Exhibit 10(d)(2)
OPTION PURCHASE AGREEMENT
THIS OPTION PURCHASE AGREEMENT ("Agreement") is made as of June 17, 1998,
between TEXFI INDUSTRIES, INC., a Delaware corporation (the "Company"), and
MENTMORE HOLDINGS CORPORATION, a Delaware corporation (the "Optionee").
RECITALS
WHEREAS, the Company has entered into a forbearance agreement dated as of
June 5, 1998 (the "Forbearance Agreement") by and among the Company, BankBoston,
N.A., the CIT Group/ Commercial Services, Inc. and National Bank of Canada (the
"Lenders") and BankBoston, N.A. as the Agent for the Lenders;
WHEREAS, the conditions to the effectiveness of the Forbearance Agreement
include that (i) the Optionee guarantee (the "Guaranty") one million dollars
($1,000,000) of the obligations owed by the Company pursuant to the terms of the
Amended and Restated Loan and Security Agreement, dated as of December 19, 1997,
between the Company, the financial institutions party thereto from time to time
and BankBoston, N.A., such Guaranty to be secured by a letter of credit (the
"Letter of Credit") and (ii) the Optionee agree to defer receipt of certain
management fees owed to it by the Company;
WHEREAS, the Optionee has issued the Guaranty and the Letter of Credit and
has agreed to defer the receipt of certain management fees owed to it by the
Company; and
WHEREAS, in consideration of the issuance of the Guaranty and the Letter
of Credit and the agreement of the Optionee to defer the receipt of certain
management fees owed to it by the Company, the Company has agreed to issue to
the Optionee or the Optionee's designee an option (the "Option") to purchase
600,000 shares of the Company's common stock, par value $1.00 per share (the
"Common Stock");
NOW, THEREFORE, on the terms and subject to the conditions set forth in
this Agreement, the parties hereto agree as follows:
ARTICLE I
AUTHORIZATION AND ISSUANCE OF OPTION
1.1 Authorization of the Option. The Company has authorized the issuance
of the Option to the Optionee.
1.2 Issuance of the Option. Simultaneously with the execution and delivery
of this Agreement, the Company shall issue and deliver to the Optionee a
certificate evidencing the Option in the form attached hereto as Exhibit A.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Optionee to enter into this
Agreement, the Company hereby represents and warrants that:
2.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is qualified or licensed to do business and is in good standing in
every jurisdiction where the nature of its business or the ownership of its
properties requires it to be so qualified or licensed and where the failure to
be so qualified or licensed would have a material adverse effect on the business
prospects, financial condition, operating results, assets or operations of the
Company and its subsidiaries taken as a whole. The Company has all requisite
corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
business and to carry out the transactions contemplated by this Agreement.
2.2 Capital Stock. The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, par
value $1.00 per share, of which 8,859,098 shares of Common Stock are issued and
outstanding as of the date of this Agreement.
2.3 Authorization; No Breach. The execution, delivery and performance of
this Agreement and all other agreements contemplated hereby to which the Company
is a party have been duly authorized by the Company and do not require the
approval of the Company's shareholders. This Agreement and all other agreements
contemplated hereby have been validly executed and delivered by the Company and
each such agreement constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally or by general equitable principles.
After giving effect to the consummation of the transactions contemplated hereby,
the Company will not be in default under any contract, agreement, instrument or
indenture related to the borrowing of money to which it is a party or by which
it or any of its property is bound. The execution and delivery by the Company of
this Agreement and all other agreements contemplated hereby to which the Company
is a party and the fulfillment of the compliance with the respective terms
hereof and thereof by the Company, the offering, sale and issuance of the Option
hereunder (assuming the accuracy of the Optionee's investment representations
set forth in Section 3.1), do not and shall not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any lien, security interest, charge or
encumbrance upon the Company's or any subsidiary's capital stock or assets
pursuant to, (iv) give any third party the right to modify, terminate or
accelerate any obligation under, (v) result in a violation of, or (vi) require
any authorization, consent, approval, exemption or other action by or notice to
any court or administrative or governmental body pursuant to, the Certificate of
Incorporation or bylaws of the Company or any subsidiary, or any law,
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statute, rule or regulation to which the Company or any subsidiary is subject,
or any material agreement, instrument, order, judgment or decree to which the
Company or any subsidiary is a party or by which it, or any of its property, is
bound.
