Exhibit 10.9.2
STOCK PURCHASE WARRANT
This Warrant is issued this 15th day of November, 1995, by FCOA ACQUISITION
CORP., a Delaware corporation (the "Company"), to SIRROM CAPITAL CORPORATION, a
Tennessee corporation (SIRROM CAPITAL CORPORATION and any subsequent assignee or
transferee hereof are hereinafter referred to collectively as "Holder" or
"Holders").
AGREEMENT:
1. Issuance of Warrant; Term. For and in consideration of SIRROM CAPITAL
CORPORATION making a loan to Factory Card Outlet of America Ltd., an Illinois
corporation and wholly owned subsidiary of the Company ("Subsidiary") in an
amount of Four Million and no/100ths Dollars ($4,000,000) pursuant to the terms
of a secured promissory note of even date herewith (the "Note") and related loan
agreement of even date herewith (the "Loan Agreement"), and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Holder the right to purchase 23,658
shares of the Company's common stock (the "Common Stock"), which the Company
represents equals 2.5% of the capital stock of the Company on the date hereof,
calculated on a fully diluted basis after exercise of this Warrant ("Base
Amount"), provided that in the event that the indebtedness evidenced by the Note
is outstanding on the following dates, the Base Amount shall be increased to the
corresponding number set forth below:
Date Base Amount
---- -----------
April 15, 1997 33,465 shares of Common Stock,
or
November 15, 1998 43,477 shares of Common Stock,
or
November 15, 1999 53,700 shares of Common Stock;
and further provided that the issuance of the Common Stock hereunder is subject
to the provisions of Section 3A hereof. The shares of Common Stock issuable upon
exercise of this Warrant are hereinafter referred to as the "Shares." This
Warrant shall be exercisable at any time and from time to time from the date
hereof until November 30, 2000. For purposes of this Warrant the term "fully
diluted basis" shall be determined in accordance with generally accepted
accounting principles as of the date hereof.
2. Exercise Price. The exercise price (the "Exercise Price") per share for
which all or any of the Shares may be purchased pursuant to the terms of this
Warrant shall be One Cent ($.01).
3. Exercise. This Warrant may be exercised by the Holder hereof (but only
on the conditions herein set forth) as to all or any increment or increments of
One Hundred (100) Shares (or the balance of the Shares if less than such
number), upon delivery of written notice of intent to exercise to the Company at
the following address: 000 Xxxxxxxx Xxxxx, Xxxxxxxxxxx, XX 00000-0000 or such
other address as the Company shall designate in a written notice to the Holder
hereof, together with this Warrant and payment to the Company of the aggregate
Exercise Price of the Shares so purchased. The Exercise Price shall be payable,
at the option of the Holder, (i) by certified or bank check, (ii) by the
surrender of the Note or portion thereof having an outstanding principal balance
equal to the aggregate Exercise Price or (iii) by the surrender of a portion of
this Warrant having a fair market value equal to the aggregate Exercise Price.
Upon exercise of this Warrant as aforesaid, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this Warrant a certificate or certificates for the
total number of whole Shares for which this Warrant is being exercised in such
names and denominations as are requested by such Holder (subject to Sections 4
and 5 hereof). If this Warrant shall be exercised with respect to less than all
of the Shares, the Holder shall be entitled to receive a new Warrant covering
the number of Shares in respect of which this Warrant shall not have been
exercised, which new Warrant shall in all other respects be identical to this
Warrant. The Company covenants and agrees that it will pay when due any and all
state and federal issue taxes (exclusive of any taxes based upon the income of
Holder) which may be payable in respect of the issuance of this Warrant or the
issuance of any Shares upon exercise of this Warrant.
