<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1996
REGISTRATION NO. 333-13827
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
FACTORY CARD OUTLET CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5943 36-3652087
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
--------------------------
745 BIRGINAL DRIVE
BENSENVILLE, ILLINOIS 60106-1212
(630) 238-0010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
CHARLES R. CUMELLO, PRESIDENT
FACTORY CARD OUTLET CORP.
745 BIRGINAL DRIVE
BENSENVILLE, ILLINOIS 60106-1212
(630) 238-0010
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
LORI J. BRAENDER, ESQ. WILLIAM J. GRANT, JR., ESQ.
PITNEY, HARDIN, KIPP & SZUCH WILLKIE FARR & GALLAGHER
200 CAMPUS DR. ONE CITICORP CENTER
FLORHAM PARK, N.J. 07932-0950 153 E. 53RD ST.
(201) 966-6300 NEW YORK, N.Y. 10022-4677
(212) 821-8000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AGGREGATE REGISTRATION FEE
OF SECURITIES TO BE REGISTERED OFFERING PRICE (1) (2)
<S> <C> <C>
Common Stock, no par value per share........................................... $37,950,000 $11,500
</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
(2) This amount was wired to the account of the Securities and Exchange
Commission at Mellon Bank in payment of the required registration fee due in
connection with this Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in New York, New York, on
September, 1996.
FACTORY CARD OUTLET CORP.
By: /s/ WILLIAM E. FREEMAN
-----------------------------------------
WILLIAM E. FREEMAN
CHAIRMAN OF THE BOARD
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
TITLE DATE
-------------------------- -------------------
Chairman of the Board
/s/ WILLIAM E. FREEMAN of Directors
- ------------------------------ (principal executive November 12, 1996
William E. Freeman officer)
/s/ CHARLES R. CUMELLO
- ------------------------------ President and Director November 12, 1996
Charles R. Cumello
Executive Vice President
/s/ GLEN J. FRANCHI and Treasurer
- ------------------------------ (principal financial and November 12, 1996
Glen J. Franchi accounting officer)
/s/ MICHAEL I. BARACH
- ------------------------------ Director November 12, 1996
Michael I. Barach
- ------------------------------ Director , 1996
Dr. Robert C. Blattberg
/s/ BART A. BROWN, JR.
- ------------------------------ Director November 12, 1996
Bart A. Brown, Jr.
/s/ RICHARD A. DOPPELT
- ------------------------------ Director November 12, 1996
Richard A. Doppelt
/s/ J. BAYARD KELLY
- ------------------------------ Director November 12, 1996
J. Bayard Kelly
- ------------------------------ Director , 1996
James L. Nouss, Jr.
/s/ STEWART M. KASEN
- ------------------------------ Director November 12, 1996
Stewart M. Kasen
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation of the Company.
*3.2 Amended and Restated Bylaws of the Company.
* 4.1 Specimen of Registrant's Common Stock Certificate.
* 5.1 Opinion of Pitney, Hardin, Kipp & Szuch.
*10.1 Employment Agreement, dated as of April 6, 1995, by and between the Company and
Charles R. Cumello.
*10.1.1 Loan Agreement, dated as of October 1, 1995, between FCO and Charles R. Cumello.
*10.2 Consulting Agreement, dated July 30, 1996 by and between the Company and J.
Bayard Kelly.
10.3 Supply Agreement, dated as of August 2, 1996, by and between the Company and Fine
Art Developments, p.l.c.
10.4 Lease Agreement between the Company and Prudential Insurance Company of America,
dated September 25, 1992.
10.5 Lease Agreement between the Company and Elk Grove Village Industrial Park Ltd.,
dated July 17, 1995.
10.6.1 1989 Stock Option Plan of the Company, as amended.
*10.6.2 1996 Employee Stock Purchase Plan of the Company.
10.7 Business Loan Agreement dated November 10, 1995 among the Company, FCO and Bank
One, Chicago, N.A. ("Bank One"), as amended.
10.8 Loan Agreement dated as of July 2, 1996 by and between FCO and Petra Capital,
L.L.C. ("Petra").
10.8.1 Stock Purchase Warrant dated July 2, 1996 by and between the Company and Petra,
as amended.
10.8.2 Secured Promissory Note dated July 2, 1996 by and between FCO and Petra.
10.8.3 Security Agreement dated July 2, 1996 by and between FCO and Petra.
10.8.4 Guaranty Agreement dated July 2, 1996 by and between the Company and Petra.
10.9.1 Loan Agreement dated November 15, 1995 by and between FCO and Sirrom Capital
Corporation ("Sirrom").
10.9.2 Stock Purchase Warrant dated November 15, 1995 by and between the Company and
Sirrom.
10.9.3 Secured Promissory Note dated November 15, 1995 by and between FCO and Sirrom.
10.9.4 Security Agreement dated November 15, 1995 by and between FCO and Sirrom.
10.9.5 Guaranty Agreement dated November 15, 1995 by and between the Company and Sirrom.
10.9.6 First Amendment to Loan Agreement and Loan Documents dated June 28, 1996 by and
between FCO and Sirrom
10.9.7 Stock Purchase Warrant dated June 28, 1996 by and between the Company and Sirrom.
10.9.8 Secured Promissory Note dated June 28, 1996 by and between FCO and Sirrom.
10.9.9 Amended and Restated Stock Purchase Warrant dated July 30, 1996 by and between
the Company and Sirrom.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.9.10 Amendment to Stock Purchase Warrant dated July 30, 1996 by and between the
Company and Sirrom.
*11.1 Computation of Earnings per Share.
+21.1 List of the subsidiaries of the Company.
+23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Pitney, Hardin, Kipp & Szuch (included as part of Exhibit 5.1).
+24.1 Power of Attorney (contained on the signature page of this Registration
Statement).
+27.1 Financial Data Schedules.
</TABLE>
- ------------------------
* To be filed by amendment
+ Filed previously
<PAGE>
Exhibit 1.1
2,750,000 Shares
FACTORY CARD OUTLET CORP.
Common Stock
(No Par Value)
FORM OF UNDERWRITING AGREEMENT
____________, 1996
Alex. Brown & Sons Incorporated
Piper Jaffray Inc.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
Factory Card Outlet Corp., a Delaware corporation (the "Company"), and
certain shareholders of the Company (the "Selling Shareholders) propose to sell
to the several underwriters (the "Underwriters") named in Schedule I hereto for
whom you are acting as representatives (the "Representatives") an aggregate of
2,750,000 shares (the "Firm Shares") of the Company's common stock, no par value
(the "Common Stock") of which 2,550,000 shares will be sold by the Company and
200,000 shares will be sold by the Selling Shareholders. The respective amounts
of the Firm Shares to be so purchased by the several Underwriters are set forth
opposite their names in Schedule I hereto and the respective amounts to be sold
by the Selling Shareholders are set forth opposite their names in Schedule II
hereto. The Company and the Selling Shareholders are sometimes referred to
herein collectively as the "Sellers." The Company and the Selling Shareholders
also propose to sell at the Underwriters' option an aggregate of up to 412,500
additional shares of the Common Stock (the "Option Shares") as set forth below.
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the
<PAGE>
accounts of the several Underwriters. The Firm Shares and the Option Shares (to
the extent the aforementioned option is exercised) are herein collectively
referred to as the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY THE AND THE SELLING
SHAREHOLDERS.
(a) The Company hereby represents and warrants to each of the
Underwriters as follows:
(i) A registration statement on Form S-1 (File No. 333-13827) with
respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission.
Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses (meeting the requirements of the
Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to you and each preliminary
prospectus delivered to the Underwriters for use in connection with
this offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by the Rules and Regulations. Such registration
statement shall be herein referred to as the "Registration Statement"
and shall include any registration statement filed pursuant to Rule
462(b) under the Act (the "Rule 462(b) Registration Statement"). The
Registration Statement, which shall be deemed to include all
information omitted therefrom in reliance upon Rule 430A and contained
in the Prospectus referred to below, has become effective under the
Act and no post-effective amendment to the Registration Statement has
been filed as of the date of this Agreement. "Prospectus" means (A)
the form of prospectus first filed with the Commission pursuant to
Rule 424(b) or (B) the last preliminary prospectus included in the
Registration Statement filed prior to the time it becomes effective or
filed pursuant to Rule 424(a) under the Act that is delivered by the
Company to the Underwriters for delivery to purchasers of the Shares,
together with the term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7), if any, under the Act. Each
preliminary prospectus included in the Registration Statement prior to
the time it becomes effective is herein referred to as a "Preliminary
Prospectus." Any reference herein to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to
any supplements or amendments thereto, filed with the Commission after
the date of filing of the Prospectus under Rules 424(b) or 430A, and
prior to the termination of the offering of the Shares by the
Underwriters.
-2-
<PAGE>
(ii) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its
properties, conduct its business as described in the Registration
Statement and enter into and perform its obligations under this
Agreement. Each of the subsidiaries of the Company as listed on
Exhibit 21 of the Registration Statement (collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration
Statement. The Company and each of the Subsidiaries are duly
qualified to transact business and are in good standing in all
jurisdictions in which the conduct of their business requires such
qualification except where the failure to so qualify or be in good
standing, whether singly or in the aggregate, would not result in a
material adverse effect on the earnings, business, management,
properties, assets, rights, operations, condition (financial or
otherwise), or prospects of the Company and its Subsidiaries taken as
a whole, or a material adverse effect on the ability of the Company to
consummate the transactions contemplated hereby (a "Material Adverse
Effect"). The outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable and are owned by the Company or another
Subsidiary free and clear of all liens, encumbrances and equities and
claims; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert
any obligations into shares of capital stock or ownership interests in
the Subsidiaries are outstanding. The only subsidiaries of the Company
are the subsidiaries listed on Exhibit 21 to the Registration
Statement and certain other subsidiaries which, when considered in the
aggregate as a single subsidiary, do not constitute a "significant
subsidiary" as defined in Rule 1-02 of Regulations S-X.
(iii) The outstanding shares of Common Stock, including all
shares to be sold by the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable;
the portion of the Shares to be issued and sold by the Company have
been duly authorized for issuance and sale to the Underwriters and
when issued and paid for as contemplated herein will be validly
issued, fully paid and non-assessable; and no preemptive rights of
stockholders exist with respect to any of the Shares or the issue and
sale thereof. No holder of Shares will be subject to personal
liability by being such a holder.
(iv) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. The Common
Stock and the Shares conform to the descriptions thereof contained in
the Registration Statement. The certificates for the Shares are in
due and proper form and complies with all applicable statutory
requirements, with any applicable requirements of the charter and
by-laws of the Company and the requirements of The Nasdaq National
Market. Except as described in or contemplated by the Prospectus,
there are no outstanding securities
-3-
<PAGE>
of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the
Company and there are no outstanding or authorized options, warrants
or rights of any character obligating the Company to issue any shares
of its capital stock or any securities convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares
of such stock.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus relating to the proposed offering
of the Shares nor instituted proceedings for that purpose nor to the
Company's knowledge, are any such proceedings contemplated by the
Commission, and the Company has fully complied with any request on the
part of the Commission for additional information. The Registration
Statement contains, and the Prospectus and any amendments or
supplements thereto will contain, all statements which are required to
be stated therein by, and will conform to, the requirements of the Act
and the Rules and Regulations. The Registration Statement and any
amendment thereto do not contain, and will not contain, any untrue
statement of a material fact and do not omit, and will not omit, to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any
amendments and supplements thereto do not contain, and will not
contain, any untrue statement of material fact; and do not omit, and
will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. If Rule
434 is used, the Company will comply with the requirements of Rule 434
and the Prospectus shall not be "materially different," as such term
is used in Rule 434, from the Prospectus included in the Registration
Statement at the time it became effective. The Company makes no
representations or warranties as to information contained in or
omitted from the Registration Statement or the Prospectus, or any such
amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any
Underwriter through the Representatives, specifically for use in the
preparation thereof.
(vi) The consolidated financial statements of the Company and
the Subsidiaries, together with related notes and schedules as set
forth in the Registration Statement, present fairly the financial
position and the results of operations and cash flows of the Company
and the consolidated Subsidiaries, at the indicated dates and for the
indicated periods. Such financial statements and related schedules
have been prepared in accordance with generally accepted principles of
accounting, consistently applied throughout the periods involved, and
all adjustments necessary for a fair presentation of results for such
periods have been made. The summary financial and statistical data
included in the Registration Statement present fairly the information
shown therein and such data have been compiled on a basis consistent
with the financial statements presented therein and the books and
records of the company.
-4-
<PAGE>
(vii) KPMG Peat Marwick LLP, who have certified certain of the
financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required
by the Act and the Rules and Regulations.
(viii) Except as set forth in the Registration Statement, there
is no action, suit, claim, proceeding, inquiry or investigation
pending or, to the knowledge of the Company, threatened against the
Company or any of the Subsidiaries, or to which the property of the
Company or any Subsidiary is subject, before or brought by any court
or governmental agency or otherwise which if determined adversely to
the Company or any of its Subsidiaries might result, whether singly or
in the aggregate, in a Material Adverse Effect.
(ix) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial
statements (or as described in the Registration Statement) hereinabove
described, subject to no lien, mortgage, pledge, charge or encumbrance
of any kind except those reflected in such financial statements (or as
described in the Registration Statement) or which, singly or in the
aggregate, are not material in amount and do not interfere with the
use made or proposed to be made of such property by the Company or any
of its Subsidiaries. The Company and the Subsidiaries occupy their
leased properties under valid and binding leases (conforming in all
material respects to the description thereof set forth in the
Registration Statement). Neither the Company nor any Subsidiary has
any notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any Subsidiary under
any of such leases, or affecting or questioning the rights of the
Company or any Subsidiary of the continued possession of the leased
premises under any such lease.
(x) The Company and the Subsidiaries have filed all Federal,
State, local and foreign income tax returns which have been required
to be filed and have paid all taxes indicated by said returns and all
assessments received by them or any of them to the extent that such
taxes have become due. All tax liabilities have been adequately
provided for in the financial statements of the Company.
(xi) Neither the Company nor any Subsidiary has sustained since
the date of the latest audited financial statements included in the
Prospectus any material loss, or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth in the Prospectus; and
since the respective dates as of which information is given in the
Registration Statement and the Prospectus, (A) there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business,
management, properties, assets, rights, operations, condition
(financial or otherwise), or prospects of the Company
-5-
<PAGE>
and its Subsidiaries taken as a whole, whether or not occurring in the
ordinary course of business, (B) there has not been any material
transaction entered into or any material transaction that is probable
of being entered into by the Company or the Subsidiaries other than
transactions described in the Registration Statement, as it may be
amended or supplemented and (C) there has not been any change in the
capital stock or long-term debt of the Company or any of the
Subsidiaries. The Company and the Subsidiaries have no material
contingent obligations which are not disclosed in the Company's
financial statements which are included in the Registration Statement.
(xii) Neither the Company nor any of the Subsidiaries is or with
the giving of notice or lapse of time or both, will be, in violation
of its charter or by-laws and no default by the Company or any
Subsidiary exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which it is a party or by which it, or any
of its properties, is bound. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated
and the fulfillment of the terms hereof and the use of the proceeds
from the sale of the Shares as described in the Prospectus under the
caption "Use of Proceeds" have been duly authorized by all necessary
corporate action and do not, and will not, whether with or without the
giving of notice or passage of time or both, conflict with or result
in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any assets or property of the Company or
any Subsidiary under, any indenture, mortgage, lease, deed of trust or
other agreement or instrument to which the Company or any Subsidiary
is a party or by which the Company or any of the Subsidiaries may be
bound, nor will such action result in any violation of the charter or
by-laws of the Company or any Subsidiary or any order, rule or
regulation applicable to the Company or any Subsidiary of any court or
of any regulatory body or administrative agency or other governmental
body having jurisdiction.
(xiii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xiv) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated (except such additional steps as may
be required by the Commission, the National Association of Securities
Dealers, Inc. (the "NASD") or such additional steps as may be
necessary to qualify the Shares for public offering by the
Underwriters under state securities or Blue Sky laws) has been
obtained or made and is in full force and effect.
-6-
<PAGE>
(xv) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses (the "Governmental
Licenses"). The Company and the Subsidiaries are in compliance with
the terms and conditions of all such Governmental Licenses, except
where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect. All of the Governmental Licenses are
valid and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to
be in full force and effect would not, whether singly or in the
aggregate, have a Material Adverse Effect and neither the Company nor
any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses, which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xvi) The Company and the Subsidiaries own or possess, or can
acquire on reasonable terms, adequate patents, patent rights,
licenses, inventions, copyrights, trademarks, service marks, trade
names or other intellectual property (collectively "Intellectual
Property") necessary to carry on the business now operated by them,
and neither the Company nor any of the Subsidiaries has infringed or
has a conflict with the asserted rights of others with respect to any
Intellectual Property, which infringement or conflict would, whether
singly or in the aggregate, have a Material Adverse Effect nor is the
Company aware of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of
the Company or the Subsidiaries therein. The Company knows of no
material infringement by others of Intellectual Property owned by or
licensed to the Company.
(xvii) Neither the Company, nor to the Company's best knowledge,
any of its affiliates (within the meaning of Rule 405 under the Act),
has taken or will take, directly or indirectly, any action designed to
cause or result in, or which has constituted or which might reasonably
be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale
of the Shares.
(xviii) Neither the Company nor any Subsidiary is, nor will be,
upon the issuance and sale of the Shares and the application of net
proceeds therefrom, as described in the Prospectus, an "investment
company" within the meaning of such term under the Investment Company
Act of 1940 and the rules and regulations of the Commission thereunder
(the "1940 Act").
(xix) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain
-7-
<PAGE>
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xx) The Company and each of its Subsidiaries carry, or are
covered by, insurance in such amounts and covering such risks as is
adequate for the conduct of their respective businesses and the value
of their respective properties and as is customary for companies
engaged in similar industries.
(xxi) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Section 412 or 4971 of the
Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is
intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(xxii) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, AN ACT RELATING TO DISCLOSURE OF DOING BUSINESS WITH
CUBA, and the Company further agrees that if it commences engaging in
business with the government of Cuba or with any person or affiliate
located in Cuba after the date the Registration Statement becomes or
has become effective with the Commission or with the Florida
Department of Banking and Finance (the "Department"), whichever date
is later, or if the information reported or incorporated by reference
in the Prospectus, if any, concerning the Company's business with Cuba
or with any person or affiliate located in Cuba changes in any
material way, the Company will promptly provide the Department notice
of such business or change, as appropriate, in a form acceptable to
the Department.
(xxiii) No labor dispute with the employees of the Company or
any Subsidiary exists or, to the knowledge of the Company, is
imminent, and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its or any Subsidiary s
principal suppliers, customers or vendors, which, in any case, may
reasonably be expected to result in a Material Adverse Effect.
-8-
<PAGE>
(xxiv) There are no contracts or documents which are required to
be described in the Registration Statement or the Prospectus or to be
filed as exhibits thereto which have not been so described and filed
as required.
(xxv) Except as disclosed in the Prospectus, there has been no
storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, hazardous waste
or hazardous substances (collectively, "Hazardous Materials") by the
Company or any Subsidiary (or, to the knowledge of the Company, any of
the Company s or any Subsidiary s predecessors in interest) at, upon
or from any of the property now owned or leased by the Company or any
Subsidiary in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment decree or permit, except for any violation or remedial
action which would not have, or could not be reasonably likely to
have, singly or in the aggregate with all such violations and remedial
actions, a Material Adverse Effect; there has been no material spill,
discharge, leak, emission, injection, escape, dumping or release of
any kind onto such property or into the environment surrounding such
property of any Hazardous Materials due to or caused by the Company,
any Subsidiary or any of the Company s or Subsidiary s predecessors or
with respect to which the Company has knowledge, except for any such
spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably like to have,
singly or in the aggregate with all other such spills, discharges,
leaks, emissions, injections, escapes, dumpings and releases, a
Material Adverse Effect. The terms "hazardous wastes," "toxic wastes"
and "hazardous substances" shall have the meanings specified in any
applicable local, State or Federal laws or regulations with respect to
environmental protection. Each of the Company and the Subsidiaries is
in compliance with any and all applicable Federal, state and local
laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants.
(xxvi) Other than as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right (other than rights which have
been waived or satisfied) to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(b) Each of the Selling Shareholders severally represents and
warrants as follows:
(i) Such Selling Shareholder now has and at the Closing Date (and the
Option Closing Date, as the case may be (as such dates are hereinafter
defined))
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<PAGE>
will have good and marketable title to the Firm Shares and the Option
Shares to be sold by such Selling Shareholder, free and clear of any
liens, encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Firm Shares and
Option Shares; and upon the delivery of, against payment for, such
Firm Shares and Option Shares pursuant to this Agreement, the
Underwriters will acquire good and marketable title thereto, free and
clear of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and
authority to execute and deliver this Agreement, the Power of
Attorney, and the Custodian Agreement referred to below and to perform
his or its obligations under such Agreements. This Agreement, the
Power of Attorney and the Custodian Agreement (collectively, the
"Selling Shareholders Agreements") have been duly authorized, executed
and delivered by such Selling Shareholders. The execution and
delivery of the Selling Shareholder Agreements and the consummation by
such Selling Shareholder of the transactions herein and therein
contemplated and the fulfillment by such Selling Shareholder of the
terms hereof and thereof will not require any consent, approval,
authorization, or other order of any court, regulatory body,
administrative agency or other governmental body (except as may be
required under the Act, state securities laws or Blue Sky laws) and
will not result in a breach of any of the terms and provisions of, or
constitute a default under, the organizational documents of such
Selling Shareholder, if not an individual, or any indenture, mortgage,
lease, deed of trust or other agreement or instrument to which such
Selling Shareholder is a party, or of any order, rule or regulation
applicable to such Selling Shareholder of any court or of any
regulatory body or administrative agency or other governmental body
having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result
in the stabilization or manipulation of the price of the Common Stock
and, other than as permitted by the Act, the Selling Shareholder will
not distribute any prospectus or other offering material in connection
with the offering of the Shares.
(iv) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties
of the Company contained herein or the information contained in the
Registration Statement, such Selling Shareholder (A) has no reason to
believe that the representations and warranties of the Company
contained in this Section 1 are not true and correct and (B) is
familiar with the Registration Statement and has no knowledge of any
material fact, condition or information not disclosed in the
Registration Statement which has adversely affected or may adversely
affect the business of the Company or any of the Subsidiaries; and the
sale of the Firm Shares (and the Option Shares) by such Selling
Shareholder pursuant hereto is not prompted by any information
concerning the Company or any of the Subsidiaries which is not set
forth in the
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<PAGE>
Registration Statement. The information pertaining to such Selling
Shareholder under the caption "Selling Shareholders" in the Prospectus
is complete and accurate in all material respects.
2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Sellers agree to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $ per
share, the number of Firm Shares set forth opposite the name of each
Underwriter in Schedule I hereof, subject to adjustments in accordance with
Section 9 hereof. The number of Firm Shares to be purchased by each
Underwriter from each Seller shall be as nearly as practicable in the same
proportion to the total number of Firm Shares being sold by each Seller as
the number of Firm Shares being purchased by each Underwriter bears to the
total number of Firm Shares to be sold hereunder. The obligations of the
Company and of each of the Selling Shareholders shall be several and not
joint.
(b) Certificates in negotiable form for the total number of the
Shares to be sold hereunder by the Selling Shareholders have been placed in
custody with the Company as custodian (the "Custodian") pursuant to the
Custodian Agreement executed by each Selling Shareholder for delivery of
all Firm Shares and any Option Shares to be sold hereunder by the Selling
Shareholders. Each of the Selling Shareholders specifically agrees that
the Firm Shares and any Option Shares represented by the certificates held
in custody for the Selling Shareholders under the Custodian Agreement are
subject to the interests of the Underwriters hereunder, that the
arrangements made by the Selling Shareholders for such custody are to that
extent irrevocable, and that the obligations of the Selling Shareholders
hereunder shall not be terminable by any act or deed of the Selling
Shareholders (or by any other person, firm or corporation including the
Company, the Custodian or the Underwriters) or by operation of law
(including the death of an individual Selling Shareholder or the
dissolution of a corporate Selling Shareholder) or by the occurrence of any
other event or events, except as set forth in the Custodian Agreement. If
any such event should occur prior to the delivery to the Underwriters of
the Firm Shares (or the Option Shares) hereunder, certificates for the Firm
Shares or the Options Shares, as the case may be, shall be delivered by the
Custodian in accordance with the terms and conditions of this Agreement as
if such event had not occurred. The Custodian is authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares held by it
against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in
New York Clearing House funds by certified or bank cashier's checks or
similar next day funds drawn to the order of the Company for the Shares to
be sold by it and to the order of the Company, "as Custodian" for the
Shares to be sold by the Selling Shareholders, in each case against
delivery of certificates therefor to the Representatives for the several
accounts of the Underwriters. Such payment and delivery are to be made at
the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, Maryland, at 10:00
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<PAGE>
a.m., Baltimore time, on the third business day after the date of this
Agreement (or on the fourth business day thereafter if pricing of the
offering of the Shares shall occur after 4:30 p.m., Baltimore time) or at
such other time and date not later than five business days thereafter as
you and the Company shall agree upon, such time and date being herein
referred to as the "Closing Date." (As used herein, "business day" means a
day on which the New York Stock Exchange is open for trading and on which
banks in New York are open for business and not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will
be delivered in such denominations and in such registrations as the
Representatives request in writing not later than the second full business
day prior to the Closing Date, and will be made available for inspection by
the Representatives at least one business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth,
the Company and the Selling Shareholders listed on Schedule III hereto
hereby grant an option to the several Underwriters to purchase the Option
Shares at the price per share as set forth in the first paragraph of this
Section 2. The maximum number of Option Shares to be sold by the Company
and the Selling Shareholders is set forth opposite their respective names
on Schedule III hereto. The option granted hereby may be exercised in
whole or in part by giving written notice (i) at any time before the
Closing Date and (ii) from time to time thereafter within 30 days after the
date of this Agreement, by you, as Representatives of the several
Underwriters, to the Company, the Attorney-in-Fact, and the Custodian
setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in
which the Option Shares are to be registered and the time and date at which
such certificates are to be delivered. If the option granted hereby is
exercised in part, the respective number of Option Shares to be sold by the
Company and each of the Selling Shareholders listed in Schedule III hereto
shall be determined on a pro rata basis in accordance with the percentages
set forth opposite their names on Schedule III hereto, adjusted by you in
such manner as to avoid fractional shares. The time and date at which
certificates for Option Shares are to be delivered shall be determined by
the Representatives but shall not be earlier than three nor later than 10
full business days after the exercise of such option, nor in any event
prior to the Closing Date (such time and date being herein referred to as
an "Option Closing Date"). If the date of exercise of an option is three
or more days before the Closing Date, the notice of exercise shall set the
Closing Date as the Option Closing Date. The number of Option Shares to be
purchased by each Underwriter shall be in the same proportion to the total
number of Option Shares being purchased as set forth in the notice from the
Representatives as the number of Firm Shares being purchased by such
Underwriter bears to the total number of Firm Shares, adjusted by you in
such manner as to avoid fractional shares. The option with respect to the
Option Shares granted hereunder may be exercised only to cover
over-allotments in the sale of the Firm Shares by the Underwriters. You,
as Representatives of the several Underwriters, may cancel any such option
at any time prior to its expiration by giving written notice of such
cancellation to the Company and the Attorney-in-Fact. To the extent, if
any, that an option is exercised, payment for the Option Shares shall be
made on the Option Closing Date in New York Clearing House
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<PAGE>
funds by certified or bank cashier's check or similar next day funds drawn
to the order of the Company for the Option Shares to be sold by it and to
the order of the Company, as "Custodian" for the Option Shares to be sold
by the Selling Shareholders, against delivery of certificates therefor at
the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, Maryland.
(e) If on the Closing Date or on an Option Closing Date, as the case
may be, any Selling Shareholder fails to sell the Firm Shares or Option
Shares which such Selling Shareholder has agreed to sell on such date as
set forth in Schedule II and III hereto, the Company agrees that it will
sell or arrange for the sale of that number of shares of Common Stock to
the Underwriters which represents Firm Shares or the Option Shares which
such Selling Shareholder has failed to so sell, as set forth in Schedule II
and III hereto, or such lesser number as may be requested by the
Representatives.
3. OFFERING BY THE UNDERWRITERS.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it
advisable to do so. The Firm Shares are to be initially offered to the
public at the initial public offering price set forth in the Prospectus.
The Representatives may from time to time thereafter change the public
offering price and other selling terms. To the extent, if at all, that any
Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with
a Master Agreement Among Underwriters entered into by you and the several
other Underwriters.
4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in
Rule 430A of the Rules and Regulations is followed, to prepare and
timely file with the Commission under Rule 424(b) of the Rules and
Regulations a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness
of the Registration Statement in reliance on Rule 430A of the Rules
and Regulations and (B) not file any amendment to the Registration
Statement (including any filing under Rule 462(b)), any term sheet
under Rule 434 or any supplement to the Prospectus of which the
Representatives shall not previously have been advised and furnished
with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Rules and
Regulations.
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<PAGE>
(ii) The Company will advise the Representatives promptly (A)
when the Registration Statement or any post-effective amendment
thereto shall have become effective, (B) of receipt of any comments
from the Commission, (C) of any request of the Commission for
amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information, and (D) of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the
institution or threatened institution of any proceedings for that
purpose. The Company will use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of
the Prospectus and to obtain as soon as possible the lifting thereof,
if issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws
of such jurisdictions as the Representatives may reasonably have
designated in writing and will make such applications, file such
documents, and furnish such information as may be reasonably required
for that purpose, provided the Company shall not be required to
qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from
time to time, prepare and file such statements, reports, and other
documents, as are or may be required to continue such qualifications
in effect for a period of one year from the date of the offering of
the Shares or such longer period as the Representatives may reasonably
request.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request, and the
Company hereby consents to the use of such copies for purposes
permitted by the Act. The Company will deliver to, or upon the order
of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus
in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to
the Representatives at or before the Closing Date, four signed copies
of the Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Representatives such
number of copies of the Registration Statement (including such number
of copies of the exhibits filed therewith that may reasonably be
requested), and of all amendments thereto, as the Representatives may
reasonably request. The copies of the Registration Statement and the
Prospectus, and all amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to
the extent permitted by the Rules and Regulations.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934 (the "Exchange
Act"), and the rules and regulations of the Commission thereunder, so
as to permit the completion of the
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<PAGE>
distribution of the Shares as contemplated in this Agreement and the
Prospectus. If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer, any event shall occur
as a result of which, in the judgment of the Company or in the
reasonable opinion of the Underwriters, it becomes necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at
any time to amend the Registration Statement or supplement the
Prospectus to comply with any law, the Company promptly will, subject
to Section 4(a)(i), prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to
the Prospectus so that the Prospectus as so amended or supplemented
will not, in the light of the circumstances when it is so delivered,
be misleading, or so that the Prospectus will comply with the law, and
the Company will furnish to the Underwriters such number of copies of
such amendment or supplement as the Underwriters may reasonably
request.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration
Statement, an earning statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement,
which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(vii) The Company will, for a period of five years from the
Closing Date, deliver to the Representatives copies of annual reports
and copies of all other documents, reports and information furnished
by the Company to its stockholders or filed with any securities
exchange pursuant to the requirements of such exchange or with the
Commission pursuant to the Act or the Exchange Act. The Company will
deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial
statements.
(viii) No offering, sale, short sale, pledge or other
disposition of any shares of Common Stock of the Company or other
securities convertible into or exchangeable or exercisable for shares
of Common Stock or derivative of Common Stock (or agreement for such)
will be made for a period of 180 days after the date of this
Agreement, directly or indirectly, by the Company without the prior
written consent of Alex. Brown & Sons Incorporated. The foregoing
shall not apply to (A) the Shares to be sold hereunder and (B) any
shares of Common Stock issued by the Company upon the exercise of an
option or warrant or the conversion of security outstanding on the
date hereof and described in the Prospectus.
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<PAGE>
(ix) The Company will use its best efforts to list, subject to
notice of issuance, the Shares on The Nasdaq National Market.
(x) The Company has caused each officer and director and
specific shareholders of the Company to furnish to you, on or prior to
the date of this Agreement, a letter or letters, in form and substance
satisfactory to the Representatives, pursuant to which each such
person shall agree not to offer, sell, sell short, pledge or otherwise
dispose of any shares of Common Stock or any other securities
convertible, exchangeable or exercisable for shares of Common Stock or
derivative of shares of Common Stock owned by such person or request
the registration for the offer or sale of any of the foregoing (or as
to which such person has the right to direct the disposition of) for a
period of 180 days after the date of this Agreement, directly or
indirectly, except with the prior written consent of Alex. Brown &
Sons Incorporated ("Lockup Agreements").
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with
the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required in accordance
with Rule 463 under the Act.
(xii) The Company shall not invest, or otherwise use the
proceeds received by the Company from its sale of the Shares in such a
manner as would require the Company or any of the Subsidiaries to
register as an investment company under the 1940 Act.
(xiii) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a
registrar for the Common Stock.
(xiv) The Company will not take, directly or indirectly, any
action designed to cause or result in, or that has constituted or
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
(i) No offering, sale, short sale or other disposition of any
shares of Common Stock or other capital stock of the Company or other
securities convertible, exchangeable or exercisable for Common Stock
or derivative of Common Stock owned by the Selling Shareholder or
request for the registration of the offer or sale of any of the
foregoing (or as to which the Selling Shareholder has the right to
direct the disposition of) will be made for a period of 180 days after
the date of this Agreement, directly or indirectly, by such Selling
Shareholder
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<PAGE>
otherwise than hereunder or with the prior written consent of Alex.
Brown & Sons Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 and the Interest and Dividend Tax
Compliance Act of 1983 with respect to the transactions herein
contemplated, each of the Selling Shareholders agrees to deliver to
you prior to or at the Closing Date a properly completed and executed
United States Treasury Department Form W-9 (or other applicable form
or statement specified by Treasury Department regulations in lieu
thereof).
(iii) Such Selling Shareholder will not take, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any securities of the
Company.
5. COSTS AND EXPENSES.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement,
including, without limiting the generality of the foregoing, the following:
accounting fees of the Company; the fees and disbursements of counsel for,
and any other advisors to, the Company; the cost of printing and delivering
to, or as requested by, the Underwriters, copies of the Registration
Statement, the Preliminary Prospectuses, the Prospectus, this Agreement,
any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase or sale of the Shares,
the Blue Sky survey and any supplements or amendments thereto; the
preparation, issuance and delivery of the certificates for the Shares to
the Underwriters; the filing fees of the Commission; the filing fees and
expenses (including legal fees and disbursements) incident to securing any
required review by the National Association of Securities Dealers, Inc.
(the "NASD") of the terms of the sale of the Shares; the listing fee and
other expenses incident to securing the listing of the Shares on The Nasdaq
National Market; and the expenses, including filing fees and the fees and
disbursements of counsel for the Underwriters, incurred in connection with
preparation of the Blue Sky survey and the qualification of the Shares
under State securities or Blue Sky laws. [The Selling Shareholders have
agreed with the Company to reimburse the Company for a portion of such
expenses.] To the extent, if at all, that any of the Selling Shareholders
engage special legal counsel to represent them in connection with this
offering, the fees and expenses of such counsel shall be borne by such
Selling Shareholder. Any stock or other transfer taxes or duties imposed
on the sale of the Shares to the several Underwriters will be paid by the
Sellers pro rata. The Company shall not be required to pay for any of the
Underwriters' expenses (other than those related to qualification under
NASD regulation and State securities or Blue Sky laws) except that, if this
Agreement shall not be consummated because the conditions in Section 6
hereof are not satisfied, or because this Agreement is terminated by the
Representatives pursuant to Section 11 hereof, or by reason of any failure,
refusal or inability on the part of the Company or the
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<PAGE>
Selling Shareholders to perform any undertaking or satisfy any condition of
this Agreement or to comply with any of the terms hereof on their part to
be performed, unless such failure to satisfy said condition or to comply
with said terms be due to the default or omission of any Underwriter, then
the Company shall reimburse the several Underwriters for reasonable
out-of-pocket expenses, including fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and
proposing to market the Shares or in contemplation of performing their
obligations hereunder; but the Company and the Selling Shareholders shall
not in any event be liable to any of the several Underwriters for damages
on account of loss of anticipated profits from the sale by them of the
Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase the Firm
Shares on the Closing Date and the Option Shares, if any, on an Option
Closing Date are subject to the accuracy, as of the Closing Date or each
Option Closing Date, as the case may be, of the representations and
warranties of the Company and the Selling Shareholders contained herein,
and to the performance by the Company and the Selling Shareholders of their
covenants and obligations hereunder and to the following additional
conditions:
(a) The Registration Statement (including any Rule 462(b)
Registration Statement) and all post-effective amendments thereto shall
have become effective and any and all filings required by Rule 424 and Rule
430A of the Rules and Regulations shall have been made, and any request of
the Commission for additional information (to be included in the
Registration Statement or otherwise) shall have been disclosed to the
Representatives and complied with to their reasonable satisfaction. No
stop order suspending the effectiveness of the Registration Statement, as
amended from time to time, shall have been issued and no proceedings for
that purpose shall have been taken or, to the knowledge of the Company or
the Selling Shareholders, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or State
court of competent jurisdiction shall have been issued as of the Closing
Date or the Option Closing Date, as the case may be, which would prevent
the issuance of the Shares.
(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Pitney, Hardin,
Kipp & Szuch, counsel for the Company and the Selling Shareholders, dated
the Closing Date or the Option Closing Date, as the case may be, addressed
to the Underwriters (and stating that it may be relied upon by counsel to
the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own or lease its
properties, conduct its business as described in the Registration
Statement and enter into and perform its obligations under this
Agreement; each of the Subsidiaries has been duly organized and is
validly existing as a corporation in good standing under the laws of
the
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<PAGE>
jurisdiction of its incorporation, with corporate power and authority
to own or lease its properties and conduct its business as described
in the Registration Statement; the Company and each of the
Subsidiaries are in good standing and duly qualified to transact
business in all jurisdictions in which the conduct of their business
requires such qualification, except where the failure to be in good
standing or to so qualify would not, whether singly or in the
aggregate, result in a Material Adverse Effect; and the outstanding
shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable
and are owned by the Company or a Subsidiary; and, to the best of such
counsel's knowledge, the outstanding shares of capital stock of each
of the Subsidiaries is owned free and clear of all liens, encumbrances
and equities and claims, and no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to
convert any obligations into any shares of capital stock or of
ownership interests in the Subsidiaries are outstanding. The only
subsidiaries of the Company are the subsidiaries listed on Exhibit 21
to the Registration Statement and certain other subsidiaries which,
when considered in the aggregate as a single subsidiary, do not
constitute a "significant subsidiary" as defined in rule 1-02 of
Regulations S-X.
(ii) To the best of the knowledge of such counsel, neither the
Company nor any Subsidiary is, or with the giving of notice or lapse
of time or both, will be, in violation of its charter or by-laws and
no default by the Company or any Subsidiary exists in the due
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which
the Company or any Subsidiary is a party or to which the property of
the Company or a Subsidiary is subject.
(iii) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of Common Stock have been duly authorized; the
outstanding shares of Common Stock, including the Shares to be sold by
the Selling Shareholders, have been duly authorized and validly issued
and are fully paid and non-assessable; all of the Shares conform to
the description thereof contained in the Prospectus; the certificates
for the Shares are in due and proper form and complies with all
applicable statutory requirements, with any applicable requirements of
the charter and by-laws of the Company and the requirements of The
Nasdaq National Market; the shares of Common Stock, including the
Option Shares, if any, to be sold by the Company pursuant to this
Agreement have been duly authorized and will be validly issued, fully
paid and non-assessable when issued and paid for as contemplated by
this Agreement; and no preemptive rights of stockholders exist with
respect to any of the Shares or the issue or sale thereof. No holders
of Shares will be subject to personal liability by being such a
holder.
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(iv) Except as described in or contemplated by the Prospectus,
to the knowledge of such counsel, there are no outstanding securities
of the Company convertible or exchangeable into or evidencing the
right to purchase or subscribe for any shares of capital stock of the
Company and there are no outstanding or authorized options, warrants
or rights of any character obligating the Company to issue any shares
of its capital stock or any securities convertible or exchangeable
into or evidencing the right to purchase or subscribe for any shares
of such stock; and except as described in the Prospectus, to the
knowledge of such counsel, no holder of any securities of the Company
or any other person has the right, contractual or otherwise, which has
not been satisfied or effectively waived, to cause the Company to sell
or otherwise issue to them, or to permit them to underwrite the sale
of, any of the Shares or the right to have any shares of Common Stock
or other securities of the Company included in the Registration
Statement or the right, as a result of the filing of the Registration
Statement or otherwise, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(v) The Registration Statement, including any Rule 462(b)
Registration Statement, has become effective under the Act; any
required filing pursuant to Rule 424 has been made in the manner and
within the time period required by Rule 424 and, to the best of the
knowledge of such counsel, no stop order proceedings with respect to
the Registration Statement have been instituted or are pending or
threatened under the Act.
(vi) The Registration Statement, including any Rule 462(b)
Registration Statement, the Prospectus and each amendment or
supplement thereto comply as to form in all material respects with the
requirements of the Act and the Rules and Regulations (except that
such counsel need express no opinion as to the financial statements
and related schedules contained therein). If Rule 434 has been relied
upon, the Prospectus was not "materially different" as such term is
used in Rule 434, from the prospectus included in the Registration
Statement at the time it became effective.
(vii) The statements under the captions "Business Property,"
"Business -- Litigation," "Capitalization," "Shares Eligible for
Future Sale" and "Certain Federal Income Tax Considerations" in the
Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, fairly summarize in
all material respects the information called for with respect to such
documents and matters.
(viii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are
not so filed or described as required, and such contracts and
documents as are summarized in the Registration Statement or the
Prospectus are fairly summarized in all material respects.
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(ix) To the best of such counsel s knowledge, except as set
forth in the Prospectus, there is not pending or threatened any
action, suit, claim, proceeding, inquiry or investigation, to which
the Company or any Subsidiary is a party, or to which the property of
the Company or any Subsidiary is subject, before or brought by any
court or governmental agency or otherwise, which if determined
adversely to the Company or any of its Subsidiaries, might result,
whether singly or in the aggregate, in a Material Adverse Effect.
(x) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated (including the
issuance of the Shares and the use of the proceeds therefrom as
described in the Prospectus) do not and will not, whether with or
without the giving of notice or lapse of time or both, conflict with
or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the
Company or any Subsidiary pursuant to any contract, indenture,
mortgage, lease, deed of trust, loan or credit agreement, or any other
agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries may be bound except for such conflicts, breaches or
defaults, liens, charges or encumbrances that would not, whether
singly or in the aggregate, have a Material Adverse Effect, nor will
such action result in any violation of the provisions of the charter
or by-laws of the Company or any Subsidiary, or to the best of such
counsel's knowledge, any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, governmental
instrumentality or court having jurisdiction over the Company or any
Subsidiary or their respective properties, assets or operations.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or
other governmental body is necessary in connection with the execution
and delivery of this Agreement and the consummation of the
transactions herein contemplated (other than as may be required by the
NASD or as required by State securities and Blue Sky laws as to which
such counsel need express no opinion) except such as have been
obtained or made, specifying the same.
(xiii) The Company is not, and will not become, as a result of
the consummation of the transactions contemplated by this Agreement,
and application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the
1940 Act.
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(xiv) The Selling Shareholders Agreements have been duly
authorized, executed and delivered on behalf of the Selling
Shareholders.
(xv) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by
State securities and Blue Sky laws as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion
of the Shares to be sold by such Selling Shareholder.
(xvi) The Custodian Agreement and the Power of Attorney executed
and delivered by each Selling Shareholder are valid and binding and
enforceable against the executing Selling Shareholder in accordance
with their terms.
(xvii) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) have
acquired good and marketable title to the Shares being sold by each
Selling Shareholder on the Closing Date, and the Option Closing Date,
as the case may be, free and clear of all liens, encumbrances,
equities and claims.
In rendering such opinion Pitney, Hardin, Kipp & Szuch may rely as to
matters governed by the laws of states other than New Jersey, the General
Corporation Laws of the State of Delaware or Federal laws on local counsel
in such jurisdictions (and as to the matters set forth in subparagraphs
(xiv) through (xvii) on opinions of other counsel representing the
respective Selling Shareholders, provided that in each case Pitney, Hardin,
Kipp & Szuch shall state that they believe that they and the Underwriters
are justified in relying on such other counsel. In addition to the matters
set forth above, such opinion shall also include a statement to the effect
that nothing has come to the attention of such counsel which leads them to
believe that (i) the Registration Statement, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the Prospectus, or any supplement thereto, on the
date it was filed pursuant to the Rules and Regulations and as of the
Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements, in the light of the
circumstances under which they are made, not misleading (except that such
counsel need express no view as to financial statements, schedules and
statistical information contained therein). With respect to such
statement, such counsel may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(c) The Representatives shall have received from Willkie Farr &
Gallagher counsel for the Underwriters, an opinion dated the Closing Date
or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, with respect to
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corporate proceedings by the Company, the form of the Registration
Statement and the Prospectus (other than financial and statistical data),
the validity of the Shares and other related matters as the Representatives
may reasonably request. In rendering such opinion Willkie Farr & Gallagher
may rely as to all matters governed other than by the laws of the State of
New York, the General Corporation laws of the State of Delaware or Federal
laws on the opinion of counsel referred to in Paragraph (b) of this Section
6. In addition to the matters set forth above, such opinion shall also
include a statement to the effect that nothing has come to the attention of
such counsel which leads them to believe that (i) the Registration
Statement, or any amendment thereto, as of the time it became effective
under the Act (but after giving effect to any modifications incorporated
therein pursuant to Rule 430A under the Act) as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(ii) the Prospectus, or any supplement thereto, on the date it was filed
pursuant to the Rules and Regulations and as of the Closing Date or the
Option Closing Date, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact, necessary in order to
make the statements, in the light of the circumstances under which they are
made, not misleading (except that such counsel need express no view as to
financial statements, schedules and statistical information contained
therein). With respect to such statement, may state that their belief is
based upon the procedures set forth therein, but is without independent
check and verification.
(d) The Representatives shall have received at or prior to the
Closing Date from Willkie Farr & Gallagher a memorandum or summary, in form
and substance satisfactory to the Representatives, with respect to the
qualification for offering and sale by the Underwriters of the Shares under
the State securities or Blue Sky laws of such jurisdictions as the
Representatives may reasonably have designated to the Company.
(e) The Representatives shall have received, on each of the date
hereof, the Closing Date and the Option Closing Date, as the case may be, a
letter dated the date hereof, the Closing Date or the Option Closing Date,
as the case may be, in form and substance satisfactory to the
Representatives, of KPMG Peat Marwick LLP, confirming that they are
independent public accountants within the meaning of the Act and the
applicable published Rules and Regulations thereunder and stating that in
their opinion the financial statements and schedules examined by them and
included in the Registration Statement comply in form in all material
respects with the applicable accounting requirements of the Act and the
related published Rules and Regulations; and containing such other
statements and information as is ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements
and certain financial and statistical information contained in the
Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates
of the Chief Executive Officer and the Chief Financial Officer of the
Company to the effect that, as of the Closing
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Date or the Option Closing Date, as the case may be, each of them severally
represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have
been taken or are, to his or her knowledge, contemplated by the
Commission;
(ii) The representations and warranties of the Company contained
in Section 1 hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be, and the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Closing Date or the Option
Closing Date, as the case may be;
(iii) All filings required to have been made pursuant to
Rules 424 or 430A under the Act have been made;
(iv) He or she has carefully examined the Registration Statement
and the Prospectus and, in his or her opinion, the statements
contained in the Registration Statement and the Prospectus were true
and correct as of their respective dates, and such Registration
Statement and Prospectus did not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been
set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment; and
(v) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the
earnings, business, management, properties, assets, rights,
operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries taken as a whole, whether or not arising
in the ordinary course of business.
(g) The Company and the Selling Shareholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties, covenants and conditions contained herein
and related matters as the Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, have been approved for
listing upon notice of issuance on The Nasdaq National Market.
(i) The Lockup Agreements described in Section 4 shall be in full
force and effect.
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<PAGE>
(j) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in
all material respects satisfactory to the Representatives and to counsel
for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated
by the Representatives by notifying the Company and the Selling
Shareholders of such termination in writing or by telegram at or prior to
the Closing Date or the Option Closing Date, as the case may be.
In such event, the Selling Shareholders, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing
Date, as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. INDEMNIFICATION.
(a) The Company and the Selling Shareholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of the Act and the
Exchange Act, against any losses, claims, damages or liabilities to which
such Underwriter or any such controlling person may become subject under
the Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement
thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse each Underwriter and
each such controlling person upon demand for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in
connection with investigating or defending any such loss, claim, damage or
liability, action or proceeding or in responding to a subpoena or
governmental inquiry related to the offering of the Shares, whether or not
such Underwriter or controlling person is a party to any action or
proceeding; provided, however, that the Company and the Selling
Shareholders will not be liable in any such case
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<PAGE>
to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement, or
omission or alleged omission made in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representatives specifically for use in the
preparation thereof. In no event, however, shall the liability of any
Selling Shareholder for indemnification under this Section 8(a) exceed the
proceeds received by such Selling Shareholder from the Underwriters in the
offering. This indemnity agreement will be in addition to any liability
which the Company or the Selling Shareholders may otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and
hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement, the Selling Shareholders, and each
person, if any, who controls the Company or the Selling Shareholders within
the meaning of the Act or the Exchange Act, against any losses, claims,
damages or liabilities to which the Company or any such director, officer,
Selling Shareholder or controlling person may become subject under the Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or (ii)
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were
made; and will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, Selling Shareholder or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however,
that each Underwriter will be liable in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission has been made in the Registration Statement,
any Preliminary Prospectus, the Prospectus or such amendment or supplement,
in reliance upon and in conformity with written information furnished to
the Company by or through the Representatives specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to this Section 8, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing. No indemnification provided for in
Section 8(a) or (b) shall be available to any party who shall fail to give
notice as provided in this Section 8(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related
and was materially prejudiced by the failure to give such notice, but the
failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified
party for contribution or otherwise than on account of the
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provisions of Section 8(a) or (b). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party and shall pay
as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred (or within 30 days
of presentation) the fees and expenses of the counsel retained by the
indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them
or (iii) the indemnifying party shall have failed to assume the defense and
employ counsel acceptable to the indemnified party within a reasonable
period of time after notice of commencement of the action. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm (and local
counsel) for all such indemnified parties. Such firm shall be designated
in writing by you in the case of parties indemnified pursuant to Section
8(a) and by the Company and the Selling Shareholders in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent (which consent shall not be unreasonably withheld) but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. In
addition, the indemnifying party will not, without the prior written
consent of the indemnified party (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment in
any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or proceeding)
unless such settlement, compromise or consent includes an unconditional
release of each indemnified party from all liability arising out of such
claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Shareholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however,
the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute
to such amount paid or payable by such indemnified party in such proportion
as is appropriate to reflect not only
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such relative benefits but also the relative fault of the Company and the
Selling Shareholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Shareholders on
the one hand and the Underwriters on the other shall deemed to be in the
same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. 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 Company or the Selling Shareholders
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this
Section 8(d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) referred to
above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation, and (iii) no
Selling Shareholder shall be required to contribute any amount in excess of
the lesser of (A) that proportion of the total of such losses, claims,
damages or liabilities indemnified or contributed against equal to the
proportion of the total Shares sold hereunder which is being sold by such
Selling Shareholder, or (B) the proceeds received by such Selling
Shareholder from the Underwriters in the offering. The Underwriters'
obligations in this Section 8(d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may
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join him or it as an additional defendant in any such proceeding in which
such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A
successor to any Underwriter, or to the Company, its directors or officers,
or any person controlling the Company, shall be entitled to the benefits of
the indemnity, contribution and reimbursement agreements contained in this
Section 8.
9. DEFAULT BY UNDERWRITERS.
If on the Closing Date or the Option Closing Date, as the case may be,
any Underwriter shall fail to purchase and pay for the portion of the
Shares which such Underwriter has agreed to purchase and pay for on such
date (otherwise than by reason of any default on the part of the Company or
a Selling Shareholder), you, as Representatives of the Underwriters, shall
use your reasonable efforts to procure within 36 hours thereafter one or
more of the other Underwriters, or any others, to purchase from the Company
and the Selling Shareholders such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Shares or option Shares, as the case
may be, which the defaulting Underwriter or Underwriters failed to
purchase. If during such 36 hours you, as such Representatives, shall not
have procured such other Underwriters, or any others, to purchase the Firm
Shares or Option Shares, as the case may be, agreed to be purchased by the
defaulting Underwriter or Underwriters, then (a) if the aggregate number of
shares with respect to which such default shall occur does not exceed 10%
of the Firm Shares or Option Shares, as the case may be, covered hereby,
the other Underwriters shall be obligated, severally, in proportion to the
respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares
or Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of Firm
Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the
case may be, covered hereby, the Company and the Selling Shareholders or
you as the Representatives of the Underwriters will have the right, by
written notice given within the next 36-hour period to the parties to this
Agreement, to terminate this Agreement without liability on the part of the
non-defaulting Underwriters or of the Company or of the Selling
Shareholders except to the extent provided in Section 8 hereof. In the
event of a default by any Underwriter or Underwriters, as set forth in this
Section 9, the Closing Date or Option Closing Date, as
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the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes
any person substituted for a defaulting Underwriter. Any action taken
under this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this
Agreement.
10. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or
telegraphed and confirmed as follows: if to the Underwriters, to Alex.
Brown & Sons Incorporated, 135 East Baltimore Street, Baltimore, Maryland
21202, Attention: _____________________; with a copy to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202.
Attention: General Counsel; if to the Company or the Selling Shareholders,
to Factory Card Outlet, Inc., 745 Birginal Drive, Bensenville, Illinois
60106, Attention: ________________; with a copy to Pitney, Hardin, Kipp &
Szuch, 200 Campus Drive, Florham Park, New Jersey 07932-0950, Attention:
Lori J. Braender.
11. TERMINATION.
This Agreement may be terminated by you by notice to the Company and
the Selling Shareholders as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material adverse change
in or affecting the condition, financial or otherwise, of the Company and
its Subsidiaries taken as a whole or the earnings, business, management,
properties, assets, rights, operations, condition (financial or otherwise)
or prospects of the Company and its Subsidiaries taken as a whole, whether
or not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation,
declaration, emergency, calamity, crisis or change on the financial markets
of the United States would, in your reasonable judgment, make it
impracticable to market the Shares or to enforce contracts for the sale of
the Shares, or (iii) suspension of trading in securities generally on the
New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree
or other promulgation of any
-30-
<PAGE>
statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects or may
materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading in the rating of the Company's debt
securities by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 463(g) under the Exchange act) or (vii)
the taking of any action by any governmental body or agency in respect of
its monetary or fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person
will have any right or obligation hereunder. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign merely
because of such purchase.
13. INFORMATION PROVIDED BY UNDERWRITERS.
The Company, the Selling Shareholders and the Underwriters acknowledge
and agree that the only information furnished or to be furnished by any
Underwriter to the Company for inclusion in any Prospectus or the
Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to
the Underwriters), legends required by Item 502(d) of Regulation S-K under
the Act and the information under the caption "Underwriting" in the
Prospectus.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation
made by or on behalf of any Underwriter or controlling person thereof, or
by or on behalf of the Company or its directors or officers and (c)
delivery of and payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
-31-
<PAGE>
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling
Shareholders, the Company and the several Underwriters in accordance with
its terms.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Shareholder represents by so doing that he has been duly
appointed as Attorney-in-Fact by such Selling Shareholder pursuant to a
validly existing and binding Power of Attorney which authorizes such
Attorney-in-Fact to take such action.
Very truly yours,
FACTORY CARD OUTLET, INC.
By
------------------------------
Name
Title
[Selling Shareholders]
By
------------------------------
[Attorney-in-Fact]
The foregoing Underwriting
Agreement is hereby confirmed
and accepted as of the date
first above written.
-32-
<PAGE>
ALEX, BROWN & SONS INCORPORATED
- --------------------------------
- --------------------------------
As Representatives of the several
Underwriters listed on Schedule I
By: Alex, Brown & Sons Incorporated
By:
-----------------------------
Authorized Officer
-33-
<PAGE>
SCHEDULE I
SCHEDULE OF UNDERWRITERS
Number of Firm Shares
Underwriter to be Purchased
----------- -----------------------------
Alex, Brown & Sons Incorporated
Piper Jaffray Inc.
-------------
Total
=============
<PAGE>
SCHEDULE II
SCHEDULE OF SELLING SHAREHOLDERS
Number of Firm Shares
Selling Shareholder to be Sold
------------------- --------------------------
-------------
Total
=============
<PAGE>
SCHEDULE III
SCHEDULE OF OPTION SHARES
Number of Maximum Number Percentage of
Name of Seller of Option Shares Total Option Shares
%
----------- ----
Total 100%
=========== ====
<PAGE>
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (this "Agreement"), dated as of August 2, 1996, is by
and among Factory Card Outlet of America Ltd., an Illinois corporation ("FCOA"),
and Fine Art Developments p.l.c. ("Fine Art").
W I T N E S S E T H:
WHEREAS, FCOA is a leading U.S. retailer in the discount segment of the
social/personal expressions industry and operates as a specialty retail chain of
discount greeting card and party supply stores;
WHEREAS, Fine Art and Fine Art's subsidiaries (collectively, "FAD")
manufacture and distribute certain greeting cards, including greeting cards
known to the parties hereto and referred to herein as "Everyday and Seasonal
Counter Cards"; and
WHEREAS, FCOA desires to purchase from FAD, and FAD desires to sell to
FCOA, Everyday and Seasonal Counter Cards in accordance with the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, FCOA and FAD, intending to be legally bound, hereby agree as
follows:
1. Term; Termination. This Agreement shall be effective as of July 1, 1996
and shall terminate on December 31, 1999; provided, however, that this Agreement
shall automatically renew for successive one-year terms thereafter.
Notwithstanding the foregoing,
<PAGE>
either party hereto may terminate without cause this Agreement by providing the
other party with at least twelve (12) months' prior written notice of such
termination no more than thirty (30) days after any Review Date (as hereinafter
defined); provided, however, that no such termination pursuant to this Section 1
shall be effective prior to December 1, 1998.
2. Purchase and Sale; Minimum Quantity.
(a) During the term of this Agreement (including, but not limited to,
any renewal terms hereof) FAD shall sell to FCOA, and FCOA shall purchase from
FAD, the number of Everyday and Seasonal Counter Cards covered by any and all
purchase orders (each, an "Order") placed by FCOA with FAD.
(b) A list of Everyday and Seasonal Counter Cards to be purchased and
sold pursuant to Section 2(a) hereof shall be agreed upon by both parties
hereto, and shall be attached to this Agreement as Schedule I hereto and made a
part hereof, by no later than September 30, 1996.
(c) Notwithstanding any contrary provision contained herein, during
the term of this Agreement, FCOA agrees to purchase from FAD no less than the
Minimum Quantity (as hereinafter defined) of Everyday and Seasonal Counter Cards
during the period from July 1, 1996 through June 30, 1997 (the "Initial Quantity
Period) and during each one-year period (from July 1 through June 30) thereafter
(each, a "Subsequent Quantity Period").
<PAGE>
(d) For purposes hereof, the term "Minimum Quantity" with respect to
the Initial Quantity Period and each Subsequent Quantity Period means the number
of Everyday and Seasonal Counter Cards equal to forty-two percent (42%) of
FCOA's total annual purchases of Everyday and Seasonal Counter Cards (consisting
of regular stock excluding surplus) for such Initial Quantity Period or
Subsequent Quantity Period, as the case may be. The "Minimum Quantity" for each
Subsequent Quantity Period shall be agreed upon by both parties hereto by no
later than January 1 next preceding the commencement of such Subsequent Quantity
Period (the "Quantity Review Date"). In the event that such Minimum Quantity has
not been agreed upon by the Quantity Review Date for such corresponding
Subsequent Quantity Period, then the Minimum Quantity established for the next
preceding Subsequent Quantity Period shall remain in effect until the earlier to
occur of (i) the termination of this Agreement or (ii) the agreement of the
parties hereto to increase the Minimum Quantity for such Subsequent Quantity
Period.
3. Orders; Delivery.
(a) FCOA shall, from time to time, place an Order with FAD for such
number and types of Everyday and Seasonal Counter Cards as FCOA desires to
purchase from FAD.
(b) Within a reasonable period (taking into account the type of
product(s) ordered by FCOA and the context of the Order) after receipt of an
Order, FAD shall
<PAGE>
deliver the ordered Everyday and Seasonal Counter Cards to FCOA's central
warehouse in Bensenville, Illinois or such other central warehouse as is
designated in advance by FCOA.
(c) No delivery of any products under this Agreement shall be deemed
to have been accepted by FCOA until FCOA has inspected such products and has
determined, in its sole discretion, that such products (i) conform to FCOA's
quality standards and (ii) are of quality equal to or better than the quality of
the same or similar products sold by FAD to FCOA during the twelve (12) months
prior to the date of this Agreement. If, within ninety (90) days after receipt,
FCOA determines that any or all of the products (i) do not conform to FCOA's
quality standards or (ii) are inferior to the quality of the same or similar
products sold by FAD to FCOA during the twelve (12) months prior to the date
hereof, then FCOA shall notify FAD and attempt to resolve any such problem with
FAD. If FCOA determines, in its sole discretion, that such problem has not been
resolved to FCOA's satisfaction within a reasonable period of time, FAD shall,
at FAD's option, either replace or provide a full refund for such products.
4. Purchase Price; Payment.
(a) Subject to Section 5 hereof, FCOA shall pay to FAD an amount (the
"Purchase Price") equal to U.S. $0.16 for each Everyday and Seasonal Counter
Card delivered to and accepted by FCOA during the period from July 1, 1996
through June 30, 1998 (the "Initial Price Period").
<PAGE>
(b) The Purchase Price for the Everyday and Seasonal Counter Cards to
be purchased by FCOA during any one-year period (July 1 through June 30 of each
fiscal year) after the Initial Price Period (each, a "Subsequent Price Period")
shall be agreed to by the parties hereto by no later than the January 1 next
preceding the commencement of such Subsequent Price Period (the "Price Review
Date"). Notice of any proposed change in the Purchase Price must be delivered by
FAD to FCOA by no later than thirty (30) days prior to the Price Review Date
(the "Price Notice Date"). In the event that such Purchase Price has not been
agreed to by the parties hereto by the Price Review Date, then, upon written
notice by either party to the other party within sixty (60) days after the Price
Notice Date, this Agreement shall continue at the Purchase Price then in effect
until the earlier to occur of (i) the mutual agreement of the parties to a
change in the Purchase Price, (ii) the date twelve (12) months after the Price
Review Date or (iii) termination of this Agreement in accordance with Section 1
hereof. If the parties hereto agree to a change in the Purchase Price in
accordance with this Section 4(b), this Agreement shall continue at the Purchase
Price then in effect and such change shall become effective on the date six (6)
months after the Price Review Date.
(c) The amount of the Purchase Price specified forth in Section 4(a)
hereof or determined in accordance with Section 4(b) hereof is inclusive of (i)
the cost of the Everyday and Seasonal Counter Cards purchased, (ii) all freight
and transportation costs to deliver such Everyday and Seasonal Counter Cards to
FCOA's designated central distribution center and (iii) all duties, customs and
any and all other charges, fees and costs associated with the delivery of
<PAGE>
such Everyday and Seasonal Counter Cards, the payment of which shall be the sole
obligation of FAD.
(d) Except as provided in Section 5 hereof, in no event shall the
Purchase Price for any Subsequent Price Period be reduced below the Purchase
Price for the preceding Price Period.
(e) FCOA shall pay the Purchase Price to FAD in United States
denominated dollars in accordance with FAD's current payment terms with FCOA in
effect as of July 1, 1996.
5. Overruns, Close-Outs and Excess Inventory; Discussions.
(a) In so far as practicable, FCOA shall be entitled to a right of
first refusal to purchase from FAD any and all of FAD's production overruns,
close-outs and excess inventory of Everyday and Seasonal Counter Cards and
non-counter cards including, without limitation, boxed cards (collectively,
"Everyday and Seasonal Cards"), not previously sold (collectively, "Close-Outs")
at prices substantially consistent with past pricing policies with respect to
each line or type of Everyday and Seasonal Cards, which prices shall be mutually
agreed upon by the parties hereto, and to be listed on Schedule II to be
attached hereto and made a part hereof, by no later than September 30, 1996;
provided, however, failure to reach such agreement by such date shall not
constitute a material breach under this Agreement. For purposes hereof, the term
"Close-Outs" does not include FAD's take-backs (i.e., FAD's products sold to
other vendors or products of
<PAGE>
other distributors or manufacturers which have been repurchased by FAD from the
market). Any such purchases of Close-Outs shall not be included in the
calculation of the Minimum Quantity for purposes of Section 2 hereof.
(b) Members of management designated by FCOA and FAD will meet and
commence discussions on or prior to September 1, 1996 to establish (i) a
mutually agreed upon list of Everyday and Seasonal Cards to be made a part of
this Agreement pursuant to Section 2(b) hereof, (ii) a mutually agreed upon list
of prices for Close-Outs to be purchased and sold pursuant to Section 5(a),
consistent with Section 4(c) hereof, and (iii) mutually agreed upon prices for
take-backs to be purchased by FCOA from FAD, consistent with Section 4(c)
hereof. Any delay attributable to FAD or its management in meeting on or prior
to September 1, 1996 to commence such discussions shall extend the date for
agreeing upon such issues until October 30, 1996. Each of the parties hereto
agrees to diligently conduct such discussions and to negotiate such terms in
good faith. The parties hereto anticipate that the 30-day period designated in
Section 5(a) should be sufficient for the parties to reach a reasonable and fair
agreement on such terms.
6. Restrictive Covenants.
(a) FAD acknowledges that FAD has, through its relationship with FCOA,
access to confidential information of FCOA, including, without limitation,
various methods of merchandising, purchasing and sales techniques and systems
and business practices relating to FCOA's program of offering greeting cards at
a single discount price to retail customers
<PAGE>
(collectively, the "Confidential Information"), which Confidential Information
gravely affects the successful conduct of FCOA's business and is intended to be
private and confidential. FAD agrees that it shall not, directly or indirectly,
disclose or use any Confidential Information, except as necessary to fulfill its
obligations under this Agreement. This Section 6(a) shall survive the
termination of this Agreement.
(b) FAD acknowledges that FCOA has successfully developed over time a
unique method of merchandising, purchasing and sales techniques and systems and
business practices relating to its greeting card discount program which are
critical to the successful conduct of its business. Accordingly, during the term
of this Agreement, FAD shall not knowingly supply, encourage or assist any other
"one price" strategy retailer in the Restricted Area who is retailing at U.S.
$0.39 or less per card. For the avoidance of doubt, this undertaking will not
preclude FAD from continuing to supply either existing or new customers who have
a "one price" strategy in excess of U.S. $0.39 per card.
(c) In addition to the restriction contained in Section 6(b) hereof,
for the period from July 1, 1996 through June 30, 1998, FAD shall not in the
Restricted Area supply, encourage or assist any other "one price" strategy
retailer which, for the avoidance of doubt shall exclude retailers referred to
in Section 6(b) hereof, who is retailing at less than U.S. $0.75 per card and
which is a drug store chain or which generates 70% or more of its gross revenues
from the sale of greeting cards, party goods, gift wrap, gift wrap accessories
and/or stationery. This restriction shall not apply to retailers that use a
half-off discount strategy who currently purchase from FAD or
<PAGE>
its subsidiaries as long as no such retailer regularly sells its greeting cards
at a price per card less than 2 for U.S. $1.00 or U.S. $0.50.
(d) For the avoidance of doubt, the restrictions contained in Sections
6(b) and 6(c) hereof shall not apply to sales by FAD to The 1/2 Off Card Shop
Inc.
(e) During the term of this Agreement, FAD shall not sell regular
stock to any retailer in the Restricted Area at a price per card equal to or
less than the price at which it sells such stock to FCOA.
(f) During the term of this Agreement, FCOA shall not sell product
supplied by FAD other than in the United States of America, Guam, Puerto Rico,
the United States Virgin Islands and Mexico (the "Restricted Area") without the
prior written consent of FAD.
(g) In the event that FAD is in breach of the restrictions contained
in Sections 6(b), 6(c) and 6(e) hereof, FCOA shall have the right to immediately
terminate this Agreement and FAD shall have the same right in the event that
FCOA is in breach of the restriction contained in Section 6(f) hereof.
7. Ownership Rights; Indemnification.
(a) FAD shall only be required to supply Everyday and Seasonal Counter
Cards pursuant to this Agreement for which it holds a copyright or license to
sell in the Restricted Area; provided, however, FAD shall use reasonable efforts
to acquire and maintain any
<PAGE>
and all copyright, copyright license and other intellectual property and similar
rights necessary for FAD to sell to FCOA for resale of Everyday and Seasonal
Counter Cards in the Restricted Area.
(b) Subject to the foregoing, FAD hereby represents and covenants that
it (i) is the exclusive owner of all rights (including, without limitation, all
intellectual property and similar rights), title and interests, in, to and under
the Everyday and Seasonal Counter Cards and (ii) has the right to enter into,
and consummate the transactions contemplated by, this Agreement. FAD shall
indemnify, defend, and hold harmless FCOA and its shareholders, officers,
directors, employees, agents, servants, successors and assigns from and against
all losses, damages, injuries, claims, demands and expenses, including
reasonable attorneys' fees and costs, of whatsoever nature, which FCOA or any of
the other indemnitees listed herein may receive or incur as a result of any
misrepresentation by FAD under this Section 7(b).
8. Warehousing Facility. During the term of this Agreement, FAD shall
maintain a warehousing facility in the United States which will hold stock for
call-off by FCOA. The level of stock held in such facility shall be at the sole
discretion of FAD but shall be based on FCOA's forecast requirements (as
initially determined in the discussions between FAD and FCOA to be held pursuant
to Section 5(b) hereof) and shall be such as to maintain reasonable delivery
schedules to FCOA.
9. Other Products. FCOA shall, during the term of this Agreement, use
commercially reasonable efforts to purchase from FAD products other than the
Everyday and
<PAGE>
Seasonal Counter Cards required to be purchased pursuant to this Agreement,
provided such other products are offered by FAD at competitive prices and
delivery terms.
10. Force Majeure. No liability shall arise under this Agreement in respect
of the consequences of any failure of either party hereto to perform its
obligations hereunder by reason of Force Majeure. "Force Majeure" for the
purposes of this Agreement shall mean any substantial reason or cause beyond the
party's control, including but not limited to fire, flood, war, embargo,
strikes, lock-outs, labor troubles, transport interruptions, accident,
explosion, riot, insurrection, governmental laws or regulations, lawful property
seizure or shortages of materials or labor or supplies of any kind.
11. Notices. Any notices or communications under this Agreement shall be in
writing and shall be deemed to be delivered immediately if delivered by
messenger or express courier or transmitted by telecopier with oral or
telecopied confirmation of receipt, or within ten (10) business days after
having been mailed by first class air mail, postage prepaid, to the party
receiving such communication at the address indicated below its signature block
on the last page of this Agreement or such other address as any party may in the
future specify by notice to the other party delivered in accordance with this
Section 11, except that notices of change of address shall be deemed to be given
only upon receipt by the party to whom it is directed.
<PAGE>
12. Modifications to Agreement. No modification, amendment, supplement to
or waiver of this Agreement, or any part thereof, shall be binding upon the
parties hereto unless made in a writing signed by both parties hereto.
13. Complete Agreement. This Agreement, together with the Orders covering
sales of Everyday and Seasonal Counter Cards to FCOA, sets forth the entire
understanding of the parties, which supersedes and merges all prior proposals,
understandings and all other agreements, oral and written, between the parties
relating to the subject matter hereof; provided, however, to the extent of any
conflict, difference or inconsistency between the Orders and this Agreement, the
terms and conditions of this Agreement shall apply.
14. Waiver. A failure of any of the parties hereto to exercise any right
provided for herein shall not be deemed to be a waiver of any right hereunder.
15. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or enforcement
of such provision in any other jurisdiction. The parties hereto agree that, if
any covenant contained in this Agreement is adjudged unreasonable in any
proceeding, such covenant shall be modified so as to render such covenant to be
adjudged reasonable.
<PAGE>
16. Headings. This Agreement shall not be interpreted by reference to any
of the title headings to the sections herein or to the schedules hereto, which
have been inserted for convenience purposes only and are not deemed a part
hereof.
17. Binding Nature; Assignment. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns. Notwithstanding the
foregoing, neither party shall assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the other
party, such consent not to be unreasonably withheld.
18. Arbitration. Any controversy or claim, directly or indirectly, arising
out of or relating to this Agreement, shall be submitted to and settled by
arbitration conducted in Cook County, Illinois in accordance with the rules and
procedures then existing under the Commercial Arbitration Rules of the American
Arbitration Association, provided that notwithstanding anything to the contrary
contained in such Rules a panel of three arbitrators shall be used. The decision
in writing of a majority of the arbitrators on the panel shall be final,
conclusive, and binding on all parties hereto who had notice of such arbitration
and an opportunity to participate therein (whether or not such party so
participated); provided, however, no decision relating to a breach or alleged
breach of Section 6 hereof shall be binding on the parties hereto, and either
party hereto shall have the right to pursue any and all available remedies for
any such a breach or alleged breach in any court having jurisdiction, unless
both parties hereto agree in writing to be bound by such decision of the
arbitrators. Judgment upon any binding decision rendered by such panel may be
entered in any court having jurisdiction.
<PAGE>
19. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois without regard to
conflicts of law or choice of law rules. The sole jurisdiction and venue for the
entering of any judgment and for any litigation arising out of this Agreement
shall be an appropriate federal or state court in the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of
the date first above written.
