the prior written agreement of the Company, Grantee may
not require the Company to repurchase more than 10,000 shares in any three month
period.
b. To exercise the right of repurchase set forth in this Section 4,
Grantee must give notice in writing to the company. The notice set forth the
number of shares to be repurchased and whether the repurchase price is to be at
the Fair Market Value (defined below) or $3.25/share. Within ten (10) days of
receipt of such notice, the Company must deliver cash or readily available funds
in the amount of the repurchase price to Grantee together with a replacement
stock certified for the amount of shares not repurchased, if any.
5. Adjustment of and Changes In Stock of the Company.
In the event of reorganization, recapitalization, change of shares,
stock split, spinoff, stock dividend, reclassification, subdivision, or
combination of shares, merger, consolidation, right offering, or any other
change in the corporate structure or shares of capital stock of the Company
(collectively "Capital Change"), the Company shall make such adjustments as it
deems appropriate in the number and kind of shares of Stock subject to the
Option, provided, the financial or economic benefits to Grantee hereunder
existing prior to any such Capital Change shall not be reduced or otherwise
limited as a result of any such adjustment.
6. Notice of Piggyback Registration and Inclusion of Registrable
Securities.
Subject to the terms of Agreement, in the event the Company decides to
Register (defined below) any of its Stock (either for its own account or the
account of a security holder or holders exercising their respective demand
registration rights) on a form that would be suitable for a registration
involving solely Registrable Securities (defined below), the company at its sole
cost and expense will: (i) promptly give Grantee written notice thereof (which
notice shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable Blue Sky or other state
securities laws) and (ii) include in such Registration (and any related
qualification under Blue Sky laws or other compliance), and in any underwriting
involved therein, all the registrable Securities specified in a written request
delivered to the Company by Grantee within fifteen (15) days after delivery of
such written notice from the Company.
a. Piggyback Registration involving an Underwriting. If
the registration of which the
Company gives notice is for a Registered public offering involving an
underwriting, the Company
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shall so advise the Grantee as a part of the written notice given pursuant to
this Section 7. In such event, the right of grantee to Registration shall be
conditioned upon such underwriting. If Grantee desires to distribute their
securities through such underwriting, they shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement wight the underwriter's representative for such
offering. The Grantee shall have no right to participate in the selection of the
underwriters for an offering pursuant to this Section 7 and Grantee shall have
no liability for any costs and fees related thereto.
b. Blue Sky in Piggyback Registration. In the event of any Registration
of Registrable Securities pursuant to this Section 7, the Company will exercise
its best efforts to Register and qualify the securities covered by the
Registration Statement under such other securities or Blue Sky laws of such
jurisdictions (not exceeding twenty (20) unless otherwise agreed to by the
Company) as shall be reasonably appropriate for the distribution of such
securities; provided, however, that the company shall not be required to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions.
c. Definitions. For purposes of this Agreement, the following
definitions shall apply:
(1) The terms "Register", "Registered", and "Registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
(2) "Registrable Securities" shall mean all Stock not
previously sold to the public and issued or issuable upon conversion or exercise
of any of the Company's Convertible Securities purchased by or issued to the
Investors, including Stock issued or issuable pursuant to stock splits, stock
dividends and Stock Options, including the Options hereunder.
(3) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commissions thereunder, all as the same shall be in effect at the time.
7. Fair market Value.
As used herein, the "Fair Market Value" of a share of Stock shall be
the average of the high and low sale prices per share of Stock as quoted by
NASDAQ or any exchange upon which the shares of Stock of the Company are then
traded as determined by the Company on the applicable date of reference
hereunder, or if there is no sale on such date, the Company shall determine the
Fair Market Value by resort to such sales prior to the applicable date or such
experts as the Company shall deem appropriate, which may include appraisal of
the shares of Stock for this purpose.
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S1-510098.1
8. No Rights of Stockholders.
Neither the Grantee, nor any personal representative, shall be or shall
have any of the rights and privileges of a stockholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
Option, in whole or in part, prior to the date of actual exercise of the Option
in whole or in part.
