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EXHIBIT 10.2
WARRANT AGREEMENT
WARRANT AGREEMENT (this "Agreement"), dated as of July 9, 1998, by and
between PC Flowers & Gifts, Inc., a Delaware corporation (the "Grantor"), and
Fingerhut Companies, Inc., a Minnesota corporation (the "Grantee").
W I T N E S S E T H:
WHEREAS, the Grantor and the Grantee are parties to an Investor
Subscription Agreement of even date herewith (as the same may be amended from
time to time, the "Investment Agreement") pursuant to which Grantee is
purchasing 248 shares of Common Stock of the Grantor, without par value ("Common
Stock") and the Grantor is to issue to the Grantee Warrants to purchase up to
1252 shares of Common Stock.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Grant of Warrant. The Grantor hereby grants to Grantee an
irrevocable warrant (the "Warrant") to purchase up to 1252 shares of Common
Stock (the "Warrant Shares") which together with 248 shares of Common Stock to
be issued to Fingerhut on the date hereof will represent sixty percent (60%) of
the outstanding Common Stock of the Grantor after exercise of such Warrant and
issuance of all shares subject to any options, warrants, convertible securities,
subscription rights or otherwise which are in existence or outstanding as of the
date hereof. The purchase price for the Warrant Shares shall be as follows:
Percent of
Outstanding Exercise
Shares Owned Price Per
after Exercise Share, Aggregate
Number of ("Percentage ("Exercise Exercise
Shares Ownership") Price") Price Expiration Date
------ ----------- ------- ----- ---------------
419 40% $7,159.90 $3,000,000 January 8, 1999
333 50% $6,006.01 $2,000,000 January 8, 2000
500 60% $5,000.00 $2,500,000 June 30, 2000
The Percentage Ownership shall be adjusted downward to reflect the issuance of
options to employees of the Grantor other than Xxxxxxx X. Xxxxx, in each
instance as approved in writing by the Grantee.
SECTION 2. Exercise of Warrant. The Grantee may exercise this Warrant, in
whole or in part (but, with respect to Warrants exercisable at the same Exercise
Price, all Warrants at such Exercise Price), at any time from the date hereof by
giving to the Grantor notice to such effect, specifying a date not later than
ten business days from the date such notice is given for the
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closing of the purchase. Such closing may be by mail or by transfer of funds as
specified on such notice.
SECTION 3. Adjustment of Warrant Shares Issuable.
(a) In case at any time or from time to time after the date of
this Agreement the Grantor shall (i) declare or pay any dividend or make any
other distribution upon any capital stock of the Grantor which is payable in
Common Stock or securities convertible into Common Stock ("Convertible
Securities"), or (ii) effect a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in Common Stock), then, in any such
event, the total number of additional shares of Common Stock, or (in the case of
any such dividend or distribution payable in Convertible Securities) Convertible
Securities issuable in payment of such dividend or distribution or to give
effect to such subdivision shall be deemed to have been issued immediately after
the close of business on the record date (or other date) for the determination
of holders of any class of securities in connection with such subdivision.
(b) In case the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares of Common Stock, the Exercise Price in effect immediately prior to
such combination or consolidation shall, concurrently with the effectiveness of
such combination or consolidation, be proportionately increased.
(c) In case the Grantor shall take any of the actions set
forth in (a) and (b) above, the number of Warrant Shares purchasable upon
exercise of each Warrant immediately prior thereto shall be adjusted so that the
Grantee shall be entitled to receive the kind and number of Warrant Shares which
it would have owned or have been entitled to receive after any of the events
described above, had each such Warrant been exercised immediately prior to such
event or any record date with respect thereto. An adjustment made pursuant to
this clause (c) shall become effective immediately after the effective date of
such event retroactive to the record date, if any for such event.
(d) If the Grantor issues any shares of Common Stock or
Convertible Securities other than with the written consent of the Grantee, the
number of Warrant Shares issuable pursuant to this Agreement shall be increased,
as required, to provide to the Grantee that it shall receive the Percentage
Ownership.
SECTION 4. Payment and Delivery of Warrant Shares. At any closing
hereunder, (a) Grantee shall make payment to the Grantor of the Exercise Price,
and (b) Grantor shall issue the Warrant Shares to the Grantee and register such
issuance on Grantor's stock ledger.
SECTION 5. Representations and Warranties of the Grantor.
(a) Organization. The Grantor is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware.