FINE ART DEVELOPMENTS p.l.c. FACTORY CARD OUTLET OF AMERICA LTD.
By: /s/ KEITH CHAPMAN By: /s/ WILLIAM E. FREEMAN
------------------------------ ------------------------------
Keith Chapman, William E. Freeman,
Chairman Chairman of the Board
Mailing Mailing
Address: Dawson Lane, Dudley Hill, Bradford Address: 745 Birginal Drive
West Yorkshire BD4 6HW Bensenville, Illinois
England 60106-1212 U.S.A.
Attention: Office of Attention: Office of
the Chairman the President
Phone: (0) 1274 651188 Phone: (708) 238-0010
Fax: (0) 1274 687386 Fax: (708) 238-9547
<PAGE>
Exhibit 10.4
Property No. 558
INDUSTRIAL BUILDING LEASE
THIS LEASE, made as of the 25 day of September, 1992, by and between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey Corporation, hereinafter
called "Landlord" and Factory Card Outlet of America, Ltd., a(n) Delaware
Corporation, hereinafter called "Tenant";
ARTICLE I - BASIC TERMS
1.01 (A) Address of Landlord: The Prudential Insurance Company
of America,
c/o: Equity Investment
Attention: Vice President
130 E. Randolph St., Suite 1200
Chicago, IL 60601
or such other address as may from time to time be designated by Tenant
in writing.
(B) Address of Tenant: 745 Birginal
Bensenville, IL 60106
or such other address as may from time to time be designated by Tenant
in writing.
(C) Premises: The parcel(s) of real property, the legal description of
which is set forth on Exhibit "A" attached hereto, together with the
Building and improvements thereon located.
(D) Building: The building located upon the Premises, the common
address of which is 745 Birginal
Bensenville, IL
(E) Guarantor(s): FCOA Acquisition Corp.
745 Birginal
Bensenville, IL
(F) Term: The period of time commencing October 13, 1992 and expiring
September 30, 2002, unless extended or sooner terminated as set forth
herein.
(G) Rent: All sums, moneys or payments required to be paid by Tenant
to Landlord pursuant to Landlord pursuant to this Lease.
-1-
<PAGE>
(H) Base Rent: $3,854,441.98 for the Term payable as follows:
*1. $294,491.60 per annum ($24,540.97 per month) for the period
from March 13, 1993 **through September 1994;
2. $373,777.80 per annum ($31,148.15 per month) for the period
from October 1994 through September 1997;
3. $430,410.80 per annum ($35,867.57 per month) for the period
from October 1997 through September 2000;
4. $492,707.10 per annum ($41,058.92 per month) for the period
from October 2000 through September 2002;
* Base rent for the period of October 13, 1992 through March 12,
1993 is abated. **Rent for month of March 1993 to be prorated
from March 13th.
(I) Security Deposit: $25,000.00.
(J) Permitted Uses: Office/Warehouse/Distribution of greeting cards,
gifts and related items.
(K) Broker(s): PRUDENTIAL REALTY CO., INC. and PODOLSKY AND
ASSOCIATES, LTD.
(L) Exhibits: A. Legal Description of Premises
B, B-1, B-2. Plans and Specifications for Tenant Improvements and
Allowances both to be paid by Landlord.
C. Tenant Corporate Resolution and Lease Guaranty.
1.02 Effect of Reference to Basic Terms: Each reference in this Lease to any of
the Basic Terms contained in Section 1.01 shall be construed to incorporate into
such reference all of the definitions set forth in Section 1.01.
ARTICLE II - GRANT AND TERM
2.01 In consideration of the rents, covenants, agreements and conditions
hereinafter provided to be paid, kept, performed and observed, Landlord leases
to Tenant and Tenant hereby hires from Landlord the Premises described in
Section 1.01 (C).
2.02 Tenant shall have and hold the Premises for and during the Lease Term
described in Section 1.01 (F), subject to the payment of the Rent and to the
full and timely performance by Tenant of the covenants and conditions
hereinafter set forth.
2.03 In the event Tenant takes possession of the Premises prior to the beginning
of the Term hereof with Landlord's consent, all the provisions of this Lease
shall be in full force and effect upon Tenant's so taking possession.
ARTICLE III - RENT
3.01 Base Rent. Tenant covenants to pay without notice, deduction, set-off or
abatement unless otherwise provided herein to Landlord the Base Rent specified
in Section 1.01 (H) in lawful money of the United States in equal consecutive
monthly installments
-2-
<PAGE>
in advance on the first day of each month during the Lease Term. Rent for any
partial month shall be prorated on a per diem basis. Rent shall be payable to
Landlord at Landlord's address shown at Section 1.01 (A) above or such other
place as Landlord may designate from time to time in writing. Tenant shall pay
the first full month's Base Rent upon execution of this Lease. Base rent
includes $50,070.00 in real estate taxes and $7,929.00 for all risk fire and
extended coverage insurance premiums.
3.02 Real Estate Taxes. During the Lease Term, including any extensions or
holding over, Tenant shall pay to Landlord, as Additional Rent, the amount by
which the Real Estate Taxes levied against the Premises exceeds $50,070.00 per
annum. Commencing in January 1994 and every January thereafter the monthly Base
Rent provided for in paragraph 1.01 (H) will be adjusted to reflect any increase
over $50,070.00. Landlord will furnish Tenant with a copy of the tax bill.
Adjustment will be based on the provisions year's bill. If there is an increase
for the prorata share of 1993 it will be paid in a lump sum [ILLEGIBLE].
Landlord represents that the fully assessed 1991 Real Estate tax bill paid in
1992 was $50,070.00.
"Real Estate Taxes" shall mean: (a) all ad valorem real estate taxes,
assessments, levies, impositions or charges on the Building (adjusted after
protest or litigation, if any) for any part of the Lease Term, exclusive of
penalties, (b) any taxes which shall be levied in lieu of any such ad valorem
Real Estate Taxes, (c) any special assessments for benefits on or to the
Premises paid in annual installments by Landlord, (d) occupational taxes or
excise taxes levied on rentals derived from the operation of the Premises or the
privilege of leasing property, and (e) the reasonable expenses of protesting,
negotiating or contesting the amount or validity of any such taxes, charges or
assessments, such expense to be applicable to the period of the time contested,
protested or negotiated. Landlord will have the responsibility to protest the
Real Estate Taxes; however, if Landlord fails to do so, Tenant may do so at
Tenant's cost and expense. Landlord has no knowledge of any existing or
contemplated special assessments. If the Term of the Lease shall end during a
tax calendar year ("tax calendar year" shall mean each annual period for which
ad valorem real estate taxes are assessed and levied) of which part only is
included in the Term hereof, the amount of such Additional Rent shall be
prorated on a per diem basis and shall be paid on or before the last day of the
Term. If the Term ends in any tax calendar year before the amount to be payable
by Tenant has been determined under the provisions of this Section, an amount
payable for the portion of the Lease Term during the tax calendar year shall be
resaonably estimated by Landlord and the estimated amount shall be promptly paid
by Tenant. The tax bill in the last year of the Lease will be prorated based on
105% of the most recent annual ascertainable Real Estate tax bill.
3.03
3.04 Payment of Additional Rent. Any Additional Rent payable by Tenant under
this Lease shall be due and payable ten (10) days after billing by Landlord.
3.05 Service Charge. Tenant's failure to make any monetary payment required of
Tenant hereunder within ten (10) days of the due date therefor
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shall result in the imposition of a service charge for such late payment in the
amount of ten percent (10%) of the amount due. In addition, any sum not paid
within thirty (30) days of the due date therefor shall bear interest at the rate
of 4% over the prime rate per annum (or such lesser percentage as may be the
maximum amount permitted by law) from the date due until paid.
ARTICLE IV - USE; HAZARDOUS MATERIAL
4.01 The Premises hereby leased shall be used by and/or at the sufferance of
Tenant only for the purposes set forth in Section 1.01 (J) above and for no
other purposes. Tenant shall not use or permit the use of the Premises in any
manner that will tend to create waste or a nuisance, shall keep all its
mechanical apparatus free of noise and vibration which may be transmitted beyond
the confines of the Premises and shall not cause or permit objectionable odors
to emanate or be dispelled from the Premises.
4.02 In the event any Hazardous Material (hereinafter defined) is brought or
caused to be brought into or onto the Premises by Tenant. Tenant shall handle
any such material in compliance with all applicable federal, state and/or local
regulations. For purposes of this Section, "Hazardous Material" means and
includes any hazardous, toxic or dangerous waste, substance or material defined
as such in (or for purposes of) the Comprehensive Environmental Response,
Compensation, and Liability Act, any so-called "Superfund" or "Superlien" law,
or any federal, state or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect. Tenant shall submit to
Landlord on an annual basis copies of its approved hazardous materials
communication plan, OSHA monitoring plan, and permits required by the Resource
Recovery and Conservation Act of 1976, if Tenant is required to prepare, file or
obtain any such plans or liabilities, damages, costs or expenses (including
reasonable attorneys' fees) which Landlord may suffer or incur as a result of
Tenant's introduction into or onto the Premises of any Hazardous Material. This
Section shall survive the expiration or sooner termination of this Lease.
ARTICLE V - LAWS AND ORDINANCES
5.01 Compliance with Laws and Ordinances. Only as required due to Tenant's use
of Premises, Tenant covenants throughout the Lease Term, at Tenant's sole cost
and expense, promptly to comply with all laws and ordinances and the orders,
rules and regulations and requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards, and officers
thereof, and the orders, rules and regulations of the Board of Fire Underwriters
where the Premises are situated, or any other body or hereafter constituted
exercising similar
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functions, foreseen or unforeseen, ordinary as well as extraordinary, and
whether or not the same require structural repairs or alterations, which may be
applicable to the Premises, or the use or manner of use of the Premises. Tenant
will likewise observe and comply with the requirements of all policies of public
liability, fire and all other policies of insurance at any time in force with
respect to the buildings and improvements on the Premises and the equipment
thereof.
5.02 Tenant's Right to Contest. Tenant shall have the right to contest by
appropriate legal proceedings, and by counsel reasonably acceptable to Landlord,
without cost or expense to Landlord, the validity of any law, ordinance, order,
rule, regulation or requirement of the nature herein referred to, and if, by the
terms of any such law, ordinance, order, rule, regulation or requirement,
compliance therewith may legally be held in abeyance without subjecting Tenant
or Landlord to any liability for failure so to comply therewith, Tenant may
postpone compliance therewith until the final determination of any such
proceedings, provided that all such proceedings shall be prosecuted with all due
diligence and dispatch.
5.03 Licenses and Permits. During the Lease Term, Tenant shall obtain any
necessary licenses or permits to conduct or operate its business in and upon the
Premises which are required by any applicable governmental body or agency having
jurisdiction over the Premises and shall pay the fee or charge imposed for
issuance of such license or permit. Tenant shall renew any such licenses or
permits in accordance with the rules, codes, statutes or ordinances requiring
such licenses or permits. Tenant covenants during the Lease Term to conduct or
operate only the business for which it is licensed and in the event of a change
in the nature of its business or operation to obtain any necessary new or
additional licenses or permits. Tenant shall at its sole cost and expense comply
with all requirements and perform all necessary action required under such
rules, codes, statutes or ordinances for the issuance of such permits or
licenses.
ARTICLE VI - UTILITIES AND SERVICES
6.01 Tenant shall contract in its own name and timely pay for all charges for
electricity, gas, water, fuel, sewer charges, telephone, trash hauling, snow
removal, and any other services or utilities used in, servicing or assessed
against the Premises, unless otherwise herein expressly provided, and to
indemnify, defend and save Landlord harmless against any liability or damages on
such account.
ARTICLE VII - QUIET ENJOYMENT
7.01 Landlord covenants that Tenant, on paying the Rents herein provided and
keeping, performing, and observing the covenants, agreements and conditions
herein provide dof Tenant, shall peaceably and quietly hold and enjoy the
Premises for the term aforesaid, subject, however, to the terms of this Lease.
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ARTICLE VIII - ASSIGNMENT AND SUBLETTING
8.01 Tenant shall not assign or hypothecate this Lease nor sublet or otherwise
transfer its interest in all or any part of the Premises without the prior
written consent of Landlord not to be unreasonably withheld. If Tenant wishes to
assign this Lease or sublet all or any part of the Premises it shall give notice
in writing (by certified mail or by personal delivery) of such intention to
Landlord, furnishing Landlord with a copy of the proposed assignment or sublease
document and full information as to the identity and financial status of the
proposed assignee or subtenant. Thereupon, Landlord shall have, within fifteen
(15) days of receipt of such notice, document and (ILLEGIBLE) the right to
terminate this Lease or to approve or reject such assignment or subletting by
written notice to Tenant. If no such response is given, Landlord shall be deemed
to have elected to approve the assignment or subletting. Notwithstanding any
assignment or sublease, Tenant shall remain liable hereunder and shall not be
released without the express written agreement of Landlord to such release. If a
subletting is so approved and the rents under such a sublease are greater than
the rents provided for herein, then Landlord shall have the further option
either (a) to convert the sublease into a prime lease and receive all of the
rents, in which case this Lease shall be deemed terminated as to the sublet
space and Tenant will be relieved of further liability hereunder with regard
thereto; or (b) to require Tenant to remain liable under this Lease, in which
event Tenant shall be entitled to retain 75% of net profit after deducting
reasonable sublet expenses of such excess rents. The consent by Landlord to any
assignment or subletting shall not constitute a waiver of the necessity for such
consent to any subsequent assignment or subletting.
ARTICLE IX - DAMAGE OR DESTRUCTION
9.01 If the Premises or the Building or any part thereof is so damaged by fire
or other casualty, cause or condition whatsoever as to be substantially
untenantable and Landlord shall determine not to restore same. Landlord may, by
written notice to Tenant given within sixty (60) days after such damage,
terminate this Lease as of the date of the damage. If this Lease id not
terminated as above provided and if the Premises are made partially or wholly
untenantable as aforesaid, Landlord, at its expense, shall restore the same with
reasonable promptness but not greater than 180 days, subject to force majure as
defined in Section 15.01 to the condition in which Landlord furnished the
Premises to Tenant at the commencement of the Lease Term as to those items that
were provided at Landlord's expense without any reimbursement by Tenant.
Landlord shall be under no obligation to restore any alterations, improvements
or additions to the Premises made by Tenant or paid for by Tenant, including,
but not limited to, any of the initial tenant finish done or paid for by Tenant
or any subsequent changes, alterations or additions made by Tenant.
9.02 If, as a result of fire or other casualty, cause or condition whatsoever
the Premises are made partially or wholly untenantable and, if Landlord has not
given the sixty (60) day notice above provided for and fails within one hundred
twenty (120) days after such damage occurs to substantially restore the Premises
for Tenant's use and occupancy, Tenant may terminate this Lease as of the end of
said one hundred twenty (120) days by notice to Landlord given not later than
five (5) days after expiration of said one hundred twenty (120) day period. If
the
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Premises are rendered totally untenantable but this Lease is not terminated, all
rent shall abate from the date of the fire or other relevant cause or condition
until the Premises are ready for occupancy and reasonably accessible to Tenant.
If a portion of the Premises is untenantable, rent shall be prorated on a per
diem basis and apportioned in accordance with the portion of the Premises which
is usable by the Tenant until the damaged part is ready for the Tenant's
occupancy. In all cases, due allowance shall be made for reasonable delay caused
by adjustment of insurance loss, strikes, labor difficulties or any cause beyond
Landlord's reasonable control. For the purposes of this Lease, the Premises
shall be considered tenantable so long as to the extent that the Premises are
occupied. In any event, Tenant shall be responsible for the removal, or
restoration, when applicable. of all its damaged property and debris from the
Premises, upon request by Landlord or reimburse Landlord for the cost of
removal.
ARTICLE X - LANDLORD'S RIGHTS
10.01 Landlord reserves the right the following rights:
(a)
(b) During the last ninety (90) days of the Term or any extension
thereof, if Tenant has vacated the Premises, to decorate,
remodel, repair, alter or otherwise prepare the Premises for
recoccupancy;
(c) To exhibit the Premises to others and to display "For Lease"
signs on the Premises during the last six months of the Term or
any extension thereof; and
(d) To take any and all measures, including making inspection,
repairs, alterations, additions and improvements to the Premises
or to the Building as may be necessary or desirable for the
operation, safety, protection or preservation of the Premises or
the Building or of Landlord's interest therein.
Landlord may enter upon the Premises at any reasonable time for the purpose of
exercising any or all of the foregoing rights hereby reserved without being
deemed guilty of an eviction or disturbance of Tenant's use or possession and
without being liable in any manner to Tenant.
ARTICLE XI - HOLDING OVER
11.01 In the event of a holding over by Tenant after expiration or termination
of this Lease without the consent in writing of Landlord, Tenant shall be deemed
a tenant at sufferance and shall pay rent for such occupancy at the rate of
twice the last-current Base Rent, plus any Additional Rent, prorated for the
entire holdover period, plus any other damages occasioned by such holdings over.
Except as otherwise agreed, any
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holding over with the written consent of Landlord shall constitute Tenant a
month-to-month tenant.
ARTICLE XII - SIGNS AND ADVERTISEMENTS
12.01 Tenant shall not put upon nor permit to be put upon any part of the
Premises or the Building, any signs, billboards or advertisements whatever in
any location or any form without the prior written consent of Landlord, which
consent shall not be unreasonably withheld.
ARTICLE XIII - MORTGAGE AND TRANSFER; ESTOPPEL CERTIFICATES
13.01 Landlord shall have the right to transfer, mortgage, pledge or otherwise
encumber, assign and convey, in whole or in part, the Premises, the Building,
this Lease, and all or any part of the rights now or thereafter existing and all
rents and amount payable to Landlord under the provisions hereof. Nothing herein
contained shall limit or restrict any such rights, and the rights of the Tenant
under this Lease shall be subject and subordinate to all instruments executed
and to be executed in connection with the exercise of any such rights,
including, but not limited to, the lien of any mortgage, deed of trust, or
security agreement now or hereafter placed upon Landlord's interest in the
Premises providing any transfer, mortgage or other instruments will not affect
Tenant's right to Quiet Enjoyment provided in Para. 7.01 so long as Tenant is
not in default. This paragraph shall be self-operative. However, Tenant
covenants and agrees to execute and deliver upon demand such further reasonable
instruments subordinating this Lease to the lien of any such mortgage, deed of
trust or security agreement as shall be requested by the Landlord and/or
mortgagee or proposed mortgagee or holder of any security agreement.
13.02 Upon Landlord's written request, Tenant shall execute, acknowledge and
deliver to Landlord a written statement certifying: (i) that none of the terms
or provisions of this Lease have been changed (or if they have been changed);
(ii) that this Lease has not been cancelled or terminated; (iii) the last date
of payment of the Base Rent and other charges and the time period covered by
such payment; (iv) that Landlord is not in default under this Lease (or, if
Landlord is claimed to be in default, stating why); and (v) such other matters
as may be reasonably required by Landlord or the holder of a mortgage, deed of
trust or lien to which the Property is or becomes subject. Tenant shall deliver
such statement to Landlord within ten (10) days after Landlord's request. Any
such statement by Tenant may be given by Landlord to any prospective purchaser
or encumbrancer of the Property. Such purchaser or encumbrancer may relay
conclusively upon such statement to Landlord with such ten (10) day period,
Landlord, and any prospective purchasee or encumbrancer, may conclusively
presume and rely upon the following facts: (i) that the terms and provisions of
this Lease have not been changed except as otherwise represented by Landlord;
(ii) that this Lease has not been cancelled or terminated except as otherwise
represented by Landlord; (iii) that not more than one month's Base Rent or other
charges have been paid in advance; and (iv) that Landlord is not in default
under the Lease. In such event, Tenant shall be stopped from denying the truth
of such facts.
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ARTICLE XIV - EMINENT DOMAIN
14.01 If the Premises or such substantial part thereof as reasonably renders the
remainder unfit for the intended uses shall be taken by any competent authority
under the power of eminent domain or be acquired for any public or quasi-public
use or purpose, the Term of this Lease shall cease and terminate upon the date
when the possession of said Premises or the part thereof so taken shall be
required for such use or purpose and without apportionment of the award and
Tenant shall have no claim against Landlord for the value of any unexpired Term
of this Lease. If any condemnation proceeding shall be instituted in which it is
sought to take any part of the Building or to change the grade of any street or
alley adjacent to the Building and such taking or change of grade makes it
necessary or desirable to substantially remodel the Building to conform to the
changed grade, Landlord shall have the right to terminate this Lease after
having given written notice of termination to Tenant not less than 180 days
prior to the date of termination designated in the notice. In either of said
events, rent at the then current rate shall be apportioned as of the date of the
termination. No money or other consideration shall be payable by the Landlord to
the Tenant for the right of termination and the Tenant shall have no right to
share in the condemnation award or in any judgment for damages caused by the
taking or the change of grade. Nothing in this paragraph shall preclude an award
being made to Tenant for loss of business or depreciation to and cost of removal
of equipment or fixtures. Tenant has the right to apply for a separate award
providing it does not interfere with Landlord's rights, unless less time is
afforded by condemning authority.
ARTICLE XV - LANDLORD'S OR TENANT'S INABILITY TO PERFORM
15.01 If, by reason of inability to obtain and utilize labor, materials or
supplies; circumstances directly or indirectly the result of a state of war or
national or local emergency; any laws, rules, orders, regulations or
requirements of any governmental authority now or hereafter in force; strikes or
riots; accident in, damage to or the making of repairs, replacements, or
improvements to the Premises or any of the equipment thereof; or by reason of
any other cause beyond the reasonable control of Landlord or Tenant, Landlord or
Tenant shall be unable to perform or shall be delayed in the performance of any
covenant to supply any service, such nonperformance or delay in performance
shall not render Landlord or Tenant liable to the other in any respect for
damages to either person or property, constitute a total or partial eviction,
constructive or otherwise, work an abatement of rent or relieve Tenant or
Landlord from the fulfillment of any covenant or agreement contained in this
Lease.
ARTICLE XVI - BANKRUPTCY OR INSOLVENCY
16.01 It is understood and agreed that the following shall apply in the event of
the bankruptcy or insolvency of Tenant:
(A) If a petition is filed by, or an order for relief is entered against
Tenant under Chapter 7 of the Bankruptcy Code and the trustee of
Tenant elects to assume this Lease for the purpose of assigning it,
such election or assignment, or both, may be made only if all of the
terms and conditions of subparagraph (B) and (D) below are satisfied.
To be effective, an election to assume
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this Lease must be in writing and addressed to landlord, and in
Landlord's business judgment, all of the conditions hereinafter
stated, which Landlord and Tenant acknowledge to be commercially
reasonable, must have been satisfied. If the trustee fails so to elect
to assume this Lease within sixty (60) days after such filing or
order, this Lease will be deemed to have been rejected, and Landlord
shall then immediately be entitled to possession of the Premises
without further obligation to Tenant or the trustee, and this Lease
shall be terminated. Landlord's right to be compensated for damages in
the bankruptcy proceeding, however, shall survive such termination.
(B) If Tenant files a petition for reorganization under Chapters 11 or 13
of the Bankruptcy Code, or if a proceeding filed by or against Tenant
under any other chapter of the Bankruptcy Code is converted to a
chapter 11 or 13 proceeding and Tenant's trustee or Tenant as
debtor-in-possession fails to assume this Lease within sixty (60) days
from the date of the filing of such petition or conversion, then the
trustee or the debtor-in-possession shall be deemed to have rejected
this Lease. To be effective, any election to assume this Lease must be
in writing addressed to Landlord and, in Landlord's business judgment,
all of the following conditions, which Landlord and Tenant acknowledge
to be commercially reasonable, must have been satisfied:
(1) The trustee or the debtor-in-possession has cured or has provided
to Landlord adequate assurance, as defined in this subparagraph
(B), that:
(a) It will cure all monetary defaults under this Lease within
ten (10) days from the date of assumption; and
(b) It will cure all nonmonetary defaults under this lease
within thirty (30) days from the date of assumption.
(2) The trustee or the debtor-in-possession has compensated Landlord,
or has provided Landlord with adequate assurance, as hereinafter
defined, that within ten (10) days from the date of assumption
Landlord will be compensated for any pecuniary loss it has
incurred arising from the default of Tenant, the trustee, or the
debtor-in-possession, as recited in Landlord's written statement
of pecuniary loss sent to the trustee or debtor-in-possession.
(3) The trustee or the debtor-in-possession has provided Landlord
with adequate assurance of the future performance of each of
Tenant's obligations under this Lease; provided, however, that:
(a) From and after the date of assumption of this Lease, it
shall pay all monetary obligations, including the Base and
Additional Rents payable under this Lease in advance in
equal monthly installments on each date that such Rents are
payable.
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(b) It shall also deposit with Landlord, as security for the
timely payment of Rent, an amount equal to three months'
Base Rent and other monetary obligations payable under this
Lease;
(c) If not otherwise required by the terms of this Lease, it
shall also pay in advance, on each day that any installment
of Base Rent is payable, one-twelfth of Tenant's annual tax,
escalation and other obligations under this Lease; and
(d) The obligations imposed upon the trustee or the
debtor-in-possession will continue for Tenant after the
completion of bankruptcy proceedings.
(4) For purposes of this subparagraph (B), "adequate assurance" means
that:
(a) Landlord determines that the Tenant, trustee or the
debtor-in-possession has, and will continue to have,
sufficient unencumbered assets, after the payment of all
secured obligations and administrative expenses, to assure
Landlord that the trustee or the debtor-in-possession will
have sufficient funds timely to fulfill Tenant's obligations
under this Lease and to keep the Premises properly staffed
with sufficient employees to conduct a fully operational,
actively promoted business in the Premises; and
(b) An order shall have been entered segregating sufficient cash
payable to Landlord and/or a valid and perfected first lien
and security interest shall have been granted in property of
Tenant, trustee, or debtor-in-possession which is acceptable
in value and kind to Landlord, to secure to Landlord the
obligation of the Tenant, trustee or debtor-in-possession to
cure all monetary and nonmonetary defaults under this Lease
within the time periods set forth above.
(C) In the event this Lease is assumed by a trustee appointed for Tenant
or by Tenant as debtor-in-possession under the provisions of
subparagraph (B) above and, thereafter, Tenant is either adjudicated a
bankrupt or files a subsequent petition for arrangement under Chapter
11 of the Bankruptcy code, then Landlord may, as its option, terminate
this Lease and all the tenant's rights under it, by giving written
notice of Landlord's election so to terminate.
(D) If the trustee or the debtor-in-possession has assumed this Lease,
pursuant to subparagraph (A) or (B) above, to assign or to elect to
assign Tenant's interest under this Lease or the estate created by
that interest to any other person, such interest or estate may be
assigned only if the intended assignee has provided adequate assurance
of future performance, as defined in this subparagraph (D), of all of
the terms, covenants, and conditions of this Lease.
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For the purposes of this subparagraph (D) "adequate assurance of
future performance" means that Landlord has ascertained that each of
the following conditions has been satisfied.
(1) The assignee has submitted a current financial statement,
audited by a certified public accountant, which shows a net
worth and working capital in amounts determined by Landlord
to be sufficient to assure the future performance by the
assignee of the tenant's obligations under this Lease;
(2) If requested by Landlord, the assignee will obtain
guarantees, in form and substance satisfactory to Landlord,
from one or more persons who satisfy Landlord's standards of
creditworthiness; and
(3) Landlord or the assignee has obtained consents or waivers
from any third parties which may be required under any
lease, mortgage, financing arrangement, or other agreement
by which Landlord is bound, to enable Landlord to permit
such assignment.
(E) When, pursuant to the Bankruptcy Code, the trustee or the
debtor-in-possession is obligated to pay reasonable use and occupancy
charges for the use of all or part of the Premises, it is agreed that
such charges will not be less than the Base Rent as defined in this
Lease, plus Additional Rent and other monetary obligations of Tenant
included herein.
(F) Neither Tenant's interest in this Lease nor any estate of Tenant
created in this Lease shall pass to any trustee, receiver, assignee
for the benefit of creditors, or any other person or entity, nor
otherwise by operation of law under the laws of any state having
jurisdiction of the person or property of Tenant, unless Landlord
consents in writing to such transfer. Landlord's acceptance of rent or
any other payments from any trustee, receiver, assignee, person, or
other entity will not be deemed to have waived, or waive, either the
requirement of Landlord's consent or Landlord's right to terminate
this Lease for any transfer of Tenant's interest under this Lease
without such consent.
ARTICLE XVII - COMPLETION AND ACCEPTANCE OF PREMISES, MAINTENANCE AND REPAIR
17.01 Completion and Acceptance. Landlord will complete the Premises in
accordance with the Plans and Specifications attached hereto as Exhibit "B",
"B-1," "B-2." Tenant acknowledges that it will examine the Premises before
taking possession hereunder. Unless Tenant furnishes Landlord with a notice in
writing specifying any such defect in the construction of the Premises within
thirty (30) days after taking possession, such taking of possession shall be
conclusive evidence as against Tenant that
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at the time thereof the Premises were in good order and satisfactory condition.
17.02 Maintenance and Repair by Tenant. Tenant shall be responsible for all
maintenance and repair to the Premises of whatsoever kind or nature that is not
hereafter set forth specifically as the obligation of Landlord. Tenant shall
take good care of the Premises and fixtures, and keep them in good repair and
free from filth, overloading, danger of fire or any pest or nuisance, and repair
any damage or breakage done by Tenant or Tenant's agents, employees or invitees,
including damage done to the Building by Tenant's equipment or installations.
Tenant shall be responsible for the repair and replacement of all glass and
plate glass on the Premises. Tenant shall furnish and pay for the upkeep,
maintenance, repair and periodic servicing of the heating, ventilation and air
conditioning system servicing the Premises. At the end of the Lease Term, Tenant
shall quit and surrender the Premises broom clean in as good condition as when
received by Tenant, normal wear and tear excepted. In the event Tenant fails to
maintain the Premises as provided for herein Landlord shall have the right, but
not the obligation, to perform such maintenance as is required of Tenant in
which event Tenant shall promptly reimburse Landlord for its costs in providing
such maintenance or repairs together with a ten percent (10%) charge for
Landlord's overhead.
17.03 Maintenance and Repair by Landlord. Provided Tenant is not in default
Landlord shall be responsible for the maintenance, repair or replacement of the
roof and structural portions of the building and parking lot on the Premises,
provided that any repairs or replacements thereof shall not be necessitated by
the negligence of Tenant. In the event of a transfer by Landlord of its interest
in the Premises to a party not owned by or affiliated with Prudential Insurance
Co. and if Landlord fails to perform its obligations pursuant to this section
17.03, then after notice and opportunity to cure Tenant shall have the right,
but not the obligation to perform same and to set off the reasonable cost
thereof against future installments of rent.
[ARTICLE XVIII - ILLEGIBLE]
ARTICLE XIX - ALTERATIONS AND ADDITIONS, MECHANICS' LIENS
19.01 Alterations and Additions. Except as provided for in paragraph 19.01,
Tenant shall not make any alterations, improvements, or additions to the
Premises without the prior written consent and approval of plans therefor by
Landlord. Such consent and approval not to be unreasonably withheld.
Alterations, improvements or additions so made upon the Premises, except
moveable furniture and equipment placed in the Premises at the expense of
Tenant, shall be and become the property of Landlord and shall remain upon and
be surrendered with the Premises as part thereof at the termination of this
Lease, without
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disturbance, molestation, injury or damage, unless Landlord elects to require
Tenant to remove such alterations or improvements from the Premises. In the
event damage to the Premises or the Building shall be caused by moving said
furniture and equipment in or out of the Premises, said damage shall be promptly
repaired at the cost of Tenant. Tenant shall be permitted to make nonstructural
interior alterations not exceeding $10,000.00 without consent of Landlord.
19.02 Mechanic's Liens. Tenant shall not cause nor permit any mechanic's liens
or other liens to be placed upon the Premises or the Building and in case of the
filing of any such lien or claim therefor, Tenant shall promptly discharge same;
provided, however, that Tenant shall have the right to contest the validity or
amount of any such lien upon its prior posting of security with Landlord, which
security, in Landlord's sole reasonable judgment, must be adequate to pay and
discharge any such lien in full plus Landlord's reasonable estimate of its legal
fees. Tenant agrees to pay all reasonable legal fees and other costs incurred by
Landlord because of any mechanic's or other liens attributable to Tenant being
placed upon the Premises or the Building.
ARTICLE XX - INSURANCE
20.01 Public Liability, Property Damage Insurance. Tenant covenants and agrees
to maintain on the Premises at all times during the Term of this Lease, or any
extension or renewal thereof, a policy or policies of comprehensive public
liability and property damage insurance, naming Landlord and its Managing Agent
as additional insured, with not less than $1,000,000.00 combined single limit
for both bodily injury and property damage.
20.02 Fire and Extended Coverage Insurance. Landlord shall throughout the Term
of this Lease or any extension or renewal thereof maintain all risk fire and
extended coverage insurance on the Building and other improvements located on
the Premises (excluding Tenant's contents) in such amounts and with such
deductibles as Landlord shall reasonably determine. If the amount of the
premises exceed Seven Thousand Nine Hundred Twenty Nine Dollars ($7,929.00) per
annum ($.07 per sq. ft.) Tenant, as Additional Rent, shall reimburse Landlord in
the amount of the excess on an annual basis within ten days, after receipt of
Landlord's insurance [illegible] Landlord represents that current premium (1992)
does not exceed $7,929.00.
20.03 Indemnification of Landlord. Except as set forth in Section 20.04 below,
Tenant shall indemnify and defend Landlord, its employees and agents and save it
harmless from and against any and all loss (including loss of rents payable by
Tenant) and against all claims, actions, damages, liability and expenses in
connection with loss of life, bodily and personal injury or damage arising from
any occurrence in, upon or at the Premises or any part thereof, or occasioned
wholly or in part by any act or omission of Tenant, its agents, contractors,
employees, servants, licensees, concessionaires or invitees or by anyone
permitted to be on the Premises by Tenant. Tenant assumes all risks of and
Landlord, its employees and agents shall not be liable for injury to person or
damage to property resulting from the condition of the Premises or from the
bursting or leaking of any and all pipes, utility lines, connections, or air
conditioning or heating equipment in, on or about the Premises, or from water,
rain or snow which may leak into, issue or flow from any part of the Building.
Tenant agrees, at all times, to indemnify and hold Landlord harmless against all
actions, claims, demands, costs, damages or expenses of any kind which may be
brought or made against the Landlord or which the Landlord may pay or incur by
reason of Tenant's occupancy of the Premises or its negligent
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<PAGE>
performance of or failure to perform any of its obligations under this Lease. In
case Landlord shall, without fault on its part, be made a party to any
litigation commenced by or against Tenant, then Tenant shall indemnify, defend
and hold Landlord harmless and shall pay all costs, expenses, and reasonable
attorneys' fees incurred or paid by the Landlord in connection with such
litigation.
20.4 [See Rider]
ARTICLE XXI - USE OF EXTERIOR AREAS
21.01 Tenant shall not use any part of the Building exterior for outside
storage. No trash, rates, pallets, or refuse shall be permitted anywhere on the
outside of the Building by Tenant except in enclosed metal containers to be
located as directed by Landlord. Tenant shall not park any trucks or trailers,
loaded or empty, except in front of the docks on the concrete apron provided for
such purposes.
ARTICLE XXII - DEFAULT AND REMEDIES
22.01 In the event:
(a) Tenant shall at any time fail to pay any item of Rent when due; or
(b) Tenant shall fail to keep, perform or observe any other covenant,
agreement, condition or undertaking hereunder;
(c) The Premises shall be vacated for any period for which Tenant has not
paid its Rent.
If Tenant shall default under this Section and if such default cannot with due
diligence be cured within a period of thirty (30) days after written notice has
been mailed by Landlord to Tenant (except for a default under Section 22.01 (a)
hereof, which default shall be cured within ten (10) days after written notice),
and Tenant promptly commences to eliminate the causes of such default, then
Landlord shall not have the right to declare said term ended by reason of such
default or to repossess without terminating the Lease so long as Tenant is
proceeding diligently and with reasonable dispatch to take all steps and do all
work required to cure such default, and does so cure such default. If said
default is not timely cured then Landlord shall have the right, without further
notice to or demand, to re-enter and take exclusive possession of the Premises,
with legal process, and to refuse to allow Tenant to enter the same or have
possession thereof; to change the locks on the doors to the Premises; take
possession of any furniture or other property in or upon the Premises (Tenant
hereby waiving the benefit of all exemptions by law), sell the same at public or
private sale without notice and apply the proceeds thereof to the costs of sale,
payment of damages and payment of the rent due under this Lease; all without
being liable to Tenant for any damages or to any prosecution therefor; and
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<PAGE>
(i) As agent of Tenant to relet the Premises or any part thereof for the
balance of the Lease Term or for a shorter or longer term and receive the
rents therefor, applying them first to the payment of the expenses of such
reletting and, second, to the payment of damages suffered to the Premises
and rents due and to become due under this Lease. Tenant remaining liable
for and hereby agreeing to pay Landlord any deficiency; or
(ii) To cancel and terminate the remaining Lease Term, re-enter and take
possession of the Premises free of this Lease and thereafter this Lease
shall be null and void and the rents in such case shall be apportioned and
paid on and up to the date of such entry. Thereafter both parties shall be
released and relieved from and of any and all obligations thereafter to
accrue hereunder. Tenant shall be liable for all loss and damage resulting
from such breach or default;
(iii) To treat such default as an anticipatory breach of this Lease and, as
liquidated damages for such default, be entitled to the difference, if
any, between the sum which, at the time of such termination for
anticipatory breach represents the then present worth (computed at seven
percent per year) of the excess aggregate Rents and Additional Rents
payable hereunder which would have accrued over the balance of the Term
(including extensions) had such term not been prematurely terminated, over
the aggregate market rental value of the Premises over the Term (including
extensions) which the Lease would have run had it not been so terminated.
22.02 Remedies Cumulative. All rights and remedies provided in this Lease for
Landlord's protection shall be cumulative and in addition to any other rights
and remedies provided by law. Landlord shall be entitled to recover from Tenant
its reasonable attorneys' fees incurred by enforcing its rights hereunder.
22.03 No Waiver. No waiver by Landlord of a breach or default by Tenant under
the terms and conditions of this Lease shall be construed to be a waiver of any
subsequent breach or default nor of any other term or condition of this Lease,
and the failure of Landlord to assert any breach or to declare a default by
Tenant shall not be construed to constitute a waiver thereof so long as such
breach or default continues unremedied.
22.04 No Reinstatement. No receipt of money by Landlord from Tenant after the
expiration or termination of this Lease, or after the commencement of any suit,
or after final judgment for possession of the Premises, shall reinstate,
continue or extent the Term of this Lease nor affect any such notice, demand or
suit.
ARTICLE XXIII - DEFINITION OF LANDLORD
23.01 The term "Landlord" as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners at the time in question of the fee or the
Premises, and in the event of any transfer or transfers of the title to such
fee, Landlord herein named (and in case of any subsequent transfers or
conveyances, the then-grantor) shall be automatically freed and relieved, from
and after the date of such transfer or conveyance, of all liability as
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<PAGE>
respects the performance of any covenants or obligations on the part of Landlord
contained in this Lease thereafter to be performed; provided that any funds in
the hands of such Landlord or the then-grantor at the time of such transfer, in
which Tenant has an interest, shall be turned over to the grantee, and any
amount then due and payable to Tenant by Landlord or the then-grantor under any
provision of this Lease, shall be paid to Tenant. Landlord shall supply Tenant
with written evidence from grantee that funds have been received.
ARTICLE XXIV - NOTICES
24.01 Except as otherwise herein provided, whenever by the terms of this Lease
notice shall or may be given either to Landlord or to Tenant, such notice shall
be in writing and shall be deemed to have been properly served if hand-delivered
or sent by facsimile, by overnight or by certified mail, return receipt
requested, postage prepaid, if to Landlord, at the place where rent is payable,
and if to Tenant, at the Premises. The date of such hand-delivery, mailing or
facsimile transmission, with hard copy to follow, will be deemed the date of
service.
ARTICLE XXV - SECURITY DEPOSIT
25.01 Tenant herewith deposits with Landlord the sum set forth in Section
1.01(I) as security for the performance by Tenant of every covenant and
condition of this Lease. Said deposit may be commingled with other funds of
Landlord and shall bear no interest. If Tenant shall default with respect to any
covenant or condition of this Lease, Landlord may apply the whole or any part of
such security deposit to the payment of any sum in default or any sum which
Landlord may be required to spend by reason of Tenant's default, in which event
Tenant shall re-deposit with Landlord, within five days of demand therefor, the
amount so applied. Landlord may, but shall not be limited to, applying the
security deposit first to any restoration and/or cleanup costs necessary over
and above normal wear and tear of the Premises. It is understood that the
security deposit is not to be considered as the last month's rent under this
Lease. Should Tenant comply with all of the covenants and conditions of this
Lease, the security deposit or any balance thereof shall be returned to Tenant
at the expiration of the Term hereof. Contemporaneously with the Security
Deposit Tenant has deposited $24,540.97, of which $14,724.54 will be balance of
Base Rent for March 1993 and $9,816.43 will be credited to Rent for April 1993,
the balance of April 1993 Base Rent ($14,724.54) will be paid April 1, 1993.
ARTICLE XXVI - MISCELLANEOUS
26.01 Persons Bound. The agreements, covenants and conditions of this Lease
shall be binding upon and inure to the benefit of the heirs, legal
representatives, successors and assigns of each of the parties hereto, except
that no assignment, encumbrance or subletting by Tenant, unless permitted by the
provisions of this Lease, shall vest any right in the assignee, encumbrancee or
subtenant of Tenant.
26.02 Partial Invalidity. If any terms, covenant, condition or provision of this
Lease or the application thereof to any person or circumstance shall, to any
extent be invalid, unenforceable or violate a party's legal rights, then such
term, covenant, condition or provision shall be
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<PAGE>
deemed to be null and void and unenforceable, however, all other provisions of
this Lease, or the application of such term or provision to persons or
circumstances other than those to which are held invalid, unenforceable or
violative of legal rights, shall not be affected thereby, and each and every
other term, condition, covenant and provision of this Lease shall be valid and
be enforced to the fullest extent permitted by law.
26.03 Captions. The headings and captions used throughout this Lease are for
convenience and reference only and shall in no way be held to explain, modify,
amplify, or aid in the interpretation, construction or meaning of any provisions
in this Lease. The words "Landlord" and "Tenant" wherever used in this Lease
shall be construed to mean plural where necessary, and the necessary grammatical
changes required to make the provisions hereof apply either to corporation,
partnerships, or individuals, men or women, shall in all cases be assumed as
though in each case fully expressed.
26.04 No Option. Submission of this instrument for examination does not
constitute a reservation of nor option for the Premises. The instrument does not
become effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
26.05 Brokers. Tenant represents that it has dealt directly with and only with
the broker or brokers set forth at Item 1.01(K) above, and that Tenant knows of
no other broker who negotiated this Lease or is entitled to any commission in
connection herewith. Tenant agrees to indemnify, defend and hold harmless
Landlord from and against any commissions or claims by any other broker or
brokers pertaining to Tenant's having entered into this Lease. Landlord agrees
to pay real estate brokerage fees at Landlord's sole expense to the above named
Brokers.
26.06 Applicable Law. This Lease, its interpretation and enforcement shall be
governed by the laws of the state in which the Premises are located.
26.07 Waiver of Jury. Landlord and Tenant agree that, to the extent permitted by
law, each shall and hereby does waive trial by jury in any action, proceeding or
counterclaim brought by either against the other on any matter whatsoever
arising out of or in any way connected with this Lease.
26.08 Allocation of Rent. Landlord and Tenant agree that no portion of the Base
Rent paid by Tenant during the portion of the Term of this Lease occurring after
the expiration of any period during which such rent was abated shall be
allocated by Landlord or Tenant for income tax purposes to such rent abatement
period, nor is such rent intended by the parties to be allocable for income tax
purposes to any abatement period.
ARTICLE XXVII -ENTIRE AGREEMENT
27.01 This Lease contains the entire agreement between the parties and no
modification of this Lease shall be binding upon the parties unless evidenced by
an agreement in writing signed by the Landlord and the Tenant after the date
hereof. If there be more than one Tenant named herein, the provisions of this
Lease shall be applicable to and binding upon such tenants jointly and
severally.
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<PAGE>
ARTICLE XXVIII -RIDER
28.01 A Rider consisting of 1 page, with paragraphs, numbered 20.04, is attached
hereto and made a part hereof.
IN WITNESS WHEREOF, the parties have signed triplicate counterparts hereof
as of the date and year hereinabove set forth.
TENANT: FACTORY CARD OUTLET OF AMERICA LTD. LANDLORD:
/s/J. Bayard Kelly Pres THE PRUDENTIAL INSURANCE
- ---------------------------------- COMPANY OF AMERICA
By: /s/ Bernard C. Buchholz
------------------------
VP, Asset Management
Attest /s/Carol A. Travis Secretary
------------------------------
Carol A. Travis its Secretary
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<PAGE>
RIDER
ATTACHED TO AND MADE PART OF
LEASE DATED September 25, 1992
BETWEEN THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, AS LANDLORD
AND FACTORY CARD OUTLET OF AMERICA, INC., AS TENANT
20.04 Indemnification of Tenant. Landlord shall indemnify and defend Tenant, its
employees and agents and save it harmless from and against all loss and against
all claims, actions, damages, liability and expenses in connection with loss of
life, bodily and personal injury or damage arising from any occurrence in, upon
or at the Premises or any part thereof, occasioned wholly by the failure or
negligent performance by Landlord or its agents to perform any of its repair or
maintenance obligations under this Lease. In case Tenant shall, without fault on
its part, be made a party to any litigation commenced by or against Landlord,
then Landlord shall indemnify, defend and hold harmless Tenant and shall pay all
costs, expenses and reasonable attorney's fees incurred or paid by Tenant in
connection with such litigation.
<PAGE>
Exhibits to Lease between Factory Card Outlet Of America Ltd. and Prudential
Insurance Co. of America for property at 745 Birginal, Bensenville, Illinois.
These Exhibits and the Lease to which they are attached (collectively, the
"Lease") shall be deemed one instrument. Whenever there is a conflict in
provisions between the Exhibits and the Lease, those in the Exhibits shall
prevail.
EXHIBIT A
LEGAL DESCRIPTION
Lots 4 and 5 in O'Hare West Industrial Plaza, a Subdivision in the NW 1/2 of
Section 11 and the SW 1/2 of Section 2, Township 40 North, Range 11 East of the
Third Principal Meridian, according to the Plat thereof recorded April 26, 1971
as Document R71-16332, and certificate of correction filed February 21, 1973 as
Document R73-9686, in DuPage County, Illinois.
<PAGE>
EXHIBIT B
PLANS AND SPECIFICATIONS FOR TENANT IMPROVEMENTS
AND ALLOWANCE BOTH TO BE PAID BY LANDLORD
Landlord shall perform, at Landlord's sole cost and expense the following tenant
improvements in accordance with provisions of Article 17:01:
a) The carpets in the entire office shall be shampooed and vacuum cleaned.
b) The vinyl tile in the office and washroom areas shall be stripped and
waxed.
c) The walls in the office and rest room area shall be painted with Tenant's
selection of colors from Landlord's standard selection chart.
d) All mechanical, electrical, sprinkler, plumbing and door systems shall be
in good working order and repair.
e) All H.V.A.C. equipment will be in good working order and repair and will
remain in good working order during the first 12 months of the Lease,
providing Tenant performs normal maintenance during this period. Landlord
will pass through to Tenant all warranties and guarantees that are in
effect at the commencement of the Lease.
f) Ceiling tiles will be cleaned, or replaced as necessary.
g) The ceiling grid shall be cleaned or painted as necessary.
h) Rest rooms shall be cleaned and sanitized.
i) All truck and parking areas shall be repaired, seal coated and restriped.
j) See Exhibit B-1 for demolition and construction work to be performed.
k) Landlord shall provide Tenant a maximum allowance of $21,000.00 to move
existing warehouse lighting or install additional warehouse lighting
fixtures, additional carpet or additional painting in office area.
l) The work detailed above in (c) (f) and (g) will not be performed in the
north 5,000 sq.ft. of office area, unless required by Paragraph (m).
m) Tenant reserves the right to have Landlord remove the north office portion
(approximately 5,000 sq. ft.) any time during the first three years of the
lease term, or in the alternative Landlord will complete the work detailed
in (c) (f) and (g) above in the approximate 5,000 sq.ft.
<PAGE>
EXHIBIT B-1
COMPLETION SCHEDULE & INSPECTION BY TENANT
All work listed on Exhibit B specified for warehouse and parking areas, except
item (k), shall be completed no later than 15 days after leases are executed by
both parties.
All work specified for office area shall be completed by December 1, 1992.
Tenant shall have 30 days after above stated completion dates to inspect the
work done by Landlord except for H.V.A.C. equipment, which in accordance with
item (e) of Exhibit "B" shall have a 12 month warranty by Landlord, provided
Tenant performs the routine H.V.A.C. service and maintenance. Landlord shall not
be responsible for any damage to H.V.A.C. equipment caused by Tenant or Tenant's
employee. In the event there are any deficiencies or adjustments Landlord shall
have fifteen (15) days after being notified in writing by Tenant to make the
adjustments.
<PAGE>
TENANT ESTOPPEL CERTIFICATE
Property Name: 745 Birginal Road, Bensenville, Illlinois
("Property")
Tenant: Factory Card Outlet of America, Ltd., an Illinois
Corporation
To: Lehman Brothers Holdings, Inc. d/b/a Lehman
Capital, A Division of Lehman Brothers Holdings
Inc., a Delaware Corporation (Lender) and "CP
Financing Corp II and The First National Bank of
Chicago, as Trustee"
DEFINITIONS:
Lease Date: September 25, 1992
Landlord: CenterPoint Properties Corporation
Tenant: Factory Card Outlet of America, Ltd.
Security Deposit: $25,000.00
Date of Possession: October 13, 1992
Rent Commencement Date: March 13, 1992
Monthly Base Rent: $31,148.15 (Oct '94 - Sept. '97)
Annual Base Rental
Amount: $373,777.80 (Oct '94 - Sept. '97)
Monthly Deposits: None-$50,070.00 Tax Stop and $7,929.00 Insurance
Stop; otherwise, Net Lease
Term: 9 Years and 11.5 Months (Oct. 13, 1992 - Sept.
30, 2002)
Termination Date: September 30, 2002
Renewal Option(s): None
Square Footage: 113,266
Use: Office; warehouse; distribution of greeting
cards, gifts and related items.
Tenants Address For Yasar H. Jaleel
Notices: Factory Card Outlet of America, Ltd.
745 Birginal Road
Bensenville, IL 60106
Lender proposes to finance the Property and this Tenant Estoppel
Certificate is to be made and delivered in connection with that financing.
<PAGE>
The undersigned Tenant under the above-referenced lease dated as of the
Lease Date between Landlord and Tenant ("Lease"), certifies, represents,
confirms and agrees in favor of Lender the following:
1. The above-described Lease has not been canceled, modified, assigned,
extended or amended and contains the entire agreement between Landlord
and Tenant except as follows:
2. Rent has been paid to August 31, 1995. There is no Prepaid Rent. The
amount of Security Deposit is as set forth above, which is currently
being held by Landlord.
3. Tenant took possession of the leased premises on the Date of
Possession and commenced to pay rent on the Rent Commencement Date, in
the amount of the Monthly Base Rent, each payable in advance. Our
current Annual Base Rental Amount is as set forth above, payable in
equal monthly installments subject to rent escalation. We are
currently in occupancy of the leased premises. Rent abated for the
period of Oct. 15, 1992 through March 12, 1993.
4. The Lease is for the Term set forth above and ending on the
Termination Date as set forth above and we have no Renewal Options.
5. All space and improvements covered by the Lease have been completed
and furnished to the satisfaction of Tenant, all conditions required
under the Lease have been met and Tenant has accepted and taken
possession of the leased premises on the Date of Possession as set
forth above and presently occupies the leased premises, presently
consisting of the Square Footage as set forth above.
6. As of the date set forth below the lease is (a) in full force and
effect, and (b) free from default by both Landlord and Tenant; and we
have no claims, liens, charges or credits against Landlord or offsets
against rent.
7. The undersigned has not assigned or sublet the Lease nor does the
undersigned hold the Property under assignment or sublease.
8. There are no other agreements written or oral between the undersigned
and Landlord with respect to the Lease and/or the leased premises and
building. Landlord has satisfied all commitments, arrangements or
understandings made to induce Tenant to enter into the Leases and
Landlord is not in any respect in default in the performance of the
terms and provisions of the Lease, nor is there now any fact or
condition which, with notice or lapse of time or both, would become
such a default.
9. The leased premises are currently being used for the Use set forth
above.
10. Tenant is maintaining (free of default) all insurance policies that
the Lease requires Tenant to maintain.
11. Neither Landlord nor Lender nor any of their respective successor or
assigns, has or will have any personal liability of any kind or nature
under or in connection with the Lease; and, in the event of a default
by Landlord or Lender under the Lease, Tenant shall look solely to
Landlord's or Lender's interest in the building in which the leased
premises are located.
<PAGE>
12. Tenant is not in any respect in default under the terms and provisions
of the Lease (nor is there now any fact or condition which, with
notice or lapse or time or both, would become such a default), and
Tenant has not assigned, transferred or hypothecated its interest
under the Lease.
13. Tenant (i) does not have an option or preferential right to purchase
all or any part of the leased premises or all or any part of the
building of which the leased premises are a part; and (ii) does not
have any right, title or interest with respect to the leased premises
other than as lessee under the Lease.
14. We understand that Lender is planning to finance the Property on which
the leased premises is located to Landlord and we agree to make all
payments required under the Lease to Lender upon our receipt of
written notice from Landlord and Lender. Further, upon receipt of such
written notice, we will thereafter look to Lender and not Landlord as
the landlord under the Lease. We agree to give all notices required to
be given by us to Landlord under the Lease to Lender upon our receipt
of said written notice.
15. The statements contained herein may be relied upon by Lender and by
any prospective purchaser or lender of the Property.
16. If Tenant is a Corporation, the undersigned is a duly appointed
officer of the corporation signing this Agreement and is the incumbent
in the office indicated under his or her name. If Tenant is a
partnership or joint venture, the undersigned is a duly appointed
partner or officer of the partnership or joint venture signing this
certificate. In any event, the undersigned individual is duly
authorized to execute this Agreement on behalf of Tenant.
17. Tenant (a) executes this certificate with the understanding that
Lender is contemplating financing the above mentioned Property and
that if Lender finances the Property, Lender will do so in material
reliance on this certificate; and (b) agrees that the certifications
and representations made herein shall survive such acquisition.
18. The current address to which all notices to Tenant as required under
the Lease should be sent in the Tenant's Address for Notices.
19. Lender's rights hereunder shall inure to its successors and assigns.
IN WITNESS WHEREOF, Tenant has executed this estoppel certificate as of
this 6th day of September, 1995.
Factory Card Outlet of America, Ltd., an
Illinois Corporation
By: /s/???
-----------------------------
Its: Executive V.P., Chief Administrative Officer
<PAGE>
STANDARD COMMERCIAL LEASE
(EXISTING BUILDING) EGIP #11
IL 1/80 Drafted: July 11, 1995
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between ELK GROVE
VILLAGE INDUSTRIAL PARK LTD., a Texas Limited Partnership d/b/a Elk Grove
Village Industrial Park Ltd. hereinafter referred to as "Landlord", and FACTORY
CARD OUTLET OF AMERICA hereinafter referred to as "Tenant":
W I T N E S S E T H :
See
P. 32
1. Premises and Term. In consideration of the obligation of Tenant to pay
rent as herein provided, and in consideration of the other terms, provisions and
covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby accepts and leases from Landlord, all that portion (hereinafter referred
to as the "premises") of certain real property, buildings and improvements
situated within the County of DuPage, State of Illinois, legally described in
Exhibit "A", said premises being as outlined on the site plan contained in
Exhibit "B", and including any parking areas and truck loading areas
specifically marked in red on said Exhibit B for the exclusive use of tenant,
said Exhibits being attached hereto and incorporated herein by reference, and
all rights, privileges, easements, appurtenances and immunities belonging to or
in any way pertaining to the premises.
TO HAVE AND TO HOLD the same for a term commencing on August 1, 1995 and
ending July 31, 1998 thirty-six (36) months thereafter, unless terminated
pursuant to any provision hereof. Tenant acknowledges that it has inspected the
premises, knows the condition thereof, and accepts such premises, and
specifically the buildings and improvements are in good and satisfactory
condition as of when possession was taken, except for latent defects and
punchlist items identified within thirty (30) days after possession. Tenant
further acknowledges that no representations as to the repair of the premises,
nor promises to alter, remodel or improve the premises have been made by
Landlord, unless such are expressly set forth in this lease. After the
commencement date, Tenant shall, upon demand, execute and deliver to Landlord a
letter of acceptance of delivery of the premises.
2. Base Rent and Security Deposit.
A. Tenant agrees to pay to Landlord for the premises in lawful money of the
United States rent for the entire term hereof at the rate of Forty Nine Thousand
One Hundred Seventy Two and 40/100 Dollars ($49,172.40) per month, in advance,
except that the monthly installment which otherwise shall be due on the
commencement date recited above, shall be due and payable on the date hereof.
Thereafter, one such monthly installment shall be due and payable without demand
on or before the first day of each calendar month succeeding the commencement
date recited above during the demised term; further provided, that the rental
payment for any fractional calendar month at the commencement or end of the
lease term shall be prorated.
B. In addition, Tenant agrees to deposit with Landlord on the date hereof
the sum of Forty Nine Thousand One Hundred Seventy Two and 40/100 Dollars
($49,172.40), which sum shall be held by Landlord, without obligation for
interest, as security for the full, timely and faithful performance of Tenant's
covenants and obligations under this lease, it being expressly understood and
agreed that such deposit is not an advance rental deposit or a measure of
Landlord's damages in case of Tenant's default. Upon the occurrence of any event
of default by Tenant, Landlord may, from time to time, without prejudice to any
other remedy provided herein or provided by law, use such fund to the extent
necessary to make good any arrears of rent or other payments due Landlord
hereunder, and any other damage, injury, expense or liability caused by any
event of Tenant's default; and Tenant shall pay to Landlord on demand the amount
so applied in order to restore the security deposit to its original amount.
Although the security deposit shall be deemed the property of Landlord, any
remaining balance of such deposit shall be returned by Landlord to Tenant within
thirty (30) days after termination of this lease when Landlord shall have
determined that all Tenant's obligations under this lease have been fulfilled.
Subject to the other terms and conditions contained in this lease, if the
premises are conveyed by Landlord, said deposit may be turned over to
Landlord's, or its successor's grantee, and if so, Tenant hereby releases
Landlord, or its successor, as the case may be, as long as Tenant is notified of
said conveyance and so long as the successor or grantee has assumed said
responsibility for said deposit, from any and all liability with respect to said
deposit and its application or return.
3. Use. The demised premises shall be continuously used by Tenant, but only
for the purpose of receiving, storing, shipping and selling (other than at
retail) products, materials and merchandise made and/or distributed by Tenant
and for such other lawful purposes as may be incidental thereto. Tenant shall at
its own cost and expense obtain any and all licenses and permits necessary for
any such use. The parking of automobiles, trucks or other vehicles in the areas
not specifically designated on Exhibit B (unless such other areas are designated
by Landlord to be common parking areas) and the outside storage of any property
are prohibited without Landlord's prior written consent, Tenant shall comply
with all governmental laws, ordinances and regulations applicable to the use of
the premises and its occupancy thereof, and shall promptly comply with all
governmental orders and directives for the correction, prevention and abatement
of any violations or nuisances in or upon, or connected with, the premises, all
at Tenant's sole expense. If, as a result of any change in the governmental
laws, ordinances and regulations, the premises must be altered to lawfully
accommodate Tenant's use and occupancy thereof, such alterations shall be made
only with the consent of Landlord, but the entire cost thereof shall be borne by
Tenant; provided, that, the necessity of Landlord's consent shall in no way
create any liability against Landlord for failure of Tenant to comply, or alter
the premises to comply, with such laws, ordinances and regulations. Tenant shall
not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or
vibrations to emanate from the premises, nor take any other action which would
constitute a nuisance or would disturb or endanger any other tenants of the
building in which the premises are situated or unreasonably interfere with such
tenants' use of their respective premises or permit any use which would
adversely affect the reputation of the building in which the premises are
situated. Without Landlord's prior written consent, Tenant shall not receive,
store or otherwise handle any product, material or merchandise which is
explosive or highly flammable. Tenant will not permit the premises to be used
for any purpose (including, without limitation, the storage of merchandise) in
any manner which would render the insurance thereon void or increase the
insurance rate thereof, and Tenant shall immediately cease and desist from such
use, paying all costs and expense resulting from such improper use.
4. Taxes.
A. Landlord agrees to pay all general and special taxes, assessments and
governmental charges of any kind and nature whatsoever (hereinafter collectively
referred to as "taxes") lawfully levied against the real property described in
Exhibit A, the building situated thereon and the grounds, parking areas,
driveways and alleys around the building. If for any real estate tax year
applicable to the term hereof (or any renewal or extension of such term),
Tenant's proportionate share of such taxes levied for such tax year shall exceed
the sum of Seventy Five Thousand Seven Hundred Seventy Seven and 25/100 Dollars
($75,777.25) ("Landlord's share"), Tenant shall pay to Landlord as additional
rent within fifteen (15) days after Landlord's billing which will include a copy
of the tax bill for such tax year issues, the amount of such excess applicable
to each installment less any monthly payments paid by Tenant as provided below
for such tax year. Upon the issuance of the actual bills (as distinguished from
any estimated bill) for taxes to be paid in the calendar year in which the
commencement date falls and upon the issuance of such actual bills in each
succeeding calendar year
<PAGE>
during the term hereof. Tenant shall, upon Landlord's request, commencing with
the first day of the month next succeeding the date on which the taxes covered
by such bills are due without penalty and on the first day of each of the next
eleven months, pay as additional rent and not as a deposit, one-twelfth (1/12th)
of the amount by which the taxes paid in such calendar year exceeded Landlord's
share. In addition, Tenant shall pay within fifteen (15) days after Landlord's
billing for same with a copy of the tax bill its proportionate share of any
reasonable fees, expenses and costs incurred by Landlord in protesting any
assessments, levies or the tax rate pertaining to the lease term only.
B. If at any time during the term of this lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord's capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or charges
(not including Landlord's income taxes), or the part thereof so measured or
based, shall be deemed to be included within the term "taxes" for the purposes
hereof.
C. Any payment to be made pursuant to this Paragraph 4 with respect to the
real estate tax year in which this lease commences or terminates shall be
prorated.
See P. 29
5. Landlord's Repairs. Landlord shall at its expense maintain in good
repair, reasonable wear and tear excepted, only the footings and foundation,
roof and the structural soundness of the exterior walls of the building. Tenant
shall immediately give Landlord written notice of any defect (latent or
otherwise) or need for repairs in the foundation, structural elements and
exterior walls of the building, after which Landlord shall have thirty (30) days
or such commercially feasible period of time, so long as Landlord is proceeding
diligently to repair same or cure such defect, Landlord's liability with respect
to any defects, repairs or maintenance for which Landlord is responsible under
any of the provisions of this lease shall be limited to the cost of such repairs
or maintenance or the curing of such defect. The term "walls" as used herein
shall not include windows, glass or plate glass, doors, special store fronts or
office entries.
See P. 33
6. Tenant's Repairs.
A. Tenant shall at its own cost and expense keep and maintain all parts of
the premises, in good condition, promptly making all necessary repairs and
replacements, whether ordinary or extraordinary, or structural or nonstructural,
with materials and workmanship of the same character, kind and quality as the
original, including but not limited to, windows, glass and plate glass, doors,
skylights, any special office entries, interior walls and finish work, floors
and floor coverings, interior roof drains, heating and air conditioning systems,
electrical systems and fixtures, sprinkler systems, dock boards, truck doors,
dock bumpers, paving, plumbing work and fixtures, termite and pest
extermination, regular removal of trash and debris. Tenant as part of its
obligations hereunder shall (i) keep the parking areas, driveways, alleys and
the whole of the premises in a clean and sanitary condition, and (ii) without
injury to the roof, other horizontal surfaces of the building, parking areas,
driveways and sidewalks, remove all snow and ice from same. Tenant will, as far
as possible, keep all such parts of the premises from deterioration due to
ordinary wear and from falling temporarily out of repair, and upon termination
of this lease in any way Tenant will yield up the premises to Landlord in good
condition and repair, loss by fire or other casualty covered by insurance to be
maintained by Landlord pursuant to paragraph 12A hereof except (but not
excepting any damage to glass). In the event of any insurance claims, Tenant
shall be liable for payment of any deductible under any of Landlord's insurance
policies with respect to the premises. Said deductible not to exceed $5,000.
B. Tenant shall not damage any demising wall or disturb the integrity and
support provided by any demising wall and shall, at its sole cost and expense,
promptly repair any damage or injury to any demising wall caused by Tenant or
its employees, agents or invitees.
C. Tenant and its employees, customers and licensees shall have the
nonexclusive right to use, in common with the other parties occupying said
building, common parking areas, if any, (exclusive of any parking or work load
areas designated or to be designated by Landlord, for the exclusive use of
Tenant or other tenants occupying or to be occupying other portions of the
building), driveways and alleys adjacent to said building, subject to such
reasonable rules and regulations as Landlord may from time to time prescribe.
Further, pursuant to Paragraph 29, Landlord shall perform the landscape
maintenance for the grounds around the building, including, but not limited to,
the mowing of grass, care of shrubs, general landscaping.
E. Tenant shall, at its own cost and expense, enter into a regularly
scheduled preventive maintenance/service contract with a maintenance contractor
approved by Landlord, for servicing all heating and air conditioning systems and
equipment within the premises. The service contract must include all services
outlined on Exhibit D and must become effective within thirty (30) days of the
date Tenant takes possession of the premises.
F. Tenant shall, at its own cost and expense, repair any damage to the
premises resulting from and/or caused in whole or in part by the negligence or
misconduct of Tenant, its agents, servants, employees, patrons, customers, or
any other person entering upon the premises as a result of Tenant's business
activities or caused by Tenant's default hereunder.
7. Alterations. Tenant shall not make any alterations, additions or
improvements to the premises (including, without limitation, the roof and wall
penetrations) without the prior written consent of Landlord, which consent shall
not be unreasonably withheld for interior, non-structural alterations. Tenant
may, without the consent of Landlord, but at its own cost and expense and in a
good workmanlike manner erect such shelves, bins, machinery and other trade
fixtures as it may deem advisable, without altering the basic character of the
building or improvements and without overloading or damaging such building or
improvements, and in each case after complying with all applicable governmental
laws, ordinances, regulations and other requirements. All alterations,
additions, improvements and partitions erected by Tenant shall be and remain the
property of Tenant during the term of this lease and Tenant shall, unless
Landlord otherwise elects as hereinafter provided, remove all alterations,
additions, improvements and partitions erected by Tenant and restore the
premises to their original condition by the date of termination of this lease or
upon earlier vacating of the premises; provided, however, that if at such time
Landlord so elects such alterations, additions, improvements and partitions but
not Tenant's trade fixtures, shall become the property of Landlord as of the
date of termination of this lease or upon earlier vacating of the premises and
title shall pass to Landlord under this lease as by a bill of sale. All shelves,
bins, machinery and trade fixtures installed by Tenant may be removed by Tenant
prior to the termination of this lease if Tenant so elects, and shall be removed
by the date of termination of this lease or upon earlier vacating of the
premises if required by Landlord; upon such removal Tenant shall restore the
premises to their original condition. All such removals and restoration shall be
accomplished in a good workmanlike manner so as not to damage the primary
structure or structural qualities of the buildings and other improvements within
which the premises are situated. If Landlord shall consent to any alterations,
additions or improvements proposed by Tenant, Tenant shall construct the same in
accordance with all governmental laws, ordinances, rules and regulations and
shall, prior to construction, provide such assurances to Landlord, (including,
but not limited to, waivers of lien, surety company performance bonds and
personal guaranties of individuals of substance) as Landlord shall require to
protect Landlord against any loss from any mechanics', laborers' or
materialmen's liens, or other liens.
8. Signs. Tenant shall not install any signs upon the premises, except that
Landlord will provide, at Tenant's request and cost, Landlord's standard
identification sign, which sign shall be removed by Tenant upon termination of
this lease.
9. Inspections. Landlord and Landlord's agents and representatives shall
have the right to enter and inspect the premises at any reasonable time with
prior oral notice except in case of emergency, during business hours, for the
following purposes: (i) to ascertain the condition of the premises; (ii) to
determine whether Tenant is diligently fulfilling Tenant's responsibilities
under this lease; (iii) to make such repairs as may be required or permitted to
be made by Landlord under the terms of this lease; or (iv) to do any other act
or thing which Landlord deems reasonable to preserve the premises and the
building and improvements of which the premises are a part. During the period
that is six (6) months prior to the end of the term hereof and at any time
Tenant is in material default hereunder and such default has remained uncured
for at least thirty (30) days, Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any reasonable
time with prior oral notice except in case of emergency, during business hours
for the purpose of showing the premises and shall have the right to erect on the
premises suitable signs in-
<PAGE>
dicating that the premises are available for leases. Tenant shall give written
notice to Landlord at least thirty (30) days prior to vacating the premises and
shall arrange to meet with Landlord for a joint inspection of the premises prior
to vacating. In the event of Tenant's failure to give such notice or arrange
such joint inspection, Landlord's inspection at or after Tenant's vacating the
premises shall be conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
10. Utilities. Landlord agrees to provide, at its cost, water, electricity
and telephone service connections into the premises; but Tenant shall pay for
all water, gas, heat, light, power, telephone, sewer, sprinkler system charges
and other utilities and services used on or from the premises, including without
limitation, Tenant's proportionate share of any central station signaling system
installed in the premises or the building of which the premises are a part,
together with any taxes, penalties, and surcharges or the like pertaining
thereto and any maintenance charges for utilities. Tenant shall furnish all
electric light bulbs, tubes and ballasts. If any such services are not
separately metered to Tenant, Tenant shall pay such pay such proportion of all
charges jointly metered with other premises as determined by Landlord, in its
sole discretion, to be reasonable. Any such charges paid by Landlord and
assessed against Tenant shall be immediately payable to Landlord on demand
within fifteen (15) days after Landlord's billing with copies of Landlord's
bills and shall be additional rent hereunder. Landlord shall in no event be
liable for any interruption or failure of utility services on or to the
premises.
11. Assignment and Subletting.
A. Tenant shall not have the right to assign or pledge this lease or to
sublet the whole or any part of the premises, whether voluntary or by operation
of law, or permit the use or occupancy of the premises by anyone other than
Tenant, without the prior written consent of Landlord which shall not be
unreasonably withheld or delayed and such restrictions shall be binding upon any
assignee or subtenant to which Landlord has consented. In the event Tenant
desires to sublet the premises, or any portion thereof, or assign this lease,
Tenant shall give written notice thereof to Landlord within a reasonable amount
of time prior to the proposed commencement date of such subletting or
assignment, which notice shall set forth the name of the proposed subtenant or
assignee, the relevant terms of any sublease and copies of financial reports and
other relevant financial information of the proposed subtenant or assignee.
Notwithstanding any permitted assignment or subletting, Tenant shall at all
times remain directly, primarily and fully responsible and liable for the
payment of the rent herein specified and for compliance with all of its other
obligations under the terms, provisions and covenants of this lease. Upon the
occurrence of an "event of default" (as hereinafter defined), if the premises or
any part thereof are then assigned or sublet, Landlord, in addition to any other
remedies herein provided, or provided by law, may, at its option collect
directly from such assignee or subtenant all rents due and becoming due to
Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord from Tenant hereunder, and no such collection shall be construed
to constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder.
B. In addition to, but not in limitation of, Landlord's right to approve of
any subtenant or assignee, Landlord shall have the option, in its sole
discretion, in the event of any proposed subletting or assignment, to terminate
this lease, or in the case of a proposed subletting of less than the entire
premises, to recapture the portion of the premises to be sublet, as of the date
the subletting or assignment is to be effective. The option shall be exercised,
if at all, by Landlord giving Tenant written notice thereof within ten (10)
business days following Landlord's receipt of Tenant's written notice as
required above. If this lease shall be terminated with respect to the entire
demised premises pursuant to this paragraph, the term of this lease shall end on
the date stated in Tenant's notice as the effective date of the sublease or
assignment as if that date had been originally fixed in this lease for the
expiration of the term hereof; provided, however, that effective on such date
Tenant shall pay Landlord all amounts, as estimated by Landlord, payable by
Tenant to such date, with respect to taxes, insurance, repairs, maintenance,
restoration and other obligations, costs or charges which are the responsibility
to Tenant hereunder. Further, upon any such cancellation Landlord and Tenant
shall have no further obligations or liabilities to each other under this lease,
except with respect to obligations or liabilities which accrued hereunder as of
such cancellation date (in the same manner as if such cancellation date were the
date originally fixed in this lease for the expiration of the term hereof). If
Landlord recaptures under this paragraph only a portion of the demised premises,
the rent during the unexpired term hereof shall abate proportionately based on
the rent per square foot contained in this lease as of the date immediately
prior to such recapture. Tenant shall, at Tenant's own cost and expense,
discharge in full any commissions which may be due and owing as a result of any
proposed assignment or subletting, whether or not the premises are recaptured
pursuant hereto and rented by Landlord to the proposed tenant or any other
tenant.
C. Notwithstanding the provisions of the foregoing paragraphs, Tenant may,
without Landlord's consent, assign this lease to any corporation succeeding to
substantially all the business and assets of Tenant by merger, consolidation,
purchase of assets or otherwise or to any corporation or entity which is a
subsidiary or division of Tenant, provided that the following conditions are
satisfied: (i) the total assets and net worth of such assignee shall be equal to
or more than that of Tenant immediately prior to such transaction; (ii) Tenant
is not then in default hereunder; and (iii) such successor shall execute and
deliver to Landlord an instrument in writing fully assuming all obligations and
liabilities imposed on Tenant hereunder. Upon satisfaction of the foregoing,
Landlord agrees to discharge Tenant from any further liability hereunder.