9. Nontransferability of Option.
During the Grantee's lifetime, the Option hereunder shall be
exercisable only by the Grantee, or any guardian or legal representative of the
Grantee, and the Option shall not be transferable except, in case of the death
of the Grantee, by will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution, or other similar process. In the
event of (a) any attempt by the Grantee to alienate, assign, pledge,
hypothecate, or otherwise dispose of the Option except as provided for herein,
or (b) the levy of any attachment, execution, or similar process upon the rights
or interest hereby conferred, the Company may terminate the Option by notice to
the Grantee and the Option shall thereupon become null and void unless grantee
cures such default within thirty (30) days of the Company's notice.
10. Notice.
Any notice to the Company provided for in this instrument shall be
addressed to it in care of its secretary at its executive offices at 00000 XXX,
Xx. 00, Xxxxxxxxx, X.X. 13601, and any notice to the Grantee shall be addressed
to the Grantee at 0000 X. Xxxxxxxx Xxx X., Xxxxxxx, XX 00000. Any notice shall
be deemed to be duly given if and when properly addressed and posted by
registered or certified mail, postage prepaid.
11. Representations and Warranties of Grantee and Restrictions on
Transfer Imposed
by the Securities Act.
a. Representations and Warranties by Xxxxxxx. Grantee represents
and warrants to the
Company as follows:
(1) Grantee is experienced in evaluating and investing in
restaurant and franchise companies such as the Company and have had the
opportunity to discuss the Company's business, management and financial affairs
with its Chief Executive Officer and have had the opportunity to review the
Company's plan of operations, its tax returns and current financial statement.
Xxxxxxx understands that such discussions, as well as any written information
issued by the Company, were intended to describe the aspects of the Company's
business and prospects which it believes to be material but were not necessarily
a thorough or exhaustive description.
(2) In the event Grantee exercises Xxxxxxx's Options, the Stock
will be acquired for your own account, for investment and not with a view to, or
for resale in connection with,
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S1-510098.1
any distribution or public offering thereof within the meaning of the Securities
Act.
(3) Grantee understands that neither the Options nor the Stock
have been registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof, and that they must be held
by Grantee indefinitely and Grantee must therefore bear the economic risk of
such investment indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from registration. Grantee is
aware of the provisions of Rule 144 promulgated under the Securities Act which
permit limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
through a "broker's transaction" or in transactions directly with a "market
maker" (as provided by Rule 44(f)) and the number of shares being sold during
any three-month period not exceeding specified limitations. Grantee is aware
also that, while many of the restrictions of rule 144 do not apply to the resale
of shares by a person who owned those shares for at least two years prior to
their resale and who is not an "affiliate" (within the meaning of Rule 144(a))
of the issuer and has not been an affiliate of the issuer for at least three
months prior to the date of resale of the restricted securities, the Company
does not warrant or represent that Grantee is not an affiliate as of the dare of
this Agreement or that Grantee will not be an affiliate at any relevant times in
the future,
(4) Grantee has the full right to, power and authority to enter
into and perform this Agreement, and this Agreement constitutes a legal, valid
and binding obligation upon Grantee except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
affecting enforcement of creditors' rights, and except as limited by application
of legal principles affecting the availability of equitable remedies.
b. Legends. Each instrument representing the Securities
may be endorsed with
the following legends:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH
RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
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AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT.
The Company need not register a transfer of legended Securities, and may also
instruct its transfer agent not to register the transfer of the Securities,
unless one of the conditions specified in each of the foregoing legends is
satisfied.
c. Removal of Legends and transfer Restrictions. Any legend
endorsed on an instrument pursuant to Section 11 hereof and the stop transfer
instructions with respect to such securities shall be removed, and the Company
shall issue an instrument without such legend to the holder of such Securities
if such Securities are registered under the Securities Act and a prospectus
meeting the requirements of Section 10 of the Securities Act is available or if
such holder provides the Company with an opinion of counsel for such holder of
the Securities, reasonably satisfactory to the Company, to the effect that a
public sale, transfer or assignment of such Securities may be made without
registration.
12. Governing Law.
the validity, construction, interpretation, and effect of this
instrumental shall exclusively be governed by and determined in accordance with
the internal laws of the State of Washington, except to the extent preempted by
federal law which shall to such extent govern. In the event of a dispute
hereunder, the prevailing party to any action shall be entitled to recover its
attorney's fees and costs in addition to any other amounts or type of relief.
DATED in Seattle, Washington, this 19th day of May, 1997.
JRECK SUBS GROUP, INC.
