AGREEMENT
This Agreement (this "Agreement") is entered into this 11th day
of January, 2000, by and among Xxxxxx'x Furniture, Inc., a Delaware
corporation (the "Company"), General Electric Capital Corporation, a New
York corporation ("GECC"), and Japan Omnibus Ltd., an international
business corporation incorporated under the laws of the British Virgin
Islands ("JOL").
RECITALS
GECC has purchased from the Company Notes dated (i) as of August
14, 1997, as amended as of March 31, 1999, in the outstanding principal
amount of $5,501,091.20 (the "Initial Note"), (ii) as of August 14, 1997,
as amended as of March 31, 1999, in the outstanding principal amount of
$2,500,000 (the "August 1997 Note") and (iii) as of December 30, 1997, as
amended as of March 31, 1999, in the outstanding principal amount of
$2,500,000 (collectively with the Initial Note and the August 1997 Note,
the "GECC Notes").
JOL has purchased from the Company Notes dated (i) as of August
14, 1997, as amended as of March 31, 1999, in the outstanding principal
amount of $500,000 (the "JOL August 1997 Note") and (ii) as of December 30,
1997, as amended as of March 31, 1999, in the outstanding principal amount
of $1,000,000 (together with the JOL August 1997 Note, the "JOL Notes"; the
JOL Notes and the GECC Notes are referred to herein collectively as the
"Notes").
The Company, GECC and JOL are parties to a Supplemental
Securities Purchase Agreement dated as of August 14, 1997 (as amended on
September 14, 1999 and December 14, 1999, the "Supplemental Purchase
Agreement") relating to the Notes. Capitalized terms used herein without
definition have the meanings set forth in the Supplemental Purchase
Agreement.
In connection with the transactions contemplated by the Xxxxxx'x
Furniture Inc. Series A Convertible Preferred Stock Securities Purchase
Agreement dated as of January 11th, 2000 (the "2000 Securities Purchase
Agreement"), the Company, GECC and JOL desire to amend certain provisions
of the Notes and the Supplemental Purchase Agreement and to provide certain
additional rights to the holders of the Notes.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Effective as of December 24, 1999, Section 6.2 of the Supplemental
Purchase Agreement shall be amended in its entirety to read as follows:
6.2. Financial Covenants. For purposes of this Section 6.2,
"fiscal year" and "fiscal quarter" are measured on the basis of a fiscal
year ending on the Sunday closest to December 25 of the relevant calendar
year.1 The Company's compliance with the financial covenants set forth
below shall be determined based solely on the assets, liabilities and
operating results of the Company's retail and hospitality operations,
except that Indebtedness relating to the Company's e-commerce and
business-to-business operations shall be taken into account for purposes of
calculating compliance with the covenant in paragraph (b) and lease expense
(other than lease expense previously approved by GECC) and interest expense
relating to the Company's e-commerce and business-to-business operations
shall be taken into account for purposes of calculating compliance with the
covenant in paragraph (c).
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1 E.g., fiscal year 2000 is the twelve-month period ending December 24,
2000; the fiscal quarters of fiscal year 2000 are the quarterly periods
ending March 26, June 25, September 24 and December 24 of such year.