12. Fire and Casualty Damage.
A. Landlord agrees to maintain standard fire and extended coverage
insurance covering the building of which the premises are a part in an amount
not less than ninety percent (90%) (or such greater percentage as may be
necessary to comply with the provisions of any co-insurance clauses of the
policy) of the "replacement cost" thereof as such term is defined in the
Replacement Cost Endorsement to be attached thereto, insuring against the perils
of fire and lightning and included extended coverage, or at Landlord's option
all risk coverage, such coverages and endorsements to be as defined, provided
and limited in the standard bureau forms prescribed by the insurance regulatory
authority for the state in which the premises are situated for use by insurance
companies admitted in such state for the writing of such insurance on risks
located within such state. Subject to the provisions of subparagraphs 12C, 12D
and 12F below, such insurance shall be for the sole benefit of Landlord and
under its sole control. If during the second full lease year after the
commencement date of this lease, or during any subsequent year of the primary
term or any renewal or extension, Landlord's cost of maintaining such insurance
shall exceed Landlord's cost of maintaining such insurance for the first full
lease year of the term hereof. Tenant agrees to pay to Landlord, as additional
rent, Tenant's full proportionate share (as defined in subparagraph 24) with
copies of the insurance bill of such excess. Said payments shall be made to
Landlord within fifteen (15) days after presentation to Tenant of Landlord's
statement setting forth the amount due, and the failure to pay such excess shall
be treated in the same manner as a default in the payment of rent hereunder when
due. Any payment to be made pursuant to this subparagraph 12A with respect to
the year in which this lease commences or terminates shall bear the same ratio
to the payment which would be required to be made for the full year as the part
of such year covered by the term of this lease bears to a full year. Tenant
shall not take out separate insurance concurrent in form or contributing in the
event of loss with that required to be maintained by Landlord hereunder unless
Landlord is included as an additional insured thereon. Tenant shall immediately
notify Landlord whenever any such separate insurance is taken out and shall
promptly deliver to Landlord the policy of such insurance.
B. If the buildings situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty, Tenant shall give immediate
written notice thereof to Landlord.
C. If the buildings situated upon the premises should be damaged by any
peril covered by the insurance to be provided by Landlord under subparagraph 12A
above, but only to such extent that rebuilding or repairs can in Landlord's
estimation be completed within one hundred fifty (150) days after the date upon
which Landlord is notified by Tenant of such damage, (except that Landlord will
not rebuild if such damage occurs during the last year of the term hereof), this
lease shall not terminate, and Landlord shall at its sole cost and expense
thereupon proceed with reasonable diligence to rebuild and repair such buildings
to substantially the condition in which they existed prior to such damage,
except Landlord shall not be required to rebuild, repair or replace any part of
the partitions, fixtures, additions and other improvements which may have been
placed in, on or about the premises by Tenant. If the premises are untenantable
in whole or in part following such damage, the rent payable hereunder during the
period in which the premises are untenantable shall be reduced on a pro rata
basis. In the event that Landlord should fail to complete such repairs and
rebuilding within one hundred fifty (150) days after the date upon which
Landlord is notified by Tenant of such damage, Tenant may at its option
terminate this lease by delivering written notice of termination to Landlord as
Tenant's exclusive remedy, whereupon all rights and obligations hereunder shall
cease and terminate; provided, however, that if construction is delayed because
of changes, deletions, or additions in construction requested by Tenant,
strikes, lockouts, casualties, acts of God, war, material or labor shortages,
Governmental regulation or control or other causes beyond the reasonable control
of Landlord, the period for restoration, repair or rebuilding shall be extended
for the amount of time Landlord is so delayed. If such delays beyond Landlord's
control exceed a total of 250 days from Tenant's notice, this lease shall
terminate at Tenant's election, by giving Landlord written notice of such intent
ten (10) days after the two hundred fiftieth (250th) day (as of the 250th to
260th day) of Tenant's original written notice of such casualty.
D. If the buildings situated upon the premises should be damaged or
destroyed by fire, tornado or other casualty and Landlord is not required to
rebuild pursuant to the provisions of subparagraph 12C hereof, this lease shall
at the option of Landlord, upon notice to Tenant, given within thirty (30) days
after Landlord is notified by Tenant of such damage, terminate and the rent
shall be abated during the unexpired portion of this lease, effective upon the
date of the occurrence of such damage.
<PAGE>
E. Tenant covenants and agrees to maintain insurance on all alterations,
additions, partitions and improvements erected by or on behalf of Tenant in, on
or about the premises in an amount not less than ninety percent (90%) (or such
greater percentage as may be necessary to comply with the provisions of any
co-insurance clause of the policy) of the "replacement cost" thereof, as such
term is defined in the Replacement Cost Endorsement to be attached thereto. Such
insurance shall insure against the perils and be in form, including stipulated
endorsements, as provided in Subparagraph 12A hereof. Such insurance shall be
for the sole benefit of Tenant and under its sole control provided that Tenant
shall be obligated to commence the rebuilding of the improvements erected by
Tenant, upon Landlord's determination to rebuild or repair and to apply such
proceeds in payment of the cost thereof. In the event Landlord decides not to
rebuild or repair, Tenant will not be obligated to repair such alterations. All
such policies shall be procured by Tenant from responsible insurance companies
satisfactory to Landlord. Certificate of such insurance, together with receipt
evidencing payment of the premiums therefor, shall be delivered to Landlord
prior to the commencement date of this lease. Not less than fifteen (15) days
prior to the expiration date of any such policies, certified copies of renewals
thereof (bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be cancelled or charged to reduce insurance provided thereby.
F. Notwithstanding anything herein to the contrary, in the event the holder
of any indebtedness secured by a mortgage or deed of trust covering the premises
of the building of which the premises are a part requires that the insurance
proceeds be applied to such indebtedness, then Landlord shall have the right to
terminate this lease by delivering written notice of termination to Tenant
within fifteen (15) days after such requirement is made by any such holder,
whereupon all rights and obligations hereunder shall cease and terminate.
G. Each of Landlord and Tenant hereby release the other from any and all
liability or responsibility to the other or anyone claiming through or under
them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any other perils insured in policies of insurance covering
such property even if such loss or damage shall have been caused by the fault or
negligence of the other party or anyone for whom such party may be responsible,
including any other tenants or occupants of the remainder of the building in
which the premises are located; provided, however, that this release shall be
applicable and in force and effect only to the extent that such release shall be
lawful at that time and in any event only with respect to loss or damage
occurring during such times as the releasor's policies shall contain a clause or
endorsement to the effect that any such release shall not adversely affect or
impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Each of Landlord and Tenant agrees that it will request its
insurance carriers to include in its policies such a clause or endorsement. If
extra cost shall be charged therefor, each party shall advise the other thereof
and of the amount of the extra cost, and the other party, at its election, may
pay the same, but shall not be obligated to do so. If such other party fails to
pay such extra cost, the release provisions of this paragraph shall be
inoperative against such other party to the extent necessary to avoid
invalidation of such releasor's insurance.
H. In the event of any damage or destruction to the premises by any peril
covered by the provisions of this Paragraph 12, Tenant shall, upon notice from
<PAGE>
Landlord, forthwith remove, at its sole cost and expense, such portion or all of
Tenant's shelves, bins, machinery and other trade fixtures and all other
property belonging to Tenant or his licensees from such portion or all of the
premises as Landlord shall request and Tenant hereby indemnifies and holds
harmless the property Landlord (including without limitation the trustee and
beneficiaries if Landlord is a trust), Landlord's agents and employees from any
loss, liability, claims, suits, costs, expenses, including attorney's fees and
damages, both real and alleged, arising out of any damage or injury as a result
of the failure to properly secure the premises prior to such removal and/or as a
result of such removal.
13. Liability. Landlord shall not be liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person whomsoever, for
any injury to person or damage to property on or about the premises, to the
extent caused by the negligence or misconduct of Tenant, its agents, servants or
employees, or of any other person entering upon the premises, or caused by the
improvements located on the premises which Tenant is responsible for
maintaining, becoming out of repair or caused by leakage of gas, oil, water or
steam or by electricity emanating from the premises, or due to any cause
whatsoever and Tenant hereby covenants and agrees that it will at all times
indemnify and hold safe and hold harmless the property, the Landlord (including
without limitation the trustee and beneficiaries if Landlord is a trust),
Landlord's agents and employees from any loss, liability, claims, suits, costs,
expenses, including attorney's fees and damages, both real and alleged, arising
out of such damage or injury; except injury to persons or damage to property to
the extent the cause of which is the negligence of Landlord or the failure of
Landlord to repair any part of the premises which Landlord is obligated to
repair and maintain hereunder within a reasonable time after the receipt of
written notice from Tenant of needed repairs. Tenant shall procure and maintain
throughout the term of this lease a policy or policies of insurance, in form and
substance satisfactory to Landlord, at Tenant's sole cost and expense, insuring
both Landlord (and if Landlord is a trust, the trustee, beneficiaries and their
agents) and Tenant against all claims, demands or actions arising out or in
connection with (i) the premises; (ii) the condition of the premises; (iii)
Tenant's operations in and maintenance and use of the premises; and (iv)
Tenant's liability assumed under this lease; the limits of such policy or
policies to be in the amount of not less than $2,000,000 per occurrence in
respect of injury to persons (including death), and in the amount of not less
than $250,000 per occurrence in respect of injury to persons (including death),
and in the amount of not less than $250,000 per occurrence in respect of
property damage or destruction, including loss of use thereof. All such policies
shall be procured by Tenant from responsible insurance companies satisfactory to
Landlord. Certificates of Insurance of such policies, together with receipt
evidencing payment of premiums therefor, shall be delivered to Landlord prior to
the commencement date of this lease. Not less than (15) days prior to the
expiration date of any such policies, Certificates of Insurance of the renewals
thereof (bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days written notice shall be given to Landlord before such policy
may be canceled or changed to reduce the insurance coverage provided thereby.
14. Condemnation.
A. If the whole or any substantial part of the premises should be taken for
any public or quasi-public use under governmental law, ordnance or regulation,
or by right of eminent domain, or by private purchase in lieu thereof and the
taking would prevent or materially interfere with the use of the premises for
the purpose for which they are then being used, this lease shall terminate and
<PAGE>
the rent shall be abated during the unexpired portion of this lease, effective
when the physical taking of said premises shall occur.
B. If part of the premises shall be taken for any public or quasi-public
use under any governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, and this lease is not terminated
as provided in the subparagraph above, this lease shall not terminate but the
rent payable hereunder during the unexpired portion of this lease shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances and Landlord shall undertake to restore the premises to a
condition suitable for Tenant's use, as near to the condition thereof
immediately prior to such taking as is reasonably feasible under all the
circumstances.
C. In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their respective
interests in any condmenation proceedings; provided that Tenant shall not be
entitled to receive any award for Tenant's loss of its leasehold interest, the
right to such award being hereby assigned by Tenant to Landlord.
15. Holding Over. Tenant will, at the termination of this lease by lapse of
time or otherwise, yield up immediate possession to Landlord. If Tenant retains
possession of the premises or any part thereof after such termination, then
Landlord may, at its option, serve written notice upon Tenant that such holding
over constitutes any one of (ii) creation of a month to month tenancy, upon the
terms and conditions set forth in this lease, or (iii) creation of a tenancy at
sufferance, in any case upon the terms and conditions set forth in this lease;
provided, however, that the monthly rental (or daily rental under (iii)) shall,
in addition to all other sums which are to be paid by Tenant hereunder, whether
or not as additional rent, be equal to double the rental being paid monthly to
Landlord under this lease immediately prior to such termination (prorated in the
case of (iii) on the basis of a 365 day year for each day Tenant remains in
possession. If no such notice is served, then a tenancy at sufferance shall be
deed to be created at the rent in the preceding sentence. Tenant shall also pay
to Landlord all damages sustained by Landlord resulting from retention of
possession by Tenant, including the loss of any proposed subsequent tenant for
any portion of the premises. The provisions of this paragraph shall not
constitute a waiver by Landlord of any right of re-entry as herein set forth;
nor shall receipt of any rent or any other act in apparent affirmance of the
tenancy operate as a waiver of the right to terminate this lease for a breach of
any of the terms, covenants, or obligations herein on Tenant's part to be
performed.
16. Quiet Enjoyment. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the premises, good title to the premises, free
and clear of all liens and encumbrances, excepting only the lien for current
taxes not yet due, such mortgage or mortgages as are permitted by the terms of
this lease, zoning ordinances and other building and fire ordinances and
governmental regulations relating to the use of such property, and easements,
restrictions and other conditions of record. In the event this lease is a
sublease, then Tenant agrees to take the premises subject to the provisions of
the prior leases. Landlord represents and warrants that it has full right and
authority to enter into this lease and that Tenant, upon paying the rental
herein set forth and performing its other covenants and agreements herein set
forth, shall peaceably and quietly have, hold and enjoy the premises for the
term hereof without hindrance or molestation from Landlord, subject to the terms
and provisions of this lease. Landlord agrees to make reasonable efforts to
protect Tenant from interference or disturbance by other tenants or third
persons; however, Landlord shall not be liable for any such interference or
disturbance by other tenants or other persons; however, Landlord shall not be
liable for any such interference or disturbance, nor shall Tenant be released
from any of the obligations of this lease because of such interference or
disturbance.
<PAGE>
17. Events of Default. The following events shall be deemed to be events of
default by Tenant under this lease:
(a) Tenant shall fail to pay when or before due any some of money
becoming due to be paid to Landlord hereunder, whether such sum be any
installment of the rent herein reserved, any other amount treated as
additional rent hereunder, or any other payment or reimbursement to
Landlord required herein, whether or not treated as additional rent
hereunder, and such failure shall continue for a period of five (5) days
from the date such payment was due; or Landlord shall give Tenant written
notice of default twice during a calendar year. Tenant shall have five (5)
days from the date of Landlord's notice to cure such default.
(b) Tenant shall fail to comply with any term, provision or covenant
of this lease other than by failing to pay when or before due any sum of
money becoming due to be paid to Landlord hereunder, and shall not cure or
commence to cure and diligently proceed to cure such default within twenty
(20) days (forthwith, if the default involves a hazardous condition) after
written notice thereof to Tenant; or
(c) Tenant shall abandon any substantial portion of the premises; or
(d) Tenant shall fail to immediately vacate the premises upon
termination of this lease, by lapse of time or otherwise, or upon
termination of Tenant's right to possession only; or
(e) The leasehold interest of Tenant shall be levied upon under
execution or be attached by process of law or Tenant shall fail to contest
diligently the validity of any lien or claimed lien and give sufficient
security to Landlord to insure payment thereof or shall fail to satisfy any
judgment rendered thereon and have the same released, and such default
shall continue for ten (10) days after written notice thereof to Tenant; or
(f) Tenant shall admit in writing its inability to pay its debts
generally as they become due, file a petition in bankruptcy or a petition
to take advantage of any insolvency statute, make an assignment for the
benefit of creditors, make a transfer in fraud of creditors, apply for or
consent to the appointment of a receiver of itself or of the whole or any
substantial part of its property, or file a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws, as now in
effect or hereafter amended, or any other applicable law or statute of the
United States or any state thereof; or
(g) A court of competent jurisdiction shall enter an order, its
judgment or decree adjudicating Tenant a bankrupt, or appointing a receiver
of Tenant, or of the whole or any substantial part of its property, without
the consent of Tenant, or approving a petition filed against Tenant seeking
reorganization or arrangement from Tenant under the bankruptcy laws of the
United States, as now in effect or hereafter amended, or any state thereof,
and such order, judgment or decree shall not be vacated or set aside or
stayed within thirty (30) days from the date of entry thereof.
18. Remedies. Upon the occurrence of any of such events of default
described in Paragraph 17 hereof or elsewhere in this lease, Landlord shall have
the option to pursue any one or more of the following remedies without any
notice or demand whatsoever:
(a) Landlord may, at its election, terminate this lease or terminate
Tenant's right to possession only, without terminating the lease;
(b) Upon any termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of Tenant's right to possession without
termination of the lease, Tenant shall surrender possession and vacate the
premises immediately, and deliver possession thereof to Landlord, and
Tenant hereby grants to Landlord full and free license to enter into and
upon the premises in such event with process of law and to repossess
Landlord of the premises as of Landlord's former estate and to expel or
remove Tenant and any others who may be occupying or within the premises
and to remove any and all property therefrom, without being deemed in any
manner guilty of trespass, eviction or forcible entry or detainer, and
without incurring any liability for any damage resulting therefrom, Tenant
hereby waiving any right to claim damage for such re-entry and expulsion,
and without relinquishing Landlord's right to rent or any other rent given
to Landlord hereunder or by operation of law;
(c) Upon any termination of this lease, whether by lapse of time or
otherwise, Landlord shall be entitled to recover as damages, all rent,
including any amounts treated as additional rent hereunder, and other sums
due and payable by Tenant on the date of termination, plus the sum of (i)
an amount equal to the then present value of the rent, including any
amounts treated as additional rent hereunder, and other sums provided
herein to be paid by Tenant for the residue of the stated term hereof, less
the fair rental value of the premises for such residue (taking into account
the time and expense necessary to obtain a replacement tenant or tenants,
including expenses hereinafter described in subparagraph (d) relating to
recovery of the premises, preparation for reletting and for reletting
itself), and (ii) the cost of performing any other covenants which would
have otherwise been performed by Tenant;
(d) (i) Upon any termination of Tenant's right to possession only
without termination of the lease, Landlord may, at Landlord's option, enter
into the premises, remove Tenant's signs and other evidences of tenancy,
and take and hold possession thereof as provided in subparagraph (b) above,
without such entry and possession terminating the lease or releasing
Tenant, in whole or in part, from any obligation, including Tenant's
obligation to pay the rent, including any amounts treated as additional
rent, hereunder for the full term. In any case Tenant shall pay forthwith
to Landlord, if Landlord so elects, a sum equal to the entire amount of the
rent, including any amounts treated as additional rent hereunder, for the
residue of the stated term hereof plus any other sums provided herein to be
paid by Tenant for the remainder of the lease term.
See P. 28
(e) Landlord may, at Landlord's option, enter into and upon the
premises, with process of law, if Landlord determines in its reasonable
commercial judgment that Tenant is not acting within a commercially
reasonable time to maintain, repair or replace anything for which Tenant is
responsible hereunder and correct the same, without being deemed in any
manner guilty of trespass, eviction or forcible entry and detainer and
without incurring any liability for any damage resulting therefrom and
Tenant agrees to reimburse Landlord, on demand, as additional rent, for any
expenses which Landlord may incur in thus effecting compliance with
Tenant's obligations under this lease;
(f) Any and all property which may be removed from the premises by
Landlord pursuant to the authority of the lease or of law, to which Tenant
is or may be entitled, may be handled, removed and stored, as the case may
be, by or at the direction of Landlord at the risk, cost and expense of
Tenant, and Landlord shall in no event be responsible for the value,
preservation and safekeeping thereof. Tenant shall pay to Landlord, upon
demand, any and all expenses incurred in such removal and all storage
charges against such property so long as the same shall be in Landlord's
possession or under Landlord's control. Any such property of Tenant not
retaken by Tenant from storage within thirty (30) days after removal from
the premises shall conclusively be presumed to have been conveyed by Tenant
to Landlord under this lease as a bill of sale without further payment or
credit by Landlord to Tenant.
In the event Tenant fails to pay any installment of rent, including any
amount treated as additional rent hereunder, or other sums hereunder as and when
such installment or other charge is due, Tenant shall pay to Landlord on demand
a late charge in an amount equal to five percent (5%) of such installment or
other charge overdue in any month and five percent (5%) each month thereafter
until paid in full to help defray the additional cost to Landlord for processing
such late payments, and such late charge shall be additional rent hereunder and
the failure to pay such late charge within ten (10) days after demand therefor
shall be an additional event of default hereunder. The provision for such late
charge shall be in addition to all Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any
of the other remedies herein provided or any other remedies provided by law (all
such remedies being cumulative), nor shall pursuit of any remedy herein provided
constitute a forfeiture or waiver of any rent due to Landlord hereunder or of
any damages accruing to Landlord by reason of the violation of any of the terms,
provisions and covenants herein contained. No act or thing done by Landlord or
its agents during the term hereby granted shall be deemed a termination of this
lease or an acceptance of the surrender of the premises, and no agreement to
terminate this lease or accept a surrender of said premises shall be valid
unless in writing signed by Landlord. No waiver by Landlord of any violation or
breach violation or breach of any of the terms, provisions and covenants herein
contained. Landlord's acceptance of the payment of rental or other payments
hereunder after the occurrence of an event of default shall not be construed as
a waiver of such default, unless Landlord so notifies Tenant in writing.
Forbearance by Landlord to enforce one or more of the remedies herein provided
upon an event of default shall not be deemed or construed to constitute a waiver
of such default or of Landlord's right to enforce any such remedies
<PAGE>
with respect to such default or any subsequent default.
20. Mortgages. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the premises or the improvements situated thereon, provided,
however, that if the mortgagee, trustee or holder of any such mortgage or deed
of trust elects to have Tenant's interest in this lease superior to such lien,
whether this lease was executed before or after said mortgage or deed of trust.
Tenant shall at any time hereafter upon ten (10) days after request from
landlord and Landlord will use its best efforts to obtain a Non-disturbance
Agreement, execute any instruments, releases or other documents which may be
required by any mortgagee for the purpose of subjecting and subordinating this
lease to the lien of any such mortgage or for the purpose of evidencing the
superiority of this lease to the lien of any such mortgage, as may be the case.
22. Mechanic's and Other Liens. Tenant shall have no authority, express or
implied, to create or place any lien or encumbrance of any kind or nature
whatsoever upon, or in any manner to bind, the interest of Landlord in the
premises or to charge the rentals payable hereunder for any claim in favor of
any person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs, and each such claim shall affect
and each such lien shall attach to, if at all, only the leasehold interest
granted to Tenant by this instrument. Tenant covenants and agrees that it will
pay or case to be paid all sums legally due and payable by it on account of any
labor performed or materials furnished in connection with any work performed on
the premises on which any lien is or can be validly and legally asserted against
its leasehold interest in the premises or the improvements thereon and that it
will save and hold Landlord harmless from any and all loss, cost or expense
based on or arising out of asserted claims o liens against the leasehold estate
or against the right, title and interest of the Landlord in the premises or
under the terms of this lease. Tenant will not permit any mechanic's lien or
liens or any other liens which may be imposed by law affecting Landlord's or its
mortgagee's interest in the premises or any building or other improvement of
which the premises are a part to be placed upon the premises or any building or
improvement thereon during the term hereof, and in case of the filing of any
such lien Tenant will promptly pay same. If any such lien shall remain in force
and effect for twenty (20) days after written notice thereof from Landlord to
Tenant, Landlord shall have the right and privilege at Landlord's option of
paying and discharging the same or any portion thereof without inquiry as to the
validity thereof, and any amounts so paid, including expenses and interest,
shall be so much additional indebtedness hereunder due from Tenant to Landlord
and shall be repaid to Landlord immediately on rendition of a bill therefor.
Notwithstanding the foregoing, Tenant shall have the right to contest any such
lien in good faith and with all due diligence so long as any such contest, or
action taken in connection therewith, protects the interest of Landlord and
Landlord's mortgagee in the premises and Landlord and any such mortgagee are, by
the expiration of said twenty (20) day period, furnished such protection, and
indemnification against any loss, cost or expense related to any such lien and
the contest thereof as are satisfactory to Landlord and any such mortgagee.
23. Notices. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
<PAGE>
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Elk Grove Village Industrial Park
Ltd. or to such other entity at such other address as Landlord may specify
from time to time by written notice delivered in accordance herewith.
(b) All payments required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify
from time to time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered, whether actually received or
not, when deposited in the United States Mail, postage prepaid, Certified
or Registered Mail, addressed to the parties hereto at the respective
addresses set out below, or at such other address as they have theretofore
specified by written notice delivered in accordance herewith:
LANDLORD: TENANT:
Elk Grove Village Industrial Park Ltd. Factory Card Outlet of America**
c/o Hamilton Partners Attn: Charlie Cumello, President/CEO
300 Park Blvd. 745 Birginal Drive
Itasca, IL.60143 Bensenville, IL. 60106
If and when included within the term "Landlord", as used in this instrument,
there are more than one person, firm or corporation, all shall jointly arrange
among themselves for their joint execution of such a notice specifying some
individual at some specific address for the receipt of notices and payments to
Landlord; if and when included with the term "Tenant", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Tenant. All parties
included within the terms "Landlord" and "Tenant", respectively, shall be bound
by notices given in accordance with the provisions of this paragraph to the same
effect as if each had received such notice.
24. Miscellaneous.
A. Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall by held to
include the plural, unless the context otherwise requires.
** cc: Peter D. Finocchiaro, Esq.
Rivkin, Radler & Kremer
30 N. LaSalle St., Ste. 4300
Chicago, IL 60602-2507
<PAGE>
B. The terms, provisions and covenants and conditions contained in this
lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns, except as otherwise herein expressly provided. Landlord shall
have the right to assign any of its rights and obligations under this lease and
Landlord's grantee or Landlord's successor, as the case may be, shall upon such
assignment, become Landlord hereunder, thereby freeing and relieving the grantor
or assignor, as the case may be, of all covenants and obligations of Landlord
hereunder. Each party agrees to furnish to the other, promptly upon demand, a
corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of such party to
enter into this lease. Nothing herein contained shall give any other tenant in
the building of which the premises are a part any enforceable rights either
against Landlord or Tenant as a result of the covenants and obligations of
either party set forth herein.
C. The captions inserted in this lease are for convenience only and in no
way define, limit or otherwise describe the scope or intent of this lease, or
any provision hereof, or in any way affect the interpretation of this lease.
D. Tenant shall at any time and from time to time within ten (10) days
after written request from Landlord execute and deliver to the Landlord or any
prospective Landlord or mortgagee or prospective mortgagee a sworn and
acknowledged estoppel certificate, in form reasonably satisfactory to Landlord
and/or Landlord's mortgagee or prospective mortgagee certifying and stating as
follows: (i) this lease has not been modified or amended (or if modified or
amended, setting forth such modifications or amendments); (ii) this lease as so
modified or amended is in full force and effect (or if not in full force and
effect, the reasons therefor); (iii) the Tenant has no offsets or defenses to
its performance of the terms and provisions of this lease, including the payment
of rent, or if there are any such defenses or offsets, specifying the same; (iv)
Tenant is in possession of the premises, if such be the case; (v) if an
assignment of rents or leases has been served upon Tenant by a mortgagee or
prospective mortgagee, Tenant has received such assignment and agrees to be
bound by the provisions thereof; and (vi) any other accurate statements
reasonably required by Landlord or its mortgagee or prospective mortgagee. It is
intended that any such statement delivered pursuant to this subsection may be
relied upon by any prospective purchaser or mortgagee and their respective
successors and assigns and Tenant shall be liable for all loss, cost or expense
resulting from the failure of any sale or funding of any loan caused by any
misstatement contained in such estoppel certificate. In addition to any other
remedy Landlord may have hereunder, Landlord may, at its option, if Tenant does
not deliver to Landlord an estoppel certificate as set forth above within
fifteen (15) business days after Tenant is requested to do so, cancel this lease
effective the last day of the then current months, without incurring any
liability on account thereof, and the term hereby granted is expressly limited
accordingly.
E. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this lease shall survive the
expiration or earlier termination of the term hereof, including, without
limitation, all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
premises, Landlord and Tenant shall jointly inspect the premises and Tenant
shall pay to Landlord any reasonable amount estimated by Landlord as necessary
to put the premises, including without limitatation heating and air
conditioning systems and equipment therein, in good condition and repair. Any
work required to be done by Tenant prior to its vacation of the premises which
has not been completed upon such vacation, shall be completed by Landlord and
billed to Tenant. Tenant shall also, prior to vacating the premises, pay to
Landlord the amount, as reasonably estimated by Landlord, of Tenant's obligation
hereunder for unpaid real estate taxes for the years during the term of this
lease for which such taxes are a lien against the premises, and insurance
premiums for the year in which the lease expires or terminates. All such
amounts shall be used and held by Landlord for payment of such obligations of
Tenant hereunder, with Tenant being liable for any additional costs therefor
upon demand by Landlord, or with any excess to be returned to Tenant after all
such obligations have been determined and satisfied, as the case may be with
work orders attached for said work contemplated. Any security deposit held by
Landlord shall be credited against the amount payable by Tenant under this
subparagraph 24F.
G. If any clause, phrase, provision or portion of this lease or the
application thereof to any person or circumstance shall be invalid or
unenforceable under applicable law, such event shall not affect, impair or
render invalid or unenforceable the remainder of this lease nor any other
clause, phrase, provision or portion hereof, nor shall it affect the application
of any clause, phrase, provision or portion hereof to other persons or
circumstances, and it is also the intention of the parties to this lease that
in lieu of each such clause, phrase, provisions or portion of this lease that
is invalid or unenforceable, there be added as a part of this lease contract a
clause, phrase, provision or portion as similar in terms to such invalid or
unenforceable clause, phrase, provision or portion as may be possible and be
valid and enforceable.
H. Submission of this lease shall not be deemed to be a reservation of the
premises. Landlord shall not be bound hereby until its delivery to Tenant of an
executed copy hereof signed by Landlord, already having been signed by Tenant,
and until such delivery Landlord reserves the right to exhibit and lease the
premises from Tenant until such time as Tenant has paid to Landlord the security
deposit required by subparagraph 2B hereof and the first month's rent as set
forth in subparapraph 2A hereof.
I. All references in this lease to "the date hereof" or similar references
shall be deemed to refer to the last date in point of time, on which all parties
hereto have executed this lease.
J. Tenant's "proportionate share" as used in this lease shall mean a
fraction, the numerator of which is the rentable area (other than any designated
parking or loading areas) contained in the premises and the denominator of which
is the rentable area contained in the building, in each case as determined by
Landlord. For purposes hereof the numerator is 124,225 and the denominator is
164,225 and Tenant's proportionate share is seventy-five and 64/100 percent
(75.64%).
27. Special Provisions. Paragraphs 28 through 36 and Exhibits A through D
are attached hereto and made a part hereof.
EXECUTED the 17th day of July, 1995
ATTEST/WITNESS LANDLORD
ELK GROVE VILLAGE INDUSTRIAL PARK LTD.
- ------------------------------------- ----------------------------------------
Title
-------------------------------- ----------------------------------------
By: /s/ [illegible]
ATTEST/WITNESS -------------------------------------
Title: Managing General Partner
/s/ Glen J. Franchi ----------------------------------
- -------------------------------------
Title Executive Vice President and TENANT
--------------------------------
Chief Administrative Officer FACTORY CARD OUTLET OF AMERICA
-------------------------------- ----------------------------------------
By: /s/ Charles R. Cumello
-------------------------------------
Title: President and Chief Operating
----------------------------------
Officer
----------------------------------
<PAGE>
28. As to Landlord's remedies, pursuant to paragraph 18, should Tenant be in
default, Landlord may, but need not, relet the premises or any part thereof for
such rent and upon such terms as Landlord, in its sole discretion, shall
determine (including the right to relet the premises for a greater or lesser
term than that remaining under this Lease, the right to relet the premises as a
part of a larger area, and the right to change the character or use made of the
premises). If Landlord decides to relet the premises or a duty to relet is
imposed upon Landlord by law, Landlord and Tenant agree that Landlord shall only
be required to use the same efforts Landlord then uses to lease other properties
Landlord owns or manages (or if the premises is then managed for Landlord, then
Landlord will instruct such manager to use the same efforts such manager then
uses to lease other space or properties which it owns or manages); provided,
however, that Landlord (or its manager) shall not be required to give any
preference or priority to the showing or leasing of the premises over any other
space that Landlord (or its manager) may be leasing or have available and may
place a suitable prospective tenant in any such available space regardless of
when alternative space becomes available; provided, further, that Landlord shall
not be required to observe any instruction given by Tenant about such reletting
or accept any tenant offered by Tenant unless such offered tenant has a
creditworthiness acceptable to Landlord; leases the entire premises, agrees to
use the premises in a manner consistent with the Lease and leases the premises
at the same rent, for no more than the current term and on the same other terms
and conditions as in this Lease without the expenditures by Landlord for tenant
improvements or broker's commissions. In any such case, Landlord may, but shall
not be required to, make repairs, alterations and additions in or to the
premises and redecorate the same to the extent Landlord deems necessary or
desirable, and Tenant shall, upon demand, pay the cost thereof, together with
Landlord's expenses of reletting, including, without limitation, any broker's
commission incurred by Landlord. If the consideration collected by Landlord upon
any such reletting plus any sums previously collected from Tenant are not
sufficient to pay the full amount of all rent, including any amounts treated as
additional rent hereunder and other sums reserved in this Lease for the
remaining term hereof, together with the cost of repairs, alterations,
additions, redecorating, and Lessor's expenses of reletting and the cost of
collection of the rent accruing therefrom (including reasonable attorneys' fees
and reasonable broker's commissions), Tenant shall pay to Landlord the amount of
such deficiency upon demand and Tenant agrees that Landlord may file suit to
recover any sums falling due under this section from time to time.
29. Landlord shall be responsible for landscape maintenance under the terms of
this lease except for the watering of the grass and other planted materials
which shall specifically be the responsibility of Tenant. If during the second
full lease year after the commencement date of this lease, or during any
subsequent year of the primary term or any renewal or extension, the cost to
Landlord of said landscape maintenance service shall exceed the cost for such
service during the first full lease year hereof, Tenant shall pay to Landlord
within fifteen (15) days after Landlord's billing which shall include invoices
for said maintenance work for Tenant's proportionate share of the amount of such
excess and failure to pay such excess shall be treated in the same manner as a
default in the payment of rent hereunder when due.
30. Tenant covenants not to introduce any hazardous or toxic materials onto the
Property without a) first obtaining Landlord's written consent and b) complying
with all applicable federal, state and local laws or ordinances pertaining to
the transportation, storage, use or disposal of such materials, including not
limited to obtaining proper permits.
If Tenant's transportation, storage, use or disposal of hazardous or toxic
materials on the Property results in 1) contamination of the soil or surface or
ground water or 2) loss or damage to person(s) or property, then Tenant agrees
to respond in accordance with the following paragraph.
Tenant agrees (i) to notify Landlord immediately of any contamination,
claim of contamination, loss or damage, (ii) after consultation and approval by
Landlord to clean up the contamination in full compliance with all applicable
statutes, regulations and
<PAGE>
standards, and (iii) to indemnify, defend and hold Landlord harmless from and
against any claims, suits, causes of action, costs and fees, including
attorney's fees, arising from or connected with any such contamination, claim of
contamination, loss or damage. This provision shall survive termination of this
lease.
Landlord represents, that to the best of its knowledge that there are no
hazardous or toxic materials on or in the Premises, building or any land around
or under the same. Landlord agrees to indemnify, defend and hold Tenant harmless
from any pre-existing conditions.
31. It is expressly understood and agreed that nothing in this Lease contained
shall be construed as creating any liability whatsoever against the Landlord, or
its successors and assigns, personally, and in particular without limiting the
generality of the foregoing, there shall be no personal liability to pay any
indebtedness accruing hereunder or to perform any covenant, either express or
implied, herein contained, and that all personal liability of Landlord, or its
successors and assigns, of every sort, if any, is hereby expressly waived by
Tenant, and every person now or hereafter claiming any right or security
hereunder, and that so far as Landlord, or its successors and assigns, is
concerned the owner of any indebtedness or liability accruing hereunder shall
look solely to the property hereby leased for the payment thereof.
32. The Tenant may assume occupancy of the warehouse portion of the premises
prior to the commencement of the term hereof provided that upon such occupancy
all of the terms and provisions of this Lease (other than the terms and
provisions relating to the payment of rent) shall become effective as of the
date of such occupancy. If Tenant assumes occupancy prior to the commencement of
the term, any rent abated because of such early occupancy shall become
immediately due and payable upon the occurrence of any event of default by
Tenant under this Lease.
33. In the event that Tenant makes any roof penetrations during the term of
this Lease the obligation of the Landlord to perform the roof maintenance shall
terminate and in lieu thereof, Tenant shall be required to make such repairs.
34. Landlord hereby agrees to provide Tenant with the right to lease Additional
space in the building commonly known as 2900 Lively Boulevard, Elk Grove
Village, Illinois, when and if such Additional space should become available
during the term of this Lease. In the event this right to lease is exercised by
Tenant, Tenant shall have the right to lease the entire Additional space
consisting of 40,000 square feet, but shall specifically not have the right to
lease only part of said Additional space under the provisions of this paragraph.
In the event Tenant desires to exercise the right to lease said Additional
space, Tenant shall so notify Landlord in writing. Landlord shall respond to
Tenant in writing as to when the Additional space is available. The rental for
any such Additional space shall be based on rental rates prevailing in the open
market for similar properties at the time of notice by Tenant of Tenant's desire
to exercise the right granted under this paragraph. Tenant shall return an
executed lease containing the same terms and conditions as does this Lease for
any such Additional space within thirty (30) days after Landlord submits said
Lease to Tenant.
Landlord specifically shall not be obligated to notify Tenant of the
availability of said Additional space unless Tenant has advised Landlord of
Tenant's intention to lease said Additional space as provided for hereinabove.
In no event shall this right to lease Additional space be in effect if the
premises are subleased or available for sublease under any of the provisions of
this Lease Agreement.
35. Landlord will cause to construct at its own expense improvements shown on
Exhibit "C", attached hereto and made a part hereof.
<PAGE>
36. Landlord shall at any time and from time to time within ten (10) days after
written request from Tenant execute and deliver to Tenant or any prospective
Lender or Financier a sworn and acknowledged estoppel certificate, in form
reasonably satisfactory certifying and stating as follows: (i) this lease has
not been modified or amended (or if modified or amended, setting forth such
modifications or amendments); (ii) this lease as so modified or amended is in
full force and effect (or if not in full force and effect, the reason therefor);
(iii) any other accurate statements reasonably required by such party.
<PAGE>
LEGAL DESCRIPTION
That part of Lot 11 in Elk Grove Industrial Park Unit 3, being a
Subdivision in Section 3, Township 40 North, Rangell, East of the Third
Principal Meridian in DuPage County, Illinois described as follows:
Beginning at the Northeast Corner of said Lot 11; thence South along the East
Line of Lot 11 a distance of 414.09 Feet; thence East along a line parallel to
the North Line of said Lot 11 a distance of 98.61 Feet to a point; thence South
along a line parallel to the East Line of Lot 11 a distance of 47.51 Feet to a
point; thence west along a line parallel to the South Line of Lot 11 a distance
of 261.44 Feet to a point on the West Line of Lot 11; thence North along the
West Line of Lot 11 a distance of 471.57 Feet to the Northwest Corner of Lot 11;
thence East along the North Line of Lot 11 a distance of 377.00 Feet to the
point of beginning, said area contains a 164,225 square foot building commonly
known as 2800-2900 Lively Boulevard, Elk Grove Village, Illinois, DuPage
County, consisting of the square footage as indicated in Paragraph 24.J and as
outlined in red on Exhibit B.
EXHIBIT "A"
<PAGE>
[Blueprint diagram of property.]
EGIP # II
2800-2900 LIVELY BLVD.
164,225 SQ. FT.
EXHIBIT "B"
<PAGE>
EXHIBIT "C"
Landlord will cause to construct at its own expense the following improvements
on behalf of Tenant.
* The demolition work in the warehouse area as shown on Exhibit B will be
completed.
* The walls in the office and washroom areas will be painted and broken
ceiling tiles will be replaced as necessary.
* The floors in the office and washroom areas will be re-surfaced with either
carpet or vinyl composite floor tile.
* Four (4) each edge of dock levelers, Kelley or equal, will be installed at
the south interior truck docks.
* The warehouse floor will be power scrubbed clean.
* The lighting fixtures will be placed in good working condition.
* The plumbing, heating, ventilating and air-conditioning systems will be
placed in working condition.
* The dock doors and levelers will be placed in good working condition.
* The concrete masonry wall which encloses the north interior truck dock will
be cleaned and painted (white) on the warehouse side of the wall.
* An Allowance of $10,000 will be provided Tenant for improvements in the
building (office or warehouse area) in addition to those outlined above.
Landlord's contractor will perform said work.
* Install locks on the Tenant's side of the rolling fire doors in the south
demising wall to secure Tenant's space.
<PAGE>
EXHIBIT "D"
The following work will be required in accordance with the maintenance contract
required in Paragraph 6.E. of the Lease:
1. Check performance of all major components.
2. Lubricate moving parts as required.
3. Check refrigerant charges (during cooling season).
4. Inspect for oil and refrigerant leaks.
5. Check operating and safety controls.
6. Check pressures and temperatures.
7. Inspect condensers.
8. Inspect fans, motors and starters.
9. Tighten electrical connections at equipment.
10. Test amperages and voltages.
11. Check belts and drives.
12. Change oil and filters, or dryers, as required.
13. Check temperature on control system.
14. Thoroughly inspect heat exchanger.
<PAGE>
FCOA ACQUISITION CORP.
1989 STOCK OPTION PLAN
July 7, 1989
1. Purpose.
The purpose of this plan (the "Plan") is to secure for FCOA Acquisition
Corp. (the "Company") and its shareholders the benefits arising from capital
stock ownership by key employees, non-employee directors and independent
consultants of the Company and its subsidiary corporations who are expected to
contribute to the Company's future growth and success. Except where the context
otherwise requires, the term "Company" shall include all subsidiaries of the
Company as defined in Sections 425(e) and 425(f) of the Internal Revenue Code of
1986, as amended (the "Code").
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and meeting the requirements of Section
422A of the Code or non-statutory options which are not intended to meet the
requirements of Section 422A of the Code.
(b) Administration. The Plan will be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors
may in its sole discretion grant options to purchase shares of the Company's
Common Stock and issue shares upon exercise of such options as provided in the
Plan. The Board shall have authority, subject to the express provisions of the
Plan, to construe the respective option agreements and the Plan, to prescribe,
amend and rescind rules and regulations relating to the Plan, to determine the
terms and provisions of the respective option agreements, which need not be
identical, and to make all other determinations in the judgment of the Board of
Directors necessary or desirable for the administration of the Plan. The Board
of Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No director shall be liable for any
action or determination made in good faith. The Board of Directors may, to the
full extent permitted by law,
-1-
<PAGE>
delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee.
3. Eligibility.
(a) General. Options shall be granted only to persons who are, at the
time of grant, employees (including officers and directors who are employees),
non-employee directors and consultants of the Company. No person shall be
granted any Incentive Stock Option under the Plan who, at the time such option
is granted, owns, directly or indirectly, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, unless the
requirements of paragraph (b) of Section 11 are satisfied. The attribution of
stock ownership provisions of Section 425(d) of the Code, and any successor
provisions thereto, shall be applied in determining the shares of stock owned by
a person for purposes of applying the foregoing percentage limitation. A person
who has been granted an option may, if he or she is otherwise eligible, be
granted an additional option or options if the Board of Directors shall so
determine.
(b) Grant of Options to Directors. From and after the registration of the
Common Stock of the Company under the Securities Exchange Act of 1934 (the
"Exchange Act"), the selection of a director as a participant and the number of
shares for which an option or options may be granted to such director shall be
determined either (i) by the Board of Directors, of which a majority, as well as
a majority of the directors acting in the matter, shall be "disinterested
persons" (as hereinafter defined) or (ii) by, or only in accordance with, the
full authority to act in the matter, of which all members shall be
"disinterested persons". For the purposes of the Plan, a director or member of
such committee shall be deemed to be "disinterested" only if such person
qualifies as a "disinterested person" within the meaning of paragraph (d)(3) of
Rule 16D-3 under the Exchange Act (or any successor rule), as such term is
interpreted from time to time.
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock of the Company which may be issued and sold under the
Plan is 41,400 shares. Such shares may be authorized and unissued shares or may
be shares issued and thereafter acquired by the Company. If an option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full, the unpurchased shares subject to such
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<PAGE>
option shall again be available for subsequent option grants under the Plan.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be specified by the Board of Directors. Each option agreement
shall state whether the options granted thereby are Incentive Stock Options or
non-statutory options.
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors, provided,
however, that in the case of an Incentive Stock Option, the exercise price shall
not be less than 100% of the fair market value of such stock, as determined by
the Board of Directors at the time of grant of such option, or less than 110% of
such fair market value in the case of options described in paragraph (b) of
Section 11.
(b) Payment of Purchase Price. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, by delivery to
the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, or by any combination of such methods of payment. The
fair market value of any shares of the Company's Common Stock which may be
delivered upon exercise of the option shall be determined in accordance with the
terms of the applicable option agreement. An option agreement may provide for
other forms of payment of purchase price, including, without limitation, payment
by exchange of outstanding options granted under the Plan.
7. Option Period.
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine, but, in the case of Incentive Stock Options,
in no event after the expiration of ten years from the day on which the option
is granted (or five years in the case of options described in paragraph (b) of
Section 11) and, in the case of non-statutory options, in no event after the
expiration of ten years plus 30 days from the day on which the option is
granted, and in either case, shall be subject to earlier termination as provided
in the Plan.
-3-
<PAGE>
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
froth in the agreement evidencing such option, subject to the provisions of
Section 7 above.
9. Nontransferability of Options.
No option granted under the Plan shall be assignable or transferable by the
person to whom it is granted, either voluntarily or by operation of law, except
by will or the laws of descent and distribution. During the life of the
optionee, the option shall be exercisable only by such person.
10. Effect of Termination of Employment.
No Incentive Stock Option may be exercise unless, at the time of such
exercise, the optionee is, and has been continuously since the date of grant of
his or her Incentive Stock Option, employed by the Company, except that if and
to the extent the option agreement or instrument so provides:
(a) the Incentive Stock Option may be exercise within the period of three
months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the
applicable option agreement);
(b) if the optionee dies while in the employ of the Company, or within
three months after the optionee ceases to be such an employee, the
Incentive Stock Option may by exercised by the person to whom it is
transferred by will or by the laws of descent and distribution within
the period of one year after the date of death (or within such lesser
period as may be specified in the applicable option agreement); and
(c) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised
within the period of one year after the date the optionee ceases to be
such an employee because of such disability (or within such lesser
period as may be specified in the applicable option agreement);
provided, however, that in no event may any Incentive Stock Option be exercised
after the expiration date of the Incentive Stock
-4-
<PAGE>
Option. For all purposes of the Plan and any Incentive Stock Option granted
hereunder, "employment" shall be defined in accordance with the provisions of
Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations).
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be specifically designated as Incentive Stock Options and shall be
subject to the following additional terms and conditions:
(a) Dollar Limitation. Incentive Stock Options granted to any employee
under the Plan (and any other incentive stock option plans of the Company) shall
not, in the aggregate, become exercisable for the first time in any one calendar
year for shares of Common Stock with an aggregate fair market value (determined
as of the respective date or dates of grant) of more than $100,000.
(b) 10% Shareholder. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 425(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value
of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years from the
date of grant.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors may, in its sole
discretion, include additional provisions in any option granted under the Plan,
including without limitation restrictions on transfer, repurchase rights,
commitments to pay cash bonuses, make or arrange for loans or transfer other
property to optionees upon exercise of options, or such other provisions as
shall be determined by the Board of Directors; provided that such term or
condition of the Plan and such additional provisions shall not cause any
Incentive Stock Option granted under the Plan to fail to qualify as an Incentive
Stock Option within the meaning of Section 422A of the Code.
-5-
<PAGE>
(b) Acceleration. The Board of Directors may, in its sole discretion,
accelerate the date or dates on which all or any particular option or options
granted under the Plan may be exercised.
13. General Restrictions.
(a) Investment Representations. The Company may require any person to
whom an option is granted, as a condition of exercising such option, to give
written assurances in substance and form satisfactory to the Company to the
effect that such person is acquiring the Common Stock subject to the option for
his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws.
(b) Compliance With Securities Laws. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance of purchase of shares thereunder, such
option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Board of Directors. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
14. Rights as a Shareholder.
The holder of an option shall have no rights as a shareholder with respect
to any shares covered by the option until the date of issue of a stock
certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
15. Adjustments.
(a) General. If, as a result of a merger, consolidation, sale of all or
substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to the outstanding shares of Common
Stock or other securities, the outstanding shares of Common Stock are increased
or decreased, or are exchanged for a different number or kind of
-6-
<PAGE>
shares or other securities, or additional shares or new or different shares or
other securities are distributed with respect to such shares of Common Stock or
other securities, an appropriate and proportionate adjustment may be made in (i)
the maximum number and kind of shares reserved for issuance under the Plan, (ii)
the number and kind of shares or other securities subject to then outstanding
options under the Plan, and (iii) the price for each share subject to any then
outstanding options under the Plan, without changing the aggregate purchase
price as to which such options remain exercisable.
(b) Board Authority to Make Adjustments. Adjustments under this Section
15 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the Plan on account
of any such adjustments.
16. Reorganization.
(a) General. In the event of a merger or consolidation in which the
Company is not the surviving corporation, or which results in the acquisition of
substantially all of the Company's outstanding Common Stock by a single person,
entity or group of persons or entities acting in concert, or in the event of the
sale or transfer of all or substantially all of the assets of the Company, or in
the event of a reorganization or liquidation of the Company, prior to the
Expiration Date or termination of this option, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company, shall, as to outstanding options, either (i) provide that such
options shall be assumed, or options substantially equivalent to the terms of
the options provided for hereunder shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), if any, (ii) upon written
notice to the Optionees, provide that all unexercised options shall become
exercisable effective upon the consummation of such merger, consolidation,
acquisition, reorganization, liquidation, sale or transfer, but such options
shall terminate immediately following the consummation of such transaction,
unless exercised by the Optionee within a specified number of days following the
date of such notice effective upon the consummating of such transaction, or
(iii) in the event of a merger under the terms of which holders of the Common
Stock of the Company will receive upon consummation thereof a cash payment for
each share surrendered in the merger (the "Merger Price"), make or provide for a
cash payment to the optionees equal to the difference between (A) the Merger
Price times the number of shares of Common Stock subject to such outstanding
options (to the extent exercisable) and (B) the
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<PAGE>
aggregate exercise price of all such outstanding options in exchange for the
termination of such options.
(b) Substitute Options. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee. Whether an authorized leave of absence, or absence in military or
governmental service, shall constitute termination of employment shall be
determined at the time of such absence in accordance with the provisions of
Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations).
18. Other Employee Benefits.
The amount of any compensation deemed to be received by an employee as a
result of the exercise of an option or the sale of shares received upon such
exercise will not constitute compensation with respect to which any other
employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, except that without the approval of the
shareholders of the Company the Board of Directors may not (a) materially
increase the benefits accruing to individuals who participate in the Plan, (b)
increase the maximum number of shares which may be issued under the Plan (except
for adjustments specifically provided in the Plan), or (c) materially modify the
requirements as to eligibility for participation in the Plan. The termination
or any modification or amendment of the Plan shall not, without the consent of
an optionee, affect his or
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<PAGE>
her rights under an option previously granted to him or her. With the consent
of the optionee affected, the Board of Directors may amend outstanding option
agreements in a manner not inconsistent with the Plan. The Board of Directors
shall have the right to amend or modify the terms and provisions of the Plan and
any of the outstanding Incentive Stock Options granted under the Plan to the
extent necessary to qualify any or all such options for such favorable federal
income tax treatment (including deferral of taxation upon exercise) as may be
afforded incentive stock options under Section 422A of the Code.
20. Withholding.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of Options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common stock otherwise issuable pursuant to the exercise of
an Option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 20(a)
may only satisfy his or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
(b) Notwithstanding the foregoing, in the case of an optionee subject to
the reporting requirements of Section 16(a) of the Exchange Act, no election to
use shares for the payment of withholding taxes shall be effective unless made
in compliance with any applicable requirements of Rule 16b-3(e) or any successor
rule under such Act.
21. Cancellation and New Grant of Options.
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, the cancellation
of any or all outstanding options under the Plan and the grant in substitution
therefor of new options under the Plan covering the same or different numbers of
shares of Common Stock having an option exercise price per share which may be
lower or higher than the exercise price per share of the canceled options.
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<PAGE>
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, any Incentive
Stock Options previously granted under the Plan shall terminate and no further
Incentive Stock Options shall be granted. Amendments to the Plan not requiring
shareholder approval shall become effective when adopted by the Board of
Directors; amendments requiring shareholder approval (as provided in Section 19)
shall become effective when adopted by the Board of Directors, but not Incentive
Stock Option issued after the date of such amendment shall become exercisable
(to the extent that such amendment to the Plan was required to enable the
Company to grant such Incentive Stock Option to a particular optionee) unless
and until such amendment shall have been approved by the Company's shareholders.
If such shareholder approval is not obtained within twelve months of the Board's
adoption of such amendment, any Incentive Stock Options granted on or after the
date of such amendment shall terminate to the extent that such amendment to the
Plan was required to enable the Company to grant such option to a particular
optionee. Subject to this limitation, options may be granted under the Plan at
any time after the effective date and before the date fixed for termination of
the Plan.
(b) Termination. The Plan shall terminate upon the earlier of (i) the
close of business of the date next preceding the tenth anniversary of the date
of its adoption by the Board of Directors, or (ii) the date on which all shares
available for issuance under the Plan shall have been issued pursuant to the
exercise or cancellation of options granted under the Plan. If the date of
termination is determined under (i) above, then options outstanding on such date
shall continue to have force and effect in accordance with the provisions of the
instruments evidencing such options.
Adopted by the Board of Directors on
July 7, 1989.
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<PAGE>
Exhibit 10.7
BANK [LOGO] ONE Business Loan Agreement
================================================================================
Agreement by and between Bank One, Chicago ("Bank One"), located at Arlington
Heights, Illinois and Factory Card Outlet of America. Ltd. and FCOA Acquisition
Corp. collectively ("Borrower"), located at 745 Birginal Dr. Bensenville,
Illinois 60106.
Borrower has requested certain extension(s) of credit provided by Bank One,
evidenced by the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Business Purpose
(a) Revolving Promissory Note $15,000,000 November __, 1995
------------------------- ----------- ----------------- ---------------------
Instrument Amount Date (Obligor) (Guarantor)
Borrower
--------------------- -------------------------- ---------------------
Obligor Obligor (Obligor) (Guarantor)
Business Purpose Revolving
(b) Promissory Note $5,000,000 November __, 1995
------------------------- ----------- ----------------- ---------------------
Instrument Amount Date (Obligor) (Guarantor)
Borrower
--------------------- -------------------------- ---------------------
Obligor Obligor (Obligor) (Guarantor)
(c) Promissory Note $1,500,000 May 1, 1995
------------------------- ----------- ----------------- ---------------------
Instrument Amount Date (Obligor) (Guarantor)
Factory Card Outlet
of America Ltd. FCOA Acquisition Corp.
--------------------- -------------------------- ---------------------
Obligor Obligor (Guarantor)
Instrument Amount
</TABLE>
and any and all renewals, extensions or substitutions therefor ("Obligations").
In consideration of the mutual promises set forth below and the extension(s) of
credit as described above and subject to Borrower's satisfactory fulfillment of
all conditions incident to the borrowing(s), Bank One and Borrower agree as
follows:
ARTICLE I - DEFINITIONS
The following terms shall have the following meanings in this Agreement or in
any document made or delivered pursuant to or in conjunction with this
Agreement:
1.1 All computations and determinations as to accounting or financial matters
shall be made in accordance with generally accepted accounting principles
consistently applied ("GAAP"), and all accounting or financial terms shall have
the meanings ascribed to such terms by GAAP.
1.2 "Indebtedness" shall mean:
(a) All indebtedness and liabilities of whatsoever kind, nature and
description owed to Bank One by Borrower (including Liabilities of Borrower as
defined in any note now or hereafter executed by Borrower in favor of Bank One),
whether direct or indirect, absolute or contingent, due or to become due or
whether now existing or hereafter arising, and howsoever evidenced or acquired,
and whether joint and several;
<PAGE>
(b) All future advances which Bank One at any time may, but shall not be
required to, make for the protection or preservation of Bank One's rights and
interests arising hereunder, including, without limitation, advances for taxes,
levies, assessments, insurance, and reasonable attorneys' fees, if allowable by
law; and
(c) All costs and expenses incurred by Bank One in the protection and
preparation for sale of any of the collateral hereinafter described in Section
3.1 in any other security document including, without limitation, attorneys'
fees, if allowable by law, and court costs.
1.3 "Obligation" shall mean the above referenced extension(s) of credit
including any Promissory Note, Guaranty, Letter of Credit or other instrument of
Borrower evidencing any loan, advance, credit or extension or renewal thereof
made or committed by Bank One to Borrower under this Agreement.
1.4 "Person" shall mean and include an individual, partnership, corporation,
trust, unincorporated association or organization, government or any department
or agency thereof.
1.5 "Related Person" shall include, but shall not be confined to, any Person
related to Borrower by common control or ownership.
1.6 "Subordinated Debt" shall mean indebtedness of Borrower which is
subordinated to all indebtedness of Borrower to Bank One under the terms and
conditions approved in writing by Bank One.
1.7 The aforestated definitions, and all other definitions which may be set
forth herein, shall be applicable to the singular and plurals of said defined
term.
ARTICLE II - REPRESENTATIVES AND WARRANTIES
Borrower represents and warrants that:
2.1 If applicable, it is a duly organized, legally existing corporation in good
standing under the laws of the State of Illinois, is qualified to do business in
and is in good standing under the laws of any other state in which it conducts
its business.
2.2 It has the power and is duly authorized to enter into this Agreement and to
execute and deliver to Bank One, now and from time to time hereafter, additional
instruments, resolutions, agreements and other instruments or documents relating
to the Obligation owed to Bank One. It has, by proper action, authorized and
empowered those persons whose signatures appear in this Agreement, and any
instruments, documents and exhibits that have been delivered in connection
herewith to execute the same for and on its behalf.
2.3 The execution by it of this Agreement or any other agreements, instruments,
or documents which may, from time to time hereafter, be executed in respect
hereto and delivered to Bank One, shall not constitute a breach of any
provisions contained in its articles of incorporation or bylaws, or if
promulgated pursuant thereto, and that the performance by it of its obligations
hereunder or any agreements executed by it and delivered hereunder shall not
constitute an event of default under any other agreement to which it is now a
party.
2.4 All financial statements and information relating to it which have been or
may hereafter be delivered by it, its agents or accountants to Bank One are true
and correct and have been prepared in accordance with GAAP and that there have
been no material adverse changes in its financial or business condition or
operations since the submission of any financial information to Bank One, and no
material adverse changes in its financial or business condition or operations
are imminent or threatened.
2.5 All of its Federal, State and other tax returns and reports, including
reports to any governmental authority, for the proper maintenance and operation
of its properties, assets and business, as may be required by law to be filed or
paid, have been filed, and all Federal, State and other taxes, assessments, fees
and other governmental charges (other than those presently payable, without
penalty) imposed upon it or its properties or assets, which are due and payable,
have been fully paid unless being contested by it in the ordinary course of
business for which it has provided adequate reserves.
<PAGE>
2.6 There is no litigation or, legal or administrative proceedings,
investigations or other action of any nature, pending or, to its knowledge,
threatened against or affecting it, which have not been disclosed to Bank One
and involve the possibility of any judgment or liability not covered by
insurance which may materially or adversely affect any of its properties or
assets or its right to carry on its business as now conducted.
2.7 It has good, valid and marketable title to all of its property and assets
free of any adverse lien, security interest or encumbrance, except liens,
security interests, pledges and encumbrances disclosed to Bank One by Borrower
in writing prior to the date hereof.
2.8 All of the funds loaned to it pursuant to this Agreement have been or will
be used exclusively in its normal business operation, will not be diverted to or
used in any other manner, and will not be used for the purchasing or carrying of
any "Margin Stock" as defined in regulations promulgated by the Federal Reserve
Board or the Securities and Exchange Commission.
2.9 It possesses and will continue to possess all permits, licenses, trademarks,
patents and rights thereto to conduct its business and that its business does
not conflict or violate any valid rights of others with respect to the
foregoing.
2.10 If applicable, it is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof ("ERISA"). Neither a Reportable Event nor a Prohibited Transaction, as
defined per ERISA, has occurred and is continuing with respect to any Plan, nor
has there been a notice of intent to terminate a Plan or appoint a trustee to
administrate a Plan.
2.11 It is in material compliance with all Federal, State and local laws,
ordinances, regulations, rulings and interpretations relating to industrial
hygiene, public health or safety, environmental conditions, the protection of
the environment, the release, discharge, emission or disposal to air, water,
land or ground water, the withdrawal or use of ground water or the use,
handling, disposal, treatment, storage or management of or exposure to Hazardous
Materials ("Hazardous Materials Laws"), the violation of which would have a
material effect on its business, its financial condition or its assets. The term
"Hazardous Materials" means any flammable materials, radioactive materials,
pollutants, toxic substances, hazardous water, hazardous materials, hazardous
substances, polychlorinated biphenyls, asbestos, urea formaldehyde, petroleum
(including its derivatives, by-products or other hydrocarbons) or related
materials or other controlled, prohibited or regulated substances or materials,
including, without limitation, any substances defined or listed as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "pollutants" or "toxic substances" under any Hazardous Materials
Laws. It has not received any written or oral communication or notice from any
judicial or governmental entity nor it is aware of any investigation by any
agency for any violation of any Hazardous Materials Law,
2.12 Details of all litigation, legal or administrative proceedings,
investigation or other action of similar nature, pending or threatened against
it, at any time during the term of this Agreement, which in part or in whole may
or will render any of these Representations and Warranties no longer true,
accurate and correct in each and every respect, will be brought to the attention
of Bank One, in writing, within fifteen (15) days from the date Borrower
acquires knowledge of same.
ARTICLE III - SECURITY
3.1 As security for repayment of the Indebtedness, regardless of whether the
principal sum evidenced by an Obligation is reduced to zero and thereafter
increased/decreased an unlimited number of times, Borrower hereby grants to Bank
One or has previously caused to be granted to Bank One a security interest
and/or lien in or on the following property under separate instrument(s):
<PAGE>
|X| Accounts, general intangibles, chattel paper, instruments, and other
forms of obligations and receivables
|X| Inventory, merchandise, raw materials, work in process and supplies
|X| Goods, equipment, machinery, furnishings and other personal property
___ Real estate located at _____________________________________________
___ An assignment of life insurance on the life of ______________________
in an amount no less than $_____________
___ Specific collateral described as follows: ____________________________
___________________________________________
3.2 It is further agreed that the security described above shall secure
repayment of all Indebtedness and that a default in terms of any note, security
agreement, mortgage, or other agreement from Borrower to Bank One shall
constitute a default of all notes, security agreements, mortgages, and other
agreements, and that Bank One may proceed in exercising its rights thereunder in
any order or manner it may choose. The purpose of this section being to
cross-collateralize and cross-default all Indebtedness. Additionally, the
security interest described above, if any, may be modified, added to or deleted
from time to time without modification of this Agreement.
ARTICLE IV - AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any Indebtedness is outstanding or
so long as this Agreement is in effect, Borrower shall:
4.1 Maintain insurance against fire, business interruption, public liability,
theft and other casualty on its insurable real and personal property to their
full replacement costs with companies acceptable to Bank One and against
liability on account of damage to persons or property and as required under all
applicable Workers' Compensation Laws. Furthermore, Borrower shall maintain any
other insurance as may from time to time be reasonably requested by Bank One,
shall insert a joint loss payee clause naming Bank One in all fire and extended
coverage policies and shall deliver certified copies of all such insurance
policies to Bank One upon demand.
4.2 Maintain, keep, and preserve its buildings and properties and every part
thereof in good repair, working order, and condition and from time to time make
all needful and proper repairs, renewals, replacements, additions, betterments,
and improvements thereto, so that at all times the efficiency thereof shall be
fully preserved and maintained.
4.3 Duly pay and discharge or cause to be paid and discharged all taxes,
assessments, and other governmental charges imposed upon it and its properties
or any part thereof or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies, which if unpaid might by law become a
lien or charge upon its property, except such items as are being in good faith
appropriately contested and for which it has provided adequate reserves.
4.4 Carry on and conduct its business in substantially the same manner and in
substantially the same fields as such business is now and has heretofore been
carried on, maintain management with the same expertise and experience, and if
management is to be changed, immediately notify Bank One of said change, and
maintain its legal existence, and comply with all valid and applicable statutes,
rules and regulations.
4.5 Maintain, keep, and preserve a system of accounting in accordance with GAAP,
deliver to Bank One financial reports in a form satisfactory to Bank One as Bank
One may request from time to time, permit the duly authorized representative(s)
of Bank One at all reasonable times to examine and inspect the books and records
of it or any related business entity of it, to make abstracts and copies
thereof, and to visit and inspect any of its property wherever the same may be
located.
4.6 Comply with all laws and regulations which it is required to comply with
including Hazardous Materials Laws and regulations, and permit Bank One to make
environmental audits from time to time if requested by Bank One with costs of
same to be paid by Borrower.
<PAGE>
ARTICLE V - NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any Indebtedness is outstanding or
so long as this Agreement is in effect, except for that previously disclosed in
writing to and consented to by Bank One, Borrower shall not without prior
written consent of Bank One:
5.1 Create, incur or assume any indebtedness for borrowed money, other than to
Bank One, or act as guarantor for any indebtedness of others in an aggregate
amount greater than $ 00 other than Subordinated Debt at any time. For purpose
hereof, sale of accounts receivable and or entering into capital leases of
personal property shall be deemed the incurring of indebtedness for borrowed
money.
5.2 Mortgage, pledge, assign, hypothecate, encumber, create or grant a security
interest in any of its assets except to Bank One, nor sell, lease, transfer,
assign or otherwise dispose of any of its assets, properties or business outside
of the ordinary course of business, except secured purchase money or lease
indebtedness up to the amount permitted by Section 5.1, if any.
5.3 Invest in, loan or advance money to, organize or participate in the
organization or in the creation of any other business entity.
5.4 Merge, transfer, acquire or consolidate with or into any other entity,
change ownership, dissolve, and/or transfer or sell any assets outside of the
ordinary course of business without the prior written consent of Bank One.
5.5 If Borrower is a corporation, release, redeem, retire, purchase, or
otherwise acquire directly or indirectly any of its capital stock, or make any
changes in its capital structure, or pay, set aside, allocate or declare any
dividends, in cash or other property, upon its capital stock.
ARTICLE VI - ADDITIONAL COVENANTS
Borrower agrees that each additional covenant listed below is fully applicable
if marked by an "X" or a check in the applicable box or boxes, or if the
information necessary to complete same is typed or written in the appropriate
space provided.
|_| 6.1 GUARANTY. Prior to or contemporaneous with the execution of this
Agreement, Borrower shall deliver to Bank One the Guaranty(s) of
_________________________________________ (Guarantor(s) name(s)) in
form and content acceptable to Bank One which Guaranty(s) shall
provide for liability of the Guarantor(s) for payment of the
Indebtedness and performance of the terms, conditions and provisions
of this Agreement and any and all applicable Security documents and
agreements.
|X| 6.2 FINANCIAL REPORTS. Borrower covenants in accordance with Section 4.5
that it will deliver to Bank One:
|X| (a) Within ninety (90) days after the end of each fiscal year of
Borrower, audited, consolidated financial statements of Borrower
prepared in accordance with GAAP which shall include a Balance
Sheet, Statement of Income, Statement of Reconciliation of Net
Worth, Statement of Changes in Financial Position and Notes to
financial statements and within thirty (30) days from the
applicable filing deadline, Borrower's Federal income tax return.
|X| (b) Within thirty (30) days after the end of each fiscal month of
Borrower, internally prepared financial statements of Borrower
prepared in accordance with GAAP which shall include a Balance
Sheet at the end of each such period and an Income Statement for
the period from the beginning of the current fiscal year to the
end of such period. These statements shall be prepared on
substantially the same accounting basis as the statements
required in Section 6.2(a) above, if applicable, and the accuracy
of the statements (subject to audit and year-end adjustments)
shall be certified by the chief financial officer or president of
Borrower.
<PAGE>
|X| (c) Simultaneously with the financial statements required above,
a Compliance Certificate, in form attached to this Agreement,
certifying that the financial statements are complete and correct
and that the Borrower has no knowledge of any condition, event or
act which with notice or lapse of time or both, could constitute
an Event or Default or which materially and adversely could
affect the financial condition or operations of Borrower, or if
such condition, event or acts exist, specifying the nature and
status thereof.
|_| (d) Within ___________________ (__) days after the end of each
_______________ year, signed and dated personal financial
statements of all individual Guarantor(s) and Obligor(s), if any,
on Bank One's forms, and by May 1 of each calendar year, the
personal income tax returns filed for the past calendar year of
all individual Guarantor(s) and Obligor(s), if any.
|_| (e) Simultaneously with the financial statements required in
___________ above, __________ financial statement(s) of all
corporate or partnership Guarantor(s) and Obligor(s), if any,
prepared in accordance with GAAP.
|X| 6.3 TANGIBLE NET WORTH. Borrower agrees to maintain a Tangible Net Worth
of not less than either (check one):
|X| (a) Ten million five hundred thousand DOLLARS ($ 10,500,000) or
|_| (b) the amount(s) set forth for the following period(s):
Period(s) Amount(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
"Tangible Net Worth" shall be determined in accordance with GAAP and
shall be deemed to include the amount of total assets of Borrower
excluding the amount of Intangible Assets of Borrower minus the amount
of total liabilities of Borrower, exclusive of Subordinated Debt, if
any.
"Intangible Assets" shall be determined in accordance with GAAP and be
deemed to include at book value, without limitation, leasehold
improvements, goodwill, patents, copyrights, secret processes,
deferred expenses relating to sales, general administrative, research
and development expense, and all amounts due from any officer,
employee, director, shareholder or Related Person.
|X| 6.4 DEBT TO TANGIBLE NET WORTH. Borrower agrees to maintain ratio of Debt
to Tangible Net Worth of not more than either (check one):
|X| (a) 3.00 to 1. _________ or
|_| (b) the ratio(s) set forth for the following period(s):
Period(s) Ratio(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
"Debt" shall be determined in accordance with GAAP and shall be deemed
to include all liabilities of Borrower including but not limited to
accruals, deferrals net of deferred rent liability, and capitalized
leases, less Subordinated Debt, if any.
|_| 6.5 WORKING CAPITAL. Borrower agrees to maintain net working capital
(Current Assets less current liabilities) of not less than either
(check one):
<PAGE>
|_| (a) DOLLARS ($________________) or
|_| (b) the amount(s) set forth for the following period(s):
Period(s) Amount(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
"Current Assets" shall be determined in accordance with GAAP and shall
be deemed to include inventory at lower of cost or current market
value less any amounts due from any officer, employee, director,
shareholder or Related Person.
|X| 6.6 CURRENT RATIO. Borrower agrees to maintain a Current Ratio (Current
Assets divided by current liabilities) of not less than either (check
one):
|X| (a) 1.10 to 1. ________ or
|_| (b) the ratio(s) set forth for the following period(s):
Period(s) Ratio(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
|_| 6.7 CASH FLOW RATIO. Borrower agrees to maintain a Cash Flow Ratio (net
income after taxes plus depreciation plus amortization to current
maturities of long term debt) of not less than either (check one):
|_| (a) _________. _________ to _________ _________
|_| (b) the amount(s) set forth for the following period(s):
Period(s) Ratio(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
|X| 6.8 DEBT SERVICE COVERAGE RATIO. Borrower agrees to maintain a Debt
Service Coverage Ratio (net income before interest expense,
depreciation expense, amortization expense, less inventory
capitalization income, plus/minus deferred rent expense to current
maturities of long term debt plus interest) of:
|X| (a) 1.50 to 1. ________ or
|_| (b) the ratio(s) set forth for the following period(s):
Period(s) Ratio(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
|_| 6.9 CAPITAL EXPENDITURES. Borrower agrees not to purchase, lease or
otherwise acquire or enter into any commitment to purchase, lease or
otherwise acquire additional capital assets where the aggregate
liability or expenditure therefore exceeds the following, except with
prior written consent by Bank One (check one):
<PAGE>
|_| (a) $_______________ per fiscal year commencing with fiscal
year ___________or
|_| (b) the amount(s) set forth for the following period(s):
Period(s) Amount(s)
__________________________ _______________________________
__________________________ _______________________________
__________________________ _______________________________
|X| 6.10 SUBORDINATION OF DEBT. Borrower shall cause to be subordinate all
Indebtedness including interest thereon ("Junior Indebtedness"), which may at
any time now or hereafter be owed to any officer, employee, director,
shareholder or Related Person by the Borrower in favor of all Indebtedness,
including interest thereon ("Senior Indebtedness") due Bank One. Borrower shall
obtain and deliver to Bank One subordination agreements from said officers,
employees, directors, shareholders or Related Persons for said Junior
Indebtedness in form and content acceptable to Bank One. Upon the occurrence of
an Event of Default under this Agreement, Borrower shall without notice from
Bank One immediately cease payment of any fees or advances to any officer,
employee, director, shareholder or Related Person and shall also cease payment
of the sums, if any, allowed to be paid by the terms of the Subordination
Agreement(s).
|X| 6.11 DEPOSIT ACCOUNTS. Borrower shall establish and maintain its principal
deposit accounts at Bank One as long as any Indebtedness remains outstanding or
so long as this Agreement remains in effect.
|_| 6.12 COMPENSATION. Borrower agrees, except with prior written consent of
Bank One, that salary, withdrawals, bonuses and all other compensation paid, in
cash or otherwise, by Borrower to the following person(s) shall not exceed the
following amount(s).