BY
Its
Accepted and Agreed to:
By
Xxxxxxxx X. Xxx
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By
Xxxxx X. Xxx
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Exhibit A
NOTICE OF INTENT
TO EXERCISE OPTION
I, , hereby give notice to Jreck Subs Group, inc. that pursuant to the terms of
my Grant of Stock Options Agreement dated May 19, 1997 (the "Agreement"), I
intend to, and hereby do, exercise my options to
acquire____________________________ shares of common stock of Jreck Subs Group,
Inc.
Enclosed herewith is my check in the amount of________________________________
dollars ($_____) which represents the option exercise price of $.001 per share.
DATED:___________________
Xxxxxxxx X. Xxx
SSN#
Xxxxx X. Xxx
SSN#
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May 8, 1997
Xxxxxxxxxxx X. Xxxxxx
President
Jreck Subs Inc.
Box 6
Watertown, NY 13601-0006
RE: Purchase of Seawest Sub Shops, Inc Common Stock
Dear Xxxxx:
This letter is intended to set forth terms and conditions of our agreement
regarding the acquisition
of common stock of Seawest Sub Shops, Inc. ("Seawest") from Xxxxxxxx x. Xxx and
Xxxxx X. Xxx
("Day") by Jreck Subs, Inc. ("Jreck").
1. Purchase of Common Stock
a. Seawest has 5,000,000 authorized shares of common stock, no
par value, and
2,271,000 shares outstanding.
b. At closing, Jreck will purchase 2,000,000 shares of common
stock of Seawest
owned by Day for $150,000.
c. Within a reasonable time following the Closing, Jreck agrees to
offer to purchase all remaining all outstanding shares held by third parties for
the minimum price of $0.08 per share (i.e., the same share price paid to Day).
Jreck further agrees to indemnify, defend and hold Day harmless (including
attorneys fees) from and against any and all claims by Seawest minority
shareholders related to Jreck's purchase of Day's stock and this agreement.
d. Jreck acknowledges that it has had the opportunity to review
Seawest's books and records. Jreck is a sophisticated purchaser in a similar
business to Seawest's. Jreck acknowledges that Seawest is in litigation with
certain franchises and there are leases upon which Seawest has defaulted.
2. Jreck's Option to Repurchase Seawest Stores
a. As part of negotiations with a third party Seawest transferred
ownership of three Seawest owned stores on April 25, 1997 for total
consideration of $70,000:
(1) 0000 Xxxxx, Xxxxx X, Xxxxxxx, XX 00000
(2) 000-000xx Xxxxxx XX, Xxxxxxx, XX 00000
(3) 00000-00xx Xxxxxx XX, #000, Xxxxxxx, XX 00000
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b. Under Seawest's agreement with the third party, Seawest may, at its
sole option, repurchase these three company stores from the third party for
$70,000 by payment to the third party no later than May 15, 1997.
c. If Jreck so chooses, at Jreck's sole discretion, Seawest will
repurchase the three
units with funds to be provided by Jreck.
3. Noncompetition Agreement
a. At closing, Day will enter into a Noncompetition Agreement with
Jreck which will prevent Day from franchising submarine sandwich shops (but not
multiple food concepts as currently contemplated by Food Court Systems, Inc.)
for a period of three years. Jreck will pay Day the following consideration for
the Noncompetition Agreement:
(1) For each month for the 12 month period commencing on the first of
June,1997, Jreck will pay Day $8,000 per month.
(2) Jreck will Issue Day, at Day's selection, either (a) 100,000
common shares, or (b) options to purchase 100,000 common shares for a total
consideration of $100, of Jreck common stock. Jreck and Day agree to negotiate
the terms of this payment in order to minimize income tax consequences to Day
related to this payment. Jreck will issue a "Put Option" which will allow Day to
sell the 100,000 shares back to Jreck, upon demand after a mutually agreeable
period of time, for not less than $3.25 per share in cash.
4. Liabilities of Seawest and Day. Jreck will assume all liabilities,
existing or contingent,
of Seawest and all liabilities of Seawest personally guaranteed by Day. Jreck
will indemnify Day
from any and all claims by Seawest creditors.
5. Transfer Tax. Jreck shall be responsible of all transfer taxes, if
any.
6. Closing. Closing for this Stock Purchase and Sale Agreement
("Closing"), and payment
of the purchase price, shall be at the offices of Xxxxxxxx, Xxxxxxx & Xxxxx, in
Seattle,
Washington, on May 16, 1997 (unless extended by mutual agreement).
