Exhibit 1
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SECURITIES PURCHASE AGREEMENT
AMONG
FAMILY BARGAIN CORPORATION
AND
THE PURCHASERS
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Dated: December 30, 1996
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TABLE OF CONTENTS
Page
1. DEFINITIONS........................................................1
2. CLOSING............................................................9
2.1 Time and Place of the Closings................................9
2.2 Transactions at the Closing...................................9
2.3 Transaction Expenses.........................................10
2.4 Post-Closing Option..........................................10
3. CONDITIONS TO THE CLOSING.........................................11
3.1 Conditions Precedent to the Obligations of the Purchasers....11
3.1.1 Compliance by the Company...........................11
3.1.2 Board of Directors..................................11
3.1.3 Consents............................................12
3.1.4 December Sales......................................12
3.1.5 Absence of Material Adverse Effect..................12
3.1.6 Officer's Certificate...............................12
3.1.7 No Injunction.......................................13
3.1.8 Other Transaction Agreements........................13
3.2 Conditions Precedent to Obligations of the Company...........13
3.2.1 Compliance by the Purchasers........................13
3.2.2 Consents............................................14
3.2.3 Officer's Certificate...............................14
3.2.4 No Injunction.......................................14
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................15
4.1 Corporate Existence and Power................................15
4.2 Power and Authority..........................................16
4.3 Affiliate Transactions.......................................17
4.4 No Contravention, Conflict, Breach, Etc......................17
4.5 Consents.....................................................18
4.6 Capitalization of the Company................................18
4.7 Rights Plan..................................................19
4.8 Registration Rights..........................................19
4.9 Subsidiaries.................................................20
4.10 SEC Documents................................................21
4.11 Financial Statements.........................................22
4.12 14(f) Notice.................................................24
4.13 No Existing Violation, Default, Etc..........................24
4.14 Licenses and Permits.........................................25
4.15 Title to Properties..........................................26
4.16 Intellectual Property........................................26
4.17 Environmental Matters........................................28
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Page
4.18 Taxes........................................................29
4.19 Litigation...................................................30
4.20 Labor Matters................................................30
4.21 Employee Benefits............................................31
4.22 Contracts....................................................33
4.23 Contingent Liabilities.......................................34
4.24 No Material Adverse Change...................................34
4.25 Finder's Fees................................................35
4.26 Investment Company...........................................35
4.27 Exemption from Registration; Restrictions on Offer and Sale of
Same or Similar Securities...................................35
4.28 Full Disclosure..............................................36
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..................37
5.1 Existence and Power..........................................37
5.2 Power and Authority..........................................37
5.3 No Contravention, Conflict, Breach, Etc......................37
5.4 Acquisition for Own Account..................................38
5.5 Finder's Fee.................................................39
5.6 Ownership of Common Stock....................................39
6. COVENANTS OF THE PARTIES..........................................39
6.1 Pre-Closing Activities.......................................39
6.2 Stock Exchange Listing.......................................43
6.3 14(f) Notification...........................................43
6.4 Access. ....................................................43
6.5 Publicity....................................................44
6.6 Acquisition Proposals........................................44
6.7 Certificates for Securities, Exchange Notes and Conversion
Shares To Bear Legends.......................................45
6.8 Removal of Legends...........................................46
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS............................................47
8. INDEMNIFICATION...................................................47
8.1 Indemnification by the Company...............................47
8.2 Notification.................................................48
9. TERMINATION.......................................................50
9.1 Termination..................................................50
9.2 Effect of Termination........................................51
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Page
10. MISCELLANEOUS.....................................................52
10.1 Performance; Waiver..........................................52
10.2 Successors and Assigns.......................................52
10.3 Notices......................................................53
10.4 Governing Law................................................54
10.5 Severability.................................................54
10.6 Headings; Interpretation.....................................54
10.7 Entire Agreement.............................................55
10.8 No Third Party Rights........................................55
10.9 Counterparts.................................................55
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT ("AGREEMENT"), dated December 30,
1996, among Family Bargain Corporation, a Delaware corporation (the "Company"),
and the Persons set forth on Schedule 2.2 hereof (the "Purchasers").
WHEREAS, the Company desires to sell to the Purchasers, and the
Purchasers desire to purchase, an aggregate of 27,000 shares (the "Securities")
of the Company's Series B Junior Convertible Exchangeable Preferred Stock, par
value $.01 per share (the "Series B Preferred"), at a purchase price equal to
$1,000.00 per Security (the "Purchase Price Per Security") (or $27,000,000 in
the aggregate) upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, each of the Company and the Purchasers agrees as follows:
1. DEFINITIONS.
The terms defined in this Section 1 shall have the following
meanings for all purposes of this Agreement:
"Acquisition Proposal" means any proposal or offer to the Company or
stockholders of the Company with respect to a merger, consolidation, tender
offer (including a self tender offer), exchange offer, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Subsidiaries, any purchase of, or option to purchase, any equity securities
(or securities convertible into equity securities) of the Company or any of its
Subsidiaries or any purchase of, or option to
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purchase, any of the assets of the Company or any of its Subsidiaries (other
than (i) the sale of inventory in the ordinary course of business of the Company
or any of its Subsid iaries and (ii) grants and exercises of options actually
granted prior to the date hereof.
"Act" means the Securities Act of 1933, as amended, or any
superseding Federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect from time to time. References to
a particular section of the Securities Act of 1933, as amended, shall include a
reference to the comparable section, if any, of any such superseding Federal
statute.
An "Affiliate" of, or a person "affiliated" with, a specified
Person, means a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified. The term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract, or otherwise.
"Annual Reports" means the Company's Annual Report on Form 10-K for
the year ended January 28, 1995 as filed with the SEC and the Company's Annual
Report on Form 10-K for the year ended January 27, 1996 (as amended by the
Company's Form 10-K/A dated May 14, 1996), as filed with the SEC and delivered
to the Purchasers (including, in each case, all exhibits and schedules thereto
and documents incorporated by reference therein).
"Benefit Plans" has the meaning set forth in Section 4.21.
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"Board of Directors" means the Board of Directors of the Company, as
constituted from time to time.
"By-Laws" means the By-laws of the Company, as amended through the
date hereof.
"Certificate of Designations" means the Certificate of Designations
of the Company to be filed by the Company with the Secretary of State of the
State of Delaware on or prior to the date and time of the Closing, substantially
in the form attached as Exhibit A hereto.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company, as amended through the date hereof.
"Closings" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the Company's common stock, par value
$.01 per share.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Conversion Shares" means the shares of Common Stock issuable or
issued upon conversion of the Series B Preferred pursuant to the terms of this
Agreement and the Certificate of Designations.
"Disclosure Letter" has the meaning set forth in Article 4.
"Employee Preferred" has the meaning set forth in Section 4.6.
"Encumbrance" means any mortgage, pledge, lien, security interest,
restriction upon voting or transfer, claim or other encumbrance of any kind.
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"Environmental Information" has the meaning set forth in Section
4.17(D).
"Environmental Laws" means all federal, state, local and foreign
laws, principles of common law, regulations, codes and ordinances, as well as
orders, decrees, judgments or injunctions issued, promulgated, approved or
entered thereunder relating to pollution, protection of the environment, or
health and safety.
"ERISA" has the meaning set forth in Section 4.21.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any superseding Federal statute, and the rules and regulations
promulgated 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 such
superseding Federal statute.
"Exchange Notes" means the Subordinated Notes of the Company
issuable or issued in redemption of the Series B Preferred pursuant to the terms
of this Agreement and the Certificate of Designations.
"Factory 2-U" means Factory 2-U, Inc., an Arizona corporation.
"Financial Advisory Agreement" means the Financial Advisory
Agreement, dated as of the date hereof, between the Company and TCR, as amended,
supplemented or modified from time to time in accordance with the terms thereof.
"FINOVA Credit Facility" means the credit facility provided under
the loan and security agreement dated November 10, 1995, between Factory 2-U and
FINOVA Capital Corporation, as amended through the date hereof and as may be
further amended in accordance with the terms hereof.
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"14(f) Notice" means a notice of the Company containing the
information required by Rule 14f-1 under the Exchange Act to be filed with the
SEC in compliance with such Rule in connection with the actions described in
Section 3.1.2, as amended, modified or supplemented (including all exhibits and
schedules thereto and documents incorporated by reference therein).
"General Textiles" means General Textiles, a California corporation.
"Governmental Authority" means the government of any nation or
state, or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"GT Credit Facility" means the credit facility provided under the
loan and security agreement dated as of October 14, 1993, between General
Textiles and Greyhound Financial Capital Corporation (now named FINOVA Capital
Corporation), as amended through the date hereof.
"Intellectual Property" has the meaning set forth in Section
4.16(A).
"Initial Closing" has the meaning set forth in Section 2.1.
"IP Licenses" has the meaning set forth in Section 4.16(B).
"Knowledge of the Company" means the knowledge of the Company after
due inquiry.
"Law" means any law, treaty, rule or regulation of a Governmental
Authority or judgment, order, writ, injunction or determination of an arbitrator
or a court or other Governmental Authority.
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"Liabilities" has the meaning set forth in Section 9.1.
"Licenses" means any certificates, permits, licenses, franchises,
consents, approvals, orders, authorizations and clearances from appropriate
Governmental Authorities.