Person(s) Amount(s)
__________________________ $_______________________________
__________________________ $_______________________________
__________________________ $_______________________________
|X| 6.13 BORROWING BASE. Borrower is subject to certain "Borrowing Base"
conditions as set forth in the "Borrowing Base" Addendum attached hereto and
made a part hereof.
|_| 6.14 OPINION OF COUNSEL. If required by Bank One, Bank One shall receive a
favorable written opinion of Counsel for Borrower acceptable to Bank One in form
and substance satisfactory to Bank One in its sole discretion, relating to the
Representations and Warranties set forth herein and such other matters as Bank
One may reasonably request.
|X| 6.15 ADDITIONAL PROVISIONS. If any, as are set forth in the Rider attached
hereto and made part hereof.
ARTICLE VII - DEFAULT AND REMEDIES
7.1 Borrower shall be in default hereunder upon the happening of any of the
following ("Event of Default"):
(a) The occurrence of an event of default under the terms of any evidence
of Indebtedness or any Obligation, security agreement, mortgage and
other agreement executed in connection therewith or herewith,
including any renewal, extension or modification thereof or hereof or
in any other obligation or agreement with Bank One, whether now or
hereafter existing;
(b) Non-performance of any covenant, warranty or liability contained or
referred to herein; or
<PAGE>
(c) If any warranty, representation or statement made or furnished to Bank
One by or on behalf of Borrower, Guarantor or any Obligor, in
connection with this Agreement, or to induce Bank One to make a loan
to Borrower, proves to have been false in any material respect when
made or furnished.
7.2 Upon the occurrence of an Event of Default, Bank One may, at its option,
declare principal and accrued interest of all Indebtedness to be immediately due
and payable, without presentation, demand, protest or notice of any kind, all of
which are hereby expressly waived. Bank One shall have all the rights and
remedies of a Secured Party under the Uniform Commercial Code, as enacted in the
state where Bank One's principal office is located, said rights and remedies
being cumulative in nature. Bank One may set off any of the Borrower's or
Guarantor's deposits or accounts, and any other indebtedness of Bank One to
Borrower against the Indebtedness before or after an Event of Default, without
first looking to any property securing payment thereof.
7.3 Acceptance of payment, in full or part, or waiver of any Event of Default
shall not operate as a waiver of any current or later Event of Default, nor of
any other right of Bank One.
7.4 The provisions of this Agreement concerning any Event of Default are not
intended in any way to affect any rights of Bank One with respect to any
Indebtedness of Borrower to Bank One which may or hereafter be payable on
demand.
7.5 No delay or failure of Bank One in exercising any right, power, remedy or
privilege hereunder shall affect such right, power or privilege or be construed
as a waiver against Bank One.
7.6 Any waiver, permit, consent or approval by Bank One of any breach or Event
of Default hereunder must be in writing and shall be effective only to the
extent set forth in such writing.
ARTICLE VIII - MISCELLANEOUS
8.1 All notices required to be given under any term of this Agreement shall be
sufficient if mailed, via registered or certified mail, return receipt
requested, or sent via overnight or hand courier, to the parties at their
respective addresses as previously set forth.
8.2 All documents referred to in this Agreement shall for all purposes be
considered part of this Agreement, and all terms used in this Agreement shall
have the meaning set forth in said documents, and this Agreement shall include
all of the provisions stated in said documents.
8.3 This Agreement is a continuing agreement and shall continue in effect
notwithstanding that from time to time, no Indebtedness may exist. This
Agreement shall continue as to any Indebtedness and as to any and all renewals,
extensions or modifications thereof.
8.4 This Agreement may be executed in several counter-parts, each of which shall
be an original and all of which shall constitute the same instrument.
8.5 This Agreement, together with all other documents executed concurrently
herewith or attached hereto, constitutes the full and complete Agreement of the
parties and may not be modified except by written instrument signed by all
parties hereto.
8.6 This Agreement shall be binding upon and inure to the benefit of Borrower
and Bank One and their respective successors and assigns.
8.7 Borrower agrees to pay on demand all costs and expenses in connection with
the negotiation, preparation, execution, delivery, filing, recording,
administration, enforcement, litigation, collection, or filing of any legal
action on or for any Obligation, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for Bank One, with respect thereto.
Time is of the essence of all requirements of Borrower hereunder. The
obligations of Borrower under this paragraph shall survive payment of any
Obligation.
8.8 This Agreement shall be governed and construed in accordance with the laws
of the state where Bank One's principal office is located.
<PAGE>
8.9 Any provision contained in this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
8.10 Borrower shall fully and promptly pay, perform, discharge, defend,
indemnify and hold harmless Bank One from any and all claims, orders, demands,
causes of action, proceedings, judgments, or suits and all liabilities, losses,
costs or expenses (including, without limitation, technical consultant fees,
count costs, expenses paid to third parties and reasonable legal fees) and
damages arising out of, or as a result of (i) any release, discharge, deposit,
dump, spilt, leak or placement of any Hazardous Material into or on any
Collateral or property owned, leased, rented or used by Borrower (the
"Property") at any time; (ii) any contamination of the soil or ground water of
the Property or damage to the environment and natural resources of the Property
or the result of actions whether arising under any Hazardous Material Law, or
common law; or (iii) any toxic, explosive or otherwise dangerous Material which
have been buried beneath or concealed within the Property. This indemnity shall
survive termination of this Agreement.
8.11 This Agreement contains the entire agreement of the panties and supersedes
all prior agreements and understandings, oral or written, with respect to the
subject matter hereof.
Executed this 10th day of November, 1995.
BORROWER:
Bank One, Chicago, NA Factory Card Outlet of America Ltd.
By: /s/ [ILLEGIBLE] By: /s/ C.R. Cumello
--------------------------- ---------------------------------
FCOA Acquisition Corp.
Its Vice President
By: /s/ C.R. Cumello
---------------------------------
<PAGE>
RIDER TO BUSINESS LOAN AGREEMENT
DATED NOVEMBER 10, 1995
1. As of December 31, 1995 and June 30, 1996, the aggregate outstanding
principal balance of the Note and the $5,000,000 note of Borrower shall not
exceed, and Borrower shall make such payments thereon as are necessary to so
effect, an amount equal to 45% of Eligible Inventory.
2. Borrower shall pay to Bank One a commitment fee equal to 1/4% per year
of the daily average unused amount of the $15,000,000 Note, such payment due on
the last day of each calendar quarter.
3. Borrower shall maintain a Fixed Cost Coverage Ratio within 90% of that
provided in the financial projections provided Bank One prior to the date of
this Agreement. "Fixed Cost Coverage Ratio" means the ratio of (a) the twelve
month rolling average of the sum of (i) earnings before interest, taxes and
non-store depreciation and amortization charges, plus (ii) rental payments, to
(b) the twelve month rolling average of the sum of (i) interest payments due and
payable plus (ii) rental payments.
4. Borrower shall maintain a Leverage Ratio of not greater than 4.00:1.
"Leverage Ratio" means the ratio of (a) the sum of (i) all indebtedness and
other liabilities of Borrower, including Subordinated Debt plus (ii) 3 times the
aggregate of all of Borrower's obligations under operating leases to (b)
Tangible Net Worth.
5. In the event there is a default hereunder occasioned by a breach of a
covenant in paragraph 3 or 4 immediately above, which default continues for two
consecutive months, in addition to all other remedies available to Bank One
hereunder, Borrower is prohibited from executing any leases for the opening of
any new store or other retail outlet without the prior written consent of Bank
One.
6. Borrower shall not open any new store or other retail outlet, or change
the location of any existing store, without prior written notice to Bank One.
7. Without the prior written consent of Bank One, Factory Card Outlet of
America Ltd. shall make no loans, advances or extensions of credit, nor pay any
dividends or other distributions on account of its common stock to FCOA
Acquisition Corp.
<PAGE>
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of August 2, 1996, by and among FCOA Acquisition
Corp., a Delaware corporation (the "Company"), and the Persons listed on
Schedule A attached hereto (the "Stockholders"). Certain capitalized terms used
herein are defined in Section 8 below.
WHEREAS, the Company and the initial holders of the Company's Series A
Preferred, are parties to a Series A Preferred Stock Purchase Agreement, dated
as of July 10, 1989, as amended by a First Amendment to the Series A Preferred
Stock Purchase Agreement dated July 15, 1994 and by a Second Amendment to the
Series A Preferred Stock Purchase Agreement of even date herewith (as amended,
the "Series A Purchase Agreement");
WHEREAS, the Company and the initial holders of the Company's Subordinated
Debentures Due 1993 are parties to a Purchase Agreement, dated as of September
11, 1990 (the "Sub Debt Purchase Agreement") whereby holders of shares of Common
Stock issued in payment of interest thereunder are entitled to certain
registration rights (the "Interest Shares");
WHEREAS, the Company and the initial holders of the Company's Series B
Preferred (the "Series B Stockholders") are parties to a Stock Purchase
Agreement, dated as of July 15, 1994, as amended by a First Amendment to the
Series B Preferred Stock Purchase Agreement of even date herewith (the "Series B
Purchase Agreement");
WHEREAS, the Company and the initial holders of the Company's Series C
Preferred (the "Series C Stockholders") are parties to a Stock Purchase
Agreement of even date herewith (the "Series C Purchase Agreement");
WHEREAS, certain other parties hereto hold shares of the Company's Common
Stock, no par value per share (the "Common Stock");
WHEREAS, in order to induce the Series C Stockholders to enter into the
Series C Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition to the
Series C Stockholders' obligations to acquire the Series C Preferred pursuant to
the Series C Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties to this Agreement hereby agree as follows:
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1. Demand Registrations.
(a) Requests for Registration. The holders of the Series C Registrable
Securities shall be entitled to request registration under the Securities Act of
all or a portion of their Registrable Securities at any time ("Series C Demand
Registrations"), the holders of the Series B Registrable Securities shall be
entitled to request registration under the Securities Act of all or a portion of
their Registrable Securities at any time ("Series B Demand Registrations"), and
the holders of the Series A Registrable Securities and the Common Stock
Registrable Securities, acting as a single class, shall be entitled to request
registration under the Securities Act of all or a portion of their Registrable
Securities at any time ("Series A Demand Registrations," and, together with
Series B Demand Registrations and Series C Demand Registrations, "Demand
Registrations"), subject to the terms and conditions hereof (including without
limitation Sections l(b), (c) and (d) below).
(b) Long-Form Demand Registrations. Subject to Section 1(a) above and the
other terms and conditions hereof, the holders of a majority of the Series C
Registrable Securities then in existence shall be entitled to request two Series
C Demand Registrations on Form S-1 or any similar long form ("Series C Long-Form
Demand Registrations"), the holders of a majority of the Series B Registrable
Securities then in existence shall be entitled to request two Series B Demand
Registrations on Form S-1 or any similar long form ("Series B Long-Form Demand
Registrations"), and the holders of a majority of the Series A Registrable
Securities and the Common Stock Registrable Securities then in existence, voting
as single class, shall be entitled to request two Series A Demand Registrations
on Form S-1 or any similar long form ("Series A Long-Form Demand Registrations,"
and, together with the Series B Long-Form Demand Registrations and the Series C
Long-Form Demand Registrations, "Long-Form Demand Registrations").
(c) Short-Form Registrations. Subject to Section 1(a) above and the other
terms and conditions hereof, the holders of a majority of the Series C
Registrable Securities then in existence, the holders of a majority of the
Series B Registrable Securities then in existence and the holders of a majority
of the Series A Registrable Securities and the Common Stock Registrable
Securities then in existence, acting as a single class, shall each be entitled
to request an unlimited number of Demand Registrations on Form S-2 or S-3, or
any similar short form (a "Short-Form Demand Registration"). After the Company
has become subject to the reporting requirements of the Securities Exchange Act,
the Company shall use its best efforts to make Short-Form Registrations
available for the sale of Registrable Securities.
(d) Other Conditions. The Company shall not be obligated hereunder to
effect any Demand Registration unless the aggregate offering price of the
Registrable Securities to be offered pursuant to such registration is at least
$7.5 million. The Company shall not be obligated to effect any Demand
Registration requested pursuant to Section 1(1)) or (c) above within 12 months
after the effective date of any prior such Demand Registration. The Company
shall pay all Registration Expenses, as defined in Section 5 below, of the
holders of Registrable Securities requested to be included in any Demand
Registration. A registration shall not count
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as one of the permitted Series A Long-Form Registrations unless at least 75 % of
the Series A Registrable Securities requested to be included in such
registration are registered and sold thereunder, a registration shall not count
as one of the permitted Series B Long-Form Registrations unless at least 75 % of
the Series B Registrable Securities requested to be included in such
registration are registered and sold thereunder, and a registration shall not
count as one of the permitted Series C Long-Form Registrations unless at least
75 % of the Series C Registrable Securities requested to be included in such
registration are registered and sold thereunder, provided that in any event the
Company shall pay all Registration Expenses in connection with any registration
initiated as a Demand Registration whether or not it has become effective. All
Long-Form Demand Registrations shall be underwritten registrations. All Demand
Registrations shall be Short-Form Registrations whenever the Company is
permitted to use any applicable short form.
(e) Notices and Participation. Each request for a Demand Registration shall
be in writing and shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. Within ten days after receipt of any such request, the Company shall
give written notice of such requested registration to all other holders of
Registrable Securities and, subject to Section 1(f) and (h) below, shall use its
best efforts to include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion therein
within 20 days after the receipt of the Company's notice.
(f) Priority on Demand Registration. The Company shall not include in any
Demand Registration any securities which are not Registrable Securities without
the prior written consent of the holders of a majority of the Registrable
Securities initially requesting such registration. If a Demand Registration is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion all or a number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering
exceed the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requesting such registration, then the Company shall be required to include in
such Demand Registration only that number of Registrable Securities and other
securities, if any, which the managing underwriter believes may be sold in an
orderly manner in such offering in the following order of priority of
participation:
(i) first, the Series C Registrable Securities, the Series B
Registrable Securities and the Series A Registrable Securities and Common
Stock Registrable Securities requested to be included therein, pro rata
among the holders thereof on the basis of the number of Series C, Series B,
Series A and Common Stock Registrable Securities held by each such holder,
(ii) second, any other Registrable Securities requested to be included
therein, pro rata among the holders thereof on the basis of the number of
such other Registrable Securities held by each such holder, and (iii)
third, any other securities requested and permitted to be included therein,
pro rata on the basis of the number of such other securities held by each
holder thereof; and
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(g) Selection of Underwriters. The holders of a majority of the Registrable
Securities initially requesting registration hereunder shall have the right to
select the investment banker(s) and manager(s) to administer the offering made
pursuant to such registration, subject to the Company's approval which shall not
be unreasonably withheld.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any of
its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
shall give prompt written notice (in any event within five business days after
its receipt of notice of any exercise of demand registration rights other than
under this Agreement) to all holders of Registrable Securities of its intention
to effect such a registration and, subject to Sections 2(c) and 2(d) below,
shall include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein within 20
days after receipt of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary 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
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
shares owned by each such holder,, and (iii) third, other securities requested
and permitted to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of the Company's
securities other than Registrable Securities, 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 holders initially requesting such registration, the Company
shall include in such registration (i) first, the securities requested to be
included therein by the holders requesting such registration, (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of such Registrable Securities on the basis of the number of
such Registrable Securities owned by each such holder, and (iii) third, other
securities requested and permitted to be included in such registration.
(e) Other Registrations. If the Company has previously filed a registration
statement with respect to Registrable Securities pursuant to Section 1 or this
Section 2, and if
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such previous registration has not been withdrawn or abandoned, the Company
shall not file or cause to be effected any other registration of any of its
equity securities or securities convertible or exchangeable into or exercisable
for its equity securities under the Securities Act (except on Forms S-4 or S-8
or any successor forms), whether on its own behalf or on behalf of any holder or
holders of such securities, until a period of at least 90 days has elapsed from
the effective date of such previous registration, without the prior consent of
holders of a majority of the Registrable Securities included in such previous
registration or the underwriters managing such previous registration.
(f) Notwithstanding anything contained in this Agreement to the contrary,
if any holder of Registrable Securities does not elect to include his or its
Registrable Securities in a Piggyback Registration, such holder of Registrable
Securities shall not be entitled to request or participate in any request for
any Demand Registration or to include such holder's Registrable Securities in
any registration hereunder for six months after the effective date of said
Piggyback Registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities agrees not to effect any public
sale or distribution (including sales pursuant to Rule 144) 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 Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included (except as part of such underwritten registration) and
(ii) the seven days prior to and the 120-day period beginning on the IP0 Date
(except as part of such underwritten registration), unless the underwriters
managing the registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or distribution
(including sales pursuant to Rule 144) of its equity securities, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and during the 180-day period beginning on the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration in which Registrable Securities are included (except as
part of such underwritten registration or pursuant to registrations on Forms S-4
or S-8 or any successor forms), unless the underwriters managing the registered
public offering otherwise agree, and (ii) shall cause each holder of at least 3
% (on a fully-diluted basis) of its Common Stock, or any securities convertible
into or exchangeable or exercisable for Common Stock, purchased from the Company
at any time after the date of this Agreement (other than in a registered public
offering) to agree not to effect any public sale or distribution (including
sales pursuant to Rule 144) of any such securities during such period (except as
part of such underwritten registration, if otherwise permitted), unless the
underwriters managing the registered public offering otherwise agree.
(c) It shall be the responsibility of the Company to notify holders of
Registrable Securities of the periods in which the restrictions contained in
Section 3 are in effect.
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4. Registration Procedures. Whenever the holders of Registrable Securities
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company shall use its best efforts to effect the registration and
the sale of such Registrable Securities in accordance with the intended method
of disposition thereof (including the registration of Series A Preferred, Series
B Preferred, Series C Preferred and Common Stock held by a holder of Registrable
Securities requesting registration as to which the Company has received
reasonable assurances that only Registrable Securities shall be distributed to
the public), and pursuant thereto the Company shall as expeditiously as
possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall furnish to counsel to the holders of
Registrable Securities copies of all such documents proposed to be filed, which
documents shall be subject to the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the effectiveness of
each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than 180 days and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such Registrable Securities
under such other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller provided that the Company shall not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this subsection, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein
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not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on the NASD automated quotation system and, if
listed on the NASD automated quotation system, use its best efforts to secure
designation of all such Registrable Securities covered by such registration
statement as a NASDAQ "national market system security" within the meaning of
Rule 1 lAa2-1 of the Securities and Exchange Commission or, failing that, to
secure NASDAQ authorization for such Registrable Securities and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register as such with respect to such Registrable Securities with the
NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting agreements
in customary form) and take all such other actions as the holders of a majority
of the Registrable Securities being sold or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities (including effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the Securities and Exchange Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in its sole
and exclusive judgment, might be deemed to be an underwriter or a controlling
person of the Company, to participate in the preparation of such registration or
comparable statement and to require the insertion therein of material, furnished
to the Company in writing, which in the reasonable judgment of such holder and
its counsel should be included;
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(1) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(m) use its best efforts to cause such Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities; and
(n) obtain a cold comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by cold comfort letters as the holders of a majority of the Registrable
Securities being sold reasonably request provided that Registrable Securities
constitute at least 10% of the securities covered by such registration
statement).
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or compliance
with this Agreement, 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 (all such expenses being
herein called "Registration Expenses"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
included in any Piggyback Registration or initially requesting any Demand
Registration, as applicable.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law, each
holder of Registrable Securities, its partners, officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact
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contained in any 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, 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 Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder 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 writing by such holder; provided that the obligation to indemnify
shall be individual to each holder and shall be limited to the net amount of
proceeds received by such holder from the sale of Registrable Securities
pursuant to such registration statement.
(c) 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 reasonable 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.
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(d) If the indemnification provided for in this Section 6 is unavailable or
insufficient to hold harmless an indemnified party under Section 6(a) or 6(d)
above, 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 Section 6(a) or 6(d) above 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 6(d) 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 6(d). 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.
(e) The indemnification provided for under this Agreement 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.
7. Participation in Underwritten Registrations. No Person may participate
in any registration hereunder which is underwritten unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons 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 Registrable Securities 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.
8. Definitions.
"Common Stock" means the Company's Common Stock, no par value per share.
"Common Stock Registrable Securities" means Registrable Securities relating
to the Common Stock referred to in clause (vii) of the definition of Registrable
Securities.
"Investor Registrable Securities" means, collectively, the Series A
Registrable Securities, the Series B Registrable Securities and the Series C
Registrable Securities.
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"IPO Date" means the effective date of the first firm underwritten public
offering of Common Stock under the Securities Act.
"Market Price" shall have the meaning set forth in the Company's
Certificate of Incorporation as in effect on the date hereof.
"Person" shall have the meaning set forth in the Series C Purchase
Agreement.
"Registrable Securities" means (i) any Common Stock issued or issuable upon
the conversion of any Series C Preferred issued pursuant to the Series C
Purchase Agreement, (ii) any Common Stock issued or issuable upon the conversion
of any Series B Preferred issued pursuant to the Series B Purchase Agreement,
(iii) any Common Stock issued or issuable upon the conversion of any Series A
Preferred issued pursuant to the Series A Purchase Agreement, (iv) 15,000
Interest Shares issued pursuant to the Sub Debt Purchase Agreement, (v) any
Common Stock issued or issuable upon exercise of any Stock Options, (vi) any
Common Stock issued or issuable directly or indirectly with respect to the
securities referred to in clauses (i) through (v) above by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization and (vii) Common
Stock issued and outstanding as of the date hereof. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when they have been distributed to the public pursuant to a offering registered
under the Securities Act or sold to the public through a broker, dealer or
market maker in compliance with Rule 144 under the Securities Act (or any
similar rule then in force). For purposes of this Agreement, a Person shall be
deemed to be a holder of Registrable Securities whenever such Person has the
right to acquire directly or indirectly such Registrable Securities (upon
conversion or exercise in connection with a transfer of securities or otherwise,
but disregarding any restrictions or limitations upon the exercise of such
right), whether or not such acquisition has actually been effected.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred", "Series B Preferred" and "Series C Preferred" means
the Company's Series A Preferred Stock, its Series B Preferred Stock and its
Series C Preferred Stock, respectively, each with a par value $.01 per share.
"Series A Registrable Securities" means Registrable Securities relating to
the Series A Preferred referred to in clauses (iii) and (iv) of the definition
of Registrable Securities.
"Series B Registrable Securities" means Registrable Securities relating to
the Series B Preferred referred to in clause (ii) of the definition of
Registrable Securities.
"Series C Registrable Securities" means Registrable Securities relating to
the Series C Preferred referred to in clause (i) of the definition of
Registrable Securities.
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"Stock Options" means stock options issued or issuable to directors,
employees, consultants and sponsors of the Company pursuant to the FCOA
Acquisition Corp. 1989 Stock Option Plan, as amended, exercisable for up to
280,000 shares of Common Stock.
"Subsequent Offering Date" means the effective date of any underwritten
public offering of Common Stock under the Securities Act occurring after the IPO
Date.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement. Except as provided in this Agreement, the Company shall not grant to
any Persons the right to request the Company to register any equity securities
of the Company, or any securities convertible or exchangeable into or
exercisable for such securities, without the prior written consent of the
holders of a majority of the Series C Registrable Securities then in existence,
the holders of a majority of the Series C Registrable Securities then in
existence and the holders of a majority of the Series A Registrable Securities
and Common Stock Registrable Securities then in existence, voting as a single
class; provided that the Company may grant rights to other Persons to (i)
participate in Piggyback Registrations so long as such rights are subordinate to
the rights of the holders of Registrable Securities with respect to such
Piggyback Registrations and (ii) request registrations so long as the holders of
Registrable Securities are entitled to participate in any such registrations on
the basis set forth in Section 2(d) above.
(b) Adjustments Affecting Registrable Securities. The Company shall not
take any action, or permit any change to occur, with respect to its securities
which would adversely affect the ability of the holders of Registrable
Securities to include such Registrable Securities in a registration undertaken
pursuant to this Agreement or which would adversely affect the marketability of
such Registrable Securities in any such registration (including, without
limitation, effecting a stock split or a combination of shares).
(c) Remedies. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived generally upon, but only
upon, the prior written consent of the Company and holders of a majority of the
Series A Registrable Securities and Common Stock Registrable Securities in
existence at the time such amendment
12
<PAGE>
or waiver becomes effective, voting as a single class, holders of a majority of
the Series B Registrable Securities in existence at the time such amendment or
waiver becomes effective, and holders of a majority of the Series C Registrable
Securities in existence at the time such amendment or waiver becomes effective.
(e) Successors and Assigns. All covenants and agreements in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of purchasers
or holders of any Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of such Registrable Securities.
Furthermore, whether or not any express assumption has been made, the provisions
of this Agreement which are enforceable against a holder of Registrable
Securities in his or its capacity as such are also enforceable against any
subsequent holder of such Registrable Securities.
(f) Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(i) Governing law. The corporate law of the State of Delaware will govern
all issues and questions concerning the relative rights of the Company and its
stockholders. All other issues and questions concerning the construction,
validity, interpretation and enforcement of this Agreement and the schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Illinois, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Illinois or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Illinois.
(j) Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable overnight courier service (charges
prepaid) or mailed to the recipient by certified or registered mall, return
receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to each Stockholder at the address indicated on
Schedule A attached hereto and to the Company at the address indicated below:
13
<PAGE>
FCOA Acquisition Corp.
745 Birginal Drive
Bensonville, Illinois 60106
Attention: Office of the Chairman of the Board
with copies to:
William E. Freeman
318 Beacon Light Road
Califon, New Jersey 07830
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, New Jersey 07932
Attention: Lori J. Braender, Esq.
Bryan Cave LLP
One Metropolitan Square, Suite 3600
Saint Louis, Missouri 63102
Attention: James L. Nouss, Jr.
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Agreement as of the date first written above.
FCOA ACQUISITION CORP.
By: /s/ William E. Freeman
-------------------------------------
Its Chairman
ALLSTATE INSURANCE COMPANY
By:
--------------------------------------
Its
--------------------------------------
By:
--------------------------------------
Its
--------------------------------------
CTC ILLINOIS TRUST COMPANY, AS TRUSTEE
FOR THE ALLSTATE RETIREMENT PLAN
By:
--------------------------------------
Its
--------------------------------------
CTC ILLINOIS TRUST COMPANY, AS TRUSTEE
FOR THE AGENTS PENSION PLAN
By:
--------------------------------------
Its
--------------------------------------
BESSEMER VENTURE PARTNERS FCOA
By:
-------------------------------------
Robert H. Buescher
Its Authorized Agent
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Agreement as of the date first written above.
FCOA ACQUISITION CORP.
By:
--------------------------------------
Its
--------------------------------------
ALLSTATE INSURANCE COMPANY
By: /s/ [ILLEGIBLE]
-------------------------------------
Its
--------------------------------------
By: /S/ [ILLEGIBLE]
--------------------------------------
Its
--------------------------------------
CTC ILLINOIS TRUST COMPANY, AS TRUSTEE
FOR THE ALLSTATE RETIREMENT PLAN
By: /S/ [ILLEGIBLE]
--------------------------------------
Its
--------------------------------------
CTC ILLINOIS TRUST COMPANY, AS TRUSTEE
FOR THE AGENTS PENSION PLAN
By: /S/ [ILLEGIBLE]
--------------------------------------
Its
--------------------------------------
BESSEMER VENTURE PARTNERS FCOA
By: _____________________________________
Robert H. Buescher
Its Authorized Agent
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Agreement as of the date first written above.
FCOA ACQUISITION CORP.
By:
--------------------------------------
Its
--------------------------------------
ALLSTATE INSURANCE COMPANY
By:
-------------------------------------
Its
--------------------------------------
By:
--------------------------------------
Its
--------------------------------------
CTC ILLINOIS TRUST COMPANY, AS TRUSTEE
FOR THE ALLSTATE RETIREMENT PLAN
By:
--------------------------------------
Its
--------------------------------------
CTC ILLINOIS TRUST COMPANY, AS TRUSTEE
FOR THE AGENTS PENSION PLAN
By: /S/ [ILLEGIBLE]
--------------------------------------
Its
--------------------------------------
BESSEMER VENTURE PARTNERS FCOA
By: /s/ Robert H. Buescher
-------------------------------------
Robert H. Buescher
Its Authorized Agent
<PAGE>
GARLEN INVESTMENTS LTD.
By:
--------------------------------------
Its
--------------------------------------
JASMINE TRUSTEES LTD. A/C 5615
By:
--------------------------------------
Its
--------------------------------------
JASMINE TRUSTEES LTD. A/C 5616
By:
--------------------------------------
Its
--------------------------------------
/s/ William E. Freeman
-----------------------------------------
William E. Freeman
-----------------------------------------
Dawood Al-Shirian
-----------------------------------------
Ahmed A. N. Al-Agil
-----------------------------------------
Abdulaziz Al-Fahad
-----------------------------------------
Mohammad Al-Moussa
-----------------------------------------
Othman M. Al-Rasheed
<PAGE>
-----------------------------------------
Mohammad Al-Moussa
/s/ Othman M. Al-Rasheed
-----------------------------------------
Othman M. Al-Rasheed
AL-OUDA INSTALLMENT CO. LIMITED
-----------------------------------------
By: Abdoullah A. Al-Sherian
Its
--------------------------------------
JARIR INVESTMENTS
-----------------------------------------
By: Muhammad Al-Agil
Its
-------------------------------------
COMMUNITY INVESTMENT PARTNERS II, L.P.
-----------------------------------------
By: Daniel Burkhardt
Its
-------------------------------------
FINE ARTS DEVELOPMENTS, P.L.C.
-----------------------------------------
By: Keith Chapman
Its
-------------------------------------
-----------------------------------------
William E. Freeman
<PAGE>
Signature Page to Registration Agreement
AL-OUDA INSTALLMENT CO. LIMITED
-----------------------------------------
By: Abdoullah A. Al-Sherian
Its
--------------------------------------
NHN, LTD.
-----------------------------------------
By:
-------------------------------------
Its
-------------------------------------
COMMUNITY INVESTMENT PARTNERS II, L.P.
-----------------------------------------
By: Daniel Burkhardt
Its
-------------------------------------
FINE ARTS DEVELOPMENTS, P.L.C.
-----------------------------------------
By:
-------------------------------------
Its
-------------------------------------
/s/ Lam Wai Hung
-----------------------------------------
Lam Wai Hung
SHAD RUN NOMINEE CORPORATION
-----------------------------------------
By: Ms. Sara [ILLEGIBLE]
Its
-------------------------------------
<PAGE>
REGISTRATION AGREEMENT
/s/ Charles R. Cumello
-------------------------------------
Charles R. Cumello
-------------------------------------
Martin J. Merksamer
<PAGE>
REGISTRATION AGREEMENT
-------------------------------------
Charles R. Cumello
/s/ Martin J. Merksamer
-------------------------------------
Martin J. Merksamer
<PAGE>
REGISTRATION AGREEMENT
CONSTRUCTION COUNSELLORS, INC.
/s/ [ILLEGIBLE]
-------------------------------------
By: [ILLEGIBLE]
---------------------------------
Its C.E.O.
<PAGE>
Exhibit 10.8
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of the 2nd day of July, 1996,
is made and entered into on the terms and conditions hereinafter set forth, by
and between FACTORY CARD OUTLET OF AMERICA LTD., an Illinois corporation
("Borrower"), and PETRA CAPITAL, LLC. a Georgia limited liability company
("Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender make available to Borrower a
term loan in the original principal amount of Three Million and No/100ths
Dollars ($3,000,000) (the "Loan") on the terms and conditions hereinafter set
forth, and for the purpose(s) hereinafter set forth, and
WHEREAS, in order to induce Lender to make the Loan to Borrower, Borrower
has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements of
Borrower, has agreed to make the Loan upon the terms and conditions hereinafter
set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
ARTICLE I
THE LOAN
1.1 Evidence of Loan Indebtedness and Repayment. Subject to the terms and
conditions hereof, the Lender shall make the Loan to Borrower by wire transfer
in immediately available funds. The Loan shall be evidenced by a Secured
Promissory Note in the original principal amount of Three Million and No/100ths
Dollars ($3,000,000), substantially in the form of Exhibit A attached hereto and
incorporated herein by this reference (the "Note"), dated as of the date hereof,
executed by Borrower, in favor of Lender. The Loan shall be payable in
accordance with the terms of the Note. The Note, this Agreement and any other
instruments and documents executed by Borrower, now or hereafter evidencing,
securing or in any way related to the indebtedness evidenced by the Note are
herein individually referred to as a "Loan Document" and collectively referred
to as the "Loan Documents."
<PAGE>
1.2 Processing Fee. Borrower shall pay a processing fee of $60,000 to
Lender in one or more installments at or prior to closing.
1.3 Purpose(s) of Loan and Use of Proceeds. The purposes of the Loan shall
be (i) to provide working capital to Borrower, (ii) to pay all costs and
expenses incurred by the parties hereto in connection with the making and
documenting of the Loan, including attorneys' fees and expenses, and (iii) for
other general corporate purposes.
1.4 Prepayment. Borrower may prepay the indebtedness evidenced by
the Note in whole or in part at any time and from time to time without
premium or penalty.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Borrower's Representations. Borrower hereby represents and warrants to
Lender as follows:
(a) Corporate Status. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Illinois; and has the corporate power to own and operate its properties,
to carry on its business as now conducted and to enter into and to perform
its obligations under this Agreement and the other Loan Documents to which
it is a party. Except as set forth on Schedule 2.1(a), Borrower is duly
qualified to do business and in good standing in each state in which a
failure to be so qualified and in good standing would have a material
adverse effect on Borrower's financial position or its ability to conduct
its business in the manner now conducted.
(b) Other Business Organizations. Borrower neither owns nor has an
interest in, directly or indirectly, any other corporation, partnership,
joint venture or other business organization ("Subsidiaries").
(c) Authorization. Borrower has full legal right, power and
authority to conduct its business and affairs as they are presently
conducted. Borrower has full legal right, power and authority to enter
into and perform its obligations under the Loan Documents, without the
consent or approval of any other person, firm, governmental agency or
other legal entity, except such consents and approvals as have already
been given to Borrower. The execution and delivery of this Agreement, the
borrowing hereunder, the execution and delivery of each Loan Document to
which Borrower is a party, and the performance by Borrower of its
obligations thereunder (i) are within the corporate powers of Borrower,
(ii) have been duly authorized by all necessary corporate action properly
taken, and (iii) do not and will not contravene or conflict with (A) any
provision of law, (B) any judgment, ordinance, regulation or order of any
court or governmental agency that is applicable to Borrower or its
property, (C) the articles of incorporation or bylaws of Borrower, or (D)
any agreement binding upon Borrower. The officer(s) executing this
Agreement, the Note and all of the other Loan
2
<PAGE>
Documents to which Borrower is a party are duly authorized to act on
behalf of Borrower.
(d) Validity and Binding Effect. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to
limitations imposed by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally or the application of
general equitable principles.
(e) Capitalization. The authorized capital stock of Borrower
consists solely of 100,000 shares of common stock, no par value per share
("Borrower Common Stock"). of which 2,500 shares (the "Borrower Shares")
are issued and outstanding. The authorized capital stock of FCOA
Acquisition Corp., a Delaware corporation and parent corporation of
Borrower ("Guarantor"), consists of (i) 1,000,000 shares of common stock,
no par value per share ("Parent Common Stock"), of which 216,000 shares
("Parent Common Shares") are issues and outstanding; (ii) 20,000 shares of
Series A convertible preferred stock, $.01 par value per share ("Parent
Series A Preferred Stock"), of which 20,000 shares ("Series A Shares") are
issued and outstanding; and (iii) 34,750 shares of Series B convertible
preferred stock, $.01 par value per share ("Series B Preferred Stock"), of
which 31,214 shares ("Series B Shares") are issued and outstanding (the
Borrower Shares, the Parent Common Shares, the Series A Shares and the
Series B Shares are sometimes collectively referred to herein as the
"Shares"). All of the Shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable and free of preemptive rights.
Except for the Shares, there are no shares of capital stock or other
securities of Borrower or Guarantor issued or outstanding. Except as set
forth on Schedule 2.1(e) hereto, there are no outstanding options,
warrants or rights to purchase or acquire from Borrower or Guarantor any
securities of Borrower or Guarantor, and there are no contracts,
commitments, agreements, understandings, arrangements or restrictions as
to which Borrower or Guarantor is a party or by which it is bound relating
to any shares of capital stock or other securities of Borrower or
Guarantor (including the Shares), whether or not outstanding.
(f) Trademarks, Patents, Etc. Schedule 2.1(f) is an accurate and
complete list of all patents, trademarks, trade names, trademark
registrations, service names, service marks, copyrights, licenses,
formulas and applications therefor owned by Borrower or used by Borrower
in the operation of its business, title to each of which is, except as set
forth in Schedule 2.1(f) hereto, held by Borrower free and clear of all
adverse claims, liens, security agreements, restrictions or other
encumbrances. There is no infringement action, lawsuit, claim or complaint
pending against Borrower which asserts that Borrower's operations violate
or infringe the rights or the trade names, trademarks, trademark
registration, service name, service mark or copyright of others with
respect to any apparatus or method of Borrower, nor is Borrower in any way
making use of any confidential information or trade secrets of any person
except with the consent of such person.
3
<PAGE>
(g) No Conflicts. Consummation of the transactions hereby
contemplated and the performance of the obligations of Borrower under and
by virtue of the Loan Documents will not result in any breach of, or
constitute a default under, any mortgage. security deed or agreement, deed
of trust, lease, bank loan or credit agreement, articles of incorporation
or bylaws, agreement or certificate of limited partnership, partnership
agreement. license, franchise or any other instrument or agreement to
which Borrower is a party or by which Borrower or its properties may be
bound or affected, except such agreements and other documents as to which
Borrower has obtained an effective waiver.
(h) Litigation. There are no actions, suits or proceedings pending,
or. to the knowledge of Borrower, threatened, against or affecting
Borrower involving the validity or enforceability of any of the Loan
Documents at law or in equity, and there are no proceedings pending, or,
to the knowledge of Borrower, threatened, against or affecting Borrower
before any governmental or administrative agency; and to Borrower's
knowledge, Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority.
(i) Financial Statements. The consolidated financial statements of
Borrower and Guarantor, attached hereto as Schedule 2.1(i)(A), are true
and correct in all material respects have been prepared on the basis of
accounting principles consistently applied, and fairly present the
financial condition of Borrower and Guarantor as of the date(s) thereof No
material adverse change has occurred in the financial condition of
Borrower or Guarantor since the date(s) thereof; and no additional
borrowings have been made by Borrower or Guarantor since the date(s)
thereof other than as set forth on Schedule 2.1(i)(B).
(j) Other Agreements; No Defaults. Borrower is not a party to
indentures, loan or credit agreements, leases or other agreements or
instruments, or subject to any articles of incorporation or corporate
restrictions that could have a material adverse effect on the ability of
Borrower to carry out its obligations under the Loan Documents to which it
is a party. Borrower is not in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument material to its
business to which it is a party, including but not limited to this
Agreement and the other Loan Documents, and to Borrower's knowledge, no
other default or event has occurred and is continuing that with notice or
the passage of time or both would constitute a default or event of default
under any of same.
(k) Compliance With Law. Borrower has obtained all material
licenses, permits and approvals and authorizations necessary or required
in order to conduct its business and affairs as heretofore conducted and
as intended to be conducted as of the date of this Agreement. To
Borrower's knowledge, Borrower is in compliance with all laws,
regulations, decrees and orders applicable to it (including but not
limited to laws, regulations, decrees and orders relating to
environmental, occupational and health standards and controls, antitrust,
monopoly, restraint of trade or unfair competition), to the extent that
noncompliance, in the aggregate, cannot reasonably be expected to have a
material adverse effect on its business,
4
<PAGE>
operations, property or financial condition or to affect materially
adversely Borrower's ability to perform its obligations under the Loan
Documents.
(l) Debt. Schedule 2.1(l) is a complete and correct list of all
credit agreements, indentures, purchase agreements, promissory notes and
other evidences of indebtedness, guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in
respect of which Borrower or Guarantor, or any of the properties thereof
is in any manner directly or contingently obligated; and the maximum
principal or face amounts of the credit in question that are outstanding
and that are available pursuant to the terms of such agreements are
correctly stated, and all liens of any nature given or agreed to be given
as security therefor are correctly described or indicated in such
Schedule.
(m) Taxes. Borrower and Guarantor have filed or caused to be filed
all tax returns that to Borrower's knowledge are required to be filed
(except for returns that have been appropriately extended), and has paid,
or will pay when due, all taxes shown to be due and payable on said
returns and all other taxes, impositions, assessments, fees or other
charges imposed on them by any governmental authority, agency or
instrumentality, prior to any delinquency with respect thereto (other than
taxes, impositions, assessments, fees and charges currently being
contested in good faith by appropriate proceedings, for which appropriate
amounts have been reserved). To Borrower's knowledge, no tax liens have
been filed against Borrower or Guarantor or any of Borrower's or
Guarantor's properties.
(n) Certain Transactions. Except as set forth on Schedule 2.1(o)
hereto, Borrower is not indebted, directly or indirectly, to any of its
shareholders, officers, or directors or to their respective spouses or
children, in any amount whatsoever; none of said shareholders, officers or
directors or any members of their immediate families, are indebted to
Borrower or have any direct or indirect ownership interest in any firm or
corporation with which Borrower has a business relationship, or any firm
or corporation which competes with Borrower, except that shareholders,
officers and/or directors of Borrower may own no more than 4.9% of
outstanding stock of publicly traded companies which may compete with
Borrower. No officer or director of Borrower or any member of their
immediate families is, directly or indirectly, interested in any material
contract with Borrower. Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
(o) Statements Not False or Misleading. To Borrower's knowledge
after reasonable investigation, no representation or warranty given as of
the date hereof by Borrower contained in this Agreement or any schedule
attached hereto or any statement in any document, certificate or other
instrument furnished or to be furnished by Borrower to Lender pursuant
hereto, taken as a whole, contains or will (as of the time so furnished)
contain any untrue statement of a material fact, or omits or will (as of
the time so furnished) omit to state any material fact which is necessary
in order to make the statements contained therein not misleading.
5
<PAGE>
(p) Margin and Government Regulations. Borrower is not engaged in
the business of extending credit for the purposes of purchasing or
carrying margin stock, and no proceeds of the Loan will be used for a
purpose which violates, or would be inconsistent with, Regulations G, T, U
or X of the Board of Governors of the Federal Reserve System Borrower is
not an "investment company" within the meaning of the Investment Company
Act of 1940, as amended, or a "holding company" or a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or
subject to regulation under the Federal Power Act, the Interstate Commerce
Act or any other federal law or laws of Illinois limiting its ability to
incur indebtedness or to execute, deliver or perform the Loan Documents.
(q) Significant Contracts. Schedule 2.1(r) is a complete and correct
list of all contracts, agreements and other documents pursuant to which
Borrower receives revenues in excess of $25,000 per fiscal year. Each such
contract, agreement and other document is in full force and effect; as of
the date hereof and Borrower knows of no reason why such contracts,
agreements and other documents would not remain in full force and effect
pursuant to the terms thereof.
(r) Environment. Borrower has duly complied with, and its business,
operations. assets, equipment, property, leaseholds or other facilities
are in compliance with, the applicable provisions of all applicable
federal, state and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder, except
to the extent that failure to so comply would not have a material adverse
effect on its business. Borrower has been issued and will maintain all
required federal, state and local permits, licenses, certificates and
approvals relating to (1) air emissions; (2) discharges to surface water
or groundwater; (3) noise emissions; (4) solid or liquid waste disposal;
(5) the use, generation, storage, transportation or disposal of toxic or
hazardous substances or wastes (which shall include any and all such
materials listed in any federal, state or local law, code or ordinance and
all rules and regulations promulgated thereunder as hazardous or
potentially hazardous); or (6) other environmental, health or safety
matters, except to the extent that failure to do so would not have a
material adverse effect on its business. Borrower has not received notice
of, and is not otherwise aware of facts which constitute material
violations of any applicable federal, state or local environmental, health
or safety laws, codes or ordinances, and any rules or regulations
promulgated thereunder with respect to Borrower's businesses, operations,
assets, equipment, property, leaseholds, or other facilities. In
connection with property owned or leased by Borrower, and except in
accordance with a valid governmental permit, license, certificate or
approval, there has not been (during the period of Borrowers ownership or
lease thereof) any emission, spill, release or discharge into or upon (1)
the air; (2) soils, or any improvements located thereon; (3) surface water
or groundwater; or (4) the sewer, septic system or waste treatment,
storage or disposal system servicing the premises, of any toxic or
hazardous substances or wastes at or from the premises. Borrower has not
received any complaint, order, directive, claim, citation or notice by any
governmental authority or any person or entity against or respecting
Borrower with respect to (1) air emissions; (2) spills, releases or
discharges to soils or improvements located
6
<PAGE>
thereon, surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing the premises; (3) noise
emissions; (4) solid or liquid waste disposal; (5) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or
waste; or (6) other environmental, health or safety matters affecting
Borrower or its business, operations, assets, equipment, property,
leaseholds or other facilities Borrower has no indebtedness, obligation
or liability (absolute or contingent, matured or not matured), with
respect to the storage, treatment, cleanup or disposal of any solid
wastes, hazardous wastes or other toxic or hazardous substances
(including without limitation any such indebtedness, obligation, or
liability with respect to any current regulation, law or statute
regarding such storage, treatment, cleanup or disposal).
ARTICLE 3
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
3.1 Payment of Obligations. Borrower shall pay the indebtedness evidenced
by the Note according to the terms thereof; and shall timely pay or perform, as
the case may be, all of the other obligations of Borrower to Lender, direct or
contingent, described in the Loan Documents, together with interest thereon, and
any extensions, modifications, consolidations and/or renewals thereof and any
notes given in payment thereof.
3.2 Financial Statements and Reports. Borrower shall furnish to Lender (i)
as soon as practicable and in any event within one hundred twenty (120) days
after the end of each fiscal year of Borrower, a consolidated balance sheet of
Guarantor as of the close of such fiscal year, a consolidated statement of
earnings and retained earnings of Guarantor as of the close of such fiscal year
and a consolidated statement of cash flows for Guarantor for such fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), audited by an independent certified public
accountant reasonably acceptable to Lender (it being understood that any "Big 6"
accounting firm would be acceptable to Lender) and certified by an officer of
Borrower and accompanied by a certificate of the President of Borrower, stating
that to the best of the knowledge of such officer, Borrower has kept, observed,
performed and fulfilled each covenant, term and condition of this Agreement and
the other Loan Documents during the preceding fiscal year and that no Event of
Default, as herein defined, has occurred and is continuing (or if an Event of
Default has occurred and is continuing, specifying the nature of same, the
period of existence of same and the action Borrower has taken or proposes to
take in connection therewith), (ii) within thirty-five (35) days of the end of
each calendar month, a consolidated balance sheet of Guarantor as of the close
of such month and a consolidated statement of earnings and retained earnings of
Guarantor as of the close of such month, all in reasonable detail (including
financial information for the preceding six (6) months), and prepared
substantially in accordance with GAAP (except for the absence of footnotes and
subject to year-end adjustments), and (iii) with reasonable promptness, such
other financial data as Lender may reasonably request.
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3.3 Maintenance of Books and Records, Inspection. Borrower and Guarantor
shall maintain their books, accounts and records in accordance with GAAP, and
five (5) days after written notice from Lender, shall permit Lender, its
officers, employees and any professionals designated by Lender in writing, at
Borrower's expense, to visit, inspect and/or audit any of Borrower's or
Guarantor's properties, books and financial records, and to discuss Borrower's
and Guarantor's accounts, affairs and finances with Borrower or Guarantor or the
principal officers of Borrower and/or Guarantor during reasonable business
hours, all at such times as Lender may reasonably request; provided that (i)
prior to an Event of Default, Lender shall not engage in an audit more than once
per six months, (ii) no such visit, inspection and/or audit shall materially
interfere with the conduct of Borrower's or Guarantor's business, and (iii) that
prior to an Event of Default, the expenses to be incurred by Borrower in
connection with any such visit, inspection or audit shall not exceed $25,000 in
any calendar year.
3.4 Insurance. Without limiting any of the requirements of any of the
other Loan Documents, Borrower shall maintain in amounts customary for entities
engaged in comparable business activities, (i) to the extent required by
applicable law, worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation liabilities,
with adequate reserves, under a plan approved by Lender, such approval not to be
unreasonably withheld or delayed), and (ii) fire and "all risk" casualty
insurance on its properties against such hazards and in at least such amounts as
are customary in Borrower's business. Borrower will make commercially reasonable
efforts to obtain and maintain public liability insurance in an amount, and at a
cost, deemed reasonable to the Borrower's Board of Directors. At the reasonable
request of Lender, Borrower will promptly deliver a certificate specifying the
details of such insurance in effect.
3.5 Taxes and Assessments. Borrower and Guarantor shall (i) file all tax
returns and appropriate schedules thereto that are required to be filed under
applicable law, prior to the date of delinquency, (ii) pay and discharge all
taxes, assessments and governmental charges or levies imposed upon Borrower and
Guarantor upon their income and profits or upon any properties belonging to
them, prior to the date on which penalties attach thereto, and (iii) pay all
taxes, assessments and governmental charges or levies that, if unpaid, might
become a lien or charge upon any of their properties; provided, however, that
Borrower or Guarantor in good faith may contest any such tax, assessment,
governmental charge or levy described in the foregoing clauses (ii) and (iii) so
long as appropriate reserves are maintained with respect thereto.
3.6 Corporate Existence. Borrower and Guarantor shall maintain their
corporate existences and good standings in the states of their incorporation,
and their qualifications and good standings as foreign corporations in each
jurisdiction in which failure to be so qualified would have a material adverse
effect on Borrower's or Guarantor's financial position or their abilities to
conduct their businesses at a given time.
3.7 Compliance with Law and Other Agreements. Except where the failure to
do so would not materially adversely affect Borrower's operations or its ability
to fulfill its obligations under the Loan Documents, Borrower shall maintain its
business, operations and property owned or used in connection therewith in
compliance with (i) all applicable federal, state and local laws, regulations
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and ordinances governing such business operations and the use and ownership of
such property. and (ii) all agreements, licenses, franchises, indentures and
mortgages to which Borrower is a party or by which Borrower or any of its
properties is bound. Without limiting the foregoing. Borrower shall pay all of
its indebtedness promptly in accordance with the terms thereof
3.8 Notice of Default. Borrower shall give written notice to Lender of the
occurrence of any default, event of default or Event of Default under this
Agreement or any other Loan Document promptly upon Borrower's knowledge of the
occurrence thereof.
3.9 Notice of Litigation. Borrower shall give notice, in writing, to
Lender of (i) any actions, suits or proceedings instituted by any persons
whomsoever against Borrower, or affecting any of the assets of Borrower, wherein
the amount at issue is in excess of Two Hundred Fifty Thousand and No/100ths
Dollars ($250,000.00), and (ii) any dispute, not resolved within sixty (60) days
of the commencement thereof, between Borrower on the one hand and any
governmental regulatory body on the other hand, which dispute, if determined
adversely to Borrower, would have a material adverse effect on the normal
operations of Borrower.
3.10 Conduct of Business. Borrower will continue to engage in a business
of the same general type and manner as conducted by it on the date of this
Agreement.
3.11 ERISA Plan. If Borrower institutes a pension plan that is subject to
the requirements of Title IV of the Employee Retirement Income Security Act of
1974, Pub. L. No. 93-406, September 2, 1974, 88 Stat. 829, 29 U.S.C.A. ss. 1001
et seq. (1975), as amended from time to time ("ERISA"), then the following
covenants shall be applicable during such period as any such plan (the "Plan")
shall be in effect: (i) Borrower hereby covenants that throughout the existence
of the Plan, Borrower's contributions under the Plan will meet the minimum
funding standards required by ERISA, and (ii) Borrower covenants that it will
send to Lender a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
3.12 Dividends, Distributions, Stock Rights, etc. Neither Borrower nor
Guarantor shall declare or pay any dividend of any kind (other than stock
dividends payable to all holders of any class of capital stock), in cash or in
property, on any class of the capital stock of Borrower or Guarantor, or
purchase, redeem, retire or otherwise acquire for value any shares of such
stock, nor make any distribution of any kind in cash or property in respect
thereof, nor make any return of capital of shareholders, nor make any payments
in cash or property in respect of any stock options, stock bonus or similar plan
(except as required or permitted hereunder), nor grant any preemptive rights
with respect to the capital stock of Borrower or Guarantor, without the prior
written consent of Lender. Borrower shall provide Lender with written notice of
any and all requests for redemption pursuant to Article 4 of Guarantor's
Articles of Incorporation made to Guarantor and/or Borrower by the holders of a
majority of the outstanding shares of Guarantor's Series A Preferred Stock, or
the holders of majority of the outstanding shares of Guarantor's Series B
Preferred Stock, within ten (10) days of Guarantor's or Borrower's receipt of
any such requests.
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3.13 Guaranties, Loans, Payment of Debt. Without Lender's prior express
written consent, neither Borrower nor Guarantor shall guarantee nor be liable in
any manner, whether directly or indirectly, or become contingently liable after
the date of this Agreement in connection with the obligations or indebtedness of
any person or entity whatsoever, except for the endorsement of negotiable
instruments payable to Borrower or Guarantor for deposit or collection in the
ordinary course of business. Without Lender's prior express written consent,
neither Borrower nor Guarantor shall (i) make any loan, advance or extension of
credit to any person other than in the normal course of its business, or (ii)
make any payment on any debt that is subordinate to the Loan, if any, except for
trade accounts payable incurred in the ordinary course of Borrower's or
Guarantor's business.
3.14 Debt. Without the express prior written consent of Lender, neither
Borrower nor Guarantor shall create, incur, assume or suffer to exist
indebtedness of any description whatsoever, (excluding (i) the indebtedness
evidenced by the Note, (ii) the endorsement of negotiable instruments payable to
Borrower or Guarantor for deposit or collection in the ordinary course of
business, (iii) indebtedness incurred in the ordinary course of business
(provided that no such debt, individually, exceeds $100,000) and (iv) the
indebtedness listed on Schedule 2.1(1) hereto).
3.15 No Liens. Neither Borrower nor Guarantor shall create, incur, assume
or suffer to exist any lien, security interest, security title, mortgage, deed
of trust or other encumbrance upon or with respect to any of its properties, now
owned or hereafter acquired, except:
a. liens in favor of Lender;
b. liens for taxes or assessments or other governmental charges or
levies if not yet due and payable;
c. liens in connection with the leasing of equipment in favor of the
lessor of such equipment;
d. purchase money security interests for specific equipment in favor
of the seller of such equipment; and
e. liens described on Schedule 2.1(l) hereto.
3.16 Mergers, Consolidations, Acquisitions and Sales. Without the prior
written consent of Lender, neither Borrower nor Guarantor shall (a) be a party
to any merger, consolidation or corporate reorganization, nor (b) purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other person, firm or entity, nor
(c) sell, transfer, convey, grant a security interest in or lease all or any
substantial part of its assets, nor (d) create any Subsidiaries nor convey any
of is assets to any Subsidiary.
3.17 Transactions With Affiliates. Except as described on Schedule 2.1(o)
hereof, Borrower shall not enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any affiliate, except in the ordinary course of and pursuant
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to the reasonable requirements of Borrower's business and upon fair and
reasonable terms approximately no less favorable to Borrower than Borrower would
obtain in a comparable arm's length transaction with a person not an affiliate.
For the purposes of this Section 3.17, "affiliate" shall mean a person.
corporation, partnership or other entity controlling, controlled by or under
common control with Borrower.
3.18 Environment. Borrower shall comply with all applicable provisions of
all applicable federal, state and local environmental, health, and safety laws,
codes and ordinances, and all rules and regulations issued thereunder; notify
Lender immediately of the receipt of any written notice of a hazardous discharge
or environmental complaint received from any governmental agency or any other
party; notify Lender immediately of any hazardous discharge from or affecting
Borrower's premises; contain and remove the same, in compliance with all
applicable laws as quickly as practicable; promptly pay any fine or penalty
assessed in connection therewith (provided that Borrower may in good faith
contest any such fine or penalty); and following the receipt of any notice of
hazardous discharge or environmental complaint from any governmental authority
permit Lender to inspect the premises, to conduct tests thereon, and to inspect
all books, correspondence, and records pertaining thereto, and at Lender's
reasonable request, and at Borrower's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to Lender, and
such other and further assurances reasonably satisfactory to Lender that the
condition has been corrected.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 Closing of the Loan. The obligation of Lender to fund the Loan on the
date hereof (the "Closing Date") is subject to the fulfillment, on or prior to
the Closing Date, of each of the following conditions:
(a) Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and conditions
required by this Agreement.
(b) Lender shall have received an opinion of counsel for Borrower
and Guarantor, Pitney, Hardin, Kipp & Szuch, dated the Closing Date, in
form and substance satisfactory to Lender's counsel, King & Spalding.
(c) Borrower shall have delivered to Lender the Note executed by
Borrower.
(d) Lender shall have received a Stock Purchase Warrant and a
Warrant Valuation Letter both executed by Guarantor, all in form
acceptable to Lender.
(e) Borrower shall have delivered to Lender a Security Agreement
executed by Borrower (in form acceptable to Lender) and related UCC-1
Financing Statement(s) (in form acceptable to Lender) executed by
Borrower.
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(f) Lender shall have received copies of the articles of
incorporation and other publicly filed organizational documents of
Borrower and Guarantor, certified by the Secretary of State or other
appropriate public official in the jurisdictions in which Borrower and
Guarantor are incorporated.
(g) Lender shall have received certified (as of the date of this
Agreement) copies of all corporate action taken by Borrower and Guarantor,
including resolutions of their Board of Directors, authorizing the
execution, delivery and performance of the Loan Documents.
(h) Lender shall have received a certificate as to the legal
existence and good standing of Borrower and Guarantor, issued by the
Secretary of State or other appropriate public official in the
jurisdictions in which Borrower and Guarantor are incorporated.
(i) Lender shall have received certificates of the Secretaries of
State or other appropriate public officials as to Borrower's and
Guarantor's qualifications to do business and good standings in each
jurisdiction in which a failure to be so qualified would have a material
adverse effect on their financial positions or their ability to conduct
their business in the manner now conducted.
(j) Lender shall have received Intercreditor Estoppel Agreements
executed by Bank One, Chicago, N.A. and Sirrom Capital Corporation and
acknowledged by Borrower.
(k) Lender shall have received a Guaranty Agreement executed by
Guarantor, in form acceptable to Lender.
(l) Lender shall have received the written consent and waivers of
Guarantor's shareholder's to the extent necessary for the execution of the
Loan Documents by Borrower and/or Guarantor (as applicable) (including
without limitation the stock purchase warrant issued by Guarantor in favor
of Lender) and the performance by Borrower and/or Guarantor (as
applicable) of the obligations thereunder.
ARTICLE 5
DEFAULT AND REMEDIES
5.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Default by Borrower in the payment of the principal of or
interest on the indebtedness evidenced by the Note in accordance with the
terms of the Note, which default is not cured within five (5) business
days;
(b) Any misrepresentation by Borrower as to any material matter
hereunder or under any of the other Loan Documents, or delivery by
Borrower of any schedule, statement, resolution,
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report, certificate, notice or writing to Lender that is untrue in any
material respect on the date as of which the facts set forth therein are
stated or certified;
(c) Failure of Borrower to perform any of its obligations, covenants
or agreements under this Agreement, the Note or any of the other Loan
Documents or failure of Borrower to cause Guarantor to perform any
covenants under this Agreement or any of the other Loan Documents;
(d) Either Borrower or Guarantor (i) shall generally not pay its
debts as such debts become due; or (ii) shall make an assignment for the
benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (iv) shall have had any such petition or
application filed or any such proceeding commenced against it in which an
order for relief is entered or an adjudication or appointment is made; or
(v) shall indicate, in writing or by failing to respond in writing within
sixty (60) days, its consent to, approval of or acquiescence in any such
petition, application, proceeding or order for relief or the appointment
of a custodian, receiver or trustee for it or a substantial part of its
assets; or (vi) shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of sixty (60) days or
more;
(e) Either Borrower or Guarantor shall be liquidated, dissolved,
partitioned or terminated, or the charter thereof shall expire or be
revoked;
(f) A default or event of default shall occur under any of the other
Loan Documents and, if subject to a cure right, such default or event of
default shall not be cured within the applicable cure period;
(g) Either Borrower or Guarantor shall default in the timely payment
or performance of any obligation now or hereafter owed to Lender in
connection with any other indebtedness of Borrower or Guarantor now or
hereafter owed to Lender taking into account any grace period provided for
such obligation; or
(h) Either Borrower or Guarantor shall have defaulted and continue
to be in default in the timely payment or performance of any other
indebtedness or obligation, which in the aggregate exceeds One Hundred
Thousand and No/100ths Dollars ($100,000.00) or materially adversely
affects Borrower's or Guarantor's financial condition.
With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (ten (10) days, if such Curable Default may be cured
solely by payment of a sum of money) of notice thereof to Borrower given in
accordance with the provisions hereof; provided, however, that this provision
shall not require notice to Borrower and an opportunity to cure any Curable
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Default of which Borrower has had actual knowledge for the requisite number of
days set forth in this sentence.
5.2 Acceleration of Maturity Remedies. If Borrower or Guarantor receives
any notice or request from the holders of a majority of the outstanding shares
of Guarantor's Series A Preferred Stock, or the holders of a majority of the
outstanding shares of Guarantor's Series B Preferred Stock, pursuant to which
the notifying shareholder(s) exercise any redemption rights in accordance with
Article 4 of Guarantor's Articles of Incorporation, Lender may immediately
accelerate the indebtedness evidenced by the Note as well as any and all other
indebtedness of Borrower to Lender under the Loan Documents, and upon such
acceleration such indebtedness shall be immediately due and payable in full.
Upon the occurrence of any Event of Default described in subsection 5.1(d), the
indebtedness evidenced by the Note as well as any and all other indebtedness of
Borrower to Lender under the Loan Documents shall be immediately due and payable
in full; and upon the occurrence of any other Event of Default described above,
Lender at any time thereafter may at its option accelerate the maturity of the
indebtedness evidenced by the Note as well as any and all other indebtedness of
Borrower to Lender under the Loan Documents; all without notice of any kind.
Upon the occurrence of any such Event of Default and the acceleration of the
maturity of the indebtedness evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any and all
rights and remedies possessed by Lender pursuant to the terms of the Note
and all of the other Loan Documents; and
(b) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
5.3 Remedies Cumulative; No Waiver. No right, power or remedy conferred
upon or reserved to Lender by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder, under any
of the other Loan Documents or now or hereafter existing at law, in equity or by
statute. No delay or omission by Lender to exercise any right, power or remedy
accruing upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein, and every right, power and remedy
given by this Agreement and the other Loan Documents to Lender may be exercised
from time to time and as often as may be deemed expedient by Lender.
5.4 Proceeds of Remedies. Any or all proceeds resulting from the exercise
of any or all of the foregoing remedies shall be applied as set forth in the
Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including, without limitation,
reasonable attorney's fees incurred by Lender in connection with the
exercise of its remedies;
Second, to the expenses of curing the default that has occurred, in
the event that Lender elects, in its sole discretion, to cure the default
that has occurred;
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Third, to the payment of the obligations of Borrower under the Loan
Documents (the "Obligations"), including but not limited to the payment of
the principal of and interest on the indebtedness evidenced by the Note,
in such order of priority as Lender shall determine in its sole
discretion, and
Fourth, the remainder, if any, to Borrower or to any other person
lawfully thereunto entitled.
ARTICLE 6
TERMINATION
6.1 Termination of this Agreement. This Agreement shall remain in full
force and effect until the payment by Borrower of all amounts owed to Lender
hereunder, at which time Lender shall cancel the Note and deliver it to
Borrower.
ARTICLE 7
MISCELLANEOUS
7.1 Performance By Lender. If Borrower shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Lender may,
at its option, pay, perform or observe the same, and all payments made or costs
or expenses incurred by Lender in connection therewith (including but not
limited to reasonable attorney's fees), with interest thereon at the highest
default rate provided in the Note (if none, then at the maximum rate from time
to time allowed by applicable law), shall be immediately repaid to Lender by
Borrower and shall constitute a part of the Obligations. Lender shall be the
sole judge of the reasonableness and necessity for any such actions and of the
amounts to be paid.
7.2 Successors and Assigns Included in Parties. Whenever in this Agreement
one of the parties hereto is named or referred to, legal representatives,
successors, successors-in-title and assigns of such parties shall be included,
and all covenants and agreements contained in this Agreement by or on behalf of
Borrower or by or on behalf of Lender shall bind and inure to the benefit of
their respective legal representatives, successors-in-title and assigns, whether
so expressed or not.
7.3 Costs and Expenses. Borrower agrees to pay all reasonable costs and
expenses incurred by Lender in connection with the making of the Loan, including
but not limited to filing fees, recording taxes, indebtedness taxes, and
reasonable attorneys' fees, promptly upon demand of Lender, provided that legal
fees of Lender's counsel exclusive of any out-of-pocket costs or expenses shall
not exceed $15,000. Borrower further agrees to pay all premiums for insurance
required to be maintained by Borrower pursuant to the terms of the Loan
Documents and all of the reasonable out-of-pocket costs and expenses incurred by
Lender in connection with the collection of the Loan, amendment to the Loan
Documents, or prepayment of the Loan, including but not limited to reasonable
attorneys' fees, promptly upon demand of Lender, provided, however, that any
amendment to the Loan Documents made necessary solely
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because of a ministerial decision on the part of Lender (by way of example, and
not limitation, a name change or an address change of Lender) shall be effected
at Lender's expense, excluding any fees or expenses of Borrower, Guarantor or
counsel for Borrower or Guarantor.
7.4 Assignment. The Note, this Agreement and the other Loan Documents may
be endorsed, assigned and/or transferred in whole or in part by Lender, and any
such holder and/or assignee of the same shall succeed to and be possessed of the
rights and powers of Lender under all of the same to the extent transferred and
assigned; provided, however, that, prior to an Event of Default, Lender may not
transfer or assign any of the Loan Documents to a retailer in the social
expressions business or to a significant equity owner of any such retailer,
without the prior written consent of Borrower. Lender may grant participations
in all or any portion of its interest in the indebtedness evidenced by the Note,
and in such event Borrower shall continue to make payments due under the Loan
Documents to Lender and Lender shall have the sole responsibility of allocating
and forwarding such payments in the appropriate manner and amounts, and the sole
right to exercise the audit and inspection rights under Section 3.3 hereof
Borrower shall not assign any of its rights nor delegate any of its duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Lender.
7.5 Time of the Essence. Time is of the essence with respect to each and
every covenant, agreement and obligation of Borrower hereunder and under all of
the other Loan Documents.
7.6 Severability. If any provision(s) of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
7.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
Anything in this Agreement, the Note or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and loan charges agreed to
be paid to Lender for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Note shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then ipso facto, the obligation to pay such interest and/or loan charges shall
be reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected by Lender that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the
indebtedness evidenced by the Note and/or refunded to Borrower so that at no
time shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Note exceed the maximum amounts permitted from
time to time by applicable law.
7.8 Article and Section Headings; Defined Terms. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
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7.9 Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement or any of the Loan Documents shall be
in writing, signed by the party giving such notice, election or demand and shall
be delivered personally, telecopied, telexed, or sent by certified mail or
overnight via nationally recognized courier service (such as Federal Express),
to the other party at the address set forth below, or at such other address as
may be supplied in writing and of which receipt has been acknowledged in
writing. The date of personal delivery or delivery by such courier service,
telecopy or telex or four (4) business days after the date of mailing, as the
case may be, shall be the date of such notice, election or demand. For the
purposes of this Agreement:
The Address of Lender is: Petra Capital, LLC
150 Fourth Avenue North
Suite 1050
Nashville, TN 37219
Attention: Robert G. Shuler
Telecopy: (615)313-5990
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr.
Telecopy: (404) 572-5149
The Address of Borrower is: Factory Card Outlet of America Ltd.
745 Birginal Drive
Bensenville, IL 60106-1212
Attention: Charles R. Cumello
Telecopy: (708) 595-2104
with copies to: William E. Freeman
318 Beacon Right Road
Califon, NJ 07830
Telecopy: (908) 832-9440
and
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, NJ 07932
Attention: Lori J. Braender, Esq.
Telecopy: (201) 966-1550
7.10 Entire Agreement. This Agreement and the other written agreements
between Borrower and Lender represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
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Agreement and any other document executed contemporaneously herewith with
respect to the Obligations, the provision of this Agreement shall control. The
execution and delivery of this Agreement and the other Loan Documents by the
Borrower were not based upon any fact or material provided by Lender, nor was
the Borrower induced or influenced to enter into this Agreement or the other
Loan Documents by any representation, statement, analysis or promise by Lender.
7.11 Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of Georgia
applicable to contracts to be wholly performed in such State except to the
extent certain rights and privileges may be granted Lender under applicable
federal laws in which event federal law shall control. No amendment or
modification hereof shall be effective except in a writing executed by each of
the parties hereto.
7.12 Survival of Representations and Warranties. All covenants,
representations and warranties contained herein or in any of the Loan Documents,
or made by or furnished on behalf of the Borrower in connection herewith or any
of the Loan Documents, shall survive the execution and delivery of this
Agreement and all other Loan Documents and shall continue in full force and
effect so long as the Obligations are unpaid.
7.13 Jurisdiction and Venue. Borrower hereby consents to the jurisdiction
of the courts of the State of Georgia and the United States District Court for
the Northern District of Georgia, as well as to the jurisdiction of all courts
from which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations arising under
this Agreement or any other Loan Documents or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such court.
7.14 Waiver of Trial by Jury. LENDER AND BORROWER HEREBY WAIVE TRIAL BY
JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT
OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT OR THE LOAN DOCUMENTS.
7.15 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
7.16 Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
PETRA CAPITAL, LLC, a Georgia limited
liability company
By: Petra Capital Management, LLC, Manager
By: /s/ Rob Shuler
---------------------------------
Name: Rob Shuler
Title: Manager
BORROWER:
FACTORY CARD OUTLET OF AMERICA LTD., an
Illinois corporation
By:__________________________________
Name:________________________________
Title:_______________________________
ACKNOWLEDGED AND AGREED TO:
FCOA ACQUISITION CORP., a
Delaware corporation
By:__________________________________
Name:_____________________________
Title:____________________________
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
PETRA CAPITAL, LLC, a Georgia limited
liability company
By: Petra Capital Management, LLC, Manager
By:__________________________________
Name:________________________________
Title:_______________________________
BORROWER.
FACTORY CARD OUTLET OF AMERICA LTD., an
Illinois corporation
By: /s/ Glenn Franchi
--------------------------------------
Name: Glenn Franchi
Title: Executive Vice President
ACKNOWLEDGED AND AGREED TO:
FCOA ACQUISITION CORP., a
Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER
PETRA CAPITAL, LLC. a Georgia limited
liability company
By: Petra Capital Management, LLC. Manager
By:_____________________________________
Name:_______________________________
Title:______________________________
BORROWER:
FACTORY CARD OUTLET OF AMERICA LTD. an
Illinois corporation
By:_____________________________________
Name:_______________________________
Title:______________________________
ACKNOWLEDGED AND AGREED TO:
FCOA ACQUISITION CORP., a
Delaware corporation
By: /s/ William E. Freeman
-------------------------------
Name: William E. Freeman
Title: Chairman
21
<PAGE>
Index of Schedules and Attachments
Exhibit A - Form of Note
Schedule 2 1(a) - Foreign Qualification
Schedule 2.1(e) - Options, Warrants, Stock Rights, Etc.
Schedule 2.1(f) - Trademarks, Patents, Etc.
Schedule 2.1(i)(A) and (B) - Financial Statements
Schedule 2.1(l) - Debt and Liens
Schedule 2.1(o) - Shareholder Transactions
Schedule 2.1(r) - Significant Contracts
<PAGE>
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY,
WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
SECURED PROMISSORY NOTE
$3,000,000 July 2, 1996
FOR VALUE RECEIVED, the undersigned, FACTORY CARD OUTLET OF AMERICA LTD.,
an Illinois corporation ("Maker"), promises to pay to the order of PETRA
CAPITAL, LLC, a Georgia limited liability company ("Payee"; Payee and any
subsequent holder[s] hereof are hereinafter referred to collectively as
"Holder"), to Payee's account number 2080000549194 at First Union National Bank
of Georgia, Perimeter Center, 4570 Ashford Dunwoody Road, Atlanta, Georgia
30346, ABA routing number 061000227, or at such other place as Holder may
designate to Maker in writing from time to time, the principal sum of THREE
MILLION AND NO/100THS DOLLARS ($3,000,000.00), together with interest on the
outstanding principal balance hereof from the date hereof at the rate of twelve
and one-half percent (12.5%) per annum (computed on the basis of a 360-day
year); provided, however, that Holder may charge and receive interest upon any
renewal or extension hereof at the greater of (i) the rate set out above, or
(ii) any rate agreed to by the undersigned that is not in excess of the maximum
rate of interest allowed to be charged under applicable law (the "Maximum Rate")
at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
first (1st) day of August, 1996, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until July 2, 2001 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full; provided, however, that each interest payment prior to February
1, 1997 shall be payable only at a rate of seven and one-half percent (7.5%) per
annum with the remaining five percent (5%) per annum interest due hereunder
accruing from the date hereof until February 1, 1997 at which time all accrued
and unpaid interest shall be due and payable.
