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EXHIBIT 10.1
SHARE EXCHANGE AGREEMENT
AGREEMENT, dated as of December 12, 1995 (the "Agreement"), by and
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between L.A. Gear, Inc., a California corporation (the "Company") and Trefoil
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Capital Investors, L.P., a Delaware limited partnership ("Trefoil"), the holder
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of all of the shares of Series A cumulative convertible preferred stock
("Series A Preferred Stock") of the Company.
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WHEREAS, the Company and Trefoil desire to exchange the Series A
Preferred Stock for newly issued Series B cumulative convertible preferred
stock ("Series B Preferred Stock"), having the terms set forth in the
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Certificate of Determination (the "Certificate of Determination") attached
hereto as Exhibit A. ----------------------------
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I - THE EXCHANGE
SECTION 1.01. The Exchange.
Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing (as defined in Section 1.02 hereof),
(a) Trefoil shall assign, transfer, and convey to the Company one
million (1,000,000) shares of Series A Preferred Stock and all accrued and
unpaid dividends thereon. Trefoil shall deliver at the Closing certificates
representing such shares duly endorsed in blank or accompanied by stock powers
duly endorsed in blank in exchange for and against delivery by the Company of
certificates representing the number of shares of Series B Preferred Stock to
which Trefoil is entitled pursuant to Section 1.01(b) hereof.
(b) The Company shall issue and deliver to Trefoil (i) one million
(1,000,000) shares of Series B Preferred Stock, plus (ii) an additional number
of shares of Series B Preferred Stock (rounded up to the next whole number)
equal to a certain amount of accrued and unpaid dividends in respect of the
Series A Preferred Stock through the Closing (the "Arrearage Amount") divided
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by 100, in exchange for and against delivery by Trefoil of certificates
evidencing one million (1,000,000) shares of Series A Preferred Stock, and in
satisfaction of all accrued and unpaid dividends thereon. For purposes of
determining the Arrearage Amount, the amount of accrued and unpaid dividends
shall be equal to the sum of (i) dividends accrued and unpaid through November
30, 1995, plus (ii) additional dividends, accruing at a rate of 7.5% per annum
during the period beginning December 1, 1995 and ending on the Closing Date
(the "Interim Period"), on any dividends on the Series A Preferred Stock which
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were accrued and unpaid as of November 30, 1995, plus (iii) current dividends
accruing and becoming payable on the Series A Preferred Stock during the
Interim Period, which shall accrue at the rate of 7.5% per annum during the
Interim Period. The Company shall deliver to Trefoil one or more certificates
representing the aggregate number of shares of Series B Preferred Stock Trefoil
is entitled to in
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accordance with this Section 1.01(b) (the transactions contemplated by this
Section 1.01 being referred to herein as the "Exchange") and the Registration
Rights Amendment (as defined in Section 5.02(d)).
SECTION 1.02 Consummation of the Exchange.
The Exchange will be consummated (the "Closing") at the
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offices of Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx, 000 Xxxxx Xxxxxxxx Xxxxxx,
Xxx Xxxxxxx, Xxxxxxxxxx at 10:00 a.m. on the third business day after
satisfaction or waiver of all conditions in Article V (or such other time and
place as the parties may mutually agree) (the "Closing Date"), unless this
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Agreement has been earlier terminated in accordance with its terms.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF TREFOIL
Trefoil hereby represents and warrants to the Company as
follows:
SECTION 2.01. Authority; Approval.
Trefoil has all requisite power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Trefoil and the consummation by Trefoil of the transactions
contemplated hereby has been duly authorized by all necessary corporate or
partnership action and no other proceedings on the part of Trefoil are
necessary to authorize the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Trefoil and, assuming the
due authorization, execution and delivery thereof by the Company, constitutes
the legal, valid and binding obligations of Trefoil, enforceable against
Trefoil in accordance with its terms, except that such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally.
SECTION 2.02. No Conflict.
(a) The execution and delivery of this Agreement by
Trefoil and consummation of the Exchange contemplated hereby does not, and the
performance of this Agreement and the Exchange by Trefoil will not: (i)
conflict with or violate the Certificate of Limited Partnership or Agreement of
Limited Partnership, in each case as amended or restated, of Trefoil, (ii)
result in any breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any Encumbrance (as defined in Section 7.03) on any of the
properties or assets of Trefoil pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise, or other
instrument or obligation to which Trefoil is a party or by which Trefoil is
bound or affected.
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(b) The execution and delivery of this Agreement by
Trefoil and consummation of the Exchange contemplated hereby does not, and the
performance of this Agreement and the Exchange by Trefoil will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, either domestic or foreign
("Governmental Entities").
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SECTION 2.03. Absence of Litigation.