"Material Adverse Effect" means a material adverse effect on the
assets, results of operations, business, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole.
"Monthly Financial Statements" has the meaning set forth in
Section 4.11(B).
"NASDAQ Small-Cap Market" means the Nasdaq Small-Cap Market of
the Nasdaq Stock Market.
"1995 Audited Financial Statements" has the meaning set forth in
Section 4.11(A).
"Person" means any individual, firm, corporation, partnership,
limited liability company or partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
"Preferred Stock" has the meaning set forth in Section 4.6.
"Preliminary Prospectus" shall mean the Company's Preliminary
Prospectus, dated November 6, 1996 (subject to completion), relating to
convertible subordinated debentures due 2006 of the Company, which were never
sold.
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"Purchase Price Per Security" has the meaning set forth in the first
recital of this Agreement.
"Purchasers" has the meaning set forth in the preamble to this
Agreement.
"Quarterly Reports" means the Company's Quarterly Report on Form
10-Q for the quarter ended October 27, 1996, the Company's Quarterly Report on
Form 10-Q for the quarter ended July 27, 1996, the Company's Quarterly Report on
Form 10-Q for the quarter ended April 27, 1996, the Company's Quarterly Report
on Form 10-Q for the quarter ended October 28, 1995, the Company's Quarterly
Report on Form 10-Q for the quarter ended July 28, 1995 and the Company's
Quarterly Report on Form 10-Q for the quarter ended April 28, 1995, each as
filed with the SEC.
"Registration Rights Agreement" means the Registration Rights
Agreement to be dated as of the date of the Closing between the Company and the
Purchasers, substantially in the form attached as Exhibit B hereto, as amended,
supplemented or modified from time to time in accordance with the terms thereof.
"Representatives" shall mean the employees, counsel, accountants and
other authorized representatives of the Purchasers, investors in any of the
Purchasers and any of their respective Affiliates.
"Rights" shall mean the Company's Preferred Stock Purchase Rights
issued pursuant to the Rights Plan.
"Rights Plan" shall mean the Rights Agreement dated as of November
27, 1995, between the Company and Corporate Stock Transfer, Inc., as Rights
Agent.
"SEC" means the Securities and Exchange Commission.
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"SEC Documents" means the Annual Reports, the Quarterly Reports, the
Preliminary Prospectus and all other documents filed by the Company with the SEC
(including all exhibits and schedules thereto and documents incorporated by
reference therein) since January 1, 1994.
"Second closing" shall have the meaning set forth in Section 2.1.
"Securities" has the meaning set forth in the second recital of this
Agreement.
"Separation Agreement" means the Separation Agreement dated as of
the date hereof, a true and complete copy of which has been delivered by the
Company to the Purchasers, as amended, supplemented or modified from time to
time in accordance with the terms thereof and Section 3.1.8.
"Series A Preferred" has the meaning set forth in Section 4.6.
"Series B Preferred" has the meaning set forth in the first recital
of this Agreement.
"Shareholders Securities Purchase Agreement" has the meaning set
forth in Section 4.2.
"Subsidiary" means, with respect to any Person, any corporation,
limited or general partnership, joint venture, association, limited liability
company or partnership, joint stock company, trust, unincorporated organization,
or other entity analogous to any of the foregoing of which 50% or more of the
equity ownership (whether voting stock or comparable interest) is, at the time,
owned, directly or indirectly by such Person.
"Tax" or "Taxes" has the meaning set forth in Section 4.18.
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"TCR" means Three Cities Research, Inc.
"Transaction Agreements" means this Agreement, the Separation
Agreement, the Financial Advisory Agreement and the Registration Rights
Agreement.
"Transaction Expenses" means, with respect to the Company or the
Purchasers and their Affiliates, the expenses of such Person or Persons (whether
or not incurred prior to the date hereof) arising out of, relating to or
incidental to the discussion, evaluation, negotiation, documentation and closing
of the transactions contem plated hereby (including, without limitation, the
fees, disbursements and other expenses of lawyers, accountants, actuaries,
investment bankers and any other advisors thereto).
2. CLOSING.
2.1 Time and Place of the Closings. Subject to the terms and
conditions of this Agreement, the closing of the sale and purchase of the
Securities contemplated hereby (the "Closing") shall take place at the offices
of Xxxx, Marks & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00
A.M., New York time on January 14, 1997 (the "Initial Closing") or at such other
date and such other place as the parties hereto shall agree; provided, however,
the Purchasers may defer their obligation to purchase up to $5,000,000.00 of the
Securities until a date no later than February 15, 1997 (the "Second Closing").
The "Closing Date" shall be the date the Initial Closing occurs.
2.2 Transactions at the Closings. At any Closing, subject to
the terms and conditions of this Agreement, the Company shall issue and sell to
each of the Purchasers, and each of the Purchasers shall purchase, the pro rata
portion (based upon
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the number of Securities to be purchased at such Closing) of such number of
Securities as are set forth opposite such Purchaser's name on Schedule 2.2 at
the Purchase Price Per Security. At such Closing, the Company shall deliver to
each of the Purchasers certificates representing the pro rata portion (based
upon the number of Securities to be purchased at such Closing) of such number of
Securities as are set forth opposite such Purchaser's name on Schedule 2.2, each
registered in the name of such Purchaser or its nominees, against payment of the
Purchase Price Per Security with respect thereto by wire transfer of immediately
available funds to an account or accounts previously desig nated by the Company.
2.3 Transaction Expenses. At any Closing, subject to the terms
and provisions of this Agreement, the Company shall pay to each of the
Purchasers or their respective designees an amount equal to the pro rata portion
(based upon the number of Securities to be purchased at such Closing) of the
Transaction Expenses, plus (without duplication) in the case of a Second
Closing, the Transaction Expenses incurred since the Initial Closing, of such
Purchaser and its Affiliates, in each case, by wire transfer of immediately
available funds to an account or accounts designated by the Purchasers.
2.4 Post-Closing Option. The Purchasers shall have an option
to purchase from the Company, at the same price and on the same terms and
conditions as this Agreement, at any time up to and including 90-days from the
Initial Closing, up to 5,000 shares of Series B Preferred in addition to the
27,000 shares purchased at the Initial Closing and/or deferred pursuant to the
proviso in Section 2.1. This option may be exercised by written notice by the
Purchasers to the Company.
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3. CONDITIONS TO THE CLOSING.
3.1 Conditions Precedent to the Obligations of the Purchasers.
The obligations of each of the Purchasers to be discharged under this Agreement
on or prior to the Closings are subject to satisfaction of the following
conditions at or prior to the Initial Closing (unless expressly waived in
writing by each of the Purchasers at or prior to the Initial Closing), except
for the conditions set forth in Section 3.1.3 and 3.1.7, which must be satisfied
at or prior to the Initial Closing and the Second Closing with respect to the
Initial Closing and the Second Closing, respectively (unless expressly waived in
writing by each of the Purchasers at or prior to such Closing):
3.1.1 Compliance by the Company. All of the terms,
covenants and conditions of this Agreement to be complied with and performed by
the Company at or prior to the Initial Closing shall have been complied with and
performed by it in all material respects, and the representations and warranties
made by the Company in this Agreement shall be true and correct at and as of the
Initial Closing, with the same force and effect as though such representations
and warranties had been made at and as of the Initial Closing, except for
changes expressly contemplated by this Agreement and except for representations
and warranties that are made as of a specific time, which shall be true and
correct only as of such time, and except for representations and warranties made
in Sections 4.14 to 4.17 and Section 4.24, which shall be true and correct as of
the date hereof.
3.1.2 Board of Directors. The members of the Board of
Directors identified on Schedule 3.1.2A shall have delivered irrevocable
resignations from the Board of Directors effective upon the Initial Closing.
The Board of Directors
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shall have elected the individuals set forth on Schedule 3.1.2B to fill such
vacancies and such newly-elected persons shall be legally entitled to fill such
vacancies upon the later to occur of (a) the Closing Date or (b) 10 days after
the later of the date that the 14(f) Notice is mailed to stockholders of the
Company and filed with the SEC.
3.1.3 Consents. All consents, approvals,
authorizations, orders, registrations, filings and qualifications of or with any
(A) Governmental Authority, (B) stock exchange on which the securities of the
Company are traded and (C) other Persons (whether acting in an individual,
fiduciary or other capacity) necessary or required to be made or obtained by the
Company or any of its Subsidiaries for the consummation of the transactions
contemplated by the Transaction Agreements shall have been made or obtained, as
the case may be, and shall be in full force and effect, and the Purchasers shall
have been furnished with appropriate evidence thereof.
3.1.4 December Sales. The Company shall have sales for
the five weeks ended on December 28, 1996 of at least $42 million, as reflected
in the unaudited monthly consolidated financial statements of the Company or, if
such unaudited monthly consolidated financial statements of the Company have not
been completed, in a certificate of the chief financial officer of the Company.
3.1.5 Absence of Material Adverse Effect. No event or
events shall have occurred between October 27, 1996 and the date hereof that
individually or in the aggregate has had or would reasonably be expected to have
a Material Adverse Effect.
