THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE TRANSFERRED WITHOUT SUCH
REGISTRATION OR EXEMPTION THEREFROM.
STOCK PURCHASE WARRANT
[Initial Warrant]
This Warrant is issued this __________ day of __________, _____, by THE
GREAT TRAIN STORE COMPANY, a Delaware corporation (the "Company"), to SIRROM
CAPITAL CORPORATION d/b/a TANDEM CAPITAL, a Tennessee corporation (SIRROM
CAPITAL CORPORATION and any subsequent assignee or transferee hereof are
hereinafter referred to collectively as "Holder" or "Holders"). Capitalized
terms not defined herein shall have the meanings assigned by the Debenture
Purchase Agreement referred to in Section 1.
Agreement:
1. Issuance of Warrant; Term. For and in consideration of Sirrom
Capital Corporation d/b/a Tandem Capital purchasing from the Company and other
Borrowers a Subordinated Debenture in the original principal amount of Three
Million Dollars ($3,000,000.00) (the "Debenture") pursuant to the terms of a
Debenture Purchase Agreement dated ___________ ____, 1998 (the "Debenture
Purchase 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 at any time and from time to time, in whole or in
part, on or after ________ ___, 1998, up to175,000 shares of the Company's
common stock, $.01 par value (the "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 _________ , 1998, until ___________ ____, 20___ .
2. Exercise Price. The exercise price (the "Exercise Price") per share
for which all or any of the Shares may be purchased shall be equal to an initial
Exercise Price of $3.75 per share, adjusted as provided by Section 7.
3. Exercise. This Warrant may be exercised by the Holder hereof as to
all or any increment or increments of 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 address set forth in the Debenture Purchase Agreement, 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 Debenture 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 where the excess of (A) the Fair Market
Value of the Shares subject to the portion of this Warrant that is surrendered
(the "Surrendered Shares"), over (B) the aggregate Exercise Price of the
Surrendered Shares, is equal to the aggregate Exercise Price for the Shares to
be issued. Upon payment of the Exercise Price, the Holder shall be deemed to be
the holder of record of the Shares, notwithstanding that the stock transfer
books of the Company may then be closed or that certificates representing such
Shares may not then be actually delivered to the Holder. The Company shall as
promptly as practicable thereafter, and in any event within 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. If this Warrant
shall be exercised with respect to less than all of the Shares, the Holder shall
be entitled upon surrender of the old Warrant 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 which may be payable in respect of the issuance of
this Warrant or the issuance of any Shares upon exercise of this Warrant.
4. Covenants, Conditions, and Repurchase. The above provisions are
subject to the following:
4.1 Restrictive Legend . Each certificate representing Shares shall
bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAW. THESE SECURITIES MAY NOT BE TRANSFERRED WITHOUT SUCH
REGISTRATION OR EXEMPTION THEREFROM.
4.2 Validity; Reservation of Shares . The Company covenants and agrees
that all Shares which may be issued upon exercise of this Warrant will, upon
issuance and payment therefor pursuant to this Warrant, be 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 as will be sufficient to permit the exercise in full of this Warrant.
4.3 Repurchase. The Company may at any time upon 10 Business Days prior
notice repurchase all or less than all of the then outstanding Warrants at a
price of $0.01 per Share issuable upon exercise of such Warrants, provided that
on the date notice is given (i) the Common Stock issuable upon exercise of the
Warrants shall be subject to an effective registration statement under the
Securities Act of 1933, and (ii) the average closing bid price (or, if the
Common Stock is not then listed for trading on the NASDAQ National Market, the
Fair Market Value) of the Common Stock for the 20 preceding trading days shall
be at least 200% of the Exercise Price of the Warrants to be repurchased. On and
after the date the indebtedness evidenced by the Debentures has been paid in
full, the Company may upon 10 Business Days prior notice repurchase all or less
than all of the then outstanding Warrants at a price equal to the aggregate
Exercise Price of the shares issuable upon exercise of such Warrants, provided
that on the date notice is given the Common Stock issuable upon exercise of the
Warrants shall be subject to an effective registration statement under the
Securities Act of 1933. Provided further, that in either case, the holder of
Warrants may during the ten Business Days following the date of notice, give
notice of exercise of the Warrants called for repurchase, in which event the
Company's right to repurchase the Warrants shall be suspended for the period
provided for closing of the purchase of Common Stock issuable upon exercise of
the Warrants.