2.4 Authorization and Consent. Assuming the accuracy of the Optionee's
investment representations set forth in Section 3.1, no authorization,
exemption, consent or approval of, notice to, or declaration to or filing with,
any governmental authority is required for the valid execution, delivery and
performance by the Company of this Agreement or the consummation by the Company
of the transactions contemplated hereby. The Company has obtained all material
third party consents, waivers, approvals and exemptions necessary to consummate
the transactions contemplated hereby, except for any such third party consents,
waivers, approvals and exemptions required for any of the shares that may be
purchased pursuant to the Option to be listed on the New York Stock Exchange.
2.5 Reports with Securities and Exchange Commission. The Company has made
all filings with the Securities and Exchange Commission which it is required to
make under the Securities Exchange Act of 1934.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OPTIONEE
3.1 Optionee's Investment Representations. The Optionee hereby represents
that:
A. The Optionee is acquiring the Option and the shares which may be
purchased pursuant to the exercise of the Option (together, for purposes of this
Section 3.1, the "Investment Securities") for its own account with the present
intention of holding such Investment Securities for purposes of investment, and
that the Optionee has no intention of selling such Investment Securities in a
public distribution in violation of the federal securities laws or any
applicable state securities laws.
B. The Optionee is sophisticated in financial matters and is able to
evaluate the risks and benefits of its investment in the Investment Securities.
C. The Optionee is able to bear the economic risk of its investment
in the Investment Securities for an indefinite period of time because the
Investment Securities have not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.
D. The Optionee has had full opportunity to interview directors and
officers and to ask questions and receive answers concerning the Company and has
had
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full access to such other information concerning the Company as it has
requested.
ARTICLE IV
COVENANTS OF THE COMPANY
4.1 Reservation of Shares. The Company covenants and agrees that all
shares that may be issued upon the exercise of the Option will, upon issuance,
be fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof (other than transfer taxes in respect of any
transfer occurring contemporaneously with such issue) and shall be approved for
listing on the New York Stock Exchange subject to the issuance thereof if the
Company's securities are then listed on the New York Stock Exchange. The Company
further covenants and agrees that during the period within which the rights
represented by the Option may be exercised, the Company will at all times have
authorized and reserved a sufficient number of shares of Common Stock to provide
for the exercise in full of the rights represented by the Option. The Company
will provide to, or make available to, as the case may be, the Optionee the same
information, reports and notices as it shall provide to, or make available to,
the holders of its Common Stock, and at the same time as such information,
reports and notices are provided to, or made available to, the holders of its
Common Stock.
4.2 Listing of Shares.The Company shall use its best efforts to insure
that, within ninety (90) days from the date of this Agreement, the shares that
may be purchased pursuant to the Option are approved for listing on the New York
Stock Exchange or, if the Common Stock is not so listed, on such other markets
or exchanges on which the Common Stock is then listed for trading.
ARTICLE V
PROVISIONS WITH RESPECT TO THE OPTION
5.1 Exercise Price. The exercise price (the "Exercise Price") for the
Option shall be the lower of: (i) the average closing price of the Common Stock
on the New York Stock Exchange for the thirty (30) trading days preceding June
17, 1998; or, (ii) such price for the thirty (30) trading days following June
17, 1998.
5.2 Term and Exercise. The Option may be exercised in whole or in part as
to any whole number of shares at any time and from time to time prior to ten
(10) years from the date of this Agreement by (i) delivery to the Company of a
written notice of exercise stating the number of shares that the Optionee then
elects to purchase and (ii) payment of the Exercise Price in certified funds or
by wire transfer of immediately available funds to an account designated by the
Company.
5.3 Anti-Dilution Provisions.
A. Exercise Price Adjustments. The Exercise Price shall be subject
to
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adjustment from time to time as follows:
(i) In the event the Company should at any time or from time
to time after the date hereof fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Exercise
Price shall be appropriately decreased and the number of shares of Common Stock
issuable pursuant to the Option shall be appropriately increased in proportion
to such increase of the aggregate of shares of Common Stock and those issuable
with respect to Common Stock Equivalents to be outstanding immediately following
such transaction compared with the aggregate of the shares of Common Stock and
those shares issuable with respect to Common Stock Equivalents then outstanding
immediately prior to such transaction.