3.1.6 Officer's Certificate. The Purchasers shall have
received a certificate, dated the Closing Date and signed by the Chief Operating
Officer
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of the Company, certifying that the conditions set forth in this Section 3.1
have been satisfied on and as of such date.
3.1.7 No Injunction. There shall be no judgment,
injunction, order or decree enjoining the Company or the Purchasers from
consummating the transactions contemplated by this Agreement to be consummated
at or before the Closing.
3.1.8 Other Transaction Agreements. The Separation
Agreement, the Financial Advisory Agreement and the Registration Rights
Agreement shall have each been executed and delivered by the parties thereto
(other than the Purchasers and TCR) and remain in full force and effect. The
Company shall not have agreed to any amendment of, or waived any of its rights
under, the Separation Agreement.
3.2 Conditions Precedent to Obligations of the Company. The
obligations of the Company to be discharged under this Agreement on or prior to
the Closings are subject to satisfaction of the following conditions at or prior
to the Initial Closing (unless expressly waived in writing by the Company at or
prior to the Initial Closing), except for the conditions set forth in Sections
3.2.2 and 3.2.4, which must be satisfied at or prior to the Initial Closing and
the Second Closing with respect to the Initial Closing and the Second Closing,
respectively (unless expressly waived in writing by the Company at or prior to
such Closing):
3.2.1 Compliance by the Purchasers. All of the terms,
covenants and conditions of this Agreement to be complied with and performed by
the Purchasers in all material respects at or prior to the Initial Closing,
shall have been
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complied with and performed by the Purchasers and the representations and
warranties made by the Purchasers in this Agreement, shall be true and correct
at and as of the Initial Closing, with the same force and effect as though such
representations and warranties had been made at and as of the Initial Closing,
except for changes contemplated by this Agreement.
3.2.2 Consents. All consents, approvals,
authorizations, orders, registrations, filings and qualifications of or with any
(A) Governmental Authority and (B) other Persons (whether acting in an
individual, fiduciary or other capacity) necessary or required to be made or
obtained by the Purchasers for the consum mation of the transactions
contemplated by the Transaction Agreements to which any Purchaser is a party,
shall have been made or obtained, as the case may be, and shall be in full force
and effect, and the Company shall have been furnished with appropriate evidence
thereof.
3.2.3 Officer's Certificate. The Company shall have
received a certificate, dated the Closing Date and signed by an appropriate
officer of each Purchaser, certifying that the conditions set forth in this
Section 3.2 have been satisfied on and as of such date.
3.2.4 No Injunction. There shall be no judgment,
injunction, order or decree enjoining the Company or the Purchasers from
consummating the transactions contemplated by this Agreement to be consummated
at or before the Closing.
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4. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.
The Company hereby represents and warrants to each Purchaser that,
except as disclosed in writing by the Company to the Purchasers in a letter
specifically with respect to this Article 4 (the "Disclosure Letter") delivered
to the Purchasers on or prior to the date hereof:
4.1 Corporate Existence and Power.
(A) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has the corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the SEC Documents and as
currently conducted. The Company is duly qualified to transact business as a
foreign corporation and is in good standing (if applicable) in each jurisdiction
in which the conduct of its business or its ownership, leasing or operation of
property requires such qualification, other than any failure to be so qualified
or in good standing as would not singly or in the aggregate with all such other
failures reasonably be expected to have a Material Adverse Effect.
(B) True and complete copies of the Certificate of
Incorporation and the By-Laws as in effect on the date hereof have been provided
by the Company to the Purchasers. The minute books of the Company contain in all
material respects true and complete records of all meetings and consents in lieu
of meetings of the Board of Directors (and any committees thereof) and of the
stockholders of the Company.
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4.2 Power and Authority. The Company has the full corporate
power and authority to execute and deliver the Transaction Agreements and to
perform its obligations thereunder. The execution, delivery and performance by
the Company of the Transaction Agreements and the consummation by the Company of
the transactions contemplated thereby have been duly authorized and approved by
the Board of Directors and no further corporate action on the part of the
Company is necessary to authorize the execution, delivery and performance by the
Company of such agreements or the consummation by the Company of the
transactions contemplated thereby. The purchase of securities of the Company
under the Securities Purchase Agreement, dated December 30, 1996 ("Shareholders
Securities Purchase Agreement"), by and between Xxxxxx X. Xxxxxx, Xxxxxx Xxxxx,
Xxxx X. Xxxxxx, Dutford Limited and Coplex Foundation and the purchasers listed
on the signature pages thereof has been approved by the Board of Directors. Each
of the Transaction Agreements has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms. Assuming the Purchasers
(individually or as a group) have not been the beneficial owners (within the
meaning of Rule 13d-3 of the Exchange Act) of any shares of Common Stock prior
to their execution and delivery of this Agreement other than such shares as have
been disclosed in writing to the Company prior to the execution of this
Agreement, the foregoing authorizations and approvals by the Board of Directors
(including the approval of the acquisition of securities under the Shareholders
Securities Purchase Agreement) constitute prior approval by the Board of
Directors of the transactions which resulted in the Purchasers
17
becoming "interested stockholders" within the meaning of paragraph (a)(1) of
Section 203 of the Delaware General Corporation Law.
4.3 Affiliate Transactions. Except for the transactions
contemplated by the Separation Agreement or as disclosed in any SEC Document or
in the Disclosure Letter, the Company and its Subsidiaries have not entered into
any material transaction or material series of transactions with any
stockholder, director, officer, employee or Affiliate of the Company other than
any transactions with any Subsidiary in the ordinary course of business of the
Company and its Subsidiaries.
4.4 No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance of each of the Transaction Agreements by the Company
and the consummation of the transactions contemplated thereby will not conflict
with, contravene or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, or result in the creation or
imposition of any Encumbrance upon any assets or properties of the Company or of
any of its Subsidiaries, or cause the Company or any of its Subsidiaries to be
required to redeem, repurchase or offer to repurchase any of their respective
indebtedness under (A) the certificate of incorporation, the by-laws or other
organizational document of the Company or any of its Subsidiaries, (B) any
material Law of any Governmental Authority having jurisdiction over the Company
or any of its Subsidiaries, or any of their respective assets, properties or
operations or (C) any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any material lease, permit, license or other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or
18
any of its Subsidiaries is bound or to which any of the assets, properties or
operations of the Company or any of its Subsidiaries is subject.
4.5 Consents. No consent, approval, authorization, order,
registration, filing or qualification of or with any (A) Governmental Authority,
(B) stock exchange on which the securities of the Company are traded or (C)
other Person (whether acting in an individual, fiduciary or other capacity) is
required to be made or obtained by the Company or any of its Subsidiaries for
the execution, delivery and performance by the Company of the Transaction
Agreements and the consummation of the transactions contemplated thereby, except
for the actions described in Section 3.1.2 and 3.1.6 and except consents which
are not material to the business or operations of the Company and its
Subsidiaries, taken as a whole.
4.6 Capitalization of the Company. The authorized capital
stock of the Company consists of: (A) 80,000,000 shares of Common Stock of which
4,693,337 shares are issued and outstanding; and (B) 7,500,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), of which
4,500,000 shares are designated as Series A 9 1/2% Cumulative Convertible
Preferred Stock (the "Series A Preferred") and 25,000 shares are designated as
Series A Junior Participating Preferred. There are not more than 3,881,261
shares of the Series A Preferred issued and outstanding. No other class of
capital stock of the Company is, or, other than the Securities, up to an
aggregate of $1,500,000 in value of Class B Preferred offered to the employees
of the Company (the "Employee Preferred") and such additional number of shares
of Class B Preferred as may be agreed to by the Purchasers in writing, at the
Closings will be issued. From the date hereof until the Initial Closing, except
for the
19
issuance of the Securities and the Employee Preferred and the exercise of any
options or the conversion of the Preferred Stock described in the Disclosure
Letter, the Company will not issue any shares of its capital stock. All
outstanding shares of capital stock of the Company have been duly authorized,
are validly issued, fully paid and nonassessable and have been issued in
compliance with applicable federal and state securities laws. At the Initial
Closing, all of the Securities subject to such Closing will be duly authorized
and, when issued in accordance with this Agreement, will be validly issued,
fully paid and nonassessable. The stockholders of the Company have no preemptive
or similar rights with respect to the securities of the Company. Except as set
forth in the Disclosure Letter, there are no outstanding (i) securities or
obligations of the Company (other than the Series A Preferred) convertible into
or exchangeable for any capital stock of the Company, (ii) warrants (other than
414,105 warrants), rights (other than 4,693,337 Rights), or options to subscribe
for or purchase from the Company any such capital stock or any such convertible
or exchangeable securities or obligations or (iii) obligations of the Company to
issue such shares, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
4.7 Rights Plan. The Board of Directors has voted to redeem
the rights issued under the Rights Plan effective on the Closing Date, after
which such Rights Plan has no further force and effect.
4.8 Registration Rights. The Purchasers shall, by virtue of
their purchase of Securities hereunder and conversion thereof into Conversion
Shares in accordance with the terms of this Agreement and the Certificate of
Designations, be entitled to the rights of a holder under the Registration
Rights Agreement. Other than
20
the Registration Rights Agreement and except as set forth in the Disclosure
Letter, neither the Company nor any of its Subsidiaries has previously entered
into any agreement granting any registration rights to any Person.