5. Transfer and Replacement of Warrant. Subject to the provisions of
Section 4, this Warrant may be transferred, in whole or in part, but only in
multiples of 10,000 Shares, to any person or business entity, by presentation of
the Warrant to the Company with written instructions for such transfer; provided
that the transferee is an accredited investor as defined in Regulation D of the
Securities Act of 1933, and in compliance with all applicable federal and state
securities laws. 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 transferee or transferees and in the denominations specified in such
instructions. Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft or destruction of this Warrant, and of indemnity or
security reasonably satisfactory to it, or upon surrender of this Warrant if
mutilated, the Company will make and deliver a new Warrant of like tenor,
bearing the restrictive legend set forth above, in lieu of this Warrant. This
Warrant shall be promptly canceled by the Company upon the surrender hereof in
connection with any transfer or replacement. 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; Rights Offering; Preemptive Rights.
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock that are then issuable upon exercise of this Warrant
shall be deemed to be outstanding and owned by the Holder and the Holder shall
be entitled to participate in such rights offering. The Company shall not grant
any preemptive rights with respect to any of its Common Stock without the prior
written consent of the Holder.
7. Adjustment of Number of Shares and Exercise Price.
7.1 Recapitalizations -- Adjustment of Number of Shares. If all or any
portion of this Warrant shall be exercised subsequent to any transaction in
which the Company shall (i) pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock payable in shares of
its capital stock (whether payable in shares of its Common Stock or of capital
stock of any other class), (ii) subdivide outstanding shares of Common Stock
into a larger number of shares, (iii) combine outstanding shares of Common Stock
into a smaller number of shares, (iv) issue by reclassification of shares of
Common Stock any shares of capital stock of the Company, or (v) otherwise change
its capital structure, 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,
then the Holder exercising this Warrant shall receive, for the aggregate price
paid upon such exercise, the aggregate number and class of shares and such other
securities which such Holder would have received if this Warrant had been
exercised immediately prior to the record date for such transaction.
7.2 Mergers, Etc. -- Adjustment of Number of Shares. 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, or the holders of Common Stock are entitled to
receive cash or other property, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate number
and class of shares, cash or other property 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.
7.3 Adjustment of Exercise Price Upon Issuance of Shares, Warrants,
Rights, Etc.
(a) Initial Exercise Price. The initial Exercise Price shall be $3.75
per share.
(b) Recapitalizations. If the Company, at any time prior to the
expiration of this Warrant, shall (i) pay a stock dividend or otherwise make a
distribution or distributions on shares of its Common Stock payable in shares of
its capital stock (whether payable in shares of its Common Stock or of capital
stock of any class), (ii) subdivide outstanding shares of Common Stock into a
larger number of shares, (iii) combine outstanding shares of Common Stock into a
smaller number of shares, (iv) issue by reclassification of shares of Common
Stock any shares of capital stock of the Company, or (v) otherwise change its
capital structure, then the Exercise Price then in effect shall be multiplied by
a fraction of which the numerator shall be the number of shares of Common Stock
of the Company outstanding before such event and of which the denominator shall
be the number of shares of Common Stock outstanding after such event. Such
adjustment shall become effective immediately after the record date in the case
of a dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) [Reserved].
(d) Issuance of Warrants, Rights, or Convertible Securities at Less
Than Exercise Price. If the Company, at any time prior to the expiration of this
Warrant, shall issue (i) options or warrants entitling the holder to subscribe
for or purchase shares of Common Stock at an exercise price less than the
Exercise Price, or (ii) securities convertible into Common Stock at a conversion
price less than the Exercise Price, then the Exercise Price then in effect shall
be reset at such lower amount. Provided, that the adjustment provided by this
Section 7.3(d) shall not apply to issuance of securities pursuant to options,
warrants, or conversion rights outstanding on the date this Warrant is issued,
plus up to a maximum of 100,000 additional shares issuable to officers,
directors, or employees (but not consultants or independent contractors) under
the Company's 1994 Incentive Compensation Plan, 1994 Director Stock Option Plan,
or other stock based compensation plan which may be approved by the stockholders
of the Company. Such adjustment shall be made whenever such options, warrants or
convertible securities are issued at an exercise or conversion price less than
the Exercise Price, and such adjustment shall become effective immediately after
the date on which such options, warrants or convertible securities are issued.
Provided, that upon the expiration of any right or warrant to purchase or
convert into Common Stock the issuance of which resulted in an adjustment in the
Exercise Price pursuant to this Section 7.3(d), if such right or warrant shall
expire and shall not have been exercised, the Exercise Price shall immediately
upon such expiration be recomputed and effective immediately upon such
expiration be increased to the price which it would have been (but reflecting
any other adjustments in the Exercise Price made pursuant to the provisions of
this Section 7 after the issuance of such rights or warrants) had the adjustment
of the Exercise Price made upon the issuance of such rights or warrants been
made on the basis of offering for subscription or purchase only that number of
shares of Common Stock actually purchased or obtained upon the exercise of such
rights or warrants actually exercised.
