Exhibit 14 to Schedule 13-D
SECURITIES PURCHASE AGREEMENT
BETWEEN
▇▇▇▇▇▇'▇ FURNITURE, INC.
AND
GENERAL ELECTRIC CAPITAL CORPORATION
Dated as of August 26, 1996
TABLE OF CONTENTS
PAGE
1. Purchase and Sale of the Securities...............................1
1.1. Authorization to Sell the
Securities...............................................1
1.2. Closing..................................................1
1.3. Deliveries at Closing....................................2
1.4. Cancellation of Certain Indebtedness.....................3
1.5. Definitions..............................................3
2. Representations and Warranties of the Company.....................3
2.1. Organization and Qualification...........................3
2.2. Due Authorization........................................4
2.3. Subsidiaries.............................................4
2.4. Sec Reports..............................................4
2.5. Financial Statements.....................................5
2.6. Actions Pending; Compliance with Laws....................5
2.7. Title to Properties; Insurance...........................6
2.8. Governmental Consents, etc...............................6
2.9. Holding Company Act and Investment Company Act...........6
2.10. Taxes....................................................6
2.11. Conflicting Agreements and Charter Provisions............7
2.12. Capitalization...........................................7
2.13. Issuance, Sale and Delivery of the Notes and the
Warrant..................................................8
2.14. Issuance, Sale and Delivery of the Common Stock..........8
2.15. Registration Under Exchange Act..........................8
2.16. ERISA....................................................9
2.17. Possession of Franchises, Licenses, etc..................9
2.18. Environmental and Other Regulations.....................10
2.19. Patents and Trademarks..................................10
2.20. Material Contracts and Obligations......................10
2.21 Books and Records.......................................11
2.22. Transactions with Related Parties.......................11
2.23. Brokers.................................................11
2.24. Accuracy of Information.................................11
2.25. Offering of Securities..................................12
2.26. Use of Proceeds.........................................12
2.27. Unlawful Use of Proceeds................................12
3. Representations and Warranties of the Purchaser..................13
3.1. Organization and Qualification..........................13
3.2. Due Authorization.......................................13
3.3. Conflicting Agreements and Other Matters................13
3.4. Acquisition for Investment..............................14
3.5. Brokers or Finders......................................14
3.6. Accredited Investor.....................................14
4. Registration, Exchange and Transfer of Notes.....................14
4.1. Authorized Denominations of Notes.......................14
4.2. The Note Register; Persons Deemed Owners................14
4.3. Issuance of New Notes Upon Exchange or Transfer.........15
4.4. Lost, Stolen, Damaged and Destroyed Notes...............15
5. Payment of Notes.................................................15
5.1. Home Office Payment.....................................15
5.2. Limitation on Interest..................................16
5.3. Interest................................................16
5.4. Business Day............................................16
6. Covenants of the Company.........................................16
6.1. Payment of the Notes....................................16
6.2. Financial Covenants.....................................17
6.3. Limitation on Senior Equity Securities..................18
6.4. Merger; Purchase and Sale of Assets.....................18
6.5. Compliance with Laws....................................19
6.6. Limitation on Agreements................................19
6.7. Preservation of Franchises and Existence................19
6.8. Insurance...............................................19
6.9. Payment of Taxes and Other Charges......................20
6.10. Effect of Certain Breaches..............................20
6.11. ERISA...................................................21
6.12. Financial Statements and Other Reports..................21
6.13. Inspection of Property..................................22
6.14. Rights of First Offer...................................23
6.15. Lost, Stolen, Damaged and Destroyed Stock Certifi-
▇▇▇▇▇...................................................24
6.16. Related Party Transactions..............................24
6.17 Operations in Accordance with Business Plan.............24
6.18 Best Efforts to Cause the Conversion of Preferred
Stock...................................................24
6.19. Notice of Breach........................................24
7. Restrictions on Transfer.........................................25
8. Events of Default and Remedies...................................25
8.1. Events of Default.......................................25
8.2. Acceleration of Maturity................................27
8.3. Other Remedies..........................................27
8.4. Conduct no Waiver; Collection Expenses..................28
8.5. Annulment of Acceleration...............................28
8.6. Remedies Cumulative.....................................28
8.7. Limitations.............................................29
9. Redemption..............................................29
9.1. Optional Redemption.....................................29
9.2. Mandatory Redemption....................................29
9.3. Procedures for Partial Redemption.......................29
9.4. Change in Control.......................................29
9.5. Redemption Procedures...................................30
10. Subordination of Notes...........................................30
10.1. Subordination of Notes to Senior Indebtedness...........30
10.2. Proofs of Claim of Holders of Senior Indebtedness;
Voting..................................................33
10.3. Rights of Holders of Senior Indebtedness
Unimpaired..............................................33
10.4. Effects of Event of Default.............................33
10.5. Company's Obligations Unimpaired........................34
10.6. Subrogation.............................................34
11. Interpretation..........................................34
11.1 Definitions.............................................34
11.2. Accounting Principles...................................40
12. Miscellaneous...........................................40
12.1. Payments................................................40
12.2. Severability............................................40
12.3. Specific Enforcement....................................40
12.4. Entire Agreement........................................41
12.5. Counterparts............................................41
12.6. Notices and Other Communications........................41
12.7. Amendments..............................................42
12.8. Cooperation.............................................42
12.9. Successors and Assigns..................................42
12.10. Expenses and Remedies...................................43
12.11. Survival of Representations and Warranties..............44
12.12. Transfer of Securities..................................44
12.13. Governing Law; Consent to Jurisdiction..................45
12.14. Term....................................................46
12.15. Publicity...............................................46
12.16. Signatures..............................................46
THIS SECURITIES PURCHASE AGREEMENT, dated as of August 26, 1996 (this
"Agreement"), between ▇▇▇▇▇▇'▇ FURNITURE, INC., a Delaware corporation
(including its predecessors, the "Company") and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation (the "Purchaser").
WHEREAS, the Purchaser wishes to purchase from the Company, and the Company
wishes to sell to the Purchaser, (i) 5,000,000 shares of the Company's Common
Stock par value $.001 per share (the "Common Stock"), at an aggregate purchase
price of $5,000,000, (ii) the Company's 10% Subordinated Pay-In-Kind Notes due
August 31, 2001 (including all securities issued in exchange or replacement
therefor or in respect of payments of interest thereon, herein referred to as
the "Notes", substantially in the form set forth on Exhibit A hereto), in the
initial aggregate principal amount of $5,000,000, and (iii) in connection with
the sale of the Notes, a warrant (the "Warrant" and, together with any warrants
issued upon any division thereof, the "Warrants") to purchase 1,400,000 shares
of Common Stock, having the terms and conditions set forth in the form of the
Warrant attached hereto as Exhibit B. The Common Stock, the Notes and the
Warrants are collectively referred to as the "Securities".
WHEREAS, in connection with the purchase and sale of the Securities, the
Purchaser, the Company and the stockholders listed on the signature pages
thereof, will enter into a Stockholders Agreement in substantially the form
attached hereto as Exhibit C (the "Stockholders Agreement").
WHEREAS, the Purchaser and the Company desire to provide for such purchase
and sale and to establish various rights and obligations in connection
therewith.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
1. PURCHASE AND SALE OF THE SECURITIES.
1.1. Authorization to Sell the Securities. Subject to the terms and
conditions of this Agreement, the Company has duly authorized the issuance and
sale of the Securities.
1.2. Closing. The closing of the transactions contemplated hereby (the
"Closing") will take place at the offices of Fried, Frank, Harris, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, New York, New York, at 9:00 a.m. on the date of this Agreement or on
such other date as shall be mutually agreed by the Company and the Purchaser
(the "Closing Date").
1.3. Deliveries at Closing. At the Closing:
(i) Stroock & Stroock & ▇▇▇▇▇
and Olimpia, ▇▇▇▇▇▇ & Lively, counsel to the Company, shall have delivered to
the Purchaser opinions dated the Closing Date with respect to the matters set
forth in Exhibit D hereto;
(ii) the Company shall have executed a registration
rights agreement in the form of Exhibit E hereto (the "Registration Rights
Agreement");
(iii) the Company shall have delivered to the Purchaser the Warrant
in the form of Exhibit B;
(iv) the Company shall have delivered to the Purchaser
stock certificates registered in the name of the Purchaser representing
5,000,000 shares of Common Stock;
(v) the Company shall have delivered to the
Purchaser Notes in such denominations as the Purchaser has requested, dated the
Closing Date and registered in the name of the Purchaser, in an initial
aggregate principal amount of $5,000,000;
(vi) the Purchaser shall have paid to
the Company $10,000,000 by wire transfer of immediately available funds of which
$5,000,000 shall represent the purchase price for the Common Stock and
$5,000,000 shall represent the purchase price for the Notes and the Warrant;
(vii) the Company shall have delivered evidence of cancellation of certain
indebtedness of the Company as described in Section 1.4 below;
(viii) the Company shall have delivered evidence of the conversion to
Common Stock of all shares of the Company's Preferred Stock, par value $.001 per
share (the "Preferred Stock"), which are designated as Series A Preferred Stock
("Series A Preferred Stock") outstanding immediately before Closing (and all
accrued but unpaid dividends thereon) such that as of the Closing Date no
Preferred Stock will remain outstanding;
(ix) concurrently with the Closing hereunder, ▇▇▇▇▇▇
Group (as set forth on Schedule 1.3A attached hereto) shall have purchased from
the Company 1,000,000 shares of Common Stock for an aggregate purchase price of
$1,000,000, and the Other Investors (as set forth on Schedule 1.3B attached
hereto) shall have purchased from the Company 3,000,000 shares of Common Stock
for an aggregate purchase price of $3,000,000; and
(x) the employment agreement
between the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a copy which is attached as Exhibit F
hereto shall have been executed and delivered by the parties thereto and shall
be in full force and effect.
The Closing of the purchase and sale of the
Securities shall be deemed to have taken place in the State of New York.
1.4. Cancellation of Certain Indebtedness. On or before the Closing Date,
the Company shall enter into Cancellation and Exchange Agreements with (a) ▇▇▇▇▇
Investments Inc. ("▇▇▇▇▇"), the holder of (i) a Demand Promissory Note issued by
the Company in the aggregate principal amount of $1,500,000, dated May 21, 1996
and (ii) a Demand Promissory Note issued by the Company in the aggregate
principal amount of $500,000, dated July 2, 1996, and (b) each holder (together
with ▇▇▇▇▇, each a "Note Holder") of Series 1996-I or Series 1996-II Convertible
Promissory Notes, which are currently outstanding in the aggregate principal
amount of $950,000, whereby such aforementioned indebtedness of the Company,
including any accrued and unpaid interest thereon, shall be cancelled in
exchange for shares of Common Stock. Each Note Holder shall receive the number
of shares of Common Stock equal to (x) the sum of (i) the aggregate principal
amount of indebtedness of the Company held by such Note Holder and (ii) any
accrued and unpaid interest thereon divided by (y) the Common Stock purchase
price of $1.00 per share.
1.5. Definitions. Certain capitalized terms used in this Agreement are
defined in Section 11 hereof.
2. Representations and Warranties of the Company. The Company represents
and warrants as follows:
2.1. Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated and has the power to
own its respective property and to carry on its respective business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and in good standing in every jurisdiction in
which the nature of the respective business conducted or property owned by it
makes such qualification necessary and where the failure so to qualify would be
material to the Company or such Subsidiary, as the case may be.
2.2. Due Authorization. The execution and delivery of this Agreement, the
Stockholders Agreement, the Registration Rights Agreement, the Notes and the
Warrant and the issuance and sale of the Securities by the Company and
compliance by the Company with all the provisions of this Agreement, the
Stockholders Agreement, the Registration Rights Agreement, the Notes and the
Warrant (i) are within the corporate power and authority of the Company; (ii) do
not or will not require any approval or consent of the stockholders of the
Company, other than approvals and consents which have been duly obtained; and
(iii) have been authorized by all requisite corporate proceedings on the part of
the Company. This Agreement, the Stockholders Agreement, the Registration Rights
Agreement, the Notes and the Warrant have been duly executed and delivered by
the Company and constitute valid and binding agreements of the Company,
enforceable in accordance with their respective terms, except that (i) such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. The Company has
furnished to the Purchaser true and correct copies of the Company's Certificate
of Incorporation and By-laws as in effect on the date of this Agreement.
2.3. Subsidiaries. The Subsidiaries of the Company, all of which are wholly
owned by the Company, together with their jurisdiction of incorporation, are as
set forth on Schedule 2.3 hereto.
2.4. SEC Reports. The Company and its predecessor have filed all proxy
statements, reports and other documents required to be filed by it under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since December
31, 1993; and the Company has furnished the Purchaser copies of its Annual
Report on Form 10-K for the fiscal year ended December 31, 1993, and all proxy
statements and reports under the Exchange Act filed by the Company after such
date, each as filed with the Securities and Exchange Commission (the
"Commission") (collectively, the "SEC Reports"). Each SEC Report was in
compliance with the requirements of its respective report form and did not on
the date of filing contain any untrue statement of a material fact or omit to
state a 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 and as of the date hereof there is no fact not disclosed in
the SEC Reports which is material to the Company.
2.5. Financial Statements. The financial statements (including any related
schedules and/or notes) included in the SEC Reports have been prepared in
accordance with generally accepted accounting principles consistently followed
(except as indicated in the notes thereto) throughout the periods involved and
fairly present the consolidated financial condition, results of operations,
changes in stockholders' equity and cash flows of the Company and its
Subsidiaries as of the dates thereof and for the periods ended on such dates (in
each case subject, as to interim statements, to changes resulting from year-end
adjustments, which in the aggregate will not be material in amount or effect),
and the Company and its Subsidiaries have no material liabilities, contingent or
otherwise, not reflected in the Company's balance sheet as of January 28, 1996,
included in the SEC Reports or otherwise referred to in the SEC Reports or
otherwise disclosed to the Purchaser in writing prior to the date of this
Agreement, other than any such liabilities incurred in the ordinary course of
business since January 28, 1996. Since January 28, 1996, the Company and its
Subsidiaries have operated their respective businesses only in the ordinary
course and no event has occurred which has or is reasonably likely to have a
material adverse effect on the business, financial condition, operations,
results of operations, assets, liabilities or prospects of the Company or any of
its Subsidiaries (a "Material Adverse Effect"), other than changes disclosed or
referred to in the SEC Reports or otherwise disclosed to the Purchaser in
writing prior to the date of this Agreement.
2.6. Actions Pending; Compliance with Laws. There is no action, suit,
investigation or proceeding pending or, to the knowledge of the Company,
threatened by any public official or governmental authority, against the Company
or any of its Subsidiaries or any of their respective properties or assets by or
before any court, arbitrator or governmental body, department, commission,
board, bureau, agency or instrumentality, which questions the validity or
enforceability of, or seeks to enjoin or invalidate this Agreement, the
Stockholders Agreement, the Registration Rights Agreement or the Securities or
any action taken or to be taken pursuant hereto or thereto, or, except as set
forth in the SEC Reports or as otherwise disclosed to the Purchaser in writing,
which is reasonably likely to be material to the Company or any of its
Subsidiaries, and neither the Company nor any of its Subsidiaries is in default
in any material respect with respect to any judgment, order, writ, injunction,
decree or award.
2.7. Title to Properties; Insurance. The Company and each of its
Subsidiaries have good and valid title to, or, in the case of property leased by
any of them as lessee, a valid and subsisting leasehold interest in, their
respective properties and assets, free of all liens and encumbrances other than
those referred to in the financial statements of the Company (or the notes
thereto) for the year ended January 28, 1996, included in the SEC Reports,
except in each case for such defects in title and such other liens and
encumbrances which are disclosed in the SEC Reports or which do not in the
aggregate materially detract from the value to the Company and its Subsidiaries
of their respective properties and assets. The Company and its Subsidiaries
maintain insurance in such amounts (to the extent available in the public
market), including self-insurance, retainage and deductible arrangements, and of
such a character as is reasonable for companies engaged in the same or similar
business. All insurance policies of the Company and its Subsidiaries are
disclosed on Schedule 2.7.
2.8. Governmental Consents, etc. The Company is not required to obtain any
consent, approval or authorization of, or to make any declaration or filing
with, any governmental authority as a condition to or in connection with the
valid execution, delivery and performance of this Agreement, the Stockholders
Agreement, and the Registration Rights Agreement, the Notes and the Warrant and
the valid offer, issue, sale or delivery of the Securities, or the performance
by the Company of its obligations in respect thereof, except for any filings
required to effect any registration pursuant to the Registration Rights
Agreement and any filings required pursuant to state and federal securities laws
which will be timely made after the Closing hereunder.
2.9. Holding Company Act and Investment Company Act. Neither the Company
nor any Subsidiary is: (i) a "public utility company" or a "holding company," or
an "affiliate" or a "subsidiary company" of a "holding company," or an
"affiliate" of such a "subsidiary company," as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, or (ii) a "public
utility," as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated person"
of any such "affiliated person," as such terms are defined in the Investment
Company Act of 1940, as amended.
2.10. Taxes. The Company and each of its Subsidiaries have filed or caused
to be filed all tax returns which are required to be filed and have paid or
caused to be paid all taxes as shown on said returns and on all assessments
received by them to the extent that such taxes have become due, except taxes the
validity or amount of which is being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside. The
federal income tax returns of the Company and its Subsidiaries have been
examined and reported on by the Internal Revenue Service (or closed by
applicable statutes) and all tax liabilities including additional assessments
have been satisfied for all fiscal years prior to and including the fiscal year
ended December 31, 1993, for the Company and its Subsidiaries and May 2, 1992
for ▇▇▇▇▇▇'▇ Sofa Factory and its Subsidiaries. The Company and its Subsidiaries
have paid or caused to be paid, or have established reserves that the Company
reasonably believes to be adequate, for all federal income tax liabilities and
state income tax liabilities applicable to the Company or any of its
Subsidiaries for all fiscal years which have not been examined and reported on
by the taxing authorities (or closed by applicable statutes).
2.11. Conflicting Agreements and Charter Provisions. Neither the Company
nor any of its Subsidiaries is a party to any contract or agreement or subject
to any charter or bylaw provision or judgment or decree which has or is
reasonably likely to have a Material Adverse Effect. None of (i) the execution
and delivery of this Agreement, the Shareholders Agreement, the Registration
Rights Agreement, the Notes and the Warrant and the issuance of the Securities
and (ii) the fulfillment of and compliance with the terms and provisions hereof
and thereof and of the Securities will conflict with or result in a breach of
the terms, conditions or provisions of, or give rise to a right of termination
under, or constitute a default under, or result in any violation of, the
Certificate of Incorporation or By-laws of the Company or any Subsidiary or any
mortgage, agreement, instrument, order, judgment, decree, statute, law, rule or
regulation to which the Company or any Subsidiary or any of their respective
properties is subject. Neither the Company nor any of its Subsidiaries (i) is in
default under any outstanding indenture or other debt instrument or with respect
to the payment of principal of or interest on any outstanding obligation for
borrowed money, or (ii) is in default under any of their respective contracts or
agreements, or under any instrument by which the Company or any of its
Subsidiaries is bound which default, in the case of this clause (ii),
individually or in the aggregate with all other such defaults, would be material
to the Company or any of its Subsidiaries.
2.12. Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of: (a) 35,000,000 shares of Common Stock, of which
4,120,810 shares are validly issued and outstanding, fully paid and
nonassessable; (b) warrants to purchase 185,701 shares of Common Stock which are
validly issued and outstanding, fully paid and nonassessable; (c) options to
purchase 191,614 shares of Common Stock which are validly issued and
outstanding, fully paid and nonassessable; and (d) 666,667 shares of Preferred
Stock, of which 117,694 shares of Series A Preferred Stock are validly issued
and outstanding, fully paid and nonassessable, and no other shares of Preferred
Stock are outstanding, as of the closing, 78,749 shares of such Series A
Preferred Stock shall be converted into shares of Common Stock. All of the
outstanding shares of Common Stock have been validly issued and are fully paid
and nonassessable. No class of capital stock of the Company is entitled to
preemptive rights. Except for the options and warrants listed above and letter
agreements providing for the grant to employees of options to purchase 15,000
shares of Common Stock, there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of any class of
capital stock of the Company, or contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of its capital stock or options, warrants or rights to purchase or
acquire any shares of its capital stock. Since January 1, 1996, except for an
increase in the number of authorized shares of Common Stock from 8,333,333
shares to 35,000,000 shares, the Company has not changed the amount of its
authorized capital stock or subdivided or otherwise changed any shares of any
class of its capital stock, whether by way of reclassification,
recapitalization, stock split or otherwise, or issued or reissued, or agreed to
issue or reissue, any of its capital stock.
2.13. Issuance, Sale and Delivery of the Notes and the Warrant. When issued
and delivered by the Company, and paid for by the Purchaser, the Notes and the
Warrant will constitute valid and legally binding obligations of the Company
enforceable against it in accordance with their terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' and contracting parties' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
2.14. Issuance, Sale and Delivery of the Common Stock. The shares of Common
Stock being issued to the Purchaser at the Closing are duly authorized and when
issued and delivered in accordance herewith will be, validly issued, fully paid
and nonassessable. The shares of Common Stock which will be issued upon exercise
of the Warrant have been authorized and reserved for issuance, and when issued
and delivered in accordance with the terms of the Warrant, will be validly
issued, fully paid and nonassessable.
2.15. Registration Under Exchange Act. The Company has not registered the
Notes or the Warrant as a class pursuant to Section 12 of the Exchange Act.
Neither the Notes nor the Warrant will be registered as such class and such
registration is not required except as otherwise required by the provisions of
the Registration Rights Agreement.
2.16. ERISA. No accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, exists with
respect to any Pension Plan (as defined in Section 11) (other than a
Multiemployer Plan (as defined below)). No liability to the PBGC has been, or is
reasonably likely to be, incurred with respect to any Pension Plan (other than a
Multiemployer Plan) by the Company, any of its Subsidiaries or any ERISA
Affiliate (as defined below) which is or would be materially adverse to the
Company, its Subsidiaries and any ERISA Affiliate. Neither the Company nor any
of its Subsidiaries and any ERISA Affiliate has incurred, or is reasonably
likely to incur, any withdrawal liability under Title IV of ERISA with respect
to any Multiemployer Plan which is or would be materially adverse to the
Company, its Subsidiaries and its ERISA Affiliates and if the Company, its
Subsidiaries and ERISA Affiliates, were to completely withdraw as of the date
hereof from each Multiemployer Plan in which they participate, the Company, its
Subsidiaries and its ERISA Affiliates would not incur any material withdrawal
liability under Title IV of ERISA. Neither the Company nor any of its
Subsidiaries has any obligation to provide post-retirement health benefits to
any employee or former employee. No fiduciary of any employee benefit plan (as
defined in Section 3(3) of ERISA) maintained or contributed to by the Company or
any of its subsidiaries, for the benefit of their respective employees (each an
"Employee Plan") has engaged or caused any Employee Plan to engage in any
transaction prohibited by Section 4975 of the Code or Section 406 of ERISA which
is reasonably likely to subject the Company or any Subsidiary or any entity the
Company or any Subsidiary has an obligation to indemnify to any tax or penalty
imposed under Section 4975 of the Code or Section 502 of ERISA. Each Employee
Plan has been maintained and administered in compliance with all applicable law
including ERISA and the Code in all material respects. An "ERISA Affiliate" for
purposes of this Section is any trade or business, whether or not incorporated,
which, together with the Company, is under common control, as described in
Section 414(b) or (c) of the Code, and the term "Multiemployer Plan" shall mean
any Pension Plan which is a "multiemployer plan" (as such term is defined in
Section 4001(a)(3) of ERISA).