7. General Provisions.
a. Notices. Any notices and similar communications concerning
this Agreement
("Notice") shall be in writing and may be delivered by facsimile, followed by
regular mail.
b. Governing Law. This Agreement shall be governed by Washington
state law. The
venue of any action shall be King County, Washington. In the event of a disput
respecting this
agreement, the prevailing party shall be entitled to recover its costs and
reasonable attorneys fees
from the other party.
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S1-510098.1
c. Complete Agreement and Binding Effect. This Agreement shall become
binding upon execution by all of the parties hereto. This Agreement represents
the complete agreement of the parties and shall supersede all previous and
contemporaneous negotiations, correspondence, commitments, agreements and
understandings of the parties, whether oral or written, with respect to the
transactions contemplated hereby.
d. Counterparts. This Agreement may be executed in mutual
counterparts and sent
by facsimile and all such counterparts shall constitute one original.
8. Stock Purchase and Sale Agreement. The parties will enter into a Stock
Purchase and Sale Agreement which will contain customary representations,
warranties, indemnifications and covenants. However, mutual execution of the
Stock Purchase and Sale Agreement shall not be a condition to Closing. The
parties further agree to execute such further documentation, if any, which is
mutually deemed to be necessary and reasonable to accomplish the transactions
contemplated herein.
9. Acceptance. If the foregoing terms are acceptable to you, please
acknowledge your
acceptance by your signature below on or prior to 2:00 pm, Pacific Standard
Time, May 9, 1997.
Yours very truly, Yours very truly,
Xxxxxxxx X. Day Xxxxxxxx X. Day
President For Xxxxxxxx X. Xxx and Xxxxx X. Xxx
The provisions of this Agreement are hereby acknowledged and accepted:
DATED_______________, 1997 JRECK SUBS, INC.
Xxxxxxxxxxx X. Xxxxxx
President
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Addendum
It is the intention of the parties that the shares of Xxxxxxxx and Xxxxx Xxx
shall be acquired by a wholly owned subsidiary of Jreck Subs Group, Inc. to be
formed prior to closing. The indemnifications given to Xxxxxxxx and Xxxxx Xxx
shall be given by both the subsidiary and Jreck Subs Group, Inc.
by:_______________________ by:________________________________
Jreck Subs Group, Inc. Seawest Sub Shops, Inc.
-----------------------------------
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S1-510098.1
REPRESENTATION AND WARRANTY AGREEMENT
The undersigned purchaser ("Purchaser") has agreed to purchase Two
Million (2,000,000) shares of no par common voting stock (the "Shares") of
SEAWEST SUB SHOPS, INC., a Washington corporation, (the "Company") from XXXXXXXX
X. XXX and XXXXX X. XXX, husband and wife, ("Sellers") pursuant to the terms of
that certain letter purchase agreement dated as of May 8, 1997 (the "Purchase
Agreement"). In connection with the purchase, purchaser represents and warrants
to Seller, and Seller represents and warrants to Purchaser, as set forth below.
1. Purchaser's Representations and Warranties.
Purchaser represents and warrants to Seller that each of the
following are true and correct as of the date hereof:
(a) Purchaser is purchasing the Shares solely for Purchaser's
own account for investment and not with a view to or for sale or distribution of
the Shares or any portion thereof and not with any present intention of selling,
offering to sell or otherwise disposing of or distributing the Shares or any
portion thereof in any transaction other than a transaction complying with the
registration requirements of the Securities Act of 1933, as amended (the "Act",
and applicable state securities or "blue sky" laws, or pursuant to an exemption
therefrom. Purchaser also represents that the entire legal and beneficial
interest of the Shares that Purchaser is purchasing is being purchased for, and
will be held for, Purchaser's account only, and neither in whole nor in part for
any other person or entity, except a wholly owned subsidiary of Purchaser.
(b) Purchaser acknowledges that it has received all such
information as Purchaser deems necessary and appropriate to enable it to
evaluate the financial risk inherent in making an investment in the Shares,
including but not limited to this Agreement and related materials, which include
a description of some of the risks inherent to an investment in the Company.