(ii) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a reverse split or other
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Exercise Price shall be appropriately
increased and the number of shares of Common Stock issuable upon exercise shall
be appropriately decreased in proportion to such decrease in the outstanding
shares of Common Stock.
(iii) Issuance of Common Stock Below Exercise Price. If the
Company shall, at any time or from time to time, directly or indirectly, sell or
issue shares of Common Stock for cash or property or in payment of an obligation
which could be made in cash at the election of the Company, or rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock in either case at a price per
share of Common Stock (determined, in the case of rights, options, warrants or
convertible or exchangeable securities, by dividing (x) the total amount
received or receivable by the Company (including the amount of payment of an
obligation which could be made in cash at the election of the Company) in
consideration of the sale or issuance of such rights, options, warrants or
convertible or exchangeable securities, plus the total consideration payable to
the Company upon exercise or conversion or exchange thereof, by (y) the total
number of shares of Common Stock covered by such rights, options, warrants or
convertible or exchangeable securities) lower than the Exercise Price of the
Option immediately prior to such sale or issuance, then the applicable Exercise
Price shall be reduced to a price determined by multiplying the Exercise Price
in effect immediately prior thereto by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding immediately prior
to such sale or issuance plus the number of shares of Common Stock which the
aggregate
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consideration received (determined as provided below) for such sale or issuance
would purchase at the applicable Exercise Price immediately prior to such sale
or issuance and the denominator of which shall be the total number of shares of
Common Stock outstanding immediately after such sale or issuance. Such
adjustment shall be made successively whenever such sale or issuance is made.
For the purposes of such adjustments, the shares of Common Stock which the
holder of any such rights, options, warrants, or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall be deemed to be
issued and outstanding as of the date of such sale or issuance and the
consideration received by the Company (plus any underwriting discounts or
commissions in connection therewith) for such rights, options, warrants or
convertible or exchangeable securities, plus the consideration stated in such
rights, options, warrants or convertible or exchangeable securities to be paid
for the shares of Common Stock covered thereby. If the Company shall sell or
issue shares of Common Stock for a consideration consisting, in whole or in
part, of property other than cash or its equivalent, then in determining the
"price per share of Common Stock" and the "consideration received by the
Company" for purposes of the first sentence and the immediately preceding
sentence of this Section 5.3(A)(iii), the fair value of such property shall be
determined in good faith by the Board of Directors of the Company. The
determination of whether any adjustment is required under this Section
5.3(A)(iii), by reason of the sale and issuance of rights, options, warrants or
convertible or exchangeable securities and the amount of such adjustment, if
any, shall be made only at the time of such issuance or sale and not at the
subsequent time of issuance or sale of Common Stock upon the exercise of such
rights to subscribe or purchase.
B. No Impairment. The Company will not, by amendment of its
Certificate or Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 5.3 and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Optionee
against dilution.
5.4 Rights as a Shareholder. The Optionee will have no rights as a
shareholder with respect to any shares covered by the Option until the date that
the Optionee has fully complied with the terms of Section 5.2 above. Except as
provided in Section 5.3 above, no adjustment will be made for dividends, other
distributions, or other rights for which the record date is prior to the date of
such issuance.
5.5 Cash in Lieu of Fractional Shares. The Company shall not be required
to issue fractional shares upon the exercise of the Option. If, by reason of any
change made pursuant to Section 5.3, the Optionee would be entitled, upon the
exercise of any rights evidenced hereby, to receive a fractional interest in a
share, the Company shall, upon such exercise, purchase such fractional interest
for an amount in cash equal to the fair market value of such fractional interest
(as determined in good faith by the Board of Directors of the Company),
determined as of the date of the exercise of the Option.
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ARTICLE VI
REGISTRATION RIGHTS
6.1 Piggyback Registrations.
A. Right to Piggyback. Whenever the Company proposes to register any
of its securities under the Securities Act of 1933, as amended, or any similar
federal law then in force (the "Securities Act") in any primary, secondary or
combined offering (other than pursuant to a Demand Registration), and the
registration form to be used may be used for the registration of Registrable
Securities (a "Piggyback Registration"), the Company will give prompt written
notice to the Optionee of its intention to effect such a registration and will
(subject to the priorities established below) include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within thirty (30) days after the receipt of the
Company's notice.