(e) Distributions of Other Property. If the Company, at any time prior
to the expiration of this Warrant, shall distribute to all holders of Common
Stock (and not to holders of Warrants on an as-exercised basis) evidences of its
indebtedness, or any of its assets, or rights or warrants to subscribe for or
purchase any security (excluding those referred to in Section 7.3(d) above), the
Exercise Price at which this Warrant shall thereafter be exercisable shall be
determined by multiplying the Exercise Price in effect prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which (x) the denominator shall be the per share Fair Market Value
of Common Stock determined as of the record date mentioned above, and of which
(y) the numerator shall be such per share Fair Market Value of the Common Stock
on such record date less the then fair market value at such record date of the
portion of such evidence of indebtedness, assets, or rights or warrants so
distributed applicable to one outstanding share of Common Stock, as determined
by the Board of Directors of the Company in good faith; provided, however that
in the event of a distribution exceeding ten percent of the net assets of the
Company, then such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) (an "Appraiser")
selected in good faith by the Holders of majority in interest of the Warrants;
and provided, further, that the Company, after receipt of the determination by
such Appraiser shall have the right to select an additional Appraiser, in which
case the fair market value shall be equal to the average of the determination by
each such Appraiser. Provided, that no such adjustment shall be made which has
the effect of increasing the Exercise Price. In either case the adjustments
shall be described in a statement provided to all Holders of Warrants. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
7.4 Other Adjustments, Etc.
(a) Rounding. All calculations under this Section 7 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(b) Notice of Adjustments. Whenever the Exercise Price is adjusted
pursuant to this Section 7, the Company shall promptly mail to each holder of
Warrants, a notice setting forth the Exercise Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(c) Exercise After Reclassification, Merger, Share Exchange, or Sale of
Assets. In case of any reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, any sale or transfer of
all or substantially all of the assets of the Company, or any compulsory share
exchange pursuant to which share exchange the Common Stock is converted into
other securities, cash or property, then the holders of Warrants shall have the
right thereafter to purchase upon exercise of such Warrants only the kind and
amount of shares of stock and other securities and property receivable upon or
deemed to be held following such reclassification, consolidation, merger, sale,
transfer, or share exchange by a holder of the number of shares of the Common
Stock which the holder of this Warrant would have received upon exercise of this
Warrant immediately prior to such reclassification, consolidation, merger, sale,
transfer, or share exchange. The terms of any such consolidation, merger, sale
transfer or share exchange shall include such terms so as to continue to give to
the holder of this Warrant the right to receive the securities or property set
forth in this Section 7.4(c) upon any exercise following such consolidation,
merger, sale, transfer, or share exchange. This provision shall similarly apply
to successive reclassifications, consolidations, mergers, sales, transfers, or
share exchanges.
(d) Procedure for Other Adjustments. In case at any time conditions
shall arise by reason of action taken by the Company which in the opinion of the
Board of Directors of the Company are not adequately covered by the other
provisions hereof and which might materially and adversely affect the rights of
the holders of Warrants (different than or distinguished from the effect
generally on the rights of holders of any securities of the Company) or in case
at any time any such conditions are expected to arise in the opinion of the
Board of Directors of the Company by reason of any action contemplated by the
Company, an Appraiser selected by the holders of more than 50% of the Warrants
shall give its opinion as to the adjustment, if any (not inconsistent with the
standards established in this Section 7), of the Exercise Price (including, if
necessary, any adjustment as to the securities which may be acquired upon
exercise) and any distribution which is or would be required to preserve without
diluting the rights of the holders of the Warrants; provided, however, that the
Company, after receipt of the determination by such Appraiser, shall have the
right to select an additional Appraiser, in which case the adjustment shall be
equal to the average of the adjustments recommended by each such Appraiser. The
Board of Directors of the Company shall make the adjustment recommended
forthwith upon the receipt of such opinion or opinions or the taking of any such
action contemplated, as the case may be; provided, however, that no such
adjustment of the Exercise Price shall be made which in the opinion of the
Appraiser(s) giving the aforesaid opinion or opinions would result in an
increase of the Exercise Price then in effect.
(e) No Double Counting. Notwithstanding anything to the contrary
contained in this Warrant, to the extent that any adjustment is made under the
terms of this Section 7 to the Exercise Price or the number of shares issuable
hereunder, no further adjustment shall be made with respect to the
recapitalization, issuance of securities, or distribution requiring adjustment.