Purchaser further acknowledges that Purchaser has received satisfactory and
complete information concerning the business and financial condition of the
Company in response to all inquiries in resect thereof, including but not
limited to the pending litigation involving the Company as set forth on Exhibit
A and all UCC filings and other matters set forth in Exhibit B, both of which
are attached hereto. Purchaser relies upon the Affidavits of Xxxxxxxx and Xxxxx
Xxx, dated as of the date hereof, in making such acknowledgment.
(c) Xxxxxxxxx realizes that Xxxxxxxxx's purchase of the Shares
involve a high degree of risk and will be a highly speculative investment, and
that he, she or it is able, without impairing Purchaser's financial condition,
to hold the Shares for an indefinite period of time.
(d) Purchaser alone, or with the assistance of
professional advisors, has such
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S1-510098.1
knowledge and experience in financial and business matters that the undersigned
is capable of evaluating the merits and risks of Purchaser's purchase of the
Shares, or has a preexisting personal or business relationship with the Company
or any of its officers, directors, or controlling persons of a duration and
nature that enables the undersigned to be aware of the character, business
acumen and general business financial circumstances of the Company or such other
person.
(e) Purchaser has carefully read this Agreement and the
Company and Sellers have made available to Purchaser or Purchaser's advisors all
information and documents requested by Purchaser relating to investment in the
Shares, and has provided answers to Purchaser's satisfaction to all of
Purchaser's questions concerning the Company and the Shares.
(f) Purchaser understands that neither the Company nor any of
its officers or directors has any obligation to register the Shares under any
federal or state securities act or law.
(g) Xxxxxxxxx has relied solely upon this Agreement, the
Affidavit of Xxxxxxxx and Xxxxx Xxx, the advice of his or her representatives,
if any, and independent investigations made by the Purchaser and/or his or her
purchaser representatives, if any, in making the decision to purchase the Shares
purchased herein and acknowledges that no representations or agreements other
then those set forth in this Agreement have been made to the Purchaser in
respect thereto.
2. Seller's Representations and Warranties. Except as expressly
set forth in this
paragraph 2, Purchaser is purchasing the shares "as is" and Purchaser assumes
all risk of loss
related thereto. Seller represents and warrants to Purchaser that each of the
following are true
and correct as of the date hereof:
(a) The Shares constitute 2,000,000 shares of the issued and
currently outstanding 2,271,000 shares of the Company. Except as set forth on
Exhibit D, no shares, options, or warrants have been or are contemplated being
issued after the execution of this document.
(b) The Shares are owned by Sellers and the Shares
constitute all of Sellers'
Shares in the Company.
(c) Except for that certain Security Pledge Agreement dated
February 25, 1991 (copy attached as Exhibit C hereto) and related agreements by
and between Seller, the Company, Xxxxxxx X. Xxxx and Xxxxx X. Xxxxxx, the Shares
are free and clear of liens and encumbrances.
3. Restricted Securities.
Purchaser acknowledges, and Sellers hereby disclose to Purchaser the
following:
(a) The Shares that Purchaser is purchasing have not been
registered under the
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Act or under the laws of the State of Washington, and the Shares must be held
indefinitely unless a transfer of them is subsequently registered under the Act
or an exemption from such registration is available; and
(b) The Sellers shall cause the Company to make a notation in
its records of the above-described restrictions on transfer and of the legend
noted in Paragraph 4 below.
4. Legend.
Purchaser agrees to cause the Company to endorse the following
endorsement on (or such legend as is substantially similar to the following) all
certifies representing any of the Shares subject to the provisions of this
Agreement:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED ON THE
BOOKS OF THE CORPORATION, WITHOUT REGISTRATION OF SUCH
SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION
THEREFROM, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION,
TO BE EVIDENCED BY AN OPINION OF SHAREHOLDERS'S COUNSEL, IN
FORM ACCEPTABLE TO THE CORPORATION, THAT NO VIOLATION OF SUCH
REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT. THESE SHARES REPRESENT OWNERSHIP IN A
PRIVATELY HELD CORPORATION PURSUANT TO THE LAWS OF THE STATE
OF WASHINGTON."
5. Miscellaneous.
(a) On or after the date of this Agreement, each of the
parties shall, at the request of the other, furnish, execute and deliver such
documents and instruments and take such other actions as the requesting party
shall reasonably require as necessary or desirable to carry out the transactions
contemplated herein.