4.9 Subsidiaries. The Disclosure Letter sets forth a complete
and accurate list of all of the Subsidiaries of the Company together with their
respective jurisdictions of incorporation or organization. Except for its
Subsidiaries, the Company holds no equity, partnership, joint venture or other
interest in any Person. True and complete copies of the certificate of
incorporation, by-laws and other organizational documents of the Subsidiaries of
the Company as in effect on the date hereof have been provided by the Company to
the Purchasers. Each Subsidiary of the Company has been duly incorporated or
organized and is validly existing as a corporation or other legal entity in good
standing under the laws of the jurisdiction of its incorporation or
organization, has the corporate or other power and authority to own, lease and
operate its properties and to conduct its business as currently conducted and is
duly qualified to transact business as a foreign corporation or other legal
entity and is in good standing (if applicable) in each jurisdiction in which the
conduct of its business or its ownership, leasing or operation of property
requires such qualification, other than any failure to be so qualified or in
good standing as would not singly or in the aggregate with all such other
failures reasonably be expected to have a Material Adverse Effect. All of the
outstanding capital stock of each Subsidiary of the Company has been duly
authorized and validly issued, is fully paid and nonassessable and is owned by
the Company, directly or through other Subsidiaries of the Company (other than
directors' qualifying shares), free and clear of any Encumbrance (other than
such transfer restrictions as may
21
exist under federal and state securities laws or any Encumbrances between or
among the Company and/or any Subsidiary of the Company or as may be reflected in
the financial statements included in the SEC Documents or described in the
Disclosure Letter), and there are no rights granted to or in favor of any third
party (whether acting in an individual, fiduciary or other capacity), other than
the Company or any Subsidiary of the Company, to acquire any such capital stock,
any additional capital stock or any other securities of any such Subsidiary.
Except as set forth in the SEC Documents, there exists no restriction, other
than those pursuant to applicable law or regulation, on the payment of cash
dividends by any Subsidiary.
4.10 SEC Documents.
(A) The Company has delivered true and complete copies
of all SEC Documents to the Purchasers.
(B) As of its filing date, each SEC Document filed,
and each SEC Document that will be filed by the Company prior to the Closing
Date, as amended or supplemented prior to the Closing Date, if applicable,
pursuant to the Exchange Act (i) complied or will comply in all material
respects with the applicable requirements of the Exchange Act and (ii) did not
or will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(C) Each final registration statement filed with the
SEC pursuant to the Act, as of the date such statement or amendment became
effective (i) complied in all material respects with the applicable requirements
of the Act and
22
(ii) did not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any prospectus, in light of
the circumstances under which they were made).
4.11 Financial Statements.
(A) The audited consolidated financial statements and
related schedules and notes included in the SEC Documents comply in all material
respects with the requirements of the Exchange Act and the Act and the rules and
regulations of the SEC thereunder, were prepared in accordance with generally
accepted accounting principles consistently applied throughout the period
involved and fairly present in all material respects the financial condition,
results of operations, cash flows and changes in stockholders' equity of the
Company and its Subsidiaries at the dates and for the periods presented. The
Company previously delivered true and complete copies of the audited
consolidated financial statements and related schedules and notes of the Company
as of January 27, 1996 and January 28, 1995 and for each of the three years in
the period ended January 27, 1996 (the "1995 Audited Financial Statements").
Except as set forth in the Disclosure Letter, the 1995 Audited Financial
Statements comply in all material respects with the requirements of the Exchange
Act and the Act and the rules and regulations of the SEC thereunder, were
prepared in accordance with generally accepted accounting principles
consistently applied throughout the period involved and fairly present in all
material respects the financial condition, results of operations, cash flows and
changes in stockholders' equity of the Company and its Subsidiaries at the dates
and for the periods presented. The unaudited quarterly consolidated financial
23
information included in the SEC Documents were derived from financial statements
which fairly present in all material respects the financial condition, results
of operations and cash flows of the Company and its Subsidiaries at the dates
and for the periods to which they relate, subject to year-end adjustments
(consisting only of normal recurring accruals), and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis except as otherwise stated therein and have been prepared on a basis
consistent with that of the audited financial statements referred to above
except as otherwise stated therein.
(B) The unaudited monthly consolidated financial
statements for the month of November 1996 (the "Monthly Financial Statements")
previously delivered by the Company to the Purchasers fairly present in all
material respects the financial condition and results of operations of the
Company and its Subsid iaries at the dates and for the periods to which they
relate, subject to quarter-end and year-end adjustments (consisting only of
normal recurring accruals), and have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the monthly
financial statements of the Company for 1994 and 1995 except as otherwise stated
therein. Notwithstanding the foregoing, the Monthly Financial Statements do not
reflect an inventory shrinkage adjustment, which adjustment shall be an amount
not to exceed $560,000. Such inventory shrinkage adjustment shall be provided
for in the Monthly Financial Statements for the months of December 1996 and
January 1997. For each fiscal month after the date hereof and prior to the
Closing, beginning with December 1996, as soon as reasonably practicable and in
any event within 14 days after the end of each such fiscal month, the Company
shall prepare and
24
deliver to the Purchasers monthly financial statements of the Company that shall
fairly present in all material respects the financial condition and results of
operations of the Company and its Subsidiaries at the dates and for the periods
to which they relate, subject to quarter-end and year-end adjustments
(consisting only of normal recurring accruals), prepared in accordance with
generally accepted accounting principles applied on a basis consistent with the
Monthly Financial Statements.
4.12 14(f) Notice. At the time the 14(f) Notice is first
mailed to the stockholders of the Company and filed with the SEC, it will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of circumstances
under which they were made, not misleading; provided that the Company makes no
representation or warranty with respect to (i) any statement or omissions
included in the 14(f) Notice based upon information furnished in writing to the
Company by or on behalf of the Purchasers specifically for use therein or (ii)
any portion thereof which is not deemed to be filed under applicable SEC rules
and regulations.
4.13 No Existing Violation, Default, Etc. None of the Company
nor any of its Subsidiaries is (A) in violation of any provision of its
certificate of incorporation, by-laws or other organizational documents or (B)
in violation of any applicable Law, stock exchange rule or regulation, which
violation has or would reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 4.13, no breach, event of default or event that,
but for the giving of notice or the lapse of time or both, would constitute an
event of default exists under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money,
25
any guarantee of any agreement or instrument for borrowed money or any lease,
permit, license or other agreement to which the Company or any of its
Subsidiaries is a party or by which the Company or any such Subsidiary is bound
or to which any of the properties, assets or operations of the Company or any
such Subsidiary is subject, which breach, event of default, or event that, but
for the giving of notice or the lapse of time or both, would constitute an event
of default, has or would reasonably be expected to have a Material Adverse
Effect. Without giving effect to any waiver previously granted, there exists (i)
no event of default, (ii) no event that, but for the giving of notice or the
lapse of time or both, would constitute an event of default and (iii) no event
that would require the Company or any of its Subsidiaries to prepay, redeem,
repurchase or offer to repurchase any of (a) its indebtedness existing under the
FINOVA Credit Facility, the GT Credit Facility or otherwise or (b) the Series A
Preferred.
4.14 Licenses and Permits. The Company and its Subsidiaries
have such Licenses as are necessary to own, lease or operate their properties
and to conduct their businesses in the manner described in the SEC Documents and
as currently owned or leased and conducted and all such Licenses are valid and
in full force and effect except such Licenses that the failure to have or to be
in full force and effect individually or in the aggregate has not had, and would
not reasonably be expected to have, a Material Adverse Effect. None of the
Company nor any of its Subsidiaries has received any written notice that any
violations are being or have been alleged in respect of any such License and no
proceeding is pending or, to the Knowledge of the Company, threatened, to
suspend, revoke or limit any such License the effect of which would reasonably
be expected to have a Material Adverse Effect. The Company and its
26
Subsidiaries are in compliance with their respective obligations under such
Licenses, with such exceptions as individually or in the aggregate have not had,
and would not reasonably be expected to have, a Material Adverse Effect, and no
event has occurred that allows, or after notice or lapse of time would allow,
revocation, suspension, limitation or termination of such Licenses, except such
events as have not had, or would not reasonably be expected to have, a Material
Adverse Effect.
4.15 Title to Properties. The Company and its Subsidiaries
have sufficient title to all material properties (real and personal) owned by
the Company and any such Subsidiary that are necessary for the conduct of the
business of the Company and any such Subsidiary as described in the SEC
Documents and as currently conducted, free and clear of any Encumbrance that may
materially interfere with the conduct of its business, and all material
properties held under lease by the Company and the Subsidiaries are held under
valid, subsisting and enforceable leases except for such leases the loss of
which would not reasonably be expected to have a Material Adverse Effect.
4.16 Intellectual Property.
(A) The Company and each of its Subsidiaries owns or
is licensed to use all (i) patents, trademarks, trade names, service marks,
copyrights and any applications therefor and (ii) trade secrets, know-how,
computer software programs and proprietary information, in each case, that are
material to the conduct of the business of the Company and its Subsidiaries as
described in the SEC Documents and as currently conducted, free and clear of any
Encumbrance that may materially interfere with the conduct of their business
("Intellectual Property").