2.17. Possession of Franchises, Licenses, Etc. The Company and its
Subsidiaries possess all franchises, certificates, licenses, permits and other
authorizations from governmental or political subdivisions or regulatory
authorities and all patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, free from burdensome restrictions, that are necessary
in any material respect to the Company or any of its Subsidiaries for the
ownership, maintenance and operation of their respective properties and assets,
and neither the Company nor any of its Subsidiaries is in violation of any
thereof in any material respect.
2.18. Environmental and Other Regulations. The Company and its Subsidiaries
are in compliance with all applicable federal, state, local and foreign laws and
regulations relating to protection of the environment and human health, and are
in compliance in all material respects with all other applicable federal, state,
local and foreign laws and regulations, including, without limitation, those
relating to equal employment opportunity and employment safety. There are no
claims, notices, civil, criminal or administrative actions, suits, hearings,
investigations, inquiries or proceedings pending or, to the best knowledge of
the Company, threatened against the Company or any Subsidiary that are based on
or related to any environmental matters, including any disposal of hazardous
substances at any place, or the failure to have any required environmental
permits, and there are no past or present conditions that are likely to give
rise to any liability or other obligations of the Company or any Subsidiary
under any environmental laws.
2.19. Patents and Trademarks. Set forth on Schedule 2.19 is a true and
complete list of all patents, patent applications, trademarks, service marks,
trademark and service ▇▇▇▇ applications, trade names, copyrights and licenses
presently used by the Company or any Subsidiary or necessary for the conduct of
the business of the Company and its Subsidiaries as conducted and as proposed to
be conducted (the "Intellectual Property Rights"). The Company owns, or has the
right to use under the agreements or upon the terms described on Schedule 2.19,
all of the Intellectual Property Rights. To the best of the Company's knowledge,
the business conducted or proposed to be conducted by the Company and its
Subsidiaries does not infringe or violate any of the patents, trademarks,
service marks, trade names, copyrights, licenses, trade secrets or other
proprietary rights of any other person or entity. Except as set forth on
Schedule 2.19, to the Company's knowledge, no other Person has any right to or
interest in any inventions, improvements, discoveries or other confidential
information utilized by the Company or any Subsidiary in its business.
2.20. Material Contracts and Obligations. Schedule 2.20 sets forth a list
of the following agreements or commitments of any nature to which the Company or
any Subsidiary is a party or by which it is bound: (a) any agreement relating to
the Intellectual Property Rights, (b) all employment and consulting agreements,
and all employee benefit, bonus, pension, profit-sharing, stock option, stock
purchase and similar plans and arrangements, (c) all manufacturing, distributor
and sales representative agreements and all agreements with suppliers or
vendors, (d) all agreements or commitments which restrict the ability of the
Company or any Subsidiary or Affiliate to engage in any business or line of
business in any location, (e) all agreements or commitments relating to
Indebtedness or Guarantees of the Company or any Subsidiary and (f) any other
agreement or commitment which requires future payments by or to the Company or
any Subsidiary in excess of $50,000 or which is otherwise material to the
Company or any of its Subsidiaries. The Company has delivered or made available
to the Purchaser copies of all of the foregoing agreements and commitments. All
of such agreements and commitments are valid, binding and in full force and
effect, except that, with respect to parties to such agreements and commitments
other than the Company and its Subsidiaries, this representation is made only to
the best knowledge of the Company.
2.21. Books and Records. All the books, records and accounts of the Company
and its Subsidiaries are in all material respects true and complete, are
maintained in accordance with good business practice and all laws applicable to
its business, and accurately present and reflect in all material respects all of
the transactions therein described. The Company has previously delivered to the
Purchaser true and complete texts of all of the minutes relating to meetings of
the stockholders, board of directors and committees of the board of directors of
the Company and each Subsidiary for the past five years.
2.22. Transactions with Related Parties. Schedule 2.22 sets forth a true
and complete list of the amounts and other essential terms of any contract,
arrangement or transaction currently in effect or effected during the past five
years between the Company or any Subsidiary and any Related Party, other than
(i) arrangements for the payment of salary, including bonuses, for services
rendered to the Company, which arrangements have previously been disclosed to
the Purchaser, (ii) other arrangements with any such person which in the
aggregate do not involve more than $10,000 or (iii) as previously disclosed in
the SEC Reports.
2.23. Brokers. Neither the Company nor any Subsidiary has engaged any
finder, broker or investment adviser, and has no obligation to pay any fees, in
connection with the transactions contemplated hereby.
2.24. Accuracy of Information. None of the representations and warranties
of the Company contained herein or the information, documents or other materials
(other than projections) which have been furnished in writing by the Company or
any of its representatives to the Purchaser in connection with the transactions
contemplated by this Agreement contains any material misstatement of fact, or
omits any material fact required to be stated herein or therein or necessary to
make the statements herein and therein not misleading. All projections furnished
in writing by the Company (i) have been prepared by management of the Company
after a careful analysis of all material data, (ii) are based on reasonable
assumptions by management of the Company and (iii) represent the best estimate
by management of the Company, based upon current reasonable assumptions, as to
the financial performance of the Company and its Subsidiaries for the periods
indicated, but do not represent any guarantee or assurance of the future
financial results of the Company and its Subsidiaries.
2.25. Offering of Securities. Neither the Company nor any Person acting on
its behalf has offered any of the Securities or any similar securities of the
Company for sale to, solicited any offers to buy any of the Securities or any
similar securities of the Company from or otherwise approached or negotiated
with respect to the Company with any Person other than the Purchaser and other
"Accredited Investors" (as defined in Rule 501(a) under the Securities Act).
Neither the Company nor any Person acting on its behalf has taken or will take
any action (including, without limitation, any offering of any securities of the
Company under circumstances which would require the integration of such offering
with the offering of any of the Securities under the Securities Act and the
rules and regulations of the Commission thereunder) which could reasonably be
expected to subject the offering, issuance or sale of any of the Securities to
the registration requirements of Section 5 of the Securities Act.
2.26. Use of Proceeds. The proceeds of the sale of the Securities will be
used by the Company for the purpose of debt reduction and for general corporate
purposes.
2.27. Unlawful Use of Proceeds.
(a) The Company will not use any proceeds from the sale of the Notes to
purchase or carry any "Security", as defined in Section 3(a)(10) of the Exchange
Act, or for any other purpose which would result in any transaction contemplated
by this Agreement constituting a "purpose credit" within the meaning of
Regulation G issued by the Board of Governors of the Federal Reserve System (12
CFR Part 207), or which would involve a violation of Section 7 of the Exchange
Act or Regulation T, U or X of said Board of Governors (12 CFR Parts 220, 221
and 224, respectively).
(b) The Company does not intend to apply and will not apply any part of the
proceeds of the sale of the Notes in any manner which is unlawful or which would
involve a violation of any regulation of the United States Treasury Department,
including, without limitation, the Foreign Assets Control Regulations, the
Transactions Control Regulations, the Cuban Assets Control Regulations, the
Foreign Funds Control Regulations, the Iranian Assets Control Regulations, the
Iraqi Transactions Regulations, the Nicaraguan Trade Control Regulations, the
South African Transactions Regulations and the Libyan Sanctions Regulations.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants as follows:
3.1. Organization and Qualification. The Purchaser is a corporation duly
organized and existing in good standing under the laws of the jurisdiction of
its formation and has the power to own its respective property and to carry on
its respective business as now being conducted. The Purchaser is duly qualified
to do business and in good standing in every jurisdiction in which the nature of
the respective business conducted or property owned by it makes such
qualification necessary, except where the failure to so qualify would not
prevent consummation of the transactions contemplated hereby or have a material
adverse effect on the Purchaser's ability to perform its obligations hereunder.
3.2. Due Authorization. The Purchaser has all right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Purchaser and the
consummation by the Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary action on behalf of the Purchaser. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
a valid and binding agreement of the Purchaser enforceable in accordance with
its terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors, rights, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3.3. Conflicting Agreements and Other Matters. Neither the execution and
delivery of this Agreement nor the performance by the Purchaser of its
obligations hereunder will conflict with, result in a breach of the terms,
conditions or provisions of, constitute a default under, or require any consent,
approval or other action by or any notice to or filing with any court or
administrative or governmental body pursuant to, the organizational documents or
agreements of the Purchaser or any mortgage, agreement, instrument, order,
judgment, decree, statute, law, rule or regulation to which the Purchaser or any
of its respective properties are subject.
3.4. Acquisition for Investment. The Purchaser is acquiring the Securities
being purchased by it for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof, and the
Purchaser has no present intention or plan to effect any distribution thereof.
The Purchaser acknowledges that the Securities have not been registered under
the Securities Act and may be sold or disposed of in the absence of such
registration only pursuant to an exemption from such registration.
3.5. Brokers or Finders. No agent, broker, investment banker or other firm
or Person, including any of the foregoing that is an Affiliate of the Purchaser,
is or will be entitled to any broker's fee or any other commission or similar
fee from the Purchaser in connection with any of the transactions contemplated
by this Agreement that the Company will be responsible for pursuant to Section
12.10.
3.6. Accredited Investor. The Purchaser is an "accredited investor" within
the meaning of Rule 501 promulgated under the Securities Act.
4. Registration, Exchange and Transfer of Notes.
4.1. Authorized Denominations of Notes. The Notes are issuable only as
fully registered Notes in denominations of at least $100,000 and any integral
multiple thereof; provided, that Additional Notes (as defined below) may be
issued in fractional denominations as provided herein.
4.2. The Note Register; Persons Deemed Owners. The Company shall maintain,
at its office designated for notices in accordance with Section 12.6, a register
for the Notes (the "Note Register"), in which the Company shall record the name
and address of the person in whose name each Note has been issued and the name
and address of each transferee and prior owner of each Note. The Company may
deem and treat the person in whose name a Note is so registered as the holder
and owner thereof for all purposes and shall not be affected by any notice to
the contrary, until due presentment of such Note for registration of transfer as
provided in this Article 4.
4.3. Issuance of New Notes Upon Exchange or Transfer. Upon surrender for
exchange or registration of transfer of any Note at the office of the Company
designated for notices in accordance with Section 12.6, the Company shall
execute and deliver, at its expense, one or more new Notes of any authorized
denominations requested by the holder of the surrendered Note, each dated the
date to which interest has been paid on the Note so surrendered (or, if no
interest has been paid, the date of such surrendered Note), but in the same
aggregate unpaid principal amount as such surrendered Note, and registered in
the name of such person or persons as shall be designated in writing by such
holder. Every Note surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or by his attorney duly authorized in writing. The
Company may also condition the issuance of any new Note or Notes in connection
with a transfer by any person on the payment of a sum sufficient to cover any
stamp tax or other governmental charge imposed in respect of such transfer.
4.4. Lost, Stolen, Damaged and Destroyed Notes. At the request of any
Purchaser, the Company will issue, at its expense, in replacement of any Note or
Notes lost, stolen, damaged or destroyed, upon surrender of the mutilated
portions thereof, if any, a new Note or Notes of the same denominations and of
the same unpaid principal amounts and otherwise of the same tenor as the Note or
Notes so lost, stolen, damaged or destroyed.
5. PAYMENT OF NOTES.
5.1. Home Office Payment. The Company will pay to the Purchaser or any
transferee thereof all sums becoming due on the Notes including all sums which
become due on the Notes at the maturity thereof) at the address specified by the
Purchaser for such purpose in Schedule 5.1 hereto, or at the address specified
by such transferee, by wire transfer of immediately available funds, or at such
other address or by such other method as a Purchaser or transferee shall have
designated by notice to the Company, without presentment for notation of payment
and without surrender. Before selling or otherwise transferring any Note, the
Purchaser or transferee will make a notation thereon of the aggregate amount of
all payments of principal, if any, theretofore made, and of the date to which
interest has been paid.
5.2. Limitation on Interest. No provision of this Agreement or of any Note
shall require the payment or permit the collection of interest in excess of the
maximum rate which is permitted by law. If any such excess interest is provided
for herein or in any Note, or shall be adjudicated to be so provided for, then
the Company shall not be obligated to pay such interest in excess of the maximum
rate permitted by law, and the right to demand payment of any such excess
interest is hereby waived, any other provisions in this Agreement or in any Note
to the contrary notwithstanding.
5.3. Interest.
(a) Interest on the unpaid principal balance of each Note shall be payable
at a rate per annum (computed on the basis of a 360-day year of twelve 30-day
months) of 10.00%, due and payable (i) quarterly, on each November 30, February
28, May 31 and August 31 (each, a "Payment Date") after the date of the Notes
commencing with November 30, 1996 and (ii) on the date of any prepayment, on the
amount prepaid, until the Notes have been paid in full.
(b) Accrued interest on each Note is required to be paid in cash (in
accordance with Section 5.1 herein) on each Payment Date after August 31, 1998.
On each Payment Date prior to and including August 31, 1998, in lieu of payment
of interest in cash, the Company shall pay all interest in additional notes (the
"Additional Notes"), which shall be dated the applicable Payment Date, shall
bear interest from and after such date, shall mature on August 31, 2001 and
shall be governed by, and subject to the terms, provisions and conditions of,
this Agreement, except that interest shall accrue on each Additional Note from
the date of such Additional Note.
5.4. Business Day. Any payments in respect of any Note which are required
under this Agreement to be made on a day which is not a Business Day shall be
made on the next succeeding Business Day.
6. COVENANTS OF THE COMPANY. From the date hereof and as long as any of the
Notes remain outstanding:
6.1. Payment of the Notes. The Company shall pay the principal of and
interest on the Notes (including Additional Notes) on the dates and in the
manner provided in this Agreement and the Notes.
6.2. Financial Covenants. (a) The Company will not permit its Consolidated
Net Worth at any time to be less than the amounts set forth below for the fiscal
years indicated:
1996 $15,500,000
1997 $14,000,000
1998 $14,500,000
1999 $17,000,000
2000 $24,000,000
2001 $35,500,000
(b) The Company will not incur, create, assume or permit to exist any
Indebtednes if such Indebtedness would result in a ratio of Consolidated Total
Indebtedness to Consolidated Net Worth of more than the amounts set forth below
for the fiscal years indicated:
1996 No greater than 1.0
1997 No greater than 1.0
1998 No greater than .80
1999 No greater than .60
2000 No greater than .35
(c) The Company will not permit its Fixed Charge Ratio to be less than the
amounts set forth below for the fiscal years indicated:
1996 No less than .40
1997 No less than .70
1998 No less than 1.0
1999 No less than 1.3
2000 No less than 1.6
(d) The Company and its Subsidiaries will not make capital expenditures in
excess of the amounts set forth below for the fiscal years indicated:
1996 $3,000 000
1997 $7,500,000
1998 $7,000,000
1999 $4,000,000
2000 $4,000,000
Any amount not spent in any one fiscal year may be spent in a succeeding
fiscal year, subject to the Company's annual business plan.
6.3 Limitation on Senior Equity Securities. The Company will not issue any
equity securities or any rights, options, warrants or other securities which are
exercisable for, exchangeable for or convertible into shares of any class of
capital stock ranking senior as to dividends or upon liquidation to the Common
Stock.
6.4 Merger; Purchase and Sale of Assets. (a) The Company will not merge
with or into or consolidate with any other Person unless the Company is the
continuing or surviving entity and the shares of Common Stock then outstanding
remain unchanged and outstanding and represent at least a majority of the Voting
Securities of the surviving corporation, and immediately after the consummation
of such merger or consolidation the surviving corporation would not be in
violation of any covenant set forth in Section 6.2 hereof.
(b) The Company will not, and will not permit any Subsidiary to, in any
transaction or series of transactions, sell, lease or exchange any assets of the
Company and/or any Subsidiary representing in the aggregate more than 10% of the
Company's Consolidated Net Worth, except for sales of inventory in the ordinary
course of business and except for subleasing of vacant retail space on
arm's-length terms.
(c) The Company will not, and will not permit any Subsidiary to, in any
transaction or series of transactions, acquire (including pursuant to a merger
or consolidation) all or any substantial portion of the business or assets of
any Person (except for acquisitions in any fiscal year involving aggregate
consideration of less than 10% of the Company's Consolidated Net Worth as of the
commencement of such fiscal year) unless (i) such transaction or series of
transactions has been approved by the Board of Directors of the Company and (ii)
after giving effect to such transaction or series of transactions, the Company
would be in compliance with the covenants set forth in Section 6.2 hereof.
6.5. Compliance with Laws. The Company will, and will cause each Subsidiary
to, comply with all applicable statutes, rules, regulations and orders of all
governmental authorities, with respect to the conduct of its business and the
ownership of its properties, including without limitation, those relating to
protection of the environment and human health, equal employment opportunity,
employee safety, ERISA and international trade laws and regulations, and apply
for obtain and maintain all permits necessary for the conduct of its business
and the ownership of its properties.
6.6. Limitation on Agreements. Except for the provisions of any Senior
Indebtedness, the Company will not, and will not permit any Subsidiary to, enter
into any agreement, or any amendment, modification, extension or supplement to
any existing agreement, which contractually prohibits the Company from paying
interest on the Notes or redeeming the Notes.
6.7. Preservation of Franchises and Existence. The Company will (i)
maintain its corporate existence, rights and franchises in full force and
effect, and (ii) cause the Subsidiaries to maintain their respective corporate
existences, rights and franchises in full force and effect, provided that
nothing in this Section 6.7 shall prevent the Company or any Subsidiary from
discontinuing its operations in any particular state or at any particular
location or locations within the state, or prevent the corporate existence,
rights and franchises of any Subsidiary from being terminated if, in the opinion
of the Board of Directors of the Company, the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries and
the loss thereof is not disadvantageous in any material respect to the holders
of Securities.
6.8. Insurance. The Company will, and will cause each of the Subsidiaries
to maintain, with insurers believed by the Company to be responsible, such
insurance, in such amounts and of such types as are customarily carried under
similar circumstances by companies engaged in the same or a similar business or
having similar properties similarly situated.
6.9. Payment of Taxes and Other Charges. The Company will pay or discharge,
and will cause each of the Subsidiaries to pay or discharge, before the same
shall become delinquent, (i) all taxes, assessments and other governmental
charges or levies imposed upon it or any of its properties or income (including,
without limitation, such as may arise under Sections 4062, 4063, or 4064 of
ERISA or any similar provision of law), and (ii) all claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like persons
which, in the case of either clause (i) or clause (ii), if unpaid, might result
in the creation of a material lien upon any of its properties, provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith pursuant to
appropriate proceedings.
6.10. Effect of Certain Breaches. In addition to the rights of the
Purchaser under the Stockholders Agreement, upon the occurrence of any Event of
Default under the Notes, then, and in each such case, the Board of Directors of
the Company shall take all necessary action to increase or decrease the size of
the Board of Directors and to appoint to the Board of Directors a number of
additional members (the "Additional Members") designated by the Purchaser that,
when added to any directors then in office designated solely by the Purchaser,
will result in directors designated by the Purchaser constituting a majority of
the entire Board of Directors. The holders of 66 2/3% in outstanding principal
amount of the Notes shall be entitled to designate the Additional Members of the
Board of Directors, and, for so long as such breach or Event of Default
continues, at each subsequent annual meeting the holders of 66 2/3% in
outstanding principal amount of the Notes shall be entitled to propose (and the
Board of Directors shall nominate and recommend) persons reasonably acceptable
to the Board of Directors as the Additional Members of the Board of Directors of
the Company. In the event of any vacancy arising by reason of the resignation,
death, removal or inability to serve of any Additional Member, the Purchaser
shall be entitled to designate a successor to fill such vacancy for the
remaining term of such director. At such times as such Event of Default shall
have been cured or waived, the rights of the holders of Notes under this Section
6.10 shall terminate (and the holders of the Notes shall cause such Additional
Directors to resign from the Board of Directors of the Company), subject to
revesting in the event of each and every subsequent event of the character
indicated above.
6.11. ERISA. Neither the Company nor any Subsidiary shall incur any
material liability with respect to retiree medical or death benefits or unfunded
benefits payable after termination of employment. All employee benefit plans and
arrangements maintained or contributed to by the Company, any Subsidiary or any
ERISA Affiliate shall be maintained in compliance in all material respects with
all applicable law, including any reporting requirements. With respect to any
plan maintained by or contributed to by the Company or any Subsidiary, neither
the Company nor any Subsidiary will fail to make any contribution due from it
under the terms of such plan or as required by law. Neither the Company nor any
ERISA Affiliate will permit a Pension Plan to incur an accumulated funding
deficiency (as such term is defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived, cause a lien or a security interest to attach
to any asset of the Company or any Subsidiary for the benefit of any Plan, or
incur any liability which would be material to the Company or any of its
Subsidiaries under Title IV of ERISA, including withdrawal liability (other than
the payment of premiums, none of which are overdue). Neither the Company nor any
Subsidiary, nor any other Person including any fiduciary, will engage in any
transaction prohibited by Section 406 of ERISA or Section 4975 of the Code which
is reasonably likely to subject the Company, any Subsidiary or any entity that
the Company or any Subsidiary has an obligation to indemnify to any tax or
penalty imposed under Section 4975 of the Code or Section 502 of ERISA.
6.12. Financial Statements and Other Reports.
(i) The Company will, as soon as practicable and in any event within 60
days after the end of each quarterly period (other than the last quarterly
period) in each fiscal year, furnish to the Purchaser statements of consolidated
net income and cash flows and a statement of changes in consolidated
stockholders' equity of the Company and its Subsidiaries for the period from the
beginning of the then current fiscal year to the end of such quarterly period,
and a consolidated balance sheet of the Company and its Subsidiaries as of the
end of such quarterly period, setting forth in each case in comparative form
figures for the corresponding period or date in the preceding fiscal year, all
in reasonable detail and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments; provided,
however, that delivery pursuant to clause (iii) below of a copy of the Quarterly
Report on Form 10-Q of the Company for such quarterly period filed with the
Commission shall be deemed to satisfy the requirements of this clause (i);
(ii) it will, as soon as practicable and in any event within 100 days after
the end of each fiscal year, furnish to the Purchaser statements of consolidated
net income and cash flows and a statement of changes in consolidated
stockholders' equity of the Company and its Subsidiaries for such year, and a
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such year, setting forth in each case in comparative form the corresponding
figures from the preceding fiscal year, all in reasonable detail and examined
and reported on by independent public accountants of recognized national
standing selected by the Company; provided, however, that delivery pursuant to
clause (iii) below of a copy of the Annual Report on Form 10-K of the Company
for such fiscal year filed with the Commission shall be deemed to satisfy the
requirements of this clause (ii);
(iii) it will, promptly upon transmission thereof, furnish to the Purchaser
copies of all such financial statements, proxy statements, notices and reports
as it shall send to its stockholders and copies of all such registration
statements (without exhibits), other than registration statements elating to
employee benefit or dividend reinvestment plans, and all such regular and
periodic reports as it shall file with the Commission;
(iv) it will, promptly after such package becomes available, furnish to the
Purchaser copies of all financial reporting packages prepared for management of
the Company; and
(v) it will promptly furnish to the Purchaser copies of any compliance
certificates furnished to lenders in respect of Indebtedness of the Company and
its Subsidiaries and, with reasonable promptness, furnish to the Purchaser such
other financial and other data of the Company and its Subsidiaries as the
Purchaser may reasonably request, including, but not limited to, operating
financial information for each retail store owned or operated by the Company or
any of its Subsidiaries.