<PAGE>
The indebtedness evidenced hereby may be prepaid in whole or in part, at
any time and from time to time, without penalty. Any such prepayments shall be
credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that in
the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default shall occur under that certain
Loan Agreement of even date herewith, between Maker and Payee (as may be amended
from time to time, the "Loan Agreement"), which default or event of default is
not cured following the giving of any applicable notice and within any
applicable cure period set forth in said Loan Agreement; or should any default
by Maker be made in the performance or observance of any covenants or conditions
contained in any other instrument or document now or hereafter evidencing, or
securing or otherwise relating to the indebtedness evidenced hereby (subject to
any applicable notice and cure period provisions that may be set forth therein);
then, and in such event, the entire outstanding principal balance of the
indebtedness evidenced hereby, together with any other sums advanced hereunder,
under the Loan Agreement and/or under any other instrument or document now or
hereafter evidencing. or securing the indebtedness evidenced hereby, together
with all unpaid interest accrued thereon, shall, at the option of Holder and
without notice to Maker, at once become due and payable and may be collected
forthwith, regardless of the stipulated date of maturity. Upon the occurrence of
any Event of Default (as defined in the Loan Agreement), at the option of Holder
and without notice to Maker, all accrued and unpaid interest, if any, shall be
added to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
seven percentage points (7.0%) in excess of the above-specified interest rate,
or (ii) the Maximum Rate in effect from time to time, regardless of whether or
not there has been an acceleration of the payment of principal as set forth
herein. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of default hereunder,
acceptance of a past-due installment or other indulgences granted from time to
time, shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable laws. No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for payment of the indebtedness evidenced hereby, shall operate to
release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or
2
<PAGE>
hereafter liable for payment of the indebtedness evidenced hereby. either in
whole or in part, unless Holder agrees otherwise in writing. This Note may
not be changed orally, but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change. modification or
discharge is sought.
The indebtedness and other obligations evidenced by this Note are further
evidenced by (i) the Loan Agreement and (ii) certain other instruments and
documents, as may be required to protect and preserve the rights of Maker and
Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate, and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Georgia, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law
MAKER
FACTORY CARD OUTLET OF AMERICA LTD., an
Illinois corporation
By:_____________________________________
Name:________________________________
Title:_______________________________
3
<PAGE>
SCHEDULE 2.1(a) TO LOAN AGREEMENT
Foreign Qualifications
Borrower and Guarantor are in good standing in all jurisdictions in
which they are incorporated or qualified to do business as a foreign
corporation.
<PAGE>
SCHEDULE 2.1(e) TO LOAN AGREEMENT
Capitalization
1. Borrower - none.
2. Guarantor - See attached capitalization table as of March 27, 1996. The
amount of common stock shown as outstanding (231,000) on the attached
table was also the "outstanding" number as of November 15, 1995 (rather
than the 216,000 indicated in Schedule 2.1(a) to the original Loan
Agreement).
<PAGE>
SCHEDULE 2.1(f) TO LOAN AGREEMENT
Intellectual Property
1. Patents - none.
2. Trademarks, Trade Names, Registrations, etc.:
PARTY MANIA - Registration Numbers 1,834,212 (logo) and 1,834,213 (name),
dated May 3, 1994.
FACTORY CARD OUTLET - Registration applied for with the U.S.P.T.O. on
May 9, 1994.
3. Copyrights - none.
4. Licenses - none.
5. Formulas - none.
<PAGE>
SCHEDULE 2(i) TO LOAN AGREEMENT
Financial Statements
On file with the Lender.
<PAGE>
SCHEDULE 2.1(l) TO LOAN AGREEMENT
Debts and Liens
Debt
1. Credit Agreements:
Business Loan Agreement among Borrower, Guarantor and Bank
One, Chicago, N.A. ("Bank One") dated November 10, 1995,
increasing Borrower's current secured line of credit to
$20,000,000.00. Principal amount outstanding as of June 21,
1996 is $12,565,000.00, exclusive of the $1,500,000.00 term
loan described below.
Bank One extended a term loan to Borrower on May 1, 1995 in
the principal amount of $1,500,000.00 to purchase computer
equipment pursuant to the terms of Borrower's prior line of
credit facility.
2. Indentures - none.
3. Purchase Agreements - none.
Promissory Notes and other evidences of indebtedness:
Business Purpose Revolving Promissory Note from Borrower and
Guarantor to Bank One dated November 10, 1995 in the principal
amount of $15,000,000.00 to evidence a portion of the line of
credit described in #1 above.
Business Purpose Revolving Promissory Note from Borrower and
Guarantor to Bank One dated November 10, 1995 in the principal
amount of $5,000,000.00 to evidence a portion of the line of
credit described in #1 above.
Promissory Note from Borrower to Bank One dated May 1, 1995 in
the principal amount of $1,500,000.00 to evidence the
term loan described in #1 above.
Various installment notes payable in connection with purchases
of motor vehicles, due in monthly installments through 1999,
with interest rates ranging from 2.9% to 11%. $118,276
outstanding as of June 21, 1996.
Life insurance policy loans in the amount of $101,165 as of
July 1, 1995.
<PAGE>
Secured Promissory Note from Borrower to Sirrom Capital
Corporation ("Sirrom") dated November 15, 1995 in the
principal amount of $4,000,000 to evidence a term loan.
Secured Promissory Note from Borrower to Sirrom dated June
28, 1996 in the principal amount of $1,000,000 to evidence
a term loan.
5. Guaranties:
Guarantor has guaranteed the obligations of Borrower to Bank
One under the term loan described in item #1 above.
Guarantor has guaranteed the obligations of Borrower to Sirrom
under the terms loans described in item #1 above
6. Capital Leases:
Various equipment capital leases with maturities through
2000. $260,369 outstanding as of June 21, 1996.
7 Other - none.
Liens
1. Non-Titled Personal Property Security Agreement between
Borrower and Bank One granting a blanket lien on all of
Borrower's assets to secure the $20,000,000.00 line of credit
described in #1 above.
2. Commercial Security Agreement between Borrower and Bank One
granting a purchase money security interest in certain
computer equipment and software purchased with the proceeds of
the term loan described in #1 above.
3. Security interest granted in certain motor vehicles to
secure the installment notes described in #4 above.
4. Borrower's landlord for Borrower's facility at 2620 Lake
Circle Drive, Indianapolis, Indiana, has filed a UCC-1
financing statement in connection with inventory, equipment
and fixtures located at or used in connection with such
facility.
5. Security Agreement between Borrower and Sirrom, dated
November 15, 1995, to secure the promissory notes described in
#4 above.
<PAGE>
SCHEDULE 2.1(o) TO LOAN AGREEMENT
Certain Transactions
1. On or about September 1, 1995, Borrower made a loan to Charles R.
Cumello in the principal amount of $175,000.00 to assist with relocation
expenses.
2. William Freeman controls TRIWEF Corporation/Triad Sales International
("Triad"). Triad has made its offices, staff and foreign representative offices
available to Borrower and Guarantor for foreign sourcing, buying and freight
consolidation of imported goods. Triad has provided sourcing for such imported
goods and other services in return for a buying commission which is not in
excess of standard industry commissions.
<PAGE>
SCHEDULE 2.1(r) TO LOAN AGREEMENT
Significant Contracts
None.
<PAGE>
Exhibit 10.8.1
STOCK PURCHASE WARRANT
This Warrant is issued this 2nd day of July, 1996, by FCOA ACQUISITION
CORP., a Delaware corporation (the "Company"), to PETRA CAPITAL, LLC, a Georgia
limited liability company (PETRA CAPITAL, LLC 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 PETRA CAPITAL,
LLC 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 Three Million and no/100ths Dollars ($3,000,000) 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 18,980
shares of the Company's common stock (the "Common Stock"), which the Company
represents equals 1.875% 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 by the
corresponding number of shares of Common Stock set forth below:
Date Increase in Base Amount
---- -----------------------
January 1, 1998 7,592 shares of Common Stock
July 1, 1999 7,592 shares of Common Stock
July 1, 2000 7,591 shares of Common Stock
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 1, 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. (a) 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: 745 Birginal Drive, Bensenville, IL
<PAGE>
60106-1212 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 or (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance 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.
(b) In lieu of exercising this Warrant pursuant to Section 3(a) above,
the Holder shall have the right to require the Company to convert this Warrant,
in whole or in part and at any time or times into Shares (the "Conversion
Right"), upon delivery of written notice of intent to convert to the Company at
its address in Section 3(a) or such other address as the Company shall designate
in a written notice to the Holder hereof, together with this Warrant. Upon
exercise of the Conversion Right, the Company shall deliver to the Holder
(without payment by the Holder of any Exercise Price) that number of Shares
which is equal to the quotient obtained by dividing (x) the value of the number
of Shares into which this Warrant is being converted at the time the Conversion
Right is exercised (determined by subtracting the aggregate Exercise Price for
the Shares into which this Warrant is being converted immediately prior to the
exercise of the Conversion Right from a number equal to the product of (i) the
fair market value per Share as at such time, multiplied by (ii) that number of
Shares purchasable upon exercise of this Warrant immediately prior to the
exercise of the Conversion Right (taking into account all applicable adjustments
pursuant to Section 8), by (y) such fair market value per Share. Any references
in this Warrant to the "exercise" of this Warrant, and the use of the term
exercise herein, shall be deemed to include (without limitation) any exercise of
the Conversion Right.
3A. Non-Voting 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 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
2
<PAGE>
of this Warrant, the holders thereof shall receive such Non-Voting Common Stock
in lieu of Common Stock 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, 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
King & Spalding 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.
3
<PAGE>
(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. For purposes of this Section 4(c), the
issuance of any options, warrants or other rights or securities exercisable for
or convertible into capital stock shall be deemed to be an issuance of capital
stock as if such options, warrants or other rights or securities were exercised
or converted on the date of issuance thereof (whether or not immediately
exercisable or convertible). Notwithstanding anything contained herein to the
contrary, the Company may issue stock options to any person or entity that is
not an officer of the Company or other member of management without making any
anti-dilution adjustments for the Holder(s) under the anti-dilution provision
hereto, to the extent that at the time of issuance of such options and after
giving effect thereto the number of shares of Common Stock issuable upon
excercise of all such options issued after the date hereof (or upon conversion
of securities issuable upon exercise of such options) does not exceed fifteen
percent (15%) of the number of shares of Common Stock issued or issuable upon
exercise or conversion of securities issued by the Company after the date
hereof. To the extent any increase in the number of Shares issuable pursuant to
this Warrant is made pursuant to this Section 4(c) the number of Shares by which
the Base Amount thereafter is scheduled to increase as provided in Section 1
shall be proportionately increased.
5. Transfer of Warrant. Subject to the provisions of Section 4 hereto,
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
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<PAGE>
engaged in the same business as the Company, or to a significant equity owner of
any such company, without the prior written consent of the Company. 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.
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 hereto,
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 hereto, 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
5
<PAGE>
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 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 Warrant which provide therein for piggyback registration rights 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, 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.
(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
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<PAGE>
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 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, 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 writing by such holder; provided that the
obligation to indemnify 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
7
<PAGE>
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.
(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,
8
<PAGE>
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
(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.
9
<PAGE>
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/ William E. Freeman
---------------------------------------
Name: William E. Freeman
Title: Chairman
PETRA CAPITAL, LLC, a Georgia limited
liability company
By: Petra Capital Management, LLC, Manager
By:___________________________________
Name:______________________________
Title:_____________________________
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the
date first above written.
FCOA ACQUISITION CORP., a Delaware
corporation
By:______________________________________
Name:_________________________________
Title:________________________________
PETRA CAPITAL, LLC, a Georgia limited
liability company
By: Petra Capital Management, LLC, Manager
By: /s/ Rob Shuler
---------------------------------
Name: Rob Shuler
Title: Manager
11
<PAGE>
Exhibit 10.8.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY,
WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
SECURED PROMISSORY NOTE
$3,000,000 July 2, 1996
FOR VALUE RECEIVED, the undersigned, FACTORY CARD OUTLET OF AMERICA
LTD., an Illinois corporation ("Maker"), promises to pay to the order of PETRA
CAPITAL, LLC, a Georgia limited liability company ("Payee"; Payee and any
subsequent holder[s] hereof are hereinafter referred to collectively as
"Holder"), to Payee's account number 2080000549194 at First Union National Bank
of Georgia, Perimeter Center, 4570 Ashford Dunwoody Road, Atlanta, Georgia
30346, ABA routing number 061000227, or at such other place as Holder may
designate to Maker in writing from time to time, the principal sum of THREE
MILLION AND NO/100THS DOLLARS ($3,000,000.00), together with interest on the
outstanding principal balance hereof from the date hereof at the rate of twelve
and one-half percent (12.5%) per annum (computed on the basis of a 360-day
year), provided, however, that Holder may charge and receive interest upon any
renewal or extension hereof at the greater of (i) the rate set out above, or
(ii) any rate agreed to by the undersigned that is not in excess of the maximum
rate of interest allowed to be charged under applicable law (the "Maximum Rate")
at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due
and payable monthly, in arrears, with the first installment being payable on the
first (1st) day of August, 1996, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until July 2, 2001 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full, provided, however, that each interest payment prior to
February 1, 1997 shall be payable only at a rate of seven and one-half percent
(7.5%) per annum with the remaining five percent (5%) per annum interest due
hereunder accruing from the date hereof until February 1, 1997 at which time all
accrued and unpaid interest shall be due and payable.
The indebtedness evidenced hereby may be prepaid in whole or in part,
at any time and from time to time, without penalty. Any such prepayments shall
be credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
<PAGE>
Time is of the essence of this Note. It is hereby expressly agreed that
in the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default shall occur under that certain
Loan Agreement of even date herewith, between Maker and Payee (as may be amended
from time to time, the "Loan Agreement"), which default or event of default is
not cured following the giving of any applicable notice and within any
applicable cure period set forth in said Loan Agreement, or should any default
by Maker be made in the performance or observance of any covenants or conditions
contained in any other instrument or document now or hereafter evidencing, or
securing or otherwise relating to the indebtedness evidenced hereby (subject to
any applicable notice and cure period provisions that may be set forth therein);
then, and in such event, the entire outstanding principal balance of the
indebtedness evidenced hereby, together with any other sums advanced hereunder,
under the Loan Agreement and/or under any other instrument or document now or
hereafter evidencing, or securing the indebtedness evidenced hereby, together
with all unpaid interest accrued thereon, shall, at the option of Holder and
without notice to Maker, at once become due and payable and may be collected
forthwith, regardless of the stipulated date of maturity. Upon the occurrence of
any Event of Default (as defined in the Loan Agreement), at the option of Holder
and without notice to Maker, all accrued and unpaid interest, if any, shall be
added to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
seven percentage points (7.0%) in excess of the above-specified interest rate,
or (ii) the Maximum Rate in effect from time to time, regardless of whether or
not there has been an acceleration of the payment of principal as set forth
herein. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and ah court costs.
Presentment for payment, demand, protest and notice of demand, protest
and nonpayment are hereby waived by Maker and all other parties hereto. No
failure to accelerate the indebtedness evidenced hereby by reason of default
hereunder, acceptance of a past-due installment or other indulgences granted
from time to time, shall be construed as a novation of this Note or as a waiver
of such right of acceleration or of the right of Holder thereafter to insist
upon strict compliance with the terms of this Note or to prevent the exercise of
such right of acceleration or any other right granted hereunder or by applicable
laws. No extension of the time for payment of the indebtedness evidenced hereby
or any installment due hereunder, made by agreement with any person now or
hereafter liable for payment of the indebtedness evidenced hereby, shall operate
to release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or
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<PAGE>
hereafter liable for payment of the indebtedness evidenced hereby, either in
whole or in part, unless Holder agrees otherwise in writing. This Note may not
be changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.
The indebtedness and other obligations evidenced by this Note are
further evidenced by (i) the Loan Agreement and (ii) certain other instruments
and documents, as may be required to protect and preserve the rights of Maker
and Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate. then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Georgia, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by vsssoluntary action of the parties or by operation of law.
MAKER
FACTORY CARD OUTLET OF AMERICA LTD., an
Illinois corporation
By: /s/ Glenn J. Franchi
-------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
3
<PAGE>
Exhibit 10.8.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement"), dated as of the 2nd day of July.
1096, is made and entered into by and between FACTORY CARD OUTLET OF AMERICA
LTD. an Illinois corporation ("Borrower"), and PETRA CAPITAL, LLC, a Georgia
limited liability company ("Lender").
WITNESSETH:
WHEREAS, Lender is making a loan (the "Loan") in the amount of $3,000,000
to Borrower, pursuant to that certain Loan Agreement of even date herewith by
and between Borrower and Lender (the "Loan Agreement"), and
WHEREAS, in connection with the making of the Loan, Lender desires to
obtain from Borrower and Borrower desires to grant to Lender a security interest
in certain collateral more particularly described below.
AGREEMENT:
NOW, THEREFORE, in conside1ation of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Borrower hereby grants to Lender a security
interest in the following described property and any and all proceeds (although
proceeds are covered, Lender does not authorize the sale of any of the
following, except to the extent permitted under Sections 10 and 11 hereof) and
products thereof and accessions thereto (collectively the "Collateral"):
(a) Equipment. All equipment and other tangible persona! property of
Borrower of any kind and description, whether now owned or hereafter
acquired and wherever located, together with all parts, accessories and
attachments and all replacements thereof and additions thereto;
(b) Inventory, Accounts, Contract Rights, Chattel Paper, Documents,
Instruments and General Intangibles. All of Borrower's inventory and any
agreements for lease of same and rentals therefrom, and all of Borrower's
accounts, accounts receivable, contract rights, chattel paper, software,
documents. instruments and general intangibles and the proceeds therefrom,
whether now in existence or owned or hereafter arising or acquired, entered
into or created, and wherever located, and whether held for lease or sale,
or furnished or to be furnished under contracts of service;
<PAGE>
(c) Trademarks, Etc. All trademarks, trade names, and service marks
now held or hereafter acquired by Borrower, both those that are registered
with the United States Patent and Trademark Office and any unregistered
marks used by Borrower in the United States, and trade dress, including
logos and designs, in connection with which any such marks are used,
together with all registrations regarding such marks and the rights to
renewals thereof, and the goodwill of the business of Borrower symbolized
by such marks, and all patents, licenses, technology and other intangible
property of Borrower, whether now owned or hereafter acquired;
(d) Copyrights. All copyrights now held or hereafter acquired by
Borrower and any applications for U.S. copyrights hereafter made by
Borrower; and
(e) Proprietary Information, Computer Data, Etc. All proprietary
information and trade secrets of Borrower with respect to Borrower's
business, whether now owned or hereafter acquired, and all of Borrower's
computer programs and the information contained therein and all
intellectual property rights with respect thereto, whether now owned or
hereafter acquired.
2. Secured Indebtedness. The obligations secured hereby shall include (a)
loans to be made concurrently or in connection with this Agreement or the Loan
Agreement as evidenced by one or more promissory notes payable to the order of
Lender that shall be due and payable as set forth in such promissory notes, and
any renewals, increases or extensions thereof, and (b) all future advances made
by Lender for taxes, levies, insurance and preservation of the Collateral and
all attorney 5 fees, court costs and expenses of whatever kind incident to the
collection of any of said indebtedness or other obligations and the enforcement
and protection of the security interest created hereby.
3. Representations, Warranties and Agreements of Borrower. So long as the
Loan is outstanding, Borrower represents, warrants and agrees as follows:
(a) Borrower will promptly notify Lender, in writing, of any change in
Borrowers place or places of business and of any change in the location of
the Collateral or any records pertaining thereto.
(b) Except as set forth on Schedule 3(b) hereto, Borrower is the owner
of the Collateral free and clear of any liens, security interests, claims
and encumbrances, contingent or otherwise. Borrower will defend the
Collateral against the claims and demands of all persons.
(c) Borrower will pay to Lender all amounts secured hereby as and when
the same shall be due and payable, whether at maturity, by acceleration or
otherwise, and will promptly perform all terms of this Agreement and the
other Loan Documents (as defined in the Loan Agreement) between Borrower
and Lender, and will promptly discharge all said liabilities.
2
<PAGE>
(d) Borrower will at all times keep the Collateral insured against all
insurable hazards in amounts at least equal to the lesser of the full cash
value of the Collateral and the outstanding balance of the Loan. Such
insurance shall be obtained from such companies as may be reasonably
acceptable to Lender, with provisions reasonably satisfactory to Lender for
payment of losses thereunder to Lender as its interests may appear. If
required by Lender, Borrower shall deposit copies of the policies with
Lender. If an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing, any money received by Lender under said
policies may be applied to the payment of any indebtedness secured hereby,
whether or not due and payable, and otherwise said money shall be delivered
by Lender to Borrower for the purpose of repairing or restoring the
Collateral. Subject to the rights of any lender that is senior to Lender
whether under law or by agreement, Borrower assigns to Lender all right to
receive proceeds of insurance not exceeding the amounts secured hereby,
directs any insurer to pay all proceeds directly to Lender, and appoints
Lender Borrower's attorney in fact to endorse any draft or check made
payable to Borrower in order to collect the benefits of such insurance. If
Borrower fails to keep the Collateral insured as required hereunder, Lender
shall have the right to obtain such insurance at Borrower's expense and add
the cost thereof to the other amounts secured hereby.
(e) Borrower will pay all costs of filing of financing, continuation
and termination statements with respect to the security interests created
hereby, and Lender is authorized to do all things that it deems necessary
to perfect and continue perfection of the security interests created hereby
and to protect the Collateral.
(f) The address set forth after Borrower's signature on this Agreement
is Borrower's principal place of business and the location where the
records concerning all intangible Collateral are kept and/or maintained.
The addresses set forth on Schedule 3(f) hereto are all of the locations
where Borrower does business and the locations of all tangible Collateral.
4. Default. Borrower shall be in default upon the occurrence of a default
or Event of Default (as defined in the Loan Agreement) that has not been cured
during the applicable grace period.
5. Remedies Upon Default. Upon the occurrence of an Event of Default, all
sums secured hereby shall immediately become due and payable at Lender's option
without notice to Borrower, and Lender may proceed to enforce payment of same
and to exercise any and all rights and remedies provided by the Uniform
Commercial Code (Georgia) or other applicable law, as well as all other rights
and remedies possessed by Lender, all of which shall be cumulative. Following
the occurrence of an Event of Default, and upon demand by Lender, Borrower shall
assemble the Collateral and make it available to Lender at a place reasonably
convenient to Lender and Borrower. Any notice of sale, lease or other intended
disposition of the Collateral by Lender sent to Borrower at the address
hereinafter set forth, or at such other address of Borrower as Borrower may
designate in writing, at least five (5) days prior to such action, shall
constitute reasonable notice to Borrower.
3
<PAGE>
Lender may waive any default before or after the same has been declared
without impairing its right to declare a subsequent default hereunder, this
right being a continuing one.
6. Severability. If any provision of this Agreement is held invalid, such
invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
7. Binding Effect. This Agreement shall inure to the benefit of Lender's
successors and assigns and shall bind Borrower's representatives, successors and
assigns.
8. Termination Statement. Borrower agrees that, notwithstanding the payment
in full of all indebtedness secured hereby and whether or not there is any
outstanding obligation of Lender to make future advances, Lender shall not be
required to send Borrower a termination statement with respect to any financing
statement filed to perfect Lender's security interest(s) in any of the
Collateral, unless and until Borrower shall have made written demand therefor.
Upon receipt of such a written demand, Lender may at its option, in lieu of
sending a termination statement to Borrower, cause said termination statement to
be filed with the appropriate filing officer(s).
9. Protection of Collateral. Borrower will not permit any liens or security
interests other than those created by this Agreement, and those in favor of any
lender described on Schedule 3(b) hereto, to attach to any of the Collateral,
nor permit any of the Collateral to be levied upon under any legal process which
is not released within sixty (60) days, nor permit anything to be done that may
impair the security intended to be afforded by this Agreement (except in favor
of a lender listed on Schedule 3(b) hereto), nor permit any tangible Collateral
to become attached to or commingled with other goods without the prior written
consent of Lender.
10. Special Agreements With Respect to Certain Tangible Collateral.
Borrower additionally agrees and warrants as follows:
(a) Borrower will not permit any of the Collateral to be relocated to
any facility not shown on Schedule 3(f) hereto, except for temporary
periods in the normal and customary use thereof, without the prior written
consent of Lender which consent shall not be unreasonably withheld.
Borrower will permit Lender to inspect the Collateral as permitted under
the Loan Agreement.
(b) If any of the Collateral is equipment or goods that is or are used
in more than one state, Borrower will contemporaneously herewith furnish
Lender a list of the states wherein such equipment or goods are or will be
used, and hereafter will notify Lender in writing (i) of any other states
in which such equipment or goods are so used, and (ii) of any change in the
location of Borrower's principal place of business.
(c) Borrower will not sell, exchange, lease or otherwise dispose of
any of the Collateral or any interest therein, except for (i) inventory in
the ordinary course of business, and (ii) the sale of equipment that is
obsolete or no longer used or useful in the business of Borrower without
the prior written consent of Lender.
4
<PAGE>
(d) Borrower will keep the Collateral in good condition and repair and
will pay and discharge all taxes, levies and other impositions levied
thereon as well as the cost of repairs to or maintenance of same, and will
not permit anything to be done that may impair the value of any of the
Collateral. If Borrower fails to pay such sums on or before their
respective due dates, Lender may do so for Borrower's account and add the
amount thereof to the other amounts secured hereby.
(e) Until default in any of the terms hereof, or the terms of any
indebtedness secured hereby, Borrower shall be entitled to possession of
the Collateral and to use the same in any lawful manner consistent with
past practices, provided that such use does not violate the terms of any
policy of insurance thereon.
(f) Borrower will not allow the Collateral to be attached to real
estate in such manner as to become a fixture or a part of any real estate
without the prior written consent of Lender.
11. Special Agreements With Respect to Intangible and Certain Tangible
Collateral. Borrower additionally warrants and agrees as follows:
(a) Lender's security interest hereunder shall attach to all proceeds
of all sales or other dispositions of the Collateral. If at any time any
such proceeds shall be represented by any instruments, chattel paper or
documents of title, then such instruments, chattel paper or documents of
title shall be promptly delivered to Lender (but only to the extent
Borrower is not required to deliver the same to a lender senior to Lender)
and shall be subject to the security interest granted hereby. If at any
time any of Borrower's inventory is represented by any document of title,
such document of title will be delivered promptly to Lender (but only to
the extent Borrower is not required to deliver the same to a lender senior
to Lender) and shall be subject to the security interest granted hereby.
(b) By the execution of this Agreement, Lender shall not be obligated
to do or perform any of the acts or things provided in any contracts
covered hereby that are to be done or performed by Borrower, but if there
is a default by Borrower in the payment of any amount due in respect of any
indebtedness secured hereby (subject to any applicable grace period), then
Lender may, at its election, perform some or all of the obligations
provided in said contracts to be performed by Borrower, and if Lender
incurs any liability or expenses by reason thereof, the same shal1 be
payable by Borrower upon demand and shall also be secured by this
Agreement.
(c) After the occurrence and during the continuance of an Event of
Default, Lender shall have the right to notify the account debtors
obligated on any or all of Borrower's accounts receivable to make payment
thereof directly to Lender, and to take control of all proceeds of any such
accounts receivable. Until such time as Lender elects to exercise such
right by mailing to Borrower written notice thereof, Borrower is
authorized, as agent of the Lender, to collect and enforce said accounts
receivable.
5
<PAGE>
12. Power of Attorney. Borrower hereby constitutes the Lender or its
designee, as Borrower's attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Borrower's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lender's possession.
to sign the name of Borrower on any invoice or bill of lading relating to any of
the accounts receivable, drafts against customers, assignments and verifications
of accounts receivable and notices to customers; to send verifications of
accounts receivable; to notify the Post Office authorities to change the address
for delivery of mail addressed to Borrower to such address as the Lender may
designate; to execute any of the documents referred to in Section 3(e) hereof in
order to perfect and/or maintain the security interests and liens granted herein
by Borrower to the Lender; and to do all other acts and things necessary to
carry out this Security Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of commission or omission (other than acts of gross negligence or
willful misconduct), nor for any error of judgment or mistake of fact or law;
this power being coupled with an interest is irrevocable until all of the
obligations secured hereby are paid in full and any and all promissory notes
executed in connection therewith are terminated and satisfied.
6
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement, or
have caused this Agreement to be executed as of the date first above written.
BORROWER:
FACTORY CARD OUTLET OF AMERICA LTD.
By /s/ Glenn Franchi
--------------------------------------
Name: Glenn Franchi
Title: Executive Vice-President
Address: 745 Birginal Drive
Bensenville, IL
60106-1212
LENDER:
PETRA CAPITAL, LLC
By: Petra Capital Management, LLC, Manager
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
7
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement, or
have caused this Agreement to be executed as of the date first above written.
BORROWER:
FACTORY CARD OUTLET OF AMERICA LTD.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 745 Birginal Drive
Bensenville, IL
60106-1212
LENDER:
PETRA CAPITAL, LLC
By: Petra Capital Management, LLC, Manager
By /s/ Rob Shuler
--------------------------------------
Name: Rob Shuler
Title: Manager
7
<PAGE>
SCHEDULE 3(b) TO SECURITY AGREEMENT
Liens
1. Non-Titled Personal Property Security Agreement between Borrower and
Bank One, Chicago, N.A. ("Bank One") granting a blanket lien on all of the
assets of Borrower to secure a $20,000,000.00 line of credit.
2. Commercial Security Agreement between Borrower and Bank One granting a
purchase money security interest in certain computer equipment and software
purchased with the proceeds of $1,500,000.00 term loan.
3. Security interest granted in certain motor vehicles to secure the
installment notes.
4. Borrower's landlord for Borrower's facility at 2620 Lake Circle Drive,
Indianapolis, Indiana, has filed a UCC-1 financing statement in connection with
inventory, equipment and fixtures located at or used in connection with such
facility.
5 Security Agreement between Borrower and Sirrom Capital Corporation, dated
November 15, 1995, to secure certain promissory notes.
<PAGE>
SCHEDULE 3(f) TO SECURITY AGREEMENT
Addresses
See attached list of store, warehouse and office locations.
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 1
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
101 BUFFALO GROVE MGR - DOLORES ORACION (847) 577-3807 4,485 RETAIL SQ. FT. DIST: 44
PLAZA VERDE CENTER FAX (847) 577-3812 MON-FRI 9:00 - 9:00
1245 WEST DUNDEE ROAD Open 6/05/85 SAT 9:00 - 6:00
BUFFALO GROVE SUN 10:00 - 5:00
IL 60089
102 VILLA PARK MGR - JULIE KELLMER (630) 832-0509 8,403 RETAIL SQ. FT. DIST: 13
VILLA OAKS CENTER ASST - ANNE WALLE FAX (630) 832-9452 MON-FRI 9:00 - 9:00
138 WEST ROOSEVELT ROAD SHARON SOLLER Open 9/26/85 SAT 9:00 - 6:00
VILLA PARK CRYSTAL MCNALLY SUN 10:00 - 6:00
IL 60181
103 ROLLING MEADOWS MGR - TOM LEN (847) 952-8674 4,711 RETAIL SQ. FT. DIST: 44
MEADOWS TOWN HALL ASST - CHRISTINE O'DWYER FAX (847) 952-8691 MON-FRI 10:00 - 9:00
1400 EAST GULF ROAD Open 10/24/85 SAT 10:00 - 6:00
ROLLING MEADOWS SUN 11:00 - 5:00
IL 60008
104 NILES MGR - JANELLE ELDRIDGE (847) 647-1274 9,840 RETAIL SQ. FT. DIST: 44
VILLAGE CROSSING S/C FAX (847) 647-7900 MON-FRI 9:00 - 9:00
5653 TOUHY AVENUE Open 11/07/85 SAT 9:00 - 9:00
NILES SUN 9:00 - 5:00
IL 60714
105 BLOOMINGDALE MGR - DEBBIE LORGE (630) 307-3679 9,850 RETAIL SQ. FT. DIST: 11
BLOOMINGDALE COURT #250 ASST - SUE TURNER FAX (630) 307-3708 MON-FRI 9:30 - 9:00
364 WEST ARMY TRAIL ROAD Open 10/01/89 SAT 9:00 - 6:00
BLOOMINGDALE SUN 10:00 - 5:00
IL 60108
107 ST. CHARLES MGR - PAULA HUMME (630) 377-7769 4,290 RETAIL SQ. FT. DIST: 13
PIANO FACTORY 1B ASST - JOAN DEPAUW FAX (630) 377-7795 MON-FRI 10:00 - 9:00
410 S FIRST STREET Open 5/29/86 SAT 10:00 - 6:00
ST CHARLES SUN 11:00 - 5:00
IL 60174
108 MT. VERNON MGR - DEBBIE MAYFIELD (618) 242-8771 4,100 RETAIL SQ. FT. DIST: 61
JENT FACTORY OUTLET FAX (618) 242-8766 MON-FRI 9:00 - 7:00
257 OUTLET AVENUE Open 6/24/94 SAT 9:00 - 7:00
MT VERNON, IL 62864 SUN 11:00 - 5:00
IL 62864
109 DARIEN MGR - CHRIS EWERT (708) 985-8377 8,220 RETAIL SQ. FT. DIST: 13
CHESTNUT COURT CENTER ASST - MICHELE BROWN FAX (708) 985-9616 MON-FRI 9:00 - 9:00
7511 SOUTH LEMONT CENTER DIANE MISTAKOVICH Open 10/24/86 SAT 9:00 - 6:00
DARIEN SUN 11:00 - 6:00
IL 60559
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 2
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
110 EVANSTON MGR - OPEN (847) 866-7740 4,128 RETAIL SQ. FT. DIST: 44
EVANSTON PLAZA FAX (847) 866-7907 MON-FRI 9:00 - 9:00
1930 WEST DEMPSTER Open 5/21/87 SAT 9:00 - 6:00
EVANSTON SUN 9:00 - 5:00
IL 60201
113 JOLIET MGR - GAYLE MUSSER (815) 436-1224 9,712 RETAIL SQ. FT. DIST: 13
LOUIS JOLIET POINTE ASST - COLLEEN PERCY FAX (815) 439-2264 MON-FRI 9:00 - 9:00
2856 PLAINFIELD ROAD Open 10/01/89 SAT 9:00 - 9:00
JOLIET SUN 10:00 - 5:00
IL 60435
114 LIBERTYVILLE MGR - CHERI LINEHAN (847) 362-1610 3,340 RETAIL SQ. FT. DIST: 44
RED TOP PLAZA OUTLET C ASST - DAN ELQUIST FAX (847) 362-1613 MON-FRI 9:00 - 9:00
1366 SOUTH MILWAUKEE AVENUE SARA BRZEZYSKI Open 11/01/89 SAT 9:00 - 5:00
LIBERTYVILLE SUN 10:00 - 5:00
IL 60048
115 BLOOMINGTON MGR - JIM DUE (309) 662-4421 5,413 RETAIL SQ. FT. DIST: 61
2103 NORTH VETERANS PARKWAY ASST - ABBI MCCLURE FAX (309) 662-4586 MON-FRI 9:00 - 9:00
#324 Open 10/01/89 SAT 9:00 - 6:00
BLOOMINGTON SUN 10:00 - 5:00
IL 61704
117 BRICKTOWN MGR - MICHAEL KEITH (312) 622-3338 4,980 RETAIL SQ. FT. DIST: 43
BRICKTOWN SQUARE #108-110 ASST - DONNA VASSAR FAX (312) 622-1742 MON-FRI 10:00 - 9:00
6560 WEST FULLERTON AVENUE KRISSY AICHINGER Open 11/01/89 SAT 9:00 - 9:00
CHICAGO SUN 10:00 - 6:00
IL 60635
118 ROCKFORD MGR - LINDA KOSOWIEC (815) 226-9111 4,399 RETAIL SQ. FT. DIST: 40
FOREST PLAZA C3 & 4 ASST - GARY HANSON FAX (815) 226-9114 MON-FRI 9:00 - 9:00
6387 EAST STATE STREET Open 10/01/89 SAT 9:00 - 6:00
ROCKFORD SUN 9:00 - 5:00
IL 61111
119 COUNTRYSIDE MGR - OPEN (708) 354-1558 7,260 RETAIL SQ. FT. DIST: 13
COUNTRY S/C A2 & 3 ASST - ARLENE BELLINO FAX (708) 354-3335 MON-FRI 9:00 - 9:00
102 COUNTRYSIDE Open 11/01/89 SAT 9:00 - 6:00
COUNTRYSIDE SUN 10:00 - 5:00
IL 60525
120 ELGIN MGR - CONNIE AWE (847) 931-9600 4,620 RETAIL SQ. FT. DIST: 44
FOX RIVER PLAZA A5 & 6 ASST - LORI MELLEN FAX (847) 931-9605 MON-FRI 9:30 - 9:00
440-D AIRPORT ROAD Open 9/20/90 SAT 9:00 - 6:00
ELGIN SUN 10:00 - 5:00
IL 60120
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 3
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
121 CRYSTAL LAKE MGR - KRIS OBHMKE (815) 455-0460 3,869 RETAIL SQ. FT. DIST: 44
CRYSTAL LAKE COURT S/C ASST - LISA RICHARDSON FAX (815) 455-0518 MON-FRI 9:30 - 9:00
5587 NORTWEST HIGHWAY Open 3/01/90 SAT 9:00 - 6:00
CRYSTAL LAKE SUN 10:00 - 5:00
IL 60014
123 NORTH RIVERSIDE MGR - CHERYL AGUIRRE (708) 447-8691 5,490 RETAIL SQ. FT. DIST: 43
7337 WEST 25TH STREET ASST - DOROTHY HULL FAX (708) 447-8726 MON-FRI 9:00 - 9:00
NORTH RIVERSIDE MARCY JONES Open 7/12/90 SAT 9:00 - 7:00
SUN 10:00 - 6:00
IL 60546
124 MORTON GROVE MGR - WAYNE CEDERBERG (847) 967-7441 5,490 RETAIL SQ. FT. DIST: 43
7154 WEST DEMPSTER ASST - PAT AMENIRO FAX (847) 967-9636 MON-FRI 9:00 - 9:00
MORTON GROVE Open 7/12/90 SAT 9:00 - 9:00
SUN 10:00 - 5:00
IL 60053
125 SKOKIE MGR - VICKY WHITE (847) 674-3923 2,800 RETAIL SQ. FT. DIST: 44
FASHION CENTER ASST - OPEN FAX (847) 674-3942 MON-FRI 9:00 - 9:00
9448 SKOKIE BOULEVARD Open 10/18/90 SAT 9:00 - 6:00
SKOKIE SUN 10:00 - 5:00
IL 60077
126 CHICAGO RIDGE MGR - RACHELLE BARTON (708) 425-1115 9,017 RETAIL SQ. FT. DIST: 13
COMMONS OF CHICAGO RIDGE ASST - KIM PILOT FAX (708) 425-1313 MON-FRI 9:00 - 9:00
267 COMMON DRIVE Open 10/25/90 SAT 9:00 - 9:00
CHICAGO RIDGE SUN 10:00 - 5:00
IL 60415
128 SCOTTSDALE MGR - JUDI SCHUHRKE (312) 582-7787 4,940 RETAIL SQ. FT. DIST: 43
SCOTTSDALE CENTER ASST - VICKY JOHNSON FAX (312) 582-9341 MON-FRI 9:00 - 9:00
8059 SOUTH CICERO AVENUE BARBARA MARKS Open 6/05/85 SAT 9:00 - 6:00
CHICAGO SUN 10:00 - 5:00
IL 60652
129 MIDWAY SQUARE MGR - KATINA MCDONALD (312) 585-7733 5,320 RETAIL SQ. FT. DIST: 43
MIDWAY SQUARE CENTER ASST - MONICA HOLTZ FAX (312) 585-9791 MON-FRI 9:00 - 9:00
5125 SOUTH PULASKI ROAD Open 5/01/91 SAT 9:00 - 6:00
CHICAGO SUN 10:00 - 5:00
IL 60632
130 BRIDGEVIEW MGR - STEVE KELLEY (708) 233-0123 4,960 RETAIL SQ. FT. DIST: 43
BRIDGEVIEW COURT CENTER ASST - SARAH WELLER FAX (708) 233-0131 MON-FRI 9:00 - 9:00
7769 & 7771 SOUTH HARLEM Open 10/25/91 SAT 9:00 - 6:00
BRIDGEVIEW SUN 10:00 - 5:00
IL 60455
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 4
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
131 MERRILLVILLE MGR - BARBARA TRIPLETT (219) 736-1855 5,220 RETAIL SQ. FT. DIST: 43
MERRILLVILLE PLAZA ASST - MARTHA MARTINEZ FAX (219) 736-1858 MON-FRI 9:00 - 9:00
1630 EAST 80TH AVENUE KAYE CRUMBLEY Open 11/01/91 SAT 9:00 - 8:00
MERRILLVILLE SUN 10:00 - 5:00
IN 46410
132 WHEATON MGR - RHONDA ACKERMAN (708) 665-2230 6,348 RETAIL SQ. FT. DIST: 13
DANADA SQUARE ASST - JAMES TILLMAN FAX (630) 665-2582 MON-FRI 9:00 - 9:00
#83 DANADA SQUARE EAST TONY BERRY Open 5/08/92 SAT 9:00 - 9:00
WHEATON SUN 10:00 - 5:00
IL 60187
133 MT. PROSPECT MGR - BARNEY GLASS (847) 506-1153 5,800 RETAIL SQ. FT. DIST: 44
MT. PROSPECT PLAZA ASST - SYLVIA BAILEY FAX (847) 506-1168 MON-FRI 9:00 - 9:00
1038 MT. PROSPECT PLAZA Open 7/16/92 SAT 9:00 - 9:00
MT. PROSPECT SUN 10:00 - 5:00
IL 60056
134 WHITNEY SQUARE MGR - TAMI MCFARLANE (608) 276-9720 8,000 RETAIL SQ. FT. DIST: 40
WHITNEY SQUARE S/C ASST - CINDY SCHARA FAX (608) 276-9730 MON-FRI 9:30 - 9:00
676 H.S. WHITNEY WAY Open 8/13/92 SAT 9:00 - 9:00
MADISON SUN 10:30 - 5:00
WI 53711
135 MISHAWAKA MGR - GAIL COWSERT (219) 271-2830 7,300 RETAIL SQ. FT. DIST: 47
INDIAN RIDGE S/C ASST - AMY BRUGGER FAX (219) 271-2838 MON-FRI 9:00 - 9:00
5816 GRAPE ROAD PAM MILBOURN Open 10/29/92 SAT 9:00 - 9:00
MISHAWAKA SUN 10:00 - 5:00
IN 46545
136 BROWN DEER MGR - DAVID STELZL (414) 355-3110 7,049 RETAIL SQ. FT. DIST: 40
MARKETPLACE OF BROWN DEER ASST - DOROTHY FIELDS FAX (414) 355-3310 MON-FRI 9:30 - 9:00
9190 GREEN BAY ROAD JENNY SWITALSKI Open 10/22/92 SAT 9:30 - 9:00
BROWN DEER SUN 11:00 - 6:00
WI 53209
137 NAPERVILLE MGR - TERI LAWN (708) 355-9572 5,320 RETAIL SQ. FT. DIST: 13
HERITAGE SQUARE #108 ASST - KAREN REED FAX (708) 355-9583 MON-FRI 9:30 - 9:00
428 SOUTH ROUTE 59 DIANA KLEIN Open 11/05/92 SAT 9:00 - 6:00
NAPERVILLE SUN 10:00 - 6:00
IL 60540
138 OAK PARK MGR - EVA AYAASH (708) 386-7770 5,700 RETAIL SQ. FT. DIST: 43
1035 WEST LAKE STREET ASST - DAVE STRICKLAND FAX (708) 386-7790 MON-FRI 9:30 - 9:00
OAK PARK Open 11/12/92 SAT 9:30 - 6:00
SUN 11:00 - 5:00
IL 60301
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 5
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
139 MOLINE MGR - KELLY HEALD (309) 797-2096 8,676 RETAIL SQ. FT. DIST: 51
4371 16TH STREET ASST - DEBBIE WERMELING FAX (309) 797-8295 MON-FRI 9:00 - 9:00
MOLINE Open 2/01/93 SAT 9:00 - 9:00
SUN 10:00 - 6:00
IL 61265
140 BROOKFIELD MGR - DON SMITH (414) 821-9640 6,234 RETAIL SQ. FT. DIST: 40
BROOKFIELD FASHION CENTER ASST - PATRICIA STARK FAX (414) 821-9643 MON-FRI 9:30 - 9:00
16900 J WEST BLUEMOUND RD Open 4/22/93 SAT 9:00 - 6:00
BROOKFIELD SUN 11:00 - 5:00
WI 53005
141 WEST ALLIS MGR - LYNN WAWRZYNIAKOWSKI (414) 771-3032 9,763 RETAIL SQ. FT. DIST: 40
WEST ALLIS TOWN CENTER FAX (414) 771-3206 MON-FRI 9:00 - 9:00
6718 WEST GREENFIELD Open 6/05/85 SAT 9:00 - 9:00
WEST ALLIS SUN 10:30 - 6:00
WI 53214
142 CALUMET CITY MGR - MELISSA MUELLER (708) 868-4920 8,475 RETAIL SQ. FT. DIST: 43
OAKVIEW SHOPPING CENTER ASST - CARMEN REYES FAX (708) 868-5217 MON-FRI 9:00 - 9:00
1737 EAST WEST ROAD DEBBIE SHEAHAN Open 7/29/93 SAT 9:00 - 9:00
CALUMET CITY SUN 10:00 - 6:00
IL 60409
143 ORLAND PARK MGR - GINA KELLEY (708) 403-5228 5,936 RETAIL SQ. FT. DIST: 43
LAKEVIEW PLAZA ASST - YOLANDA VALLE FAX (708) 403-1026 MON-FRI 9:00 - 9:00
15778 LAGRANGE ROAD STACY RANDOLPH Open 8/05/93 SAT 9:00 - 9:00
ORLAND PARK SUN 10:00 - 6:00
IL 60462
144 ONE SCHAUMBURG PLACE MGR - PAM GRIFFEY (847) 995-9511 6,348 RETAIL SQ. FT. DIST: 44
SPACE T-158 ASST - OPEN FAX (847) 995-9513 MON-FRI 10:00 - 9:00
601 NORTH MARTINGALE ROAD Open 9/02/93 SAT 10:00 - 9:00
SCHAUMBURG SUN 11:00 - 6:00
IL 60173
145 TIMMERMAN MGR - DAN SYMONIAK (414) 466-0567 8,600 RETAIL SQ. FT. DIST: 40
TIMMERMAN PLAZA ASST - JAY VREELAND FAX (414) 466-0341 MON-FRI 9:00 - 9:00
10328 WEST SILVER SPRING DR Open 9/30/93 SAT 9:00 - 9:00
MILWAUKEE SUN 10:00 - 6:00
WI 53225
146 EVANSVILLE MGR - PAUL MELTON (812) 477-3269 9,873 RETAIL SQ. FT. DIST: 61
LAWNDALE S/C ASST - PATTI PAYTON FAX (812) 473-8648 MON-FRI 9:00 - 9:00
862 SOUTH GREEN RIVER ROAD PAMELA RUSSELBURG Open 10/28/93 SAT 9:00 - 9:00
EVANSVILLE SUN 10:00 - 6:00
IN 47715
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 6
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
147 SPEEDWAY MGR - DAN MCCAFFERTY (317) 484-1721 13,325 RETAIL SQ. FT. DIST: 47
SPEEDWAY SUPER CENTER ASST - JERRI GARDNER FAX (317) 484-1375 MON-FRI 9:00 - 9:00
5926 B CRAWFORDSVILLE ROAD SHELAINE AVERITT Open 11/18/93 SAT 9:00 - 9:00
SPEEDWAY DANA RODDA SUN 11:00 - 6:00
IL 46224
148 GREENWOOD MGR - LISA HERNDON (317) 888-8101 8,355 RETAIL SQ. FT. DIST: 47
GREENWOOD SHOPPES ASST - DEBI RIDENOUR FAX (317) 888-8272 MON-FRI 9:00 - 9:00
906 NORTH US 31 JULIE MASHINO Open 4/28/94 SAT 9:00 - 9:00
GREENWOOD JAMIE CROW SUN 10:00 - 6:00
IN 46142
149 WILLOW LAKE MGR - PAM BOURNE (317) 872-7072 8,830 RETAIL SQ. FT. DIST: 47
WILLOW LAKE S/C ASST - LANETA GAMBY FAX (317) 872-8419 MON-FRI 9:00 - 9:00
2620 LAKE CIRCLE DRIVE SHARI GROSS Open 11/18/93 SAT 9:00 - 9:00
INDIANAPOLIS SUN 11:00 - 6:00
IN 46268
150 FORT WAYNE MGR - STEVE NELSON (219) 483-4207 7,890 RETAIL SQ. FT. DIST: 47
COLDWATER CROSSING S/C ASST - GINA WOOD FAX (219) 482-4482 MON-FRI 9:00 - 9:00
5511 COLDWATER ROAD SUITE C JILL BISHOP Open 12/02/93 SAT 9:00 - 9:00
FORT WAYNE SUN 10:00 - 6:00
IN 46825
151 MARION MGR - PAMELA STAFFORD (319) 377-9522 9,859 RETAIL SQ. FT. DIST: 51
COLLINS ROAD SQUARE ASST - CRYSTAL FREITAGER FAX (319) 377-0803 MON-FRI 9:00 - 9:00
1370 TWIXT TOWN ROAD OPEN Open 3/10/94 SAT 9:00 - 9:00
MARION SUN 10:00 - 6:00
IA 52302
152 LAFAYETTE PLACE MGR - DEBBIE WOOD (317) 388-9277 8,500 RETAIL SQ. FT. DIST: 47
3629 COMMERCIAL DRIVE ASST - SHIRLEY WOLFE FAX (317) 388-9294 MON-FRI 9:00 - 9:00
INDIANAPOLIS Open 4/28/94 SAT 9:00 - 9:00
SUN 10:00 - 6:00
IN 46222
153 ROCHESTER MGR - OPEN (507) 287-0287 9,860 RETAIL SQ. FT. DIST: 51
T.J. MAXX PLAZA ASST - CONNIE PETERS FAX (507) 287-0306 MON-FRI 9:00 - 9:00
1300 SALEM ROAD S.W. DARCY JENSEN Open 9/22/94 SAT 9:00 - 9:00
ROCHESTER SUN 10:00 - 6:00
MN 55902
154 RACINE MGR - KRISTIE GRINDEY (414) 634-5530 10,048 RETAIL SQ. FT. DIST: 40
RACINE CENTER ASST - JENNY PETRICK FAX (414) 634-0578 MON-FRI 9:30 - 9:00
5201 Q WASHINGTON AVENUE KARYN SCHIESL Open 9/27/94 SAT 9:30 - 9:00
RACINE SUN 10:00 - 6:00
WI 53406
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 7
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
155 HIKES POINT MGR - KIMBERLY KANE (502) 458-4254 11,160 RETAIL SQ. FT. DIST: 47
HIKES POINT PLAZA MIT - DAN TORRES FAX (502) 458-4643 MON-FRI 9:00 - 9:00
4048 TAYLORSVILLE ROAD Open 10/23/94 SAT 9:00 - 9:00
LOUISVILLE SUN 10:00 - 6:00
KY 40220
156 SOUTHPORT MGR - PAUL VANDERSEE (515) 256-9151 10,375 RETAIL SQ. FT. DIST: 51
SOUTHPORT SHOPPING CENTER ASST - JANE STEEN FAX (515) 256-9167 MON-FRI 9:00 - 10:00
6325 S.E. 14TH STREET Open 10/10/94 SAT 9:00 - 10:00
DES MOINES SUN 10:00 - 8:00
IA 50320
157 BAKERS SQUARE MGR - KATHY BEUTLER (402) 334-5408 9,469 RETAIL SQ. FT. DIST: 51
BAKER SQUARE ASST - CONNIE PETERSON FAX (402) 334-0267 MON-FRI 9:00 - 9:00
13415 WEST CENTER ROAD NICOLE MILLER Open 11/14/94 SAT 9:00 - 9:00
OMAHA SUN 10:00 - 6:00
NE 68144
158 HARPERS STATION MGR - LORI MAYNARD (513) 489-3544 7,851 RETAIL SQ. FT. DIST: 68
11309-E MONTGOMERY ASST - CATHY ELFERS FAX (513) 489-3709 MON-FRI 9:00 - 9:00
CINCINNATI Open 12/07/94 SAT 9:00 - 9:00
SUN 10:00 - 6:00
OH 45208
159 ROOKWOOD MGR - CHRIS SCHULZE (513) 531-9242 7,880 RETAIL SQ. FT. DIST: 68
ROOKWOOD PAVILION, SUITE A-9 ASST - SHELBY GANTENBERG FAX (513) 531-9246 MON-FRI 9:00 - 9:00
2692 MADISON ROAD Open 10/30/94 SAT 9:00 - 9:00
CINCINNATI SUN 10:00 - 6:00
OH 45208
160 EASTGATE STATION MGR - EVAN CORDAY (513) 943-1000 7,070 RETAIL SQ. FT. DIST: 68
700 EASTGATE SOUTH DRIVE ASST - AMY WENTZEL FAX (513) 943-0898 MON-FRI 9:00 - 9:00
CINCINNATI ADDRIENNE LUDLOW Open 3/03/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
OH 45208
161 BALLWIN PLAZA MGR - KATHY TABER (314) 227-3558 6,650 RETAIL SQ. FT. DIST: 61
BALLWIN PLAZA CENTER ASST - PAM EDMONDS FAX (314) 527-3061 MON-FRI 9:00 - 9:00
15425 MANCHESTER ROAD Open 2/15/95 SAT 9:00 - 9:00
BALLWIN SUN 10:00 - 6:00
MO 63011
162 FAIRVIEW HEIGHTS MGR - VICKIE BECKER (618) 397-5210 11,433 RETAIL SQ. FT. DIST: 61
MARKET PLACE FAX (618) 397-5245 MON-FRI 9:00 - 9:00
22 PLAZA DRIVE Open 2/15/95 SAT 9:00 - 9:00
FAIRVIEW HEIGHTS SUN 10:00 - 6:00
IL 62208
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 8
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
163 LEMAY PLAZA MGR - BRUCE POPE (314) 892-2117 12,370 RETAIL SQ. FT. DIST: 61
LEMAY PLAZA FAX (314) 892-3667 MON-FRI 9:00 - 9:00
2560 LEMAY FERRY ROAD Open 11/25/94 SAT 9:00 - 9:00
ST LOUIS SUN 10:00 - 6:00
MO 63125
164 WASHINGTON SHOPPES MGR - SHERYL WILLIAMS (317) 890-1111 11,340 RETAIL SQ. FT. DIST: 47
10021 EAST WASHINGTON STREET ASST - PATTI ELLIOT FAX (317) 897-5338 MON-FRI 9:00 - 9:00
INDIANAPOLIS SHELLY GOODMAN Open 11/12/94 SAT 9:00 - 9:00
SUN 10:00 - 6:00
IN 46229
165 APPLETON MGR - BONNIE KILEY (414) 730-0101 8,470 RETAIL SQ. FT. DIST: 40
FOX RIVER MALL ASST - TAMMY BAUER FAX (414) 730-8180 MON-FRI 9:00 - 9:00
4651 MICHAELS DRIVE SUE WALTER Open 11/23/94 SAT 9:00 - 9:00
APPLETON SUN 10:00 - 6:00
WI 54915
166 JANESVILLE MGR - CHERYL RADTKEON (608) 752-2322 7,200 RETAIL SQ. FT. DIST: 40
2033 HUMES ASST - MARY ZIPSE FAX (608) 752-2689 MON-FRI 9:00 - 9:00
JANESVILLE MARIE VIVOLA Open 2/15/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
WI 53545
167 CONSUMER SQUARE MGR - JENNIFER SMITH (614) 861-2111 10,355 RETAIL SQ. FT. DIST: 68
6418 TUSSING ROAD ASST - BRENDA MECUM FAX (614) 861-2442 MON-FRI 9:00 - 9:00
COLUMBUS Open 5/08/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
OH 43068
168 COLERAIN MGR - KIM VANVLIET (513) 923-9777 8,227 RETAIL SQ. FT. DIST: 68
COLERAIN TOWNE CENTER ASST - AMY RICCOBENE FAX (513) 923-9781 MON-FRI 9:00 - 9:00
10204 COLERAIN AVENUE Open 7/22/95 SAT 9:00 - 9:00
CINCINNATI SUN 10:00 - 6:00
OH 45251
169 EAU CLAIRE MGR - RENAE HARKE (715) 834-9663 8,070 RETAIL SQ. FT. DIST: 40
CHIPPEWA VALLEY PLAZA ASST - WENDY BAUER FAX (715) 834-9970 MON-FRI 9:00 - 9:00
3900 BLOCK OF GATEWAY DR LEANN GRINLEY Open 3/29/95 SAT 9:00 - 9:00
EAU CLAIRE SUN 10:00 - 6:00
WI 54701
170 WEST BROAD PLAZA MGR - KIM BOWATER (614) 351-0369 7,240 RETAIL SQ. FT. DIST: 68
4091 WEST BROAD STREET ASST - RHOADENA JOHNSON FAX (614) 351-0394 MON-FRI 9:00 - 9:00
COLUMBUS JULE WILLIAMS Open 4/17/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
OH 43228
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 9
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
171 HANOVER PARK MGR - CATHY HULTEN (708) 736-9450 9,408 RETAIL SQ. FT. DIST: 13
WESTVIEW PLAZA ASST - JOLENE STOCKER FAX (630) 736-9454 MON-FRI 9:00 - 9:00
7470 BARRINGTON ROAD VIRGINIA BONES Open 5/08/95 SAT 9:00 - 9:00
HANOVER PARK CHAD WORTHEN SUN 10:00 - 6:00
IL 60103
172 90TH & FORT MGR - BARB MALONE (402) 573-5225 11,250 RETAIL SQ. FT. DIST: 51
PLAZA NORTH CENTER ASST - CINDY ADDISON FAX (402) 573-5167 MON-FRI 9:00 - 9:00
5515 NORTH 90TH ST. Open 8/28/95 SAT 9:00 - 9:00
OMAHA SUN 10:00 - 6:00
NE 68134
173 AKRON EAST MGR - DEBBIE SWARZMILLER (216) 630-8409 8,205 RETAIL SQ. FT. DIST: 68
CHAPEL HILL SQUARE ASST - KIM METZ FAX (216) 630-8411 MON-FRI 9:00 - 9:00
1912 BUCHHOLZER BOULEVARD Open 5/20/95 SAT 9:00 - 9:00
AKRON SUN 10:00 - 6:00
OH 44310
174 KENOSHA MGR - PAM KINDSCHUH (414) 697-6360 8,380 RETAIL SQ. FT. DIST: 40
SOUTHPORT PLAZA ASST - VIDA ZIMMER FAX (414) 697-6361 MON-FRI 9:00 - 9:00
6932 GREEN BAY ROAD GILLIAN POPLAWSKI Open 7/24/95 SAT 9:00 - 9:00
KENOSHA SUN 10:00 - 6:00
WI 53142
175 MENTOR MGR - SHANNON BOWSER (216) 350-9816 8,160 RETAIL SQ. FT. DIST: 68
CREEKSIDE COMMONS ASST - ROBIN COMO FAX (216) 350-9863 MON-FRI 9:00 - 9:00
9597 MENTOR AVENUE Open 10/05/95 SAT 9:00 - 9:00
MENTOR SUN 10:00 - 6:00
OH 44060
176 DOWNERS PLAZA MGR - SANDIE HILL (630) 663-0428 9,000 RETAIL SQ. FT. DIST: 13
DOWNERS PLAZA ASST - SHERYL HENDERSON FAX (630) 663-0581 MON-FRI 9:00 - 9:00
124 OGDEN AVENUE CAROL HOZVICKA Open 9/15/95 SAT 9:00 - 9:00
DOWNERS GROVE SUN 10:00 - 6:00
IL 60515
177 NORTH OLMSTEAD MGR - CAROL HOZVICKA (216) 716-1411 8,000 RETAIL SQ. FT. DIST: 68
WATER TOWER SQUARE S/C ASST - LAURA ROBINSON FAX (216) 716-1413 MON-FRI 9:00 - 9:00
27246 LORAIM ROAD KIM VITANZA Open 12/03/95 SAT 9:00 - 9:00
NORTH OLMSTEAD SUN 10:00 - 6:00
OH 44070
178 CLARKSVILLE MGR - FALICIA CORNILLE (812) 280-7664 7,880 RETAIL SQ. FT. DIST: 47
CLARKSVILLE TOWNE CENTER ASST - KRISTI KERN FAX (812) 280-7669 MON-FRI 9:00 - 9:00
706 EAST S.R. 131 RHONDA SCHMIDT Open 9/08/95 SAT 9:00 - 9:00
CLARKSVILLE SUN 10:00 - 6:00
IN 47129
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 10
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
179 FL0RENCE MGR - BRUCE MOYER (606) 282-7030 8,788 RETAIL SQ. FT. DIST: 68
FLORENCE SQUARE S/C ASST - MOLLY WINKLE FAX (606) 282-6974 MON-FRI 9:00 - 9:00
7673 MALL ROAD Open 9/16/95 SAT 9:00 - 9:00
FLORENCE SUN 10:00 - 6:00
KY 41042
180 DIXIE HIGHWAY MGR - DIANE LEWIS (502) 447-2070 9,183 RETAIL SQ. FT. DIST: 47
KMART PLAZA ASST - GLENDA BEELER FAX (502) 447-2069 MON-FRI 9:00 - 9:00
4921-A DIXIE HIGHWAY Open 10/25/95 SAT 9:00 - 6:00
LOUISVILLE SUN 10:00 - 6:00
KY 40216
181 MATTESON MGR - VALERIE BAFFIELD (708) 747-7380 7,776 RETAIL SQ. FT. DIST: 13
MATTESON TOWN CENTER ASST - BELETA JACKSON FAX (708) 747-7247 MON-FRI 9:00 - 9:00
134 TOWN CENTER ROAD Open 10/25/95 SAT 9:00 - 9:00
MATTESON SUN 10:00 - 6:00
IL 60443
182 OSHKOSH MGR - HEATHER BOWMAN (414) 232-8982 8,280 RETAIL SQ. FT. DIST: 40
OSHKOSH SHOPPING CENTER ASST - LYNN KELLER FAX (414) 232-8984 MON-FRI 9:00 - 9:00
1941 SOUTH KOELLER STREET LORI BOUGIE Open 10/06/95 SAT 9:00 - 9:00
OSHKOSH SUN 10:00 - 6:00
WI 54901
183 CRESTWOOD MGR - TODD SIGLER (314) 909-0552 8,532 RETAIL SQ. FT. DIST: 61
WATSON PLAZA ASST - MARY ELLEN SISK FAX (314) 909-0564 MON-FRI 9:00 - 9:00
9815 WATSON ROAD SUITE 114 Open 10/07/95 SAT 9:00 - 9:00
CRESTWOOD SUN 10:00 - 6:00
MO 63126
184 EAST TOWN S/C MGR - CRYSTAL GREEN (608) 245-1193 8,222 RETAIL SQ. FT. DIST: 40
EAST TOWNE PLAZA S/C ASST - RICH NODORFT FAX (608) 245-1195 MON-FRI 9:00 - 9:00
2031 ZEIER ROAD Open 10/24/95 SAT 9:00 - 9:00
MADISON SUN 10:00 - 6:00
WI 53704
185 BLOOMINGTON IN MGR - BRAD MARTIN (812) 335-0248 6,804 RETAIL SQ. FT. DIST: 47
2817 EAST THIRD STREET ASST - JENNIFER MARSHALL FAX (812) 335-0253 MON-FRI 9:00 - 9:00
HEATHER ALEXANDER Open 11/24/95 SAT 9:00 - 9:00
BLOOMINGTON SUN 10:00 - 6:00
IN 47408
186 CASTLETON MGR - TONY CASE (317) 842-2943 7,168 RETAIL SQ. FT. DIST: 47
LINEN 'N THINGS PLAZA ASST - BRIAN CUNNINGHAM FAX (317) 842-3183 MON-FRI 9:00 - 9:00
8540 CASTLETON CORNER DRIVE GLORIA MERZ Open 11/04/95 SAT 9:00 - 9:00
INDIANAPOLIS SUN 10:00 - 6:00
IN 46250
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 11
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
187 GRAND ISLAND MGR - GAYLE NEWMAN (308) 381-1809 9,796 RETAIL SQ. FT. DIST: 51
ILE DE GRAND S/C ASST - CAROL MANCHAME FAX (308) 381-2377 MON-FRI 9:00 - 9:00
2235 NORTH WEBB ROAD ROXIE STOBBE Open 11/17/95 SAT 9:00 - 9:00
GRAND ISLAND SUN 10:00 - 6:00
NE 68803
188 WEST DES MOINES MGR - AARON MCFARLAND (515) 267-0941 9,424 RETAIL SQ. FT. DIST: 51
WEST RIDGE S/C ASST - DOUG FLETHER FAX (515) 267-1011 MON-FRI 9:00 - 9:00
10201 NORTH WEBB ROAD JAMES SASSATELLI Open 1/31/96 SAT 9:00 - 9:00
CLIVE DAWN GORELICH SUN 10:00 - 6:00
IA 50325
189 LINCOLN MGR - KAYLEEN KNISLEY (402) 477-3445 9,840 RETAIL SQ. FT. DIST: 51
ABE LINCOLN MALL ASST - DOROTHY MARSHALL FAX (402) 477-3791 MON-FRI 9:00 - 9:00
4720 NORTH 27TH STREET JULIE KEYS Open 2/07/96 SAT 9:00 - 9:00
LINCOLN SUN 10:00 - 6:00
NE 68521
190 CHAMPAIGN MGR - DINA VOLEMAN (217) 355-6837 8,406 RETAIL SQ. FT. DIST: 61
BAYTOWN SQUARE ASST - JOELLA WILCOXIN FAX (217) 355-6895 MON-FRI 9:00 - 9:00
2019 NORTH PROSPECT Open 2/01/96 SAT 9:00 - 9:00
CHAMPAIGN SUN 10:00 - 6:00
IL 61821
191 WATERLOO MGR - JODY KIES (319) 235-7999 8,350 RETAIL SQ. FT. DIST: 51
FLAMMANG SQUARE ASST - PAT BEINER FAX (319) 235-7938 MON-FRI 9:00 - 9:00
1150 FLAMMANG DRIVE SHELLY HAMLIN Open 3/25/96 SAT 9:00 - 9:00
WATERLOO SUN 10:00 - 6:00
IA 50702
192 MANSFIELD MGR - LINDA DURDLE (419) 529-2548 8,400 RETAIL SQ. FT. DIST: 68
SPRINGFIELD SQUARE SUITE 108 ASST - JANET LONGWELL FAX (419) 529-2978 MON-FRI 9:00 - 9:00
556 N. LEXINGTON-SPRINGFIELD CATHY JOHNSON Open 2/23/96 SAT 9:00 - 9:00
MANSFIELD SUN 9:00 - 6:00
OH 44906
193 CARRIAGE PLACE MGR - RANDY LICHTENBERGER (614) 442-1788 8,705 RETAIL SQ. FT. DIST: 68
CARRIAGE PLACE S/C ASST - PAT SHARP FAX (614) 442-1785 MON-FRI 9:00 - 10:00
2630 BETHEL JERAMI CAMPBELL Open 2/06/96 SAT 9:00 - 10:00
COLUMBUS SUN 11:00 - 7:00
OH 43220
194 72 & JONES MGR - CARLOS O'FERRAL (402) 392-2885 7,738 RETAIL SQ. FT. DIST: 51
713 1/2 SOUTH 72ND STREET ASST - TAMMY RE JACKSON FAX (402) 392-2961 MON-FRI 9:00 - 9:00
Open 4/09/96 SAT 9:00 - 9:00
OMAHA SUN 10:00 - 6:00
NE 68114
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 12
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
195 SPRINGFIELD MGR - TERI FLOWER (417) 886-1840 8,163 RETAIL SQ. FT. DIST: 61
JAMES RIVER TOWNE CENTER ASST - TRACI KATZFEY FAX (417) 886-1843 MON-FRI 9:00 - 9:00
1839 INDEPENDENCE SUITE S JEFF BAKER Open 4/13/96 SAT 9:00 - 9:00
SPRINGFIELD SUN 10:00 - 6:00
MO 65804
196 UNIVERSITY MGR - SHERRY FRANKS (812) 421-8526 RETAIL SQ. FT. DIST: 61
UNIVERSITY S/C ASST - PAMELA OMER FAX (812) 421-8532 MON-FRI - ^
4821 UNIVERSITY DRIVE Open 6/05/96 SAT - |
EVANSVILLE SUN - |
IN 47712 OPEN |
- -----------------------------------------------------------------------------------------------------------------------------------
NOT OPEN |
|
197 BRADLEY MGR - TINA EDDINGTON (815) 939-9159 RETAIL SQ. FT. DIST: 13 |
WATER TOWER PLAZA FAX (815) 939-9267 MON-FRI 9:00 - 9:00 v
1595 NORTH STATE ROUTE 50 Open 8/01/96 SAT 9:00 - 9:00
BRADLEY SUN 10:00 - 6:00
IL 60915
198 LAFAYETTE MARKET MGR - MARTH WHITE RETAIL SQ. FT. DIST: 47
LAFAYETTE MARKET PLACE MON-FRI -
3540 STATE ROAD 38E SUITE 301 Open 8/10/96 SAT -
LAFAYETTE SUN -
IN 47905
199 HIGHLAND GROVE MGR - OPEN RETAIL SQ. FT. DIST: 43
HIGHLAND GROVE MON-FRI -
10229 INDIANAPOLIS BOULEVARD Open 8/15/96 SAT -
HIGHLAND SUN -
IN 46320
200 DEER GROVE MGR - OPEN RETAIL SQ. FT. DIST: 44
DEER GROVE CENTER MON-FRI -
637 EAST DUNDEE ROAD Open 8/15/96 SAT -
PALATINE SUN -
IL 60067
201 WAUSAU MGR - OPEN RETAIL SQ. FT. DIST: 40
MOUNTAIN VIEW SQUARE MON-FRI -
3712 RIB MOUNTAIN ROAD Open 8/25/96 SAT -
WAUSAU SUN -
WI 54401
202 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 13
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
203 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99 NOT
NEW STORE ADDRESS MON-FRI - OPEN
Open 10/01/96 SAT - |
ANYWHERE SUN - |
IL v
204 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
205 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
206 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
207 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
208 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
209 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
210 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 14
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
501 WHEATON/BALTIMORE MGR - LOREN BAILEY (301) 946-8093 6,512 RETAIL SQ. FT. DIST: 12 OPEN
WHEATON PARK S/C ASST - REBECCA MOWELL FAX (301) 946-9502 MON-FRI 10:00 - 9:00 |
12021 GEORGIA AVENUE ELISABETH RICCI Open 9/24/92 SAT 10:00 - 8:00 |
WHEATON SUN 11:00 - 5:00 |
MD 20902 v
502 LOCH RAVEN MGR - SUSAN BUSSARD (410) 296-6441 6,379 RETAIL SQ. FT. DIST: 1
HILLENDALE S/C ASST - PATRICIA MORRISON FAX (410) 296-8743 MON-FRI 10:00 - 9:00
6829 LOCH RAVEN BLVD ALYCIA BURNHAM Open 9/26/92 SAT 10:00 - 8:00
BALTIMORE SUN 11:00 - 5:00
MD 21204
503 COCKEYSVILLE MGR - DANA ALSTON (410) 683-0585 7,450 RETAIL SQ. FT. DIST: 1
CHURCH LANE CENTER ASST - NANNETTE MAGGITTI FAX (410) 683-0482 MON-FRI 10:00 - 9:00
9952 YORK ROAD TRACEY HEDRICK Open 5/22/93 SAT 10:00 - 8:00
COCKEYSVILLE SUN 11:00 - 5:00
MD 21030
504 DUNDALK MGR - KEN HUMPHREYS (410) 282-8501 5,280 RETAIL SQ. FT. DIST: 1
MERRITT POINT S/C ASST - LINDA RIPPLE FAX (410) 282-8502 MON-FRI 10:00 - 9:00
1581 MERRITT BOULEVARD JENNIFER WATTS Open 10/02/93 SAT 9:00 - 7:00
DUNDALK SUN 11:00 - 5:00
MD 21228
505 CATONSVILLE MGR - DAVID JOHNSON (410) 747-6766 4,970 RETAIL SQ. FT. DIST: 1
FORTY WEST PLAZA ASST - MARY ADAMS FAX (410) 747-7291 MON-FRI 9:00 - 9:00
6489 BALTIMORE NATIONAL PIKE Open 11/05/93 SAT 9:00 - 8:00
CATONSVILLE SUN 11:00 - 5:00
MD 21228
506 LIBERTY COURT MGR - BENJAMIN SAMPSON (410) 922-1720 7,850 RETAIL SQ. FT. DIST: 1
8656 LIBERTY ROAD FAX (410) 922-9281 MON-FRI 10:00 - 9:00
RANDALLSTOWN Open 10/20/94 SAT 9:00 - 8:00
SUN 12:00 - 5:00
MD 21133
507 GLEN BURNIE MGR - MELANIE PIGOTT (410) 863-0627 7,874 RETAIL SQ. FT. DIST: 1
CHESAPEAKE SQUARE S/C ASST - KIRSTIN MARTINEZ FAX (410) 863-0629 MON-FRI 10:00 - 9:00
6714-A GOVERNOR RITCHIE HWY BETH NOVAK Open 11/06/94 SAT 9:00 - 9:00
GLEN BURNIE SUN 11:00 - 5:00
MD 21061
508 CHANTILLY MGR - ANGELA STEWART (703) 817-0801 9,125 RETAIL SQ. FT. DIST: 1
13948 METROTECH DRIVE ASST - MELANIE LUPIEN FAX (703) 817-0803 MON-FRI 9:00 - 9:00
CHANTILLY REBECCA CARROLL Open 3/31/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
VA 22021
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 15
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
509 PENN STATION MGR - TAJUANA PAYNE (301) 420-0103 10,335 RETAIL SQ. FT. DIST: 12
5604 SILVERHILL ROAD MIT - EVELYN MULLENEX FAX (301) 420-0103 MON-FRI 10:00 - 9:00
DISTRICT HEIGHTS ASST - CAROLYN MURRAY Open 4/01/95 SAT 10:00 - 9:00
DOUGLAS SHUE SUN 11:00 - 5:00
MD 20747
510 WESTGATE CENTER MGR - PAULA SANDERS (703) 368-1742 9,175 RETAIL SQ. FT. DIST: 12
WESTGATE SHOPPING CENTER ASST - HUGH KILBY FAX (703) 368-1738 MON-FRI 9:00 - 9:00
8099 SUDLEY BILL CAPORALETTI Open 5/20/95 SAT 9:00 - 9:00
MANASSAS SUN 11:00 - 5:00
VA 22110
511 LAUREL MGR - SIA MASTAN (301) 490-7900 10,750 RETAIL SQ. FT. DIST: 12
LAUREL PLAZA FAX (301) 490-7961 MON-FRI 9:00 - 9:00
9622 ROUTE 198 Open 6/05/85 SAT 9:00 - 9:00
LAUREL SUN 10:00 - 6:00
MD 20707
512 ALEXANDRIA MGR - DEBBIE HUBBARD (703) 765-9756 7,618 RETAIL SQ. FT. DIST: 12
MT VERNON PLAZA ASST - RENITA JAMES FAX (703) 765-9759 MON-FRI 9:00 - 9:00
7684 RICHMOND HIGHWAY BOBBY ARTIS Open 7/27/95 SAT 9:00 - 9:00
ALEXANDRIA SUN 11:00 - 5:00
VA 22306
513 WALDORF MGR - BECKY NICKOLS (301) 374-9501 7,716 RETAIL SQ. FT. DIST: 12
FESTIVAL AT WALDORF ASST - CHRISTINA STRICK FAX (301) 374-9017 MON-FRI 9:00 - 9:00
2910 FESTIVAL WAY Open 7/28/95 SAT 9:00 - 9:00
WALDORF SUN 11:00 - 6:00
MD 20601
514 FREDERICKSBURG MGR - CHERYL D'ORIO (540) 371-5005 9,026 RETAIL SQ. FT. DIST: 12
GREENBRIAR SHOPPING CENTER ASST - PATRICIA THOMPSON FAX (540) 371-4704 MON-FRI 9:00 - 9:00
2042 PLANK ROAD Open 8/04/95 SAT 9:00 - 9:00
FREDERICKSBURG SUN 11:00 - 5:00
VA 22401
515 HANOVER CROSSING MGR - RODNEY MERRILL (717) 632-1557 RETAIL SQ. FT. DIST: 1
HANOVER CROSSING S/C ASST - NICOLE LADY FAX (717) 632-2373 MON-FRI 9:00 - 9:00
475 EISENHOWER DRIVE PAMELA KEENEY Open 5/10/96 SAT 9:00 - 9:00
HANOVER SUN 11:00 - 5:00
PA 17331
516 FIRST STATE PLAZA MGR - CAROL GARIS (302) 993-0282 6,502 RETAIL SQ. FT. DIST: 1
1716 WEST NEWPORT PIKE ASST - KIM HENDERSON FAX (302) 993-0285 MON-FRI 9:00 - 9:00
NEWCASTLE COUNTY DEBBIE CLOUSER Open 9/30/95 SAT 9:00 - 9:00
STANTON SUN 11:00 - 5:00
DE 19804
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 16
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
517 LANDMARK MGR - WILDA C-TORRES (703) 916-1834 8,094 RETAIL SQ. FT. DIST: 12 OPEN
PLAZA AT LANDMARK ASST - DOMINIQUE THOMAS FAX (703) 916-1836 MON-FRI 9:00 - 9:00 |
6198-C LITTLE RIVER TURNPIKE JENNIFER SMITH Open 10/28/95 SAT 10:00 - 9:00 |
ALEXANDRIA SUN 11:00 - 6:00 |
VA 22312 v
518 BEL AIR MGR - DAN NISSENNBAUM (410) 838-6830 9,600 RETAIL SQ. FT. DIST: 1
TOLLGATE MARKETPLACE ASST - LEWIS LEE FAX (410) 838-6806 MON-FRI 9:00 - 9:00
615 BEL AIR ROAD SUITE O Open 12/04/95 SAT 9:00 - 9:00
BEL AIR SUN 10:00 - 6:00
MD 21014
519 MIDLOTHIAN MARKET MGR - OPEN RETAIL SQ. FT. DIST: 12 NOT
MIDLOTHIAN MARKET MON-FRI - OPEN
217 WADSWORTH DRIVE Open 9/15/96 SAT - |
RICHMOND SUN - |
VA 23236 |
v
520 NEW BALTIMORE MGR - OPEN RETAIL SQ. FT. DIST: 1
NEW BALTIMORE MALL MON-FRI -
Open 10/01/96 SAT -
BALTIMORE SUN -
MD
*** END OF REPORT ***
</TABLE>
<PAGE>
Exhibit 10.8.4
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty"), dated July 2, 1996 is made and
entered into upon the terms hereinafter set forth, by FCOA ACQUISITION CORP., a
Delaware corporation ("Guarantor"), in favor of PETRA CAPITAL, LLC, a Georgia
limited liability company ("Creditor").