27
(B) None of the Company, any of its Subsidiaries, nor,
to the Knowledge of the Company, any other party is in breach of or default
under any material licenses, sublicenses and agreements ("IP Licenses") under
which the Company or any of its Subsidiaries is either a licensor or licensee of
Intellectual Property. Each IP License is now, and immediately following the
consummation of the transactions herein contemplated will be, valid and in full
force and effect.
(C) No litigation is pending or, to the Knowledge of
the Company, threatened, that challenges the validity, enforceability or
ownership of, or right to use or license, any Intellectual Property, nor does
the Company or any Subsidiary know of any valid grounds for any such claim,
which would reasonably be expected to have a Material Adverse Effect.
(D) No item of Intellectual Property is subject to any
outstanding order, ruling, judgment, decree or agreement restricting the use
thereof by the Company or its Subsidiaries except for agreements made in the
ordinary course of business of the Company or its Subsidiaries. None of the
Company or any of its Subsidiaries has agreed to indemnify any person against
any charge of infringement or other violation with respect to any Intellectual
Property owned or used by the Company or any of its Subsidiaries except in the
ordinary course of business.
(E) To the Knowledge of the Company, none of the
Company or its Subsidiaries has infringed upon or otherwise violated the
intellectual property rights of third parties which would reasonably be expected
to have a Material Adverse Effect. None of the Company or its Subsidiaries has
received any complaint or notice alleging any such infringement or other
violation.
28
(F) To the Company's knowledge, no third party is
infringing upon or otherwise violating the Intellectual Property rights of the
Company or any of its Subsidiaries which would reasonably be expected to have a
Material Adverse Effect.
(G) All material registered trademarks and copyrights
held by the Company or any of its Subsidiaries are valid and subsisting. The
Company and its Subsidiaries have taken all necessary action to maintain and
protect the Intellectual Property that they own or use other than such actions
taken in the ordinary course of business of the Company and its Subsidiaries
that would not reasonably be expected to have a material adverse effect on any
of the Intellectual Property.
4.17 Environmental Matters. Subject to such disclosures as
are contained in the SEC Documents:
(A) the Company and its Subsidiaries, and their
respective operations and properties, are and have been in compliance with all
applicable Environmental Laws except for such failures which, individually and
in the aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect.
(B) There is no civil, criminal or administrative
judgment, action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or, to their
knowledge, threatened against the Company or any of its Subsidiaries pursuant to
Environmental Laws which could reasonably be expected to result in a fine,
penalty or other obligation, cost or expense, except such obligations, costs or
expenses which, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect.
29
(C) There are no past or present events, conditions,
circumstances, activities, practices, incidents, agreements, actions or plans
which may prevent compliance by the Company or its Subsidiaries with, or which
have given rise to, or will give rise to, material liability to the Company or
any of its Subsidiaries under Environmental Laws, except any such events,
conditions, circumstances, activities, practices, incidents, agreements, actions
or plans which, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
(D) Any facts or circumstances that are the subject of
a written report provided to the Purchasers as a result of an environmental
investigation conducted by the Purchasers of the Company and its Subsidiaries
(the "Environmental Information") shall be deemed to amend the Disclosure Letter
as of the date hereof.
4.18 Taxes. The Company and its Subsidiaries have filed or
caused to be filed, or have properly filed extensions for, all material Tax
returns that are required to be filed and have paid or caused to be paid all
material Taxes as shown on said returns and on all material assessments received
by it 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, in accordance with generally
accepted accounting principles, have been set aside. The Company and its
Subsidiaries have paid or caused to be paid, or have established reserves that
the Company or such Subsidiaries reasonably believe to be adequate in all
material respects, for all Tax liabilities applicable to the Company and its
Subsidiaries for all fiscal years that have not been examined and reported on by
the taxing authorities (or closed by applicable statutes). There is no pending
examination of United States
30
Federal income tax returns of the Company and its Subsidiaries. For purposes of
this Section 4.18, "Tax" or "Taxes" means any federal, state, county, local,
foreign and other taxes (including, without limitation, income, profits,
premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad
valorem, severance, capital levy, production, transfer, withholding, employment,
unemployment compensation, payroll and property taxes, import duties and other
governmental charges and assessments), whether or not measured in whole or in
part by net income, and including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto, and including expenses associated
with contesting any proposed adjustments related to any of the foregoing.
4.19 Litigation. Except as set forth in SEC Documents filed
with the SEC prior to the date of this Agreement, there are no pending actions,
suits, proceedings, arbitrations or investigations against or affecting the
Company or any of its Subsidiaries or any of their respective properties, assets
or operations, or with respect to which the Company or any such Subsidiary is
responsible by way of indemnity or otherwise, that are required under the
Exchange Act to be described in such SEC Documents or that, if successful, could
singly, or in the aggregate, with all such other actions, suits, investigations
or proceedings, reasonably be expected to have a Material Adverse Effect and, to
the Knowledge of the Company, no such actions, suits, proceedings or
investigations are threatened.
4.20 Labor Matters. No labor disturbance by the employees of
the Company or any of its Subsidiaries that has had or that could reasonably be
expected to have a Material Adverse Effect exists or, to the Knowledge of the
Company, is threatened.
31
4.21 Employee Benefits.
(A) Except for the plans set forth in the Disclosure
Letter (the "Benefit Plans"), there are no employee benefit plans or
arrangements of any type (including, without limitation, plans described in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
and the regulations thereunder ("ERISA")), under which the Company or any of its
Subsidiaries has or in the future could have directly, or indirectly through a
Commonly Controlled Entity (within the meaning of Sections 414(b), (c), (m) and
(o) of the Code), any material liability with respect to any current or former
employee of the Company, any of its Subsidiaries, or any Commonly Controlled
Entity. No such Benefit Plan is a "multiemployer plan" (within the meaning of
ERISA Section 4001(a)(3)).
(B) With respect to each Benefit Plan the Company has
delivered or made available to the Purchasers complete and accurate copies of
(i) all plan texts and agreements (as amended or modified to date), (ii) all
summary plan descriptions and similar material employee communications, (iii)
the most recent annual report (Form 5500 including, if applicable, Schedule B
thereto), (iv) the most recent annual and periodic accounting of plan assets,
(v) the most recent determination letter received from the Internal Revenue
Service and (vi) the most recent actuarial valuation.
(C) With respect to each Benefit Plan: (i) such
Benefit Plan has been maintained and administered at all times in material
compliance with its terms and applicable law and regulation; (ii) to the
Knowledge of the Company, no event has occurred and there exists no circumstance
under which the Company or any of its Subsidiaries could directly, or indirectly
through a Commonly Controlled Entity, incur
32
any material liability under ERISA, the Code or otherwise (other than routine
claims for benefits and other liabilities arising in the ordinary course
pursuant to the normal operation of such Benefit Plan); (iii) there are no
actions, suits or claims (other than routine claims for benefits) pending or, to
the Knowledge of the Company, threatened, with respect to any Benefit Plan or
against the assets of any Benefit Plan with respect to which suits the Company
or any of its Subsidiaries could incur any material liability; (iv) all
contributions and premiums due and owing to any Benefit Plan have been made or
paid on a timely basis and no "accumulated funding deficiency", as defined in
Code Section 412, has been incurred, whether or not waived; (v) all
contributions made under any Benefit Plan have met the requirements for
deductibility under the Code, and all contributions that have not been made have
been properly recorded on the books of the Company or a Commonly Controlled
Entity thereof in accordance with generally accepted accounting principles and
(vi) if such Benefit Plan is intended to be qualified under Section 401(a) of
the Code, such Benefit Plan has been determined to be so qualified and each
trust created under such Benefit Plan has been determined to be exempt from tax
under Section 501(a) of the Code and no event has occurred since the date of
such determinations, including effective changes in laws or regulations or
modifications to the Benefit Plans, that would adversely affect such
qualification or tax exempt status.
(D) The Accumulated Postretirement Benefit Obligation
(as defined in Statement of Financial Accounting Standards No. 106) in respect
of post- retirement health and medical benefits for current and former employees
of the Company and its Subsidiaries, calculated as of December 31, 1995 on the
basis of reasonable
33
actuarial assumptions in accordance with generally accepted accounting
principles, does not exceed $25,000.00. Except as set forth in the Separation
Agreement, no condition exists that would prevent the Company or any of its
Subsidiaries from amending or terminating any plan providing health or medical
benefits in respect of current or former employees of the Company or its
Subsidiaries.
(E) There is no contract, plan or arrangement (written
or otherwise) covering any employee or former employee of the Company or its
Subsidiaries that, individually or collectively, could give rise to the payment
by the Company or its Subsidiaries of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code other than transactions under
the Separation Agreement and provisions of the employment agreements with
Xxxxxxx X. Xxxxxxx and Xxxxxxx Xxxxxxx.
(F) Except as set forth in Schedule 4.21(F), no
employee or former employee of the Company or its Subsidiaries will become
entitled to any bonus, retirement, severance, job security or similar benefit or
enhanced such benefit (including acceleration of vesting or exercise of an
incentive award) as a result of the transactions contemplated hereby.