Together with each delivery of financial statements required by clauses (i)
and (ii) above, the Company will deliver to the Purchaser a certificate of the
Chief Financial Officer, Treasurer or other financial officer of the Company
regarding compliance by the Company with the covenants set forth in Section 6.2.
6.13. Inspection of Property. The Company will permit representatives of
the Purchaser to visit and inspect, at the Purchaser's expense, any of the
properties of the Company and its Subsidiaries, to examine the corporate books
and make copies or extracts therefrom and to discuss the affairs, finances and
accounts of the Company and its Subsidiaries with the principal officers of the
Company, all at such reasonable times, upon reasonable notice and as often as
the Purchaser may reasonably request.
6.14. Rights of First Offer. In the event that the Company intends to sell
any debt securities or any shares of capital stock or securities convertible
into, exchangeable for or exercisable for debt securities or shares of capital
stock of the Company, other than pursuant to a registered public offering:
(i) the Company shall give the Purchaser written notice of its intent to
sell such securities, specifying the number thereof to be sold and the minimum
price and terms and conditions of such sale and offering to sell to the
Purchaser (or its designee), at such minimum price and on such terms and
conditions (to the extent reasonably applicable to the Purchaser), a percentage
of such securities equal to the percentage equity interest in the Company
represented by the shares of Common Stock and Warrants then owned by the
Purchaser (and its Affiliates), after giving effect to the conversion or
exercise of all outstanding securities of the Company which are then convertible
into or exercisable for equity securities, the conversion or exercise price of
which is less than the Current Market Price;
(ii) if the Purchaser (or its designee) shall not, within 30 days after
receipt of the notice given pursuant to clause (i) above accept such offer in
writing with respect to the securities specified in such notice, then the
Company shall be free to sell such securities at a price equal to or above the
minimum price and on other terms and conditions no less favorable to the Company
than those specified in such notice, at any time within 120 days of the
expiration of such 30-day period;
(iii) if the Company shall not have consummated the proposed sale within
120 days after the expiration of the 30-day period referred to in clause (ii)
above, then the Company may not thereafter sell such securities without
complying with the provisions of this Section 6.14; and
(iv) if the Purchaser (or its designee) shall accept such offer within 30
days after the notice given pursuant to clause (i) above, then the Purchaser (or
its designee) shall purchase the securities specified in such notice as promptly
as is reasonably practicable, but within no more than 60 days thereafter.
6.15. Lost, Stolen, Damaged and Destroyed Stock Certificates. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate for shares of Common Stock and in the case of
loss, theft or destruction, upon delivery of an indemnity satisfactory to the
Company (which, in the case of the Purchaser, may be an undertaking by the
Purchaser so to indemnify the Company), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new certificate of
like tenor for a number of shares of Common Stock equal to the number of shares
of such stock represented by the certificate lost, stolen, destroyed or
mutilated.
6.16. Related Party Transactions. The Company shall not, directly or
indirectly, and shall not permit any of its Subsidiaries to, directly or
indirectly, enter into, amend or terminate any contract, arrangement or
transaction with a Related Party, other than the payment of salary and benefits
pursuant to employment agreements entered into in the ordinary course of
business.
6.17. Operations in Accordance with Business Plan. The business and
operations of the Company and its Subsidiaries shall be conducted in all
material respects in accordance with the Company's annual business plan as
approved by the Board of Directors including the GECC Designee (as defined in
the Stockholders Agreement), except for such changes which shall have been
approved in accordance with Section 2.2(u) of the Stockholders Agreement.
6.18. Best Efforts to Cause the Conversion of Preferred Stock. The Company
covenants and agrees to use its reasonable best efforts following the Closing to
cause the remaining outstanding shares of such Series A Preferred Stock to be
converted into shares of Common Stock.
6.19. Notice of Breach. As promptly as practicable, and in any event not
later than ten Business Days after senior management of the Company becomes
aware of any breach by the Company of any provision of this Agreement,
including, without limitation, this Article 6, the Company shall provide the
Purchaser with written notice specifying the nature of such breach and any
actions proposed to be taken by the Company to cure such breach.
7. RESTRICTIONS ON TRANSFER. The Purchaser and its Affiliates will not,
directly or indirectly, sell, transfer, pledge, encumber or otherwise dispose of
(collectively, a "Transfer") any of the Securities, except for: (a) Transfers to
or between Affiliates who agree to be bound by the provisions of this Agreement;
(b) Transfers of Securities pursuant to the exercise of the registration rights
set forth in the Registration Rights Agreement; or (c) Transfers which comply
with the provisions of the Securities Act. The Company may require, in
connection with any Transfer pursuant to the preceding clause (c), an opinion of
counsel to the Purchase that such Transfer complies with the provisions of the
Securities Act.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1. Events of Default. Each of the following shall constitute an Event of
Default with respect to the Notes (including any Additional Notes) under this
Agreement:
(a) Nonpayment of Principal of the Notes. If the Company fails to pay
the principal of, interest on or any other sum, if any, due on any Note, within
five days after the same becomes due and payable, whether at the maturity
thereof, on a dated fixed for a redemption, or otherwise; or
(b) Voluntary Bankruptcy and Insolvency Proceedings. If the Company or any
Subsidiary shall file a petition in bankruptcy or for reorganization or for an
arrangement or any composition, readjustment, liquidation, dissolution or
similar relief pursuant to the Federal Bankruptcy Code of 1978, as amended, or
under any similar present or future federal law or the law of any other
jurisdiction or shall be adjudicated a bankrupt or become insolvent, or consent
to the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Company or
such Subsidiary or for all or any substantial part of its respective property,
or, the Company or any Subsidiary shall make an assignment for the benefit of
its creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take any corporate action, as the case
may be, in furtherance of any of the foregoing; or
(c) Adjudication of Bankruptcy. If a petition or answer shall be filed
proposing the adjudication of the Company or any Subsidiary as a bankrupt or its
reorganization or arrangement, or any composition, readjustment, liquidation,
dissolution or similar relief with respect to it pursuant to the Federal
Bankruptcy Code of 1978, as amended, or under any similar present or future
federal law or the law of any other jurisdiction applicable to the Company or
such Subsidiary, and the Company or any Subsidiary shall consent to or acquiesce
in the filing thereof, or such petition or answer shall not be discharged or
denied within 60 days after the filing thereof; or
(d) Receivership or Sequestration. If a decree or order is rendered by a
court having jurisdiction (i) for the appointment of a receiver or custodian or
liquidator or trustee or sequestrator or assignee (or similar official) in
bankruptcy or insolvency of the Company or any Subsidiary or of all or a
substantial part of its property, or for the winding-up or liquidation of its
affairs, and such decree or order shall have remained in force undischarged and
unstayed for a period of 60 days, or (ii) for the sequestration or attachment of
any property of the Company or any Subsidiary without its return to the
possession of the Company or such Subsidiary or its release from such
sequestration or attachment within 60 days thereafter; or
(e) Acceleration of Other Indebtedness. If default shall be made with
respect to any Indebtedness of the Company (other than the Notes) with the
result that Indebtedness in an aggregate amount of $100,000 or more has been
accelerated so that the same has become due and payable prior to the date on
which the same would otherwise have become due and payable, provided that such
acceleration is not rescinded within 10 days after the declaration thereof; or
(f) Judgment Default. A judgment or order for the payment of money in
excess of $100,000 shall be entered against the Company or any Subsidiary by any
court, and either (i) such judgment or order shall continue undischarged and
unstayed for a period of 60 days or (ii) enforcement proceedings shall have been
commenced upon such judgment or order; or
(g) Covenant Defaults. The Company shall have breached in any material
respect any of the covenants set forth in this Agreement and such breach
continues for 30 days after notice in writing by the holders to the Company; or
(h) Untrue or Incorrect Representation or Warranty. Any of the
representations and warranties of or with respect to the Company or any
Subsidiary contained in Article 2 hereof shall have been untrue in any material
respect on or as of the date made and the facts or circumstances to which such
representation or warranty relates shall not have been subsequently corrected to
make such representation or warranty no longer incorrect.
8.2. Acceleration of Maturity. If any Event of Default shall have occurred
and be continuing, the holders of 66-2/3% of the outstanding principal amount of
Notes may, by notice to the Company, declare the entire outstanding principal
balance of the Notes, and all accrued and unpaid interest thereon, to be due and
payable immediately, and upon any such declaration the entire outstanding
principal balance of the Notes, and said accrued and unpaid interest shall
become and be immediately due and payable, without presentment, demand, protest
or other notice whatsoever, all of which are hereby expressly waived, anything
in the Notes or in this Agreement to the contrary notwithstanding; provided that
if an Event of Default under clause (b), (c), or (d) of Section 8.1 with respect
to the Company shall have occurred, the outstanding principal amount of all of
the Notes, and all accrued and unpaid interest thereon, shall immediately become
due and payable, without any declaration and without presentment, demand,
protest or other notice whatsoever, all of which are hereby expressly waived,
anything in the Notes or this Agreement to the contrary notwithstanding; and
provided, further, that if an Event of Default under clause (a) of Section 8.1
shall have occurred and be continuing with respect to any Note, any holder of
one or more Notes in an aggregate outstanding principal amount of at least
$500,000 may, by notice to the Company, declare the entire outstanding principal
of such Notes and all accrued and unpaid interest thereon, to be due and payable
immediately, and upon any such declaration the entire outstanding principal of
such Notes and said accrued and unpaid interest shall become and be immediately
due and payable, without presentment, demand, protest or other notice
whatsoever, all of which are hereby expressly waived, anything in such Notes or
in this Agreement to the contrary notwithstanding.
8.3. Other Remedies. If any Event of Default shall have occurred and be
continuing, from and including the date of such Event of Default to but not
including the date such Event of Default is cured or waived, any holder may
enforce its rights by suit in equity, by action at law, or by any other
appropriate proceedings, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in this Agreement or
the Notes or in aid of the exercise of any power granted in this Agreement or
the Notes, and any holder may enforce the payment of any Note held by such
holder and any of its other legal or equitable rights. During the continuance of
any Event of Default, the Company shall pay interest on the outstanding
principal of the Notes and (to the extent legally enforceable) on any overdue
installment of interest, at the rate of 12.00% per annum, until such overdue
amount is paid or until such Event of Default is cured or waived.
8.4. Conduct no Waiver; Collection Expenses. No course of dealing on the
part of any holder, nor any delay or failure on the part of any holder to
exercise any of its rights, shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. If the Company fails to
pay, when due, the principal or the premium, if any, or the interest on any
Note, the Company will pay to each holder, to the extent permitted by law, on
demand, all costs and expenses incurred by such holder in the collection of any
amount due in respect of any Note hereunder, including reasonable legal fees
incurred by such holder in enforcing its rights hereunder.
8.5. Annulment of Acceleration. If a declaration is made in accordance with
Section 8.2, then and in every such case, the holders of at least 66 2/3% of the
outstanding principal amount of the Notes may, by an instrument delivered to the
Company, annul such declaration and the consequences thereof, provided that at
the time such declaration is annulled:
(a) no judgment or decree has been entered for the payment of any monies
due on the Notes or pursuant to this Agreement;
(b) all arrears of interest on the Notes and all other sums payable on the
Notes and pursuant to this Agreement (except any principal of or interest on the
Notes which has become due and payable by reason of such declaration) shall have
been duly paid; and
(c) every other Event of Default shall have been duly waived or otherwise
made good or cured; provided, however, that only the Purchaser or an Affiliate
of the Purchaser (but not any transferee thereof other than an Affiliate of the
Purchaser) of the Note or Notes making the declaration permitted by the last
proviso of Section 8.2 may annul such declaration; and provided, further, that
no such annulment shall extend to or affect any subsequent Event of Default or
impair any right consequent thereon.
8.6. Remedies Cumulative. No right or remedy conferred upon or reserved to
the holders of Notes under this Agreement is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative and in
addition to every other right and remedy given hereunder or now and hereafter
existing under applicable law. Every right and remedy given by this Agreement or
by applicable law to the holders of Notes may be exercised from time to time and
as often as may be deemed expedient by the holders.
8.7. Limitations. Notwithstanding the foregoing provisions of this Article
8, the exercise of remedies by holders of Notes is subject to the provisions of
Article 10 hereof.
9. REDEMPTION.
9.1. Optional Redemption. The Company shall have the right, at its sole
option and election made in accordance with Section 9.5 to redeem the Notes,
including any Additional Notes, in whole or in part, in integral multiples of
not less than $250,000 at any time and from time to time, plus an amount equal
to all accrued and unpaid interest to and including the date of redemption, in
cash. Any such redemption shall reduce the Company's obligation under Section
9.2, beginning with the next succeeding Redemption Date (as defined in Section
9.2).
9.2. Mandatory Redemption. The Company shall on February 28 and on August
31, in each year commencing with the year 1999 and ending in the year 2001 (each
a "Redemption Date"), redeem Notes in the aggregate outstanding principal amount
of $1,015,335.75, at a redemption price equal to 100% of the principal amount of
the Notes to be redeemed, together with accrued and unpaid interest on such
Notes to and including such Redemption Date.
9.3 Procedures for Partial Redemption. If less than all Notes at the time
outstanding are to be redeemed, the aggregate principal amount to be redeemed
among the outstanding Notes; provided, however, that in the event that the
aggregate principal balance of the Notes then outstanding is $1,015,335.75 or
less, the Company shall be required to redeem all of such outstanding Notes if
it elects to redeem any such Notes.
9.4. Change in Control. In the event that there occurs a Change in Control,
any record holder of Notes, in accordance with the procedures set forth in
Section 9.5(b), may require the Company to redeem any or all of the Notes held
by such holder for, at such holder's option, an amount equal to principal amount
of such Notes, plus all accrued and unpaid interest on the Notes being redeemed
to and including the date of redemption, in cash.
9.5. Redemption Procedures. (a) Notice of any redemption of Notes pursuant
to Section 9.1 or 9.2 shall be mailed at least 30 but not more than 60 days
prior to the date fixed for redemption to each holder of Notes to be redeemed,
at such holder's address as it appears in the Note Register. In order to
facilitate the redemption of Notes, the Board of Directors may fix a record date
for the determination of Notes to be redeemed.
(b) Promptly following a Change in Control (but in no event more than five
Business Days thereafter), the Company shall mail to each holder of Notes, at
such holder's address as it appears on the transfer books of the Company, notice
of such Change in Control, which notice shall set forth each holder's right to
require the Company to redeem any or all Notes held by it. The Company shall
thereafter during a period of 90 days from the date of such notice (or the date
the Company was required to give such notice) redeem any Notes, in whole or in
part, at the option of the holder, upon at least five days' written notice to
the Company by such holder specifying (i) the principal amount of Notes to be
redeemed and (ii) the redemption date.
(c) On the date of any redemption being made pursuant to Section 9.1, 9.2
or 9.4 which is specified in a notice given pursuant to this Section .5, the
Company shall wire transfer to such holder the redemption price for the
principal amount of notes so redeemed, together with an amount equal to all
accrued and unpaid interest thereon to the date of redemption.
10. SUBORDINATION OF NOTES.
10.1. Subordination of Notes to Senior Indebtedness. The Indebtedness
evidenced by the Notes and all renewals and extensions thereof (collectively
called the "Junior Indebtedness") shall at all times be wholly subordinate and
junior in right of payment to any and all Senior Indebtedness of the Company
(including any claims by the holders of such Senior Indebtedness for interest
accruing after any assignment for the benefit of creditors by the Company or the
institution by or against the Company of any proceedings under the Bankruptcy
Code or any law for the relief of or relating to debtors, or any other claim by
such holders for any such interest which would have accrued in the absence of
such assignment or the institution of such proceedings) in the manner and with
the force and effect hereafter set forth:
(a) In the event of any liquidation, dissolution or winding up of the
Company, or of any execution, sale, receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or other similar proceeding relative
to the Company or its property, all sums owing on all Senior Indebtedness of the
Company (including cash collateral and amounts not yet due and payable) shall
first be paid in full before any payment is made upon the Junior Indebtedness;
and in any such event any payment or distribution of any kind or character,
whether in cash, property, or securities which shall be made upon or in respect
of the Junior Indebtedness shall be paid over to the holders of the Senior
Indebtedness of the Company, pro rata, for application in payment thereof unless
and until such Senior Indebtedness shall have been paid or satisfied in full.
In case of any assignment for the benefit of creditors by the Company or in
case any proceedings under the Bankruptcy Code or any other law for the relief
of or relating to debtors are instituted by or against the Company, or in case
of the appointment of any receiver for the Company's business or assets, or in
case of any dissolution or winding up of the affairs of the Company, the Company
and any assignee, trustee in bankruptcy, receiver, debtor in possession or other
person or persons in charge are hereby directed to pay to the holders of the
Senior Indebtedness of the Company the full amount of such holders' claims
against the Company (including interest to the date of payment) before making
any payments to the holders of Junior Indebtedness, and insofar as may be
necessary for that purpose, the Purchaser hereby assigns and transfers to the
holders of Senior Indebtedness of the Company all rights to any payments,
dividends or other distributions. The Purchaser agrees not to file or join in
any petition to commence any proceeding under the Bankruptcy Code (or other law
for the relief of or relating to debtors) so long as any Senior Indebtedness of
the Company is outstanding.
(b) In the event that all or any part of the Junior Indebtedness is
declared or becomes due and payable because of the occurrence of any Event of
Default or otherwise than at the option of the Company (other than pursuant to
its terms at its final maturity), under circumstances when the foregoing clause
(a) shall not be applicable, the holders of the Junior Indebtedness shall be
entitled to payments only after there shall first have been paid in full all
Senior Indebtedness of the Company or payment shall have been provided therefor
in a manner satisfactory to the holders of such Senior Indebtedness.
(c) Upon the occurrence of an event which is, or with the lapse of time or
notice or both would be, an event which gives any holder of any Senior
Indebtedness of the Company the right to demand payment, cash collateral,
accelerate the maturity, or terminate any commitment to further extend credit,
no payment shall be made on any Junior Indebtedness if either:
(i) notice of such default in writing or by telegram has been given to the
Company by any holder of any Senior Indebtedness of the Company, provided that
judicial proceedings shall be commenced with respect to such default (x) within
180 days thereafter if such default consists of the nonpayment of principal,
interest, or any other sum due on such Senior Indebtedness, or (y) within 180
days after the earlier of (i) the giving of such notice or
(ii) the date on which such holder is entitled to institute judicial
proceedings, or
(ii) judicial proceedings shall be pending in respect of such
default. The holder of any portion of Senior Indebtedness of the Company shall
not be entitled to give notice pursuant to this clause (c) more than once with
respect to any default which was specified in such notice and which has
continued without interruption since the date such notice was given, nor shall
such holder be entitled to give a separate notice with respect to any default
not so specified which (to the knowledge of the holder giving notice) was
existing on the date such notice was given pursuant to this clause (c) and which
has continued without interruption from the date such notice was given. Upon
receipt of any notice from any holder of any Senior Indebtedness pursuant to
this clause (c), the Company shall forthwith send a copy thereof to each holder
of Junior Indebtedness and each holder of its Senior Indebtedness at the time
outstanding.
(d) All payments, cash, or noncash distributions made to the holders of
Junior Indebtedness which should have been made to the holders of Senior
Indebtedness of the Company shall be received and held by the former in trust
for the benefit of the latter, and the holders of Junior Indebtedness shall
forthwith remit such payments, cash, or noncash distributions to the holders of
the Senior Indebtedness of the Company, pro rata, in the form in which it was
received, together with such endorsements or documents as may be necessary to
effectively negotiate or transfer the same to the holders of the Senior
Indebtedness of the Company.
(e) Each holder of Senior Indebtedness of the Company is hereby authorized
by the Purchaser to:
(i) renew, compromise, extend, accelerate or otherwise change the time of
payment, or any other terms, of any Senior Indebtedness of the Company held by
such holder;
(ii) increase or decrease the rate of interest payable thereon or any part
thereof;
(iii) exchange, enforce, waive or release any security therefor;
(iv) apply such security and direct the order or manner of sale thereof in
such manner as such older may at its discretion determine; and/or
(v) release the Company or any guarantor of any Senior Indebtedness of the
Company from liability; all without notice to the Purchaser and any holder of
Junior Indebtedness and without affecting the subordination provided by this
Agreement.
10.2. Proofs of Claim of Holders of Senior Indebtedness; Voting. The
Purchaser undertakes and agrees for the benefit of each holder of Senior
Indebtedness of the Company to execute, verify, deliver and file any proofs of
claim relating to the Junior Indebtedness which any holder of such Senior
Indebtedness may at any time require in order to prove and realize upon any
rights or claims pertaining to the Junior Indebtedness and to effectuate the
full benefit of the subordination contained herein. Upon failure of the
Purchaser to file the required proof or proofs of claim prior to 30 days before
the expiration of the time to file claims in such proceeding, each holder of
Senior Indebtedness of the Company is hereby irrevocably appointed by the
Purchaser to be the Purchaser's agent to file the appropriate claim or claims
and if such holder of Senior Indebtedness elects at its sole discretion to file
such claim or claims (i) to accept or reject any plan of reorganization or
arrangement on behalf of the Purchaser, and (ii) to otherwise vote the
Purchaser's claim in respect of the Junior Indebtedness in any manner deemed
appropriate for the benefit and protection of the holders of the Senior
Indebtedness of the Company.
10.3. Rights of Holders of Senior Indebtedness Unimpaired. No right of any
holder of any Senior Indebtedness to enforce subordination as herein provided
shall at any time or in any way be affected or impaired by any failure to act on
the part of the Company or the holders of Senior Indebtedness, or by any
noncompliance by the Company with any of the terms, provisions and covenants of
this Agreement, regardless of any knowledge thereof that any such holder of
Senior Indebtedness may have or be otherwise charged with.
10.4. Effects of Event of Default. The Company agrees, for the benefit of
the holders of Senior Indebtedness, that in the event that a Note is declared
due and payable before its maturity because of the occurrence of an Event of
Default, (i) the Company will give prompt notice in writing of such happening to
the holders of Senior Indebtedness and (ii) all Senior Indebtedness shall
forthwith become immediately due and payable upon demand, regardless of the
expressed maturity thereof.
10.5. Company's Obligations Unimpaired. The provisions of this Article 10
are solely for the purpose of defining the relative rights of the holders of
Senior Indebtedness on the one hand, and the Purchaser on the other hand, and
nothing herein shall impair, as between the Company and the Purchaser, the
obligation of the Company which is unconditional and absolute, to pay the
principal, premium, if any, and interest on the Notes in accordance with this
Agreement and the terms of the Notes, nor shall anything herein prevent the
Purchaser from exercising all remedies otherwise permitted by applicable law or
under this Agreement or the Notes upon the occurrence of an Event of Default,
subject to the rights of the holders of Senior Indebtedness as herein provided
for.