No adjustment shall be made with respect to the issuance of Common Stock upon
the exercise of rights for which an adjustment was made under Section 7.4(d), or
for any securities issued in connection with the Debenture Purchase Agreement or
the exercise of any such securities. (f) Definition of Fair Market Value. "Fair
Market Value" per share of common stock means (i) in the case of a security
listed or admitted to trading on any national securities exchange, the last
reported sale price, regular way (as determined in accordance with the practices
of such exchange), on each day, or if no sale takes place on any day, the last
reported sale price, regular way) as determined in accordance with the practices
of such exchange) on the immediately preceding trading day (and in the case of a
security traded on more than one national securities exchange, at such price
upon the exchange on which the volume of trading during the last calendar year
was the greatest), (ii) in the case of a security not then listed or admitted to
trading on any national securities exchange, the average closing bid price of
the security for the 20 trading days preceding such day, (iii) in the case of a
security not then listed or admitted to trading on any securities exchange and
as to which no such reported sale price or bid and asked prices are available,
the average of the reported high bid and low asked prices on such day, as
reported by a reputable quotation service, or The Wall Street Journal, or if
there are no bids and asked prices on such day, the average of the high bid and
low asked prices, as so reported, on the most recent day (not more than 30 days
prior to the date in question) for which prices have been so reported, and (iv)
in the case of a security determined by the Company's Board of Directors as not
having an active quoted market or in the case of other property, if the Common
Stock is no longer publicly traded the fair market value of a share of Common
Stock or other property as determined by an Appraiser (as defined in Section
7.3(e) above) selected in good faith by the holders more than 50% of the
Warrants; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the right to select an additional
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser.
8. Certain Notices. If at any time the Company shall propose to (i)
declare any cash dividend upon its Common Stock; (ii) 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; (iii) offer for subscription to
the holders of any of its Common Stock any additional shares of stock in any
class or other rights; (iv) 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; (v) voluntarily or
involuntarily dissolve, liquidate or wind up the affairs of the Company; or (vi)
redeem or purchase any shares of its capital stock or securities convertible
into its capital stock, then the Company shall give to the Holder of this
Warrant, by certified or registered mail, (i) at least 10 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 15
days' prior written notice of the date when the same shall take place. 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. Article and Section Headings. Numbered and titled article and
section headings are for convenience only and shall not be construed as
amplifying or limiting any of the provisions of this Warrant.
10. Notice. Any and all notices, elections or demands permitted or
required to be made under this Warrant 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, 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 telecopy; or the
date two business days after the date of mailing, or the date of the next
business day after delivery to a courier service, as the case may be, shall be
deemed to be the date of such notice, election or demand.
To the Holder: Sirrom Capital Corporation d/b/a Tandem Capital
500 Church Street
Suite 200
Nashville, Tennessee 37219
Attention: Craig Macnab
Facsimile No.: (615) 242-0842
with a copy to: C. Christopher Trower, Esq.
3159 Rilman Road, N.W.
Atlanta, Georgia 30327-1503
Facsimile No.: (404) 816-6854
To the Company: The Great Train Store Company
14180 Dallas Parkway-- Suite 618
Dallas, Texas 75240
Attention: President
Facsimile No. 972-392-1698
with a copy to: Douglas J. Bates, Esq.
Gallop, Johnson & Neuman, L.C.
Interco Corporate Tower-- Suite 1600
101 South Hanley Road
St. Louis, Missouri 63105
Facsimile No.: 314-862-1219
11. Severability. If any provision of this Warrant or the application
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Warrant 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.
12. Entire Agreement. This Warrant between the Company and Holder
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
13. Governing Law and Amendments. This Warrant shall be construed and
enforced under the laws of the State of Missouri applicable to contracts to be
wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
14. Counterparts. This Warrant may be executed in any number of
counterparts and by different parties to this Warrant 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 Warrant.
15. Jurisdiction and Venue. The Company hereby consents to
jurisdiction, service of process, and venue in the courts of the State of
Tennessee or the State of Texas, for the purpose of any action arising out of
any of its obligations under this Warrant, and expressly waives jury trial and
any and all objections it may have as to jurisdiction, service of process, and
venue in such courts.
16. Equity Participation. This Warrant is issued in connection with the
Debenture Purchase Agreement. It is intended that this Warrant constitute an
equity participation under and pursuant to T.C.A. ss.47-24-101, et. seq. and
that equity participation be permitted under said statutes and not constitute
interest on the Debenture. If under any circumstances whatsoever, fulfillment of
any obligation of this Warrant, the Debenture Purchase Agreement, or any other
agreement or document executed in connection with the Debenture Purchase
Agreement, shall violate the lawful limit of any applicable usury statute or any
other applicable law with regard to obligations of like character and amount,
then the obligation to be fulfilled shall be reduced to such lawful limit, such
that in no event shall there occur, under this Warrant, the Debenture Purchase
Agreement, or any other document or instrument executed in connection with the
Debenture Purchase Agreement, any violation of such lawful limit, but such
obligation shall be fulfilled to the lawful limit. If any sum is collected in
excess of the lawful limit, such excess shall be applied to reduce the principal
amount of the Debenture.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Warrant this ____________ day of _______________, ____.
COMPANY: THE GREAT TRAIN STORE COMPANY
By: _______________________________________
Title: _______________________________________
HOLDER: SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
By: _____________________________________
Title: _____________________________________