B. Piggyback Expenses. The Company's Registration Expenses will be
paid by the Company in all Piggyback Registrations.
C. Priority on Piggyback Registrations. If a Piggyback Registration
is an underwritten registration, and the managing underwriters advise the
Company in writing that in their opinion the number of Registrable Securities
requested to be included in such registration exceeds the number of Registrable
Securities that can be sold in an orderly manner in such offering after the
Company has been able to sell the number of securities it proposes to sell
within a price range acceptable to the Company, the Company will include in such
registration the number of securities the Company proposes to sell and then the
number of the Optionee's Registrable Securities that, in the opinion of the
managing underwriter, can be sold in an orderly manner in such offering after
the Company has been able to sell the number of securities it proposes to sell
within a price range acceptable to the Company. If, pursuant to this Section
6.1(C), the number of the Optionee's Registrable Securities included in such
registration is more than twenty percent (20%) less than the number of the
Optionee's Registrable Securities the Optionee has requested to be included in
such registration, then such registration will not be deemed to be an
"opportunity" as that word is used in Section 6.2(A) hereof.
D. Selection of Underwriters. If any Piggyback Registration is in
connection with an underwritten offering, the Company will have the right to
select the investment banker(s) and manager(s) to administer the Offering.
E. Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to this
Section 6.1, and if such previous registration has not been withdrawn or
abandoned, the Company will not file or cause to be effected any other
registration of any of its Registrable Securities or securities convertible or
exchangeable into or exercisable for its Registrable Securities under the
Securities Act (except on Form S-8 or Form S-4 or any successor forms), whether
on its own behalf or at the request of any holder or holders of such Registrable
Securities, until
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a period of at least ninety (90) days has elapsed from the effective date of
such previous registration.
6.2 Demand Registrations.
A. Right to Demand Registrations. At any time after three (3) years
from the date of this Agreement, if the Company has failed to provide the
Optionee with at least two (2) opportunities to register securities pursuant to
the Piggyback Registration Rights granted herein, the Optionee may request
registration under the Securities Act of all or any part of the Optionee's
Registrable Securities (a "Demand Registration"); provided, however, that the
Optionee may not request any Demand Registration after the Company has given the
notice of a Piggyback Registration referred to in Section 6.1(A) until the first
to occur of (i) 150 days (or, in the event the Company is permitted to use any
applicable short form, 90 days) after the date of such notice, (ii) 90 days (or,
in the event the Company is permitted to use any applicable short form, 45 days)
after the date of such notice, if the Company has not yet filed a registration
statement with respect to such Piggyback Registration, (iii) the withdrawal of
any registration statement the Company has filed with respect to such Piggyback
Registration (or any public announcement by the Company that it no longer
intends to pursue such public offering), or (iv) five (5) Business Days after
the effectiveness of such Piggyback Registration. The Optionee will be entitled
to request up to two (2) Demand Registrations. Each request for a Demand
Registration shall specify the approximate number of such Registrable Securities
requested to be registered and the anticipated per share price range for such
offering and proposed manner of distribution including whether or not the
offering will be underwritten. Demand Registrations will be on Form S-2 or S-3
or any similar short-form registration statement whenever the Company is
permitted to use any applicable short form.
B. Priority on Demand Registrations. If in a Demand Registration the
managing underwriters (if any) advise the Company in writing that in their
opinion the number of Registrable Securities requested to be included in such
registration together with the number of securities the Company proposes to be
included in such registration for its own account exceeds the number of
securities that can be sold in an orderly manner in such offering within a price
range acceptable to the Optionee, the Company will include in such registration
first, the number of Registrable Securities requested to be included in such
registration by the Optionee, and next, the number of securities requested to be
included in such registration by the Company for its own account.