(b) This Agreement including all matters of construction,
validity and performance, shall be governed by and construed and enforced in
accordance with the laws of the State of Washington. The parties hereto agree
that the jurisdiction and venue for any action brought between the parties under
this Agreement shall be the state and federal courts sitting in King County,
Washington, and each of the parties hereby agrees and submits itself to the
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exclusive jurisdiction and venue of such courts for such purpose.
(c) This Agreement comprises the entire agreement between the
parties related to the subject matter herein. It may be changed only by further
written agreement, signed by both parties. this Agreement supersedes and merges
within it all prior agreements or understandings between parties, whether
written or oral relating to the subject matter herein. In interpreting or
construing this Agreement, the fact that one or the other of the parties may
have drafted this Agreement or any provision shall not be given any weight or
relevance.
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S1-510098.1
Dated as of May 19, 1997.
ADMIRAL SUBS OF
OF WASHINGTON INC.,
a Washington corporation
in formation
By: Address:
Its:
XXXXXXXX X. XXX Address:
Signature
XXXXX X. XXX Address:
Signature
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EXHIBIT A
1. Xxxxx Xxxxxx, et al. v. Seawest Sub Shops, Inc., King County Superior
Court Cause No.
97-2-05279-3 SEA
2. Xxxxx X. Xxx, et al. v. Seawest Sub Shops, Inc., American Arbitration
Association
3. Xxxxxxxxxxx X. Xxxxx, et al. v. Seawest Sub Shops, Inc., American
Arbitration Association
4. Xxxxxxxx X. Xxxxx, et al. v. Seawest Sub Shops, Inc./Seawest Sub Shops,
Inc., Third-party
Plaintiff x. Xxxxx, et al., King County Superior Court Cause No.
97-2-05275-1 SEA
5. Seawest Sub Shops, Inc. x. Xxxxxx, et al., American Arbitration
Association
6. Wesbild, Inc. v. Seawest Sub Shops, Inc., Kitsap County Superior
Court Cause No
96-2-02666-4
7. Xxxx X. Xxxxxxxx, et ux. v. Seawest Sub Shops, Inc., King County
District Court, Bellevue
Division, Cause No. 9705597
8. DBSI Realty Corp. v. Seawest Sub Shops, Inc., et al., district Court,
Fourth Judicial
District, Ada County, State of Idaho, Cause No. CV OC 9606512D
9. TOPCO Financial Services, Inc. v. Seawest Sub Shops, Inc., King County
District Court,
Bellevue Division, Cause No. 9706111
10. Lakewood Real Estate L.L.C. v. Seawest Sub Shops, Inc., et al.,
(NOT FORMALLY
FILED)
11. Seawest Sub Shops, Inc. v. H.S.M. Corporation, et al.,
(NOT FORMALLY FILED)
12. Xxxxx Xxxxx, et al. v. Seawest Sub Shops, Inc., et al.,
(NOT FORMALLY FILED)
13. The Quizno's Corporation v. Seawest Sub Shops, Inc., District Court,
City and County of
Denver
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EXHIBIT B
CHART
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S1-510098.1
EXHIBIT C
SECURITY PLEDGE AGREEMENT
THIS SECURITY PLEDGE AGREEMENT ("Agreement"), dated Feb. 25, 1991, by
and
between Xxxxxxxx X. Xxx and Xxxxx X. Xxx, husband and wife, and all successors
or additional
shareholders of the Corporation ("Pledgor") and Xxxxxxx X. Xxxx and Xxxxx X.
Xxxxxx and
successors ("Pledgee"),
WITNESSETH:
WHEREAS, Pledgor and pledgee are parties to a Stock Purchase and Sale
Agreement dated
Feb. 25, 1991, and all related agreements (the "Purchase Agreement"); and
WHEREAS, pursuant to such Purchase Agreement, Seawest Sub Shops, Inc. (the
"Corporation") owes Pledgee certain amounts for which Xxxxxxx has executed a
personal guaranty;
and
WHEREAS, Pledgee desires that security be provided for such debt;
NOW THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, the parties agree as follows:
1. Pledged Stock. The term "Pledged Stock" means the shares described in
the attached Schedule I, together with all subsequently issued stock or
certificates, options, rights, or other distributions issued as an addition to,
in substitution or in exchange for, or on account of, any such shares, and all
proceeds of all of the foregoing, now or hereafter owned or acquired by Pledgor.
2. (a) Security Interest. As security for the prompt
satisfaction of the obligations
under the Purchase Agreement and this Agreement, Pledgor to Pledgee the Pledged
Stock and
grants Pledgee a lien on and security interest therein.