10.6. Subrogation. Subject to the payment in full of Senior Indebtedness,
holders of the Notes shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities made on the Senior Indebtedness until the Notes shall be paid in
full; and, for the purposes of such subrogation, payments or distributions to
the holders of Senior Indebtedness of any cash, property or securities to which
any holder of Notes would be entitled except for the provisions of this
Agreement shall, as between the Company and its creditors other than the holders
of Senior Indebtedness and holders of the Notes, be deemed to be a payment by
the Company to or on account of the Notes, it being understood that the
provisions of this Agreement are and are intended solely for the purpose of
defining the relative rights of the holders of the Notes on the one hand, and
the holders of Senior Indebtedness, on the other hand. The purpose of this
Section 10.6 is to grant to holders of the Notes the same rights against the
Company with respect to the aggregate amount of such payments or distributions
as the holders of Senior Indebtedness would have against the Company if such
aggregate amount were considered overdue Senior Indebtedness.
11. Interpretation.
11.1 Definitions.
"Affiliate" and Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"beneficially own" with respect to any securities shall mean having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing.
"Business Day" shall mean any day other than a Saturday, Sunday, or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Capitalized Lease" shall mean, with respect to any person, any lease or
any other agreement for the use of property which, in accordance with generally
accepted accounting principals, should be capitalized on the lessee's or user's
balance sheet.
"Capitalized Lease Obligation" of any person shall mean and include, as of
any date as of which the amount thereof is to be determined, the amount of the
liability capitalized or disclosed (or which should be disclosed) in a balance
sheet of such person in respect of a Capitalized Lease of such person
"Change in Control" shall mean:
(a) the acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more
than 30% of the combined voting power of the then outstanding Voting Securities
of the Company entitled to vote generally in the election of directors, but
excluding, for this purpose, any such acquisition by (i) the Company or any of
its subsidiaries, (ii) any employee benefit plan (or related trust) of the
Company or its subsidiaries, (iii) any corporation with respect to which,
following such acquisition, a majority of the combined voting power of the then
outstanding Voting Securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly or indirectly, by
individuals and entities who were the beneficial owners of voting securities of
the Company immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors or (iv) GECC or an
Affiliate of GECC; or
(b) a reorganization, merger or consolidation, in each case, with respect
to which all or substantially all the individuals and entities who were the
respective beneficial owners of the voting securities of the Company immediately
prior to such reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors of the
corporation resulting from such reorganization, merger or consolidation; or
(c) the sale or other disposition of a majority or more of the consolidated
assets or property of the Company and it Subsidiaries in one transaction or
series of related transactions, provided, however, that a "Change of Control" as
defined in either (b) or (c) above shall not include any transact on between
GECC or any Affiliate of GECC and the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consolidated" or "consolidated," when used with reference to any financial
term in this Agreement (but not when used with respect to any tax return or tax
liability), shall mean the aggregate for two or more persons of the amounts
signified by such term for all such persons, with inter-company items eliminated
and, with respect to earnings, after eliminating the portion of earnings
properly attributable to minority interests, if any, in the capital stock of any
such person or attributable to shares of preferred stock of any such person not
owned by any other such person.
"Consolidated Net Worth" shall mean the consolidated stockholders' equity
of the Company and its Subsidiaries determined in accordance with generally
accepted accounting principles consistently applied (it being understood that
the Notes and any other Subordinated Indebtedness which is not subordinated to
the Notes shall not be treated as equity for this purpose).
"Consolidated Total Indebtedness" shall mean consolidated Indebtedness of
the Company and its Subsidiaries, determined in accordance with generally
accepted accounting principles consistently applied.
"Current Market Price", when used with reference to shares of Common Stock
or other securities for any given date, shall mean the closing price per share
of Common Stock or such other securities on such date and, when used with
reference to shares of Common Stock or other securities for any period, shall
mean the average of the daily closing prices per share of Common Stock or such
other securities for such period. The closing price for each day shall be the
last quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or such other
system then in use, or, if on any such date the Common Stock or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock or such other securities selected by the Board of Directors
of the Company. If the Common Stock is listed or admitted to trading on a
national securities exchange, the closing price shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Common
Stock or such other securities are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Common Stock or such other securities are
listed or admitted to trading.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Event of Default" shall mean each of the happenings or circumstances
enumerated in Section 8.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934, as amended,
shall include reference to the comparable section, if any, of any such successor
Federal statute.
"Fixed Charge Ratio" shall mean the ratio of (a) the sum of earnings before
taxes, depreciation and amortization plus current operating lease expense plus
interest expense to (b) interest expense plus current operating lease expense of
the Company and its Subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles consistently applied,
as measured at the last day of the most recently completed fiscal quarter.
"Guarantee" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of any Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of such Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of any computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the principal amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Indebtedness" shall mean, with respect to any person, (i) all obligations
of such person for borrowed money, or with respect to deposits or advances of
any kind, (ii) all obligations of such person evidenced by bonds, debentures,
notes or similar instruments, (iii) all obligations of such person under
conditional sale or other title retention agreements relating to property
purchased by such person, (iv) all obligations of such person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such person
whether or not the obligations secured thereby have been assumed, but only to
the extent of such security, if such obligations have not been assumed, (vi) all
Capitalized Lease Obligations of such person, (vii) all Guarantees of such
person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"outstanding" shall mean when used with reference to the Notes at a
particular time, all Notes theretofore issued as provided in this Agreement,
except (i) Notes theretofore reported as lost, stolen, damaged or destroyed, or
surrendered for transfer, exchange or replacement, in respect to which
replacement Notes have been issued, (ii) Notes theretofore paid in full, and
(iii) Notes theretofore canceled by the Company, except that, for the purpose of
determining whether holders of the requisite principal amount of Notes have made
or concurred in any waiver, consent, approval, notice or other communication
under this Agreement, Notes registered in the name of, or owned beneficially by,
the Company or any Subsidiary of any thereof, shall not be deemed to be
outstanding.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" shall mean any multiemployer plan or single employer plan,
as defined in Section 4001 of ERISA, that is subject to Title IV of ERISA, that
the Company, any Subsidiary or any ERISA Affiliate maintains or is or ever has
been obligated to contribute to for the benefit of employees or former employees
of the Company, any Subsidiary or any ERISA Affiliate.
"Person" shall mean any individual, firm, corporation, partnership or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Related Party" shall mean any officer, director or beneficial holder of 3%
or more of the outstanding shares of capital stock of the Company or any
Subsidiary, any spouse, former spouse, child, parent, parent of a spouse,
sibling or grandchild of any such officer, director or beneficial holder of the
Company or any Subsidiary, and any Affiliate or Associate of any of the
foregoing persons.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Indebtedness" shall mean and include, as of any date as of which
the amount thereof is to be determined, the principal of and premium, if any,
and interest due on any Indebtedness under the Loan and Security Agreement dated
as of January 20, 1995 and as amended on May 10, 1996, between Congress
Financial Corporation (Western) as lender and ▇▇▇▇▇▇'▇ Sofa Factory, a
California corporation, and its wholly owned subsidiary, ▇▇▇▇▇▇ Convertible
Corporation, a New York corporation, as borrowers (with the Company as Guarantor
pursuant to a Guarantee signed by the Company on January 20, 1995), and any
refinancing, refunding, replacement or extension thereof.
"Subordinated Indebtedness" shall mean all Indebtedness which is by its
terms subordinated to Senior Indebtedness.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power or the Voting Securities or equity interest is
owned, directly or indirectly, by such Person.
"Voting Securities" of any Person shall mean at any time shares of any
class of capital stock of such Person which are then entitled to vote generally
in the election of directors.
11.2. Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense
required to be determined pursuant to this Agreement, and any consolidation or
other accounting computation required to be made pursuant to this Agreement, and
the construction of any definition in this Agreement containing a financial
term, shall be determined or made, as the case may be, in accordance with
generally accepted accounting principles, to the extent applicable, unless such
principles are inconsistent with the express requirements of this Agreement.
References in this Agreement to a fiscal year refer to the period ending on the
last Sunday of January of the following calendar year as determined by the 52/53
retail fiscal year. (For example, 1996 fiscal year refers to the fiscal year
ending January 26, 1997.)
12. Miscellaneous.
12.1. Payments. The Company agrees that, so long as the Purchaser shall
hold any Securities, the Company will make all cash interest or dividend
payments thereon in immediately available funds in such manner as the Purchaser
may reasonably request in writing.
12.2. Severability. If any term, provision, covenant or restriction of this
Agreement or any exhibit hereto is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement and such exhibits shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
12.3. Specific Enforcement. The Purchaser, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or equity.
12.4. Entire Agreement. This Agreement (including the documents set forth
in the exhibits hereto) contains the entire understanding of the parties with
respect to the transactions contemplated hereby.
12.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
12.6. Notices and other Communications. All notices, consents, requests,
instructions, approvals, financial statements, proxy statements, reports and
other communications provided for herein shall be in writing and shall be
delivered personally, by telecopy or sent by prepaid overnight courier service,
to:
THE COMPANY:
▇▇▇▇▇▇'▇ Furniture, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇'▇ Furniture, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Stroock, Stroock & ▇▇▇▇▇
Seven ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
THE PURCHASER:
General Electric Capital Corporation
Equity Capital Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
Attention: Counsel
With a copy to:
▇▇▇▇▇▇ ▇▇ ▇▇▇▇, Esq.
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or to such other address as any party may, from time to time, designate in
a written notice given in a like manner.
12.7. Amendments. This Agreement may be amended as to the Purchaser and
their successors and assigns, and the Company may take any action herein
prohibited, or omit to perform any act required to be performed by it, if the
Company shall obtain the written consent of the Purchaser and/or such successors
and assigns who are the registered holders of not less than 66-2/3% of the
outstanding principal amount of the Notes, including the Additional Notes, then
held by the Purchaser and their successors or assigns. This Agreement may not be
waived, changed, modified, or discharged orally, but only by an agreement in
writing signed by the party or parties against whom enforcement of any waiver,
change, modification or discharge is sought or by parties with the right to
consent to such waiver, change, modification or discharge on behalf of such
party.
12.8. Cooperation. The Purchaser and the Company agree to take, or cause to
be taken, all such further or other actions as shall reasonably be necessary to
make effective and consummate the transactions contemplated by this Agreement.
12.9. Successors and Assigns. All covenants and agreements contained herein
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns. This Agreement may be assigned by the Purchaser to any
transferee of any Securities. This Agreement may not be assigned by the Company.
12.10. Expenses and Remedies. (a) The Company agrees to pay the Purchaser
for all reasonable outside legal and consulting fees of the Purchaser in
connection with this Agreement and the consummation of all transactions
contemplated hereby, and all costs and expenses relating to any future amendment
or supplement to this Agreement or any of the Securities (or any proposal by the
Company for such amendment or supplement) whether or not consummated or any
waiver or consent with respect thereto (or any proposal for such waiver or
consent) whether or not consummated, and all costs and expenses of the Purchaser
relating to the enforcement of this Agreement, the Registration Rights
Agreement, the Warrant or the Notes or any of the Securities.
(b) The Company further agrees to indemnify and save harmless the Purchaser
and its officers, directors, partners, employees, trustees and agents, each
person who controls the Purchaser within the meaning of the Securities Act or
the Exchange Act, from and against any and all costs, expenses, damages or other
liabilities resulting from any breach of this Agreement by the Company or any
legal, administrative or other proceedings arising out of the transactions
contemplated hereby (other than such costs, expenses, damages or other
liabilities resulting, directly or indirectly, (i) from the breach by the
Purchaser of any of its agreements contained herein, (ii) from the gross
negligence or willful misconduct of the Purchaser or any of its officers,
directors, partners, employees or agents, or any person who controls the
Purchaser within the meaning of the Securities Act or the Exchange Act or (iii)
from an ERISA violation resulting from any action or inaction by the Purchaser,
other than an ERISA violation resulting from a breach by the Company of this
Agreement); provided, however, that, if and to the extent that such
indemnification is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws.
(c) The indemnified party under this Section 12.10 will, promptly after the
receipt of notice of the commencement of any action against such indemnified
party in respect of which indemnity may be sought from the Company on account of
an indemnity agreement contained in this Section 12.10, notify the Company in
writing of the commencement thereof. The omission of any indemnified party so to
notify the Company of any such action shall not relieve the Company from any
liability which it may have to such indemnified party except to the extent the
Company shall have been prejudiced by the omission of such indemnified party so
to notify the Company, pursuant to this Section 12.10. In case any such action
shall be brought against any indemnified party and it shall notify the Company
of the commencement thereof, the Company shall be entitled to participate
therein and, to the extent that it may wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the Company to such indemnified party of its election so to assume the defense
thereof, the Company will not be liable to such indemnified party under this
Section 12.10 for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof nor for any settlement
thereof entered into without the consent of the Company; provided, however, that
(i) if the Company shall elect not to assume the defense of such claim or action
or (ii) if the indemnified party reasonably determines (x) that there may be a
conflict between the positions of the Company and of the indemnified party in
defending such claim or action or (y) that there may be legal defenses available
to such indemnified party different from or in addition to those available to
the Company, then separate counsel for the indemnified party shall be entitled
to participate in and conduct the defense, in the case of (i) and (ii) (x), or
such different defenses, in the case of (ii)(y), and the Company shall be liable
for any reasonable legal or other expenses incurred by the indemnified party in
connection with the defense.
12.11. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
issuance and delivery of the Securities, regardless of any investigation made by
or on behalf of any party.
12.12. Transfer of Securities. (a) The Purchaser understands and agrees
that the Securities have not been registered under the Securities Act or the
securities laws of any state and that they may be sold or otherwise disposed of
only in one or more transactions registered under the Securities Act and, where
applicable, such laws or transactions as to which an exemption from the
registration requirements of the Securities Act and, where applicable, such laws
are available. The Purchaser acknowledges that, except as provided in the
Registration Rights Agreement, the Purchaser has no right to require the Company
to register the Securities. The Purchaser understands and agrees that each Note
or certificate representing the Securities shall bear legends substantially in
the form as follows:
"[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE] [THIS NOTE HAS]
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS
OF SUCH ACT OR SUCH LAWS."
"THE TRANSFER OF [THE SECURITIES REPRESENTED BY THIS CERTIFICATE]
[THIS NOTE] IS RESTRICTED BY AN AGREEMENT ON FILE AT THE OFFICES OF THE
CORPORATION."
"IN ADDITION TO THE RESTRICTIONS SET FORTH IN THE SECURITIES PURCHASE
AGREEMENT BETWEEN ▇▇▇▇▇▇'▇ FURNITURE, INC. AND GENERAL ELECTRIC CAPITAL
CORPORATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE RESTRICTIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT BY AND AMONG
▇▇▇▇▇▇'▇ FURNITURE, INC. AND THE STOCKHOLDERS PARTIES THERETO, A COPY OF
WHICH IS ON FILE IN THE OFFICES OF THE CORPORATION."
12.13 Governing Law; Consent to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED
STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY
ACTION, PROCEEDING OR INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL
AUTHORITY ("LITIGATION") ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION
RELATING THERETO EXCEPT IN SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF ANY
PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO ITS RESPECTIVE
ADDRESS SET FORTH IN THIS AGREEMENT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR
ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF
VENUE OF ANY LITIGATION ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES
OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, AND HEREBY FURTHER
IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
SUCH COURT THAT ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO
TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.14. Term. This Agreement shall terminate on August 31, 2001, except that
Section 12.10 shall survive the termination of this Agreement.
12.15. Publicity. Each of the parties hereto agrees that it will make no
statement regarding the transactions contemplated hereby which is inconsistent
with the press release agreed to by the parties hereto. Notwithstanding the
foregoing, each of the parties hereto may, in document required to be filed by
it with the Commission or other regulatory bodies, make such statements with
respect to the transactions contemplated hereby as each may be advised is
legally necessary upon advice of its counsel.
12.16. Signatures. This Agreement shall be effective upon delivery of
original signature pages or facsimile copies thereof executed by each of the
parties hereto.
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
agreement to be executed and delivered by their respective officers thereunto
duly authorized.
▇▇▇▇▇▇'▇ FURNITURE, INC.
BY:________________________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
BY:________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director/
Department Operations Manager
SCHEDULE 1.3A
▇▇▇▇▇▇ GROUP INCLUDES:
Shares of
Common Stock Purchased
▇▇▇▇▇▇ Group
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Trust 112,500
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Trust I 112,500
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Trust I 112,500
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust I 112,500
▇▇▇▇▇▇ Family Trust 500,000
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. 20,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 30,000
TOTAL 1,000,000
SCHEDULE 1.3B
OTHER INVESTORS include:
Shares of Common Stock
Purchased
Other Investors
ATCO Holdings, Ltd. 400,000
▇▇▇▇▇ ▇▇▇▇▇▇ Souede 250,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 250,000
United Gulf Bank (B.S.C.)E.C. 225,000
ATCO Development, Inc. 100,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 25,000
Helopolis Inc. 100,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 100,000
T. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 100,000
Carlton Securities N.V. 100,000
G Investment Partners 60,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 50,000
Zaxis Partners, L.P. 40,000
Hurly & Co. 35,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 20,000
Pollat, ▇▇▇▇▇ & Co. Inc. 15,000
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III 5,000
Quadra Appreciation Fund, Inc. 5,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TTEES for the ▇▇▇▇▇▇▇ Revocable Trust 5,000
Permal Noscal, Ltd. 405,000
Fairmont Services Ltd. 400,000
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 210,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 100,000
TOTAL 3,000,000
FORM OF NOTE
THE TRANSFER OF THIS NOTE IS RESTRICTED BY AN AGREEMENT ON
FILE AT THE OFFICES OF THE CORPORATION.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
▇▇▇▇▇▇'▇ FURNITURE, INC.
10.00% Subordinated Pay-In-Kind Note
due ▇▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇
$5,000,000.00 August 26, 1996
▇▇▇▇▇▇'▇ FURNITURE, INC. (the "Company"), a Delaware corporation, for value
received, hereby promises to pay to GENERAL ELECTRIC CAPITAL CORPORATION
("GECC"), or registered assigns, the initial aggregate principal amount of FIVE
MILLION DOLLARS ($5,000,000.00) on August 31, 2001, with interest (computed on
the basis of a 360-day year of twelve 30- day months) on the unpaid balance of
such principal amount at the rate of 10.00% per annum from the date hereof, due
and payable (i) quarterly, on each November 30, February 28, May 31 and August
31 (each, a "Payment Date") after the date of the Notes commencing with November
30, 1996 and (ii) on the date of any prepayment, on the amount prepaid, until
the Notes have been paid in full. Accrued interest on each Note is required to
be paid in cash (in accordance with Section 5.1 of the Securities Purchase
Agreement dated as of August 26, 1996, as from time to time amended, between the
Company and GECC (the "Securities Purchase Agreement")) on each Payment Date
after August 31, 1998. On each Payment Date prior to and including August 31,
1998, in lieu of payment of interest in cash, the Company shall pay all interest
in additional notes (the "Additional Notes"), which shall be dated the
applicable Payment Date, shall bear interest from and after such date, shall
mature on August 31, 2001 and shall be governed by, and subject to the terms,
provisions and conditions of, the Securities Purchase Agreement, except that
interest shall accrue on each Additional Note from the date of such Additional
Note. Interest on this Note shall cease to accrue if (i) the holder of this Note
has been notified by the Company under Section 9.5 of the Securities Purchase
Agreement that this Note will be redeemed, and (ii) all amounts due under this
Note are paid to the holder of this Note on the redemption date specified in
such notice or such amounts are segregated and held in trust by the Company for
payment upon surrender of this Note in accordance with such notice. During the
continuance of any Event of Default (as defined in the Securities Purchase
Agreement), the Company shall pay interest on the outstanding principal of, and
any other amounts (other than interest), if any, due on the Notes and (to the
extent legally enforceable) on any overdue installment of interest, at the rate
of 12.00% per annum (computed on the same basis as above) until such overdue
amount is paid or until such Event of Default is cured or waived. All payments
on this Note shall be made in lawful money of the United States of America at
the address specified by the holder hereof for such purpose in Schedule 5.1 to
the Securities Purchase Agreement or by such method as may be designated by
notice to the Company, in the manner set forth in the Securities Purchase
Agreement.
The outstanding principal amount of ___________, and all accrued and unpaid
interest on this Note, shall be payable on August 31, 2001. This Note is subject
to redemption, in whole or in part, all as specified in the Securities Purchase
Agreement.
This Note is issued pursuant to the Securities Purchase Agreement. The
registered holder of this Note is entitled to the benefits of such Securities
Purchase Agreement and may enforce the agreements of the Company contained
therein and exercise the remedies provided for thereby or otherwise available in
respect thereof.
This Note is expressly subordinated to the extent and in the manner
provided in Section 10 of the Securities Purchase Agreement to all Senior
Indebtedness (as defined therein) of the Company.
This Note is a registered Note and, as provided in the Securities Purchase
Agreement, is transferable only upon surrender of this Note for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer duly
executed, by the registered holder hereof or his attorney duly authorized in
writing. The Company may treat the person in whose name this Note is registered
as the owner hereof for the purpose of receiving payment and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
In case an Event of Default shall occur and be continuing, the unpaid
balance of the principal, interest and any other amounts payable on this Note
may be declared and become due and payable in the manner and with the effect
provided in the Securities Purchase Agreement.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF
LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS
TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND OF THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW
YORK, FOR ANY ACTION, PROCEEDING OR INVESTIGATION IN ANY COURT OR BEFORE ANY
GOVERNMENTAL AUTHORITY ("LITIGATION") ARISING OUT OF OR RELATING TO THIS NOTE
AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY
LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), AND FURTHER AGREES THAT
SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO
ITS RESPECTIVE ADDRESS SET FORTH IN THIS NOTE SHALL BE EFFECTIVE SERVICE OF
PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION TO
THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF THIS NOTE OR THE
TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS OF THE STATE OF NEW YORK OR THE
UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, AND
HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF
OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.
▇▇▇▇▇▇'▇ FURNITURE, INC
By:________________________
Name:
Title:
Exhibit 15 to Schedule 13-D
FORM OF PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 26th day of August, 1996, between
▇▇▇▇▇▇'▇ Furniture, Inc. (the "Company"), a Delaware corporation, with its
principal offices at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and the
purchaser whose name and address is set forth on the signature page hereof (the
"Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and the Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Common Stock. Subject to the
terms and conditions of this Agreement, the Company has authorized the sale of
at least 7,000,000 shares of its Common Stock, par value $.001 per share (the
"Common Stock"), at a purchase price of U.S. $1.00 per share.