C. Restrictions on Demand Registrations. The Company may postpone
for up to ninety (90) days the filing or the effectiveness of a registration
statement for a Demand Registration if the Company reasonably determines that
such Demand Registration would have an adverse effect other than of an
immaterial nature on any proposal or plan by the Company or any of its
subsidiaries to engage in any acquisition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or similar
transaction; provided that in such event, the Optionee will be entitled to
withdraw such request and, if such request is withdrawn, such Demand
Registration shall
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not count as one of the permitted Demand Registrations hereunder and the Company
will pay all expenses incurred by the Optionee in such withdrawn Demand
Registration. The Company will not be obligated to effect any Demand
Registration within six (6) months after the effective date of a previous Demand
Registration, or such lesser period after such effective date as agreed to in
writing by the managing underwriter(s) for such previous Demand Registration.
D. Selection of Underwriters. In any underwritten Demand
Registration, the Company will have the right to select the investment banker(s)
and manager(s) to administer the offering, subject to the approval of the
Optionee, which approval will not be unreasonably withheld.
E. Expenses of Demand Registration. The Optionee shall bear all
expenses of any Demand Registration hereunder unless the Company includes in
such registration securities to be registered for its own account, in which case
the Optionee will pay the expenses allocable to the registration of the
Optionee's securities included in the registration, and any expenses not so
allocable will be borne by the Optionee in proportion to the aggregate selling
price of the securities to be so registered.
6.3 Holdback Agreement.
A. The Optionee agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of equity securities of the Company, or
any securities convertible into or exchangeable or exercisable for such
securities, during the 180-day period beginning on the effective date of any
underwritten Piggyback Registration in which Registrable Securities are included
(except as part of such underwritten registration or as bona fide gifts), unless
the underwriters managing the registered pubic offering otherwise agree.
B. The Company agrees not to effect any public sale or distribution
of its equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the 180-day period beginning on the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration (except (i) as part of such underwritten registration,
(ii) as offerings pursuant to registrations on Form S-8 or any successor form or
(iii) upon the exercise or conversion of any Common Stock Equivalents then
outstanding), unless the underwriters managing the registered public offering
otherwise agree.
6.4 Registration Procedures. Whenever the Optionee has requested that any
Registrable Securities be registered pursuant to this Agreement, the Company
will use its best efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company will as expeditiously as possible:
A. prepare and file with the United States Securities and Exchange
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Commission or any governmental body or agency succeeding to the functions
thereof (the "Securities and Exchange Commission") a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to counsel selected and retained by the Optionee at the
Optionee's expense copies of all such documents proposed to be filed, which
documents will be subject to the timely review and comment of such counsel);
B. prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 270 days or until such earlier
time as all of the securities covered by such registration statement have been
sold and to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement;
C. furnish to the Optionee such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as the Optionee may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by the Optionee;
D. use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
the Optionee reasonably requests and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Optionee to consummate
the disposition in such jurisdictions of the Registrable Securities owned by the
Optionee; provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 6.4(D), (ii) subject itself to taxation
in any such jurisdiction, (iii) consent to general service of process in any
such jurisdiction or (iv) register the Registrable Securities or seek an
exemption from registration under the securities laws of any state that
requires, as a condition to registration or such exemption, that the Company
indefinitely file in such jurisdiction substantially all reports required to be
filed by the Company with the Securities and Exchange Commission;
E. notify the Optionee, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
the Optionee, the Company will promptly prepare (and, when completed, give
notice to the Optionee) a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any
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fact necessary to make the statements therein not misleading; provided, however,
that upon such notification by the Company, the Optionee will not sell
Registrable Securities until the Company has notified the Optionee that it has
prepared a supplement or amendment to such prospectus;
F. cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be included on the NASD automated quotation
system;
G. provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
H. enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Optionee or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares);
I. make available for inspection on a confidential basis by the
Optionee, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
the Optionee or any such underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees, attorneys and independent accountants to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
J. otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its securityholders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning with the first
day of the Company's first full fiscal quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
K. permit the Optionee (if, in the Optionee's sole and exclusive
judgment, the Optionee might be deemed to be an underwriter or a controlling
person of the Company within the meaning of Section 15 of the Securities Act) to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material furnished to the Company in
writing, which in the reasonable judgment of the Optionee and its counsel should
be included, provided that such material shall be furnished under such
circumstances as shall cause it to be subject to the indemnification provisions
provided pursuant to Section 6.6(B) hereof;