(a) The Company will not permit its Consolidated Net Worth
at the end of any fiscal quarter to be less than the amount set forth below
for such fiscal quarter, provided that, upon any public or private offering
of capital stock of the Company for the Company's account, the amounts set
forth below for fiscal quarters subsequent to such offering shall be
adjusted upward by an amount equal to the net proceeds of any such offering
multiplied by 0.9:
Year Q1 Q2 Q3 Q4
---- ------- ------- ------- -------
1999 N/A N/A 8.8 MM 6.0 MM
2000 13.5 MM 14.0 MM 14.5 MM 16.0 MM
2001 17.5 MM 20.0 MM 22.0 MM 26.0 MM
2002 29.0 MM 32.0 MM 35.0 MM 40.0 MM
2003 40.0 MM 40.0 MM N/A N/A
(b) The Company and its Subsidiaries will not incur, create,
assume or permit to exist any Indebtedness at the end of any fiscal quarter
if such Indebtedness would result in a ratio of Consolidated Total
Indebtedness to Consolidated Net Worth of more than the amount for such
fiscal quarter indicated set forth below:
Year Q1 Q2 Q3 Q4
---- ------- ------- ------- -------
1999 N/A N/A 3.75 5.00
2000 1.95 1.95 1.95 1.60
2001 1.30 1.10 1.00 1.00
2002 1.00 1.00 1.00 1.00
2003 1.00 1.00 N/A N/A
(c) The Company will not permit its Fixed Charge Ratio at
the end of any fiscal quarter to be less than the amount set forth below
for such fiscal quarter:
Year Q1 Q2 Q3 Q4
---- ------- ------- ------- -------
1999 N/A N/A 0.75 0.45
2000 0.95 1.10 1.10 1.30
2001 1.20 1.20 1.20 1.35
2002 1.30 1.30 1.30 1.50
2003 1.40 1.40 N/A N/A
(d) The Company and its Subsidiaries will not make capital
expenditures (net of any sale leasebacks incurred within such fiscal year)
for its retail and hospitality operations in excess of the amounts set
forth below for the fiscal years indicated:
1999 $10,000,000
2000 $8,000,000
2001 $8,000,000
2002 $8,000,000
2003 2 $4,000,000
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2 Applicable to the first two fiscal quarters of 2003.
Any amount not spent in any one fiscal year may be spent in a succeeding
fiscal year, subject to the Company's annual business plan.
2. Each of the Notes is hereby amended to provide that the payment date for
each scheduled payment of principal under the Note shall be deferred for a
period of eleven months from the date specified in such Note (i.e., the
installment of principal currently payable on April 30, 2000 shall be due
and payable on March 31, 2001 and each succeeding installment of principal
shall be due and payable one year from the date specified in such Note,
with the final installment of principal due and payable on June 30, 2003).
3. Notwithstanding paragraph 2 above, commencing with the Company's fiscal
quarter ending March 31, 2000, 50% of the Company's quarterly "free cash
flow from retail operations" (as defined below) up to a maximum of
$4,000,000 in the aggregate shall be applied ratably to the Notes (in
proportion to the outstanding principal amount of each Note) to prepay the
outstanding principal amount of each Note in the inverse order of maturity
of installments under each Note. For the purposes of this Agreement, "free
cash flow from retail operations" means EBITDA of the Company's retail and
hospitality operations, less debt service payments and less capital
expenditures for the Company's retail and hospitality operations,
determined as of the end of each fiscal quarter as promptly as practicable
and in any event within 30 days after such quarter end. Any prepayments
under the Notes required by this paragraph shall be made as promptly as
practicable, and in any event within three days, after the determination of
free cash flow from retail operations for the preceding fiscal quarter.
4. Commencing June 30, 2000, the Company and its Subsidiaries shall not
enter into any contract or commitment to make any capital expenditure or
make any capital expenditure not previously contracted for by the Company
or any of its Subsidiaries relating to the retail or hospitality operations
of the Company and its Subsidiaries (other than non-new store related
retail capital expenditures not to exceed $250,000 in the aggregate per
quarter) unless (i) such capital expenditure has previously been approved
by GECC, (ii) the Company is not (and, after giving effect to such capital
expenditure, will not be) in default of any obligation under the Notes, the
Supplemental Purchase Agreement or this Agreement and (iii) after giving
effect to such proposed capital expenditure, the Company's projected free
cash flow from retail and hospitality operations (as set forth in the
current business plan for the Company's retail and hospitality operations
approved by the Board of Directors, and subject to any reductions
reasonably necessary to reflect deviations from the targets established in
such business plan), will be sufficient to make all payments of principal
and interest under the Notes when due and payable. The Company shall
provide to GECC prior to the end of each fiscal quarter a schedule listing
all capital expenditures for retail or hospitality operations proposed to
be committed or contracted for in the succeeding fiscal quarter.
5. Provided that no cash dividends shall have been paid in respect of
shares of Series A Convertible Preferred Stock of the Company, the Company
shall have the right to defer payments of interest under all (but not less
than all) of the Notes for periods ending on or prior to December 31, 2000.