4.22 Contracts. Except as set forth in Schedule 4.22, all of
the material contracts of the Company or any of its Subsidiaries that are
required to be described in the SEC Documents or to be filed as exhibits thereto
are described in the SEC Documents or filed as exhibits thereto and are in full
force and effect. True and complete copies of all such material contracts have
been delivered by the Company to the Purchasers. Neither the Company nor any of
its Subsidiaries nor, to the Knowledge
34
of the Company, any other party is in breach of or in default under any such
contract except for such breaches and defaults as in the aggregate have not had,
and would not reasonably be expected to, have a Material Adverse Effect.
4.23 Contingent Liabilities. Except as fully reflected or
reserved against in the 1995 Audited Financial Statements, or disclosed in the
footnotes contained in such financial statements, the Company and its
Subsidiaries had no liabilities (including tax liabilities) at the date of such
financial statements, absolute or contingent, that were required by generally
accepted accounting principles consistently applied to be reflected or reserved
against in such 1995 Audited Financial Statements or disclosed in the footnotes
contained in such financial statements.
4.24 No Material Adverse Change. Except as set forth in
Schedule 4.24, since October 27, 1996: (A) the Company and its Subsidiaries have
not incurred any material liability or obligation (indirect, direct or
contingent), or entered into any material oral or written agreement or other
transaction, that is not in the ordinary course of business or that would
reasonably be expected to result in a Material Adverse Effect; (B) the Company
and its Subsidiaries have not sustained any loss or interference with its
business or properties from fire, flood, windstorm, accident or other calamity
(whether or not covered by insurance) that has had or that would reasonably be
expected to have a Material Adverse Effect; (C) there has been no material
change in the indebtedness of the Company and its Subsidiaries (other than
increases or decreases in working capital borrowings in the ordinary course of
business); (D) other than with respect to dividends required to be paid on the
outstanding Series A Preferred there has been no dividend or distribution of any
kind declared, paid or made by the Company or
35
any of its Subsidiaries on any class of its capital stock; (E) neither the
Company nor any of its Subsidiaries has made (nor does it propose to make) (i)
any material change in its accounting methods or practices or (ii) any material
change in the depreciation or amortization policies or rates adopted by it, in
either case, except as may be required by law or applicable accounting
standards; and (F) there has been no event causing a Material Adverse Effect,
nor any development that would, singly or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
4.25 Finder's Fees. Except for Xxxxxx & Xxxxxxx, no broker,
finder or other party is entitled to receive from the Company or any of its
Subsidiaries any brokerage or finder's fee for the transactions contemplated by
the Transaction Agreements as a result of the actions of the Company, any of its
Subsidiaries, or any of its Affiliates.
4.26 Investment Company. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
4.27 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities. Assuming the representations and warranties
of the Purchasers set forth in Section 5.4 hereof are true and correct in all
material respects, the offer and sale of the Securities made pursuant to this
Agreement will be exempt from the registration requirements of the Act. Neither
the Company nor any Person acting on its behalf has, in connection with the
offering of the Securities, engaged in (A) any form of general solicitation or
general advertising (as those terms are used within the meaning of Rule 502(c)
under the Act), (B) any action involving a public offering within the meaning of
Section 4(2) of the Act, or (C) any other action that would require the
36
registration under the Act of the offering and sale of the Securities pursuant
to this Agreement or that would violate applicable state securities or "blue
sky" laws with respect to the Securities. The Company has not made and will not
prior to the Closing make, directly or indirectly, any offer or sale of
Securities or of securities of the same or a similar class as the Securities if
as a result the offer and sale of the Securities contemplated hereby could fail
to be entitled to exemption from the registration require ments of the Act. As
used herein, the terms "offer" and "sale" have the meanings specified in Section
2(3) of the Act.
4.28 Full Disclosure. To the Knowledge of the Company, no
statement by the Company contained in this Agreement, the Disclosure Letter, the
SEC Documents or any other documents listed in the Disclosure Letter, or any
certificates, notices or consents delivered to the Purchasers in connection with
the purchase and sale of the Securities at or prior to the Closing, taken as a
whole, in light of the circumstances in which made, contains (or will contain)
an untrue statement of a fact material either individually or in the aggregate
to the Company and its Subsidiaries taken as a whole or omits (or will omit) to
state a fact material either individually or in the aggregate to the Company and
its Subsidiaries taken as a whole required to be stated therein or necessary to
make the statements made, in the light of the circumstances in which made, not
materially false or misleading.
37
5. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS.
The Purchasers hereby represent and warrant to the Company that:
5.1 Existence and Power. Each Purchaser is duly organized,
validly existing and in good standing under the laws of the State of its
formation and has all requisite power and authority to own, lease and operate
its properties and to conduct its business as currently conducted.
5.2 Power and Authority. Each of the Purchasers has the full
power and authority to execute and deliver the Transaction Agreements to which
it is a party and to perform its obligations thereunder. The execution, delivery
and performance by each Purchaser of such Transaction Agreements and the
consummation by each Purchaser of the transactions contemplated thereby have
been duly authorized. Each of such Transaction Agreements has been duly executed
and delivered by each Purchaser and is a valid and binding agreement of each of
the Purchasers, enforceable against each of the Purchasers in accordance with
its terms.
5.3 No Contravention, Conflict, Breach, Etc. The execution,
delivery and performance by each Purchaser of the Transaction Agreements to
which it is a party and the consummation of the transactions contemplated
thereby will not conflict with, contravene or result in a breach or violation of
any of the terms and provisions of, or constitute a default under, (A) the
partnership agreement or other organizational documents of each such Purchaser,
(B) any Law of any Governmental Authority having jurisdiction over each such
Purchaser or (iii) any agreement to which each such Purchaser is a party.
38
5.4 Acquisition for Own Account. The Securities to be acquired
by the Purchasers pursuant to this Agreement are being acquired by them for
their own accounts and with no intention of distributing or reselling the
Securities in any transaction that would be in violation of the Act or the
securities laws of any state, without prejudice, however, to the rights of the
Purchasers at all times to sell or otherwise dispose of all or any part of the
Securities under an effective registration statement under the Act, under an
exemption from such registration available under the Act, and subject,
nevertheless, to the disposition of the Purchasers' property being at all times
within their control, except as otherwise provided by this Agreement. The
Purchasers (A) have such knowledge, sophistication and experience in business
and financial matters that they are capable of evaluating the merits and risks
of an investment in the Securities, (B) fully understand the nature, scope and
duration of the limitations on transfer contained in this Agreement and (C) can
bear the economic risk of an investment in the Securities and can afford a
complete loss of such investment. The Purchasers acknowledge receipt of the SEC
Documents, the Disclosure Letter and all documents delivered in accordance
therewith and that they have been afforded the opportunity to ask such questions
as they deemed necessary, and to receive answers from, representatives of the
Company concerning the merits and risks of investing in the Securities and to
obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
and completeness of the information contained in the SEC Documents.
Notwithstanding the foregoing, nothing contained in this Section 5.5 shall
affect or be deemed to modify any representation or warranty made by the
Company.
39
5.5 Finder's Fee. Except for Xxxxxx & Xxxxxxx, Inc., no
broker, finder or other party is entitled to receive from the Company or any of
its Subsidiaries any brokerage or finder's fee for the transactions contemplated
by the Transaction Agreements as a result of the actions of the Purchasers.
5.6 Ownership of Common Stock. Except as otherwise disclosed
in writing to the Company prior to the execution of this Agreement, no Purchaser
owns beneficially (within the meaning of Rule 13d-3 of the Exchange Act) any
shares of Common Stock.
5.7 14(f) Notice. At the time the 14(f) Notice is first mailed
to the stockholders of the Company, the information furnished in writing to the
Company by or on behalf of the Purchasers specifically for use therein shall be
complete in all material aspects and shall not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of circumstances under which they were made,
not misleading; provided, however, that the Purchasers make no representation or
warranty with respect to any portion thereof which is not deemed to be filed
under applicable SEC rules and regulations.