L. in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included
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in such registration statement for sale in any jurisdiction, the Company will
use its reasonable best efforts promptly to obtain the withdrawal of such order;
and
M. furnish to the Optionee at the time of the disposition of
Registrable Securities to be registered an opinion of counsel for the Company,
in form and substance satisfactory to the Optionee, to the effect that: (i) the
Company is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation with full corporate power and
authority to own and hold its properties, including such properties as it holds
under lease, and to conduct its business as described in the registration
statement, and is qualified to conduct business and is in good standing in each
jurisdiction where the conduct of its business requires such qualification and
in which the failure to be so qualified could have a material adverse effect on
the Company; (ii) such Registrable Securities have been validly issued and are
fully paid and nonassessable; (iii) a registration statement covering such
Registrable Securities has been filed with the Securities and Exchange
Commission under the Securities Act and has been made effective by order of such
Commission; (iv) such registration statement and the prospectus contained
therein appear on their face to be appropriately responsive in all material
respects to the requirements of the Securities Act, and nothing has come to such
counsel's attention that would cause it to believe that either such registration
statement or such prospectus contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; (v) such Registrable Securities conform in all material
respects to the description thereof contained in such registration statement;
and (vi) to the best of such counsel's knowledge, no stop order has been issued
by the Securities and Exchange Commission suspending the effectiveness of such
registration statement.
6.5 Registration Expenses.
A. All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all fees and
expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, and fees and disbursements of counsel for the
Company and the Company's independent certified public accountants, underwriters
(excluding discounts and commissions) and other persons retained by the Company
(all such expenses being herein called "Registration Expenses"), will be borne
by the Company, except as otherwise provided in this Agreement (including with
respect to Demand Registrations), except that the Company will, in any event,
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any liability insurance for the Company and its board of
directors and the expenses for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
B. To the extent Registration Expenses are not required to be paid
by the Company, the Optionee will pay the Registration Expenses allocable to the
registration of
12
the Optionee's securities included in the registration, and any Registration
Expenses not so allocable will be borne by the Optionee in proportion to the
aggregate selling price of the securities to be so registered. Such expenses
would include, without limitation, underwriter's discounts and commissions and
fees of the Optionee's counsel.
6.6 Indemnification.
A. The Company agrees to indemnify, to the extent permitted by law,
the Optionee, its officers, directors, employees and agents and each person who
controls the Optionee (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses (including legal fees and
expenses) caused by any untrue or alleged untrue statement of material fact
contained in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are (i) caused by
or contained in any information furnished in writing to the Company by the
Optionee expressly for use therein, (ii) caused by the Optionee's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Optionee with a
sufficient number of copies of the same, or (iii) caused by the Optionee's sale
of Registrable Securities in violation of the proviso to Section 6.4(E) hereof.
B. In connection with any registration statement in which the
Optionee is participating, the Optionee will furnish to the Company in writing
such information, affidavits and other material as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information, affidavit or other
material so furnished in writing by the Optionee.
C. In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
properly be sought pursuant to this Article VI, such person (the "indemnified
party") shall promptly notify the person against whom such indemnity may be
sought (the "indemnifying party") in writing and the indemnifying party, upon
request of the indemnified party, shall retain counsel to which the indemnified
party has no reasonable objection to represent the indemnified party and any
others the indemnifying party may designate in such proceedings and shall pay
the fees and disbursements of such counsel related to such proceeding. Except as
otherwise provided in this paragraph, after the indemnifying party retains
counsel in accordance with the preceding sentence, the indemnifying party shall
not be liable to the
13
indemnified party under this Article VI for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. In any such proceeding,
any indemnified party shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed in writing to the retention of such counsel and to the payment
by the indemnifying party of such counsel's fees and expenses or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicting interests between them. The indemnified party agrees to consult with
the indemnifying party prior to the retention of its own counsel in situations
covered by clause (ii) of the preceding sentence. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Optionee and such
control persons of the Optionee, such firm shall be designated in writing by the
Optionee. In the case of any separate firm for the Company, and such directors,
officers and control persons of the Company, such firm shall be designated in
writing by the Company. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, such
consent not to be unreasonably withheld, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
D. The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
6.7 Participation in Underwritten Registrations. No person may participate
in any registration hereunder that is underwritten unless such person (a) agrees
to sell such person's securities on the basis provided in any underwriting
arrangements approved by the person or persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements and which are customary in
such transactions; provided, however, that the Optionee shall not
14
be required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding the Optionee
and the Optionee's intended method of distribution.