(b) Possession. Pledgee shall be entitled to possession of the
collateral until all obligations and undertakings of Pledgor secured hereby have
been fully paid and performed.
(c) Distributions. If Pledgor shall become entitled to receive
or shall receive, in connection with any of the Pledged Stock, any:
(i) Stock certificate, including, but without
limitation, any certificate
representing a stock dividend or issued in connection with any increase or
reduction of capital, reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spin-off,
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S1-510098.1
or split-off;
(ii) Option, warrant, or tight, whether as an
addition to or in substitution
or in exchange for any of the Pledged Stock, or otherwise, then:
Pledgor shall accept the same as Xxxxxxx's agent, in trust for Pledgee,
and shall deliver them forthwith to Pledgee in the exact form received with, as
applicable, Xxxxxxx's endorsement when necessary, or appropriate stock powers
duly executed in blank, to be held by Pledgee, subject to the terms hereof, as
part of the Pledged Stock.
(d) Voting Rights. Pledgor shall have and retain all voting
rights with respect to the Pledged stock, so long as Pledgor's obligations under
this Agreement are not in default (an "Event of Default"). Upon the occurrence
of an Event of Default, if Pledgor does not cure such default as provided in the
Purchase Agreement or related agreements, Pledgor or its nominee shall have,
with respect to the Pledged Stock, the right to exercise all voting rights as to
all shares of the Company's stock, including all other corporate rights and all
conversion, exchange, subscription or other rights, privileges or options
pertaining thereto as if it were the absolute owner thereof, including, without
limitation, the right to exchange any or all of the Pledged Stock, and in
connection therewith, to deliver any of the Pledged Stock to any committee,
depository, transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine, all without liability except to account for
property actually received by it; but Pledgee shall have no duty to exercise any
of the aforesaid rights, privileges or options and shall not be responsible for
any failure to do so or delay in so doing.
(e) Cash Dividends Before Default. Unless an Event of
Default shall have
occurred and be continuing, Pledgor shall be entitled to receive for its own use
cash dividends
on the Pledged Stock.
(f) Default and Sale of Pledged Shares. Upon the occurrences
of an Event of Default, if Pledgor does not cure such default as provided in the
Purchase Agreement, Pledgee may forthwith realize upon the Pledged Stock or any
part thereof, and may forthwith, or agree to, sell or otherwise dispose of and
deliver the Pledged Stock or any part thereof or interest therein, in one or
more parcels at public or private sale or sales, at any exchange, broker's board
at any of Pledgee's offices or elsewhere, at such prices and on such terms
(including, but without limitation, a requirement that any purchaser of all or
any part of the Pledged Stock purchase the shares constituting the Pledged Stock
for investment and without any intention to make a distribution thereof) as it
may deem best, for cash or on credit, or for future delivery without assumption
of any credit risk, with the right to Pledgee or any purchaser to purchase upon
any such sale the whole or any part of the Pledged Stock.
(g) Disposition of Sale Proceeds. The proceeds of any such
disposition or other
action by Pledgee shall be applied as follows:
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(i) first, to the costs and expenses incurred in
connection therewith or
incidental thereto or to the care or safekeeping of any of the Pledged Stock or
in any way relating to the rights of Pledgee hereunder, including reasonable
attorney's fees and legal expenses;
(ii) Second, to the satisfaction of Pledgor's
obligations under the Purchase
Agreement and this Agreement;
(iii) Third, to the payment of any other amounts
required by applicable
law (including, without limitation, section 9-504(1)(c) of the Uniform
Commercial Code); and
(h) Notice of Sale. Pledgee need not give more than thirty
(30) days' notice of the time and place of any public sale or of the time after
which a private sale may take place, which notice Pledgor hereby deems
reasonable.
3. Xxxxxxx's Warranties. Pledgor represents and warrants as of
the execution date of
this Agreement that:
(a) It has, and had duly exercised, all requisite power and
authority to enter into this Agreement, to pledge the Pledged Stock for the
purposes described in paragraph 2(a), and to carry out the transactions
contemplated by this Agreement;
(b) It is the legal and beneficial owner of all of the
Pledged Stock; and
(c) The execution and delivery of this Agreement, and the
performance of its terms, will not result in any violation of any provision of
the Corporation's certificate of incorporation or bylaws, or violate or
constitute a default under the terms of any agreement, indenture or other
governmental rule or regulation, applicable to the Corporation or any of its
property.