SECTION 2. Agreement to Sell and Purchase the Common Stock. At the
Closing (as defined in Section 3), the Company will sell to the Purchaser, and
the Purchaser will buy from the Company, upon the terms and conditions set forth
herein, the aggregate number of shares of Common Stock shown below:
Number of Shares Aggregate
of Common Stock Purchase Price
The Company proposes to enter into substantially this same form of purchase
agreement with certain other investors (the "Other Purchasers") and expects to
complete sales of shares of Common Stock to them. The Purchaser and the Other
Purchasers are hereinafter sometimes collectively referred to as the
"Purchasers," and this Agreement and the agreements executed by the Other
Purchasers are hereinafter sometimes collectively referred to as the "Purchase
Agreements." In addition, the Company also proposes to enter into a Securities
Purchase Agreement with General Electric Capital Corporation ("GECC") pursuant
to which GECC shall agree to acquire (i) five million shares of the Company's
Common Stock par value $.001 per share (the "Common Stock"), at an aggregate
purchase price of $5,000,000, (ii) the Company's 10% Subordinated Pay-In-Kind
Notes due August 31, 2001 (the "Notes"), in the initial aggregate principal
amount of $5,000,000 and (iii) in connection with the sale of the Notes, a
warrant (the "Warrant") to purchase 1,400,000 shares of Common Stock (the
"Securities Purchase Agreement"). The Purchase Agreements and the Securities
Purchase Agreement are hereinafter sometimes collectively referred to as the
"Agreements."
SECTION 3. The Closing. The closing (the "Closing") of the purchase and
sale of the Common Stock and the other transactions contemplated hereunder shall
take place at the offices of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, New York,
New York, at 9:00 a.m. local time on or before August 26, 1996, or such later
date as the parties hereto may agree (the "Closing Date").
3.1. Delivery of the Common Stock at the Closing. Within thirty (30)
business days of the Closing, the Company shall deliver to the Purchaser one or
more stock certificates registered in the name of the Purchaser, or in such
nominee name(s) as designated by the Purchaser, representing the number of
shares of Common Stock set forth in Section 2 above. The name(s) in which the
stock certificates are to be registered are set forth in the Stock Certificate
Questionnaire attached hereto as Appendix I. The Company's obligation to
complete the issuance and sale of the Common Stock and deliver such stock
certificate(s) to the Purchaser at the Closing shall be subject to the following
conditions: (a) concurrent closing of the transactions contemplated by the
Securities Purchase Agreement; (b) completion of the purchases and sales
pursuant to the Purchase Agreements with the Purchaser and the Other Purchasers
of at least 7,000,000 shares of Common Stock at a purchase price of U.S. $1.00
per share; (c) receipt by the Company of (i) New York Clearing House (next day)
funds in the full amount of the purchase price for the Common Stock being
purchased hereunder and/or (ii) if all or part of the purchase price for any
Common Stock is being paid by the exchange and cancellation of any promissory
notes evidencing outstanding indebtedness of the Company, and any interest
accrued and payable thereon, as referred to in subsection 3.2 hereto, an
Agreement of Cancellation and Exchange Relating to Certain Notes in
substantially the form of Exhibit A attached hereto (the "Cancellation and
Exchange Agreement"), relating to such promissory notes, as executed by the
Purchaser, together with the promissory notes referred to therein, provided that
the aggregate purchase price received by the Company under clauses (i) and (ii)
shall be at least $7,000,000; (d) certain of the Purchasers and GECC shall have
entered into a Stockholders Agreement in substantially the form of Exhibit B
attached hereto (the "Stockholders Agreement"); and (e) the accuracy in all
material respects of the representations and warranties made by the Purchasers
and the fulfillment in all material respects of those undertakings of the
Purchasers to be fulfilled prior to the Closing. The Purchaser's obligation to
accept delivery of such stock certificate(s) and to pay for the Common Stock
evidenced thereby shall be subject to the following conditions: (w) concurrent
closing of the transactions contemplated pursuant to the Securities Purchase
Agreement; (x) completion of the purchases and sales pursuant to the Purchase
Agreements with the Purchaser and the Other Purchasers of 7,000,000 shares of
Common Stock at a purchase price of U.S. $1.00 per share; (y) the Company shall
have entered into a Registration Rights Agreement in substantially the form of
Exhibit C attached hereto; and (z) the accuracy in all material respects of the
representations and warranties made by the Company herein and the fulfillment in
all material respects of those undertakings of the Company to be fulfilled prior
to Closing.
3.2. Cancellation of Certain Indebtedness. On or before the Closing Date,
the Company shall enter into a Cancellation and Exchange Agreements with (a)
▇▇▇▇▇ Investments Inc. ("▇▇▇▇▇"), the holder of (i) a Demand Promissory Note in
the aggregate principal amount of $1,500,000, issued to it by the Company, dated
May 21, 1996, and (ii) a Demand Promissory Note in the aggregate principal
amount of U.S. $500,000, dated July 2, 1996, and (b) each holder (together with
▇▇▇▇▇, each a "Note Holder") of Series 1996-I or Series 1996-II Convertible
Promissory Notes, which are currently outstanding in the aggregate principal
amount of $950,000, whereby such aforementioned indebtedness of the Company,
including any interest accrued and payable thereon, shall be canceled in
exchange for shares of Common Stock. Each Note Holder shall receive the number
of shares of Common Stock equal to (x) the sum of (i) the aggregate principal
amount of indebtedness of the Company held by such Note Holder and (ii) any
interest accrued and payable thereon divided by (y) the Common Stock purchase
price of U.S. $1.00 per share.
SECTION 4. Representations, Warranties and Covenants. The Company hereby
represents and warrants to, and covenants with, the Purchaser as follows:
4.1. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has all requisite corporate power and authority to conduct its business as
currently conducted. The Company is qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the failure to
so qualify would have a material adverse effect on the operations of the Company
and its subsidiaries, taken as a whole.
4.2. Authorized Capital Stock. As of the date hereof, the authorized
capital stock of the Company consists of: (a) thirty-five million (35,000,000)
shares of Common Stock, of which four million one hundred twenty thousand eight
hundred and ten (4,120,810) shares are validly issued and outstanding, fully
paid and nonassessable, and warrants to purchase one hundred eighty-five
thousand seven hundred and one shares (185,701) of Common Stock and options to
purchase one hundred ninety-one thousand six hundred and fourteen (191,614)
shares of Common Stock are validly issued and outstanding, fully paid and
nonassessable; and (b) six hundred and sixty-six thousand six hundred and
sixty-seven (666,667) shares of Preferred Stock, par value $.001 per share,
designated as Series A Preferred Stock (two hundred thousand (200,000) shares)
and Series B Preferred Stock (forty-four thousand four hundred and forty-four
(44,444) shares), of which one hundred seventeen thousand six hundred and
ninety-four (117,694) shares of Series A Preferred Stock are validly issued and
outstanding, fully paid and nonassessable and no shares of Series B Preferred
Stock are outstanding.
4.3. Due Execution, Delivery and Performance of the Agreements. The
Company's execution, delivery and performance of the Agreements, issuance of the
Common Stock, and execution, delivery and performance of the Stockholders
Agreement (a) have been duly authorized under Delaware law by all requisite
corporate action by the Company, and (b) will not violate any law or the
Certificate of Incorporation or Bylaws of the Company or any provision of any
indenture, mortgage, agreement, contract or other instrument to which the
Company is a party or by which the Company or any of its properties or assets is
bound as of the date hereof, or result in a breach of or constitute (upon notice
or lapse of time or both) a default under any such indenture, mortgage,
agreement, contract or other instrument or result in the creation or imposition
of any lien, security interest, mortgage, pledge, charge or other encumbrance,
of any nature whatsoever, upon any properties or assets of the Company. Upon
their execution and delivery, and assuming the valid execution thereof by the
respective Purchasers, the Agreements will constitute valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.4. Issuance, Sale and Delivery of the Common Stock. When issued and
delivered by the Company and paid for by the Purchasers, the Common Stock will
be duly authorized, validly issued, fully paid and nonassessable.
SECTION 5. Representations, Warranties and Covenants of the Purchaser. (a)
The Purchaser represents and warrants to, and covenants with, the Company that:
(i) the Purchaser is knowledgeable, sophisticated and experienced in making, and
is qualified to make, decisions with respect to investments in shares presenting
an investment decision like that involved in the purchase of the Common Stock,
including investments in securities issued by the Company, and has requested,
received, reviewed and considered all information it deems relevant in making an
informed decision to purchase the shares of Common Stock; (ii) the Purchaser is
acquiring the number of shares of Common Stock set forth in Section 2 above in
the ordinary course of its business and for its own account for investment (as
defined for purposes of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976
and the regulations thereunder) only and with no present intention of
distributing any of such shares of Common Stock or any arrangement or
understanding with any other persons regarding the distribution of such shares
of Common Stock, subject to its right to resell the shares of Common Stock as
provided in the following clause (iii); (iii) the Purchaser will not offer, sell
or otherwise transfer any shares of Common Stock except (A) to ▇▇▇▇▇▇'▇
Furniture, Inc., (B) pursuant to a registration statement which has been
declared effective under the Securities Act of 1933, as amended (the "Securities
Act"), or (C) in accordance with Rule 144 under the Securities Act or pursuant
to another available exemption from the registration requirements of the
Securities Act (which shall be confirmed in an opinion of counsel acceptable in
form and substance to the Company if the Company so requests) and, in each case,
in accordance with the applicable securities laws of any state of the United
States or any other applicable jurisdiction; (iv) the purchase of shares of
Common Stock by the Purchaser either (A) is being funded solely out of an
insurance company general investment account which exclusively supports either
(1) contracts not issued to any "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is subject to Title 1 of ERISA or any "plan" within the meaning
of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
or (2) policies which constitute "guaranteed benefit policies" under Section
401(b)(2) of ERISA, or as to which no such plan or plans maintained by any
employer and its affiliates has an interest as a contractholder (as measured by
the amount of reserves arising from the contract held by the plan or plans,
determined under Section 807(d) of the Code) which exceeds 10% of the total
liabilities of the general account; (B) is not being funded with the assets of
any (1) "employee benefit plan" within the meaning of Section 3(3) of ERISA
which is subject to Title 1 of ERISA, (2) "plan" within the meaning of Section
4975 of the Code or (3) entity deemed to hold "plan assets" within the meaning
of 29 C.F.R ss. 25103-101 of any such employee benefit plan or plans; or (C) is
not a prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code because the Purchaser has an exemption from such
prohibited transaction rules for the purchase and holding of the Common Stock;
(v) the Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any shares of Common Stock except in
compliance with the Securities Act and the rules and regulations promulgated
thereunder; (vi) the Purchaser has completed or caused to be completed the Stock
Certificate Questionnaire, attached hereto as Appendix I, and the answers
thereto are true and correct to the best knowledge of the Purchaser as of the
date hereof; (vii) the Purchaser has, in connection with its decision to
purchase the number of shares of Common Stock set forth in Section 2 above,
relied solely upon the representations and warranties of the Company contained
herein; (viii) the Purchaser is an "accredited investor" within the meaning of
Rule 501(a)(1), (2) or (3) under the Securities Act; (ix) the Purchaser
understands that the shares of Common Stock will contain a legend to the
following effect:
"THIS SECURITY HAS BEEN ACQUIRED BY THE HOLDER FOR THE PURPOSE OF
INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION. THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
'SECURITIES ACT'), OR ANY STATE SECURITIES LAWS AND NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. THE HOLDER OF THIS SECURITY, BY ITS
ACCEPTANCE HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT
OF THE COMPANY THAT: (I) IT HAS ACQUIRED A 'RESTRICTED' SECURITY WHICH
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO ▇▇▇▇▇▇'▇
FURNITURE, INC., (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS
BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (C) IN ACCORDANCE
WITH RULE 144 UNDER THE SECURITIES ACT OR PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(WHICH SHALL BE CONFIRMED IN AN OPINION OF COUNSEL ACCEPTABLE IN FORM
AND SUBSTANCE TO THE ISSUER OF THIS SECURITY IF THE ISSUER SO REQUESTS)
AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION;
AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS SET
FORTH IN (II) ABOVE;"
and (x) if the Purchaser has entered into the Stockholders Agreement, the
Purchaser understands that the stock certificates representing the shares of
Common Stock issued and sold hereby will contain a legend to the following
effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCKHOLDERS AGREEMENT,
DATED AS OF AUGUST 26, 1996, AS FROM TIME TO TIME AMENDED, A COPY OF
WHICH MAY BE OBTAINED FROM ▇▇▇▇▇▇'▇ FURNITURE, INC."
(b) The Purchaser further represents and warrants to, and covenants with,
the Company that (i) the Purchaser has full right, power, authority and capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, and (ii) upon the execution and delivery of
this Agreement, this Agreement shall constitute a valid and binding obligation
of the Purchaser enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the stock certificates for the Common Stock
delivered pursuant hereto shall survive the execution of this Agreement, the
delivery to the Purchaser of shares of Common Stock being purchased and the
payment therefor.
SECTION 7. Broker's Fee. Each of the parties hereto hereby represents that,
on the basis of any actions and agreements by it, there are no brokers or
finders entitled to compensation in connection with the sale of the Common Stock
to the Purchaser.
SECTION 8. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, telecopier, or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so mailed or if
telecopied, when receipt is acknowledged, and shall be delivered as addressed as
follows:
(a) if to the Company, to:
▇▇▇▇▇▇'▇ Furniture, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy so mailed to:
Stroock & Stroock & ▇▇▇▇▇
Seven ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person at such other place as the
Company shall designate to the Purchaser in writing; and
(b) if to the Purchaser, at its address or telecopier number as
set forth at the end of this Agreement, or at such other
address or addresses as may have been furnished to the Company
in writing.
SECTION 9. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the Purchaser.
SECTION 10. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of the securities purchased hereunder.
SECTION 11. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto 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.
SECTION 12. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
SECTION 13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
SECTION 15. Entire Agreement. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
▇▇▇▇▇▇'▇ FURNITURE, INC.
By: _______________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
Print or Type:
Name of Purchaser:
-----------------------------------
Name of Individual representing
Purchaser:
-----------------------------------
Title of Individual representing
Purchaser:
-----------------------------------
Signature by:
Individual representing Purchaser:
-----------------------------------
Address: __________________________
Telephone: ________________________
Telecopier: _______________________
Appendix I
▇▇▇▇▇▇'▇ FURNITURE, INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your shares
of Common Stock are to be
registered in (this is the name
that will appear on your stock
certificate(s)). You may use a
nominee name if appropriate: ______________________
2. The relationship between the
Purchaser of the Common Stock
and the Registered Holder listed
in response to item 1 above: _______________________
3. The mailing address of the
Registered Holder listed in
response to item 1 above: ______________________
4. The Social Security Number or
Tax Identification Number of the
Registered Holder listed
in response to item 1 above: ______________________
5. If the Registered Holder is not
the same as the Purchaser signing
the Agreement, the Purchaser hereby
represents and warrants to the
Company that the Purchaser
has full legal right, power and
authority to bind the Registered
Holder as the purchaser under
the Agreement and to make all
representations, warranties,
covenants and agreements of the
Purchaser on behalf of each
Registered Holder listed above
including, without limitation,
that the Registered Holder is an
accredited investor under Rule
501(a) under the Securities Act.
Exhibit A
AGREEMENT OF CANCELLATION AND EXCHANGE
RELATING TO CERTAIN NOTES
The undersigned, the holder (the "Note Holder") of that certain [DESCRIBE
NOTE] (the "Specified Notes"), issued by ▇▇▇▇▇▇'▇ FURNITURE, INC., a Delaware
corporation (the "Company"), hereby agrees to the cancellation of the Specified
Notes in exchange for _________ shares of the Company's Common Stock, par value
$.001 per share (the "Common Stock"), and hereby waives and relinquishes all of
its respective rights with respect thereto. Concurrently herewith, the Note
Holder hereby (i) delivers to the Company (a) an executed Purchase Agreement,
dated as of August __, 1996, between the Company and the Note Holder as
purchaser, pursuant to which the Company shall issue the Common Stock to the
Note Holder in exchange for the cancellation of the Specified Notes and for
payment of any interest accrued and payable thereon and (b) for cancellation,
the original Specified Notes representing indebtedness in the aggregate
principal amount of $___________; and (ii) agrees that the number of shares of
Common Stock issued to the Note Holder constitutes full payment for the
cancellation of the indebtedness of the Company represented by the Specified
Notes and any interest accrued and payable thereon.
[NOTE HOLDER]
By: _________________________________
Name:
Title:
Dated: As of August __, 1996
Exhibit 16 to Schedule 13D
FORM OF STOCKHOLDERS AGREEMENT
by and among
▇▇▇▇▇▇'▇ FURNITURE, INC.
and
THE STOCKHOLDERS LISTED ON
THE SIGNATURE PAGES HEREOF
Dated as of August 26, 1996
TABLE OF CONTENTS
PAGE
Section 1. Definitions.....................................................1
Section 2. Corporate Governance............................................6
2.1. Board of Directors.........................................6
2.2. Certain Actions Requiring Consent of GECC Designee.........8
2.3. Management................................................10
2.4. Directors' Indemnification................................11
2.5. Expenses..................................................12
2.6. Cooperation...............................................12
2.7. Voting....................................................12
Section 3. Restrictions on Transfers of Stock.............................12
Section 4. Rights of First Offer..........................................13
Section 4A. ▇▇▇▇▇▇ Trust Stock Rights of First Offer......................14
Section 5. Tag-Along Rights...............................................16
Section 6. Conflicting Agreements.........................................16
Section 7. Legend.........................................................17
Section 8. Representations and Warranties.................................18
Section 9. Duration of Agreement..........................................19
Section 10. Further Assurances............................................19
Section 11. Amendment and Waiver..........................................19
Section 12. Severability..................................................20
Section 13. Entire Agreement..............................................20
Section 14. Successors and Assigns........................................20
Section 15. Counterparts..................................................20
Section 16. Remedies......................................................20
Section 17. Notices and Other Communications..............................20
Section 18. Governing Law; Consent to Jurisdiction........................21
Section 19. Descriptive Headings..........................................22
Section 20. Construction..................................................22
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of August 26,
1996 by and among ▇▇▇▇▇▇'▇ FURNITURE, INC., a Delaware corporation (the
"COMPANY") and each of the stockholders of the Company listed on the signature
pages hereof (each, a "STOCKHOLDER" and collectively, the "STOCKHOLDERS").
W I T N E S S E T H :
WHEREAS, pursuant to a Securities Purchase Agreement between the Company
and General Electric Capital Corporation ("GECC") dated the date hereof (the
"SECURITIES PURCHASE AGREEMENT"), GECC is purchasing from the Company 5,000,000
shares of the Company's Common Stock, par value $.001 per share (the "COMMON
STOCK"), for an aggregate purchase price of $5,000,000, the Company's 10%
Subordinated Pay-in-Kind Notes due August 31, 2001, as described in the
Securities Purchase Agreement (the "NOTES"), in the initial principal amount of
$5,000,000, and, in connection with the Notes, a warrant (the "WARRANT") to
purchase 1,400,000 shares of Common Stock;
WHEREAS, concurrently with such purchase by GECC, (i) ▇▇▇▇▇▇ Group is
purchasing 1,000,000 shares of Common Stock for an aggregate purchase price of
$1,000,000, (ii) Other Investors are purchasing 3,000,000 shares of Common Stock
for an aggregate purchase price of $3,000,000 and (iii) ▇▇▇▇▇ Investments Inc.
("▇▇▇▇▇") and certain other holders of indebtedness of the Company are
exchanging such indebtedness for shares of Common Stock, as more fully described
in the Securities Purchase Agreement;
WHEREAS, it is a condition to the consummation of the foregoing
transactions that the parties hereto enter into this Stockholders Agreement, and
the parties hereto deem it to be in their best interests to enter into this
Agreement establishing and setting forth their agreement with respect to certain
rights and obligations associated with ownership of shares of capital stock of
the Company.
Section 1. DEFINITIONS. AS USED HEREIN, THE FOLLOWING TERMS SHALL HAVE THE
FOLLOWING MEANINGS (CAPITALIZED TERMS USED HEREIN AND NOT DEFINED HEREIN SHALL
HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE SECURITIES PURCHASE AGREEMENT):
"AFFILIATE" and "ASSOCIATE" have the meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
"BENEFICIALLY OWN" with respect to any securities shall mean having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing.
"BOARD" has the meaning assigned to it in Section 2.1.
"BY-LAWS" means the By-laws of the Company as in effect on the date hereof,
as they may be amended from time to time hereafter.
"CAPITALIZED LEASE" shall mean, with respect to any person, any lease or
any other agreement for the use of property which, in accordance with generally
accepted accounting principals, should be capitalized on the lessee's or user's
balance sheet.
"CAPITALIZED LEASE OBLIGATION" of any person shall mean and include, as of
any date as of which the amount thereof is to be determined, the amount of the
liability capitalized or disclosed (or which should be disclosed) in a balance
sheet of such person in respect of a Capitalized Lease of such person.
"CERTIFICATE" means the Certificate of Incorporation of the Company as in
effect on the date stated hereof, as it may be amended from time to time
hereafter.
"COMMON STOCK EQUIVALENTS" means rights, options, scrip, warrants or other
securities convertible into, or exchangeable or exercisable for, shares of
Common Stock.
"COMPANY" has the meaning assigned to it in the first paragraph hereof.
"CURRENT MARKET PRICE", when used with reference to shares of Common Stock
for any given date, shall mean the closing price per share of Common Stock on
such date. The closing price for each day shall be the last quoted sale price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or,
if on any such date the Common Stock or such other securities are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock or
such other securities selected by the Board of Directors of the Company. If the
Common Stock is listed or admitted to trading on a national securities exchange,
the closing price shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Stock or such other
securities are not listed or admitted to trading on the New York Stock Exchange,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange on
which the Common Stock or such other securities are listed or admitted to
trading.
"EMPLOYMENT AGREEMENT" shall mean the Employment Agreement dated as of the
date hereof between the Company and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇").
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the omission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such successor
Federal statute.
"FULLY DILUTED" shall mean, when used with reference to the Common Stock,
at any date as of which the number of shares thereof is to be determined, (i)
all shares of Common Stock outstanding at such date and (ii) all shares of
Common Stock issuable in respect of vested options or warrants to purchase, or
securities convertible into, exercisable for or exchangeable for, shares of
Common Stock outstanding on such date, the conversion, exercise or exchange
price of which is less than the Current Market Price.
"GROUP" has the meaning assigned such term for purposes of Rule 13d-5 under
the Exchange Act.
"GUARANTEE" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of any Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (iii) to lease property or to purchase securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of such Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of any computations made under this Agreement, a
Guarantee in respect of any Indebtedness for borrowed money shall be deemed to
be Indebtedness equal to the principal amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"▇▇▇▇▇▇ GROUP" shall mean those Persons listed on Schedule A attached
hereto.
"▇▇▇▇▇▇ TRUSTS" shall mean the ▇▇▇▇▇▇ Group other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
"INDEBTEDNESS" shall mean, with respect to any person, (i) all obligations
of such person for borrowed money, or with respect to deposits or advances of
any kind, (ii) all obligations of such person evidenced by bonds, debentures,
notes or similar instruments, (iii) all obligations of such person under
conditional sale or other title retention agreements relating to property
purchased by such person, (iv) all obligations of such person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien or security interest on property owned or acquired by such person
whether or not the obligations secured thereby have been assumed, but only to
the extent of such security, if such obligations have not been assumed, (vi) all
Capitalized Lease Obligations of such person, (vii) all Guarantees of such
person, (viii) all obligations (including but not limited to reimbursement
obligations) relating to the issuance of letters of credit for the account of
such person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"OTHER INVESTORS" shall mean those Persons listed on Schedule B attached
hereto.