6. COVENANTS OF THE PARTIES.
6.1 Pre-Closing Activities. From and after the date of this
Agreement until the Initial Closing, each of the Company and the Purchasers
shall act with good faith towards, and shall use its reasonable efforts to
consummate, the transactions contemplated by this Agreement, and neither the
Company nor the Purchasers will take any action that would prohibit or impair
its ability to consummate
40
the transactions contemplated by this Agreement, subject to the fiduciary duties
of the Board of Directors of the Company under Delaware law. From the date
hereof until the Initial Closing, the Company shall conduct the business of it
and its Subsidiaries in the ordinary course and shall use all reasonable efforts
to preserve intact its business organizations and relationships with third
parties and, except as otherwise provided herein or in the Separation Agreement,
to keep available the services of the present directors, officers and key
employees. Without limiting the generality of the foregoing, from the date
hereof until the Initial Closing, except as contemplated by this Agreement or as
permitted by Section 6.6, without the Purchasers' prior written consent:
(A) the Company shall not, and shall cause each of its
Subsidiaries not to, adopt or propose (or agree to commit to) any change
in the certificate of incorporation or by-laws of the Company or any of
such Subsidiaries;
(B) the Company shall not, and shall cause each of its
Subsidiaries not to, (i) enter into any loan agreement or other agreement
pursuant to which the Company or such Subsidiary incurs indebtedness for
borrowed money in excess of $250,000 (other than any such agreement among
the Company and its wholly owned Subsidiaries or among the Company's
wholly owned Subsidiaries) or (ii) amend any such existing agreement
(other than to increase the amount available for borrowing under and amend
the terms of the GT Credit Facility and the FINOVA Facility up to a
maximum of $50 million);
(C) the Company shall not, and shall cause each of its
Subsidiaries not to, sell any of the assets of the Company or such
Subsidiaries (or
41
the securities of entities holding the same) in one transaction or a
series of related transactions, where the total consideration to be
received by the Company and its Subsidiaries exceeds $250,000 (other than
in the ordinary course of business of the Company and its Subsidiaries);
(D) other than in the ordinary course of business of the
Company consistent with past practice or as set forth in the Separation
Agreement, the Company shall not, and shall cause each of its Subsidiaries
not to, acquire any assets of any other Person or Persons or acquire any
equity, partnership or other interests in any other Person or Persons, in
one transaction or series of related transactions, where the total
consideration to be paid by the Company and its Subsidiaries exceeds
$100,000;
(E) except for required payments under the FINOVA Credit
Facility or the GT Credit Facility, the Company shall not, and shall cause
each of its Subsidiaries not to, repay, redeem or repurchase any
indebtedness of the Company or any of the Subsidiaries or any shares of
capital stock of the Company;
(F) except for the transactions contemplated by the
Separation Agreement or as agreed to by the Purchasers in writing, the
Company shall not, and shall cause each of its Subsidiaries not to, enter
into any transaction with any director, executive officer or Affiliate
(other than any transaction among the Company and its wholly-owned
Subsidiaries or among any wholly-owned Subsidiaries of the Company) of the
Company out of the ordinary course of its business;
42
(G) the Company shall not, and shall cause each of its
Subsidiaries not to, (i) grant to any employee any increase in salary or
other remuneration not consistent with past practices or any increase in
severance or termination pay; (ii) grant or approve any general increase
in salaries of all or a substantial portion of its employees not
consistent with past practice; (iii) pay or award any bonus, incentive,
compensation, service award or other like benefit for or to the credit of
any employee except in accordance with written policy or consistent with
past practice; or (iv) except as set forth in the Separation Agreement,
enter into any employment contract or severance arrangement with any
employee except in accordance with written policy or consistent with past
practice or adopt or amend in any material respect any of its employee
benefit plans except as required by law;
(H) the Company shall, and shall cause each of its
Subsidiaries to, not take or agree to commit to take any action that would
make any representation or warranty of the Company hereunder required to
be true at and as of the Initial Closing as a condition to the Purchasers'
obligations to consummate the transactions contemplated hereby, inaccurate
at the Initial Closing; and
(I) except as permitted by the FINOVA Credit Facility
and the GT Credit Facility and in the ordinary course of business
consistent with past practice, the Company shall not, and shall cause its
Subsidiaries not to, agree to expend, commit or otherwise obligate itself
to make any capital expenditures.
43
6.2 Stock Exchange Listing. Upon demand of the Purchasers,
the Company shall take all actions, if necessary, to cause the Conversion Shares
to be listed on the NASDAQ Small-Cap Market.
6.3 14(f) Notification.
(A) The Company: (i) shall promptly prepare, file
with the SEC and mail to its stockholders the 14(f) Notice in accordance with
Rule 14f-1 under the Exchange Act and (ii) shall otherwise comply with all legal
requirements applicable to the activities described in Section 3.1.2. The
Company shall make available to the Purchasers copies of the 14(f) Notice prior
to the filing thereof with the SEC or mailing thereof to the stockholders of the
Company and shall make any changes therein reasonably requested by the
Purchasers insofar as such changes relate to any matters relating to the
Purchasers or the description of the transactions contemplated by the
Transaction Agreements.
(B) The Purchasers shall promptly provide to the
Company such information concerning the individuals listed on Schedule 3.1.2B as
the Company shall reasonably request for the purpose of complying with its
obligations under Section 6.3(A).
6.4 Access. Upon reasonable notice prior to the Initial
Closing, the Company shall (and shall cause each of its Subsidiaries to) afford
the Purchasers and the Representatives reasonable access during normal business
hours to its properties, books, contracts and records and personnel and advisors
(who will be instructed by the Company to cooperate), and the Company shall (and
shall cause each of the Subsidiaries to) furnish promptly to the Purchasers all
information concerning its business, properties
44
and personnel as the Purchasers or the Representatives may reasonably request;
provided, however, that any review will be conducted in a way that will not
interfere unreasonably with the conduct of the Company's business, and provided,
further, however, that no review pursuant to this Section 6.3 shall affect or be
deemed to modify any representa tion or warranty made by the Company.
6.5 Publicity. Except as required by law, regulation or stock
exchange requirements, neither (A) the Company or any of its Affiliates nor (B)
the Purchasers or any of their respective Affiliates shall, without the consent
of the other, make any public announcement or issue any press release with
respect to the transactions contemplated by the Transaction Agreements. In no
event will either (i) the Company or any of its Affiliates or (ii) the
Purchasers or any of their respective Affiliates make any public announcement or
issue any press release without consulting with the other party, to the extent
feasible, as to the content of such public announcement or press release.
6.6 Acquisition Proposals. From the date hereof until the
earlier of the Initial Closing or the termination of this Agreement, the Company
shall not, directly or indirectly, take (nor shall the Company authorize or
permit its officers, directors, employees, representatives, investment bankers,
attorneys, accountants or other agents or affiliates, to take) any action to:
solicit or initiate the submission of any Acquisition Proposal, or enter into
any agreement with respect to or propose any Acquisition Proposal or participate
in any way in discussions or negotiations with, or furnish any information to,
any Person (other than the Purchasers or any of their partners or their
respective officers, directors, employees, representatives, investment bankers,
45
attorneys, accountants, other agents or Affiliates) in connection with, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition Proposal.
The Company shall give immediate telephonic notice to the Purchasers (promptly
followed by written notice) of its receipt of any Acquisition Proposal or of any
inquiry or request for information contemplating an Acquisition Proposal. The
Company shall keep the Purchasers informed, on a current basis, of the status of
any Acquisition Proposal and any negotiations or discussions relating to such a
proposal. Except as required by law, the Company agrees that it shall not
disclose to any Person any written information furnished to it by the Purchasers
or any of their Representatives (including, without limitation, TCR and Xxxx,
Weiss, Rifkind, Xxxxxxx & Xxxxxxxx).
6.7 Certificates for Securities, Exchange Notes and
Conversion Shares To Bear Legends.
(A) So long as the Securities are not sold pursuant to
an effective registration statement under the Act or pursuant to Rule 144 under
the Act, the Securities shall be subject to a stop-transfer order and the
certificates therefor shall bear the following legend by which each holder
thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION
FROM REGISTRATION THEREUNDER."
46
(B) So long as the Conversion Shares are not sold
pursuant to an effective registration statement under the Act or pursuant to
Rule 144 under the Act, the Conversion Shares shall be subject to a
stop-transfer order and the certificates therefor shall bear the following
legend by which each holder thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OR
OTHER SECURITIES ISSUABLE UPON EXCHANGE HEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION
FROM REGISTRATION THEREUNDER.
(C) So long as the Exchange Notes are not sold
pursuant to an effective registration statement under the Act or pursuant to
Rule 144 under the Act, the Exchange Notes shall be subject to a stop-transfer
order and the certificates therefor shall bear the following legend by which
each holder thereof shall be bound:
"THESE NOTES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i)
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER.
6.8 Removal of Legends. After termination of the requirement
that all or part of such legend be placed upon a certificate, the Company shall,
upon receipt by the Company of evidence reasonably satisfactory to it that such
requirement has terminated and upon the written request of the holders of the
Securities, Conversion
47
Shares or Exchange Notes issued with respect to the Securities, issue
certificates for such Securities or Conversion Shares or Exchange Notes, as the
case may be, that do not bear such legend.
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS.
The representations, warranties, covenants and agreements contained
herein shall survive the execution and delivery of this Agreement and the
Closing hereunder.
8. INDEMNIFICATION.
8.1 Indemnification by the Company. In addition to all other
sums due hereunder or provided for in this Agreement, the Company agrees to
indemnify and hold harmless the Purchasers, their partners and their respective
Affiliates and the respective officers, directors, agents, employees,
subsidiaries, partners, advisors, representatives and controlling Persons of
each of the foregoing (each, an "indemnified party") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") resulting from any legal, administrative or other
actions brought by any Person or entity (including actions brought by the
Company or any equity or debt holders of the Company or derivative actions
brought by any Person claiming through the Company or in the Company's name),
proceedings or investigations (whether formal or informal), or written threats
thereof, based upon, relating to or arising out of this Agreement, the
transactions contemplated hereby, or any indemnified party's role therein or in
the transactions contemplated hereby; provided,
48
however, that nothing contained in this Section 8.1 shall be construed as a
guarantee by the Company with respect to the value of the Securities being
purchased by the Purchasers hereunder or indemnification of the Purchasers
against any diminution in value thereof which may occur; provided, further,
however, that the Company shall not be liable under this Section 8.1 to an
indemnified party to the extent that it is finally judicially determined that
such Liabilities resulted primarily from the willful malfeasance of such
indemnified party; and provided, further, however, that if and to the extent
that such indemnification is unenforceable for any reason other than the
immediately preceding proviso, the Company shall make the maximum contribution
to the payment and satisfaction of such indemnified Liabilities that shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for Liabilities as set forth above, the Company further
agrees to reimburse each indemnified party for all such expenses (including
reasonable fees, disbursements and other charges of counsel) as they are
incurred by such indemnified party.