Payments of interest under any Note deferred in accordance with the
preceding sentence shall be due and payable, together with interest on each
such deferred payment from and including the date on which such payment was
otherwise (but for such deferral) due and payable under the Note to but
excluding the date on which such payment is actually made by the Company as
provided in this paragraph, at an annual rate of 9.5%, compounded quarterly
on the basis of a 360-day year of 12 30-day months (the "Deferred Interest
Amount"), at the option of the holder of such Note, either (a) on December
31, 2000, in shares of Series A Convertible Preferred Stock having an
aggregate value (calculated based upon the Issue Price (as defined in the
Certificate of Designation of the Series A Convertible Preferred Stock))
equal to the Deferred Interest Amount as of such date, or (b) on the date
on which the final installment of principal of such Note is due and payable
(after giving effect to any prepayments under such Note required by
paragraph 3 of this Agreement) by the Company in accordance with such Note
as amended hereby, in cash in an amount equal to the Deferred Interest
Amount as of such date.
6. Except for any redemption of shares of Series A Convertible Preferred
Stock permitted in accordance with Section 6.2 (a) of the 2000 Securities
Purchase Agreement, no cash payments in respect of the Series A Convertible
Preferred Stock, whether of dividends, payments upon redemption or
repurchase by the Company, or upon any actual or deemed liquidation,
dissolution or winding up of the Company, shall be made unless the entire
outstanding principal amount of, and all accrued interest and other amounts
payable under the Notes have been repaid in full and the Notes have been
cancelled and retired.
7. The Company acknowledges and agrees that irreparable damage would occur
in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that GECC and JOL shall be entitled to
an injunction to prevent breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which they may be entitled at law or
equity.
8. This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective
when one or more of the counterparts have been signed by each party and
delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
9. This Agreement may be amended as to GECC, JOL and their successors and
assigns, and the Company may take any action herein prohibited, or omit to
perform any act required to be performed by it, if the Company shall obtain
the written consent of the registered holders of not less than 66 2/3% of
the aggregate outstanding principal amount of the Notes then held by GECC,
JOL and their successors or assigns; provided, however, that without the
written consent of the holder or holders of all Notes at the time
outstanding, no amendment to or waiver of any terms of this Agreement shall
change or affect the interest rate, maturity, principal amount, time of
payment, currency of payment, or the amount or allocation of any
prepayments of any Note. This Agreement may not be waived, changed,
modified, or discharged orally, but only by an agreement in writing signed
by the party or parties against whom enforcement of any waiver, change,
modification or discharge is sought or by parties with the right to consent
to such waiver, change, modification or discharge on behalf of such party.
Notwithstanding anything in this Agreement to the contrary, no provision of
this Section 9 may be waived, changed or modified.
10. All covenants and agreements contained herein shall bind and inure to
the benefit of the parties hereto and their respective successors and
assigns. This Agreement may be assigned by GECC or JOL to any transferee of
Notes. This Agreement may not be assigned by the Company.
11. The Company agrees to pay GECC and JOL for all reasonable outside legal
fees in connection with this Agreement.
12. This Agreement shall terminate upon the repayment in full of all
amounts of principal, interest and other sums due and payable on all Notes.
13. Each of the parties hereto agrees that it will make no statement
regarding the transactions contemplated hereby which is inconsistent with
the press release agreed to by the parties hereto. Notwithstanding the
foregoing, each of the parties hereto may, in documents required to be
filed by it with the Commission or other regulatory bodies, make such
statements with respect to the transactions contemplated hereby as each may
be advised is legally necessary upon advice of its counsel.
14. This Agreement shall be effective upon delivery of original signature
pages or facsimile copies thereof executed by each of the parties hereto.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES
OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN
EACH CASE LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR
INVESTIGATION IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY
("LITIGATION") ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION
RELATING THERETO EXCEPT IN SUCH COURTS), AND FURTHER AGREES THAT SERVICE OF
ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY U.S. REGISTERED MAIL TO ITS
RESPECTIVE ADDRESS SET FORTH IN THIS AGREEMENT SHALL BE EFFECTIVE SERVICE
OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY SUCH COURT. EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
OBJECTION TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS OF THE
STATE OF NEW YORK OR THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN
THE COUNTY OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY
JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized.
XXXXXX'X FURNITURE, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President
and Chief Financial Officer
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Xxxxxx X. Hashburger, Jr.
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Name: Xxxxxx X. Xxxxxxxxxx, Xx.
Title: Senior Vice President/
Department Operations Manager
JAPAN OMNIBUS LTD.
By: /s/ Xxxxx X. Xxxxx
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Name:
Title:
