Exhibit 10.14
Second Amendment
SECOND AMENDMENT TO
STOCKHOLDERS' AGREEMENT
Second Amendment to Stockholders' Agreement (this "Amendment") dated
as of March 26, 1997 by and among FURNISHINGS INTERNATIONAL INC., a Delaware
corporation (the "Company"), Masco Corporation, a Delaware corporation
("Masco"), 399 Venture Partners, Inc., a Delaware corporation ("399") and
Xxxxxxx X. Xxxxxxx, as Voting Trustee under the Voting Trust Agreement (the
"Trustee").
RECITALS
WHEREAS, the Company, Masco, 399 and the Management Stockholders are
parties to the Stockholders' Agreement dated as of August 5, 1996 by and among
the Company and its stockholders (as previously amended, the "Agreement");
(capitalized terms not otherwise defined herein are used as defined in the
Agreement);
WHEREAS, 399 has the right, as the holder of HFG Common Stock
representing more than fifty percent (50%) of the HFG Common Stock on a
Fully-Diluted Basis then held by the Institutional Stockholders as a group,
pursuant to Section 7.4(a)(i) of the Agreement to take action on behalf of the
Institutional Stockholders;
WHEREAS, the Trustee has the right pursuant to Section 7.4(a)(iii)
of the Agreement to take action on behalf of the Management Stockholders; and
WHEREAS, the parties hereto desire to amend the Agreement to provide
for a board of directors of the Company comprised of 11 persons instead of 7, to
effect changes in the weighted voting of such directors and to effect certain
other amendments.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. AMENDMENTS
1.1 Definition of Vested Shares. Clause (ii) of the definition of
"Vested Shares" is hereby amended and restated in its entirety so that it reads
as follows:
(ii) with respect to Management Securities (other than
Purchased Shares or Restricted Preferred Securities) acquired
by any Management Stockholder or Additional Management
Stockholder after the Closing, the shares which are "Vested
Shares"
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as provided by written agreement approved by the Board (acting
by Affirmative Board Vote) between the Company and such
Management Stockholder or Additional Management Stockholder,
as the case may be (it being understood that in the absence of
any such agreement all such acquired shares shall vest on a
five-year vesting schedule with 20% of such shares being
vested at the end of each anniversary of the date of original
acquisition thereof).
1.2 Board of Directors. Section 5.1(a) of the Agreement is hereby
amended and restated in its entirety so that it reads as follows:
(a) From and after the date hereof, each of the Stockholders shall
vote or cause to be voted all of its shares of voting Common Stock
(in the Series or Class as described below), at any regular or
special meeting of stockholders called for the purpose of filling
positions on the Board, or to execute a written consent in lieu of
such a meeting of stockholders for the purpose of filling positions
on the Board, and shall take all actions necessary, to ensure that
the Board consists of eleven (11) members as follows:
(i) shares of Series A-1 Common Stock shall be voted so as to
elect four (4) individuals (individually, an "Institutional
Director," and collectively, the "Institutional Directors") to
be designated by the Institutional Stockholders for so long as
the Institutional Stockholders own (x) shares of Series A-1
Preferred or (y) at least ten percent (10%) of the outstanding
HFG Common Stock on a Fully-Diluted Basis, and thereafter by
the Nominating Committee; provided, that, at any time, and
from time to time, the Institutional Stockholders, in their
sole discretion, may determine not to designate one or all of
the Institutional Directors, in which case such Institutional
Directors shall be designated by the Nominating Committee;
(ii) two (2) individuals to be designated by vote of a
majority of the outstanding shares of Class C Common, voting
separately as a class (individually, a "Management Director,"
and collectively, the "Management Directors") each of whom
must be either (A) the Chief Executive Officer (or President),
the Chief Operating Officer, the Secretary, the General
Counsel, the Chief Financial Officer (or Treasurer) or the
Chief Accounting Officer of the Company, (B) a holder of Class
C Common or (C) with the
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consent of the Nominating Committee, any person other than the
persons described in clause (A) or clause (B),
(iii) shares of Series A-2 Common Stock shall be voted so as
to elect one (1) individual (the "Masco Director") to be
designated by the Masco Stockholders, for so long as the Masco
Stockholders own (x) shares of Series A-1 Preferred, (y) at
least five percent (5%) of the outstanding HFG Common Stock on
a Fully-Diluted Basis or (z) any Senior Notes; provided, that,
at any time, and from time to time, the Masco Stockholders, in
their sole discretion, may determine not to designate the
Masco Director, in which case such Masco Director shall be
designated by the Nominating Committee; and
(iv) subject to the exercise of the Regulatory Right under
Section 5.9, shares of Series A-3 Common Stock shall be voted
so as to elect four (4) individuals (each individually, a
"Disinterested Director," and collectively, the "Disinterested
Directors"), each of whom is not (A) an Affiliate of 399, (B)
employed by the Company or any Subsidiary of the Company or
(C) a Stockholder or an Affiliate of any Stockholder, such
Disinterested Directors to be designated by the Nominating
Committee;
provided, however, that (x) effective at the Closing, the Board