8.2 Notification. Each indemnified party under this Section 8
will, promptly after the receipt of notice of the commencement of any action or
other proceeding against such indemnified party in respect of which indemnity
may be sought from the Company hereunder, 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 that
it may have to such indemnified party unless the Company is materially
prejudiced thereby. In case any such action or other proceeding shall be brought
against any indemnified party and it shall notify the Company of the
commencement thereof, the Company shall be entitled to
49
participate therein and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that any indemnified party may, at its own expense, retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
in any action or proceeding in which both the Company and an indemnified party
is, or is reasonably likely to become, a party, such indemnified party shall
have the right to employ separate counsel at the Company's expense and to
control its own defense of such action or proceeding if, in the reasonable
opinion of counsel to such indemnified party, there are or may be legal defenses
available to such indemnified party or to other indemnified parties that are
different from or additional to those available to the Company which, if the
Company and such indemnified party were to be represented by the same counsel,
would constitute a conflict of interest for such counsel or materially prejudice
the prosecution of the defenses available to such indemnified party; provided,
however, that in no event shall the Company be required to pay fees and expenses
under this Article 8 for more than one firm of attorneys representing the
indemnified parties (together, if appropriate, with one firm of local counsel
per jurisdiction) in any one legal action or group of related legal actions; and
provided, further, however, that the Company shall only be liable for the fees
and expenses of separate counsel with respect to such different or additional
defenses and such indemnified party shall instruct such separate counsel to
cooperate with the Company's counsel in order to reduce the fees and expenses
for which the Company is liable. The Company shall not be liable for any
settlement of such action or proceeding effected without its prior written
consent, not to be unreasonably withheld. The Purchasers agree that they will
not, without the prior written consent of the Company,
50
not to be unreasonably withheld, settle, compromise or consent to the entry of
any judgment in any pending or threatened claim, action or proceeding relating
to any matter subject to indemnification hereunder unless such settlement,
compromise or consent includes an unconditional release of the Company and each
other indemnified party from all liability arising or that may arise out of such
claim, action or proceeding and the Purchasers and each other indemnified party
are not obligated to take or forego taking any action, including the payment of
money, thereunder. The rights accorded to indemnified parties hereunder shall be
in addition to any rights that any indemnified party may have at common law,
under federal and state securities laws, by separate agreement or otherwise.
9. TERMINATION.
9.1 Termination. Subject to Section 9.2, this Agreement may
be terminated at any time prior to the Initial Closing:
(A) by the Purchasers if there has been a material
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement, which breach is incurable or has not been cured by
the Company within 15 days after written notice from the Purchasers;
(B) by the Company if there has been a material breach
of any representation, warranty, covenant or agreement of the Purchasers
contained in this Agreement, which breach is incurable or has not been cured by
the Purchasers within 15 days after written notice from the Company;
51
(C) by the Purchasers if any one or more of the
conditions to the obligation of the Purchasers to close has not been fulfilled
as of the scheduled Closing Date;
(D) by the Company if any one or more of the
conditions to the obligation of the Company to close has not been fulfilled as
of the scheduled Closing Date;
(E) by the Company or the Purchasers, if the Initial
Closing shall not have occurred on or before January 14, 1997; provided,
however, that the right to terminate this Agreement under this Section 9.1(E)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date;
(F) by the Company or the Purchasers, if any judgment,
injunction, order or decree enjoining the Company or the Purchasers from
consummating the transactions contemplated by a Transaction Agreement is entered
and such judgment, injunction, order or decree becomes final and nonappealable;
provided, however, that the party seeking to terminate this Agreement must use
all reasonable efforts to remove such judgment, injunction, order or decree; and
(G) by mutual written consent of the Company and the
Purchasers.
9.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except (A) to the extent such
termination results from the breach by a party hereto of any of its
representations, warranties, covenants or
52
agreements set forth in this Agreement and (B) that the covenants and agreements
contained in Section 6.5 shall survive the termination hereof.
10. MISCELLANEOUS.
10.1 Performance; Waiver. The provisions of this Agreement may
be modified or amended, and waivers and consents to the performance and
observance of the terms hereof may be given by written instrument executed and
delivered by the Company and (A) prior to the Initial Closing, by the Purchasers
and (B) after the Initial Closing by the holder or holders of the Securities
representing 66-2/3% of the aggregate outstanding Securities. The failure at any
time to require performance of any provision hereof shall in no way affect the
full right to require such performance at any time thereafter (unless
performance thereof has been waived in accordance with the terms hereof for all
purposes and at all times by the parties to whom the benefit of such performance
is to be rendered). The waiver by any party to this Agreement of a breach of any
provision hereof shall not be taken or held to be a waiver of any succeeding
breach of such provision of any other provision or as a waiver of the provision
itself.
10.2 Successors and Assigns. All covenants and agreements
contained in this Agreement by or on behalf of the parties hereto shall bind,
and inure the benefit of, the respective successors and assigns of the parties
hereto; provided, however, that the rights and obligations of either party
hereto may not be assigned without the prior written consent of the other
parties except that assignments of all or a
53
portion of the Purchasers' rights hereunder may be made by the Purchasers
following the Initial Closing in connection with transfers of the Securities.
10.3 Notices. All notices or other communications given or
made hereunder shall be validly given or made if in writing and delivered by
facsimile transmission or in Person at, mailed by registered or certified mail,
return receipt requested, postage prepaid, or sent by a reputable overnight
courier to, the following addresses (and shall be deemed effective at the time
of receipt thereof).
If to the Company:
Family Bargain Corporation
0000 Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
with copies to:
Xxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
If to the Purchasers:
Three Cities Research, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: J. Xxxxxxx Xxxxx
54
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
10.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS IN
THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
10.5 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each of the Company and the Purchasers directs
that such court interpret and apply the remainder of this Agreement in the
manner that it determines most closely effectuates their intent in entering into
this Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
10.6 Headings; Interpretation. The index and section
headings herein are for convenience only and shall not affect the construction
hereof. References
55
to sections means sections of this Agreement unless the context otherwise
requires. References to herein or hereof mean this Agreement.
10.7 Entire Agreement. The Transaction Agreements embody the
entire agreement between the parties relating to the subject matter hereof and
supersede any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations, and
memoranda, whether written or oral, between the Company and the Purchasers, or
between or among any agents, representatives, parents, Subsidiaries, Affiliates,
predecessors in interest or successors in interest, with respect to the subject
matter hereof (including, without limitation, the letter agreement heretofore
executed between the Company and TCR, except for the provisions regarding
confidentiality contained therein).
10.8 No Third Party Rights. Except for the indemnified
parties, directors and officers described in Article 8 and the rights of such
Persons expressly created under Article 8, this Agreement is intended solely for
the benefit of the parties hereto and is not intended to confer any benefits
upon, or create any rights in favor of, any Person (including, without
limitation, any stockholder or debtholder of the Company or any of the
Purchasers) other than the parties hereto.
10.9 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both of which
together shall be deemed to be one and the same instrument.
56
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date last set forth above.
FAMILY BARGAIN CORPORATION
By: /s/ Xxxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Exec VP
THREE CITIES FUND II, L.P.
By: TCR Associates, L.P.,
as General Partner
By: /s/ J. Xxxxxxx Xxxxx
--------------------------------------
Name: J. Xxxxxxx Xxxxx
Title: Attorney-In-Fact
THREE CITIES OFFSHORE II C.V.
By: TCR Associates Offshore, L.P.,
as General Partner
By: /s/ J. Xxxxxxx Xxxxx
--------------------------------------
Name: J. Xxxxxxx Xxxxx
Title: General Partner
TERFIN INTERNATIONAL LTD.
By: /s/ J. Xxxxxxx Xxxxx
--------------------------------------
Name: J. Xxxxxxx Xxxxx
Title: Attorney-In-Fact
Schedule 2.2
SECURITIES
Number
of
Purchaser Securities
--------- ----------
Three Cities Fund II, L.P. 6,540
Three Cities Offshore II C.V. 11,060
Terfin International Ltd. 4,400
------
Total 22,000
The remaining 5,000 shares shall be allocated among the Purchasers (and/or other
designees as determined by the Purchasers); provided that the Purchasers shall
be jointly and severally liable for the payment of the Purchase Price Per
Security for such shares from and after the Initial Closing.
Schedule 3.1.2A
RESIGNING DIRECTORS
1. Xxxxxx X. Xxxxxx
2. Xxxxxx Xxxxx
3. Xxxx X. Xxxxxx
Schedule 3.1.2B
NOMINEES TO BOARD OF DIRECTORS
1. J. Xxxxxxx Xxxxx
2. H. Xxxxxxx Xxxxxx
3. Xxxxxx X. Xxxx
Schedule 4.13
EXISTING VIOLATIONS, DEFAULTS, ETC.
None.
Schedule 4.21(F)
ADDITIONAL OR ENHANCED BENEFITS
None.
Schedule 4.22
CONTRACTS
None.
Schedule 4.24
MATERIAL CHANGES
None.
