Exhibit 10.9.7
STOCK PURCHASE WARRANT
This Warrant is issued this 28th day of June, 1996, 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 One Million and no/100ths Dollars ($1,000,000) pursuant to the terms
of a secured promissory note of even date herewith (the "Note") and related loan
agreement dated November 15, 1995 (as amended from time to time, the "Loan
Agreement"), and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby grants to
Holder the right to purchase 6066 shares of the Company's common stock (the
"Common Stock"), which the Company represents equals 0.625% of the capital stock
of the Company on the date hereof, calculated on a fully diluted basis after
exercise of this Warrant; provided, that the issuance of the Common Stock
hereunder is subject to the provisions of Section 3A hereof. The shares of
Common Stock issuable upon exercise of this Warrant are hereinafter referred to
as the "Shares." This Warrant shall be exercisable at any time and from time to
time from the date hereof until July 31, 2001. For purposes of this Warrant the
term "fully diluted basis" shall be determined in accordance with generally
accepted accounting principles as of the date hereof.
2. Exercise Price. The exercise price (the "Exercise Price") per share for
which all or any of the Shares may be purchased pursuant to the terms of this
Warrant shall be One Cent ($.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 September 30,
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 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,
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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 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.
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(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. Notwithstanding anything contained
herein to the contrary, the Company may issue employee stock options and
issue shares of the Company's capital stock in connection therewith
without making any anti-dilution adjustments for the Holder(s) under the
anti-dilution provision hereof; provided, however, that after the date
hereof, the Company shall not issue employee stock options for shares of
the Company's capital stock in an amount greater than ten percent (10%) of
the Company's capital stock, on a fully diluted basis, issued and
outstanding as of the date of issuance.
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.
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.
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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
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
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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 (A) 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 by present and
future holders of securities issued pursuant to the Company's 1989
Employee Stock Option Plan ("1989 Plan") that are Directors or Sponsors,
as defined therein, to the extent permitted under Section 4(c) hereof
without any dilutive effect and (B) future holders of the Company's Series
C Preferred Stock (up to $13,000,000), pursuant to any agreements executed
by the Company and such holders which provide therein for piggyback
registration rights, (iii) third, on a pari passu basis, the Shares and
securities held by employees who are granted options for such securities
under the 1989 Plan or who acquire such securities upon exercise of
options under said plan where such options are granted after the date
hereof to the extent permitted under Section 4(c) hereof without dilutive
effect, and (iv) fourth, other securities requested and permitted to be
included in such registration.
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(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.
(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
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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 writing by such holder; provided
that the obligation to indemnity shall be individual to each such holder.
(h) Any 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). An 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.
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(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 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 (ii) 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.
IN WITNESS THEREOF, 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
------------------------------
Title: Chairman
--------------------------
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: [ILLEGIBLE]
------------------------------
Title: C.F.O.
--------------------------
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