3A. Non Voting Stock. The Common Stock issuable hereunder shall be
Non-Voting Common Stock. The Company, may at any time on or before February 29,
1996, amend its Certificate of Incorporation so as to provide for a class of
Non-Voting Common Stock which shall have rights, preferences, and limitations
which are identical, in every way, to the Common Stock of the Company
outstanding on the date hereof, except that such class of Non-Voting Common
Stock of the Company outstanding on the date hereof shall not have the right to
vote on any matter except where expressly required by law, and the Non-Voting
Common Stock shall be converted into and shall become, without the necessity of
the exchange of certificates representing such stock, or any other action by the
holder thereof, Common Stock of the Company (which shall have voting rights)
upon the effectiveness of any registration statement filed under the Securities
Act (as hereinafter defined) which registration thereunder includes Common Stock
of the Company. At any time after such authorization of Non-Voting Common Stock
by the Company, upon exercise of this Warrant, the holders thereof shall receive
such Non-Voting Common Stock in lieu thereof and, under such circumstances, the
references to "Shares" shall mean such Non-Voting Common Stock. Upon exercise of
this Warrant prior to the creation of such Non-Voting Common Stock, the holder
shall
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receive Common Stock of the Company and shall exchange such Common Stock for
Non-Voting Common Stock of the Company when such Non-Voting Common Stock of the
Company is so authorized and, after such exercise of the Warrant and prior to
such exchange, shall be subject to an irrevocable proxy delivered at the time of
such exercise authorizing such person or persons designated by the Company to
exercise all voting rights with respect to such Common Stock.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act of 1933, as amended ("Securities Act") or any state
securities laws ("Blue Sky Laws"). This Warrant has been acquired for
investment purposes and not with a view to distribution or resale and may
not be pledged, hypothecated, sold, made subject to a security interest, or
otherwise transferred without (i) an effective registration statement for
such Warrant under the Securities Act and such applicable Blue Sky Laws, or
(ii) an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Company and its counsel, that registration is not
required under the Securities Act and under any applicable Blue Sky Laws
(the Company hereby acknowledges that Bass, Xxxxx & Xxxx is acceptable
counsel). Transfer of the shares issued upon the exercise of this Warrant
shall be restricted in the same manner and to the same extent as the
Warrant and the certificates representing such Shares shall bear
substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT
UNDER THE ACT AND SUCH APPLICABLE STATE SECURITIES
LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (II) IN THE OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH
SECURITIES ACTS AND SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws; provided
that such agreement of the Company to execute documents does not include any
undertaking to
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register the Warrant or the Common Stock issued upon exercise hereof under any
such laws.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment
therefor, be legally and validly issued and outstanding, fully paid and
nonassessable, free from all taxes, liens, charges and preemptive rights,
if any, with respect thereto or to the issuance thereof. The Company shall
at all times reserve and keep available for issuance upon the exercise of
this Warrant such number of authorized but unissued shares of Common Stock
and the Non-Voting Common Stock as will be sufficient to permit the
exercise in full of this Warrant.
(c) The Company covenants and agrees that it shall not sell any shares
of the Company's capital stock at a price below the lower of (i) the fair
market value of such shares determined at the time of the sale thereof, in
good faith, by the board of directors of the Company or (ii) 80% of the
sale price effective in the sale of shares of the Company's capital stock
immediately preceding such sale, appropriately adjusted by the applicable
conversion rights thereof so as to compare such immediately preceding sale
of a particular security with such sale, or if the securities sold in the
preceding sale are not identical to the securities sold in such sale, by
appropriately adjusting the price of securities sold in such preceding sale
and such sale to any like security into which they may be convertible, or
if there is no such like security into which both the preceding sale and
such sale are convertible, then, adjusted by any reasonable method
determined in good faith by the board of directors of the Company, without
the prior written consent of the Holder hereof. In the event that the
Company sells shares of the Company's capital stock in violation of this
Section 4(c), the number of shares issuable upon exercise of this Warrant
shall be equal to the product obtained by multiplying the number of shares
issuable pursuant to this Warrant prior to such sale by the quotient
obtained by dividing (i) the fair market value of the shares issued in
violation of this Section 4(c) by (ii) the price at which such shares were
sold.
5. Transfer of Warrant. Subject to the provisions of Section 4 hereof, this
Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer; provided, however, that unless an Event of Default (as
defined in the Loan Agreement) has occurred and is continuing, Holder shall not
transfer this Warrant to any supplier or vendor of the Company or any company
engaged in the same business as the Company or FCOA Acquisition Corp. Upon such
presentation for transfer, the Company shall promptly execute and deliver a new
Warrant or Warrants in the form hereof in the name of the assignee or assignees
and in the denominations specified in such instructions. The Company shall pay
all expenses incurred by it in connection with the preparation, issuance and
delivery of Warrants under this Section.