RECITALS:
A. Pursuant to a Loan Agreement of even date herewith, by and between
Factory Card Outlet of America Ltd., an Illinois corporation ("Borrower"), and
Creditor (the "Loan Agreement"), Creditor has made a loan to Borrower in the
original principal amount of $3,000,000 (the "Loan"). The Loan is evidenced by a
Secured Promissory Note of even date herewith, in the Loan amount, made and
executed by Borrower, payable to the order of Creditor (herein referred to,
together with any extensions, modifications, renewals and/or replacements
thereof, as the "Note").
B. It is a condition of Creditor's agreement to make the above-described
Loan to Borrower that Guarantor execute and deliver this Guaranty to Creditor.
C. Guarantor desires to execute and deliver this Guaranty to Creditor in
order to induce Creditor to make the above described Loan, which will be to the
direct interest, advantage and benefit of Guarantor as the sole shareholder of
Borrower.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged by Guarantor, and to induce Creditor to make loans and other
extensions of credit to Borrower pursuant to the Loan Agreement, Guarantor
hereby agrees as follows:
1. Guarantor hereby guarantees to Creditor the full and prompt payment and
performance of (a) the indebtedness evidenced by the Note, principal and any and
all interest accrued or to accrue thereon in accordance with the terms thereof,
and (b) the obligations of Borrower to Creditor pursuant to the Loan Agreement
and any and all other instruments, documents and/or agreements now or hereafter
further evidencing, securing or otherwise related to the indebtedness evidenced
by the Note and/or the Loan Agreement (collectively the "Loan Documents") (the
aforesaid indebtedness and other obligations are sometimes herein collectively
referred to as the "Guaranteed Obligations"). Guarantor hereby agrees that if
the Guaranteed Obligations are not timely paid and/or performed, as the case may
be, in accordance with the terms thereof, Guarantor immediately will pay and/or
perform such Guaranteed Obligations. If for any reason any payment or obligation
in respect of the Guaranteed Obligations shall be determined at any time to be a
voidable preference or otherwise shall be set aside or required to be returned
or repaid, this Guaranty
<PAGE>
nevertheless shall remain in full force and effect and shall be fully
enforceable against Guarantor for the payment or obligation set aside returned
or repaid, as well as any other Guaranteed Obligations still outstanding,
notwithstanding the fact that this Guaranty may have been cancelled, released
and/or returned to Guarantor by Creditor.
2. In addition to the obligations of Guarantor to Creditor pursuant to
Paragraph 1 hereof, Guarantor further agrees to pay any and all expenses
(including without limitation reasonable attorney's fees) reasonably incurred by
Creditor in endeavoring to collect and/or enforce the obligations of Guarantor
under this Guaranty.
3. Guarantor hereby waives notice of any breach or default by Borrower, and
hereby further waives presentment, demand, notice of dishonor and protest with
respect to any instrument now or hereafter evidencing any of the Guaranteed
Obligations.
4. Any act of Creditor consisting of a waiver of any of the terms,
covenants or conditions of the Guaranteed Obligations, or the giving of any
consent to any matter or thing relating to the Guaranteed Obligations, or the
granting of any indulgences or extensions of time to Borrower, may be done
without notice to Guarantor and without releasing the obligations of Guarantor
hereunder.
5. The obligations of Guarantor hereunder shall not be released by
Creditor's receipt, application or release of any security given for the
payment, performance and observance of any of the Guaranteed Obligations, but in
the case of any such receipt and application, the liability of Guarantor shall
be deemed reduced by a corresponding amount. Similarly, the obligations of
Guarantor hereunder shall not be released by any modification of any of the
terms of the Guaranteed Obligations made by Creditor and Borrower, but in the
case of any such modification, the liability of Guarantor shall be deemed
modified in accordance with the terms of any such modification.
6. The liability of Guarantor hereunder shall in no way be affected by (a)
the release or discharge of Borrower in any creditors' receivership, bankruptcy
or other proceedings, (b) the impairment, limitation or modification of the
liability of Borrower or the estate of Borrower in bankruptcy, or of any remedy
for the enforcement of any of the Guaranteed Obligations resulting from the
operation of any present or future provision of the Federal bankruptcy law or
any other statute or the decision of any court, (c) the rejection or
disaffirmance of any instrument, document or agreement evidencing any of the
Guaranteed Obligations in any such proceedings, (d) the assignment or transfer
of any of the Guaranteed Obligations by Creditor in accordance with the terms of
the Loan Agreement, or (e) the cessation from any cause whatsoever (other than
full payment and performance) of the liability of Borrower with respect to the
Guaranteed Obligations.
7. Until all of the covenants, terms and conditions of Borrower with
respect to the Guaranteed Obligations are fully paid, performed, kept and/or
observed, Guarantor: (a) shall have no rights of reimbursement or subrogation
against Borrower or any of its property by reason of any payment or acts of
performance by Guarantor in compliance with the obligations of Guarantor
hereunder, (b) waives any right to enforce any remedy that Guarantor now or
hereafter shall have
2
<PAGE>
against Borrower by reason of any one or more payments or acts of performance in
compliance with the obligations of Guarantor hereunder, and (c) subordinates any
liability or indebtedness of Borrower now or hereafter held by Guarantor to the
obligations of Borrower to Creditor under the Guaranteed Obligations.
8. This is a guaranty of payment and performance and not of collection. The
liability of Guarantor hereunder shall be direct and immediate and not
conditional or contingent upon the pursuit of any remedies against Borrower or
any other person, nor against any collateral available to Creditor. Guarantor
hereby waives any right to require that an action be brought against Borrower or
any other person or to require that resort be had to any collateral in favor of
Creditor prior to discharging its obligations hereunder.
9. Guarantor hereby consents and agrees that all payments and credits
received from Borrower or Guarantor or realized from any collateral may be
applied by Creditor to the Guaranteed Obligations in such priority as Creditor
in its sole judgment shall see fit.
10. This Guaranty is assignable by Creditor to any person or entity to
which Creditor may assign its rights under the Loan Agreement pursuant to the
terms thereof and any assignment of the Guaranteed Obligations or any portion
thereof by Creditor shall operate to vest in the assignee the rights and powers
of Creditor hereunder to the extent of such assignment. This Guaranty shall be
binding upon Guarantor and Guarantor's representatives, successors,
successors-in-title, and assigns, and shall inure to the benefit of Creditor,
its representatives, successors, successors-in-title and assigns.
11. This Guaranty shall be construed in accordance with and governed by the
laws of the State of Georgia applicable to contracts to be performed within said
state. No amendment or modification hereof shall be effective unless evidenced
by a writing signed by Guarantor and Creditor.
12. Guarantor hereby waives notice of acceptance of this Guaranty by
Creditor.
13. Guarantor hereby consents to the jurisdiction of the courts of the
State of Georgia and the United States District Court for the Northern District
of Georgia, as well as to the jurisdiction of all courts from which an appeal
may be taken from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising under this Agreement or
with respect to the transactions contemplated hereby, and expressly waives any
and all objections it may have as to venue in any of such courts.
14. CREDITOR AND GUARANTOR HEREBY WAIVE TRIAL BY JURY IN ANY ACTIONS,
PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty or
has caused this Guaranty to be executed by its duly authorized representative,
as of the date first above written.
WITNESS: FCOA ACQUISITION CORP., a Delaware
corporation
L. Yurow By: /s/ William E. Freeman
- ------------------------- -----------------------------
Name: William E. Freeman
Title: Chairman
ACCEPTED this 2nd day of
July, 1996
PETRA CAPITAL, LLC, a Georgia
limited liability company
By: Petra Capital Management, LLC, Manager
By: /s/ Rob Shuler
-------------------------
Name: Rob Shuler
Title: Manager
4
<PAGE>
Exhibit 10.9.1
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement"), dated as of the 15th day of November,
1995, is made and entered into on the terms and conditions hereinafter set
forth, by and between FACTORY CARD OUTLET OF AMERICA LTD., an Illinois
corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a Tennessee
corporation ("Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender make available to Borrower a
term loan in the original principal amount of Four Million and No/l00ths Dollars
($4,000,000) (the "Loan") on the terms and conditions hereinafter set forth, and
for the purpose(s) hereinafter set forth; and
WHEREAS, in order to induce Lender to make the Loan to Borrower, Borrower
has made certain representations to Lender; and
WHEREAS, Lender, in reliance upon the representations and inducements of
Borrower, has agreed to make the Loan upon the terms and conditions hereinafter
set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Lender to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
ARTICLE 1
THE LOAN
1.1 Evidence of Loan Indebtedness and Repayment. Subject to the terms and
conditions hereof, the Lender shall make the Loan to Borrower by wire transfer
in immediately available funds. The Loan shall be evidenced by a Secured
Promissory Note in the original principal amount of Four Million and No/l00ths
Dollars ($4,000,000),
<PAGE>
substantially in the form of Exhibit A attached hereto and incorporated herein
by this reference (the "Note"), dated as of the date hereof, executed by
Borrower, in favor of Lender. The Loan shall be payable in accordance with the
terms of the Note. The Note, this Agreement and any other instruments and
documents executed by Borrower, now or hereafter evidencing, securing or in any
way related to the indebtedness evidenced by the Note are herein individually
referred to as a "Loan Document" and collectively referred to as the "Loan
Documents."
1.2 Processing Fee. Borrower shall pay a processing fee of $80,000 to
Lender in one or more installments at or prior to closing.
1.3 Purpose(s) of Loan and Use of Proceeds. The purposes of the Loan shall
be (i) to provide working capital to Borrower, (ii) and to repay certain
indebtedness of Borrower, and (iii) to pay all costs and expenses incurred by
the parties hereto in connection with the making and documenting of the Loan,
including attorneys' fees and expenses. The proceeds of the Loan shall not be
used for any other purpose.
1.4 Prepayment. Borrower may prepay the indebtedness evidenced by the Note
in whole or in part at any time and from time to time without premium or
penalty.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Borrower's Representations. Borrower hereby represents and warrants to
Lender as follows:
(a) Corporate Status. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Illinois; and has the corporate power to own and operate its properties, to
carry on its business as now conducted and to enter into and to perform its
obligations under this Agreement and the other Loan Documents to which it
is a party. Except as set forth on Schedule 2.1(a), Borrower is duly
qualified to do business and in good standing in each state in which a
failure to be so qualified and in good standing would have a material
adverse effect on Borrower's financial position or its ability to conduct
its business in the manner now conducted.
(b) Other Business Organizations. Borrower neither owns nor has an
interest in, directly or indirectly, any other corporation, partnership,
joint venture or other business organization ("Subsidiaries").
(c) Authorization. Borrower has full legal right, power and authority
to conduct its business and affairs as they are presently conducted.
Borrower has full legal right, power and authority to enter into and
perform its obligations under the Loan Documents, without the consent or
approval of any other person, firm,
2
<PAGE>
governmental agency or other legal entity, except such consents and
approvals as have already been given to Borrower. The execution and
delivery of this Agreement, the borrowing hereunder, the execution and
delivery of each Loan Document to which Borrower is a party, and the
performance by Borrower of its obligations thereunder (i) are within the
corporate powers of Borrower, (ii) have been duly authorized by all
necessary corporate action properly taken, and (iii) do not and will not
contravene or conflict with (A) any provision of law, (B) any judgment,
ordinance, regulation or order of any court or governmental agency that is
applicable to Borrower or its property, (C) the articles of incorporation
or bylaws of Borrower, or (D) any agreement binding upon Borrower. The
officer(s) executing this Agreement, the Note and all of the other Loan
Documents to which Borrower is a party are duly authorized to act on behalf
of Borrower.
(d) Validity and Binding Effect. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, subject to
limitations imposed by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally or the application of
general equitable principles.
(e) Capitalization. The authorized capital stock of Borrower consists
solely of 100,000 shares of common stock, no par value per share ("Borrower
Common Stock"), of which 2,500 shares (the "Borrower Shares") are issued
and outstanding. The authorized capital stock of FCOA Acquisition Corp., a
Delaware corporation and parent corporation of Borrower ("Guarantor"),
consists of (i) 1,000,000 shares of common stock, no par value per share
("Parent Common Stock"), of which 216,000 shares ("Parent Common Shares")
are issues and outstanding; (ii) 20,000 shares of Series A convertible
preferred stock, $.01 par value per share ("Parent Series A Preferred
Stock"), of which 20,000 shares ("Series A Shares") are issued and
outstanding; and (iii) 34,750 shares of Series B convertible preferred
stock, $.01 par value per share ("Series B Preferred Stock"), of which
31,214 shares ("Series B Shares") (the Borrower Shares, the Parent Common
Shares, the Series A Shares and the Series B Shares are sometimes
collectively referred to herein as the "Shares"). All of the Shares are
duly authorized, validly issued and outstanding, fully paid and
nonassessable and free of preemptive rights. Except for the Shares, there
are no shares of capital stock or other securities of Borrower or Guarantor
issued or outstanding. Except as set forth on Schedule 2.1(e) hereto, there
are no outstanding options, warrants or rights to purchase or acquire from
Borrower or Guarantor any securities of Borrower or Guarantor, and there
are no contracts, commitments, agreements, understandings, arrangements or
restrictions as to which Borrower or Guarantor is a party or by which it is
bound relating to any shares of capital stock or other securities of
Borrower or Guarantor (including the Shares), whether or not outstanding.
(f) Trademarks, Patents, Etc. Schedule 2.1(f) is an accurate and
complete list of all patents, trademarks, tradenames, trademark
registrations, service names,
3
<PAGE>
service marks, copyrights, licenses, formulas and applications therefor
owned by Borrower or used by Borrower in the operation of its business,
title to each of which is, except as set forth in Schedule 2.1(f) hereto,
held by Borrower free and clear of all adverse claims, liens, security
agreements, restrictions or other encumbrances. There is no infringement
action, lawsuit, claim or complaint pending against Borrower which asserts
that Borrower's operations violate or infringe the rights or the trade
names, trademarks, trademark registration, service name, service mark or
copyright of others with respect to any apparatus or method of Borrower,
nor is Borrower in any way making use of any confidential information or
trade secrets of any person except with the consent of such person.
(g) No Conflicts. Consummation of the transactions hereby contemplated
and the performance of the obligations of Borrower under and by virtue of
the Loan Documents will not result in any breach of, or constitute a
default under, any mortgage, security deed or agreement, deed of trust,
lease, bank loan or credit agreement, articles of incorporation or bylaws,
agreement or certificate of limited partnership, partnership agreement,
license, franchise or any other instrument or agreement to which Borrower
is a party or by which Borrower or its properties may be bound or affected,
except such agreements and other documents as to which Borrower has
obtained an effective waiver.
(h) Litigation. There are no actions, suits or proceedings pending,
or, to the knowledge of Borrower, threatened, against or affecting Borrower
involving the validity or enforceability of any of the Loan Documents at
law or in equity, and there are no proceedings pending, or, to the
knowledge of Borrower, threatened, against or affecting Borrower before any
governmental or administrative agency; and to Borrower's knowledge,
Borrower is not in default with respect to any order, writ, injunction,
decree or demand of any court or any governmental authority.
(i) Financial Statements. The consolidated financial statements of
Borrower and Guarantor, attached hereto as Schedule 2.1(i) (A), are true
and correct in all material respects have been prepared on the basis of
accounting principles consistently applied, and fairly present the
financial condition of Borrower and Guarantor as of the date(s) thereof. No
material adverse change has occurred in the financial condition of Borrower
or Guarantor since the date(s) thereof, and no additional borrowings have
been made by Borrower or Guarantor since the date(s) thereof other than as
set forth on Schedule 2.1(i)(B).
(j) Other Agreements; No Defaults. Borrower is not a party to
indentures, loan or credit agreements, leases or other agreements or
instruments, or subject to any articles of incorporation or corporate
restrictions that could have a material adverse effect on the ability of
Borrower to carry out its obligations under the Loan Documents to which it
is a party. Borrower is not in default in any respect in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument material to its
business to which
4
<PAGE>
it is a party, including but not limited to this Agreement and the other
Loan Documents, and to Borrower's knowledge, no other default or event has
occurred and is continuing that with notice or the passage of time or both
would constitute a default or event of default under any of same.
(k) Compliance With Law. Borrower has obtained all material licenses,
permits and approvals and authorizations necessary or required in order to
conduct its business and affairs as heretofore conducted and as intended to
be conducted as of the date of this Agreement. To Borrower's knowledge,
Borrower is in compliance with all laws, regulations, decrees and orders
applicable to it (including but not limited to laws, regulations, decrees
and orders relating to environmental, occupational and health standards and
controls, antitrust, monopoly, restraint of trade or unfair competition),
to the extent that noncompliance, in the aggregate, cannot reasonably be
expected to have a material adverse effect on its business, operations,
property or financial condition or to affect materially adversely
Borrower's ability to perform its obligations under the Loan Documents.
(1) Debt. Schedule 2.1(1) is a complete and correct list of all credit
agreements, indentures, purchase agreements, promissory notes and other
evidences of indebtedness, guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in
respect of which Borrower or Guarantor, or any of the properties thereof is
in any manner directly or contingently obligated; and the maximum principal
or face amounts of the credit in question that are outstanding and that are
available pursuant to the terms of such agreements are correctly stated,
and all liens of any nature given or agreed to be given as security
therefor are correctly described or indicated in such Schedule.
(m) Taxes. Borrower and Guarantor have filed or caused to be filed all
tax returns that to Borrower's knowledge are required to be filed (except
for returns that have been appropriately extended), and has paid, or will
pay when due, all taxes shown to be due and payable on said returns and all
other taxes, impositions, assessments, fees or other charges imposed on
them by any governmental authority, agency or instrumentality, prior to any
delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith by
appropriate proceedings, for which appropriate amounts have been reserved).
To Borrower's knowledge, no tax liens have been filed against Borrower or
Guarantor or any of Borrower's or Guarantor's properties.
(n) Small Business Concern. The information set forth in the Small
Business Administration Forms 480, 652 and Part A of Form 1031 regarding
Borrower upon delivery thereof to Lender, pursuant to Section 4.1 hereof,
will be accurate and complete. Borrower will only use the proceeds of the
Loan as permitted in Section 1.3 hereof.
5
<PAGE>
(o) Certain Transactions. Except as set forth on Schedule 2.1(o)
hereto, Borrower is not indebted, directly or indirectly, to any of its
shareholders, officers, or directors or to their respective spouses or
children, in any amount whatsoever; none of said shareholders, officers or
directors or any members of their immediate families, are indebted to
Borrower or have any direct or indirect ownership interest in any firm or
corporation with which Borrower has a business relationship, or any firm or
corporation which competes with Borrower, except that shareholders,
officers and/or directors of Borrower may own no more than 4.9% of
outstanding stock of publicly traded companies which may compete with
Borrower. No officer or director of Borrower or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with Borrower. Borrower is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
(p) Statements Not False or Misleading. To Borrower's knowledge after
reasonable investigation, no representation or warranty given as of the
date hereof by Borrower contained in this Agreement or any schedule
attached hereto or any statement in any document, certificate or other
instrument furnished or to be furnished by Borrower to Lender pursuant
hereto, taken as a whole, contains or will (as of the time so furnished)
contain any untrue statement of a material fact, or omits or will (as of
the time so furnished) omit to state any material fact which is necessary
in order to make the statements contained therein not misleading.
(q) Margin Regulations. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock. No
proceeds received pursuant to this Agreement will be used to purchase or
carry any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
(r) Significant Contracts. Schedule 2.1(r) is a complete and correct
list of all contracts, agreements and other documents pursuant to which
Borrower receives revenues in excess of $25,000 per fiscal year. Each such
contract, agreement and other document is in full force and effect as of
the date hereof and Borrower knows of no reason why such contracts,
agreements and other documents would not remain in full force and effect
pursuant to the terms thereof.
(s) Environment. Borrower has duly complied with, and its business,
operations, assets, equipment, property, leaseholds or other facilities are
in compliance with, the applicable provisions of all applicable federal,
state and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations promulgated thereunder, except to
the extent that failure to so comply would not have a material adverse
effect on its business. Borrower has been issued and will maintain all
required federal, state and local permits, licenses, certificates and
approvals relating to (1) air emissions; (2) discharges to surface water or
groundwater; (3) noise emissions; (4) solid or liquid waste disposal; (5)
the use, generation, storage, transportation or disposal of toxic or
hazardous substances or
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wastes (which shall include any and all such materials listed in any
federal, state or local law, code or ordinance and all rules and
regulations promulgated thereunder as hazardous or potentially hazardous);
or (6) other environmental, health or safety matters, except to the extent
that failure to do so would not have a material adverse effect on its
business. Borrower has not received notice of, and is not otherwise aware
of facts which constitute material violations of any applicable federal,
state or local environmental, health or safety laws, codes or ordinances,
and any rules or regulations promulgated thereunder with respect to
Borrower's businesses, operations, assets, equipment, property, leaseholds,
or other facilities. In connection with property owned or leased by
Borrower, and except in accordance with a valid governmental permit,
license, certificate or approval, there has not been (during the period of
Borrower's ownership or lease thereof) any emission, spill, release or
discharge into or upon (1) the air; (2) soils, or any improvements located
thereon; (3) surface water or groundwater; or (4) the sewer, septic system
or waste treatment, storage or disposal system servicing the premises, of
any toxic or hazardous substances or wastes at or from the premises.
Borrower has not received any complaint, order, directive, claim, citation
or notice by any governmental authority or any person or entity against or
respecting Borrower with respect to (1) air emissions; (2) spills, releases
or discharges to soils or improvements located thereon, surface water,
groundwater or the sewer, septic system or waste treatment, storage or
disposal systems servicing the premises; (3) noise emissions; (4) solid or
liquid waste disposal; (5) the use, generation, storage, transportation or
disposal of toxic or hazardous substances or waste; or (6) other
environmental, health or safety matters affecting Borrower or its business,
operations, assets, equipment, property, leaseholds or other facilities.
Borrower has no indebtedness, obligation or liability (absolute or
contingent, matured or not matured), with respect to the storage,
treatment, cleanup or disposal of any solid wastes, hazardous wastes or
other toxic or hazardous substances (including without limitation any such
indebtedness, obligation, or liability with respect to any current
regulation, law or statute regarding such storage, treatment, cleanup or
disposal).
ARTICLE 3
COVENANTS AND AGREEMENTS
Borrower covenants and agrees that during the term of this Agreement:
3.1 Payment of Obligations. Borrower shall pay the indebtedness evidenced
by the Note according to the terms thereof, and shall timely pay or perform, as
the case may be, all of the other obligations of Borrower to Lender, direct or
contingent, described in the Loan Documents, together with interest thereon, and
any extensions, modifications, consolidations and/or renewals thereof and any
notes given in payment thereof.
3.2 Financial Statements and Reports. Borrower shall furnish to Lender (i)
as soon as practicable and in any event within one hundred twenty (120) days
after the end of each fiscal year of Borrower, a consolidated balance sheet of
Guarantor as of the close of
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such fiscal year, a consolidated statement of earnings and retained earnings of
Guarantor as of the close of such fiscal year and a consolidated statement of
cash flows for Guarantor for such fiscal year, prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP"), audited
by an independent certified public accountant reasonably acceptable to Lender
(it being understood that any "Big 6" accounting firm would be acceptable to
Lender) and certified by an officer of Borrower and accompanied by a certificate
of the President of Borrower, stating that to the best of the knowledge of such
officer, Borrower has kept, observed, performed and fulfilled each covenant,
term and condition of this Agreement and the other Loan Documents during the
preceding fiscal year and that no Event of Default, as herein defined, has
occurred and is continuing (or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action Borrower has taken or proposes to take in connection therewith), (ii)
within thirty-five (35) days of the end of each calendar month, a consolidated
balance sheet of Guarantor as of the close of such month and a consolidated
statement of earnings and retained earnings of Guarantor as of the close of such
month, all in reasonable detail (including financial information for the
preceding six (6) months), and prepared substantially in accordance with GAAP
(except for the absence of footnotes and subject to year-end adjustments), and
(iii) with reasonable promptness, such other financial data as Lender may
reasonably request.
3.3 Maintenance of Books and Records; Inspection. Borrower and Guarantor
shall maintain their books, accounts and records in accordance with GAAP, and
five (5) days after written notice from Lender, shall permit Lender, its
officers, employees and any professionals designated by Lender in writing, at
Borrower's expense, to visit, inspect and/or audit any of Borrower's or
Guarantor's properties, books and financial records, and to discuss Borrower's
and Guarantor's accounts, affairs and finances with Borrower or Guarantor or the
principal officers of Borrower and/or Guarantor during reasonable business
hours, all at such times as Lender may reasonably request; provided that (i)
prior to an Event of Default, Lender shall not engage in an audit more than once
per six months, (ii) no such visit, inspection and/or audit shall materially
interfere with the conduct of Borrower's or Guarantor's business, and (iii) that
prior to an Event of Default, the expenses to be incurred by Borrower in
connection with any such visit, inspection or audit shall not exceed $25,000 in
any calendar year.
3.4 Insurance. Without limiting any of the requirements of any of the other
Loan Documents, Borrower shall maintain in amounts customary for entities
engaged in comparable business activities, (i) to the extent required by
applicable law, worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation liabilities,
with adequate reserves, under a plan approved by Lender, such approval not to be
unreasonably withheld or delayed), and (ii) fire and "all risk" casualty
insurance on its properties against such hazards and in at least such amounts as
are customary in Borrower's business. Borrower will make commercially reasonable
efforts to
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obtain and maintain public liability insurance in an amount, and at a cost,
deemed reasonable to the Borrower's Board of Directors. At the reasonable
request of Lender, Borrower will promptly deliver a certificate specifying the
details of such insurance in effect.
3.5 Taxes and Assessments. Borrower and Guarantor shall (i) file all tax
returns and appropriate schedules thereto that are required to be filed under
applicable law, prior to the date of delinquency, (ii) pay and discharge all
taxes, assessments and governmental charges or levies imposed upon Borrower and
Guarantor upon their income and profits or upon any properties belonging to
them, prior to the date on which penalties attach thereto, and (iii) pay all
taxes, assessments and governmental charges or levies that, if unpaid, might
become a lien or charge upon any of their properties; provided, however, that
Borrower or Guarantor in good faith may contest any such tax, assessment,
governmental charge or levy described in the foregoing clauses (ii) and (iii) so
long as appropriate reserves are maintained with respect thereto.
3.6 Corporate Existence. Borrower and Guarantor shall maintain their
corporate existences and good standings in the states of their incorporation,
and their qualifications and good standings as foreign corporations in each
jurisdiction in which failure to be so qualified would have a material adverse
effect on Borrower's or Guarantor's financial position or their abilities to
conduct their businesses at a given time.
3.7 Compliance with Law and Other Agreements. Except where the failure to
do so would not materially adversely affect Borrower's operations or its ability
to fulfill its obligations under the Loan Documents, Borrower shall maintain its
business, operations and property owned or used in connection therewith in
compliance with (i) all applicable federal, state and local laws, regulations
and ordinances governing such business operations and the use and ownership of
such property, and (ii) all agreements, licenses, franchises, indentures and
mortgages to which Borrower is a party or by which Borrower or any of its
properties is bound. Without limiting the foregoing, Borrower shall pay all of
its indebtedness promptly in accordance with the terms thereof.
3.8 Notice of Default. Borrower shall give written notice to Lender of the
occurrence of any default, event of default or Event of Default under this
Agreement or any other Loan Document promptly upon Borrower's knowledge of the
occurrence thereof.
3.9 Notice of Litigation. Borrower shall give notice, in writing, to Lender
of (i) any actions, suits or proceedings instituted by any persons whomsoever
against Borrower, or affecting any of the assets of Borrower, wherein the amount
at issue is in excess of Two Hundred Fifty Thousand and No/l00ths Dollars
($250,000.00), and (ii) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Borrower on the one hand and any governmental
regulatory body on the other hand, which dispute, if determined adversely to
Borrower, would have a material adverse effect on the normal operations of
Borrower.
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3.10 Conduct of Business. Borrower will continue to engage in a business of
the same general type and manner as conducted by it on the date of this
Agreement.
3.11 ERISA Plan. If Borrower institutes a pension plan that is subject to
the requirements of Title IV of the Employee Retirement Income Security Act of
1974, Pub. L. No.93-406, September 2,1974, 88 Stat. 829, 29 U.S.C.A. ss. 1001 et
seq. (1975), as amended from time to time ("ERISA"), then the following
covenants shall be applicable during such period as any such plan (the "Plan")
shall be in effect: (i) Borrower hereby covenants that throughout the existence
of the Plan, Borrower's contributions under the Plan will meet the minimum
funding standards required by ERISA, and (ii) Borrower covenants that it will
send to Lender a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
3.12 Dividends, Distributions, Stock Rights, etc. Neither Borrower nor
Guarantor shall declare or pay any dividend of any kind (other than stock
dividends payable to all holders of any class of capital stock), in cash or in
property, on any class of the capital stock of Borrower or Guarantor, or
purchase, redeem, retire or otherwise acquire for value any shares of such
stock, nor make any distribution of any kind in cash or property in respect
thereof, nor make any return of capital of shareholders, nor make any payments
in cash or property in respect of any stock options, stock bonus or similar plan
(except as required or permitted hereunder), nor grant any preemptive rights
with respect to the capital stock of Borrower or Guarantor, without the prior
written consent of Lender. Borrower shall provide Lender with written notice of
any and all requests for redemption pursuant to Article 4 of Guarantor's
Articles of Incorporation made to Guarantor and/or Borrower by the holders of a
majority of the outstanding shares of Guarantor's Series A Preferred Stock, or
the holders of majority of the outstanding shares of Guarantor's Series B
Preferred Stock, within ten (10) days of Guarantor's or Borrower's receipt of
any such requests.
3.13 Guaranties; Loans; Payment of Debt. Without Lender's prior express
written consent, neither Borrower nor Guarantor shall guarantee nor be liable in
any manner, whether directly or indirectly, or become contingently liable after
the date of this Agreement in connection with the obligations or indebtedness of
any person or entity whatsoever, except for the endorsement of negotiable
instruments payable to Borrower or Guarantor for deposit or collection in the
ordinary course of business. Without Lender's prior express written consent,
neither Borrower nor Guarantor shall (i) make any loan, advance or extension of
credit to any person other than in the normal course of its business, or (ii)
make any payment on any debt that is subordinate to the Loan, if any, except for
trade accounts payable incurred in the ordinary course of Borrower's or
Guarantor's business.
3.14 Debt. Without the express prior written consent of Lender, neither
Borrower nor Guarantor shall create, incur, assume or suffer to exist
indebtedness of any description whatsoever, (excluding (i) the indebtedness
evidenced by the Note, (ii) the endorsement of negotiable instruments payable to
Borrower or Guarantor for deposit or collection in the
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ordinary course of business, (iii) indebtedness incurred in the ordinary course
of business (provided that no such debt, individually, exceeds $100,000) and
(iv) the indebtedness listed on Schedule 2.1(1) hereto).
3.15 No Liens. Neither Borrower nor Guarantor shall create, incur, assume
or suffer to exist any lien, security interest, security title, mortgage, deed
of trust or other encumbrance upon or with respect to any of its properties, now
owned or hereafter acquired, except:
a. liens in favor of Lender;
b. liens for taxes or assessments or other governmental charges or
levies if not yet due and payable;
c. liens in connection with the leasing of equipment in favor of the
lessor of such equipment;
d. purchase money security interest for specific equipment in favor of
the seller of such equipment; and
e. liens described on Schedule 2.1(1) hereto.
3.16 Mergers, Consolidations, Acquisitions and Sales. Without the prior
written consent of Lender, neither Borrower nor Guarantor shall (a) be a party
to any merger, consolidation or corporate reorganization, nor (b) purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other person, firm or entity, nor
(c) sell, transfer, convey, grant a security interest in or lease all or any
substantial part of its assets, nor (d) create any Subsidiaries nor convey any
of its assets to any Subsidiary.
3.17 Transactions With Affiliates. Except as described on Schedule 2.1(o)
hereof, Borrower shall not enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any
service, with any affiliate, except in the ordinary course of and pursuant to
the reasonable requirements of Borrower's business and upon fair and reasonable
terms approximately no less favorable to Borrower than Borrower would obtain in
a comparable arm's length transaction with a person not an affiliate. For the
purposes of this Section 3.17, "affiliate" shall mean a person, corporation,
partnership or other entity controlling, controlled by or under common control
with Borrower.
3.18 Environment. Borrower shall comply with all applicable provisions of
all applicable federal, state and local environmental, health, and safety laws,
codes and ordinances, and all rules and regulations issued thereunder; notify
Lender immediately of the receipt of any written notice of a hazardous discharge
or environmental complaint received from any governmental agency or any other
party; notify Lender immediately of any hazardous discharge from or affecting
Borrower's premises; contain and remove the same, in compliance with all
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applicable laws as quickly as practicable; promptly pay any fine or penalty
assessed in connection therewith (provided that Borrower may in good faith
contest any such fine or penalty); and following the receipt of any notice of
hazardous discharge or environmental complaint from any governmental authority
permit Lender to inspect the premises, to conduct tests thereon, and to inspect
all books, correspondence, and records pertaining thereto, and at Lender's
reasonable request, and at Borrower's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to Lender, and
such other and further assurances reasonably satisfactory to Lender that the
condition has been corrected.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 Closing of the Loan. The obligation of Lender to fund the Loan on the
date hereof (the "Closing Date") is subject to the fulfillment, on or prior to
the Closing Date, of each of the following conditions:
(a) Borrower shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and conditions
required by this Agreement.
(b) Lender shall have received an opinion of counsel for Borrower and
Guarantor, Pitney, Hardin, Kipp & Szuch, dated the Closing Date, in form
and substance satisfactory to Lender's counsel, Chambliss & Bahner.
(c) Borrower shall have delivered to Lender the Note executed by
Borrower.
(d) Lender shall have received a Stock Purchase Warrant and a Warrant
Valuation Letter both executed by Guarantor, all in form acceptable to
Lender.
(e) Borrower shall have delivered to Lender a Security Agreement
executed by Borrower (in form acceptable to Lender) and related UCC-1
Financing Statement(s) (in form acceptable to Lender) executed by Borrower.
(f) Borrower shall have delivered to Lender the Small Business
Administration Forms 480, 652 and 1031 (Part A) completed by Borrower.
(g) Borrower shall have delivered to Lender a Small Business
Administration Economic Impact Assessment completed by Borrower, in a form
acceptable to Lender.
(h) Lender shall have received copies of the articles of incorporation
and other publicly filed organizational documents of Borrower and
Guarantor, certified by the Secretary of State or other appropriate public
official in the jurisdictions in which Borrower and Guarantor are
incorporated.
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(i) Lender shall have received certified (as of the date of this
Agreement) copies of all corporate action taken by Borrower and Guarantor,
including resolutions of their Board of Directors, authorizing the
execution, delivery and performance of the Loan Documents.
(j) Lender shall have received a certificate as to the legal existence
and good standing of Borrower and Guarantor, issued by the Secretary of
State or other appropriate public official in the jurisdictions in which
Borrower and Guarantor are incorporated.
(k) Lender shall have received certificates of the Secretaries of
State or other appropriate public officials as to Borrower's and
Guarantor's qualifications to do business and good standings in each
jurisdiction in which a failure to be so qualified would have a material
adverse effect on their financial positions or their ability to conduct
their business in the manner now conducted.
(1) Lender shall have received an Intercreditor Estoppel Agreement
executed by Bank One, Chicago, N.A. and Borrower.
(m) Lender shall have received a Guaranty Agreement executed by
Guarantor, in form acceptable to Lender.
(n) Lender shall have received the written consent and waivers of
Guarantor's shareholder's to the extent necessary for the execution of the
Loan Documents by Borrower and/or Guarantor (as applicable) (including
without limitation the stock purchase warrant issued by Guarantor in favor
of Lender) and the performance by Borrower and/or Guarantor (as applicable)
of the obligations thereunder.
ARTICLE 5
DEFAULT AND REMEDIES
5.1 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Default by Borrower in the payment of the principal of or interest
on the indebtedness evidenced by the Note in accordance with the terms of
the Note, which default is not cured within five (5) business days;
(b) Any misrepresentation by Borrower as to any material matter
hereunder or under any of the other Loan Documents, or delivery by Borrower
of any schedule, statement, resolution, report, certificate, notice or
writing to Lender that is untrue in any material respect on the date as of
which the facts set forth therein are stated or certified;
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(c) Failure of Borrower to perform any of its obligations, covenants
or agreements under this Agreement, the Note or any of the other Loan
Documents or failure of Borrower to cause Guarantor to perform any
covenants under this Agreement or any of the other Loan Documents;
(d) Either Borrower or Guarantor (i) shall generally not pay its debts
as such debts become due; or (ii) shall make an assignment for the benefit
of creditors or petition or apply to any tribunal for the appointment of a
custodian, receiver or trustee for it or a substantial part of its assets;
or (iii) shall commence any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made; or (v) shall indicate,
in writing or by failing to respond in writing within sixty (60) days, its
consent to, approval of or acquiescence in any such petition, application,
proceeding or order for relief or the appointment of a custodian, receiver
or trustee for it or a substantial part of its assets; or (vi) shall suffer
any such custodianship, receivership or trusteeship to continue
undischarged for a period of sixty (60) days or more;
(e) Either Borrower or Guarantor shall be liquidated, dissolved,
partitioned or terminated, or the charter thereof shall expire or be
revoked;
(f) A default or event of default shall occur under any of the other
Loan Documents and, if subject to a cure right, such default or event of
default shall not be cured within the applicable cure period;
(g) Either Borrower or Guarantor shall default in the timely payment
or performance of any obligation now or hereafter owed to Lender in
connection with any other indebtedness of Borrower or Guarantor now or
hereafter owed to Lender taking into account any grace period provided for
such obligation; or
(h) Either Borrower or Guarantor shall have defaulted and continue to
be in default in the timely payment or performance of any other
indebtedness or obligation, which in the aggregate exceeds One Hundred
Thousand and No/l00ths Dollars ($100,000.00) or materially adversely
affects Borrower's or Guarantor's financial condition.
With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (ten (10) days, if such Curable Default may be cured
solely by payment of a sum of money) of notice thereof to Borrower given in
accordance with the provisions hereof; provided, however, that this provision
shall not require notice to Borrower and an opportunity to cure any Curable
Default of which Borrower has had actual knowledge for the requisite number of
days set forth in this sentence.
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5.2 Acceleration of Maturity; Remedies. If Borrower or Guarantor receives
any notice or request from the holders of a majority of the outstanding shares
of Guarantor's Series A Preferred Stock, or the holders of a majority of the
outstanding shares of Guarantor's Series B Preferred Stock, pursuant to which
the notifying shareholder(s) exercise any redemption rights in accordance with
Article 4 of Guarantor's Articles of Incorporation, Lender may immediately
accelerate the indebtedness evidenced by the Note as well as any and all other
indebtedness of Borrower to Lender under the Loan Documents, and upon such
acceleration such indebtedness shall be immediately due and payable in full.
Upon the occurrence of any Event of Default described in subsection 5.1(d), the
indebtedness evidenced by the Note as well as any and all other indebtedness of
Borrower to Lender under the Loan Documents shall be immediately due and payable
in full; and upon the occurrence of any other Event of Default described above,
Lender at any time thereafter may at its option accelerate the maturity of the
indebtedness evidenced by the Note as well as any and all other indebtedness of
Borrower to Lender under the Loan Documents; all without notice of any kind.
Upon the occurrence of any such Event of Default and the acceleration of the
maturity of the indebtedness evidenced by the Note:
(a) Lender shall be immediately entitled to exercise any and all
rights and remedies possessed by Lender pursuant to the terms of the Note
and all of the other Loan Documents; and
(b) Lender shall have any and all other rights and remedies that
Lender may now or hereafter possess at law, in equity or by statute.
5.3 Remedies Cumulative; No Waiver. No right, power or remedy conferred
upon or reserved to Lender by this Agreement or any of the other Loan Documents
is intended to be exclusive of any other right, power or remedy, but each and
every such right, power and remedy shall be cumulative and concurrent and shall
be in addition to any other right, power and remedy given hereunder, under any
of the other Loan Documents or now or hereafter existing at law, in equity or by
statute. No delay or omission by Lender to exercise any right, power or remedy
accruing upon the occurrence of any Event of Default shall exhaust or impair any
such right, power or remedy or shall be construed to be a waiver of any such
Event of Default or an acquiescence therein, and every right, power and remedy
given by this Agreement and the other Loan Documents to Lender may be exercised
from time to time and as often as may be deemed expedient by Lender.
5.4 Proceeds of Remedies. Any or all proceeds resulting from the exercise
of any or all of the foregoing remedies shall be applied as set forth in the
Loan Document(s) providing the remedy or remedies exercised; if none is
specified, or if the remedy is provided by this Agreement, then as follows:
First, to the costs and expenses, including, without limitation,
reasonable attorney's fees incurred by Lender in connection with the
exercise of its remedies;
Second, to the expenses of curing the default that has occurred, in
the event that Lender elects, in its sole discretion, to cure the default
that has occurred;
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Third, to the payment of the obligations of Borrower under the Loan
Documents (the "Obligations"), including but not limited to the payment of
the principal of and interest on the indebtedness evidenced by the Note, in
such order of priority as Lender shall determine in its sole discretion;
and
Fourth, the remainder, if any, to Borrower or to any other person
lawfully thereunto entitled.
ARTICLE 6
TERMINATION
6.1 Termination of this Agreement. This Agreement shall remain in full
force and effect until the payment by Borrower of all amounts owed to Lender
hereunder, at which time Lender shall cancel the Note and deliver it to
Borrower.
ARTICLE 7
MISCELLANOUS
7.1 Performance By Lender. If Borrower shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Lender may,
at its option, pay, perform or observe the same, and all payments made or costs
or expenses incurred by Lender in connection therewith (including but not
limited to reasonable attorney's fees), with interest thereon at the highest
default rate provided in the Note (if none, then at the maximum rate from time
to time allowed by applicable law), shall be immediately repaid to Lender by
Borrower and shall constitute a part of the Obligations. Lender shall be the
sole judge of the reasonableness and necessity for any such actions and of the
amounts to be paid.
7.2 Successors and Assigns Included in Parties. Whenever in this Agreement
one of the parties hereto is named or referred to, legal representatives,
successors, successors-in-title and assigns of such parties shall be included,
and all covenants and agreements contained in this Agreement by or on behalf of
Borrower or by or on behalf of Lender shall bind and inure to the benefit of
their respective legal representatives, successors-in-title and assigns, whether
so expressed or not.
7.3 Costs and Expenses. Borrower agrees to pay all reasonable costs and
expenses incurred by Lender in connection with the making of the Loan, including
but not limited to filing fees, recording taxes, indebtedness taxes, and
reasonable attorneys' fees, promptly upon demand of Lender; provided that legal
fees of Lender's counsel exclusive of any out-of-pocket costs or expenses shall
not exceed $15,000. Borrower further agrees to pay all premiums for insurance
required to be maintained by Borrower pursuant to the terms of the Loan
Documents and all of the reasonable out-of-pocket costs and expenses incurred by
Lender in connection with the collection of the Loan, amendment to the Loan
Documents, or prepayment of the Loan,
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including but not limited to reasonable attorneys' fees, promptly upon demand of
Lender; provided, however, that any amendment to the Loan Documents made
necessary solely because of a ministerial decision on the part of Lender (by way
of example, and not limitation, a name change or an address change of Lender)
shall be effected at Lender's expense, excluding any fees or expenses of
Borrower, Guarantor or counsel for Borrower or Guarantor.
7.4 Assignment. The Note, this Agreement and the other Loan Documents may
be endorsed, assigned and/or transferred in whole or in part by Lender, and any
such holder and/or assignee of the same shall succeed to and be possessed of the
rights and powers of Lender under all of the same to the extent transferred and
assigned; provided, however, that, prior to an Event of Default, Lender may not
transfer or assign any of the Loan Documents to a retailer in the social
expressions business, or to a lender or significant equity owner of any such
retailer, without the prior written consent of Borrower. Lender may grant
participations in all or any portion of its interest in the indebtedness
evidenced by the Note, and in such event Borrower shall continue to make
payments due under the Loan Documents to Lender and Lender shall have the sole
responsibility of allocating and forwarding such payments in the appropriate
manner and amounts, and the sole right to exercise the audit and inspection
rights under Section 3.3 hereof. Borrower shall not assign any of its rights nor
delegate any of its duties hereunder or under any of the other Loan Documents
without the prior express written consent of Lender.
7.5 Time of the Essence. Time is of the essence with respect to each and
every covenant, agreement and obligation of Borrower hereunder and under all of
the other Loan Documents.
7.6 Severability. If any provision(s) of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
7.7 Interest and Loan Charges Not to Exceed Maximum Allowed by Law.
Anything in this Agreement, the Note or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and loan charges agreed to
be paid to Lender for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrower in respect of the indebtedness evidenced by the Note shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then ipso facto, the obligation to pay such interest and/or loan charges shall
be reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected by Lender that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the
indebtedness evidenced by the Note and/or refunded to Borrower so that at no
time shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Note exceed the maximum amounts permitted from
time to time by applicable law.
17
<PAGE>
7.8 Article and Section Headings: Defined Terms. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
7.9 Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement or any of the Loan Documents shall be
in writing, signed by the party giving such notice, election or demand and shall
be delivered personally, telecopied, telexed, or sent by certified mail or
overnight via nationally recognized courier service (such as Federal Express),
to the other party at the address set forth below, or at such other address as
may be supplied in writing and of which receipt has been acknowledged in
writing. The date of personal delivery or delivery by such courier service,
telecopy or telex or four (4) business days after the date of mailing, as the
case may be, shall be the date of such notice, election or demand. For the
purposes of this Agreement:
The Address of Lender is: Sirrom Capital Corporation
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Rob Shuler
Telecopy: (615) 726-1208
with a copy to: Chambliss & Bahner
1000 Tallan Building
Two Union Square
Chattanooga, TN 37402
Attention: J. Patrick Murphy, Esq.
Telecopy: (423) 265-9574
The Address of Borrower is: Factory Card Outlet of America Ltd.
745 Birginal Drive
Bensenville, IL 60106-1212
Attention: Charles R. Cumello
Telecopy: (708) 595-2104
with copies to: William E. Freeman
318 Beacon Right Road
Califon, NJ 07830
Telecopy: (908) 832-9440
18
<PAGE>
and
Pitney, Hardin, Kipp & Szuch
200 Campus Drive
Florham Park, NJ 07932
Attention: Joseph Lunin, Esq.
Telecopy: (201) 966-1550
7.10 Entire Agreement. This Agreement and the other written agreements
between Borrower and Lender represent the entire agreement between the parties
concerning the subject matter hereof, and all oral discussions and prior
agreements are merged herein; provided, if there is a conflict between this
Agreement and any other document executed contemporaneously herewith with
respect to the Obligations, the provision of this Agreement shall control. The
execution and delivery of this Agreement and the other Loan Documents by the
Borrower were not based upon any fact or material provided by Lender, nor was
the Borrower induced or influenced to enter into this Agreement or the other
Loan Documents by any representation, statement, analysis or promise by Lender.
7.11 Governing Law and Amendments. This Agreement and all of the Loan
Documents shall be construed and enforced under the laws of the State of
Tennessee applicable to contracts to be wholly performed in such State except to
the extent certain rights and privileges may be granted Lender under applicable
federal laws in which event federal law shall control. No amendment or
modification hereof shall be effective except in a writing executed by each of
the parties hereto.
7.12 Survival of Representations and Warranties. All covenants,
representations and warranties contained herein or in any of the Loan Documents,
or made by or furnished on behalf of the Borrower in connection herewith or any
of the Loan Documents, shall survive the execution and delivery of this
Agreement and all other Loan Documents and shall continue in full force and
effect so long as the Obligations are unpaid.
7.13 Jurisdiction and Venue. Borrower hereby consents to the jurisdiction
of the courts of the State of Tennessee and the United States District Court for
the Middle District of Tennessee, as well as to the jurisdiction of all courts
from which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations arising under
this Agreement or any other Loan Documents or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such court.
19
<PAGE>
7.14 Waiver of Trial by Jury. LENDER AND BORROWER HEREBY WAIVE TRIAL BY
JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN CONTRACT
OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT OR THE LOAN DOCUMENTS.
7.15 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
7.16 Construction and Interpretation. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrower, Lender and their respective agents have participated in the
preparation hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
LENDER:
-------
SIRROM CAPITAL CORPORATION, a Tennessee
corporation
By: /s/ Rob Shuler
------------------------------------
Title: Vice President
---------------------------------
BORROWER:
---------
FACTORY CARD OUTLET OF AMERICA LTD.,
an Illinois corporation
By: /s/ C.R. Cumello
------------------------------------
Title: President
---------------------------------
ACKNOWLEDGED AND AGREED TO:
FCOA ACQUISITION CORP., a
Delaware corporation
By: /s/ William E. Freeman
---------------------------------
Title: Chairman, CEO
------------------------------
20
<PAGE>
Index of Schedules and Attachments
Exhibit A - Form of Note
Schedule 2.1(a) - Foreign Qualification
Schedule 2.1(e) - Options, Warrants, Stock Rights, Etc.
Schedule 2.1(f) - Trademarks, Patents, Etc.
Schedule 2.1(i)(A) and (B) - Financial Statements
Schedule 2.1(1) - Debt and Liens
Schedule 2.1(o) - Shareholder Transactions
Schedule 2.1(r) - Significant Contracts
21
<PAGE>
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY,
WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
SECURED PROMISSORY NOTE
$4,000,000 November ___, 1995
FOR VALUE RECEIVED, the undersigned, FACTORY CARD OUTLET OF AMERICA LTD.,
an Illinois corporation ("Maker"), promises to pay to the order of SIRROM
CAPITAL CORPORATION, a Tennessee corporation ("Payee"; Payee and any subsequent
holder[s] hereof are hereinafter referred to collectively as "Holder"), at the
office of Payee at First American Trust Company, Custody Department, 800 First
American Center, Nashville, Tennessee 37237, Attn: Jeff Eubanks, or at such
other place as Holder may designate to Maker in writing from time to time, the
principal sum of FOUR MILLION AND NO/l00THS DOLLARS ($4,000,000.00), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate of twelve and one-half percent (12.5%) per annum (computed on the
basis of a 360-day year); provided, however, that Holder may charge and receive
interest upon any renewal or extension hereof at the greater of (i) the rate set
out above, or (ii) any rate agreed to by the undersigned that is not in excess
of the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
first (1st) day of January, 1996, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until November __, 2000
(the "Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full; provided, however, that each interest payment prior to May 1,
1997 shall be payable only at a rate of seven and one-half percent (7.5%) per
annum with the remaining five percent (5%) per annum interest due hereunder
accruing from the date hereof until May 1, 1997 at which time all accrued and
unpaid interest shall be due and payable.
<PAGE>
The indebtedness evidenced hereby may be prepaid in whole or in part, at
any time and from time to time, without penalty. Any such prepayments shall be
credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that in
the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default shall occur under that certain
Loan Agreement of even date herewith, between Maker and Payee (as may be amended
from time to time, the "Loan Agreement"), which default or event of default is
not cured following the giving of any applicable notice and within any
applicable cure period set forth in said Loan Agreement; or should any default
by Maker be made in the performance or observance of any covenants or conditions
contained in any other instrument or document now or hereafter evidencing, or
securing or otherwise relating to the indebtedness evidenced hereby (subject to
any applicable notice and cure period provisions that may be set forth therein);
then, and in such event, the entire outstanding principal balance of the
indebtedness evidenced hereby, together with any other sums advanced hereunder,
under the Loan Agreement and/or under any other instrument or document now or
hereafter evidencing, or securing the indebtedness evidenced hereby, together
with all unpaid interest accrued thereon, shall, at the option of Holder and
without notice to Maker, at once become due and payable and may be collected
forthwith, regardless of the stipulated date of maturity. Upon the occurrence of
any Event of Default (as defined in the Loan Agreement), at the option of Holder
and without notice to Maker, all accrued and unpaid interest, if any, shall be
added to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
seven percentage points (7.0%) in excess of the above-specified interest rate,
or (ii) the Maximum Rate in effect from time to time, regardless of whether or
not there has been an acceleration of the payment of principal as set forth
herein. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of default hereunder,
acceptance of a past-due installment or other indulgences granted from time to
time, shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable laws. No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for
2
<PAGE>
payment of the indebtedness evidenced hereby, shall operate to release,
discharge, modify, change or affect the original liability of Maker hereunder or
that of any other person now or hereafter liable for payment of the indebtedness
evidenced hereby, either in whole or in part, unless Holder agrees otherwise in
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are further
evidenced by (i) the Loan Agreement and (ii) certain other instruments and
documents, as may be required to protect and preserve the rights of Maker and
Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law.
MAKER:
------
FACTORY CARD OUTLET OF AMERICA
LTD., an Illinois corporation
By:_____________________________
Title:__________________________
3
<PAGE>
SCHEDULE 2.1 (a) TO LOAN AGREEMENT
Foreign Qualifications
Borrower's qualification to do business as a foreign corporation has been
revoked in the States of Indiana, Wisconsin, Iowa, Nebraska, Minnesota and North
Dakota. In each case the revocation was the result of an administrative error,
such as Borrower's failure to file annual reports, and in each case Borrower has
been in contact with the appropriate state authorities to determine how to
reinstate Borrower as a foreign corporation in good standing.
<PAGE>
SCHEDULE 2.1(e) TO LOAN AGREEMENT
Capitalization
1. Borrower - none.
2. Guarantor - see attached capitalization table as of
November 3, 1995.
<PAGE>
FCOA ACQUISITION CORP.
Summary of Fully Diluted Capital Structure
Number of Shares (a/o Nov. 3, 1995)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
Series A Series B
Convertible Convertible
Preferred Preferred
Series A Series B Stock Stock Common* Common**
Convertible Convertible Common Common Stock Stock
Preferred Preferred Stock Stock Common Subordinated Options
Stock Stock Equivalents Equivalents Stock Debt Series I
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brothers Investment Partnership 9,000 268 90,000 2,680 130,000 3,000
Jasmine Trustees Limited 5,001 50,010 10,000 7,500
Othman M. Al-Rasheed 1,000 267 10,000 2,670 40,000 3,000
William E. Freeman 1,000 10,000 10,000 20,000#
Revocable Living Trust of J. Bayard 1,834 18,340 12,500
Kelly
George C. Betke, Jr. 20,000#
The Card Mart 16,000
Richard E. Bruce 1,165 116,650
Abdul Aziz Al-Othman 1,000 10,000
Construction Counselors, Inc. 10,000
Estate of Emanuel Kain 1,500
Allstate 18,716 187,160
Bessemer Ventre Partners FCOA 8,021 80,210
Mohammed Al-Moussa 3,208 32,080
Daoud Al-Sherian 267 2,670
David Jaffee 267 2,670
Lynda Davey 100 1,000
Gerald Gitner 100 1,000
Glen J. Franchi 5,000
Carol A. Travis 7,500
Michael Powell
Robert Krentzman
Mohammed Maali
Gary F. Nekola
Jeffrey B. Kelly
Vincent A. Smeraldo
Karen E. Nelson
Leanne L. Perry
Charles Cumello
Pamela Matjek
D. Kenneth Wahlstrom
Joseph Caboon
Sally Abdelsayed
Richard Banks
Debra Affeldt
Hadieh Hasan
Pamela Kidd
Paul Prospero
<CAPTION>
(8) (9) (10) (11) (12)
Conversion@
of
Common Subordinated
Stock in Debt
Common** Common*** Lieu of to
Stock Stock Interest on Series B Columns
Options Options Bridge Pref. Stock (3)-11)
Series II ISO Loan CSE Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brothers Investment Partnership 1,500 2,670 229,850
Jasmine Trustees Limited 6,680 74,190
Othman M. Al-Rasheed 2,670 58,340
William E. Freeman 40,000
Revocable Living Trust of J. Bayard 4,000 7,000 41,840
Kelly
George C. Betke, Jr. 20,000
The Card Mart 16,000
Richard E. Bruce 11,650
Abdul Aziz Al-Othman 10,000
Construction Counselors, Inc. 10,000
Estate of Emanuel Kain 1,500
Allstate 187,160
Bessemer Ventre Partners FCOA 80,210
Mohammed Al-Moussa 32,080
Daoud Al-Sherian 3,670
David Jaffee 2,670
Lynda Davey 1,000
Gerald Gitner 1,000
Glen J. Franchi 4,000 4,000 13,000
Carol A. Travis 1,000 500 9,000
Michael Powell 5,000 4,000 9,000
Robert Krentzman 3,000 2,000 5,000
Mohammed Maali 1,000 - 1,000
Gary F. Nekola 2,000 1,000 3,000
Jeffrey B. Kelly 1,500 1,000 2,500
Vincent A. Smeraldo 1,000 500 1,500
Karen E. Nelson 500 500 1,000
Leanne L. Perry 500 500 1,000
Charles Cumello 35,000 35,000
Pamela Matjek 2,000 2,000
D. Kenneth Wahlstrom 2,000 2,000
Joseph Caboon 5,000 5,000
Sally Abdelsayed 1,000 1,000
Richard Banks 1,000 1,000
Debra Affeldt 1,000 1,000
Hadieh Hasan 1,000 1,000
Pamela Kidd 1,000 1,000
Paul Prospero 1,000 1,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
Series A Series B
Convertible Convertible
Preferred Preferred
Series A Series B Stock Stock Common* Common**
Convertible Convertible Common Common Stock Stock
Preferred Preferred Stock Stock Common Subordinated Options
Stock Stock Equivalents Equivalents Stock Debt Series I
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lisa Schwartz
James Wieting
Diane W. Burkes
Robert Blattberg
Lorenzo Hernandez
Lillian Stout
Frank Soto
------ ------ ------- ------- ------- ------ ------
Total Issued and Outstanding 20,000 31,214 200,000 312,140 216,000 15,000 65,000
------ ------ ------- ------- ------- ------ ------
<CAPTION>
(8) (9) (10) (11)
Conversion@
of
Common Subordinated
Stock in Debt
Common** Common*** Lieu of to
Stock Stock Interest on Series B Columns
Options Options Bridge Pref. Stock (3)-11)
Series II ISO Loan CSE Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lisa Schwartz 1,000 1,000
James Wieting 1,000 1,000
Diane W. Burkes 500 500
Robert Blattberg 2,500 2,500
Lorenzo Hernandez 500 500
Lillian Stout 500 500
Frank Soto 500 500
------ ------ ----- ------ -------
Total Issued and Outstanding 26,000 75,000 1,500 12,020 922,660
------ ------ ----- ------ -------
</TABLE>
* Adjusted to reflect extension of the subordinated debt maturity date to
June 30, 1994
** Original Management and Sponsor Stock Option Plans
*** Revised Management Stock Option Plan
@ Conversion of $450,000 of the $500,000 of Subordinated Debt at CSE per
share price of $37.40
# Sponsor
<PAGE>
SCHEDULE 2.1(f) TO LOAN AGREEMENT
Intellectual Property
1. Patents - none.
2. Trademarks, Trade Names, Registrations, etc.:
PARTY MANIA - Registration Numbers 1,834,212 (logo)
and 1,834,213 (name), dated May 3, 1994.
FACTORY CARD OUTLET - Registration applied for with
the U.S.P.T.O. on May 9, 1994.
3. Copyrights - none.
4. Licenses - none.
5. Formulas - none.
<PAGE>
SCHEDULE 2.1(i) TO LOAN AGREEMENT
Financial Statements
See attached consolidated financial statements of Borrower and Guarantor as
of July 1, 1995.
<PAGE>
[LOGO] KPMG
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Consolidated Financial Statements and Schedules
July 1, 1995 and June 30, 1994
(With Independent Auditors' Report Thereon)
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
TABLE OF CONTENTS
================================================================================
Page(s)
-------
Independent Auditors' Report ............................. 1
Financial Statements:
Consolidated Balance Sheets ........................... 2
Consolidated Statements of Income ..................... 3
Consolidated Statements of Stockholders' Equity ....... 4
Consolidated Statements of Cash Flows ................. 5
Notes to Consolidated Financial Statements ............... 6-16
Schedule
--------
Consolidating Schedule - Balance Sheet Information as
of July 1, 1995 ....................................... 1 17
Consolidating Schedule - Income and Expense
Information for the year ended July 1, 1995 ........... 2 18
Schedule of Historical Income and Expense Information
for the years ended July 1, 1995 and June 30, 1994,
1993, 1992, and 1991 .................................. 3 19
<PAGE>
[LOGO] KPMG Peat Marwick LLP
Peat Marwick Plaza
303 East Wacker Drive
Chicago, IL 6Q601-5255
Independent Auditors' Report
The Board of Directors
FCOA Acquisition Corp.:
We have audited the accompanying consolidated balance sheets of FCOA Acquisition
Corp. and subsidiaries as of July 1, 1995 and June 30, 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the management of FCOA Acquisition Corp. and subsidiaries. Cur responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FCOA Acquisition
Corp. and subsidiaries as of July 1, 1995 and June 30, 1994, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information included in
Schedules 1 and 2 is presented for purposes of additional analysis of the
consolidated financial statements rather than to present the financial position
and results of operations of the individual companies. The historical
information included in Schedule 3 is also presented for purposes of additional
analysis. Such information has been subjected to the auditing procedures applied
in the audits of the consolidated financial statements and, in our opinion, is
fairly stated in all material respects in relation to the consolidated financial
statements taken as a whole.
/s/ KPMG Peat Marwick LLP
September 8, 1995
1
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
July 1, 1995 and June 30, 1994
<TABLE>
<CAPTION>
================================================================================================
Assets 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash $ 515,212 402,965
Accounts receivable 121,996 170,596
Inventories 25,013,222 15,881,559
Prepaid expenses 388,490 310,223
Deferred income taxes 147,132 90,502
- ------------------------------------------------------------------------------------------------
Total current assets 26,186,052 16,855,845
Fixtures and equipment at cost, net 10,178,726 4,565,996
Organization costs, less accumulated amortization 6,644 14,130
Other assets 111,114 132,411
Deferred income taxes 318,579 319,943
- ------------------------------------------------------------------------------------------------
Total assets $ 36,801,115 21,888,325
================================================================================================
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt 496,612 705,247
Current portion of capital lease obligations 37,424 21,509
Revolving credit term note payable 5,800,000 4,800,000
Term loan -- 1,500,000
Accounts payable 8,143,660 6,320,433
Income taxes payable 41,699 328,808
Accrued expenses 1,842,098 1,276,055
- ------------------------------------------------------------------------------------------------
Total current liabilities 16,361,493 14,952,052
Long-term debt 751,661 175,334
Deferred rent liability 2,973,018 2,055,412
Capital lease obligations 74,854 48,970
- ------------------------------------------------------------------------------------------------
Total liabilities 20,161,026 17,231,768
- ------------------------------------------------------------------------------------------------
Minority interest in consolidated subsidiary -- 400,000
- ------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock - Series A convertible, $.01 par value
Authorized, issued, and outstanding 20,000 shares 3,077,248 3,077,248
Preferred stock - Series B convertible, $.01 par value
Authorized, issued, and outstanding 32A16 shares 11,379,258 --
Common stock - no par value. Authorized 1,000,000 shares;
232,500 and 200,000 shares issued and outstanding in 1995
and 1994, respectively 2,636,750 2,000,000
Accumulated deficit (453,167) (820,691)
- ------------------------------------------------------------------------------------------------
Total stockholders' equity 16,640,089 4,256,557
- ------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 36,801,115 21,888,325
================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Consolidated Statements of Income
Years ended July 1, 1995 and June 30, 1994
================================================================================
1995 1994
- --------------------------------------------------------------------------------
Net sales $63,174,091 37,341,134
Cost of goods sold, including buying
and distribution expenses 32,183,209 18,227,595
- --------------------------------------------------------------------------------
Gross profit 30,990,882 19,113,539
- --------------------------------------------------------------------------------
Store operating expenses:
Payroll 9,558,322 5,667,597
Occupancy 7,573,442 4,999,463
General operating 7,684,269 4,379,689
- --------------------------------------------------------------------------------
Total store operating expenses 24,816,033 15,046,749
Regional administrative expense 1,507,193 460,665
Corporate administrative expense 3,355,077 2,207,048
Distribution center relocation expense 39,438 52,028
- --------------------------------------------------------------------------------
Total administrative and relocation expenses 4,901,708 2,719,741
- --------------------------------------------------------------------------------
Income from operations 1,273,141 1,347,049
- --------------------------------------------------------------------------------
Other expense:
Interest expense, net 411,553 496,929
Amortization of organization costs 7,393 76,578
Miscellaneous 138,009 19,821
- --------------------------------------------------------------------------------
Total other expense 556,955 593,328
- --------------------------------------------------------------------------------
Income before income taxes 716,186 753,721
- --------------------------------------------------------------------------------
Income taxes 348,662 304,616
- --------------------------------------------------------------------------------
Net income $ 367,524 449,105
================================================================================
See accompanying notes to consolidated financial statements.
3
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended July 1, 1995 and June 30, 1994
<TABLE>
<CAPTION>
=================================================================================================================
Series A Series B
convertible convertible Total
preferred preferred Common Accumulated stockholders'
stock stock stock deficit equity
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1993 $2,823,163 -- 2,000,000 (1,015,711) 3,807,452
Net income -- -- -- 449,105 449,105
Series A convertible
preferred stock
accreted redemption 254,085 -- -- (254,085) --
- -----------------------------------------------------------------------------------------------------------------
Balance at June 30, 1994 3,077,248 -- 2,000,000 (820,691) 4,256,557
Net income -- -- -- 367,524 367,524
Issuance of Series B
convertible preferred
stock -- 11,379,258 -- -- 11,379,258
Conversion of subsidiary's
stock to common stock -- -- 400,000 -- 400,000
Common stock issued in
lieu of interest on
debt instrument -- -- 236,750 -- 236,750
- -----------------------------------------------------------------------------------------------------------------
Balance at July 1, 1995 $3,077,248 11,379,258 2,636,750 (453,167) 16,640,089
=================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended July 1, 1995 and June 30, 1994
================================================================================
1995 1994
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 367,524 449,105
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization of fixtures
and equipment 1,446,370 808,164
Amortization of organization costs 7,393 76,578
Accrual of stock on subordinated
debentures and bridge loan 11,849 91,568
Deferred rent liability 917,606 609,803
Deferred income taxes (55,266) (131,752)
Change in assets and liabilities:
Decrease (increase) in assets:
Accounts receivable 48,600 136,024
Inventories (9,131,663) (5,132,846)
Prepaid expenses (78,267) (188,547)
Other assets 21,390 (796)
Increase (decrease) in liabilities:
Accounts payable 1,823,227 1,414,275
Accrued expenses 790,944 539,786
Accrued income taxes (287,109) 128,292
- --------------------------------------------------------------------------------
Net cash used in operating activities (4,117,402) (1,200,346)
- --------------------------------------------------------------------------------
Net cash used in investing activities - purchase
of fixtures and equipment, net (6,867,162) (2,206,028)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Increase in borrowings under revolving
credit term note payable 1,000,000 2,379,980
Proceeds from bridge loan -- 1,500,000
Payment of bridge loan (1,500,000) --
Payments of long-term debt (432,447) (276,230)
Payment of subordinated debentures (450,000) (50,000)
Proceeds from issuance of Series B
convertible preferred stock 11,379,258 --
Proceeds from term loan 1,100,000 --
- --------------------------------------------------------------------------------
Net cash provided by financing activities 11,096,811 3,553,750
- --------------------------------------------------------------------------------
Net increase in cash 112,247 147,376
Cash at beginning of year 402,965 255,589
- --------------------------------------------------------------------------------
Cash at end of year $ 515,212 402,965
================================================================================
See accompanying notes to consolidated financial statements.
5
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
July 1, 1995 and June 30, 1994
================================================================================
(1) Summary of Significant Accounting Policies
(a) Organization and Basis of Presentation
The consolidated financial statements include the accounts of FCOA
Acquisition Corp. (the Company) and its wholly owned subsidiary, Factory
Card Outlet of America, Ltd. (FCO). FCO is in the value segment of the
retail social expressions industry and is engaged in the sale of greeting
cards, party supplies, gift wrap, and other products.
On September 23, 1992, the Company entered into an agreement with The Card
Mart (Card Mart), a company in which a deceased former director of the
Company had a partnership interest, to form FCOA-Baltimore, Inc.
(FCOA-Baltimore). FCOA-Baltimore operated a chain of specialty stores in
the Baltimore-Washington metropolitan area under the name of "Factory Card
Outlet of America" offering a discount price format consistent with the
merchandising, purchasing, systems, and selling practices of the Company.
At June 30, 1994 the Company owned 100% of FCOA-Baltimore's common stock,
while Card Mart owned 100% of FCOA-Baltimore's preferred stock.
In October, 1994, FCOA-Baltimore was merged with and into Factory Card
Outlet of America, Ltd. In connection with the merger, Card Mart, the
holder of all of the FCOA-Baltimore preferred stock, converted all of their
FCOA-Baltimore preferred stock into the Company's common stock. Each share
of FCOA-Baltimore preferred stock was converted into one share of the
Company's common stock.
All intercompany balances have been eliminated in consolidation. Minority
interest in consolidated subsidiary of $400,000 at June 30, 1994 represents
the preferred stock in FCOA-Baltimore.