"PERMAL GROUP" shall mean those Persons listed on Schedule C attached
hereto.
"PERMITTED TRANSFER" shall mean any Transfer (i) by an individual
Stockholder to such Stockholder's spouse, former spouse, child, parent, parent
of a spouse, sibling or grandchild (collectively, "RELATIVES") or to or among a
trust of which there are no principal beneficiaries other than one or more
Relatives of such Stockholder; (ii) from a Relative of an individual Stockholder
to another Relative of that individual Stockholder or to that individual
Stockholder; (iii) by any Stockholder to any of its Affiliates or partners; or
(iv) by an Individual Stockholder pursuant to laws of descent or survivorship.
"PERSON" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the date hereof, between the Company and the stockholders listed on
the signature page thereto as it may be amended from time to time.
"RELATED PARTY" shall mean any officer, director or beneficial holder of 3%
or more of the outstanding shares of capital stock of the Company or any
Subsidiary, any Relative of any such officer, director or beneficial holder of
the Company or any Subsidiary, and any Affiliate or Associate of any of the
foregoing persons.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SELL" as to any Stock, shall mean to sell, or in any other way directly or
indirectly transfer (including by operation of law, by merger or consolidation,
or sale of securities of a holding company), assign, distribute or otherwise
dispose of, such Stock in a bona fide transaction for value; and the terms
"SALE" and "SOLD" shall have meanings correlative to the foregoing. A Permitted
Transfer shall not constitute a Sale for purposes of this Agreement.
"STOCK" means (i) any shares of Common Stock and (ii) any Common Stock
Equivalents (including, without limitation, the Common Stock issuable upon
conversion, exercise or exchange thereof), in each case, whether owned on the
date hereof or acquired hereafter.
"STOCKHOLDER" and "STOCKHOLDERS" have the meanings assigned to such terms
in the first paragraph hereof; PROVIDED that any transferee of Stock pursuant to
a Permitted Transfer shall be treated as a Stockholder for purposes of this
Agreement and shall be entitled to the benefits of, and shall be bound by, the
provisions of this Agreement.
"STOCKHOLDER'S GROUP" shall mean, with respect to any Stockholder who is a
member of the ▇▇▇▇▇▇ Group or the Permal Group, either the ▇▇▇▇▇▇ Group or the
Permal Group, as the case may be.
"SUBSIDIARY" means with respect to any Person, (i) any corporation,
partnership or other entity of which shares of capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other similar managing body of such corporation, partnership or
other entity are at the time owned by such Person, or (ii) the management of
which is otherwise controlled, directly or indirectly, through one or more
intermediaries by such Person.
"TRANSFER" as to any Stock, means to Sell, or in any other way directly or
indirectly transfer, assign, distribute, pledge, encumber or otherwise dispose
of, either voluntarily or involuntarily, and whether or not for value.
"VOTING SHARES" means shares of any class of capital stock of the Company
the holders of which are generally entitled to vote in the election of members
of the Board.
Section 2. CORPORATE GOVERNANCE.
2.1. BOARD OF DIRECTORS.
(a) MEMBERS. Subject to the provisions of Section 6.10 of the Securities
Purchase Agreement, the Board of Directors of the Company (the "BOARD") shall
consist of six members, of whom one shall be designated by GECC (such person so
designated, and any successor thereto, being referred to herein as the "GECC
DESIGNEE"); one shall be designated by Permal Group (such person so designated,
and any successor thereto, being referred to herein as the "PERMAL DESIGNEE");
one shall be ▇▇▇▇▇▇; and three shall be selected by the vote of the GECC
Designee, the Permal Designee and ▇▇▇▇▇▇ (the "JOINT DESIGNEES"). At each
meeting of the stockholders of the Company held for the purpose of electing
directors, the Stockholders (other than the ▇▇▇▇▇▇ Trusts) shall take such
action as shall be necessary to cause the GECC Designee, the Permal Designee,
▇▇▇▇▇▇ and the Joint Designees (or any successor to any such person designated
in accordance with paragraph (b) of this Section) to be elected as directors
(including, in the case of GECC and Permal Group, causing their respective
designees on the Board to nominate, and recommend to the stockholders of the
Company the election of, the GECC Designee, the Permal Designee, ▇▇▇▇▇▇ and the
Joint Designees to the Board and opposing, and causing their respective
designees on the Board to oppose, any proposal to remove GECC Designee, Permal
Designee, ▇▇▇▇▇▇ or any Joint Designee at each meeting of the stockholders of
the Company at which the election or removal of members of the Board is on the
agenda), and shall take no action which would diminish the prospects of the GECC
Designee, the Permal Designee, ▇▇▇▇▇▇ or any Joint Designee being elected to the
Board or increase the prospects of any GECC Designee, Permal Designee, ▇▇▇▇▇▇ or
any Joint Designee being removed from the Board. The Company shall take all
necessary action to reduce the size of the Board to the extent required by the
first sentence of this paragraph and shall cause the current members of the
Board to resign from office as necessary to implement the provisions of the
first sentence of this paragraph.
(b) VACANCIES. Each of the GECC Designee and Permal Designee shall hold
office until his death, resignation or removal or until his successor shall have
been duly elected and qualified. If any GECC Designee shall cease to serve as a
director of the Company for any reason, the vacancy resulting thereby shall be
filled by another person designated by GECC. If any Permal Designee shall cease
to serve as a director of the Company for any reason, the vacancy resulting
thereby shall be filled by another person designated by Permal Group. If ▇▇▇▇▇▇
shall cease to serve as a director of the Company, GECC and Permal Group shall
cause their respective designees on the Board and the Joint Designees to take
all necessary action to elect a successor to ▇▇▇▇▇▇ to fill the vacancy
resulting thereby. In the event that at any time there exist vacancies on the
Board such that there is either no GECC Designee or no Permal Designee, no
action may be taken by the Board until such vacancy is filled. GECC and Permal
Group agree to use their best efforts to designate successors to fill any such
vacancies as promptly as practicable.
(c) REMOVAL. No GECC Designee may be removed from office except by GECC and
no Permal Designee may be removed from office except by Permal Group. GECC shall
have the right to remove any GECC Designee, and Permal Group shall have the
right to remove any Permal Designee, with or without cause, at any time.
(d) QUORUM REQUIREMENTS. Subject to Section 2.2, the quorum which shall be
required for action to be taken by the Board (other than an adjournment of any
meeting of the Board) shall be the GECC Designee, the Permal Designee and
▇▇▇▇▇▇. Directors participating by telephone conference in any meeting of the
Board shall be considered in determining whether a quorum of directors is
present.
(e) COMMITTEES. The Company shall cause the GECC Designee and the Permal
Designee to be appointed to each of the committees of the Board as may be
requested at any time or from time to time by GECC or Permal Group, as the case
may be.
(f) CHAIRMAN OF THE BOARD. ▇▇▇▇▇▇ shall serve as Chairman of the Board for
as long as he is Chief Executive Officer. GECC and Permal Group presently intend
to continue to nominate ▇▇▇▇▇▇ to serve as a director and Chairman of the Board
after ▇▇▇▇▇▇ retires as Chief Executive Officer, provided that ▇▇▇▇▇▇ shall not
be obligated to accept such nomination.
(g) BOARD AND COMMITTEE MEETINGS. The Company shall hold regular meetings
of its Board on at least a quarterly basis. The Company agrees, and shall cause
its By-laws to be amended to the extent necessary to provide, that the GECC
Designee shall have the right, upon reasonable notice, to call meetings of the
Board and of each committee of the Board on which he or she is a member.
(h) DURATION. The right of each of GECC and Permal Group to designate
directors pursuant to this Section shall continue only for so long as GECC and
its Affiliates or Permal Group, as the case may be, beneficially owns at least
2,000,000 shares of Common Stock.
2.2 CERTAIN ACTIONS REQUIRING CONSENT OF GECC DESIGNEE. Notwithstanding any
other provision of this Agreement, for so long as GECC is entitled to designate
a GECC Designee to serve on the Board, without the approval, at a meeting of the
Board or a committee thereof duly called and held, of the GECC Designee, the
Company shall not, directly or indirectly, and shall not permit any of its
Subsidiaries to, directly or indirectly, take any of the following actions
(except to the extent any such action is specifically authorized under this
Agreement, the Securities Purchase Agreement, the Registration Rights Agreement
or an annual business plan previously approved by the GECC Designee in
accordance with this Section):
(a) merge with or into or consolidate with any other Person;
(b) voluntarily liquidate, dissolve or wind up or file any voluntary
petition in bankruptcy or for receivership or make any assignment for the
benefit of creditors;
(c) in any transaction or series of transactions, acquire (including
pursuant to a merger or consolidation) all or any substantial portion of the
business or assets of any Person;
(d) enter or commit to enter into any joint venture or partnership or
establish any non-wholly-owned subsidiaries or otherwise make any debt or equity
investment in any Person (other than extensions of credit in the ordinary course
of business);
(e) expand into new lines of business (it being understood that "new lines
of business" do not include the conduct in additional states in the United
States of the business conducted by the Company and its Subsidiaries as of the
date of this Agreement);
(f) assign to any other Person any rights of the Company under this
Agreement, the Registration Rights Agreement or the Securities Purchase
Agreement;
(g) in any transaction or series of transactions, sell, lease or exchange
any assets of the Company and/or any Subsidiary, except for sales of inventory
in the ordinary course of business and subleasing of vacant retail space on
arm's-length terms;
(h) adopt or change any material accounting policy of the Company or any of
its Subsidiaries, except as required by generally accepted accounting
principles;
(i) create, incur, assume or suffer to exist any Indebtedness other than
Indebtedness under the Loan and Security Agreement dated as of January 20, 1995
between the Company and Congress Financial Corporation (Western), as amended to
the date of this Agreement, including premium (if any), and interest thereon,
and other Indebtedness not to exceed in the aggregate $100,000 at any time
outstanding;
(j) mortgage, encumber, create, incur or suffer to exist, liens on its
assets (other than liens on assets under Indebtedness outstanding as of the date
hereof and materialmen's, mechanics' and other similar liens arising for work
performed in the ordinary course of business which are not overdue for more than
30 days);
(k) pay, declare or set aside any sums for the payment of, any dividends,
or make any distribution on, any shares of its capital stock or redeem,
repurchase or otherwise acquire any outstanding shares of its capital stock or
any other of its outstanding securities or Indebtedness (except for Indebtedness
(other than indebtedness to any Related Party, excluding indebtedness for
expenses incurred in the ordinary course of business on behalf of the Company
and its Subsidiaries) to the extent it becomes due in accordance with its
terms);
(l) make or commit to make (with respect to the Company and all of its
Subsidiaries taken together) during any calendar year any capital expenditure or
capital expenditures in an amount in excess of $50,000;
(m) issue or sell any shares of capital stock or rights, options, warrants
or other securities exercisable for, exchangeable for or convertible into shares
of capital stock of the Company or any of the Company's Subsidiaries, other than
upon the exercise of options or warrants outstanding on the date of this
Agreement or previously approved in accordance with this Section, or grant,
amend or terminate any stock appreciation right or other stock-based award;
(n) enter into, adopt, amend or terminate any employment or consulting
agreement, or hire or retain any person who will report directly to the Chief
Executive Officer or to whom the Company shall pay total compensation
(including, without limitation, compensation in the form of benefits) in excess
of $110,000 per year, or enter into, adopt, amend or terminate any employee
benefit plan, policy or arrangement, except as required by law or generally
accepted accounting principles;
(o) amend its Certificate or By-laws, including, without limitation, any
change in the number of directors comprising its Board of Directors, or adopt,
amend, redeem or terminate any shareholder rights plan or similar plan or
arrangement;
(p) amend, modify or waive an provision of this Agreement, the Securities
Purchase Agreement, the Registration Rights Agreement or the agreements
ancillary thereto, or become a party to any agreement which by its terms
restricts the Company's or any of its Subsidiaries', or any Stockholder's,
performance of the terms of any of such agreements;
(q) change its independent certified accountants or actuaries;
(r) register any securities under the Securities Act or grant any
registration rights therefor;
(s) enter into, amend or terminate, or waive any material rights of the
Company and its Subsidiaries under, any contract, arrangement or transaction
involving consideration in excess of $50,000 or which is otherwise material to
the Company or any of its Subsidiaries;
(t) enter into, amend or terminate any contract, arrangement or transaction
with a Related Party, other than the payment of salary and benefits pursuant to
employment arrangements entered into in the ordinary course of business in
compliance with this Agreement;
(u) enter into, adopt, amend (whether by agreement or by conduct of the
business), except as required by law or generally accepted accounting
principles, or terminate any annual business plan;
(v) take any action require by law to be approved by the Board; or
(w) agree or otherwise commit to take any of the actions set forth in the
foregoing subparagraphs (a) through (v).
2.3. MANAGEMENT.
(a) CHIEF EXECUTIVE OFFICER. Subject to the provisions of this Agreement
and the Employment Agreement, ▇▇▇▇▇▇ shall be the Chief Executive Officer of the
Company. In the event of the death, resignation, removal or other termination of
▇▇▇▇▇▇'▇ services as Chief Executive Officer, any successor Chief Executive
Officer (and any successor(s) thereto) shall be selected by GECC.
(b) APPOINTMENT OF MANAGEMENT. Subject to Section 2.2 hereof, all members
of management of the Company (other than the Chief Executive Officer) shall be
designated by, their compensation shall be determined by, and they may be
removed, promoted or demoted by, the Chief Executive Officer of the Company;
PROVIDED, however, that the designation of, setting of compensation for, or
removal, promotion or demotion of, any person who will report directly to the
Chief Executive Officer or earn total compensation (including benefits) from the
Company and its Subsidiaries of $110,000 or more per year shall be subject to
the prior approval of the Board.
2.4. DIRECTORS' INDEMNIFICATION.
(a) The Company shall obtain and cause to be maintained in effect, with
financially sound insurers, a policy of directors' and officers' liability
insurance covering the GECC Designee, the Permal Designee, ▇▇▇▇▇▇ and the Joint
Designees (and their respective successors) in an amount of at least $15,000,000
or such other amount the Board shall specify (as such amount shall be increased
from time to time at the request of GECC).
(b) The Certificate, By-laws and other organizational documents of the
Company and each of its Subsidiaries shall at all times, to the fullest extent
permitted by law, provide for indemnification of, advancement of expenses to,
and limitation of the personal liability of, the members of the Board and the
members of the boards of directors or other similar managing bodies of each of
the Company's Subsidiaries and such other persons, if any, who, pursuant to a
provision of such Certificates, By-laws or other organizational documents,
exercise or perform any of the powers or duties otherwise conferred or imposed
upon members of the Board or the boards of directors or other similar managing
bodies of each of the Company's Subsidiaries. Such provisions may not be
amended, repealed or otherwise modified in any manner adverse to any member of
the Board or any member of the boards of directors or other similar managing
bodies of any of the Company's Subsidiaries, until at least six years following
the termination of this Agreement.
(c) Each of the GECC Designee, the Permal Designee, ▇▇▇▇▇▇ and the Joint
Designees is intended to be a third-party beneficiary of the obligations of the
Company pursuant to this Section 2.4, and the obligations of the Company
pursuant to this Section 2.4 shall be enforceable by the GECC Designee, the
Permal Designee, ▇▇▇▇▇▇ and the Joint Designees.
2.5. EXPENSES. The Company shall pay the reasonable out-of-pocket expenses
incurred by each of the GECC designee, the permal designee and the joint
designees in connection with performing his or her duties, including without
limitation the reasonable out-of-pocket expenses incurred by such person
attending meetings of the board or any committee thereof or meetings of any
board of directors or other similar managing body (and any committee thereof) of
any subsidiary of the Company.
2.6. COOPERATION. Each stockholder (other than the ▇▇▇▇▇▇ Trusts) shall vote all
of its voting shares and shall take all other necessary or desirable actions
within its control (including, without limitation, attending all meetings in
person or by proxy for purposes of obtaining a quorum, executing all written
consents in lieu of meetings and voting to remove members of the board, as
applicable), and the company shall take all necessary and desirable actions
within its control (including, without limitation, calling special board and
stockholder meetings and voting to remove members of the board, as applicable),
to effectuate the provisions of Section 2.1.
2.7. VOTING. Each stockholder which is included in the permal group agrees that,
at each meeting of stockholders and in each action by written consent in lieu of
a meeting, such stockholder shall vote (or act by consent with respect to) all
voting shares over which such stockholder has voting authority in the same
manner that the voting shares held by GECC are voted with respect to each matter
subject to the vote or consent of stockholders of the Company. GECC shall
provide each such stockholder with reasonable advance notice in order for such
stockholder to comply with its obligations under this Section 2.7. Upon the
request of GECC, such stockholder shall execute an irrevocable proxy authorizing
designees of GECC to vote all voting shares over which such stockholder has
voting authority in the manner prescribed in this section. The provisions of
this Section 2.7 shall be amended to the satisfaction of GECC such that,
notwithstanding anything in this agreement to the contrary, GECC shall have only
such voting rights set forth in this Section 2.7 with respect to voting shares
owned by each stockholder in the Permal group only to the extent that such
voting rights do not cause GECC and the company to be considered members of a
"controlled group of corporations" or "under common control" within the meaning
of Sections 414(b) or (c) of the Code, or to be considered under "common
control" within the meaning of Section 4001(a)(14) of ERISA.
SECTION 3. RESTRICTIONS ON TRANSFERS OF STOCK.
(a) Notwithstanding anything to the contrary contained herein, no
Stockholder shall Transfer any Stock, except for Sales and Permitted Transfers.
The Company shall not reflect on its books any Sale of Stock, unless (a) the
Sale is pursuant to an effective registration statement under the Securities Act
and under any applicable state securities or blue sky laws, or (b) the Selling
Stockholder shall have furnished the Company with evidence reasonably
satisfactory to the Company that no such registration is required because of the
availability of an exemption from registration under the Securities Act and
under applicable state securities or blue sky laws. A written opinion of counsel
of recognized standing to the effect set forth in clause (b) of the preceding
sentence shall satisfy the requirements of such clause.
(b) Any Transfer or attempted Transfer of Stock in violation of any
provision of this Agreement shall be void, and the Company shall not record such
Transfer on its books or treat any purported transferee of such Stock as the
owner of such Stock for any purpose.
Section 4. RIGHTS OF FIRST OFFER. In the event that any stockholder intends to
sell any stock other than pursuant to a registered public offering and other
than sales on NASDAQ or a national securities exchange of shares which, when
aggregated with all other sales by such stockholder and any other members of
such stockholder group from and after the date of this agreement, would
represent not more than 1,000,000 shares of common stock in the aggregate:
(i) The stockholder intending to transfer such stock (the "PROPOSING
SELLER") shall give each other Stockholder (each an "OFFEREE") written notice of
its intent to Sell such Stock, specifying the number of securities to be sold
and the minimum price and terms and conditions of such sale and offering to Sell
to such Offeree, at such minimum price and on such terms and conditions, its pro
rata share of such Stock (based on the number of shares of Common Stock
beneficially owned by each Offeree on a Fully Diluted basis); PROVIDED that any
Offeree may, by written notice to the Proposing Seller, elect to purchase, in
addition to its pro rata share of such Stock, all or any portion of the Stock
(if any) with respect to which any other Offeree fails to exercise its right of
first offer under this Section 4, and such additional Stock shall be pro-rated
among such Offerees in the manner described above to the extent such additional
Stock is oversubscribed;
(ii) if any Offeree shall not, within 15 days after receipt of the notice
given pursuant to clause (i) above, accept such offer in writing with respect to
the Stock specified in such notice, then the Proposing Seller shall be free to
sell the Stock specified in the notice to such Offeree (but only those
securities covered by the notice of intention to sell which no other Offeree
shall have agreed to purchase) at a price equal to or above the minimum price
and on other terms and conditions no less favorable to the Proposing Seller than
those specified in such notice, at any time within 90 days of the expiration of
such 15-day period;
(iii) if the Proposing Seller shall not have consummated the proposed
Transfer within 90 days after the expiration of the 15-day period referred to in
clause (ii) above, then the Proposing Seller may not thereafter Transfer such
Stock without complying with the provisions of this Section 4; and
(iv) if any Offeree shall accept such offer within 15 days after the notice
given pursuant to clause (i) above, then such Offeree shall purchase the Stock
specified in such notice as promptly as is reasonably practicable, but in any
event within 45 days after the notice given pursuant to clause (i) above or such
later date as the Proposing Seller may designate within the 90-day period
referred to in clause (iii) above.
Section 4A. ▇▇▇▇▇▇ TRUST STOCK RIGHTS OF FIRST OFFER. If any of the ▇▇▇▇▇▇
Trusts intends to sell any stock covered by a shelf registration statement (as
defined in the Registration Rights Agreement):
(i) the ▇▇▇▇▇▇ Trust intending to transfer such stock (the "▇▇▇▇▇▇ TRUST
SELLER") shall give the Company and GECC written notice (the "▇▇▇▇▇▇ TRUST
SELLER Notice") of its intent to Sell such Stock, specifying the number of
securities to be sold and the minimum price and terms and conditions of such
sale, and offering to Sell to the Company and GECC, at such minimum price and on
such terms and conditions. The Company shall provide a copy of any ▇▇▇▇▇▇ Trust
Seller Notice to each Stockholder within two days after receipt by it of the
▇▇▇▇▇▇ Trust Seller Notice. The Company shall have the right to purchase all or
any part of such Stock by giving a written notice to the ▇▇▇▇▇▇ Trust Seller and
GECC within two days after receipt by it of the ▇▇▇▇▇▇ Trust Seller Notice,
specifying the number of shares of such Stock to be so purchased by the Company;
(ii) if the Company elects to purchase none of, or less than all, the Stock
that is the subject of the proposed Transfer by the ▇▇▇▇▇▇ Trust Seller, then
GECC shall have the right to purchase any or all of the available Stock by
giving a written notice to the ▇▇▇▇▇▇ Trust Seller and the Company within seven
days after receipt by it of the ▇▇▇▇▇▇ Trust Seller Notice (the "Notice
Period"); PROVIDED THAT any other Stockholder (each, an "Electing Stockholder")
may, by written notice to GECC prior to the expiration of the Notice Period
elect to purchase its pro rata share of the available Stock, and any such
Electing Stockholder may elect to purchase, in addition to its pro rata share of
the available Stock, all or any portion of the Stock (if any) with respect to
which GECC or any other Stockholder fails to exercise its right under this
Section 4A, and such additional Stock shall be pro-rated among such Electing
Stockholders in the manner described above to the extent such additional Stock
is oversubscribed;
(iii) GECC shall act as agent for the Electing Stockholders in connection
with any exercise by an Electing Stockholder of its rights under this Section
and the ▇▇▇▇▇▇ Trust Seller shall not be obligated to deal with any Stockholder
other than GECC in connection with any purchase and sale under this Section 4A;
PROVIDED THAT GECC shall have no liability to the ▇▇▇▇▇▇ Trust Seller if GECC
fails to purchase any Stock which GECC disclosed in writing to the ▇▇▇▇▇▇ Trust
Seller at the time of delivery of GECC's election to purchase was being
purchased by GECC solely as agent for one or more Electing Stockholders; and
GECC shall have no liability to any other Stockholder for any act or omission by
GECC under this Section 4A;
(iv) if the Company and GECC fail to elect to purchase all the Stock
specified in the ▇▇▇▇▇▇ Trust Seller Notice, then the ▇▇▇▇▇▇ Trust Seller shall
be free to sell, pursuant to a Shelf Registration Statement, the portion of such
Stock as to which no election to purchase has been made by the Company or GECC
at a price equal to or above the minimum price and on other terms and conditions
no less favorable to the ▇▇▇▇▇▇ Trust Seller than those specified in the ▇▇▇▇▇▇
Trust Seller Notice, at any time within 90 days of the expiration of the
seven-day period referred to in clause (ii) above;
(v) if the ▇▇▇▇▇▇ Trust Seller shall not have consummated the proposed
Transfer within 90 days after the expiration of the seven-day period referred to
in clause (ii) above, then the ▇▇▇▇▇▇ Trust Seller may not thereafter Transfer
such Stock without complying with the provisions of this Section 4A;
(vii) any Electing Stockholder shall provide to GECC all funds required,
and shall execute and deliver to GECC all documents reasonably requested by
GECC, in connection with the purchase by GECC of any Stock as agent for such
Electing Stockholder, and GECC shall deliver certificates representing the Stock
acquire by such Electing Stockholder to such Stockholder promptly following the
consummation of any purchase under this Section 4A and the satisfaction by such
Electing Stockholder of his obligations under this clause (vii).