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6. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder, as such, any right whatsoever as a
shareholder of the Company.
7. Observation Rights. The Holder of this Warrant shall (a) receive notice
of and be entitled to attend or may send a representative to attend all meetings
of the Company's Board of Directors in a non-voting observation capacity, (b)
receive copies of all notices, packages and documents provided to members of the
Company's Board of Directors for each board of directors meeting, and (c)
receive copies of all actions taken by written consent by the Company's Board of
Directors, from the date hereof until such time as the indebtedness evidenced by
the Note has been paid in full; provided, however, that if the Company fails to
comply with the notice provisions of this Section, such failure by the Company
shall not be a breach hereunder and shall not effect any action taken by the
Company's Board of Directors if such action had no adverse or disproportionate
effect on Holder.
8. Adjustment Upon Changes in Stock.
(a) If all or any portion of this Warrant shall be exercised
subsequent to any stock split, stock dividend, recapitalization,
combination of shares of the Company, or other similar event, occurring
after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate
number and class of shares which such Holder would have received if this
Warrant had been exercised immediately prior to such stock split, stock
dividend, recapitalization, combination of shares, or other similar event.
if any adjustment under this Section 8(a) would create a fractional share
of Common Stock or a right to acquire a fractional share of Common Stock,
such fractional share shall be disregarded and the number of shares subject
to this Warrant shall be the next higher number of shares, rounding the
fraction upward if it is one-half or more and disregarding if it is less
than one-half. Whenever there shall be an adjustment pursuant to this
Section 8(a), the Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated.
(b) If all or any portion of this Warrant shall be exercised
subsequent to any merger, consolidation, exchange of shares, separation,
reorganization or liquidation of the Company, or other similar event,
occurring after the date hereof, as a result of which shares of Common
Stock shall be changed into the same or a different number of shares of the
same or another class or classes of securities of the Company or another
entity, then the Holder exercising this Warrant shall receive, for the
aggregate price paid upon such exercise, the aggregate number and class of
shares which such Holder would have received if this Warrant had been
exercised immediately prior to such merger, consolidation, exchange of
shares, separation, reorganization or liquidation, or other similar
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event. If any adjustment under this Section 8(b) would create a fractional
share of Common Stock or a right to acquire a fractional share of Common
Stock, such fractional share shall be disregarded and the number of shares
subject to this Warrant shall be the next higher number of shares, rounding
the fraction upward if it is one-half or more and disregarding if it is
less than one-half. Whenever there shall be an adjustment pursuant to this
Section 8(b), the Company shall forthwith notify the Holder or Holders of
this Warrant of such adjustment, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated.
9. Piggyback Registrations.
(a) Whenever the Company proposes to register any of its securities
under the Securities Act (other than pursuant to the demand by holders of
securities of the Company pursuant to the right to make such demand for the
registration of the securities of the Company) and the registration form to
be used may be used for the registration of the Common Stock of the Company
(a "Piggyback Registration"), the Company shall give prompt written notice
to the holders of the Shares of its intention to effect such a registration
and, subject to Sections 9(c) and 9(d) below, shall include in such
registration all of the Shares with respect to which the Company has
received written requests for inclusion therein within 20 days after
receipt of the Company's notice.
(b) The Registration Expenses (as hereafter defined) of the holders of
the Shares shall be paid by the Company in all Piggyback Registrations.
(c) If a Piggyback Registration is an underwritten registration on
behalf of the Company, and the managing underwriters advise the Company in
writing that in their opinion all or a number of the securities requested
to be included in such registration exceeds the number which can be sold in
an orderly manner in such offering within a price range acceptable to the
Company, the Company shall include in such registration (i) first, the
securities the Company proposes to sell, (ii) second, the securities
requested to be included in such registration by holders of securities,
other than the Shares, pursuant to agreements executed by the Company and
such holders prior to the execution of this agreement which provide therein
for piggyback registration rights, and (iii) third, other securities
requested and permitted to be included in such registration, including the
Shares.