shall consist of the individuals set forth on Exhibit C hereto in
the categories shown thereon and (y) the Stockholders shall cause
the Institutional Directors, the Masco Director and the Management
Directors named thereon to be designated and elected as directors,
and not to be removed by any Stockholder without cause, until
January 1, 1998 unless such person resigns, is otherwise unable to
serve or ceases to qualify as a Management Director under Section
5.1(a)(ii)). The Nominating Committee shall initially consist of one
(1) Management Director, one (1) Institutional Director and one (1)
Disinterested Director (collectively, the "Nominating Committee"),
and upon the Closing the Nominating Committee shall consist of the
individuals set forth on Exhibit C hereto in the categories shown
thereon. The Nominating Committee shall act by majority vote,
provided that, if for any reason there shall be less than three (3)
directors on the Nominating Committee, it shall act by the unanimous
vote of the remaining director(s) on the Nominating Committee. In
the event that for any reason a Disinterested Director on the
Nominating Committee resigns or is removed from the Nominating
Committee or from the Board, the
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Nominating Committee shall (acting by the unanimous vote of the
remaining directors on the Nominating Committee) replace such
Disinterested Director with one (1) of the other Disinterested
Directors as determined by the Nominating Committee (provided that,
if the Nominating Committee fails to agree on the replacement
Disinterested Director, then the Disinterested Directors may select
by unanimous designation the Disinterested Director to serve on the
Nominating Committee). In the event that the Management Stockholders
do not designate any or either of the Management Directors, the
Nominating Committee will select one (1) additional Disinterested
Director who shall also serve on the Nominating Committee which will
then consist of two (2) Disinterested Directors and one (1)
Institutional Director.
1.3 Weighted Board Voting. Section 5.4(a) of the Agreement is hereby
amended and restated in its entirety so that it reads as follows:
(a) The directors on the Board shall have weighted votes which
together total 1,000 votes, with each director having a number of
such votes equal to the percentage set forth below:
(i) each Management Director will have a weighted vote of
10.5%, except that in the event that Xxxxx X. Xxxx is one of
the Management Directors, his weighted vote will be shifted to
3.5% and the other Management Director's weighted vote will be
shifted to 17.5%, unless and until (A) the Company receives a
notice from Xx. Xxxx or Masco that Xx. Xxxx is no longer a
member of the board of directors of Masco or (B) Xxxxx X. Xxxx
is no longer a Management Director, at which time the weighted
votes of both of the Management Directors will shift back to
their original positions of 10.5% each.
(ii) the Masco Director will have a weighted vote of 15%;
(iii) each of the Institutional Directors will have a weighted
vote of 12.25%, except that in the event there are more than
50 stockholders of the Company, such weighting shall, upon
notice to the Company from the Institutional Stockholders, be
shifted to 4.75% each, with a corresponding shift in the
weighting of each of the Disinterested Director's weighted
vote from 3.75% to 11.25%; thereafter the Institutional
Stockholders shall have the right upon
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notice to the Company to increase the weighting back to its
original position; and
(iv) each Disinterested Director will have a weighted vote of
3.75% (subject to shifting as described in clause (iii)
above); such weighting shall be unaffected if one or more of
the Disinterested Directors is replaced or designated by the
Institutional Stockholders pursuant to the Regulatory Right.
SECTION 2. MISCELLANEOUS
2.1 Further Actions. Each of the parties hereto shall cooperate and
shall take further action and shall execute and deliver such further documents
as may be reasonably requested by any other party in order to carry out the
amendments set forth herein.
2.2 Governing Law. This Amendment shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of New York,
except to the extent that the General Corporation Law of the State of Delaware
applies as a result of the Company being incorporated in the State of Delaware,
in which case such General Corporation Law shall apply.
2.3 Headings. The headings used in this Amendment have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
2.4 Counterparts. This Amendment may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
2.5 Consent to Jurisdiction; Service of Process; Waiver of Jury
Trial. The provisions of Sections 7.18 and 7.19 of the Agreement shall apply to
this Amendment as if repeated herein.
[Remainder of Page Intentionally Left Blank]
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Second Amendment
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first above written.
FURNISHINGS INTERNATIONAL INC.
By:__________________________________________
Xxxxx X. Xxxx
President and Chief Executive Officer
MASCO CORPORATION
By:__________________________________________
Xxxx X. Xxxxxxx
Senior Vice President
399 VENTURE PARTNERS, INC.
By:__________________________________________
Xxxxx X. Xxxxxx
President
_____________________________________________
Xxxxxxx X. Xxxxxxx, as Voting Trustee
[Signature Page to Second Amendment]
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