(b) Fiscal Year
In 1995, the Company adopted a policy in which its fiscal year ends on the
Saturday closest to June 30. The years ended July 1, 1995 and June 30,
1994, referred to as fiscal 1995 and 1994, respectively, each reflect a
52-week period.
(c) Inventories
Inventories are stated at the lower of cost (average) or net realizable
value. Cost has been determined by the retail method of accounting for
inventories. The Company includes costs incurred to purchase, store and
distribute goods prior to sale in determining the cost of inventory.
(d) Depreciation and Amortization
Depreciation of fixtures and equipment is computed as follows:
================================================================================
Method Estimated useful life
- --------------------------------------------------------------------------------
Fixtures and equipment Straight-line 3 to 7 years
Leasehold improvements Straight-line Remaining initial term of the leases
================================================================================
(Continued)
6
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(e) Organization Costs
Organization costs are amortized using the straight-line method over a
five-year period. Accumulated amortization was $368,366 and $360,973 as of
July 1, 1995 and June 30, 1994, respectively.
(f) Store Preopening Costs
Store preopening costs are expensed within the fiscal year in which the
related store is opened. Prepaid expenses at July 1, 1995 include $61,489
of preopening costs for stores which have not yet been opened.
(g) Accounts Payable
Accounts payable with payment terms in excess of 60 days totaled $962,877
and $624,673 at July 1, 1995 and June 30, 1994, respectively.
(h) Income Taxes
The Company and its wholly owned subsidiary, FCO, file a consolidated
Federal income tax return. A separate Federal income tax return will be
filed for FCOA-Baltimore for the short period prior to the merger of
FCOA-Baltimore with and into Factory Card Outlet of America, Ltd.
In February 1992 the Financial Accounting Standards Board issued Statement
No.109, "Accounting for Income Taxes" (SFAS No. 109). In fiscal 1994 the
Company adopted SFAS No.109 retroactively to July 10, 1989, the date of
inception.
Under SFAS No. 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between financial
reporting and tax bases of assets and liabilities and are measured using
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
(i) Software
Software costs are capitalized and amortized on a straight-line basis over
a three- or five-year period. Unamortized software costs included in
fixtures and equipment were $1,019,218 as of July 1, 1995. There were no
unamortized software costs included in fixtures and equipment as of June
30, 1994.
(j) Reclassifications
Certain prior year amounts have been reclassified from amounts previously
reported to conform with the 1995 presentation.
(Continued)
7
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(2) Fixtures and Equipment
================================================================================
1995 1994
- --------------------------------------------------------------------------------
Equipment $ 10,452,017 5,048,523
Leasehold improvements 3,389,984 1,836,360
- --------------------------------------------------------------------------------
Total fixtures and equipment 13,842,001 6,884,883
Less accumulated depreciation and amortization 3,663,275 2,318,887
- --------------------------------------------------------------------------------
Net fixtures and equipment $ 10,178,726 4,565,996
================================================================================
(3) Revolving Credit Agreement
The Company has a revolving credit agreement with its bank which permits
the Company to borrow up to $9,000,000 through September 30, 1995 and up to
$12,000,000 from October 1, 1995 to September 30, 1996. Amounts outstanding
under this and preceding agreements totaled $5,800,000 and $4,800,000 at
July 1, 1995 and June 30, 1994, respectively. Interest is payable monthly
at an annual rate equal to the bank's prime rate which was 9% at July 1,
1995. Borrowings under the revolving credit term note are secured by
accounts receivable, inventories, and equipment. This agreement contains
restrictive covenants, the more significant of which require the
maintenance of minimum ratios of total liabilities to net worth and minimum
levels of tangible net worth and net working capital.
(4) Debt
Long-term debt consists principally of a term loan agreement, motor vehicle
loans and amounts due to landlords for financed leasehold improvements.
================================================================================
1995 1994
- --------------------------------------------------------------------------------
Term loan $ 1,100,000 --
Various installment notes payable, due in
monthly installments through fiscal 1999,
each including interest at rates ranging
from 2.9% to 11.0%, secured by motor vehicles 148,273 194,766
Landlord installment notes payable (interest
rates ranging from 10% to 12%, maturities
ranging from fiscal 1995 to fiscal 1998),
secured by equipment and leasehold improvements -- 235,815
Subordinated debentures -- 450,000
- --------------------------------------------------------------------------------
Total long-term debt 1,248,273 880,581
Less current maturities 496,612 705,247
- --------------------------------------------------------------------------------
Long-term portion $ 751,661 175,334
================================================================================
(Continued)
8
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
On May 1, 1995 the Company entered into a term loan agreement with a bank
for an amount up to $1,500,000. At July 1, 1995 the Company had borrowed
$1,100,000 under this agreement. The term loan is secured by computer
equipment and software. The agreement also contains covenants which
includes the maintenance of minimum ratios of net income before interest,
depreciation and amortization to current maturities of long-term debt plus
interest. Interest on the amount borrowed is calculated at a fixed rate of
8.08%. Payments of principal and interest will begin July 31, 1995 and
continue through June 30, 1998.
The subordinated debentures held by shareholders and directors of the
Company matured on July 20, 1994. Interest on the debentures accrued at the
rate of two shares of common stock per quarter for each $1,000 of
debentures since issuance in 1991. Common stock totaling $236,750 was
issued upon the maturity of the debentures in fiscal 1995.
Maturities of long-term debt for each of the next five years are as
follows:
================================================================================
Fiscal year Amount
- --------------------------------------------------------------------------------
1996 $ 496,612
1997 553,885
1998 192,087
1999 5,689
2000
- --------------------------------------------------------------------------------
Total $1,248,273
================================================================================
On April 20, 1994 the Company entered into a term loan agreement for
$1,500,000 with one of the Company's shareholders. This term loan matured
on July 20, 1994. Interest on this loan accrued at a rate of 12% on the
outstanding and unpaid principal amount which was paid in common stock. In
addition, the Company paid a facility fee at maturity, as specified in the
term loan agreement.
(5) Lease Commitments
The Company, through its FCO subsidiary, conducts substantially all of its
operations using leased premises. Store and office leases provide that real
estate taxes, insurance, maintenance, and operating expenses are
obligations of FCO and/or the Company. Certain of the Company's leases
provide for scheduled increases in base rentals over their terms. The
Company recognizes the total rental amounts due over the lease term on a
straight-line basis and, accordingly, has established a corresponding
deferred rent obligation. Certain of the store leases provide for
percentage rentals or additional percentage rentals based on sales in
excess of specified minimums.
(Continued)
9
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
The cost of property held under capital leases was $166,841 and $93,503 at
July 1, 1995 and June 30, 1994, respectively. Accumulated amortization
related to such property was $34,513 and $14,788 at July 1, 1995 and June
30, 1994, respectively. Property held under capital leases consists
principally of office and warehouse equipment. Rent expense charged to
operations under operating leases was $5,904,484 in 1995 and $3,930,191 in
1994.
The following is a schedule of future minimum lease payments for capital
and operating leases with initial or remaining terms in excess of one year
as of July 1, 1995:
================================================================================
Capital Operating
Fiscal year leases leases
- --------------------------------------------------------------------------------
1996 $ 50,041 6,775,245
1997 44,815 6,647,037
1998 31,678 6,525,888
1999 7,902 6,298,881
2000 1,754 5,866,788
Thereafter -- 20,352,955
- --------------------------------------------------------------------------------
Total minimum lease payments 136,190 52,466,794
Less amount representing interest 23,912 --
- --------------------------------------------------------------------------------
Present value of net minimum lease
payments (including long-term
obligations of $74,854) $ 112,278 --
================================================================================
(Continued)
10
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(6) Income Taxes
Income tax expense (benefit) for the years ended July 1, 1995 and June 30,
1994 consists of:
================================================================================
Current Deferred Total
- --------------------------------------------------------------------------------
Year ended July 1, 1995:
U.S. Federal $ 321,114 (48,680) 272,434
State and local 82,814 (6,586) 76,228
- --------------------------------------------------------------------------------
$ 403,928 (55,266) 348,662
================================================================================
Year ended June 30, 1994:
U.S. Federal 331,526 (113,489) 218,037
State and local 104,842 (18,263) 86,579
- --------------------------------------------------------------------------------
$ 436,368 (131,752) 304,616
================================================================================
Income tax expense for the years ended July 1, 1995 and June 30, 1994
differs from the amounts computed by applying the U.S Federal income tax
rate of 34% to income before income taxes as a result of the following:
================================================================================
1995 1994
---------------- ----------------
Dollar Percent Dollar Percent
- --------------------------------------------------------------------------------
Computed "expected" tax expense $ 243,503 34.00% $ 256,265 34.00%
Increase in income taxes resulting from:
State and local income taxes, net of
Federal income tax benefit 54,657 7.63 34,671 4.60
Non-deductible meals and entertainment 14,792 2.07 5,459 .72
Non-deductible life insurance premiums 12,246 1.71 -- --
Non-deductible penalty 11,751 1.64 -- --
Other, net 11,713 1.63 8,221 1.09
- --------------------------------------------------------------------------------
Income tax expense $ 348,662 48.68% $ 304,616 40.41%
================================================================================
(Continued)
11
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
are as follows:
================================================================================
1995 1994
- --------------------------------------------------------------------------------
Deferred tax assets:
Alternative minimum tax credit $ 158,393 115,854
Accrued interest -- 86,812
Deferred rent obligation 444,325 360,650
Accrued vacation 124,994 59,041
Other 24,640 1,699
- --------------------------------------------------------------------------------
Total gross deferred tax assets 752,352 624,056
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Property and equipment, due to differences
in depreciation 284,140 156,563
Overhead capitalized into inventory in excess
of tax amounts 2,501 57,048
- --------------------------------------------------------------------------------
Total gross deferred tax liabilities 286,641 213,611
- --------------------------------------------------------------------------------
Net deferred tax asset $ 465,711 410,445
================================================================================
Management believes that no valuation allowance was necessary at July 1,
1995 and June 30, 1994. In assessing the realizability of deferred tax
assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. Based upon these
criteria, management has determined that it is more likely than not the
Company will realize the benefits of these deductible differences.
(7) Stockholders' Equity
(a) Convertible Preferred Stock - Series A and B
Series A Convertible Preferred Stock, $.01 par value, was issued on July
10, 1989. Each share of this stock is convertible at the holders'
discretion into ten shares of common stock. Prior to the Series B
Convertible Preferred Stock offering outlined below, the Series A
Convertible Preferred Stock was redeemable at the holders' election at a
price equal to the liquidation amount defined in the stock purchase
agreement plus 9% compounded annually from July 10, 1989, reduced by any
prior distribution amounts. Upon issuance of the Series B Convertible
Preferred Stock, accretion related to the Series A Convertible Preferred
Stock ceased and the redemption amount was fixed at $3,077,248.
(Continued)
12
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
Effective as of July 15, 1994, the Company concluded the Series B
Convertible Preferred Stock offering and entered into a stock purchase
agreement (Stock Purchase Agreement) whereby it issued its Series B
Convertible Preferred Stock, $.01 par value per share. Investors in this
offering included Allstate Venture Capital Corp., an arm of Allstate
Insurance Corporation and certain Allstate affiliates, Bessemer Venture
Partners and certain individual investors, along with some of the existing
stockholders of the Company. Each share of Series B Convertible Preferred
Stock is convertible at the holder's discretion into ten shares of common
stock. The Company may require the conversion of all of the outstanding
shares of Series B Convertible Preferred Stock into shares of the Company's
common stock in the event of an underwritten public offering of shares of
the Company's common stock within the guidelines set forth in the Stock
Purchase Agreement.
At any time on or alter June 15, 1999, by majority vote the Series B
Convertible Preferred Stockholders have the option to elect to be redeemed
as a class. Upon such election, the Company will redeem all Series B
Convertible Preferred Stock in two equal installments, the first of which
is payable 120 days following such election and the second payable one year
thereafter. The redemption provisions in place for the Series A Convertible
Preferred Stock were changed in conjunction with the issuance of the Series
B Convertible Preferred Stock so that the dates and terms are substantially
identical to those of the Series B Convertible Preferred Stock.
The Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock (collectively, Preferred Stock) are structured as "participating"
preferred stock. That is, in the event of liquidation, dissolution, or
winding up of the Company, each holder of preferred stock will be entitled
to be paid, before any distribution or payment is made upon any junior
securities, an amount in cash equal to the aggregate liquidation value of
all such holder's shares of preferred stock, as determined in accordance
with the terms of the Company's Certificate of Incorporation, plus all
accrued and unpaid dividends thereon.
The holders of preferred stock are entitled to vote with the holders of the
Company's common stock on each matter submitted to a vote of the Company's
stockholders, with each share of preferred stock having a number of votes
equal to the number of votes possessed by the number of shares of common
stock into which such share of preferred stock is convertible as of the
record date for the determination of stockholders entitled to vote on such
matter.
(b) Preferred Stock
Preferred stock may be issued from time to time in one or more series at
the discretion of the Company's Board of Directors. Different series of
preferred stock shall not be construed to constitute different classes of
shares for the purposes of voting by classes unless expressly provided. All
preferred stock rights are granted at the discretion of the Board of
Directors.
(Continued)
13
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(c) Common Stock
The voting, dividend, and liquidation rights of the holders of the common
stock are subject to the rights of the holders of the preferred stock of
any series. The holders of the common stock are entitled to one vote for
each share.
At July 1, 1995 shares of common stock were reserved for the following
purposes:
================================================================================
Conversion of Series A Convertible Preferred Stock 200,000
Conversion of Series B Convertible Preferred Stock 324,160
Exercise of outstanding stock options 176,000
Granting of additional stock options 91,000
- --------------------------------------------------------------------------------
791,160
================================================================================
(d) Dividend Restrictions
The Company must obtain written consent from the bank holding its revolving
credit term note and the consent of a majority of the then outstanding
shares of Series A Convertible Preferred Stock prior to declaring or paying
dividends at any time.
(8) Stock Option Plan
A stock option plan was approved by the stockholders of the Company on July
7, 1989, under which a maximum of 41,400 shares of common stock may be
issued to employees, outside directors, and consultants of the Company
pursuant to options granted. The stockholders also approved the issuance of
stock options for a maximum of 40,000 shares of common stock to sponsors of
the Company. On December 13, 1993, the Board of Directors of the Company
approved the allocation of 85,600 shares of common stock for the issuance
of options to employees and outside directors. In July, 1995, the Board of
Directors approved an increase in the number of shares of common stock
available for grant under the plan by 100,000 shares. The exercise price of
such options is to be determined by the Board of Directors within defined
guidelines. The term of each option will be determined in accordance with
certain events noted in the plan, but shall not be more than ten years from
the date of grant. Options are exercisable in accordance with the events
stated in the plan and vest at the rate of 25% per year from the date of
grant.
(Continued)
14
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
Pertinent information covering the stock option plan follows:
<TABLE>
<CAPTION>
=================================================================================================
1995 1994
--------------------------- -------------------------
Number Option price Number Option price
of shares per share of shares per share
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 97,500 $ 2.50-25.00 65,000 $ 2.50-10.00
Options repurchased by Company (7,500) 25.00 -- --
Granted 86,000 10.00-25.00 32,500 25.00
- -------------------------------------------------------------------------------------------------
Outstanding at end of year 176,000 $ 2.50-25.00 97,500 $ 2.50-25.00
=================================================================================================
Vested at end of year 78,200 $ 2.50-25.00 70,500 $ 2.50-25.00
Available for grant at end of year 91,000 69,500
=================================================================================================
</TABLE>
(9) Incentive Savings Plan
The Incentive Savings Plan (the Plan) provides that employees of FCO who
have attained age 21 and completed six months of service can elect to
invest any whole percentage from 1% to 13% of their compensation in the
Plan. For each dollar the employee invests up to 6% of his or her earnings,
the Company will contribute 33 cents "matching contribution" to the Plan.
The Plan also has a profit sharing feature whereby the Company may elect at
its discretion to make a "basic contribution." The Company's total
contribution to the Plan was $53,661 in 1995 and $34,704 in 1994.
(10) Related-party Transactions
FCO made inventory purchases of approximately $3,246,082 and $1,932,194 in
fiscal 1995 and 1994, respectively, from a company which is owned by a
stockholder of the Company who is also a director of the Company. These
purchases represented approximately 8.6% and 9.4% of FCO's total inventory
purchases in fiscal 1995 and 1994, respectively. At June 30, .1994, FCO
owed $56,468 for these purchases. At July 1, 1995, FCO had no outstanding
amounts payable related to these purchases.
FCO also made wholesale sales of merchandise to Card Mart of approximately
$282,246 in fiscal 1995 and $200,370 in fiscal 1994. Included in the
accounts receivable balance at July 1, 1995 and June 30, 1994 is
approximately $41,325 and $53,907, respectively, relating to these sales.
FCOABaltimore engaged Card Mart to provide management and consulting
services, which subsequent to the merger of FCO and FCOA-Baltimore have
been discontinued. Management fees for fiscal years 1995 and 1994 were
$168,929 and $270,723, respectively. FCO is obligated to pay fees of
$10,000 per month to Card Mart through September 30, 1995.
(Continued)
15
<PAGE>
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
(11) Supplemental Cash Flow Information
================================================================================
1995 1994
- --------------------------------------------------------------------------------
Cash paid during the year for:
Interest $ 634,910 403,799
Income taxes 688,574 125,864
================================================================================
Supplemental disclosure of non-cash financing activities:
The Company converted FCOA-Baltimore preferred stock (minority
interest) of $400,000 to FCOA Acquisition Corp. common stock of
$400,000 in 1995.
The Company incurred a charge of $11,849 in 1995 and $91,568 in 1994
in lieu of interest on the subordinated debentures and the bridge
loan. Accrued interest of $236,750 was repaid through the issuance of
$236,750 of common stock in 1995.
Capital lease obligations incurred and notes on vehicle purchases were
$191,938 in 1995 and $188,748 in 1994.
Accreted redemption on Series A convertible preferred stock was
$254,085 in 1994.
(12) Subsequent Events (Unaudited)
(a) Revolving Credit Agreement
The Company's revolving credit agreement has been renewed and increased to
a maximum borrowing of $20,000,000, which matures on December 31, 1996.
Advances under the agreement are limited based on inventory levels as
defined in the agreement. Interest under the agreement is payable monthly
at an annual rate equal to the bank's prime rate on the first $15,000,000
of borrowings under the agreement and the bank's prime rate plus 2 1/2% on
the next $5,000,000 of borrowings. A fee of 1/4% per year will be assessed
on the unused portion of the first $15,000,000 of the line. The collateral
related to this agreement is an interest in all business assets of the
company. The agreement also contains certain restrictive covenants.
(b) Secured Subordinated Debt
The Company is currently negotiating a $4,000,000 secured subordinated debt
facility bearing annual interest at 12.5% payable monthly except during the
first 18 months of the five year term when 7.5% of the interest will be
payable in cash and 5% will accrue. The lender would also receive a warrant
to purchase 2.5% of the fully-diluted outstanding common stock exercisable
at $.0l per share, and beginning after 18 months, additional shares accrue
at 1.0% per year until maturity or prepayment of the loan. There is no
penalty for prepayment of the loan at any time.
16
<PAGE>
Schedule 1
----------
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Consolidating Schedule - Balance Sheet Information
July 1, 1995
<TABLE><CAPTION>
====================================================================================================================
FCOA Factory Card Consolidating
Acquisition Outlet of and eliminating Consoli-
Assets Corp. America, Ltd. entries dated
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets:
Cash $ 16,706 498,506 -- 515,212
Accounts receivable 121,996 -- 121,996
Intercompany accounts receivable 11,576,008 -- (11,576,008) --
Inventories -- 25,013,222 -- 25,013,222
Prepaid expenses 388,490 -- 388,490
Deferred income taxes 147,132 -- 147,132
- --------------------------------------------------------------------------------------------------------------------
Total current assets 11,592,714 26,169,346 (11,576,008) 26,186,052
Fixtures and equipment at cost, net -- 10,178,726 -- 10,178,726
Organization costs, less
accumulated amortization -- 6,644 -- 6,644
Other assets 4,433,787 111,114 (4,433,787) 111,114
Deferred income taxes -- 318,579 -- 318,579
- --------------------------------------------------------------------------------------------------------------------
Total assets $ 16,026,501 36,784,409 (16,009,795) 36,801,115
====================================================================================================================
Liabilities and
Stockholders' Equity
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt -- 496,612 -- 496,612
Current portion of capital lease
obligations -- 37,424 -- 37,424
Revolving credit term note payable -- 5,800,000 -- 5,800,000
Accounts payable -- 8,143,660 -- 8,143,660
Intercompany accounts payable -- 11,576,008 (11,576,008) --
Income taxes payable -- 41,699 -- 41,699
Accrued expenses -- 1,842,098 -- 1,842,098
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities -- 27,937,501 (11,576,008) 16,361,493
Long-term debt -- 751,661 -- 751,661
Deferred rent liability -- 2,973,018 -- 2,973,018
Capital lease obligations -- 74,854 -- 74,854
- --------------------------------------------------------------------------------------------------------------------
Total liabilities -- 31,737,034 (11,576,008) 20,161,026
- --------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock - Series A 3,077,248 -- -- 3,077,248
Preferred stock - Series B 11,379,258 -- -- 11,379,258
Common stock 2,636,750 4,433,787 (4,433,787) 2,636,750
(Accumulated deficit) retained
earnings (1,066,755) 613,588 -- (453,167)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity $ 16,026,501 5,047,375 (4,433,787) 16,640,089
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 16,026,501 36,784,409 (16,009,795) 36,801,115
====================================================================================================================
</TABLE>
See accompanying independent auditors' report
17
<PAGE>
Schedule 2
----------
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Consolidating Schedule - Income and Expense Information
Year ended July 1, 1995
<TABLE>
<CAPTION>
=====================================================================================================================
FCOA Factory Card Consolidating
Acquisition Outlet of and eliminating
Corp. America, Ltd. entries Consolidated
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ -- 63,174,091 -- 63,174,091
Cost of goods sold, including
buying and distribution expenses -- 32,183,209 -- 32,183,209
- ---------------------------------------------------------------------------------------------------------------------
Gross profit -- 30,990,882 -- 30,990,882
- ---------------------------------------------------------------------------------------------------------------------
Store operating expenses: -- 9,558,322 -- 9,558,322
Payroll -- 7,573,442 -- 7,573,442
Occupancy
General operating -- 7,684,269 -- 7,684,269
- ---------------------------------------------------------------------------------------------------------------------
Total store operating expenses -- 24,816,033 -- 24,816,033
Regional administrative expense -- 1,507,193 -- 1,507,193
Corporate administrative expense -- 3,355,077 -- 3,355,077
Distribution center relocation expense -- 39,438 -- 39,438
- ---------------------------------------------------------------------------------------------------------------------
Total administrative and relocation
expenses -- 4,901,708 -- 4,901,708
- ---------------------------------------------------------------------------------------------------------------------
Income from operations -- 1,273,141 -- 1,273,141
- ---------------------------------------------------------------------------------------------------------------------
Other expense (income):
Interest expense (income), net (342) 411,895 -- 411,553
Amortization of organization costs -- 7,393 -- 7,393
Miscellaneous -- 138,009 -- 138,009
- ---------------------------------------------------------------------------------------------------------------------
Total other expense (income) (342) 557,297 -- 556,955
- ---------------------------------------------------------------------------------------------------------------------
Income before income taxes 342 715,844 -- 716,186
- ---------------------------------------------------------------------------------------------------------------------
Income taxes -- 348,662 -- 348,662
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 342 367,182 -- 367,524
=====================================================================================================================
</TABLE>
See accompanying independent auditors' report
18
<PAGE>
Schedule 3
----------
FCOA ACQUISITION CORP.
AND SUBSIDIARIES
Schedule of Historical Income and Expense Information
Years ended July 1, 1995 and June 30, 1994, 1993, 1992, and 1991
<TABLE>
<CAPTION>
===============================================================================================================================
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $63,174,091 37,341,134 24,332,487 17,329,510 12,591,926
Cost of goods sold, including buying
and distribution expenses 32,183,209 18,227,595 11,858,979 8,559,662 6,571,906
- -------------------------------------------------------------------------------------------------------------------------------
Gross profit 30,990,882 19,113,539 12,473,508 8,769,848 6,020,020
- -------------------------------------------------------------------------------------------------------------------------------
Store operating expenses:
Payroll 9,558,322 5,667,597 3,851,810 2,842,705 2,181,889
Occupancy 7,573,442 4,999,463 3,300,046 2,555,489 2,145,181
General operating 7,684,269 4,379,689 2,420,105 1,472,091 1,240,616
- -------------------------------------------------------------------------------------------------------------------------------
Total store operating expenses 24,816,033 15,046,749 9,571,961 6,870,285 5,567,686
Regional administrative expense 1,507,193 460,665 317,708 292,420 163,959
Corporate administrative expense 3,355,077 2,207,048 1,214,561 820,615 759,031
Distribution center relocation expense 39,438 52,028 177,020 -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total administrative and relocation expenses 4,901,708 2,719,741 1,709,289 1,113,035 922,990
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations $ 1,273,141 1,347,049 1,192,258 786,528 (470,656)
===============================================================================================================================
</TABLE>
See accompanying independent auditors' report
19
<PAGE>
SCHEDULE 2.1(1) TO LOAN AGREEMENT
Debts and Liens
Debt
----
1. Credit Agreements:
Business Loan Agreement among Borrower, Guarantor and Bank One,
Chicago, N.A. ("Bank One") dated November 10, 1995, increasing
Borrower's current secured line of credit to $20,000,000.00.
Principal amount outstanding as of November 13, 1995 is
$10,950,000.00, exclusive of the $1,500,000.00 term loan
described below.
Bank One extended a term loan to Borrower on May 1, 1995 in the
principal amount of $1,500,000.00 to purchase computer equipment
pursuant to the terms of Borrower's prior line of credit
facility.
2. Indentures - none.
3. Purchase Agreements - none.
4. Promissory Notes and other evidences of indebtedness:
Business Purpose Revolving Promissory Note from Borrower and
Guarantor to Bank One dated November 10, 1995 in the principal
amount of $15,000,000.00 to evidence a portion of the line of
credit described in #1 above.
Business Purpose Revolving Promissory Note from Borrower and
Guarantor to Bank One dated November 10, 1995 in the principal
amount of $5,000,000.00 to evidence a portion of the line of
credit described in #1 above.
Promissory Note from Borrower to Bank One dated May 1, 1995 in
the principal amount of $1,500,000.00 to evidence the term loan
described in #1 above.
Various installment notes payable in connection with purchases of
motor vehicles, due in monthly installments through 1999, with
interest rates ranging from 2.9% to 11%. $148,273 outstanding as
of July 1, 1995.
Life insurance policy loans in the amount of $101,165 as of July
1, 1995.
<PAGE>
5. Guaranties:
Guarantor has guaranteed the obligations of Borrower to Bank One
under the term loan described in item #1 above.
6. Capital Leases:
Various equipment capital leases with maturities through 1999.
$112,278 outstanding as of July 1, 1995.
7. Other - none.
Liens
-----
1. Non-Titled Personal Property Security Agreement between Borrower
and Bank One granting a blanket lien on all of Borrower's assets
to secure the $20,000,000.00 line of credit described in #1
above.
2. Commercial Security Agreement between Borrower and Bank One
granting a purchase money security interest in certain computer
equipment and software purchased with the proceeds of the term
loan described in #1 above.
3. Security interest granted in certain motor vehicles to secure the
installment notes described in #4 above .
4. Borrower's landlord for Borrower's facility at 2620 Lake Circle
Drive, Indianapolis, Indiana, has filed a UCC-l financing
statement in connection with inventory, equipment and fixtures
located at or used in connection with such facility.
<PAGE>
SCHEDULE 2.1(o) TO LOAN AGREEMENT
Certain Transactions
1. On or about September 1, 1995, Borrower made a loan to Charles R.
Cumello in the principal amount of $175,000.00 to assist with relocation
expenses.
2. William Freeman controls TRIWEF Corporation/Triad Sales International
("Triad"). Triad has made its offices, staff and foreign representative offices
available to Borrower and Guarantor for foreign sourcing, buying and freight
consolidation of imported goods. Triad has provided sourcing for such imported
goods and other services in return for a buying commission which is not in
excess of standard industry commissions.
<PAGE>
SCHEDULE 2.1(r) TO LOAN AGREEMENT
Significant Contracts
None.
<PAGE>
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 ($4,000,000) pursuant to the terms
of a secured promissory note of even date herewith (the "Note") and related loan
agreement of even date herewith (the "Loan Agreement"), and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Holder the right to purchase 23,658
shares of the Company's common stock (the "Common Stock"), which the Company
represents equals 2.5% of the capital stock of the Company on the date hereof,
calculated on a fully diluted basis after exercise of this Warrant ("Base
Amount"), provided that in the event that the indebtedness evidenced by the Note
is outstanding on the following dates, the Base Amount shall be increased to the
corresponding number set forth below:
Date Base Amount
---- -----------
April 15, 1997 33,465 shares of Common Stock,
or
November 15, 1998 43,477 shares of Common Stock,
or
November 15, 1999 53,700 shares of Common Stock;
and further provided that the issuance of the Common Stock hereunder is subject
to the provisions of Section 3A hereof. The shares of Common Stock issuable upon
exercise of this Warrant are hereinafter referred to as the "Shares." This
Warrant shall be exercisable at any time and from time to time from the date
hereof until November 30, 2000. For purposes of this Warrant the term "fully
diluted basis" shall be determined in accordance with generally accepted
accounting principles as of the date hereof.
<PAGE>
2. Exercise Price. The exercise price (the "Exercise Price") per share for
which all or any of the Shares may be purchased pursuant to the terms of this
Warrant shall be One Cent ($.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: 745 Birginal Drive, Bensenville, IL 60106-1212 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
2
<PAGE>
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, Berry & Sims 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
3
<PAGE>
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.
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
(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
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
(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.
10
<PAGE>
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/ William E. Freeman
---------------------------------------
Name: William E. Freeman
Title: Chairman/CEO
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: /s/ [Illegible]
---------------------------------------
Title: VP
11
<PAGE>
Exhibit 10.9.3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY,
WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
SECURED PROMISSORY NOTE
$4,000,000 November 15, 1995
FOR VALUE RECEIVED, the undersigned, FACTORY CARD OUTLET OF AMERICA LTD.,
an Illinois corporation ("Maker"), promises to pay to the order of SIRROM
CAPITAL CORPORATION, a Tennessee corporation ("Payee"; Payee and any subsequent
holder[s] hereof are hereinafter referred to collectively as "Holder"), at the
office of Payee at First American Trust Company, Custody Department, 800 First
American Center, Nashville, Tennessee 37237, Attn: Jeff Eubanks, or at such
other place as Holder may designate to Maker in writing from time to time, the
principal sum of FOUR MILLION AND NO/1OOTHS DOLLARS ($4,000,000.00), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate of twelve and one-half percent (12.5%) per annum (computed on the
basis of a 360-day year); provided, however, that Holder may charge and receive
interest upon any renewal or extension hereof at the greater of (i) the rate set
out above, or (ii) any rate agreed to by the undersigned that is not in excess
of the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
first (1st) day of January, 1996, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until November 15, 2000
(the "Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full; provided, however, that each interest payment prior to May 1,
1997 shall be payable only at a rate of seven and one-half percent (7.5%) per
annum with the remaining five percent (5%) per annum interest due hereunder
accruing from the date hereof until May 1, 1997 at which time all accrued and
unpaid interest shall be due and payable.
The indebtedness evidenced hereby may be prepaid in whole or in part, at
any time and from time to time, without penalty. Any such prepayments shall be
credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
<PAGE>
Time is of the essence of this Note. It is hereby expressly agreed that in
the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default shall occur under that certain
Loan Agreement of even date herewith, between Maker and Payee (as may be amended
from time to time, the "Loan Agreement", which default or event of default is
not cured following the giving of any applicable notice and within any
applicable cure period set forth in said Loan Agreement; or should any default
by Maker be made in the performance or observance of any covenants or conditions
contained in any other instrument or document now or hereafter evidencing, or
securing or otherwise relating to the indebtedness evidenced hereby (subject to
any applicable notice and cure period provisions that may be set forth therein);
then, and in such event, the entire outstanding principal balance of the
indebtedness evidenced hereby, together with any other sums advanced hereunder,
under the Loan Agreement and/or under any other instrument or document now or
hereafter evidencing, or securing the indebtedness evidenced hereby, together
with all unpaid interest accrued thereon, shall, at the option of Holder and
without notice to Maker, at once become due and payable and may be collected
forthwith, regardless of the stipulated date of maturity. Upon the occurrence of
any Event of Default (as defined in the Loan Agreement), at the option of Holder
and without notice to Maker, all accrued and unpaid interest, if any, shall be
added to the outstanding principal balance hereof, and the entire outstanding
principal balance, as so adjusted, shall bear interest thereafter until paid at
an annual rate (the "Default Rate") equal to the lesser of (i) the rate that is
seven percentage points (7.0%) in excess of the above-specified interest rate,
or (ii) the Maximum Rate in effect from time to time, regardless of whether or
not there has been an acceleration of the payment of principal as set forth
herein. All such interest shall be paid at the time of and as a condition
precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of default hereunder,
acceptance of a past-due installment or other indulgences granted from time to
time, shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable laws. No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for payment of the indebtedness evidenced hereby, shall operate to
release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or
2
<PAGE>
hereafter liable for payment of the indebtedness evidenced hereby, either in
whole or in unless Holder agrees otherwise in writing. This Note may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are further
evidenced by (i) the Loan Agreement and (ii) certain other instruments and
documents, as may be required to protect and preserve the rights of Maker and
Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law.
MAKER:
FACTORY CARD OUTLET OF AMERICA
LTD., an Illinois corporation
By: C.R. Cumello
-------------------------
Title: President
----------------------
3
<PAGE>
Pay to the order of
First Union National Bank of Tennessee
By: Rob Shuler
-------------------------
Title: VP
----------------------
<PAGE>
Exhibit 10.9.4
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement"), dated as of the 15 day of November,
1995, is made and entered into by and between FACTORY CARD OUTLET OF AMERICA
LTD., an Illinois corporation ("Borrower"), and SIRROM CAPITAL CORPORATION, a
Tennessee corporation ("Lender").
WITNESSETH:
WHEREAS, Lender is making a loan (the "Loan") in the amount of $4,000,000
to Borrower, pursuant to that certain Loan Agreement of even date herewith by
and between Borrower and Lender (the "Loan Agreement"); and
WHEREAS, in connection with the making of the Loan, Lender desires to
obtain from Borrower and Borrower desires to grant to Lender a security interest
in certain collateral more particularly described below.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Security Interest. Borrower hereby grants to Lender a security
interest in the following described property and any and all proceeds (although
proceeds are covered, Lender does not authorize the sale of any of the
following, except to the extent permitted under Sections 10 and 11 hereof) and
products thereof and accessions thereto (collectively the "Collateral"):
(a) Equipment. All equipment and other tangible personal property of
Borrower of any kind and description, whether now owned or hereafter
acquired and wherever located, together with all parts, accessories and
attachments and all replacements thereof and additions thereto;
(b) Inventory Accounts, Contract Rights, Chattel Paper Documents,
Instruments and General Intangibles. All of Borrower's inventory and any
agreements for lease of same and rentals therefrom, and all of Borrower's
accounts, accounts receivable, contract rights, chattel paper, software,
documents, instruments and general intangibles and the proceeds therefrom,
whether now in existence or owned or hereafter arising or acquired,
entered into or created, and wherever located; and whether held for lease
or sale, or furnished or to be furnished under contracts of service;
<PAGE>
(c) Trademarks, Etc. All trademarks, trade names, and service marks
now held or hereafter acquired by Borrower, both those that are registered
with the United States Patent and Trademark Office and any unregistered
marks used by Borrower in the United States, and trade dress, including
logos and designs, in connection with which any such marks are used,
together with all registrations regarding such marks and the rights to
renewals thereof, and the goodwill of the business of Borrower symbolized
by such marks, and all patents, licenses, technology and other intangible
property of Borrower, whether now owned or hereafter acquired;
(d) Copyrights. All copyrights now held or hereafter acquired by
Borrower and any applications for U.S. copyrights hereafter made by
Borrower; and
(e) Proprietary Information, Computer Data, Etc. All proprietary
information and trade secrets of Borrower with respect to Borrower's
business, whether now owned or hereafter acquired, and all of Borrower's
computer programs and the information contained therein and all
intellectual property rights with respect thereto, whether now owned or
hereafter acquired.
2. Secured Indebtedness. The obligations secured hereby shall include (a)
loans to be made concurrently or in connection with this Agreement or the Loan
Agreement as evidenced by one or more promissory notes payable to the order of
Lender that shall be due and payable as set forth in such promissory notes, and
any renewals, increases or extensions thereof, and (b) all future advances made
by Lender for taxes, levies, insurance and preservation of the Collateral and
all attorney's fees, court costs and expenses of whatever kind incident to the
collection of any of said indebtedness or other obligations and the enforcement
and protection of the security interest created hereby.
3. Representations, Warranties and Agreements of Borrower. So long as the
Loan is outstanding, Borrower represents, warrants and agrees as follows:
(a) Borrower will promptly notify Lender, in writing, of any change
in Borrower's place or places of business and of any change in the
location of the Collateral or any records pertaining thereto.
(b) Except as set forth on Schedule 3(b) hereto, Borrower is the
owner of the Collateral free and clear of any liens, security interests,
claims and encumbrances, contingent or otherwise. Borrower will defend the
Collateral against the claims and demands of all persons.
(c) Borrower will pay to Lender all amounts secured hereby as and
when the same shall be due and payable, whether at maturity, by
acceleration or otherwise, and will promptly perform all terms of this
Agreement and the other Loan Documents (as defined in the Loan Agreement)
between Borrower and Lender, and will promptly discharge all said
liabilities.
2
<PAGE>
(d) Borrower will at all times keep the Collateral insured against
all insurable hazards in amounts at least equal to the lesser of the full
cash value of the Collateral and the outstanding balance of the Loan. Such
insurance shall be obtained from such companies as may be reasonably
acceptable to Lender, with provisions reasonably satisfactory to Lender
for payment of losses thereunder to Lender as its interests may appear. If
required by Lender, Borrower shall deposit copies of the policies with
Lender. If an Event of Default (as defined in the Loan Agreement) has
occurred and is continuing, any money received by Lender under said
policies may be applied to the payment of any indebtedness secured hereby,
whether or not due and payable, and otherwise said money shall be
delivered by Lender to Borrower for the purpose of repairing or restoring
the Collateral. Subject to the rights of any lender that is senior to
Lender whether under law or by agreement, Borrower assigns to Lender all
right to receive proceeds of insurance not exceeding the amounts secured
hereby, directs any insurer to pay all proceeds directly to Lender, and
appoints Lender Borrower's attorney in fact to endorse any draft or check
made payable to Borrower in order to collect the benefits of such
insurance. If Borrower fails to keep the Collateral insured as required
hereunder, Lender shall have the right to obtain such insurance at
Borrower's expense and add the cost thereof to the other amounts secured
hereby.
(e) Borrower will pay all costs of filing of financing, continuation
and termination statements with respect to the security interests created
hereby, and Lender is authorized to do all things that it deems necessary
to perfect and continue perfection of the security interests created
hereby and to protect the Collateral.
(f) The address set forth after Borrower's signature on this
Agreement is Borrower's principal place of business and the location where
the records concerning all intangible Collateral are kept and/or
maintained. The addresses set forth on Schedule 3(f) hereto are all of the
locations where Borrower does business and the locations of all tangible
Collateral.
4. Default. Borrower shall be in default upon the occurrence of a default
or Event of Default (as defined in the Loan Agreement) that has not been cured
during the applicable grace period.
5. Remedies Upon Default. Upon the occurrence of an Event of Default, all
sums secured hereby shall immediately become due and payable at Lender's option
without notice to Borrower, and Lender may proceed to enforce payment of same
and to exercise any and all rights and remedies provided by the Uniform
Commercial Code (Tennessee) or other applicable law, as well as all other rights
and remedies possessed by Lender, all of which shall be cumulative. Following
the occurrence of an Event of Default, and upon demand by Lender, Borrower shall
assemble the Collateral and make it available to Lender at a place reasonably
convenient to Lender and Borrower. Any notice of sale, lease or other intended
disposition of the Collateral by Lender sent to Borrower at the address
hereinafter
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<PAGE>
set forth, or at such other address of Borrower as Borrower may designate in
writing, at least five (5) days prior to such action, shall constitute
reasonable notice to Borrower.
Lender may waive any default before or after the same has been declared
without impairing its right to declare a subsequent default hereunder, this
right being a continuing one.
6. Severability. If any provision of this Agreement is held invalid, such
invalidity shall not affect the validity or enforceability of the remaining
provisions of this Agreement.
7. Binding Effect. This Agreement shall inure to the benefit of Lender's
successors and assigns and shall bind Borrower's representatives, successors and
assigns.
8. Termination Statement. Borrower agrees that, notwithstanding the
payment in full of all indebtedness secured hereby and whether or not there is
any outstanding obligation of Lender to make future advances, Lender shall not
be required to send Borrower a termination statement with respect to any
financing statement filed to perfect Lender's security interest(s) in any of the
Collateral, unless and until Borrower shall have made written demand therefor.
Upon receipt of such a written demand, Lender may at its option, in lieu of
sending a termination statement to Borrower, cause said termination statement to
be filed with the appropriate filing officer(s).
9. Protection of Collateral. Borrower will not permit any liens or
security interests other than those created by this Agreement, and those in
favor of any lender described on Schedule 3(b) hereto, to attach to any of the
Collateral, nor permit any of the Collateral to be levied upon under any legal
process which is not released within sixty (60) days, nor permit anything to be
done that may impair the security intended to be afforded by this Agreement
(except in favor of a lender listed on Schedule 3(b) hereto), nor permit any
tangible Collateral to become attached to or commingled with other goods without
the prior written consent of Lender.
10. Special Agreements With Respect to Certain Tangible Collateral.
Borrower additionally agrees and warrants as follows:
(a) Borrower will not permit any of the Collateral to be relocated
to any facility not shown on Schedule 3(f) hereto, except for temporary
periods in the normal and customary use thereof, without the prior written
consent of Lender which consent shall not be unreasonably withheld.
Borrower will permit Lender to inspect the Collateral as permitted under
the Loan Agreement.
(b) If any of the Collateral is equipment or goods that is or are
used in more than one state, Borrower will contemporaneously herewith
furnish Lender a list of the states wherein such equipment or goods are or
will be used, and hereafter will notify Lender in writing (i) of any other
states in which such equipment or goods are
4
<PAGE>
so used, and (ii) of any change in the location of Borrower's principal
place of business.
(c) Borrower will not sell, exchange, lease or otherwise dispose of
any of the Collateral or any interest therein, except for (i) inventory in
the ordinary course of business, and (ii) the sale of equipment that is
obsolete or no longer used or useful in the business of Borrower without
the prior written consent of Lender.
(d) Borrower will keep the Collateral in good condition and repair
and will pay and discharge all taxes, levies and other impositions levied
thereon as well as the cost of repairs to or maintenance of same, and will
not permit anything to be done that may impair the value of any of the
Collateral. If Borrower fails to pay such sums on or before their
respective due dates, Lender may do so for Borrower's account and add the
amount thereof to the other amounts secured hereby.
(e) Until default in any of the terms hereof, or the terms of any
indebtedness secured hereby, Borrower shall be entitled to possession of
the Collateral and to use the same in any lawful manner consistent with
past practices, provided that such use does not violate the terms of any
policy of insurance thereon.
(f) Borrower will not allow the Collateral to be attached to real
estate in such manner as to become a fixture or a part of any real estate
without the prior written consent of Lender.
11. Special Agreements With Respect to Intangible and Certain Tangible
Collateral. Borrower additionally warrants and agrees as follows:
(a) Lender's security interest hereunder shall attach to all
proceeds of all sales or other dispositions of the Collateral. If at any
time any such proceeds shall be represented by any instruments, chattel
paper or documents of title, then such instruments, chattel paper or
documents of title shall be promptly delivered to Lender (but only to the
extent Borrower is not required to deliver the same to a lender senior to
Lender) and shall be subject to the security interest granted hereby. If
at any time any of Borrower's inventory is represented by any document of
title, such document of title will be delivered promptly to Lender (but
only to the extent Borrower is not required to deliver the same to a
lender senior to Lender) and shall be subject to the security interest
granted hereby.
(b) By the execution of this Agreement, Lender shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby that are to be done or performed by Borrower, but
if there is a default by Borrower in the payment of any amount due in
respect of any indebtedness secured hereby (subject to any applicable
grace period), then Lender may, at its election, perform some or all of
the obligations provided in said contracts to be performed by Borrower,
and if Lender incurs any liability or expenses by reason thereof, the same
5
<PAGE>
shall be payable by Borrower upon demand and shall also be secured by this
Agreement.
(c) After the occurrence and during the continuance of an Event of
Default, Lender shall have the right to notify the account debtors
obligated on any or all of Borrower's accounts receivable to make payment
thereof directly to Lender, and to take control of all proceeds of any
such accounts receivable. Until such time as Lender elects to exercise
such right by mailing to Borrower written notice thereof, Borrower is
authorized, as agent of the Lender, to collect and enforce said accounts
receivable.
12. Power of Attorney. Borrower hereby constitutes the Lender or its
designee, as Borrower's attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Borrower's name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lender's possession;
to sign the name of Borrower on any invoice or bill of lading relating to any of
the accounts receivable, drafts against customers, assignments and verifications
of accounts receivable and notices to customers; to send verifications of
accounts receivable; to notify the Post Office authorities to change the address
for delivery of mail addressed to Borrower to such address as the Lender may
designate; to execute any of the documents referred to in Section 3(e) hereof in
order to perfect and/or maintain the security interests and liens granted herein
by Borrower to the Lender; and to do all other acts and things necessary to
carry out this Security Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of commission or omission (other than acts of gross negligence or
willful misconduct), nor for any error of judgment or mistake of fact or law;
this power being coupled with an interest is irrevocable until all of the
obligations secured hereby are paid in full and any and all promissory notes
executed in connection therewith are terminated and satisfied.
6
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement, or
have caused this Agreement to be executed as of the date first above written.
BORROWER:
FACTORY CARD OUTLET OF AMERICA
LTD.
By: C.R. Cumello
---------------------------------
Title: President
------------------------------
Address: 745 Birginal Drive
Bensenville,IL 60106-1212
LENDER:
SIRROM CAPITAL CORPORATION
By: Rob Shuler
---------------------------------
Title: VP
------------------------------
7
<PAGE>
SCHEDULE 3(b) TO SECURITY AGREEMENT
Liens
1. Non-Titled Personal Property Security Agreement between Borrower
and Bank One, Chicago, N.A. ("Bank One") granting a blanket lien on all of the
assets of Borrower to secure a $20,000,000.00 line of credit.
2. Commercial Security Agreement between Borrower and Bank One
granting a purchase money security interest in certain computer equipment and
software purchased with the proceeds of $1,500,000.00 term loan.
3. Security interest granted in certain motor vehicles to secure the
installment notes.
4. Borrower's landlord for Borrower's facility at 2620 Lake Circle
Drive, Indianapolis, Indiana, has filed a UCC-l financing statement in
connection with inventory, equipment and fixtures located at or used in
connection with such facility.
<PAGE>
SCHEDULE 3(f) TO SECURITY AGREEMENT
Addresses
See attached of store, warehouse and office locations.
<PAGE>
<TABLE>
<CAPTION>
Store ....................... Store ....................... Store ....................... Store .......................
<S> <C> <C> <C> <C>
101 BUFFALO GROVE 109 DARIEN 119 COUNTRYSIDE 127 BACK OF THE YARDS
PLAZA VERDE CENTER CHESTNUT COURT CENTER COUNTRY S/C A2 & 3 THE YARDS PLAZA
1245 WEST DUNDEE ROAD 7511 SOUTH LEMONT CENTER 102 COUNTRYSIDE 4604 SOUTH DAMEN
BUFFALO GROVE DARIEN COUNTRYSIDE CHICAGO
IL 60089 IL 60559 IL 60525 IL 60609
102 VILLA PARK 110 EVANSTON 120 ELGIN 128 SCOTTSDALE
VILLA OAKS CENTER EVANSTON PLAZA FOX RIVER PLAZA A5 & 6 SCOTTSDALE CENTER
138 WEST ROOSEVELT ROAD 1930 WEST DEMPSTER 440-D AIRPORT ROAD 8059 SOUTH CICERO AVENUE
VILLA PARK EVANSTON ELGIN CHICAGO
IL 60181 IL 60201 IL 60120 IL 60652
103 ROLLING MEADOWS 113 JOLIET 121 CRYSTAL LAKE 129 MIDWAY SQUARE
MEADOWS TOWN HALL LOUIS JOLIET POINTE CRYSTAL LAKE COURT S/C MIDWAY SQUARE CENTER
1400 EAST GULF ROAD 2856 PLAINFIELD ROAD 5587 NORTWEST HIGHWAY 5125 SOUTH PULASKI ROAD
ROLLING MEADOWS JOLIET CRYSTAL LAKE CHICAGO
IL 60008 IL 60435 IL 60014 IL 60632
104 NILES 114 LIBERTYVILLE 122 MATTESON 130 BRIDGEVIEW
VILLAGE CROSSING S/C RED TOP PLAZA OUTLET C MATTESON PLAZA BRIDGEVIEW COURT CENTER
5653 TOUHY AVENUE 1366 SOUTH MILWAUKEE AVENUE 4159 LINCOLN HIGHWAY 7769 & 7771 SOUTH HARLEM
NILES LIBERTYVILLE MATTESON BRIDGEVIEW
IL 60714 IL 60048 IL 60443 IL 60455
105 BLOOMINGDALE 115 BLOOMINGTON 123 NORTH RIVERSIDE 131 MERRILLVILLE
BLOOMINGDALE COURT #250 2103 NORTH VETERANS PARKWAY 7337 WEST 25TH STREET MERRILLVILLE PLAZA
364 WEST ARMY TRAIL ROAD #324 NORTH RIVERSIDE 1630 EAST 80TH AVENUE
BLOOMINGDALE BLOOMINGTON MERRILLVILLE
IL 60108 IL 61704 IL 60546 IN 46410
124 MORTON GROVE 132 WHEATON
7154 WEST DEMPSTER DANADA SQUARE
MORTON GROVE #83 DANADA SQUARE EAST
WHEATON
IL 60053 IL 60187
107 ST. CHARLES 117 BRICKTOWN 125 SKOKIE 133 MT. PROSPECT
PIANO FACTORY 1B BRICKTOWN SQUARE #108-110 FASHION CENTER MT. PROSPECT PLAZA
410 S FIRST STREET 6560 WEST FULLERTON AVENUE 9448 SKOKIE BOULEVARD 1038 MT. PROSPECT PLAZA
ST CHARLES CHICAGO SKOKIE MT. PROSPECT
IL 60174 IL 60635 IL 60077 IL 60056
108 MT. VERNON 118 ROCKFORD 126 CHICAGO RIDGE 134 WHITNEY SQUARE
JENT FACTORY OUTLET FOREST PLAZA C3 & 4 COMMONS OF CHICAGO RIDGE WHITNEY SQUARE S/C
257 OUTLET AVENUE 6387 EAST STATE STREET 267 COMMON DRIVE 676 H.S. WHITNEY WAY
MT VERNON, IL 62864 ROCKFORD CHICAGO RIDGE MADISON
IL 62864 IL 61111 IL 60415 WI 53711
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Store ....................... Store ....................... Store ....................... Store .......................
<S> <C> <C> <C> <C>
135 MISHAWAKA 143 ORLAND PARK 151 MARION 159 ROOKWOOD
INDIAN RIDGE S/C LAKEVIEW PLAZA COLLINS ROAD SQUARE ROOKWOOD PAVILION, SUITE A-9
5816 GRAPE ROAD 15778 LAGRANGE ROAD 1370 TWIXT TOWN ROAD 2692 MADISON ROAD
MISHAWAKA ORLAND PARK MARION CINCINNATI
IN 46545 IL 60462 IA 52302 OH 45208
136 BROWN DEER 144 ONE SCHAUMBURG PLACE 152 LAFAYETTE PLACE 160 EASTGATE STATION
MARKETPLACE OF BROWN DEER SPACE T-158 3629 COMMERCIAL DRIVE 700 EASTGATE SOUTH DRIVE
9190 GREEN BAY ROAD 601 NORTH MARTINGALE ROAD INDIANAPOLIS CINCINNATI
BROWN DEER SCHAUMBURG
WI 53209 IL 60173 IN 46222 OH 45208
137 NAPERVILLE 145 TIMMERMAN 153 ROCHESTER 161 BALLWIN PLAZA
HERITAGE SQUARE #108 TIMMERMAN PLAZA T.J. MAXX PLAZA BALLWIN PLAZA CENTER
428 SOUTH ROUTE 59 10328 WEST SILVER SPRING DR 1300 SALEM ROAD S.W. 15425 MANCHESTER ROAD
NAPERVILLE MILWAUKEE ROCHESTER BALLWIN
IL 60540 WI 53225 MN 55902 MO 63011
138 OAK PARK 146 EVANSVILLE 154 RACINE 162 FAIRVIEW HEIGHTS
1035 WEST LAKE STREET LAWNDALE S/C RACINE CENTER MARKET PLACE
OAK PARK 862 SOUTH GREEN RIVER ROAD 5201 Q WASHINGTON AVENUE 22 PLAZA DRIVE
EVANSVILLE RACINE FAIRVIEW HEIGHTS
IL 60301 IN 47715 WI 53406 IL 62208
139 MOLINE 147 SPEEDWAY 155 HIKES POINT 163 LEMAY PLAZA
4371 16TH STREET SPEEDWAY SUPER CENTER HIKES POINT PLAZA LEMAY PLAZA
MOLINE 5926 B CRAWFORDSVILLE ROAD 4048 TAYLORSVILLE ROAD 2560 LEMAY FERRY ROAD
SPEEDWAY LOUISVILLE ST LOUIS
IL 61265 IL 46224 KY 40220 MO 63125
140 BROOKFIELD 148 GREENWOOD 156 SOUTHPORT 164 WASHINGTON SHOPPES
BROOKFIELD FASHION CENTER GREENWOOD SHOPPES SOUTHPORT SHOPPING CENTER 10021 EAST WASHINGTON STREET
16900 J WEST BLUEMOUND RD 906 NORTH US 31 6325 S.E. 14TH STREET INDIANAPOLIS
BROOKFIELD GREENWOOD DES MOINES
WI 53005 IN 46142 IA 50320 IN 46229
141 WEST ALLIS 149 WILLOW LAKE 157 BAKERS SQUARE 165 APPLETON
WEST ALLIS TOWN CENTER WILLOW LAKE S/C BAKER SQUARE FOX RIVER MALL
6718 WEST GREENFIELD 2620 LAKE CIRCLE DRIVE 13415 WEST CENTER ROAD 4651 MICHAELS DRIVE
WEST ALLIS INDIANAPOLIS OMAHA APPLETON
WI 53214 IN 46268 NE 68144 WI 54915
142 CALUMET CITY 150 FORT WAYNE 158 HARPERS STATION 166 JANESVILLE
OAKVIEW SHOPPING CENTER COLDWATER CROSSING S/C 11309-E MONTGOMERY 2033 HUMES
1737 EAST WEST ROAD 5511 COLDWATER ROAD SUITE C CINCINNATI JANESVILLE
CALUMET CITY FORT WAYNE
IL 60409 IN 46825 OH 45208 WI 53545
</TABLE>
Store .......................
167 CONSUMER SQUARE
6418 TUSSING ROAD
COLUMBUS
OH 43068
168 COLERAIN
COLERAIN TOWNE CENTER
10204 COLERAIN AVENUE
CINCINNATI
OH 45251
169 EAU CLAIRE
CHIPPEWA VALLEY PLAZA
3900 BLOCK OF GATEWAY DR
EAU CLAIRE
WI 54701
170 WEST BROAD PLAZA
4091 WEST BROAD STREET
COLUMBUS
OH 43228
171 HANOVER PARK
WESTVIEW PLAZA
7470 BARRINGTON ROAD
HANOVER PARK
IL 60103
172 90TH & FORT
PLAZA NORTH CENTER
5515 NORTH 90TH ST.
OMAHA
NE 68134
173 AKRON EAST
CHAPEL HILL SQUARE
1912 BUCHHOLZER BOULEVARD
AKRON
OH 44310
174 KENOSHA
SOUTHPORT PLAZA
6932 GREEN BAY ROAD
KENOSHA
WI 53142
<PAGE>
<TABLE>
<CAPTION>
Store ....................... Store ....................... Store ....................... Store .......................
<S> <C> <C> <C> <C>
175 MENTOR 183 CRESTWOOD 501 WHEATON/BALTIMORE 509 PENN STATION
CREEKSIDE COMMONS WATSON PLAZA WHEATON PARK S/C 5604 SILVERHILL ROAD
9597 MENTOR AVENUE 9815 WATSON ROAD SUITE 114 12021 GEORGIA AVENUE DISTRICT HEIGHTS
MENTOR CRESTWOOD WHEATON
OH 44060 MO 63126 MD 20902 MD 20747
176 DOWNERS PLAZA 184 EAST TOWN S/C 502 LOCH RAVEN 510 WESTGATE CENTER
DOWNERS PLAZA EAST TOWNE PLAZA S/C HILLENDALE S/C WESTGATE SHOPPING CENTER
124 OGDEN AVENUE 2031 ZEIER ROAD 6829 LOCH RAVEN BLVD 8099 SUDLEY
DOWNERS GROVE MADISON BALTIMORE MANASSAS
IL 60515 WI 53704 MD 21204 VA 22110
177 NORTH OLMSTEAD 185 BLOOMINGTON IN 503 COCKEYSVILLE 511 LAUREL
WATER TOWER SQUARE S/C 2817 EAST THIRD STREET CHURCH LANE CENTER LAUREL PLAZA
27246 LORAIM ROAD BLOOMINGTON 9952 YORK ROAD 9622 ROUTE 198
NORTH OLMSTEAD COCKEYSVILLE LAUREL
OH 44070 IN 47408 MD 21030 MD 20707
178 CLARKSVILLE 186 CASTLETON 504 DUNDALK 512 ALEXANDRIA
CLARKSVILLE TOWNE CENTER LINEN 'N THINGS PLAZA MERRITT POINT S/C MT VERNON PLAZA
706 EAST S.R. 131 8540 CASTLETON CORNER DRIVE 1581 MERRITT BOULEVARD 7684 RICHMOND HIGHWAY
CLARKSVILLE INDIANAPOLIS DUNDALK ALEXANDRIA
IN 47129 IN 46250 MD 21228 VA 22306
179 FL0RENCE 187 GRAND ISLAND 505 CATONSVILLE 513 WALDORF
FLORENCE SQUARE S/C ILE DE GRAND S/C FORTY WEST PLAZA FESTIVAL AT WALDORF
7673 MALL ROAD 2235 NORTH WEBB ROAD 6489 BALTIMORE NATIONAL PIKE 2910 FESTIVAL WAY
FLORENCE GRAND ISLAND CATONSVILLE WALDORF
KY 41042 NE 68803 MD 21228 MD 20601
180 DIXIE HIGHWAY 188 WEST DES MOINES 506 LIBERTY COURT 514 FREDERICKSBURG
KMART PLAZA CORNFIELD MALL 8656 LIBERTY ROAD GREENBRIAR SHOPPING CENTER
4921-A DIXIE HIGHWAY DES MOINES RANDALLSTOWN 2042 PLANK ROAD
LOUISVILLE FREDERICKSBURG
KY 40216 IA MD 21133 VA 22401
181 MATTESON 189 LINCOLN 507 GLEN BURNIE 515 MIDLOTHIAN MARKET
MATTESON TOWN CENTER ABE LINCOLN MALL CHESAPEAKE SQUARE S/C MIDLOTHIAN MARKET
134 TOWN CENTER ROAD 6714-A GOVERNOR RITCHIE HWY 175 WADSWORTH DRIVE
MATTESON LINCOLN GLEN BURNIE RICHMOND
IL 60443 NE MD 21061 VA
182 OSHKOSH 190 LAFAYETTE 508 CHANTILLY 516 FIRST STATE PLAZA
OSHKOSH SHOPPING CENTER LAFAYETTE PLACE MALL 13948 METROTECH DRIVE 1716 WEST NEWPORT PIKE
1941 SOUTH KOELLER STREET LAFAYETTE CHANTILLY NEWCASTLE COUNTY
OSHKOSH STANTON
WI 54901 IN VA 22021 DE 19804
</TABLE>
<PAGE>
Exhibit 10.9.5
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Guaranty"), dated November 15, 1995 is made and
entered into upon the terms hereinafter set forth, by FCOA ACQUISITION CORP., a
Delaware corporation ("Guarantor"), in favor of SIRROM CAPITAL CORPORATION, a
Tennessee corporation ("Creditor").
RECITALS:
A. Pursuant to a Loan Agreement of even date herewith, by and between
Factory Card Outlet of America Ltd., an Illinois corporation ("Borrower"), and
Creditor (the "Loan Agreement"), Creditor has made a loan to Borrower in the
original principal amount of $4,000,000 (the "Loan"). The Loan is evidenced by a
Secured Promissory Note of even date herewith, in the Loan amount, made and
executed by Borrower, payable to the order of Creditor (herein referred to,
together with any extensions, modifications, renewals and/or replacements
thereof, as the "Note").
B. It is a condition of Creditor's agreement to make the above-described
Loan to Borrower that Guarantor execute and deliver this Guaranty to Creditor.
C. Guarantor desires to execute and deliver this Guaranty to Creditor in
order to induce Creditor to make the above described Loan, which will be to the
direct interest, advantage and benefit of Guarantor as the sole shareholder of
Borrower.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged by Guarantor, and to induce Creditor to make loans and other
extensions of credit to Borrower pursuant to the Loan Agreement, Guarantor
hereby agrees as follows:
1. Guarantor hereby guarantees to Creditor the full and prompt payment and
performance of (a) the indebtedness evidenced by the Note, principal and any and
all interest accrued or to accrue thereon in accordance with the terms thereof,
and (1)) the obligations of Borrower to Creditor pursuant to the Loan Agreement
and any and all other instruments, documents and/or agreements now or hereafter
further evidencing, securing or otherwise related to the indebtedness evidenced
by the Note and/or the Loan Agreement (collectively the "Loan Documents") (the
aforesaid indebtedness and other obligations are sometimes herein collectively
referred to as the "Guaranteed Obligations"). Guarantor hereby agrees that if
the Guaranteed Obligations are not timely paid and/or performed, as the case may
be, in accordance with the terms thereof, Guarantor immediately will pay and/or
perform such Guaranteed Obligations. If for any reason any payment or obligation
<PAGE>
in respect of the Guaranteed Obligations shall be determined at any time to be a
voidable preference or otherwise shall be set aside or required to be returned
or repaid, this Guaranty nevertheless shall remain in full force and effect and
shall be fully enforceable against Guarantor for the payment or obligation set
aside, returned or repaid, as well as any other Guaranteed Obligations still
outstanding, notwithstanding the fact that this Guaranty may have been
cancelled, released and/or returned to Guarantor by Creditor.
2. In addition to the obligations of Guarantor to Creditor pursuant to
Paragraph 1 hereof, Guarantor further agrees to pay any and all expenses
(including without limitation reasonable attorney's fees) reasonably incurred by
Creditor in endeavoring to collect and/or enforce the obligations of Guarantor
under this Guaranty.
3. Guarantor hereby waives notice of any breach or default by Borrower, and
hereby further waives presentment, demand, notice of dishonor and protest with
respect to any instrument now or hereafter evidencing any of the Guaranteed
Obligations.
4. Any act of Creditor consisting of a waiver of any of the terms,
covenants or conditions of the Guaranteed Obligations, or the giving of any
consent to any matter or thing relating to the Guaranteed Obligations, or the
granting of any indulgences or extensions of time to Borrower, may be done
without notice to Guarantor and without releasing the obligations of Guarantor
hereunder.
5. The obligations of Guarantor hereunder shall not be released by
Creditor's receipt, application or release of any security given for the
payment, performance and observance of any of the Guaranteed Obligations, but in
the case of any such receipt and application, the liability of Guarantor shall
be deemed reduced by a corresponding amount. Similarly, the obligations of
Guarantor hereunder shall not be released by any modification of any of the
terms of the Guaranteed Obligations made by Creditor and Borrower, but in the
case of any such modification, the liability of Guarantor shall be deemed
modified in accordance with the terms of any such modification.
6. The liability of Guarantor hereunder shall in no way be affected by (a)
the release or discharge of Borrower in any creditors' receivership, bankruptcy
or other proceedings, (b) the impairment, limitation or modification of the
liability of Borrower or the estate of Borrower in bankruptcy, or of any remedy
for the enforcement of any of the Guaranteed Obligations resulting from the
operation of any present or future provision of the Federal bankruptcy law or
any other statute or the decision of any court, (c) the rejection or
disaffirmance of any instrument, document or agreement evidencing any of the
Guaranteed Obligations in any such proceedings, (d) the assignment or transfer
of any of the Guaranteed Obligations by Creditor in accordance with the terms of
the Loan Agreement, or (e) the cessation from any cause whatsoever (other than
full payment and performance) of the liability of Borrower with respect to the
Guaranteed Obligations.
2
<PAGE>
7. Until all of the covenants, terms and conditions of Borrower with
respect to the Guaranteed Obligations are fully paid, performed, kept and/or
observed, Guarantor: (a) shall have no rights of reimbursement or subrogation
against Borrower or any of its property by reason of any payment or acts of
performance by Guarantor in compliance with the obligations of Guarantor
hereunder, (b) waives any right to enforce any remedy that Guarantor now or
hereafter shall have against Borrower by reason of any one or more payments or
acts of performance in compliance with the obligations of Guarantor hereunder,
and (c) subordinates any liability or indebtedness of Borrower now or hereafter
held by Guarantor to the obligations of Borrower to Creditor under the
Guaranteed Obligations.
8. This is a guaranty of payment and performance and not of collection. The
liability of Guarantor hereunder shall be direct and immediate and not
conditional or contingent upon the pursuit of any remedies against Borrower or
any other person, nor against any collateral available to Creditor. Guarantor
hereby waives any right to require that an action be brought against Borrower or
any other person or to require that resort be had to any collateral in favor of
Creditor prior to discharging its obligations hereunder. Guarantor further
waives any right of Guarantor to require that an action be brought against
Borrower under the provisions of Title 47, Chapter 12, Tennessee Code Annotated,
as the same may be amended from time to time.
9. Guarantor hereby consents and agrees that all payments and credits
received from Borrower or Guarantor or realized from any collateral may be
applied by Creditor to the Guaranteed Obligations in such priority as Creditor
in its sole judgment shall see fit.
10. This Guaranty is assignable by Creditor to any person or entity to
which Creditor may assign its rights under the Loan Agreement pursuant to the
terms thereof and any assignment of the Guaranteed Obligations or any portion
thereof by Creditor shall operate to vest in the assignee the rights and powers
of Creditor hereunder to the extent of such assignment. This Guaranty shall be
binding upon Guarantor and Guarantor's representatives, successors,
successors-in-title, and assigns, and shall inure to the benefit of Creditor,
its representatives, successors, successors-in-title and assigns.
11. This Guaranty shall be construed in accordance with and governed by the
laws of the State of Tennessee applicable to contracts to be performed within
said state. No amendment or modification hereof shall be effective unless
evidenced by a writing signed by Guarantor and Creditor.
12. Guarantor hereby waives notice of acceptance of this Guaranty by
Creditor.
13. Guarantor hereby consents to the jurisdiction of the courts of the
State of Tennessee and the United States District Court for the Middle District
of Tennessee, as well as to the jurisdiction of all courts from which an appeal
may be taken from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising under this Agreement or
with respect to the transactions contemplated hereby, and expressly waives any
and all objections it may have as to venue in any of such courts.
3
<PAGE>
14. CREDITOR AND GUARANTOR HEREBY WAIVE TRIAL BY JURY IN ANY ACTIONS,
PROCEEDINGS, CLAIMS OR COUNTERCLAIMS, WHETHER IN CONTR5ACT OR TORT, AT LAW OR IN
EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty,
or has caused this Guaranty to be executed by its duly authorized
representative, as of the date first above written.
WITNESS FCOA ACQUISITION CORP., a Delaware
corporation
/s/ Joseph L. Lunin By: /s/ William E. Freeman
- --------------------- --------------------------------
Joseph L. Lunin Title: Chairman
ACCEPTED this 15th day of By: /s/ William E. Freeman
November 1995 Title: Chairman
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: /s/ Carolyn Perrone
-------------------
Title: CFO
4
<PAGE>
Exhibit 10.9.6
FIRST AMENDMENT TO
LOAN AGREEMENT AND LOAN DOCUMENTS
THIS FIRST AMENDMENT TO LOAN AGREEMENT AND LOAN DOCUMENTS ("Amendment")
dated as of the 28th of June, 1996, is made and entered into on the terms
and conditions hereinafter set forth, by and between FACTORY CARD OUTLET OF
AMERICA LTD., an illinois corporation ("Borrower"), and SIRROM CAPITAL
CORPORATION, a Tennessee corporation ("Lender").
WITNESSETH:
WHEREAS, Lender made a term loan to Borrower in the original principal
amount of Four Million and No/100ths Dollars ($4,000,000) (the "Loan") on the
terms and conditions set forth in that certain Loan Agreement dated as of
November 15, 1995, by and between Lender and Borrower (as now or hereafter
amended, the "Loan Agreement"); capitalized terms used herein but not otherwise
defined shall have the meanings ascribed thereto in the Loan Agreement; and
WHEREAS, the Loan is further evidenced and secured by certain agreements,
documents and instruments as more particularly described in the Loan Agreement
and defined therein as the "Loan Documents"; and
WHEREAS, Borrower desires to borrow from Lender and Lender desires to lend
to Borrower One Million and No/100ths Dollars ($1,000,000) (the "Additional
Loan"), all on the terms and conditions set forth in the Loan Agreement, secured
and evidenced by among other things (a) a security interest in certain personal
property granted pursuant to that certain Security Agreement dated as of
November 15, 1995, by and between Lender and Borrower (the "Security
Agreement"); and (b) a Guaranty Agreement dated as of November 15, 1995, by and
between FCOA Acquisition Corp. ("Guarantor") and Lender (the "Guaranty").
WHEREAS, this Amendment shall amend the Loan Documents.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. The first recital to the Loan Agreement is hereby amended to read in its
entirety as follows:
<PAGE>
WHEREAS, Borrower has requested that Lender make available to Borrower
a term loan in the original principal amount of Four Million and
No/l00ths Dollars ($4,000,000.00) (the "Original Loan"), on the terms
and conditions hereinafter set forth, and for the purpose(s)
hereinafter set forth, and an additional term loan in the original
principal amount of One Million and No/100ths Dollars ($1,000,000.00)
(the "Additional Loan") (the Original Loan and the Additional Loan are
sometimes referred to herein collectively as the "Loan") on the terms
and conditions set forth in that certain First Amendment to Loan
Agreement and Loan Documents dated as of June 28 1996 (the
"Amendment"); and
2. The second sentence of Section 1.1 of the Loan Agreement is hereby
amended to read in its entirety as follows:
The Original Loan shall be evidenced by a promissory note (the "First
Note") in the original principal amount of $4,000,000, substantially
in the form of Exhibit A attached hereto and incorporated herein by
this reference, dated November 15, 1995, executed by Borrower in favor
of Lender, and the Additional Loan shall be evidenced by a promissory
note (the "Second Note") in the original principal amount of
$1,000,000, substantially in the form of Exhibit A attached to the
Amendment, executed by Borrower in favor of Lender (the First Note and
the Second Note shall be referred to herein collectively as the
"Note").
3. The obligations of Borrower in connection with and/or relating to the
Additional Loan are further evidenced and/or secured by the Loan Documents.
4. Upon satisfaction of the conditions set forth in Section 10 hereof,
Lender shall immediately disburse the proceeds of the Additional Loan to
Borrower by wire transfer upon instructions therefor given to Lender.
5. Borrower hereby represents and warrants to Lender that all of the
representations made in Section 2.1 of the Loan Agreement are true and correct
as of the date hereof, except as modified or supplemented by Schedule 5 attached
hereto and incorporated herein by this reference.
6. Section 7.9 of the Loan Agreement is amended to substitute Lori Braender
for Joseph Lunin.
7. Schedule 3(f) of the Security Agreement is amended to substitute
Schedule 7 attached hereto in place thereof. Borrower hereby represents and
warrants to Lender that
2
<PAGE>
except as amended by Schedule B attached hereto all representations regarding
Borrower's location(s) set forth in Section 3(f) of the Security Agreement are
true and correct as of the date hereof.
8. Borrower shall pay to Lender a processing fee of $20,000 in connection
with the Additional Loan at closing.
9. Borrower shall use the proceeds of the Additional Loan for working
capital, repayment of indebtedness to Bank One, Chicago, NA, and closing costs.
10. The obligation of Lender to fund the Additional Loan on the date hereof
is subject to Borrower's satisfaction of each of the following:
(a) delivery to Lender of the Second Note;
(b) delivery to Lender of a Stock Purchase Warrant executed by Guarantor,
substantially in the form of Exhibit B attached hereto, together with a warrant
valuation letter in form and substance acceptable to Lender;
(c) delivery to Lender of copies of articles of incorporation and other
publicly filed organizational documents of Borrower and Guarantor, certified by
an authorized officer of Borrower or a public official in the jurisdiction in
which Borrower is incorporated;
(d) delivery to Lender of an opinion of Pitney, Hardin, Kipp & Szuch, as
Borrower's and Guarantor's counsel, of even date herewith, in form and substance
acceptable to Lender's counsel, Chambliss & Balmer, PLLC;
(e) delivery to Lender of an amendment to that certain Intercreditor
Estoppel Agreement dated November 15, 1995, by and between Bank One, Chicago, NA
and Lender (the "Intercreditor Agreement"), executed by Borrower and Bank One,
Chicago, NA, reflecting that the Additional Loan shall be deemed part of the
Subordinate Loan (as defined in the Intercreditor Agreement) and that Lender
shall be entitled to the same rights and benefits under the Intercreditor
Agreement for the Additional Loan as for the Loan and otherwise in form and
substance acceptable to Lender.