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(b) Authorization; No Contravention. The execution, delivery and
performance by the Grantor of this Warrant Agreement are within the Grantor's
corporate powers, have been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with, any governmental body,
agency or official (other than as may be required by state and federal
securities laws) and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of incorporation
or bylaws of the Grantor or of any other agreement, judgment, injunction, order,
decree or other instrument binding upon the Grantor.
(c) Binding Effect. This Agreement constitutes a valid and binding
agreement of the Grantor, enforceable in accordance with its terms.
(d) Private Offering. Neither the Grantor nor any person acting on its
behalf has offered the Warrant Shares or any similar securities for sale, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any persons. Neither the Grantor nor any
person acting on its behalf has taken, or will take, any action which would
subject the issuance or sale of the Warrant Shares to the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act").
(e) Issuance of Shares. Upon the exercise of the Warrant pursuant to this
Agreement, the Warrant Shares reserved for issuance hereunder will be duly and
validly authorized, issued, fully paid and non-assessable, free of preemptive
rights and free and clear of any lien and any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
the Warrant Shares), other than such limitations or restrictions imposed by the
Stockholders Agreement dated as of the date hereof among Grantor, the Grantee
and Xxxxxxx X. Xxxxx (the "Stockholders Agreement") and by the Securities Act.
(f) Capital Stock. On the date hereof, the authorized capital stock of the
Grantor consists of 10,000 shares of Common Stock of which 1,000 shares of
Common Stock are outstanding. The Warrant Shares plus 248 shares of Common Stock
to be issued to Fingerhut on the date hereof represent 60% of the Grantor's
outstanding Common Stock on a fully diluted basis, after the issuance of the
Warrant Shares. There are no options, warrants or other rights outstanding to
purchase any Shares of Common Stock of the Company
SECTION 6. Covenants of Grantor. The Grantor will at all times reserve and
keep available, solely for issuance pursuant to the exercise of the Warrant, the
number of shares of Common Stock which from time to time shall be issuable to
the Grantee upon the exercise of the Warrant. The Grantor shall take all action
to assure that all such shares shall be duly authorized and, when issued
pursuant to the exercise of the Warrant, shall be validly issued, fully paid and
non-assessable with no liability on the part of the holders thereof.
SECTION 7. Miscellaneous.
(a) The Grantee understands that the Warrant Shares are being offered only
in a transaction not involving any public offering within the meaning of the
Securities Act, and that, if in the future the Grantee decides to resell, pledge
or otherwise transfer any of the Warrant Shares, such Warrant Shares may be
resold, pledged or transferred only (i) in accordance with the
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terms of the Stockholders Agreement or (ii) pursuant to an exemption from
registration under the Securities Act.
(b) The Grantee understands that the Warrant Shares will, unless otherwise
agreed by the Grantor thereof, bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER,
CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN
A STOCKHOLDERS AGREEMENT. A COPY OF SUCH AGREEMENT MAY BE OBTAINED
BY THE HOLDER HEREOF AT THE CORPORATION'S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE.
(c) Amendments. This Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a written agreement
executed by the parties hereto.
(d) Notices. All notices, requests, other communications and distributions
to any party hereunder shall be in writing (including prepaid overnight courier,
telex, facsimile transmission or similar writing) and shall be given to such
party at its address or telecopy number set forth below or at such other address
or telecopy number as such party may hereafter specify for the purpose by notice
to the other parties.
If to the Grantor:
PC Flowers & Gifts, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
If to the Grantee:
Fingerhut Companies, Inc.
0000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Each such notice, request or other communication shall be effective (i) if given
by telex or telecopy, when such telex or telecopy is transmitted to the telex or
telecopy number specified on the signature pages hereof and the appropriate
answerback is received (in the case of telex) or telephonic confirmation of
receipt thereof is obtained (in the case of telecopy) or (ii) if given by
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mail, prepaid overnight courier or any other means, when received at the address
specified on the signature pages hereof or when delivery at such address is
refused.
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
(f) Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same Warrant.
(g) Headings. The paragraph headings herein are for convenience only and
shall not affect the construction hereof.
(h) Assignment. This Agreement shall not be assignable by either party.
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IN WITNESS WHEREOF, the Grantor and Grantee have caused this Agreement to
be duly executed as of the day and year first above written.
PC FLOWERS & GIFTS, INC.
By: /s/ Xxxxxxx X. Xxxxx, President
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FINGERHUT COMPANIES, INC.
By: /s/ Xxxxxxx Xxxxxxx, JP
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