Section 5. TAG-ALONG RIGHTS.
(a) If GECC or any member of Permal Group, whether acting alone or in
concert with any other Stockholder (collectively, the "SELLING STOCKHOLDERS")
pursuant to a common plan, understanding or arrangement, shall enter into an
agreement to Selll or otherwise vpropose to Sell to anyi Person or Group (other
than pursuant to a registered public offering) (such Person or Group, the
"TAG-ALONG TRANSFEREE"), in one transaction or a series of related transactions,
any Stock, such that immediately following the consummation of such Sale, the
Selling Stockholders would have Sold to such Person or Group in the aggregate
Stock representing in excess of 3,000,000 shares of Stock (a "TAG-ALONG SALE")
(such number of shares of Stock being referred to herein as the "TAG-ALONG
NUMBER"), then each of the other Stockholders (each a "TAG-ALONG OFFEREE") shall
have the right to participate in such Tag-Along Sale by selling a number of
shares of Common Stock equal to such Stockholder's Proportionate Share, as part
of the Tag-Along Sale by the Selling Stockholders, on the same terms as those
applicable to the Tag-Along Sale (except that, if the Tag-Along Sale involves
Common Stock Equivalents, the economic terms of such Sale shall be appropriately
adjusted to reflect that the Tag-Along Offerees are selling Common Stock).
"Proportionate Share" means, with respect to each Stockholder, a number of
shares of Common Stock which bears the same ratio to the number of shares of
Common Stock beneficially owned by such Stockholder on a Fully Diluted basis as
the Tag-Along Number bears to the number of shares of Common Stock beneficially
owned by the Selling Stockholders on a Fully Diluted basis.
(b) The Selling Stockholders shall provide to each Tag-Along Offeree
written notice of any Tag-Along Sale (the "TAG-ALONG NOTICE"), not more than 45
and not less than 15 days prior to the Tag-Along Sale, setting forth the terms
of the Tag-Along Sale and specifically identifying the Tag-Along Transferee of
the Stock, and shall give each Tag-Along Offeree at least 10 days after delivery
of the Tag-Along Notice within which to exercise its rights contained in this
Section 5, by written notice thereof to the Selling Stockholder.
Section 6. CONFLICTING AGREEMENTS. Each Stockholder represents and warrants that
such Stockholder has not granted and is not a party to any proxy, voting trust
or other agreement which is inconsistent with or conflicts with any provision of
this Agreement, and no holder of Stock shall grant any proxy or become party to
any voting trust or other agreement which is inconsistent with or conflicts with
any provision of this Agreement.
SECTION 7. LEGEND. (a) Each stockholder and the Company shall take all such
action necessary (including exchanging with the Company certificates
representing shares of stock issued prior to the date hereof) to cause each
certificate representing outstanding shares of stock (other than shares which
have been registered under the Securities Act, to which the first paragraph of
such legends shall not apply) to bear legends substantially in the form as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED BY AN AGREEMENT ON FILE AT THE OFFICES OF THE CORPORATION."
"IN ADDITION TO THE RESTRICTIONS SET FORTH IN THE SECURITIES PURCHASE
AGREEMENT BETWEEN ▇▇▇▇▇▇'▇ FURNITURE, INC. AND GENERAL ELECTRIC CAPITAL
CORPORATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT BY AND AMONG ▇▇▇▇▇▇'▇
FURNITURE, INC. AND THE STOCKHOLDERS PARTIES THERETO, A COPY OF WHICH IS ON FILE
IN THE OFFICES OF THE CORPORATION."
Transferred pursuant to rule 144 under the securities act or (iii) when
such shares are transferred in any other transaction if the seller delivers to
the company an opinion of its counsel, which counsel and opinion shall be
reasonably satisfactory to the Company, or a "no-action" letter from the staff
of the Securities and Exchange Commission, in either case to the effect that
such legend is no longer necessary in order to protect the Company against a
violation by it of the Securities Act upon any sale or other disposition of such
shares without registration thereunder. The requirement that the above legend
regarding this agreement be placed upon certificates evidencing shares of stock
shall cease and terminate upon the sale of such shares, other than pursuant to a
permitted transfer. Upon the consummation of any event requiring the removal of
a legend hereunder, the company, upon the surrender of certificates containing
such legend, shall, at its own expense, deliver to the holder of any such shares
as to which the requirement for such legend shall have terminated, one or more
new certificates evidencing such shares not bearing such legend.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
(a) Each party hereto represents and warrants to the other parties hereto
as follows:
(i) it has full power and authority to execute, deliver and perform its
obligations under this agreement this agreement.
(ii this agreement has been duly and validly authorized, executed and
delivered by it, and constitutes a valid and binding obligation of it,
enforceable against it in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights generally.
(iii) the execution, delivery and performance of this Agreement by it does
not (x) violate, conflict with, or constitute a breach of or default under its
organizational documents, if any, or any agreement to which it is a party or by
which it is bound or (y) violate any law, regulation, order, writ, judgment,
injunction or decree applicable to it.
(iv) no consent or approval of, or filing with, any governmental or
regulatory body is required to be obtained or made by it in connection with the
transactions contemplated hereby.
(v) it is not a party to any agreement which is inconsistent with the
rights of any party hereunder or otherwise conflicts with the provisions hereof.
(b) each stockholder severally represents and warrants to GECC with respect
only to itself and not any other stockholder as follows:
(i) Schedule 8(b) hereto sets forth a list of all securities of the company
(including, without limitation, shares of capital stock, convertible securities,
debentures, etc.) held of record or beneficially owned by it immediately after
the date hereof.
(ii) except as set forth on Schedule 8(b) hereto and other than this
agreement and the registration rights agreement, it is not a party to any
contract or agreement, written or oral, with respect to the voting or transfer
of securities of the Company (including, without limitation, any Voting
Agreement, Voting Trust, Stockholder's Agreement, Registration Rights Agreement,
etc.).
SECTION 9. DURATION OF AGREEMENT. Subject to the last sentence of this Section,
the rights and obligations of a stockholder under this agreement shall terminate
at such time as such stockholder no longer is the beneficial owner of any shares
of stock. This agreement shall terminate at such time as GECC no longer is the
beneficial owner of 2,000,000 or more of the outstanding shares of common stock,
or at such earlier time as may be agreed by GECC and Permal group. this
agreement (other than Section 4A), shall terminate as to any member of the
▇▇▇▇▇▇ Group on the later of (i) six months after ▇▇▇▇▇▇ ceases to be a Director
of the Company and (ii) August 31, 1999.
SECTION 10. FURTHER ASSURANCES. At any time or from time to time after the date
hereof, the parties agree to cooperate with each other, and at the request of
any other party, to execute and deliver any further instruments or documents and
to take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder.
SECTION 11. AMENDMENT AND WAIVER. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or any Stockholder unless such modification,
amendment or waiver is approved in writing by the Company, Stockholders holding
at least a majority of the Common Stock, and, so long as it holds any shares of
stock, by GECC. The failure of any party to enforce any of the provisions of
this agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
SECTION 12. 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 invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
SECTION 13. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein,
this document and the other documents dated the date hereof executed in
connection herewith embody the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
SECTION 14. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
agreement shall bind and inure to the benefit of and be enforceable by the
company and its successors and assigns and each stockholder and their respective
successors, assigns, heirs and personal representatives, so long as they hold
stock. except pursuant to a permitted transfer (in which case the transferee
shall be entitled to exercise all rights, and shall be bound by all obligations,
of a stockholder under this agreement), no stockholder shall have the right to
assign its rights and obligations under this agreement.
SECTION 15. COUNTERPARTS. This agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
SECTION 16. REMEDIES. Each stockholder shall be entitled to enforce its rights
under this agreement specifically to recover damages by reason of any breach of
any provision of this agreement and to exercise all other rights existing in
their favor. 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 each party may in its sole discretion apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive relief
(without posting a bond or other security) in order to enforce or prevent any
violation of the provisions of this agreement.
SECTION 17. NOTICES AND OTHER COMMUNICATIONS. All notices, consents, requests,
instructions, approvals, financial statements, proxy statements, reports and
other communications provided for herein shall be in writing and shall be
delivered personally, by telecopy or sent by prepaid overnight courier service,
to the company and to each stockholder as set forth below and to any subsequent
holder of stock subject to this agreement at such address as indicated by the
company's records, or at such address or to the attention of such other person
as the recipient party has specified by prior written notice to the sending
party:
THE COMPANY:
▇▇▇▇▇▇'▇ Furniture, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇'▇ Furniture, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with copies to:
▇▇▇▇▇▇ ▇▇ ▇▇▇▇, Esq.
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Stroock Stroock & ▇▇▇▇▇
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
STOCKHOLDERS:
To each Stockholder at the address for such Stockholder set forth on Schedule
17 attached hereto.
SECTION 18. GOVERNING LAW; CONSENT TO JURISDICTION. This agreement shall be
governed by and construed in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law. each of the parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
action, proceeding or investigation in any court or before any governmental
authority ("litigation") arising out of or relating to this agreement and the
transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), and further agrees that service of any
process, summons, notice or document by U.S. Registered Mail to its respective
address set forth in this Agreement shall be effective service of process for
any litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any litigation arising out of this agreement or the transactions
contemplated hereby in the courts of the State of New York or the United States
of America, in each case located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such litigation brought in any such court has been brought
in an inconvenient forum. Each of the parties irrevocably and unconditionally
waives, to the fullest extent permitted by applicable law, any and all rights to
trial by jury in connection with any litigation arising out of or relating to
this agreement or the transactions contemplated hereby.
SECTION 19. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
SECTION 20. CONSTRUCTION. Where specific language is used to clarify by example
a general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against any party.
IN WITNESS WHEREOF, the parties hereto have executed this stockholders agreement
on the day and year first above written.
▇▇▇▇▇▇'▇ Furniture, Inc.
BY:
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director/
Department Operations
Manager
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.
By:
SCHEDULE A
▇▇▇▇▇▇ GROUP CONSISTS OF:
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Trust I
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Trust I
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Trust I
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust I
▇▇▇▇▇▇ Family Trust
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SCHEDULE B
OTHER INVESTORS CONSISTS OF:
SHARES OF COMMON STOCK
PURCHASED
Other Investors
ATCO Holdings, Ltd. 400,000
▇▇▇▇▇ ▇▇▇▇▇▇ Souede 250,000
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 250,000
United Gulf Bank (B.S.C.)E.C. 225,000
ATCO Development, Inc. 100,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 25,000
Helopolis Inc. 100,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 100,000
T. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 100,000
Carlton Securities N.V. 100,000
G Investment Partners 60,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 50,000
Zaxis Partners, L.P. 40,000
Hurly & Co. 35,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 20,000
Pollat, ▇▇▇▇▇ & Co. Inc. 15,000
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III 5,000
Quadra Appreciation Fund, Inc. 5,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TTEES for the ▇▇▇▇▇▇▇ Revocable Trust 5,000
Permal Noscal, Ltd. 405,000
Fairmont Services Ltd. 400,000
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 210,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 100,000
-------
TOTAL 3,000,000
SCHEDULE C
PERMAL GROUP CONSISTS OF:
Permal Capital Management, Inc.
Permal Services, Inc.
Permal Capital Partners, L.P.
Permal Asset Management
Permal Special Opportunities, Ltd.
▇▇▇▇▇ Investments, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. & ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
United Gulf Bank (B.S.C.) E.C.
Kuwait Investment Projects
ATCO Holdings Ltd.
ATCO Development, Inc.
Exhibit 17 to Schedule 13D
REGISTRATION RIGHTS AGREEMENT
between
▇▇▇▇▇▇'▇ FURNITURE, INC.
and
THE STOCKHOLDERS LISTED ON THE SIGNATURE PAGES HEREOF
Dated as of August 26, 1996
REGISTRATION RIGHTS AGREEMENT, dated as of August 26, 1996, between
▇▇▇▇▇▇'▇ FURNITURE, INC, a Delaware corporation (the "Company"), and each of the
stockholders of the Company listed on the signature pages hereof (the
"Investors").
l. BACKGROUND. Pursuant to a Securities Purchase Agreement between the
Company and General Electric Capital Corporation ("GECC") dated the date hereof
(the "SECURITIES PURCHASE AGREEMENT"), GECC is purchasing from the Company
5,000,000 shares of the Company's Common Stock, par value $.001 per share (the
"COMMON STOCK"), for an aggregate purchase price of $5,000,000, the Company's
10% Subordinated Pay-in-Kind Notes due August 31, 2001, as described in the
Securities Purchase Agreement (the "NOTES"), in the initial principal amount of
$5,000,000, and, in connection with the Notes, a warrant (the "WARRANT") to
purchase 1,400,000 shares of Common Stock. Concurrently with such purchase by
GECC, (i) the ▇▇▇▇▇▇ Group (as defined herein) is purchasing 1,000,000 shares of
Common Stock for an aggregate purchase price of $1,000,000, (ii) certain other
investors are purchasing 3,000,000 shares of Common Stock for an aggregate
purchase price of $3,000,000 and (iii) ▇▇▇▇▇ Investments Inc. and certain other
holders of indebtedness of the Company are exchanging such indebtedness for
shares of Common Stock, as more fully described in the Securities Purchase
Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1. REGISTRATION ON REQUEST.
(a) REQUEST. Subject to Section 2.8 hereof, at any time and from time to
time upon the written request of holders of Registrable Securities (the
"Initiating Holders") representing not less than the Required Number of Shares
that the Company effect the registration under the Securities Act (other than a
Shelf Registration Statement) of all or part of such Initiating Holders'
Registrable Securities (provided that in no event shall the Company be obligated
to register less than the Required Number of Shares pursuant to such request),
the Company will promptly give written notice of such requested registration to
all registered holders of Registrable Securities, and thereupon the Company will
use its best efforts to effect the registration under the Securities Act of
(i) the Registrable Securities (representing not less than the Required
Number of Shares) which the Company has been so requested to register by such
Initiating Holders, and
(ii) all other Registrable Securities which the Company has been requested
to register by the holders thereof (such holders together with the Initiating
Holders are hereinafter referred to as the "Selling Holders") by written request
given to the Company within 20 days after the giving of such written notice by
the Company, all to the extent requisite to permit the disposition of the
Registrable Securities so to be registered.
(b) REGISTRATION OF OTHER SECURITIES. Whenever the Company shall effect a
registration pursuant to this Section 2.1 in connection with an underwritten
offering by one or more Selling Holders of Registrable Securities, no securities
other than Registrable Securities shall be included among the securities covered
by such registration unless (a) the managing underwriter of such offering shall
have advised each Selling Holder of Registrable Securities to be covered by such
registration in writing that the inclusion of such other securities would not
adversely affect such offering or (b) the Selling Holders of not less than a
majority of all Registrable Securities to be covered by such registration shall
have consented in writing to the inclusion of such other securities.
(c) REGISTRATION STATEMENT FORM. Registrations under this Section 2.1 shall
be on such appropriate registration form of the Commission as shall be selected
by the Company.
(d) EXPENSES. The Company will pay the Registration Expenses in connection
with any registration requested pursuant to this Section 2.1.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to
this Section 2.1 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective, (ii) if after
it has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Selling Holders and has
not thereafter become effective, or (iii) if the conditions to closing specified
in the underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived, other than by reason of a failure on
the part of the Selling Holders.
(f) SELECTION OF UNDERWRITERS. The underwriter or underwriters of each
underwritten offering of the Registrable Securities so to be registered shall be
selected by the mutual agreement of the Company and the Selling Holders of a
majority of the Registrable Securities so to be registered.
(g) PRIORITY IN REQUESTED REGISTRATION. If the managing underwriter of any
underwritten offering shall advise the Company in writing (with a copy to each
Selling Holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Selling Holders of a majority of the Registrable Securities
requested to be included in such registration, the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, Registrable Securities requested to be included in such
registration, pro rata among the Selling Holders requesting such registration on
the basis of the percentage of the Registrable Securities of such Selling
Holders requested so to be registered. In connection with any such registration
to which this Section 2.1(g) is applicable, no securities other than Registrable
Securities shall be covered by such registration.
(h) LIMITATIONS ON REGISTRATION ON REQUEST. Notwithstanding anything in
this Section 2.1 to the contrary, in no event will the Company be required to
effect, in the aggregate pursuant to this Section 2.1, without regard to the
holder of Registrable Securities making such request, more than two
registrations during any twelve month period.
2.2. INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If the Company proposes at any
time to register any of its securities under the Securities Act (other than a
Shelf Registration Statement) by registration on Forms ▇-▇, ▇-▇ or S-3 or any
successor or similar form(s) (except registrations on such Forms or similar
form(s) solely for registration of securities in connection with an employee
benefit plan or dividend reinvestment plan or a merger, reorganization, or
consolidation), whether or not for sale for its own account, it will, subject to
Section 2.8 hereof, each such time give prompt written notice to all registered
holders of Registrable Securities of its intention to do so and of such holders'
rights under this Section 2.2. Upon the written request of any such holder (a
"Requesting Holder") made as promptly as practicable and in any event within 20
days after the receipt of any such notice (10 days if the Company states in such
written notice or gives telephonic notice to all registered holders of
Registrable Securities, with written confirmation to follow promptly thereafter,
that (i) such registration will be on Form S-3 and (ii) such shorter period of
time is required because of a planned filing date) (which request shall specify
the Registrable Securities intended to be disposed of by such Requesting
Holder), the Company will, subject to Section 2.8 hereof, use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Requesting
Holders thereof; PROVIDED, HOWEVER, that if, at any time after giving written
notice of its intention to register any securities and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each Requesting Holder of Registrable Securities
and (i) in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from any obligation of the Company to pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
any holder or holders of Registrable Securities entitled to do so to request
that such registration be effected as a registration under Section 2.1 and (ii)
in the case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2 shall relieve the Company of its obligation to effect any registration upon
request under Section 2.1. The Company will pay all Registration Expenses in
connection with registration of Registrable Securities requested pursuant to
this Section 2.2.
(b) PRIORITY IN INCIDENTAL REGISTRATIONS. If the managing underwriter of
any underwritten offering shall inform the Company (or, in the case of a
secondary offering, the selling stockholders initiating such offering) of its
belief that the number or type of Registrable Securities requested to be
included in such registration would materially adversely affect such offering,
then the Company will include in such registration, to the extent of the number
and type which the Company is (or the selling stockholders initiating such
offering are) so advised can be sold in (or during the time of) such offering,
first, all securities proposed by the Company (or, in the case of a secondary
offering, the selling stockholders initiating such offering) to be sold for its
(or their) own account, and second, such Registrable Securities and any other
securities of the Company requested to be included in such registration, pro
rata among all such holders on the basis of the estimated gross proceeds of the
securities of such holders requested to be so included.
(c) SELECTION OF MANAGING UNDERWRITER. The managing underwriter of any
underwritten offering pursuant to this Section 2.2 shall be selected by the
Company at its sole discretion.
2.3. REGISTRATION PROCEDURES. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Section 2.1, 2.2 or 2.9, the Company
will as expeditiously as possible:
(i) in the case of a registration pursuant to Section 2.1 or 2.2, prepare
and (as soon as practicable, and in any event within 75 days in the case of
Forms S-1 or S-2 and 30 days in the case of a registration requested on Form S-3
after the end of the period within which requests for registration may be given
to the Company) file with the Commission the requisite registration statement to
effect such registration and thereafter use its best efforts to cause such
registration statement to become effective; PROVIDED, HOWEVER, that the Company
may discontinue any registration of its securities which are not Registrable
Securities (and, under the circumstances specified in Section 2.2(a), its
securities which are Registrable Securities) at any time prior to the effective
date of the registration statement relating thereto;
(ii) prepare and file with the 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 and to comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement for such period as
shall be required for the disposition of all of such Registrable Securities,
PROVIDED, THAT in the case of a registration pursuant to Section 2.1 or 2.2,
such period need not exceed 90 days;
(iii) furnish to each seller of Registrable Securities covered by such
registration statement, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
such other documents, as such seller may reasonably request;
(iv) use its best efforts (x) to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities or blue sky laws of such States of the United States of
America where an exemption is not available and as the sellers of Registrable
Securities covered by such registration statement shall reasonably request, (y)
to keep such registration or qualification in effect for so long as such
registration statement remains in effect, and (z) to take any other action which
may be reasonably necessary or advisable to enable such sellers to consummate
the disposition in such jurisdictions of the securities to be sold by such
sellers, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv) be
obligated to be so qualified or to consent to general service of process in any
such jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such other
federal or state governmental agencies or authorities as may be necessary in the
opinion of counsel to the Company and counsel to the seller or sellers thereof
to consummate the disposition of such Registrable Securities;
(vi) in the case of a registration pursuant to Section 2.1 or 2.2, furnish
to each seller of Registrable Securities a signed counterpart of
(x) an opinion of counsel for the Company, and
(y) a "comfort" letter signed by the independent public accountants who
have certified the Company's financial statements included or incorporated by
reference in such registration statement covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of the accountant's comfort letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountant's comfort letters
delivered to the underwriters in underwritten public offerings of securities
(and dated the dates such opinions and comfort letters are customarily dated)
and, in the case of the accountant's comfort letter, such other financial
matters, and in the case of the legal opinion, such other legal matters, as the
sellers of a majority of the Registrable Securities covered by such registration
statement, or the underwriters, may reasonably request;
(vii) notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, in the judgment of the Company,
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any 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 at the request of any such seller promptly prepare and furnish to it a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, in the judgment of the Company, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state 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;
(viii) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the period of
at least twelve months, but not more than eighteen months, beginning with the
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 promulgated thereunder, and promptly
furnish to each such seller of Registrable Securities a copy of any amendment or
supplement to such registration statement or prospectus;
(ix) provide and cause to be maintained a transfer agent and registrar
(which, in each case, may be the Company) for all Registrable Securities covered
by such registration statement from and after a date not later than the
effective date of such registration; and
(x) use its best efforts to list all Registrable Securities covered by such
registration statement on any national securities exchange or national
quotations system on which Registrable Securities of the same class covered by
such registration statement are then listed.