4. Pledgor's Covenants. Pledgor hereby covenants that, until all
of the obligations
have been satisfied in full, it will not:
(a) Sell, convey, or otherwise dispose of any of the Pledged
Stock or any interest therein or create, incur, or permit to exist any pledge,
mortgage, lien, charge, encumbrance or any security interest whatsoever in or
with respect to any of the Pledged Stock or the proceeds thereof, other than
that created hereby; or
(b) Consent to or approve the issuance of any additional
shares of any class of capital stock in the issuer of the Pledged Stock; or any
securities convertible voluntarily by the holder thereof or automatically upon
the occurrences or nonoccurrence of any event or condition into, or exchangeable
for, any such shares; or any warrants, options, rights, or other commitments
entitling any person to purchase or otherwise acquire any such shares.
(c) Notwithstanding the foregoing or any other provision
herein, Pledgor shall be
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entitled to sell or transfer all or a portion of the Pledged Stock (or issue new
stock) to relatives of Pledgor without restriction as long as such stock remains
subject to this Agreement.
5. Notice from Third Parties. Pledgor will promptly deliver to Pledgee
all written notices, and will promptly give Pledgee written notice of any other
notices, received by it with respect to Pledged Stock, and Pledgee will promptly
give like notice to Pledgor of any such notices received by it or its nominee.
6. Endorsement, Proxies. Pledgor shall at any time, and from time to
time, upon the written request of Pledgee, execute and deliver such further
documents and do such further acts and things as Pledgee may reasonably request
to effect the purposes of this Agreement, including, without limitation,
delivering to Pledgee upon the occurrence of an Event of Default that has not
been cured as provided in the Purchase Agreement and related agreements, such
endorsements, forms, writings and irrevocable proxies with respect to the
Pledged Stock in a form satisfactory to Pledgee as shall be necessary to carry
out the terms and purposes of this Agreement. Until receipt thereof, this
Agreement shall constitute Pledgor's proxy to Pledgee or its nominee to vote all
shares of Pledged Stock then registered in Pledgor's name.
7. Termination. Upon the satisfaction in full of all obligations and the
satisfaction of all additional costs and expenses of the corporation and Pledgor
under the Purchase Agreement as provided herein, this Agreement shall terminate
and Pledgee shall deliver to Pledgor, at Pledgor's expense, such of the Pledged
Stock as shall not have been sold or otherwise applied pursuant to this
Agreement.
8. Pledgee's Rights and Duties.
(a) Care. Beyond the exercise of reasonable care to assume the
safe custody of Pledged Stock while held hereunder, Pledgee shall have no duty
or liability to preserve rights pertaining thereto and shall be relieved of all
responsibility for the Pledged Stock upon surrendering it or tendering surrender
of it to Pledgor.
(b) No Waiver. No course of dealing between Pledgor and
Pledgee, nor any failure to exercise, nor any delay in exercising, any right,
power or privilege of Pledgee hereunder or under the Purchase Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(c) No election of Remedies. The rights and remedies provided
herein and in the Agreement and in all other agreements, instruments, and
documents delivered pursuant to or in connection with the Agreement, are
cumulative and are in addition to and not exclusive of any rights or remedies
provided by law, including, but without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code of the State of Washington.
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S1-510098.1
(d) Severability. The provisions of this Agreement are
severable, and if any clause or provisions shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision or part thereof in
such jurisdiction and shall not in any manner affect such clause of provision in
any other clause or provision in this Agreement in any jurisdiction.
9. Notice. Any notice required or permitted by this Pledge
Agreement shall be
effective if given in accordance with the provisions if the Agreement.
10. Successors. This Agreement shall inure to the benefit of and
shall be binding upon
the successors and assigns of the parties hereto.
11. Uniform Commercial Code. The provisions of this Agreement
shall be governed
by the provisions of the Uniform Commercial Code, as enacted in Washington in
Chapter 62A
RCW.
12. Choice of Law. This Agreement shall be construed in
accordance with the
substantive law of the State of Washington.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date and year first above written.
"Pledgor"
Xxxxxxxx X. Xxx Xxxxxxx X. Xxxx
Xxxxx X. Xxx Xxxxx X. Xxxxxx
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