There is no claim, action, suit, litigation, proceeding, legal
administrative or arbitration or investigation of any kind, at law or in equity
(including actions or proceedings seeking injunctive relief, collectively,
"Litigation"), pending or threatened against, affecting or involving Trefoil
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which seek to challenge the record or beneficial ownership of the Series A
Preferred Stock by Trefoil, or, as of the date hereof, which seek to prevent or
challenge the transactions contemplated hereby.
SECTION 2.04. Title.
Trefoil is the record and beneficial owner of 1,000,000 shares
of Series A Preferred Stock. Trefoil has good and marketable title to the
Series A Preferred Stock proposed to be exchanged by Trefoil hereunder and full
right, power and authority to assign, transfer and deliver such Series A
Preferred Stock hereunder, free and clear of all voting trust arrangements,
liens, encumbrances, equities, security interests, restrictions and claims
whatsoever (other than those imposed by the Securities Act of 1933, as amended
(the "Securities Act") and the state securities or "blue sky" laws of certain
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jurisdictions); and upon delivery of Series B Preferred Stock in exchange for
such Series A Preferred Stock hereunder, the Company will acquire title to such
Series A Preferred Stock, free and clear of all liens, encumbrances, equities,
claims, restrictions, security interests, voting trusts or other defects of
title whatsoever. Except as provided in this Agreement, Trefoil has not
appointed or granted any proxy, which appointment or grant is still effective,
with respect to the Series A Preferred Stock, nor has Trefoil granted or
assigned any rights to receive any accrued and unpaid dividends on the Series A
Preferred Stock.
SECTION 2.05. Investment Purposes.
Trefoil is acquiring the Series B Preferred Stock for its own
account and not with a view to or for sale in connection with any distribution
of the Series B Preferred Stock.
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ARTICLE III - REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Trefoil as
follows:
SECTION 3.01. Organization and Qualification.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of California ("California Law"), has all
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requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as is now being conducted.
SECTION 3.02. Articles of Incorporation and Bylaws.
The Company has heretofore furnished to Trefoil complete and
correct copies of the Articles of Incorporation and the Bylaws, in each case as
amended or restated, of the Company, which are in full force and effect.
SECTION 3.03. Capitalization; Title to Shares and Notes.
(a) The authorized capital stock of the Company consists of:
(1) 80,000,000 shares of common stock, no par value (the "Common Stock"), of
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which, as of the date hereof 22,936,433 shares of Common Stock were issued and
outstanding, and (2) 10,000,000 shares of Preferred Stock, 1,000,000 of which
shares are designated as the Series A Preferred Stock, par value $100 per
share. 1,000,000 shares of the Series A Preferred Stock are issued and
outstanding. None of the issued and outstanding shares of capital stock are
subject to preemptive rights created by statute, the Company's Articles of
Incorporation or Bylaws or any agreement to which the Company is a party or is
bound. Each of the outstanding shares of capital stock of the Company is duly
authorized, validly issued, fully paid and nonassessable.
(b) Upon consummation of the Exchange, all shares of the
Series B Preferred Stock (the "Series B Shares") will be duly authorized,
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validly issued, fully paid and nonassessable, will be convertible into Common
Stock of the Company in accordance with the terms of the Certificate of
Determination and will be entitled to all of the powers, preferences and rights
set forth therein. The shares of Common Stock initially issuable upon
conversion of the Series B Shares (the "Conversion Shares") have been duly
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authorized and on the Closing Date will be reserved for issuance upon such
conversion, and when issued upon conversion will be validly issued, fully paid
and nonassessable.
SECTION 3.04. Authority; Approval.
The Company has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the Registration Rights Amendment by the Company, the
approval of the Certificate of Determination by the Board of
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Directors of the Company, and the consummation by the Company of the
transactions contemplated in this Agreement have been duly authorized by all
necessary action by the Board of Directors and no other corporate proceedings
on the part of the Company other than approval by the Company's shareholders as
contemplated herein are necessary to authorize this Agreement, the Registration
Rights Amendment, or the Certificate of Determination, or to consummate the
transactions contemplated by this Agreement. This Agreement has been, and the
Registration Rights Amendment upon execution and delivery pursuant hereto will
be, duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by Trefoil, constitutes, and
the Registration Rights Amendment upon execution and delivery pursuant hereto
will constitute, the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or other similar laws affecting or relating to enforcement of creditors' rights
generally.
SECTION 3.05. No Conflict.
(a) The execution and delivery of this Agreement by the
Company and consummation of the Exchange contemplated hereby does not, and the
performance of this Agreement and the Exchange by the Company will not: (i)
conflict with or violate the Articles of Incorporation or Bylaws, in each case
as amended or restated, of the Company, (ii) except for terms of the Credit
Agreement as to which consents or waivers will be obtained prior to the Closing
Date, result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of any Encumbrance (as defined in Section 7.03) on
any of the properties or assets of the Company pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise, or
other instrument or obligation to which the Company is a party or by which the
Company is bound or affected.
