STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 8, 1999, between Klaussner
Furniture Industries, Inc., a North Carolina corporation ("KFI"), and Xxxxxx X.
Xxxxxxxxxx, a citizen and resident of the State of New York ("Greenfield").
WITNESSETH:
WHEREAS, KFI is the owner of 10,000 shares of the Series A Preferred
Stock (the "Preferred Stock") of Xxxxxxxx Convertibles, Inc., a New York
corporation ("JCI"); and
WHEREAS, JCI is a major customer of KFI; and
WHEREAS, Greenfield is the Chief Executive Officer of JCI; and
WHEREAS, on the terms stated herein, KFI desires to provide Greenfield
with an incentive to remain Chief Executive Officer of Xxxxxxxx by granting him
an option to purchase 2,106 shares of the Preferred Stock owned by KFI for
$712.25 per share (the equivalent of 300,000 shares of JCI Common Stock at $5.00
per share if such shares of Preferred Stock were converted into Common Stock on
the date hereof); and
WHEREAS, at a meeting duly held on November 30, 1999, the Board of
Directors of JCI approved this Agreement and consented to the option granted
herein;
NOW, THEREFORE, KFI and Greenfield agree as follows:
1. OPTION. KFI hereby grants to Greenfield an option to purchase, on the terms
and subject to the conditions hereinafter set forth, all or any part of an
aggregate of 2,106 shares of the Preferred Stock owned by KFI at the purchase
price of $712.25 per share (the "Option").
2. TERM. The Option may be exercised from and after the date hereof until the
earliest of:
(a) August 31, 2004;
(b) The consummation by JCI of any merger or consolidation in
which it is not the surviving corporation or pursuant to which its
stockholders exchange their common stock or the dissolution or
liquidation of JCI or the sale by JCI of all or substantially all of
its assets; or
(c) Greenfield ceasing to be Chief Executive Officer of JCI
for any reason; provided, however, that in the event of Greenfield's
death while he is Chief Executive Officer of JCI, then his estate shall
have the right to exercise the Option for a period of one year after
his death, but in no event after August 31, 2004, or the occurrence of
any of the transactions described in (b) above.
Upon the earliest to occur of the foregoing events, the Option shall terminate
and all rights of Greenfield hereunder shall expire.
3. EXERCISE OF OPTION. The Option may be exercised from time to time by
Greenfield's delivery to KFI of written notice of exercise, which notice shall
specify the number of shares to be purchased and be accompanied by payment of
the purchase price in immediately available funds. The date of actual receipt by
KFI of such notice and such purchase price shall be deemed the date of exercise
of the option. Notwithstanding the foregoing, the Option shall not be exercised,
in whole or in part, and no transfer of shares of Preferred Stock subject to the
Option shall be made, if any requisite approval or consent of any governmental
authority having jurisdiction in the matter shall not have been secured or if
the transfer would violate any federal, state or local law, regulation or order.
4. TRANSFER OF SHARES UPON EXERCISE OF OPTION. Upon exercise of the
Option as provided in Section 3 above, KFI shall take such action as may be
reasonably requested by Greenfield to effect a transfer of the shares of
Preferred Stock purchased thereby. However, Greenfield recognizes that neither
the Option nor the shares of Preferred Stock transferable upon its exercise have
been registered under any federal or state laws governing the issuance and sale
of securities and that KFI has no obligation to effect registration under any
such laws. Therefore, Greenfield agrees that any and all shares of Preferred
Stock purchased upon exercise of the Option shall be acquired for investment and
not with a view to, or for sale in connection with, any distribution thereof,
and that, at the time he exercises all or any portion of the Option, he will
furnish to KFI and JCI such documentation as either of them shall reasonably
require in order to assure compliance with all applicable securities laws in
effect at the time of exercise. Greenfield consents to such other action as KFI
or JCI deems necessary or appropriate in order to assure compliance with all
such laws, including but not limited to placing restrictive legends on
certificates evidencing the shares of Preferred Stock purchased upon exercise of
the Option. Notwithstanding the foregoing, subject to JCI's consent, KFI will
not unreasonably withhold its consent to the shares of JCI Common Stock
transferred or transferable upon exercise of the Option being included in any
registration statement filed pursuant to the Registration Rights Agreement dated
December 11, 1997 between KFI and JCI; provided, however, that the filing of any
such registration statement shall be at the sole discretion of KFI.
5. NO ASSIGNMENT. Except as provided in Section 2(c) with respect to
the death of Greenfield, the Option shall not be transferred, assigned, pledged
or hypothecated in any way, whether by operation of law or otherwise. In the
2
event of any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of the Option or any right or privilege confirmed hereby contrary to the
provisions hereof, the Option and the rights and privileges of Greenfield
hereunder shall immediately become null and void.
6. NOTICES. Any notice of exercise shall be delivered to KFI, c/o
Senior Vice President and Chief Financial Officer, at 000 Xxxxxxxx Xxxxxx, Post
Office Xxxxxx 000, Xxxxxxxx, Xxxxx Xxxxxxxx 00000, or at such other address as
may be specified by KFI from time to time.
7. ADJUSTMENTS. The shares of stock subject to the Option and the
option price shall be adjusted in the event KFI converts the Preferred Stock
into JCI Common Stock and such adjustment shall reflect any increase or decrease
in the Common Stock of JCI that is effected after the date hereof as the result
of any stock dividend, subdivision, split-up, combination or similar
recapitalization or reclassification. If the Preferred Stock is converted, then
the terms and provisions of this Agreement shall apply to the Common Stock
received by KFI on conversion and the term "Common Stock" shall be substituted
for "Preferred Stock."
8. BINDING EFFECT. This Option Agreement shall be binding upon and
inure to the benefit of Greenfield and his personal representatives, but neither
this Agreement nor any rights hereunder shall be assignable or otherwise
transferrable except as expressly set forth in Section 2(c) of this Agreement.
IN WITNESS WHEREOF, this Stock Option Agreement is executed as of
December 8, 1999.
KLAUSSNER FURNITURE INDUSTRIES, INC.
By: /s/ XXXXXX X. XXXXXXXX
------------------------------------------
Xxxxxx X. Xxxxxxxx, Senior Vice President
and Chief Financial Officer
/s/ XXXXXX X. XXXXXXXXXX
---------------------------------------------
Xxxxxx X. Xxxxxxxxxx
3