(d) Notwithstanding anything contained in this Warrant to the
contrary, if any holder of the Shares does not elect to include any Shares
in a Piggyback Registration, such holder of the Shares shall not be
entitled to include any of the Shares in any registration hereunder for six
months after the effective date of such Piggyback Registration.
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(e) Each holder of the Shares agrees not to effect any public sale or
distribution (including sales pursuant to Rule 144 under the Securities
Act) of equity securities of the Company, or any securities convertible
into or exchangeable or exercisable for such securities, during (i) the
seven days prior to and (i) the 90-day period beginning on the effective
date of any underwritten Piggyback Registration in which any of the Shares
are included (except as part of such underwritten registration) and (ii)
the seven days prior to and the 120-day period beginning on the effective
date of the first firm underwritten public offering of Common Stock of the
Company under the Securities Act (except as part of such underwritten
registration), unless the underwriters managing the registered public
offering otherwise agree.
(f) The Company agrees to indemnify, to the extent permitted by law,
each holder of the Shares, its partners, officers and directors and each
Person (as hereafter defined) who controls such holder (within the meaning
of the Securities Act), with respect to any registration which pursuant to
this Agreement includes any of the Shares, against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged untrue
statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
there to or any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by or on behalf of such
holder expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an underwritten
offering, the Company shall indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the
meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of the Shares.
(g) In connection with any registration statement in which any of the
Shares are pursuant to this Warrant included, each holder of such Shares
shall furnish to the Company in writing such information and affidavits as
the Company reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law,
shall indemnify the Company, its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in
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writing by such holder; provided that the obligation to indemnify shall be
individual to each such holder.
(h) My Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to
the extent such failure has not prejudiced the indemnifying party) and (ii)
unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified
party. if such defense is assumed, the indemnifying party shall not be
subject to any liability for any settlement made by the indemnified party
without its consent (but such consent shall not be unreasonably withheld).
M indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim shall not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonably judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim.
(i) If the indemnification provided for in this Section 9 is
unavailable or insufficient to hold harmless an indemnified party, then
each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of the losses, claims, damages or
liabilities referred to in this Section 9 in such proportion as is
appropriate to reflect the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in
connection with the statements or omissions which resulted in such losses,
claims, demands or liabilities as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or parties on the
one hand or the indemnified party on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this Section 9(i) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim
which is the subject of this Section 9(i). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.
(j) The indemnification provided for under this Warrant shall remain
in full force and effect regardless of any investigation made by or on
behalf of the
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indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities.
(k) No holder of the Shares may participate in any registration
pursuant to this Agreement which is underwritten unless such holder (i)
agrees to sell such holder's securities on the basis provided in any
underwriting arrangements approved by the holder or holders entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting
arrangements; provided that no holder of the Shares included in any
underwritten registration shall be required to make any representations or
warranties to the Company or the underwriters other than representations
and warranties regarding such holder and such holder's intended method of
distribution.
(l) For the purposes of this Section 9 "Registration Expenses" means
all expenses incident to the Company's performance of or compliance with
Section 9 of this Warrant, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue
sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters (but
excluding discounts and commissions) and other Persons retained by the
Company.
(m) For the purposes of this Section 9 "Person" means an individual, a
partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or
political subdivision thereof.
10. Certain Notices. In case at any time the Company shall propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or
make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its Common Stock
any additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell all or substantially
all of its assets to, another corporation; or
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(e) voluntarily or involuntarily dissolve, liquidate or wind up the
affairs of the Company;
then, in any one or more of said cases, the Company shall give to the
Holder of the Warrant, by certified or registered mail, (i) at least twenty
(20) days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (il) in the case
of such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, at least twenty (20) days' prior
written notice of the date when the same shall take place; provided,
however, that if the Company fails to comply with the notice provisions of
this Section, such failure by the Company shall not be a breach hereunder
and shall not effect any action taken by the Company's Board of Directors
if such action had no adverse or disproportionate effect on Holder. Any
notice required by clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required
by clause (ii) shall specify the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
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IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
FCOA ACQUISITION CORP., a Delaware
corporation
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman/CEO
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: /s/ [Illegible]
---------------------------------------
Title: VP
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