(f) delivery to Lender of resolutions of Borrower's and Guarantor's Boards
of Directors authorizing the Additional Loan, the issuance of the stock purchase
warrant in connection therewith and the reservation of the shares to be Issued
in connection with such warrant (as applicable); and
(g) delivery to Lender of SBA forms 480, 652 and 1031 (Parts A and B)
completed and executed by Borrower.
3
<PAGE>
11. The terms "Loan Document" and "Loan Documents" as defined in the Loan
Agreement are amended to include this Amendment, the Second Note and any and all
other instruments and documents executed by Borrower, now or hereafter,
evidencing, securing or in any way related to the indebtedness evidenced by the
First Note and/or the Second Note.
12. Except as modified and amended hereby, the Loan Documents shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment, or
have caused this Amendment to be executed by their duly authorized officers, as
of the day and year first above written.
BORROWER: LENDER:
FACTORY CARD OUTLET OF SIRROM CAPITAL CORPORATION,
AMERICA LTD., an Illinois corporation a Tennessee corporation
By:/s/ [illegible] By:/s/ [illegible]
--------------- ---------------
Title: Pres & CEO Title: CFO
ACKNOWLEDGED AND AGREED TO:
The undersigned Guarantor joins in the execution of this Amendment for
purposes of acknowledging and agreeing that guaranty obligations reflected in
the Guaranty also cover and include the Additional Loan.
FCOA ACQUISITION CORP., a Delaware
corporation
By:/s/ [illegible]
---------------
Title: Chairman
4
<PAGE>
SCHEDULE 5
Modifications of and Supplements to
Representations and Warranties
5
<PAGE>
SCHEDULE 2.1(a) TO LOAN AGREEMENT
Foreign Qualifications
Borrower and Guarantor are in good standing in all jurisdictions in which
they are incorporated or qualified to do business as a foreign corporation.
<PAGE>
SCHEDULE 2.1(e) TO LOAN AGREEMENT
Capitalization
1. Borrower - none.
2. Guarantor - see attached capitalization table as of March 27, 1996.
The amount of common stock shown as outstanding (231,000) on the
attached table was also the "outstanding" number as of November 15,
1995 (rather than the 216,000 indicated in Schedule 2.1(a) to the
original Loan Agreement).
<PAGE>
Schedule 2.1(j)
Borrower is not in compliance with all financial covenants required by the
Business Loan Agreement (the Agreement) dated November 10, 1995, among Borrower,
Guarantor and Bank One, Chicago, N.A. Since February, 1996, the Borrower's Fixed
Cost Coverage Ratio has not been within 90% of the projections furnished to Bank
One, Chicago, N. A., as required by the Agreement. In addition, at March 30,
1996, the Borrower's Leverage Ratio exceeded the minimum of 4.00 to 1.00 allowed
under the Agreement.
The Borrower was granted a waiver of these covenants by Bank One, Chicago, N.A.
As provided is the waiver, Bank One, Chicago, N.A. waived the Leverage Ratio for
the quarter ended March 30,1996, and released the Borrower from the Fixed Cost
Coverage Ratio for the remainder of term of the Agreement. (Refer to the
attached waiver.)
<PAGE>
Arlington Heights Office Tel 708 870 2468
311 South Arlington Heights Road
Arlington Heights Illinois 60005 1930
[LOGO] BANK-ONE(C)
June 27, 1996
Mr. Charles R. Cumello
President and CEO
Factory Card Outlet of America Ltd.
745 Birginal Drive
Bensenville, IL 60106
Re: Waiver Letter
Dear Charlie:
Please accept this letter as a modification to specific financial covenants
contained in the Business Loan Agreement and Rider ( collectively referred to as
the "Business Loan Agreement") dated November 10, 1995 as executed by Factory
Card Outlet of America Ltd., FCOA Acquisition Corporation ( referred to jointly
and severally as "Borrower") and Bank One, Chicago, NA ("Bank") for loans made
to Borrower by Bank as described in the Business Loan Agreement.
Item 3 of the Business Loan Agreement specifically addresses the Fixed Cost
Coverage Ratio. Effective March 31, 1996 the Bank agrees to waive enforcement of
the Fixed Cost Coverage Ratio as an event of default through December 31, 1996.
Item 4 of the Business Loan Agreement specifically addresses the Leverage Ratio.
Heretofore, the Leverage Ratio of the Borrower has been limited to 4.00:1.00. Be
advised that the Bank hereby agrees to temporarily waive enforcement of the
Leverage Ratio for the quarter ending March 31, 1996. Enforcement of the
Leverage Ratio at the 4.00:1.00 limit will be reinstated beginning June 30, 1996
and each subsequent calendar quarter, thereafter.
<PAGE>
Please be advised that all of the other articles, provisions and covenants
contained in the Business Loan Agreement remain in full effect.
Sincerely
/s/ James C. Atkinson
- --------------------
James C. Atkinson
Vice President
<PAGE>
SCHEDULE 2.1(1) TO LOAN AGREEMENT
Debts and Liens
Debt
1. Credit Agreements:
Business Loan Agreement among Borrower, Guarantor and Bank One,
Chicago, N.A. ("Bank One") dated November 10, 1995, increasing
Borrower's current secured line of credit to $20,000,000.00.
Principal amount outstanding as of June 21, 1996 is
$12,565,000.00, exclusive of the $1,500,000.00 term loan
described below.
Bank One extended a term loan to Borrower on May 1, 1995 in the
principal amount of $1,500,000.00 to purchase computer equipment
pursuant to the terms of Borrower's prior line of credit
facility.
2. Indentures - none.
3. Purchase Agreements - none.
4. Promissory Notes and other evidences of indebtedness:
Business Purpose Revolving Promissory Note from Borrower and
Guarantor to Bank One dated November 10, 1995 in the principal
amount of $15,000,000.00 to evidence a portion of the line of
credit described in #1 above.
Business Purpose Revolving Promissory Note from Borrower and
Guarantor to Bank One dated November 10, 1995 in the principal
amount of $5,000,000.00 to evidence a portion of the line of
credit described in #1 above.
Promissory Note from Borrower to Bank One dated May 1, 1995 in
the principal amount of $1,500,000.00 to evidence the term loan
described in #1 above.
Various installment notes payable in connection with purchases of
motor vehicles, due in monthly installments through 1999, with
interest rates ranging from 2.9% to 11%. $118,276 outstanding as
of June 21, 1996.
Life insurance policy loans in the amount of $101,165 as of July
1, 1995.
<PAGE>
Secured Promissory Note from Borrower to Sirrom Capital
Corporation ("Sirrom") dated November 15, 1995 in the principal
amount of $4,000,000 to evidence a term loan.
Secured Promissory Note from Borrower to Sirrom dated June 28,
1996 in the principal amount of $1,000,000 to evidence a term
loan.
5. Guaranties:
Guarantor has guaranteed the obligations of Borrower to Bank One
under the term loan described in item #1 above.
Guarantor has guaranteed the obligations of Borrower to Sirrom
under the terms loans described in item #1 above.
6. Capital Leases:
Various equipment capital leases with maturities through 2000.
$260,369 outstanding as of June 21, 1996.
7. Other - none.
Liens
1. Non-Titled Personal Property Security Agreement between Borrower
and Bank One granting a blanket lien on all of Borrower's assets
to secure the $20,000,000.00 line of credit described in #1
above.
2. Commercial Security Agreement between Borrower and Bank One
granting a purchase money security interest in certain computer
equipment and software purchased with the proceeds of the term
loan described in #1 above.
3. Security interest granted in certain motor vehicles to secure the
installment notes described in #4 above.
4. Borrower's landlord for Borrower's facility at 2620 Lake Circle
Drive, Indianapolis, Indiana, has filed a UCC-l financing
statement in connection with inventory, equipment and fixtures
located at or used in connection with such facility.
5. Security Agreement between Borrower and Sirrom, dated November
15, 1995, to secure the promissory notes described in #4 above.
<PAGE>
SCHEDULE 7
Modifications of and Supplements to
Representations and Warranties
of Security Agreement
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 1
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
101 BUFFALO GROVE MGR - DOLORES ORACION (847) 577-3807 4,485 RETAIL SQ. FT. DIST: 44
PLAZA VERDE CENTER FAX (847) 577-3812 MON-FRI 9:00 - 9:00
1245 WEST DUNDEE ROAD Open 6/05/85 SAT 9:00 - 6:00
BUFFALO GROVE SUN 10:00 - 5:00
IL 60089
102 VILLA PARK MGR - JULIE KELLMER (630) 832-0509 8,403 RETAIL SQ. FT. DIST: 13
VILLA OAKS CENTER ASST - ANNE WALLE FAX (630) 832-9452 MON-FRI 9:00 - 9:00
138 WEST ROOSEVELT ROAD SHARON SOLLER Open 9/26/85 SAT 9:00 - 6:00
VILLA PARK CRYSTAL MCNALLY SUN 10:00 - 6:00
IL 60181
103 ROLLING MEADOWS MGR - TOM LEN (847) 952-8674 4,711 RETAIL SQ. FT. DIST: 44
MEADOWS TOWN HALL ASST - CHRISTINE O'DWYER FAX (847) 952-8691 MON-FRI 10:00 - 9:00
1400 EAST GULF ROAD Open 10/24/85 SAT 10:00 - 6:00
ROLLING MEADOWS SUN 11:00 - 5:00
IL 60008
104 NILES MGR - JANELLE ELDRIDGE (847) 647-1274 9,840 RETAIL SQ. FT. DIST: 44
VILLAGE CROSSING S/C FAX (847) 647-7900 MON-FRI 9:00 - 9:00
5653 TOUHY AVENUE Open 11/07/85 SAT 9:00 - 9:00
NILES SUN 9:00 - 5:00
IL 60714
105 BLOOMINGDALE MGR - DEBBIE LORGE (630) 307-3679 9,850 RETAIL SQ. FT. DIST: 11
BLOOMINGDALE COURT #250 ASST - SUE TURNER FAX (630) 307-3708 MON-FRI 9:30 - 9:00
364 WEST ARMY TRAIL ROAD Open 10/01/89 SAT 9:00 - 6:00
BLOOMINGDALE SUN 10:00 - 5:00
IL 60108
107 ST. CHARLES MGR - PAULA HUMME (630) 377-7769 4,290 RETAIL SQ. FT. DIST: 13
PIANO FACTORY 1B ASST - JOAN DEPAUW FAX (630) 377-7795 MON-FRI 10:00 - 9:00
410 S FIRST STREET Open 5/29/86 SAT 10:00 - 6:00
ST CHARLES SUN 11:00 - 5:00
IL 60174
108 MT. VERNON MGR - DEBBIE MAYFIELD (618) 242-8771 4,100 RETAIL SQ. FT. DIST: 61
JENT FACTORY OUTLET FAX (618) 242-8766 MON-FRI 9:00 - 7:00
257 OUTLET AVENUE Open 6/24/94 SAT 9:00 - 7:00
MT VERNON, IL 62864 SUN 11:00 - 5:00
IL 62864
109 DARIEN MGR - CHRIS EWERT (708) 985-8377 8,220 RETAIL SQ. FT. DIST: 13
CHESTNUT COURT CENTER ASST - MICHELE BROWN FAX (708) 985-9616 MON-FRI 9:00 - 9:00
7511 SOUTH LEMONT CENTER DIANE MISTAKOVICH Open 10/24/86 SAT 9:00 - 6:00
DARIEN SUN 11:00 - 6:00
IL 60559
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 2
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
110 EVANSTON MGR - OPEN (847) 866-7740 4,128 RETAIL SQ. FT. DIST: 44
EVANSTON PLAZA FAX (847) 866-7907 MON-FRI 9:00 - 9:00
1930 WEST DEMPSTER Open 5/21/87 SAT 9:00 - 6:00
EVANSTON SUN 9:00 - 5:00
IL 60201
113 JOLIET MGR - GAYLE MUSSER (815) 436-1224 9,712 RETAIL SQ. FT. DIST: 13
LOUIS JOLIET POINTE ASST - COLLEEN PERCY FAX (815) 439-2264 MON-FRI 9:00 - 9:00
2856 PLAINFIELD ROAD Open 10/01/89 SAT 9:00 - 9:00
JOLIET SUN 10:00 - 5:00
IL 60435
114 LIBERTYVILLE MGR - CHERI LINEHAN (847) 362-1610 3,340 RETAIL SQ. FT. DIST: 44
RED TOP PLAZA OUTLET C ASST - DAN ELQUIST FAX (847) 362-1613 MON-FRI 9:00 - 9:00
1366 SOUTH MILWAUKEE AVENUE SARA BRZEZYSKI Open 11/01/89 SAT 9:00 - 5:00
LIBERTYVILLE SUN 10:00 - 5:00
IL 60048
115 BLOOMINGTON MGR - JIM DUE (309) 662-4421 5,413 RETAIL SQ. FT. DIST: 61
2103 NORTH VETERANS PARKWAY ASST - ABBI MCCLURE FAX (309) 662-4586 MON-FRI 9:00 - 9:00
#324 Open 10/01/89 SAT 9:00 - 6:00
BLOOMINGTON SUN 10:00 - 5:00
IL 61704
117 BRICKTOWN MGR - MICHAEL KEITH (312) 622-3338 4,980 RETAIL SQ. FT. DIST: 43
BRICKTOWN SQUARE #108-110 ASST - DONNA VASSAR FAX (312) 622-1742 MON-FRI 10:00 - 9:00
6560 WEST FULLERTON AVENUE KRISSY AICHINGER Open 11/01/89 SAT 9:00 - 9:00
CHICAGO SUN 10:00 - 6:00
IL 60635
118 ROCKFORD MGR - LINDA KOSOWIEC (815) 226-9111 4,399 RETAIL SQ. FT. DIST: 40
FOREST PLAZA C3 & 4 ASST - GARY HANSON FAX (815) 226-9114 MON-FRI 9:00 - 9:00
6387 EAST STATE STREET Open 10/01/89 SAT 9:00 - 6:00
ROCKFORD SUN 9:00 - 5:00
IL 61111
119 COUNTRYSIDE MGR - OPEN (708) 354-1558 7,260 RETAIL SQ. FT. DIST: 13
COUNTRY S/C A2 & 3 ASST - ARLENE BELLINO FAX (708) 354-3335 MON-FRI 9:00 - 9:00
102 COUNTRYSIDE Open 11/01/89 SAT 9:00 - 6:00
COUNTRYSIDE SUN 10:00 - 5:00
IL 60525
120 ELGIN MGR - CONNIE AWE (847) 931-9600 4,620 RETAIL SQ. FT. DIST: 44
FOX RIVER PLAZA A5 & 6 ASST - LORI MELLEN FAX (847) 931-9605 MON-FRI 9:30 - 9:00
440-D AIRPORT ROAD Open 9/20/90 SAT 9:00 - 6:00
ELGIN SUN 10:00 - 5:00
IL 60120
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 3
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
121 CRYSTAL LAKE MGR - KRIS OBHMKE (815) 455-0460 3,869 RETAIL SQ. FT. DIST: 44
CRYSTAL LAKE COURT S/C ASST - LISA RICHARDSON FAX (815) 455-0518 MON-FRI 9:30 - 9:00
5587 NORTWEST HIGHWAY Open 3/01/90 SAT 9:00 - 6:00
CRYSTAL LAKE SUN 10:00 - 5:00
IL 60014
123 NORTH RIVERSIDE MGR - CHERYL AGUIRRE (708) 447-8691 5,490 RETAIL SQ. FT. DIST: 43
7337 WEST 25TH STREET ASST - DOROTHY HULL FAX (708) 447-8726 MON-FRI 9:00 - 9:00
NORTH RIVERSIDE MARCY JONES Open 7/12/90 SAT 9:00 - 7:00
SUN 10:00 - 6:00
IL 60546
124 MORTON GROVE MGR - WAYNE CEDERBERG (847) 967-7441 5,490 RETAIL SQ. FT. DIST: 43
7154 WEST DEMPSTER ASST - PAT AMENIRO FAX (847) 967-9636 MON-FRI 9:00 - 9:00
MORTON GROVE Open 7/12/90 SAT 9:00 - 9:00
SUN 10:00 - 5:00
IL 60053
125 SKOKIE MGR - VICKY WHITE (847) 674-3923 2,800 RETAIL SQ. FT. DIST: 44
FASHION CENTER ASST - OPEN FAX (847) 674-3942 MON-FRI 9:00 - 9:00
9448 SKOKIE BOULEVARD Open 10/18/90 SAT 9:00 - 6:00
SKOKIE SUN 10:00 - 5:00
IL 60077
126 CHICAGO RIDGE MGR - RACHELLE BARTON (708) 425-1115 9,017 RETAIL SQ. FT. DIST: 13
COMMONS OF CHICAGO RIDGE ASST - KIM PILOT FAX (708) 425-1313 MON-FRI 9:00 - 9:00
267 COMMON DRIVE Open 10/25/90 SAT 9:00 - 9:00
CHICAGO RIDGE SUN 10:00 - 5:00
IL 60415
128 SCOTTSDALE MGR - JUDI SCHUHRKE (312) 582-7787 4,940 RETAIL SQ. FT. DIST: 43
SCOTTSDALE CENTER ASST - VICKY JOHNSON FAX (312) 582-9341 MON-FRI 9:00 - 9:00
8059 SOUTH CICERO AVENUE BARBARA MARKS Open 6/05/85 SAT 9:00 - 6:00
CHICAGO SUN 10:00 - 5:00
IL 60652
129 MIDWAY SQUARE MGR - KATINA MCDONALD (312) 585-7733 5,320 RETAIL SQ. FT. DIST: 43
MIDWAY SQUARE CENTER ASST - MONICA HOLTZ FAX (312) 585-9791 MON-FRI 9:00 - 9:00
5125 SOUTH PULASKI ROAD Open 5/01/91 SAT 9:00 - 6:00
CHICAGO SUN 10:00 - 5:00
IL 60632
130 BRIDGEVIEW MGR - STEVE KELLEY (708) 233-0123 4,960 RETAIL SQ. FT. DIST: 43
BRIDGEVIEW COURT CENTER ASST - SARAH WELLER FAX (708) 233-0131 MON-FRI 9:00 - 9:00
7769 & 7771 SOUTH HARLEM Open 10/25/91 SAT 9:00 - 6:00
BRIDGEVIEW SUN 10:00 - 5:00
IL 60455
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 4
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
131 MERRILLVILLE MGR - BARBARA TRIPLETT (219) 736-1855 5,220 RETAIL SQ. FT. DIST: 43
MERRILLVILLE PLAZA ASST - MARTHA MARTINEZ FAX (219) 736-1858 MON-FRI 9:00 - 9:00
1630 EAST 80TH AVENUE KAYE CRUMBLEY Open 11/01/91 SAT 9:00 - 8:00
MERRILLVILLE SUN 10:00 - 5:00
IN 46410
132 WHEATON MGR - RHONDA ACKERMAN (708) 665-2230 6,348 RETAIL SQ. FT. DIST: 13
DANADA SQUARE ASST - JAMES TILLMAN FAX (630) 665-2582 MON-FRI 9:00 - 9:00
#83 DANADA SQUARE EAST TONY BERRY Open 5/08/92 SAT 9:00 - 9:00
WHEATON SUN 10:00 - 5:00
IL 60187
133 MT. PROSPECT MGR - BARNEY GLASS (847) 506-1153 5,800 RETAIL SQ. FT. DIST: 44
MT. PROSPECT PLAZA ASST - SYLVIA BAILEY FAX (847) 506-1168 MON-FRI 9:00 - 9:00
1038 MT. PROSPECT PLAZA Open 7/16/92 SAT 9:00 - 9:00
MT. PROSPECT SUN 10:00 - 5:00
IL 60056
134 WHITNEY SQUARE MGR - TAMI MCFARLANE (608) 276-9720 8,000 RETAIL SQ. FT. DIST: 40
WHITNEY SQUARE S/C ASST - CINDY SCHARA FAX (608) 276-9730 MON-FRI 9:30 - 9:00
676 H.S. WHITNEY WAY Open 8/13/92 SAT 9:00 - 9:00
MADISON SUN 10:30 - 5:00
WI 53711
135 MISHAWAKA MGR - GAIL COWSERT (219) 271-2830 7,300 RETAIL SQ. FT. DIST: 47
INDIAN RIDGE S/C ASST - AMY BRUGGER FAX (219) 271-2838 MON-FRI 9:00 - 9:00
5816 GRAPE ROAD PAM MILBOURN Open 10/29/92 SAT 9:00 - 9:00
MISHAWAKA SUN 10:00 - 5:00
IN 46545
136 BROWN DEER MGR - DAVID STELZL (414) 355-3110 7,049 RETAIL SQ. FT. DIST: 40
MARKETPLACE OF BROWN DEER ASST - DOROTHY FIELDS FAX (414) 355-3310 MON-FRI 9:30 - 9:00
9190 GREEN BAY ROAD JENNY SWITALSKI Open 10/22/92 SAT 9:30 - 9:00
BROWN DEER SUN 11:00 - 6:00
WI 53209
137 NAPERVILLE MGR - TERI LAWN (708) 355-9572 5,320 RETAIL SQ. FT. DIST: 13
HERITAGE SQUARE #108 ASST - KAREN REED FAX (708) 355-9583 MON-FRI 9:30 - 9:00
428 SOUTH ROUTE 59 DIANA KLEIN Open 11/05/92 SAT 9:00 - 6:00
NAPERVILLE SUN 10:00 - 6:00
IL 60540
138 OAK PARK MGR - EVA AYAASH (708) 386-7770 5,700 RETAIL SQ. FT. DIST: 43
1035 WEST LAKE STREET ASST - DAVE STRICKLAND FAX (708) 386-7790 MON-FRI 9:30 - 9:00
OAK PARK Open 11/12/92 SAT 9:30 - 6:00
SUN 11:00 - 5:00
IL 60301
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 5
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
139 MOLINE MGR - KELLY HEALD (309) 797-2096 8,676 RETAIL SQ. FT. DIST: 51
4371 16TH STREET ASST - DEBBIE WERMELING FAX (309) 797-8295 MON-FRI 9:00 - 9:00
MOLINE Open 2/01/93 SAT 9:00 - 9:00
SUN 10:00 - 6:00
IL 61265
140 BROOKFIELD MGR - DON SMITH (414) 821-9640 6,234 RETAIL SQ. FT. DIST: 40
BROOKFIELD FASHION CENTER ASST - PATRICIA STARK FAX (414) 821-9643 MON-FRI 9:30 - 9:00
16900 J WEST BLUEMOUND RD Open 4/22/93 SAT 9:00 - 6:00
BROOKFIELD SUN 11:00 - 5:00
WI 53005
141 WEST ALLIS MGR - LYNN WAWRZYNIAKOWSKI (414) 771-3032 9,763 RETAIL SQ. FT. DIST: 40
WEST ALLIS TOWN CENTER FAX (414) 771-3206 MON-FRI 9:00 - 9:00
6718 WEST GREENFIELD Open 6/05/85 SAT 9:00 - 9:00
WEST ALLIS SUN 10:30 - 6:00
WI 53214
142 CALUMET CITY MGR - MELISSA MUELLER (708) 868-4920 8,475 RETAIL SQ. FT. DIST: 43
OAKVIEW SHOPPING CENTER ASST - CARMEN REYES FAX (708) 868-5217 MON-FRI 9:00 - 9:00
1737 EAST WEST ROAD DEBBIE SHEAHAN Open 7/29/93 SAT 9:00 - 9:00
CALUMET CITY SUN 10:00 - 6:00
IL 60409
143 ORLAND PARK MGR - GINA KELLEY (708) 403-5228 5,936 RETAIL SQ. FT. DIST: 43
LAKEVIEW PLAZA ASST - YOLANDA VALLE FAX (708) 403-1026 MON-FRI 9:00 - 9:00
15778 LAGRANGE ROAD STACY RANDOLPH Open 8/05/93 SAT 9:00 - 9:00
ORLAND PARK SUN 10:00 - 6:00
IL 60462
144 ONE SCHAUMBURG PLACE MGR - PAM GRIFFEY (847) 995-9511 6,348 RETAIL SQ. FT. DIST: 44
SPACE T-158 ASST - OPEN FAX (847) 995-9513 MON-FRI 10:00 - 9:00
601 NORTH MARTINGALE ROAD Open 9/02/93 SAT 10:00 - 9:00
SCHAUMBURG SUN 11:00 - 6:00
IL 60173
145 TIMMERMAN MGR - DAN SYMONIAK (414) 466-0567 8,600 RETAIL SQ. FT. DIST: 40
TIMMERMAN PLAZA ASST - JAY VREELAND FAX (414) 466-0341 MON-FRI 9:00 - 9:00
10328 WEST SILVER SPRING DR Open 9/30/93 SAT 9:00 - 9:00
MILWAUKEE SUN 10:00 - 6:00
WI 53225
146 EVANSVILLE MGR - PAUL MELTON (812) 477-3269 9,873 RETAIL SQ. FT. DIST: 61
LAWNDALE S/C ASST - PATTI PAYTON FAX (812) 473-8648 MON-FRI 9:00 - 9:00
862 SOUTH GREEN RIVER ROAD PAMELA RUSSELBURG Open 10/28/93 SAT 9:00 - 9:00
EVANSVILLE SUN 10:00 - 6:00
IN 47715
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 6
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
147 SPEEDWAY MGR - DAN MCCAFFERTY (317) 484-1721 13,325 RETAIL SQ. FT. DIST: 47
SPEEDWAY SUPER CENTER ASST - JERRI GARDNER FAX (317) 484-1375 MON-FRI 9:00 - 9:00
5926 B CRAWFORDSVILLE ROAD SHELAINE AVERITT Open 11/18/93 SAT 9:00 - 9:00
SPEEDWAY DANA RODDA SUN 11:00 - 6:00
IL 46224
148 GREENWOOD MGR - LISA HERNDON (317) 888-8101 8,355 RETAIL SQ. FT. DIST: 47
GREENWOOD SHOPPES ASST - DEBI RIDENOUR FAX (317) 888-8272 MON-FRI 9:00 - 9:00
906 NORTH US 31 JULIE MASHINO Open 4/28/94 SAT 9:00 - 9:00
GREENWOOD JAMIE CROW SUN 10:00 - 6:00
IN 46142
149 WILLOW LAKE MGR - PAM BOURNE (317) 872-7072 8,830 RETAIL SQ. FT. DIST: 47
WILLOW LAKE S/C ASST - LANETA GAMBY FAX (317) 872-8419 MON-FRI 9:00 - 9:00
2620 LAKE CIRCLE DRIVE SHARI GROSS Open 11/18/93 SAT 9:00 - 9:00
INDIANAPOLIS SUN 11:00 - 6:00
IN 46268
150 FORT WAYNE MGR - STEVE NELSON (219) 483-4207 7,890 RETAIL SQ. FT. DIST: 47
COLDWATER CROSSING S/C ASST - GINA WOOD FAX (219) 482-4482 MON-FRI 9:00 - 9:00
5511 COLDWATER ROAD SUITE C JILL BISHOP Open 12/02/93 SAT 9:00 - 9:00
FORT WAYNE SUN 10:00 - 6:00
IN 46825
151 MARION MGR - PAMELA STAFFORD (319) 377-9522 9,859 RETAIL SQ. FT. DIST: 51
COLLINS ROAD SQUARE ASST - CRYSTAL FREITAGER FAX (319) 377-0803 MON-FRI 9:00 - 9:00
1370 TWIXT TOWN ROAD OPEN Open 3/10/94 SAT 9:00 - 9:00
MARION SUN 10:00 - 6:00
IA 52302
152 LAFAYETTE PLACE MGR - DEBBIE WOOD (317) 388-9277 8,500 RETAIL SQ. FT. DIST: 47
3629 COMMERCIAL DRIVE ASST - SHIRLEY WOLFE FAX (317) 388-9294 MON-FRI 9:00 - 9:00
INDIANAPOLIS Open 4/28/94 SAT 9:00 - 9:00
SUN 10:00 - 6:00
IN 46222
153 ROCHESTER MGR - OPEN (507) 287-0287 9,860 RETAIL SQ. FT. DIST: 51
T.J. MAXX PLAZA ASST - CONNIE PETERS FAX (507) 287-0306 MON-FRI 9:00 - 9:00
1300 SALEM ROAD S.W. DARCY JENSEN Open 9/22/94 SAT 9:00 - 9:00
ROCHESTER SUN 10:00 - 6:00
MN 55902
154 RACINE MGR - KRISTIE GRINDEY (414) 634-5530 10,048 RETAIL SQ. FT. DIST: 40
RACINE CENTER ASST - JENNY PETRICK FAX (414) 634-0578 MON-FRI 9:30 - 9:00
5201 Q WASHINGTON AVENUE KARYN SCHIESL Open 9/27/94 SAT 9:30 - 9:00
RACINE SUN 10:00 - 6:00
WI 53406
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 7
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
155 HIKES POINT MGR - KIMBERLY KANE (502) 458-4254 11,160 RETAIL SQ. FT. DIST: 47
HIKES POINT PLAZA MIT - DAN TORRES FAX (502) 458-4643 MON-FRI 9:00 - 9:00
4048 TAYLORSVILLE ROAD Open 10/23/94 SAT 9:00 - 9:00
LOUISVILLE SUN 10:00 - 6:00
KY 40220
156 SOUTHPORT MGR - PAUL VANDERSEE (515) 256-9151 10,375 RETAIL SQ. FT. DIST: 51
SOUTHPORT SHOPPING CENTER ASST - JANE STEEN FAX (515) 256-9167 MON-FRI 9:00 - 10:00
6325 S.E. 14TH STREET Open 10/10/94 SAT 9:00 - 10:00
DES MOINES SUN 10:00 - 8:00
IA 50320
157 BAKERS SQUARE MGR - KATHY BEUTLER (402) 334-5408 9,469 RETAIL SQ. FT. DIST: 51
BAKER SQUARE ASST - CONNIE PETERSON FAX (402) 334-0267 MON-FRI 9:00 - 9:00
13415 WEST CENTER ROAD NICOLE MILLER Open 11/14/94 SAT 9:00 - 9:00
OMAHA SUN 10:00 - 6:00
NE 68144
158 HARPERS STATION MGR - LORI MAYNARD (513) 489-3544 7,851 RETAIL SQ. FT. DIST: 68
11309-E MONTGOMERY ASST - CATHY ELFERS FAX (513) 489-3709 MON-FRI 9:00 - 9:00
CINCINNATI Open 12/07/94 SAT 9:00 - 9:00
SUN 10:00 - 6:00
OH 45208
159 ROOKWOOD MGR - CHRIS SCHULZE (513) 531-9242 7,880 RETAIL SQ. FT. DIST: 68
ROOKWOOD PAVILION, SUITE A-9 ASST - SHELBY GANTENBERG FAX (513) 531-9246 MON-FRI 9:00 - 9:00
2692 MADISON ROAD Open 10/30/94 SAT 9:00 - 9:00
CINCINNATI SUN 10:00 - 6:00
OH 45208
160 EASTGATE STATION MGR - EVAN CORDAY (513) 943-1000 7,070 RETAIL SQ. FT. DIST: 68
700 EASTGATE SOUTH DRIVE ASST - AMY WENTZEL FAX (513) 943-0898 MON-FRI 9:00 - 9:00
CINCINNATI ADDRIENNE LUDLOW Open 3/03/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
OH 45208
161 BALLWIN PLAZA MGR - KATHY TABER (314) 227-3558 6,650 RETAIL SQ. FT. DIST: 61
BALLWIN PLAZA CENTER ASST - PAM EDMONDS FAX (314) 527-3061 MON-FRI 9:00 - 9:00
15425 MANCHESTER ROAD Open 2/15/95 SAT 9:00 - 9:00
BALLWIN SUN 10:00 - 6:00
MO 63011
162 FAIRVIEW HEIGHTS MGR - VICKIE BECKER (618) 397-5210 11,433 RETAIL SQ. FT. DIST: 61
MARKET PLACE FAX (618) 397-5245 MON-FRI 9:00 - 9:00
22 PLAZA DRIVE Open 2/15/95 SAT 9:00 - 9:00
FAIRVIEW HEIGHTS SUN 10:00 - 6:00
IL 62208
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 8
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
163 LEMAY PLAZA MGR - BRUCE POPE (314) 892-2117 12,370 RETAIL SQ. FT. DIST: 61
LEMAY PLAZA FAX (314) 892-3667 MON-FRI 9:00 - 9:00
2560 LEMAY FERRY ROAD Open 11/25/94 SAT 9:00 - 9:00
ST LOUIS SUN 10:00 - 6:00
MO 63125
164 WASHINGTON SHOPPES MGR - SHERYL WILLIAMS (317) 890-1111 11,340 RETAIL SQ. FT. DIST: 47
10021 EAST WASHINGTON STREET ASST - PATTI ELLIOT FAX (317) 897-5338 MON-FRI 9:00 - 9:00
INDIANAPOLIS SHELLY GOODMAN Open 11/12/94 SAT 9:00 - 9:00
SUN 10:00 - 6:00
IN 46229
165 APPLETON MGR - BONNIE KILEY (414) 730-0101 8,470 RETAIL SQ. FT. DIST: 40
FOX RIVER MALL ASST - TAMMY BAUER FAX (414) 730-8180 MON-FRI 9:00 - 9:00
4651 MICHAELS DRIVE SUE WALTER Open 11/23/94 SAT 9:00 - 9:00
APPLETON SUN 10:00 - 6:00
WI 54915
166 JANESVILLE MGR - CHERYL RADTKEON (608) 752-2322 7,200 RETAIL SQ. FT. DIST: 40
2033 HUMES ASST - MARY ZIPSE FAX (608) 752-2689 MON-FRI 9:00 - 9:00
JANESVILLE MARIE VIVOLA Open 2/15/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
WI 53545
167 CONSUMER SQUARE MGR - JENNIFER SMITH (614) 861-2111 10,355 RETAIL SQ. FT. DIST: 68
6418 TUSSING ROAD ASST - BRENDA MECUM FAX (614) 861-2442 MON-FRI 9:00 - 9:00
COLUMBUS Open 5/08/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
OH 43068
168 COLERAIN MGR - KIM VANVLIET (513) 923-9777 8,227 RETAIL SQ. FT. DIST: 68
COLERAIN TOWNE CENTER ASST - AMY RICCOBENE FAX (513) 923-9781 MON-FRI 9:00 - 9:00
10204 COLERAIN AVENUE Open 7/22/95 SAT 9:00 - 9:00
CINCINNATI SUN 10:00 - 6:00
OH 45251
169 EAU CLAIRE MGR - RENAE HARKE (715) 834-9663 8,070 RETAIL SQ. FT. DIST: 40
CHIPPEWA VALLEY PLAZA ASST - WENDY BAUER FAX (715) 834-9970 MON-FRI 9:00 - 9:00
3900 BLOCK OF GATEWAY DR LEANN GRINLEY Open 3/29/95 SAT 9:00 - 9:00
EAU CLAIRE SUN 10:00 - 6:00
WI 54701
170 WEST BROAD PLAZA MGR - KIM BOWATER (614) 351-0369 7,240 RETAIL SQ. FT. DIST: 68
4091 WEST BROAD STREET ASST - RHOADENA JOHNSON FAX (614) 351-0394 MON-FRI 9:00 - 9:00
COLUMBUS JULE WILLIAMS Open 4/17/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
OH 43228
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 9
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
171 HANOVER PARK MGR - CATHY HULTEN (708) 736-9450 9,408 RETAIL SQ. FT. DIST: 13
WESTVIEW PLAZA ASST - JOLENE STOCKER FAX (630) 736-9454 MON-FRI 9:00 - 9:00
7470 BARRINGTON ROAD VIRGINIA BONES Open 5/08/95 SAT 9:00 - 9:00
HANOVER PARK CHAD WORTHEN SUN 10:00 - 6:00
IL 60103
172 90TH & FORT MGR - BARB MALONE (402) 573-5225 11,250 RETAIL SQ. FT. DIST: 51
PLAZA NORTH CENTER ASST - CINDY ADDISON FAX (402) 573-5167 MON-FRI 9:00 - 9:00
5515 NORTH 90TH ST. Open 8/28/95 SAT 9:00 - 9:00
OMAHA SUN 10:00 - 6:00
NE 68134
173 AKRON EAST MGR - DEBBIE SWARZMILLER (216) 630-8409 8,205 RETAIL SQ. FT. DIST: 68
CHAPEL HILL SQUARE ASST - KIM METZ FAX (216) 630-8411 MON-FRI 9:00 - 9:00
1912 BUCHHOLZER BOULEVARD Open 5/20/95 SAT 9:00 - 9:00
AKRON SUN 10:00 - 6:00
OH 44310
174 KENOSHA MGR - PAM KINDSCHUH (414) 697-6360 8,380 RETAIL SQ. FT. DIST: 40
SOUTHPORT PLAZA ASST - VIDA ZIMMER FAX (414) 697-6361 MON-FRI 9:00 - 9:00
6932 GREEN BAY ROAD GILLIAN POPLAWSKI Open 7/24/95 SAT 9:00 - 9:00
KENOSHA SUN 10:00 - 6:00
WI 53142
175 MENTOR MGR - SHANNON BOWSER (216) 350-9816 8,160 RETAIL SQ. FT. DIST: 68
CREEKSIDE COMMONS ASST - ROBIN COMO FAX (216) 350-9863 MON-FRI 9:00 - 9:00
9597 MENTOR AVENUE Open 10/05/95 SAT 9:00 - 9:00
MENTOR SUN 10:00 - 6:00
OH 44060
176 DOWNERS PLAZA MGR - SANDIE HILL (630) 663-0428 9,000 RETAIL SQ. FT. DIST: 13
DOWNERS PLAZA ASST - SHERYL HENDERSON FAX (630) 663-0581 MON-FRI 9:00 - 9:00
124 OGDEN AVENUE CAROL HOZVICKA Open 9/15/95 SAT 9:00 - 9:00
DOWNERS GROVE SUN 10:00 - 6:00
IL 60515
177 NORTH OLMSTEAD MGR - CAROL HOZVICKA (216) 716-1411 8,000 RETAIL SQ. FT. DIST: 68
WATER TOWER SQUARE S/C ASST - LAURA ROBINSON FAX (216) 716-1413 MON-FRI 9:00 - 9:00
27246 LORAIM ROAD KIM VITANZA Open 12/03/95 SAT 9:00 - 9:00
NORTH OLMSTEAD SUN 10:00 - 6:00
OH 44070
178 CLARKSVILLE MGR - FALICIA CORNILLE (812) 280-7664 7,880 RETAIL SQ. FT. DIST: 47
CLARKSVILLE TOWNE CENTER ASST - KRISTI KERN FAX (812) 280-7669 MON-FRI 9:00 - 9:00
706 EAST S.R. 131 RHONDA SCHMIDT Open 9/08/95 SAT 9:00 - 9:00
CLARKSVILLE SUN 10:00 - 6:00
IN 47129
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 10
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
179 FL0RENCE MGR - BRUCE MOYER (606) 282-7030 8,788 RETAIL SQ. FT. DIST: 68
FLORENCE SQUARE S/C ASST - MOLLY WINKLE FAX (606) 282-6974 MON-FRI 9:00 - 9:00
7673 MALL ROAD Open 9/16/95 SAT 9:00 - 9:00
FLORENCE SUN 10:00 - 6:00
KY 41042
180 DIXIE HIGHWAY MGR - DIANE LEWIS (502) 447-2070 9,183 RETAIL SQ. FT. DIST: 47
KMART PLAZA ASST - GLENDA BEELER FAX (502) 447-2069 MON-FRI 9:00 - 9:00
4921-A DIXIE HIGHWAY Open 10/25/95 SAT 9:00 - 6:00
LOUISVILLE SUN 10:00 - 6:00
KY 40216
181 MATTESON MGR - VALERIE BAFFIELD (708) 747-7380 7,776 RETAIL SQ. FT. DIST: 13
MATTESON TOWN CENTER ASST - BELETA JACKSON FAX (708) 747-7247 MON-FRI 9:00 - 9:00
134 TOWN CENTER ROAD Open 10/25/95 SAT 9:00 - 9:00
MATTESON SUN 10:00 - 6:00
IL 60443
182 OSHKOSH MGR - HEATHER BOWMAN (414) 232-8982 8,280 RETAIL SQ. FT. DIST: 40
OSHKOSH SHOPPING CENTER ASST - LYNN KELLER FAX (414) 232-8984 MON-FRI 9:00 - 9:00
1941 SOUTH KOELLER STREET LORI BOUGIE Open 10/06/95 SAT 9:00 - 9:00
OSHKOSH SUN 10:00 - 6:00
WI 54901
183 CRESTWOOD MGR - TODD SIGLER (314) 909-0552 8,532 RETAIL SQ. FT. DIST: 61
WATSON PLAZA ASST - MARY ELLEN SISK FAX (314) 909-0564 MON-FRI 9:00 - 9:00
9815 WATSON ROAD SUITE 114 Open 10/07/95 SAT 9:00 - 9:00
CRESTWOOD SUN 10:00 - 6:00
MO 63126
184 EAST TOWN S/C MGR - CRYSTAL GREEN (608) 245-1193 8,222 RETAIL SQ. FT. DIST: 40
EAST TOWNE PLAZA S/C ASST - RICH NODORFT FAX (608) 245-1195 MON-FRI 9:00 - 9:00
2031 ZEIER ROAD Open 10/24/95 SAT 9:00 - 9:00
MADISON SUN 10:00 - 6:00
WI 53704
185 BLOOMINGTON IN MGR - BRAD MARTIN (812) 335-0248 6,804 RETAIL SQ. FT. DIST: 47
2817 EAST THIRD STREET ASST - JENNIFER MARSHALL FAX (812) 335-0253 MON-FRI 9:00 - 9:00
HEATHER ALEXANDER Open 11/24/95 SAT 9:00 - 9:00
BLOOMINGTON SUN 10:00 - 6:00
IN 47408
186 CASTLETON MGR - TONY CASE (317) 842-2943 7,168 RETAIL SQ. FT. DIST: 47
LINEN 'N THINGS PLAZA ASST - BRIAN CUNNINGHAM FAX (317) 842-3183 MON-FRI 9:00 - 9:00
8540 CASTLETON CORNER DRIVE GLORIA MERZ Open 11/04/95 SAT 9:00 - 9:00
INDIANAPOLIS SUN 10:00 - 6:00
IN 46250
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 11
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
187 GRAND ISLAND MGR - GAYLE NEWMAN (308) 381-1809 9,796 RETAIL SQ. FT. DIST: 51
ILE DE GRAND S/C ASST - CAROL MANCHAME FAX (308) 381-2377 MON-FRI 9:00 - 9:00
2235 NORTH WEBB ROAD ROXIE STOBBE Open 11/17/95 SAT 9:00 - 9:00
GRAND ISLAND SUN 10:00 - 6:00
NE 68803
188 WEST DES MOINES MGR - AARON MCFARLAND (515) 267-0941 9,424 RETAIL SQ. FT. DIST: 51
WEST RIDGE S/C ASST - DOUG FLETHER FAX (515) 267-1011 MON-FRI 9:00 - 9:00
10201 NORTH WEBB ROAD JAMES SASSATELLI Open 1/31/96 SAT 9:00 - 9:00
CLIVE DAWN GORELICH SUN 10:00 - 6:00
IA 50325
189 LINCOLN MGR - KAYLEEN KNISLEY (402) 477-3445 9,840 RETAIL SQ. FT. DIST: 51
ABE LINCOLN MALL ASST - DOROTHY MARSHALL FAX (402) 477-3791 MON-FRI 9:00 - 9:00
4720 NORTH 27TH STREET JULIE KEYS Open 2/07/96 SAT 9:00 - 9:00
LINCOLN SUN 10:00 - 6:00
NE 68521
190 CHAMPAIGN MGR - DINA VOLEMAN (217) 355-6837 8,406 RETAIL SQ. FT. DIST: 61
BAYTOWN SQUARE ASST - JOELLA WILCOXIN FAX (217) 355-6895 MON-FRI 9:00 - 9:00
2019 NORTH PROSPECT Open 2/01/96 SAT 9:00 - 9:00
CHAMPAIGN SUN 10:00 - 6:00
IL 61821
191 WATERLOO MGR - JODY KIES (319) 235-7999 8,350 RETAIL SQ. FT. DIST: 51
FLAMMANG SQUARE ASST - PAT BEINER FAX (319) 235-7938 MON-FRI 9:00 - 9:00
1150 FLAMMANG DRIVE SHELLY HAMLIN Open 3/25/96 SAT 9:00 - 9:00
WATERLOO SUN 10:00 - 6:00
IA 50702
192 MANSFIELD MGR - LINDA DURDLE (419) 529-2548 8,400 RETAIL SQ. FT. DIST: 68
SPRINGFIELD SQUARE SUITE 108 ASST - JANET LONGWELL FAX (419) 529-2978 MON-FRI 9:00 - 9:00
556 N. LEXINGTON-SPRINGFIELD CATHY JOHNSON Open 2/23/96 SAT 9:00 - 9:00
MANSFIELD SUN 9:00 - 6:00
OH 44906
193 CARRIAGE PLACE MGR - RANDY LICHTENBERGER (614) 442-1788 8,705 RETAIL SQ. FT. DIST: 68
CARRIAGE PLACE S/C ASST - PAT SHARP FAX (614) 442-1785 MON-FRI 9:00 - 10:00
2630 BETHEL JERAMI CAMPBELL Open 2/06/96 SAT 9:00 - 10:00
COLUMBUS SUN 11:00 - 7:00
OH 43220
194 72 & JONES MGR - CARLOS O'FERRAL (402) 392-2885 7,738 RETAIL SQ. FT. DIST: 51
713 1/2 SOUTH 72ND STREET ASST - TAMMY RE JACKSON FAX (402) 392-2961 MON-FRI 9:00 - 9:00
Open 4/09/96 SAT 9:00 - 9:00
OMAHA SUN 10:00 - 6:00
NE 68114
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 12
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
195 SPRINGFIELD MGR - TERI FLOWER (417) 886-1840 8,163 RETAIL SQ. FT. DIST: 61
JAMES RIVER TOWNE CENTER ASST - TRACI KATZFEY FAX (417) 886-1843 MON-FRI 9:00 - 9:00
1839 INDEPENDENCE SUITE S JEFF BAKER Open 4/13/96 SAT 9:00 - 9:00
SPRINGFIELD SUN 10:00 - 6:00
MO 65804
196 UNIVERSITY MGR - SHERRY FRANKS (812) 421-8526 RETAIL SQ. FT. DIST: 61
UNIVERSITY S/C ASST - PAMELA OMER FAX (812) 421-8532 MON-FRI - ^
4821 UNIVERSITY DRIVE Open 6/05/96 SAT - |
EVANSVILLE SUN - |
IN 47712 OPEN |
- -----------------------------------------------------------------------------------------------------------------------------------
NOT OPEN |
|
197 BRADLEY MGR - TINA EDDINGTON (815) 939-9159 RETAIL SQ. FT. DIST: 13 |
WATER TOWER PLAZA FAX (815) 939-9267 MON-FRI 9:00 - 9:00 v
1595 NORTH STATE ROUTE 50 Open 8/01/96 SAT 9:00 - 9:00
BRADLEY SUN 10:00 - 6:00
IL 60915
198 LAFAYETTE MARKET MGR - MARTH WHITE RETAIL SQ. FT. DIST: 47
LAFAYETTE MARKET PLACE MON-FRI -
3540 STATE ROAD 38E SUITE 301 Open 8/10/96 SAT -
LAFAYETTE SUN -
IN 47905
199 HIGHLAND GROVE MGR - OPEN RETAIL SQ. FT. DIST: 43
HIGHLAND GROVE MON-FRI -
10229 INDIANAPOLIS BOULEVARD Open 8/15/96 SAT -
HIGHLAND SUN -
IN 46320
200 DEER GROVE MGR - OPEN RETAIL SQ. FT. DIST: 44
DEER GROVE CENTER MON-FRI -
637 EAST DUNDEE ROAD Open 8/15/96 SAT -
PALATINE SUN -
IL 60067
201 WAUSAU MGR - OPEN RETAIL SQ. FT. DIST: 40
MOUNTAIN VIEW SQUARE MON-FRI -
3712 RIB MOUNTAIN ROAD Open 8/25/96 SAT -
WAUSAU SUN -
WI 54401
202 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 13
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
203 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99 NOT
NEW STORE ADDRESS MON-FRI - OPEN
Open 10/01/96 SAT - |
ANYWHERE SUN - |
IL v
204 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
205 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
206 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
207 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
208 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
209 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
210 NEW STORE MGR - OPEN RETAIL SQ. FT. DIST: 99
NEW STORE ADDRESS MON-FRI -
Open 10/01/96 SAT -
ANYWHERE SUN -
IL
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 14
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
501 WHEATON/BALTIMORE MGR - LOREN BAILEY (301) 946-8093 6,512 RETAIL SQ. FT. DIST: 12 OPEN
WHEATON PARK S/C ASST - REBECCA MOWELL FAX (301) 946-9502 MON-FRI 10:00 - 9:00 |
12021 GEORGIA AVENUE ELISABETH RICCI Open 9/24/92 SAT 10:00 - 8:00 |
WHEATON SUN 11:00 - 5:00 |
MD 20902 v
502 LOCH RAVEN MGR - SUSAN BUSSARD (410) 296-6441 6,379 RETAIL SQ. FT. DIST: 1
HILLENDALE S/C ASST - PATRICIA MORRISON FAX (410) 296-8743 MON-FRI 10:00 - 9:00
6829 LOCH RAVEN BLVD ALYCIA BURNHAM Open 9/26/92 SAT 10:00 - 8:00
BALTIMORE SUN 11:00 - 5:00
MD 21204
503 COCKEYSVILLE MGR - DANA ALSTON (410) 683-0585 7,450 RETAIL SQ. FT. DIST: 1
CHURCH LANE CENTER ASST - NANNETTE MAGGITTI FAX (410) 683-0482 MON-FRI 10:00 - 9:00
9952 YORK ROAD TRACEY HEDRICK Open 5/22/93 SAT 10:00 - 8:00
COCKEYSVILLE SUN 11:00 - 5:00
MD 21030
504 DUNDALK MGR - KEN HUMPHREYS (410) 282-8501 5,280 RETAIL SQ. FT. DIST: 1
MERRITT POINT S/C ASST - LINDA RIPPLE FAX (410) 282-8502 MON-FRI 10:00 - 9:00
1581 MERRITT BOULEVARD JENNIFER WATTS Open 10/02/93 SAT 9:00 - 7:00
DUNDALK SUN 11:00 - 5:00
MD 21228
505 CATONSVILLE MGR - DAVID JOHNSON (410) 747-6766 4,970 RETAIL SQ. FT. DIST: 1
FORTY WEST PLAZA ASST - MARY ADAMS FAX (410) 747-7291 MON-FRI 9:00 - 9:00
6489 BALTIMORE NATIONAL PIKE Open 11/05/93 SAT 9:00 - 8:00
CATONSVILLE SUN 11:00 - 5:00
MD 21228
506 LIBERTY COURT MGR - BENJAMIN SAMPSON (410) 922-1720 7,850 RETAIL SQ. FT. DIST: 1
8656 LIBERTY ROAD FAX (410) 922-9281 MON-FRI 10:00 - 9:00
RANDALLSTOWN Open 10/20/94 SAT 9:00 - 8:00
SUN 12:00 - 5:00
MD 21133
507 GLEN BURNIE MGR - MELANIE PIGOTT (410) 863-0627 7,874 RETAIL SQ. FT. DIST: 1
CHESAPEAKE SQUARE S/C ASST - KIRSTIN MARTINEZ FAX (410) 863-0629 MON-FRI 10:00 - 9:00
6714-A GOVERNOR RITCHIE HWY BETH NOVAK Open 11/06/94 SAT 9:00 - 9:00
GLEN BURNIE SUN 11:00 - 5:00
MD 21061
508 CHANTILLY MGR - ANGELA STEWART (703) 817-0801 9,125 RETAIL SQ. FT. DIST: 1
13948 METROTECH DRIVE ASST - MELANIE LUPIEN FAX (703) 817-0803 MON-FRI 9:00 - 9:00
CHANTILLY REBECCA CARROLL Open 3/31/95 SAT 9:00 - 9:00
SUN 10:00 - 6:00
VA 22021
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 15
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
509 PENN STATION MGR - TAJUANA PAYNE (301) 420-0103 10,335 RETAIL SQ. FT. DIST: 12
5604 SILVERHILL ROAD MIT - EVELYN MULLENEX FAX (301) 420-0103 MON-FRI 10:00 - 9:00
DISTRICT HEIGHTS ASST - CAROLYN MURRAY Open 4/01/95 SAT 10:00 - 9:00
DOUGLAS SHUE SUN 11:00 - 5:00
MD 20747
510 WESTGATE CENTER MGR - PAULA SANDERS (703) 368-1742 9,175 RETAIL SQ. FT. DIST: 12
WESTGATE SHOPPING CENTER ASST - HUGH KILBY FAX (703) 368-1738 MON-FRI 9:00 - 9:00
8099 SUDLEY BILL CAPORALETTI Open 5/20/95 SAT 9:00 - 9:00
MANASSAS SUN 11:00 - 5:00
VA 22110
511 LAUREL MGR - SIA MASTAN (301) 490-7900 10,750 RETAIL SQ. FT. DIST: 12
LAUREL PLAZA FAX (301) 490-7961 MON-FRI 9:00 - 9:00
9622 ROUTE 198 Open 6/05/85 SAT 9:00 - 9:00
LAUREL SUN 10:00 - 6:00
MD 20707
512 ALEXANDRIA MGR - DEBBIE HUBBARD (703) 765-9756 7,618 RETAIL SQ. FT. DIST: 12
MT VERNON PLAZA ASST - RENITA JAMES FAX (703) 765-9759 MON-FRI 9:00 - 9:00
7684 RICHMOND HIGHWAY BOBBY ARTIS Open 7/27/95 SAT 9:00 - 9:00
ALEXANDRIA SUN 11:00 - 5:00
VA 22306
513 WALDORF MGR - BECKY NICKOLS (301) 374-9501 7,716 RETAIL SQ. FT. DIST: 12
FESTIVAL AT WALDORF ASST - CHRISTINA STRICK FAX (301) 374-9017 MON-FRI 9:00 - 9:00
2910 FESTIVAL WAY Open 7/28/95 SAT 9:00 - 9:00
WALDORF SUN 11:00 - 6:00
MD 20601
514 FREDERICKSBURG MGR - CHERYL D'ORIO (540) 371-5005 9,026 RETAIL SQ. FT. DIST: 12
GREENBRIAR SHOPPING CENTER ASST - PATRICIA THOMPSON FAX (540) 371-4704 MON-FRI 9:00 - 9:00
2042 PLANK ROAD Open 8/04/95 SAT 9:00 - 9:00
FREDERICKSBURG SUN 11:00 - 5:00
VA 22401
515 HANOVER CROSSING MGR - RODNEY MERRILL (717) 632-1557 RETAIL SQ. FT. DIST: 1
HANOVER CROSSING S/C ASST - NICOLE LADY FAX (717) 632-2373 MON-FRI 9:00 - 9:00
475 EISENHOWER DRIVE PAMELA KEENEY Open 5/10/96 SAT 9:00 - 9:00
HANOVER SUN 11:00 - 5:00
PA 17331
516 FIRST STATE PLAZA MGR - CAROL GARIS (302) 993-0282 6,502 RETAIL SQ. FT. DIST: 1
1716 WEST NEWPORT PIKE ASST - KIM HENDERSON FAX (302) 993-0285 MON-FRI 9:00 - 9:00
NEWCASTLE COUNTY DEBBIE CLOUSER Open 9/30/95 SAT 9:00 - 9:00
STANTON SUN 11:00 - 5:00
DE 19804
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FACTORY CARD OUTLET Date: 6/13/96
Store File Listing Page: 16
Reg
Store ....................... Managers................ Phone Numbers......
<S> <C> <C> <C> <C>
517 LANDMARK MGR - WILDA C-TORRES (703) 916-1834 8,094 RETAIL SQ. FT. DIST: 12 OPEN
PLAZA AT LANDMARK ASST - DOMINIQUE THOMAS FAX (703) 916-1836 MON-FRI 9:00 - 9:00 |
6198-C LITTLE RIVER TURNPIKE JENNIFER SMITH Open 10/28/95 SAT 10:00 - 9:00 |
ALEXANDRIA SUN 11:00 - 6:00 |
VA 22312 v
518 BEL AIR MGR - DAN NISSENNBAUM (410) 838-6830 9,600 RETAIL SQ. FT. DIST: 1
TOLLGATE MARKETPLACE ASST - LEWIS LEE FAX (410) 838-6806 MON-FRI 9:00 - 9:00
615 BEL AIR ROAD SUITE O Open 12/04/95 SAT 9:00 - 9:00
BEL AIR SUN 10:00 - 6:00
MD 21014
519 MIDLOTHIAN MARKET MGR - OPEN RETAIL SQ. FT. DIST: 12 NOT
MIDLOTHIAN MARKET MON-FRI - OPEN
217 WADSWORTH DRIVE Open 9/15/96 SAT - |
RICHMOND SUN - |
VA 23236 |
v
520 NEW BALTIMORE MGR - OPEN RETAIL SQ. FT. DIST: 1
NEW BALTIMORE MALL MON-FRI -
Open 10/01/96 SAT -
BALTIMORE SUN -
MD
*** END OF REPORT ***
</TABLE>
<PAGE>
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY,
WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD, MADE SUBJECT TO A SECURITY INTEREST, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER THAT
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
SECURED PROMISSORY NOTE
$1,000,000 June __,1996
FOR VALUE RECEIVED, the undersigned, FACTORY CARD OUTLET OF AMERICA LTD.,
an Illinois corporation ("Maker"), promises to pay to the order of SIRROM
CAPITAL CORPORATION, a Tennessee corporation ("Payee"; Payee and any subsequent
holder[s] hereof are hereinafter referred to collectively as "Holder"), at the
office of Payee at First American Trust Company, Custody Department, 800 First
American Center, Nashville, Tennessee 37237, Attn: Jeff Eubanks, or at such
other place as Holder may designate to Maker in writing from time to time, the
principal sum of ONE MILLION AND NO/lOOTHS DOLLARS ($1,000,000.00), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate of twelve and one-half percent (12.5%) per annum (computed on the
basis of a 360-day year); provided, however, that Holder may charge and receive
interest upon any renewal or extension hereof at the greater of (i) the rate set
out above, or (ii) any rate agreed to by the undersigned that is not in excess
of the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
first (1st) day of August, 1996, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until June , 2001 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part, at
any time and from time to time, without penalty. Any such prepayments shall be
credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
<PAGE>
Time is of the essence of this Note. It is hereby expressly agreed that in
the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default shall occur under that certain
Loan Agreement dated November 15, 1995, between Maker and Payee (as may be
amended from time to time, the "Loan Agreement"), which default or event of
default is not cured following the giving of any applicable notice and within
any applicable cure period set forth in said Loan Agreement; or should any
default by Maker be made in the performance or observance of any covenants or
conditions contained in any other instrument or document now or hereafter
evidencing, or securing or otherwise relating to the indebtedness evidenced
hereby (subject to any applicable notice and cure period provisions that may be
set forth therein); then, and in such event, the entire outstanding principal
balance of the indebtedness evidenced hereby, together with any other sums
advanced hereunder, under the Loan Agreement and/or under any other instrument
or document now or hereafter evidencing, or securing the indebtedness evidenced
hereby, together with all unpaid interest accrued thereon, shall, at the option
of Holder and without notice to Maker, at once become due and payable and may be
collected forthwith, regardless of the stipulated date of maturity. Upon the
occurrence of any Event of Default (as defined in the Loan Agreement), at the
option of Holder and without notice to Maker, all accrued and unpaid interest,
if any, shall be added to the outstanding principal balance hereof, and the
entire outstanding principal balance, as so adjusted, shall bear interest
thereafter until paid at an annual rate (the "Default Rate") equal to the lesser
of (i) the rate that is seven percentage points (7.0%) in excess of the
above-specified interest rate, or (il) the Maximum Rate in effect from time to
time, regardless of whether or not there has been an acceleration of the payment
of principal as set forth herein. All such interest shall be paid at the time of
and as a condition precedent to the curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of default hereunder,
acceptance of a past-due installment or other indulgences granted from time to
time, shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable laws. No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for payment of the indebtedness evidenced hereby, shall operate to
release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by
2
<PAGE>
an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
The indebtedness and other obligations evidenced by this Note are further
evidenced by (i) the Loan Agreement and (ii) certain other instruments and
documents, as may be required to protect and preserve the rights of Maker and
Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If, from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto, the obligation to pay interest hereunder shall be
reduced to the Maximum Rate; and if from any circumstance whatsoever, Holder
shall ever receive interest, the amount of which would exceed the amount
collectible at the Maximum Rate, such amount as would be excessive interest
shall be applied to the reduction of the principal balance remaining unpaid
hereunder and not to the payment of interest. This provision shall control every
other provision in any and all other agreements and instruments existing or
hereafter arising between Maker and Holder with respect to the indebtedness
evidenced hereby. This Note is intended as a contract under and shall be
construed and enforceable in accordance with the laws of the State of Tennessee,
except to the extent that federal law may be applicable to the determination of
the Maximum Rate. As used herein, the terms "Maker" and "Holder" shall be deemed
to include their respective successors, legal representatives and assigns,
whether by voluntary action of the parties or by operation of law.
MAKER:
FACTORY CARD OUTLET OF AMERICA LTD.,
an Illinois corporation
By:___________________________________
Title:________________________________
3
<PAGE>
EXHIBIT B
STOCK PURCHASE WARRANT
This Warrant is issued this ___ 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/lOOths 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: 745 Birginal Drive, Bensenville, IL 6010-1212 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
<PAGE>
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
2
<PAGE>
("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, Berry & Sims 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.
3
<PAGE>
(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 (il) 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.
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
(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
7
<PAGE>
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 indemnify 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.
8
<PAGE>
(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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<PAGE>
(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 WHEREOF, the parties hereto have set their hands as of the date
first above written.
FCOA ACQUISITION CORP., a Delaware
corporation
By:_______________________________
Title:____________________________
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By:_______________________________
Title:____________________________
10
<PAGE>
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: 745 Birginal Drive, Bensenville, IL 60106-1212 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
<PAGE>
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,
2
<PAGE>
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, Berry & Sims 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.
3
<PAGE>
(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.
4
<PAGE>
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
5
<PAGE>
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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<PAGE>
(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
7
<PAGE>
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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<PAGE>
(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
9
<PAGE>
(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/ William E. Freeman
------------------------------
Title: Chairman
--------------------------
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: [ILLEGIBLE]
------------------------------
Title: C.F.O.
--------------------------
10
<PAGE>
Exhibit 10.9.8
THIS NOTE HAS NOT BEEN REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT HAS BEEN ACQUIRED FOR INVESTMENT
PURPOSES ONLY, WITHOUT A VIEW TO RESALE OR DISTRIBUTION AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD, MADE SUBJECT TO A SECURITY INTEREST OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO MAKER
THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS.
SECURED PROMISSORY NOTE
$1,000,000 June 28, 1996
FOR VALUE RECEIVED, the undersigned, FACTORY CARD OUTLET OF AMERICA LTD.,
an Illinois corporation ("Maker"), promises to pay to the order of SIRROM
CAPITAL CORPORATION, a Tennessee corporation ("Payee"; Payee and any subsequent
holder[s] hereof are hereinafter referred to collectively as "Holder"), at the
office of Payee at First American Trust Company, Custody Department, 800 First
American Center, Nashville, Tennessee 37237, Attn: Jeff Eubanks, or at such
other place as Holder may designate to Maker in writing from time to time, the
principal sum of ONE MILLION AND NO/100THS DOLLARS ($1,000,000.00), together
with interest on the outstanding principal balance hereof from the date hereof
at the rate of twelve and one-half percent (12.5%) per annum (computed on the
basis of a 365-day year); provided, however, that Holder may charge and receive
interest upon any renewal or extension hereof at the greater of (i) the rate set
Out above, or (ii) any rate agreed to by the undersigned that is not in excess
of the maximum rate of interest allowed to be charged under applicable law (the
"Maximum Rate") at the time of such renewal or extension.
Interest only on the outstanding principal balance hereof shall be due and
payable monthly, in arrears, with the first installment being payable on the
first (1st) day of August, 1996, and subsequent installments being payable on
the first (1st) day of each succeeding month thereafter until June 27, 2001 (the
"Maturity Date"), at which time the entire outstanding principal balance,
together with all accrued and unpaid interest, shall be immediately due and
payable in full.
The indebtedness evidenced hereby may be prepaid in whole or in part, at
any time and from time to time, without penalty. Any such prepayments shall be
credited first to any accrued and unpaid interest and then to the outstanding
principal balance hereof.
Time is of the essence of this Note. It is hereby expressly agreed that in
the event that any default be made in the payment of principal or interest as
stipulated above, which default is not cured within five (5) business days; or
in the event that any default or event of default
<PAGE>
shall occur under that certain Loan Agreement dated November 15, 1995, between
Maker and Payee (as may be amended from time to time, the "Loan Agreement"),
which default or event of default is not cured following the giving of any
applicable notice and within any applicable cure period set forth in said Loan
Agreement; or should any default by Maker be made in the performance or
observance of any covenants or conditions contained in any other instrument or
document now or hereafter evidencing, or securing or otherwise relating to the
indebtedness evidenced hereby (subject to any applicable notice and cure period
provisions that may be set forth therein); then, and in such event, the entire
outstanding principal balance of the indebtedness evidenced hereby, together
with any other sums advanced hereunder, under the Loan Agreement and/or under
any other instrument or document now or hereafter evidencing, or securing the
indebtedness evidenced hereby, together with all unpaid interest accrued
thereon, shall, at the option of Holder and without notice to Maker, at once
become due and payable and may be collected forthwith, regardless of the
stipulated date of maturity. Upon the occurrence of any Event of Default (as
defined in the Loan Agreement), at the option of Holder and without notice to
Maker, all accrued and unpaid interest, if any, shall be added to the
outstanding principal balance hereof, and the entire outstanding principal
balance, as so adjusted, shall bear interest thereafter until paid at an annual
rate (the "Default Rate") equal to the lesser of (i) the rate that is seven
percentage points (7.0%) in excess of the above-specified interest rate, or (ii)
the Maximum Rate in effect from time to time, regardless of whether or not there
has been an acceleration of the payment of principal as set forth herein. All
such interest shall be paid at the time of and as a condition precedent to the
curing of any such default.
In the event this Note is placed in the hands of an attorney for
collection, or if Holder incurs any costs incident to the collection of the
indebtedness evidenced hereby, Maker and any indorsers hereof agree to pay to
Holder an amount equal to all such costs, including without limitation all
actual reasonable attorney's fees and all court costs.
Presentment for payment, demand, protest and notice of demand, protest and
nonpayment are hereby waived by Maker and all other parties hereto. No failure
to accelerate the indebtedness evidenced hereby by reason of default hereunder,
acceptance of a past-due installment or other indulgences granted from time to
time, shall be construed as a novation of this Note or as a waiver of such right
of acceleration or of the right of Holder thereafter to insist upon strict
compliance with the terms of this Note or to prevent the exercise of such right
of acceleration or any other right granted hereunder or by applicable laws. No
extension of the time for payment of the indebtedness evidenced hereby or any
installment due hereunder, made by agreement with any person now or hereafter
liable for payment of the indebtedness evidenced hereby, shall operate to
release, discharge, modify, change or affect the original liability of Maker
hereunder or that of any other person now or hereafter liable for payment of the
indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
otherwise in writing. This Note may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
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The indebtedness and other obligations evidenced by this Note are further
evidenced by (i) the Loan Agreement and (ii) certain other instrument: and
documents, as may be required to protect and preserve the rights of Maker and
Payee as more specifically described in the Loan Agreement.
All agreements herein made are expressly limited so that in no event
whatsoever, whether by reason of advancement of proceeds hereof, acceleration of
maturity of the unpaid balance hereof or otherwise, shall the amount paid or
agreed to be paid to Holder for the use of the money advanced or to be advanced
hereunder exceed the Maximum Rate. If from any circumstances whatsoever, the
fulfillment of any provision of this Note or any other agreement or instrument
now or hereafter evidencing, securing or in any way relating to the indebtedness
evidenced hereby shall involve the payment of interest in excess of the Maximum
Rate, then, ipso facto the obligation to pay interest hereunder shall be reduced
to the Maximum Rate; and if from any circumstance whatsoever, Holder shall ever
receive interest, the amount of which would exceed the amount collectible at the
Maximum Rate, such amount as would be excessive interest shall be applied to the
reduction of the principal balance remaining unpaid hereunder and not to the
payment of interest This provision shall control every other provision in any
and all other agreements and instruments existing or hereafter arising between
Maker and Holder with respect to the indebtedness evidenced hereby.
This Note is intended as a contract under and Shall be construed and
enforceable in accordance with the laws of the State of Tennessee, except to the
extent that federal law may be applicable to the determination of the Maximum
Rate.
As used herein, the terms "Maker" and "Holder" Shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law.
MAKER:
FACTORY CARD OUTLET OF AMRICA
LTD., an Illinois corporation
By: [ILLEGIBLE}
----------------------------
Title: Pres & CEO
-------------------------
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Pay to the order of
First Union National Bank of Tennessee, as Agent
SIRROM CAPITAL CORPORATION
By: [ILLEGIBLE]
--------------------------
Title: CFO
-----------------------
<PAGE>
Exhibit 10.9.9
AMENDED AND RESTATED
PURCHASE WARRANT
This Warrant is issued this 30th day of July, 1996, effective as of
November 15, 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 nol100ths Dollars ($4,000,000) pursuant to the terms
of a secured promissory note dated November 15, 1995 (the "Note") and related
loan agreement dated November 15, 1995 (the "Loan Agreement"), and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby grants to Holder the right to purchase 23,658
shares of the Company's common stock (the "Common Stock"), which the Company
represents equals 2.5% of the capital stock of the Company on the date hereof,
calculated on a fully diluted basis after exercise of this Warrant ("Base
Amount"), provided that in the event that the indebtedness evidenced by the Note
is outstanding on the following dates, the Base Amount shall be increased to the
corresponding number set forth below:
Date Base Amount
--------------------------- ----------------------------------------
April 15, 1997 33,465 shares of Common Stock,
or
November 15, 1998 43,477 shares of Common Stock,
or
November 15, 1999 53,700 shares of Common Stock;
and further provided that the issuance of the Common Stock hereunder is subject
to the provisions of Section 3A. hereof The shares of Common Stock issuable upon
exercise of this Warrant are hereinafter referred to as the "Shares." This
Warrant shall be exercisable at any time and from time to time from the date
hereof until November 30, 2000. For purposes of this Warrant the term "fully
diluted basis" shall be determined in accordance with generally accepted
accounting principles as of the date hereof.
<PAGE>
2. Exercise Price. The exercise price (the "Exercise Price") per share for
which all or any of the Shares may be purchased pursuant to the terms of this
Warrant shall be One Cent ($.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: 745 Birginal Drive, Bensenville, IL 60106-1212 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 S 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
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<PAGE>
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, Berry & Sims 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 (1) 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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<PAGE>
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. 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
effective date hereof, the Company shall not issue employee stock options
for shares of the Company's capital stock in an amount greater than
fifteen percent (1S%) 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)
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<PAGE>
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.
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-ha1f. Whenever there shall be an adjustment pursuant
to this Section 8(a), the Company shall forthwith notity 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.
5
<PAGE>
(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 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 6f 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
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<PAGE>
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 $15,000,000), 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 effective
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.
(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
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<PAGE>
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 indemnity 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 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 patty'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
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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 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.
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(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
(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 mall, (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 specity, 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 (li) shall specity 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.
11. Amendment and Restatement. This Warrant evidences an amendment and
restatement of that certain Stock Purchase Warrant dated November 15, 1995 by
the
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Company in favor of Holder (the "Original Warrant"). Accordingly, this Warrant
replaces the Original Warrant.
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/ William E. Freeman
-------------------------------
Title: Chairman
SIRROM CAPITAL CORPORATION, a
Tennessee corporation
By: [ILLEGIBLE]
-------------------------------
Title: CFO
11
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Exhibit 10.9.10
AMENDMENT TO STOCK PURCHASE WARRANT
THIS AMENDMENT TO STOCK PURCHASE WARRANT (this "Amendment"), dated
as of July 30, 1996, is between ECQA ACQUISITION CORP., a Delaware corporation
(the "Company"), and SIRROM CAPITAL CORPORATION, a Tennessee corporation
("Sirrom").
WHEREAS, the Company and Sirrom are parties to that certain Stock
Purchase Warrant, dated as of June 28, 1996, respecting Sirrom's right to
purchase up to 0.625% of the capital stock of the Company (the "Warrant"); and
WHEREAS, the Company has requested that Sirrom make certain changes
to the Warrant and Sirrom is willing to make such changes;
NOW, THEREFORE, in consideration of the premises, the parties, each
intending to be legally bound hereby, agree as follows:
1. Increase in Series C Preferred Stock Section 9(c)(ii)(B) of the
Warrant is hereby amended by replacing the phrase "(up to $13,000,000)"
contained therein with the phrase "(up to $15,000,000)".
2. Full Force and Effect of Warrant. Except, and solely to the
extent, that the same have been specifically modified, amended or supplemented
by this Amendment, all of the terms and conditions of the Warrant shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
FCOA ACQUISITION CORP. SIRROM CAPITAL CORPORATION
By: William E. Freeman By: [ILLEGIBLE]
--------------------------- ---------------------------
Title: Chairman of the Board Title: CFO
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