The Company may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Company in writing as promptly
as reasonably practicable such information regarding such seller and the
distribution of such securities as the Company may from time to time reasonably
request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vii) of this
Section 2.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession, of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
2.4. UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If requested by the underwriters for
any underwritten offering by holders of Registrable Securities pursuant to a
registration requested under Section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the Company, each such
holder and the underwriters and to contain such representations and warranties
by the Company and such other terms as are generally prevailing in agreements of
that type, including, without limitation, indemnities to the effect and to the
extent provided in Section 2.7. The holders of the Registrable Securities
proposed to be distributed by such underwriters will cooperate with the Company
in the negotiation of the underwriting agreement and will give consideration to
the reasonable suggestions of the Company regarding the form thereof. Such
holders of Registrable Securities to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, such holder's
Registrable Securities, such holder's intended method of distribution and any
other representations required by law.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company proposes to register
any of its securities under the Securities Act as contemplated by Section 2.2
and such securities are to be distributed by or through one or more
underwriters, the Company will, subject to Section 2.8 hereof, if requested by
any Requesting Holder of Registrable Securities arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such Requesting
Holder among the securities of the Company to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such Requesting Holder of Registrable
Securities shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such Requesting Holder, such Requesting
Holder's Registrable Securities and such Requesting Holder's intended method of
distribution or any other representations required by law. Notwithstanding the
foregoing provisions of this Section 2.4(b), the Company need not include any
Registrable Securities of any such Requesting Holder in an underwritten offering
of the Company's securities if the inclusion of such Requesting Holder's
securities, in the opinion of the managing underwriter for such offering by the
Company, might adversely affect such offering by the Company.
(c) HOLDBACK AGREEMENTS. (i) In the case of any underwritten public
offering by the Company of shares of Common Stock, each holder of Registrable
Securities agrees not to effect any disposition (other than a disposition of
Registrable Securities under such underwritten public offering or a bona fide
pledge or a disposition to an Affiliate of such holder who agrees to be bound by
the provisions of this paragraph) (a "Disposition") of any Registrable
Securities, and not to effect any such Disposition of any other equity security
of the Company or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case, other than as
part of such underwritten public offering) during the 15 days prior to, and
during the 90-day period (or such longer period as may be reasonably requested
by the underwriter of such offering) beginning on, the effective date of such
registration statement (except as apart of such registration), provided that
each holder of Registrable Securities has received written notice of such
registration at least 15 days prior to such effective date.
(ii) If any registration of Registrable Securities shall be in connection
with an underwritten public offering, the Company agrees (i) not to effect any
public sale or distribution of any of its equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than any such sale or distribution of such securities in
connection with any merger or consolidation by the Company or any subsidiary of
the Company of the capital stock or substantially all the assets of any other
person or in connection with an employee stock option or other benefit plan)
during the 90 days prior to, and during the 180-day period beginning on, the
effective date of such registration statement (except as part of such
registration) and (ii) that any agreement entered into after the date of this
Agreement pursuant to which the Company issues or agrees to issue any privately
placed equity securities shall contain a provision under which holders of such
securities agree not to effect any Disposition of any such securities during the
period referred to in the foregoing clause (i) (except as part of such
registration, if permitted).
2.5. PREPARATION: REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants the opportunity to participate
in the preparation of such registration statement, each prospectus included
therein or filed with the Commission, and, to the extent practicable, each
amendment thereof or supplement thereto, and give each of them such access to
its books and records (to the extent customarily given to underwriters of the
Company's securities) and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
2.6. LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION Covenants. The obligation of the Company to use its best efforts to
cause the Registrable Securities to be registered under the Securities Act is
subject to the following limitations, conditions and qualifications.
(a) The Company shall be entitled to postpone for a reasonable period of
time (but not exceeding 180 days, in the case of a registration pursuant to
Section 2.1 or 2.2, and 30 days in the case of a registration pursuant to
Section 2.9) the filing of any registration statement otherwise required to be
prepared and filed by it pursuant to Section 2.1, if the Company determines, in
its reasonable judgment, that such registration and offering (i) would interfere
with any financing, acquisition, merger, consolidation, material joint venture,
corporate reorganization or other material transaction involving the Company or
any of its Affiliates, or (ii) would require premature disclosure of any of the
foregoing transactions (or of the existence of negotiations, discussions or
pending proposals with respect thereto) or of any pending or threatened
litigation, claim, assessment or governmental investigation which would be
material to the Company, and promptly gives the holders of Registrable
Securities requesting registration thereof pursuant to Section 2.1 written
notice of such delay. If the Company shall so postpone the filing of a
registration statement, such holders of Registrable Securities requesting
registration thereof pursuant to Section 2.1 shall have the right to withdraw
the request for registration by giving written notice to the Company within 30
days after receipt of the notice of postponement and, in the event of such
withdrawal, such request shall not be counted for purposes of the requests for
registration to which holders of Registrable Securities are entitled pursuant to
Section 2.1 hereof.
(b) The Company shall not be obligated to effect the registration of
Registrable Securities of any holder pursuant to Section 2.1, 2.2 or 2.9 unless
such holder consents to reasonable conditions imposed by the Company, including
without limitation:
(i) conditions prohibiting the sale of shares by such holder until the
registration shall have been effective for a specified period of time;
(ii) conditions requiring such holder to comply with all prospectus
delivery requirements of the Securities Act and with all anti-stabilization,
anti-manipulation and similar provisions of Section 10 of the Exchange Act and
any rules issued thereunder by the Commission, and to furnish to the Company
information about sales made in such public offering;
(iii) conditions prohibiting such holder from effecting sale of shares upon
receipt of telegraphic or written notice from the Company (until further notice)
given to permit the Company to correct or update a registration statement or
prospectus; and
(iv) conditions requiring that at the end of the period during which the
Company is obligated to keep the registration statement effective under Section
2.3(ii) or 2.9(c), such holder shall discontinue sales of shares pursuant to
such registration statement upon receipt of notice from the Company of its
intention to remove from registration the shares covered by such registration
statement that remain unsold, and requiring such holder to notify the Company of
the number of Registrable Securities registered that remain unsold promptly upon
receipt of notice from the Company.
(c) Holders of Registrable Securities shall use their reasonable best
efforts to effect as wide a distribution of such Registrable Securities as
reasonably practicable, and in no event shall any sale of Registrable Securities
be made knowingly to (i) any Person (including its Affiliates) or (ii) any
Persons or entities which are to the knowledge of such holders (or to the
knowledge of any underwriter for such holders) part of any "group" within the
meaning of Regulation 13D of the Exchange Act which includes such purchaser or
any of its Affiliates that, after giving effect to such sale, would beneficially
own securities representing more than 5% of the aggregate voting power of all
outstanding voting securities of the Company. The holders of such Registrable
Securities shall secure the agreement of their underwriter or underwriters, if
any, for such offering to comply with the foregoing.
2.7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration of any
securities of the Company under the Securities Act, the Company will, and hereby
does, indemnify and hold harmless, in the case of any registration statement
filed pursuant to Section 2.1, 2.2 or 2.9, each seller of any Registrable
Securities covered by such registration statement, its directors, officers,
partners, agents and Affiliates and each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such seller or any such underwriter within the meaning of the
Securities Act, insofar as losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company will reimburse such seller and each such director, officer,
partner, agent or affiliate, underwriter and controlling Person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, liability, action or proceeding; PROVIDED,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company through an instrument executed by or on behalf of such
seller or underwriter, as the case may be, specifically stating that it is for
use in the preparation thereof; and PROVIDED, further, that the Company shall
not be liable to any Person who participates as an underwriter in the offering
or sale of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus so long as such final prospectus, and any
amendments or supplements thereto, have been furnished to such underwriter. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any such director, officer, partner,
agent or affiliate or controlling Person and shall survive the transfer of such
securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. As a condition to including any
Registrable Securities in any registration statement, the Company shall have
received an undertaking satisfactory to it from the prospective seller of such
Registrable Securities, to indemnify and hold harmless (in the same manner and
to the same extent as set forth in subdivision (a) of this Section 2.7) the
Company, and each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; PROVIDED, HOWEVER, that the liability of
such indemnifying party under this Section 2.7(b) shall be limited to the amount
of proceeds received by such indemnifying party in the offering giving rise to
such liability. Such indemnity shall remain in full force and effect, regardless
of any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 2.7, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
PROVIDED, HOWEVER, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 2.7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties is reasonably likely to exist in respect of
such claim, the indemnifying party shall be entitled to participate in and, to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defense thereof and the indemnified party notifies the
indemnifying party of such indemnified party's judgment and the basis therefor.
No indemnifying party shall be liable for any settlement of any action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in this Section 2.7
shall for any reason be held by a court to be unavailable to an indemnified
party under subparagraph (a) or (b) hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount paid
or payable under subparagraph (a) or (b) hereof, the indemnified party and the
indemnifying party under subparagraph (a) or (b) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claims, damage or liability,
or action in respect thereof, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company and such prospective sellers from the offering of the securities
covered by such registration statement. 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. Such prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld.
(e) OTHER INDEMNIFICATION. Indemnification and contribution similar to that
specified in the preceding subdivisions of this Section 2.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.
(f) INDEMNIFICATION PAYMENTS. The indemnification and contribution required
by this Section 2.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred. In any case in which
it shall be judicially determined that a party is not entitled to
indemnification or contribution, any payments previously received by such party
hereunder shall be promptly reimbursed.
2.8. LIMITATIONS ON REGISTRATIONS OF REGISTRABLE SECURITIES.
(a) The Company shall not be required to effect any registration of
Registrable Securities pursuant to Section 2.1 prior to August 31, 1999 unless
either (i) GECC shall have consented thereto in writing or (ii) (x) the offering
price (net of underwriters' fees, commissions and discounts) pursuant to such
registration results in a Total Return on Investment of at least 40% per annum
and (y) GECC is given the opportunity to include at least 50% of the Registrable
Securities held by it in such registration. GECC shall have the right to require
the withdrawal of any previously filed registration statement if it determines
that the foregoing conditions will not be met.
(b) The Company shall not be required to effect any registration of
Registrable Securities pursuant to Section 2.1, 2.2 or 2.9 hereof if it shall
deliver to the holder or holders requesting such registration an opinion of
counsel (which opinion and counsel shall be reasonably satisfactory to such
holder or holders) to the effect that all Registrable Securities held by such
holder may than be sold in the public market without registration under the
Securities Act and any applicable state securities laws.
2.9 SHELF REGISTRATION STATEMENTS. (a) Within 120 days following the date
hereof, the Company shall file with the Commission and shall use its best
efforts to cause to be declared effective within 180 days from the date hereof,
Shelf Registration Statement No. 1, relating to the offer and sale of 50% of the
Registrable Securities owned by the ▇▇▇▇▇▇ Trusts from time to time in
accordance with the methods of distribution elected by them and set forth in
Shelf Registration Statement No. 1.
(b) Within 215 days following the date Shelf Registration Statement No. 1
is first declared effective by the Commission, the Company shall file with the
Commission and shall use its best efforts to cause to be declared effective
within 275 days following the effective date of Shelf Registration Statement ▇▇.
▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, relating to the offer and sale of the
remaining 50% of the Registrable Securities owned by the ▇▇▇▇▇▇ Trusts from time
to time in accordance with the methods of distribution elected by them and set
forth in Shelf Registration Statement No. 2.
(c) The Company will use its best efforts to keep each Shelf Registration
Statement continuously effective in order to permit the prospectus forming part
thereof to be usable by the ▇▇▇▇▇▇ Trusts for a period of three years from the
date such Shelf Registration Statement is first declared effective by the
Commission, or for such shorter period that will terminate when all Registrable
Securities covered by such Shelf Registration Statement have been sold pursuant
to thereto or cease to be outstanding or otherwise to be Registrable Securities.
(d) Whenever the Company shall effect a Shelf Registration Statement
pursuant to this Section 2.9, no other securities shall be included among the
securities covered by such Shelf Registration Statement.
(e) The Company will pay the Registration Expenses in connection with any
Shelf Registration Statement pursuant to this Section 2.9.
(f) At the discretion of Permal Group, either Shelf Registration Statement
may include Stock purchased by the Specified Investors (as defined below);
provided that the number of Registrable Securities purchased by the Specified
Investors after the date hereof shall not exceed 1,500,000 in the aggregate and
no Registrable Securities may be purchased by the Specified Investors after
September 30, 1996. For purposes hereof, the "Specified Investors" shall mean
all of the Investors except for the Permal Group, GECC and the ▇▇▇▇▇▇ Group.
3. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings (capitalized terms used
but not defined herein having the meanings set forth in the Stockholders
Agreement):
"AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such similar
Federal statute.
"▇▇▇▇▇▇ GROUP" shall mean those Persons listed on Schedule A attached
hereto.
"▇▇▇▇▇▇ TRUSTS" shall mean the ▇▇▇▇▇▇ Group other than ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
"HOLDER" of Common Stock or Registrable Securities means any holder of such
stock or of Warrants exercisable for such stock.
"PERSON" means a corporation, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
"REGISTRATION EXPENSES" means all expenses incident to the Company's
performance of or compliance with Section 2, including, without limitation, all
registration, filing and NASD fees, all listing fees, all fees and expenses of
complying with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), all word
processing, duplicating and printing expenses, messenger and delivery expenses,
the fees and disbursements of counsel for the Company and of its independent
public accountants, including the expenses of "cold comfort" letters required by
or incident to such performance and compliance, any fees and disbursements of
underwriters (including, without limitation, fees and expenses of counsel to the
underwriters) customarily paid by issuers or sellers of securities and the
reasonable fees and expenses of one counsel to the Selling Holders (selected by
Selling Holders representing at least a majority of the Registrable Securities
covered by such registration); PROVIDED, HOWEVER, that Registration Expenses
shall exclude, and the sellers of the Registrable Securities being registered
shall pay, underwriters' fees and underwriting discounts and commissions and
transfer taxes in respect of the Registrable Securities being registered.
"REGISTRABLE SECURITIES" means (i) the shares of Common Stock (or other
securities) held by the Investors or issuable or issued upon exercise of any
warrants to purchase Common Stock and (ii) any securities of the Company
issuable or issued with respect to the Common Stock and/or warrants (or other
securities) referred to in clause (i) by way of a merger, consolidation, stock
split, stock dividend, recapitalization of the Company or similar transaction.
As to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (b) they shall have been sold as permitted by,
and in compliance with, Rule 144 (or successor provision) promulgated under the
Securities Act, (c) they shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer under the Securities
Act shall have been delivered by the Company and subsequent public distribution
of them shall not require registration of them under the Securities Act, or (d)
they shall have ceased to be outstanding.
"REQUIRED NUMBER OF SHARES" means shares of Common Stock representing a
total of 1,000,000 shares of Common Stock, subject to adjustment as provided in
Section 12.
"SECURITIES ACT" means the Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time. References to a particular section of the
Securities Act of 1933 shall include a reference to the comparable section, if
any, of any such similar federal statute.
"SHELF REGISTRATION STATEMENT" means either Shelf Registration Statement
No. 1 or Shelf Registration Statement No. 2.
"SHELF REGISTRATION STATEMENT NO. 1" shall mean a "shelf" registration
statement of the Company pursuant to Section 2.9, which covers 50% of the
Registrable Securities owned by the ▇▇▇▇▇▇ Trusts on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the Commission, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"SHELF REGISTRATION STATEMENT NO. 2" shall mean, at the Company's election
either: (i) a "shelf" registration statement of the Company pursuant to Section
2.9, which covers the remaining 50% of the Registrable Securities owned by the
▇▇▇▇▇▇ Trusts on an appropriate form under Rule 415 under the Securities Act, or
any similar rule that may be adopted by the Commission, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein; or (ii) an amendment to
Shelf Registration Statement No. 1 to cover the remaining 50% of the Registrable
Securities owned by the ▇▇▇▇▇▇ Trusts.
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement dated the
date hereof between the Company and the Investors.
"TOTAL RETURN ON INVESTMENT" shall mean, as of any date, the compound
annual return from the Closing Date to such date on the shares of Common Stock
purchased by GECC on the Closing Date, based upon the sum of (i) all dividends
and distributions (if any) (other than dividends or distributions paid in shares
of Common Stock pro rata to all holders of Common Stock) with respect to, and
proceeds (if any) of sales of, Common Stock actually paid prior to such date,
and (ii) the proceeds which would be received by GECC from the sale of Common
Stock at the proposed public offering price on such date. In calculating Total
Return on Investment, (x) any dividend or distribution of a publicly traded
security shall be valued based upon the average closing price of such security
for the 20 consecutive trading days ending on the date of such dividend or
distribution and (y) any dividend or distribution of property other than cash or
publicly traded securities shall be valued at its fair market value as of the
date of such dividend or distribution, as determined by a nationally recognized
independent investment banking or valuation firm selected by mutual agreement
between the Company and GECC.
4. RULE 144. The Company shall take all actions reasonably necessary to
enable holders of Common Stock to sell such securities without registration
under the Securities Act within the limitation of the exemptions provided by (a)
Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the Commission
including, without limiting the generality of the foregoing, filing on a timely
basis all reports required to be filed by the Exchange Act. Upon the request of
any holder of Common Stock, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended with the consent
of the Company and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent to such amendment, action or omission to act,
of the holders of at least a majority of the Registrable Securities and GECC so
long as GECC beneficially owns at least 2,000,000 shares of Common Stock;
PROVIDED; HOWEVER; that, in the case of any amendment to the provisions of
Section 2.9, the written consent of the ▇▇▇▇▇▇ Trusts also shall be obtained.
Each beneficial owner of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 5, whether
or not such Registrable Securities shall have been marked to indicate such
consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to the
Company, be treated as the holder of such Registrable Securities for purposes of
any request or other action by any holder or holders of Registrable Securities
pursuant to this Agreement or any determination of any number or percentage of
Registrable Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
7. NOTICES All communications provided for hereunder shall be sent by
courier or other overnight delivery service, shall be effective upon receipt,
and shall be addressed as follows:
(a) if to an Investor, at such address as the Investor shall have furnished
to the Company in writing;
(b) if to any other holder of Registrable Securities, at the address that
such holder shall have furnished to the Company in writing, or, until any such
other holder so furnishes to the Company an address, then to and at the address
of the last holder of such Registrable Securities who has furnished an address
to the Company; or
(c) if to the Company, addressed to it at ▇▇▇▇▇▇'▇ Furniture, Inc. ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
or at such other address as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding.
8. ASSIGNMENT; CALCULATION OF INTERESTS IN REGISTRABLE SECURITIES.
(a) This Agreement shall be binding upon and inure the benefit of and be
enforceable by the parties hereto and, with respect to the Company, its
respective successors and assigns and, with respect to the Investors, any
beneficial owner of any Registrable Securities, subject to the provisions
respecting the minimum number or proportion of shares of Registrable Securities
required in order to be entitled to certain rights, or take certain actions,
contained herein; PROVIDED, HOWEVER, that the provisions of Section 2.9 hereof
(i) are personal to the ▇▇▇▇▇▇ Trusts, (ii) may not be assigned by the ▇▇▇▇▇▇
Trusts, (iii) upon the sale, transfer or other disposition of any particular
Registrable Securities owned by the ▇▇▇▇▇▇ Trusts, shall cease to apply to such
particular Registrable Securities, and (iv) shall not inure to the benefit of
and shall not be enforceable by any person or entity other than the ▇▇▇▇▇▇
Trusts.
(b) For purposes of this Agreement, all references to a proportion of the
Registrable Securities shall be calculated based upon the number of Registrable
Securities participating in a registration hereunder, except that for the
purposes of Section 5 Registrable Securities shall be calculated on a Fully
Diluted basis.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH
CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR
INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION")
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN
SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR
DOCUMENT BY U.S. REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN THIS
AGREEMENT SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT
AGAINST IT IN ANY SUCH COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY LITIGATION
ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE
COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES OF AMERICA, IN EACH CASE
LOCATED IN THE COUNTY OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL
BY JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11. NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
12. RECAPITALIZATIONS. ETC. In the event that any capital stock or other
securities are issued in respect of, in exchange for, or in substitution of, any
Registrable Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, stock dividend, split-up, sale of assets, distribution to
stockholders or combination of the shares of Registrable Securities or any other
change in the Company's capital structure, appropriate adjustments shall be made
in this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
At the request of the Selling Holders of a majority of Registrable Securities in
connection with any registration pursuant to Section 2.1 hereof, the Company
will effect such adjustments to the outstanding Common Stock by way of stock
split or stock dividend as the Selling Holders may reasonably request to
facilitate the registration and sale of the Common Stock.
13. ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party to such action or proceeding shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
▇▇▇▇▇▇'▇ FURNITURE, INC.
By:________________________________________
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
By:________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Director/
Department Operations Manager
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
By:________________________________________
SCHEDULE A
▇▇▇▇▇▇ GROUP CONSISTS OF:
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ Trust I
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Trust I
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Trust I
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust I
▇▇▇▇▇▇ Family Trust
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Exhibit 18 to Schedule 13D
JOINT REPORTING AGREEMENT
AND
POWER OF ATTORNEY
WHEREAS, the statement or amended statement of Schedule 13D (the "Joint
Statement") to which this joint reporting agreement and power of attorney (the
"Agreement") is an exhibit is being filed on behalf of two or more persons
(collectively, the "Reporting Persons"); and
WHEREAS, the Reporting Persons prefer to file the Joint Statement on behalf
of all of the Reporting Persons rather than individual statements on Schedule
13D on behalf of each of the Reporting Persons;
NOW THEREFORE, the undersigned hereby agree as follows with each of the
other Reporting Persons:
1. Each of the Reporting Persons is individually eligible to use the Joint
Statement.
2. Each of the Reporting Persons is responsible for the timely filing of
the Joint Statement and any amendments thereto.
3. Each of the Reporting Persons is responsible for the completeness and
accuracy of the information concerning such Reporting Person contained in the
Joint Statement.
4. None of the Reporting Persons is responsible for the completeness or
accuracy of the information concerning the other Reporting Persons contained in
the Joint Statement, unless such Reporting Person knows or has reason to believe
that such information is inaccurate.
5. The undersigned agrees that the Joint Statement is, and any amendment
thereto will be, filed on behalf of each of the Reporting Persons.
6. The undersigned hereby appoints ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and each of them, as attorney-in-fact for the undersigned
with authority to execute and deliver on behalf of the undersigned any and all
documents (including any amendments thereto) required to be filed by the
undersigned or otherwise executed and delivered by the undersigned pursuant to
the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as
amended, all other federal, state and local securities and corporation laws, and
all regulations promulgated thereunder.
7. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
Dated:
----------------------------------
(Name of Reporting Person)
----------------------------------
(Signature)
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(Title, if applicable)