6.8 No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Optionee in this Agreement.
6.9 Definition of "Registrable Securities". As used in this Article VI,
the term "Registrable Securities" means the shares of Common Stock purchased
upon exercise of the Option. As to any particular Registrable Securities, such
securities will cease to be Registrable Securities when they have been
distributed to the public through a broker, dealer or market purchaser in
compliance with Rule 144 under the Securities Act (or any similar rule then in
force) or pursuant to an effective registration statement under the Securities
Act.
ARTICLE VII
MISCELLANEOUS
7.1 Restrictive Legend. Each certificate for the shares purchased pursuant
to the exercise of the Option shall be imprinted with a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT UPON REGISTRATION UNDER ALL APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR UPON DELIVERY TO THE CORPORATION OF EITHER (A) A
NO-ACTION LETTER FROM THE STATE AND FEDERAL AGENCIES HAVING JURISDICTION
THEREOF OR (B) AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
NEITHER THE SALE NOR THE PROPOSED TRANSFER CONSTITUTES A VIOLATION OF ANY
FEDERAL OR STATE SECURITIES LAW.
7.2 Consent to Amendments. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended and the Company or the Optionee
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, with the written consent of the Company and the
Optionee. No other course of dealing between the Company and the Optionee or any
delay in exercising any rights hereunder or under the Company's Certificate of
Incorporation shall operate as a waiver of any rights of the Optionee.
7.3 Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by an party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Optionee
15
or on its behalf.
7.4 Successors and Assigns. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not. In
addition, and whether or not any express assignment has been made, the
provisions of this Agreement that are for the Optionee's benefit as a purchaser
or holder of Registrable Securities are also for the benefit of, and enforceable
by, any subsequent holder of such Registrable Securities; provided that
Registrable Securities shall cease to be Registrable Securities under this
Agreement when they have been (i) effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering them
or (ii) distributed to the public pursuant to Rule 144. This Agreement shall
terminate at such time as all of the Registrable Securities have been (i)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them or (ii) distributed to the public
pursuant to Rule 144.
7.5 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7.6 Counterparts. This Agreement may be executed in counterparts, any one
of which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same Agreement.
7.7 Descriptive Headings; Interpretation. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement. The use of the word "including" in this Agreement shall be by way of
example rather than by limitation.
7.8 Governing Law. The corporate law of the State of Delaware shall govern
all issues concerning the relative rights of the Company and its shareholders.
All other questions concerning the construction, validity and interpretation of
this Agreement and the exhibits and schedules hereto shall be governed by the
internal law, and not the law of conflicts, of the State of New York.
7.9 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, one business day after sent to the recipient by reputable express
courier service (charges prepaid) or five business days after mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to the
Optionee and to the Company at the addresses
16
indicated below:
If to the Company: Texfi Industries, Inc.
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Chief Financial Officer
If to the Optionee: Mentmore Holdings Corporation
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
17
IN WITNESS WHEREOF, the parties hereto have executed this Option Purchase
Agreement as of the date first written above.
TEXFI INDUSTRIES, INC.
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxxx Xxxxxx
------------------------------
Title: President COO
----------------------------
MENTMORE HOLDINGS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
-----------------------------
Title: President
-----------------------------
EXHIBIT A
CERTIFICATE OF OPTION
For value received, Texfi Industries, Inc. does hereby grant to
Mentmore Holdings Corporation or its designee an option to purchase up to
600,000 shares of Common Stock, par value $1.00 per share, of Texfi Industries,
Inc., on the terms and conditions set forth in that certain Option Purchase
Agreement dated as of June 17, 1998, between Texfi Industries, Inc., and
Mentmore Holdings Corporation.
TEXFI INDUSTRIES, INC.
By:_______________________________
Name:______________________________
Title:_____________________________