(b) The execution and delivery of this Agreement by the
Company and consummation of the Exchange contemplated hereby does not, and the
performance of this Agreement and the Exchange by the Company will not (other
than the required filing of the Certificate of Determination and filings
required under the federal and the state securities or "blue sky" laws of
certain jurisdictions, all of which filings will have been made on or prior to
the Closing Date) require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity.
SECTION 3.06. Absence of Litigation.
As of the date hereof, there is no Litigation pending or
threatened against, affecting or involving the Company or any of its
subsidiaries or any properties or rights of the Company or any of its
subsidiaries which seek to prevent or challenge the transactions contemplated
hereby.
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SECTION 3.07. Opinion of Financial Advisor.
The Company and the Special Committee have received the
written opinion (the "Fairness Opinion") of Sutro & Co. Incorporated, dated as
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of the date of this Agreement to the effect that the Exchange is fair, from a
financial point of view, to the shareholders of the Company (other than
Trefoil).
ARTICLE IV - ADDITIONAL AGREEMENTS
SECTION 4.01. Meeting of Shareholders.
The Company, acting through its Board of Directors, shall take
all action necessary in accordance with California Law and its Articles of
Incorporation and Bylaws to convene a meeting of the Company's shareholders to
act on this Agreement and the Exchange (the "Shareholders' Meeting") not later
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than April 10, 1996. The Company, acting through its Board of Directors, shall
use its reasonable best efforts to solicit from shareholders of the Company
proxies in favor of the approval of the Exchange and issuance of the Series B
Preferred Stock by the Requisite Vote, as defined in Section 7.03 below, of the
shareholders of the Company.
SECTION 4.02. Best Efforts; Consents; Filings.
Subject to the terms and conditions of this Agreement, the
Company and Trefoil shall each use their reasonable best efforts to (i) take
promptly, or cause to be taken, all appropriate action, and to do promptly, or
cause to be done, all things necessary, proper or advisable under applicable
foreign, federal, state or local law, statute, treaty, ordinance, rule,
regulation, order, writ, injunction, decree, judgment or decree (collectively,
"Laws") or otherwise to consummate and make effective the transactions
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contemplated by this Agreement; (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by the Company or Trefoil or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated herein,
including, without limitation, the Exchange; (iii) make any necessary filings
and thereafter make any other required submissions, notifications and filings
with respect to this Agreement and the Exchange required under (A) the
Securities Act and the Securities Exchange Act of 1934 ("Exchange Act") and the
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rules and regulations thereunder, and any other applicable Law, including,
without limitation, any other federal or state securities laws and (B) the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, if applicable, provided,
however, that Trefoil and the Company shall cooperate with each other in
connection with the making of all such filings, including, without limitation,
providing copies of all such documents to the non-filing party and its advisors
prior to any filing and, if requested, to accept all reasonable additions,
deletions or changes suggested by the non-filing party in connection therewith;
and (iv) remove any injunctions or other impediments or delays, legal or
otherwise, in order to consummate and make effective the transactions
contemplated by this Agreement for the purpose of securing to the parties
hereto all benefits contemplated by this Agreement. The Company and Trefoil
shall furnish all information required for any application
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or other filing to be made pursuant to the rules and regulations of any
applicable Law in connection with the transactions contemplated by this
Agreement. Prior to the Closing, the Company shall file the Certificate of
Determination with the Secretary of State of California.
SECTION 4.03. NYSE Listing.
The Company shall use its reasonable best efforts to cause the
Conversion Shares to be approved for listing on the New York Stock Exchange,
Inc. ("NYSE") as of the Closing Date.
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SECTION 4.04. Voting Agreement.
Trefoil hereby agrees, during the time this Agreement is in
effect, at any meeting of the shareholders of the Company (including, without
limitation, the Shareholders' Meeting) and in any action by written consent of
the shareholders of the Company or the Series A Preferred Stockholders as a
class, if and as requested to do so by the Company, to: (a) appear at any
annual or special meeting of shareholders of the Company (including, without
limitation, the Shareholders' Meeting) for the purpose of obtaining a quorum;
(b) vote in person or by proxy, all of the shares of Common Stock now owned or
with respect to which Trefoil has or shares voting power and all shares of
Series A Preferred Stock (collectively, the "Shares") in favor of this
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Agreement and the Exchange; (c) vote the Shares against any action, proposal or
agreement that could reasonably be expected to result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of the Company under this Agreement, or which could reasonably be
expected to result in any of the conditions to the Company's obligations under
this Agreement not being fulfilled; and/or (d) waive its rights to vote in any
manner (whether separately as a class or together with the Common Stock) with
respect to this Agreement and the Exchange.
SECTION 4.05. Sale of Series A Preferred Stock.
Trefoil hereby agrees that, other than the transfer
contemplated by this Agreement, Trefoil shall not, until termination of this
Agreement, directly or indirectly sell, transfer, assign or otherwise dispose
of, or pledge, grant any option or security interest with respect to, or
otherwise encumber shares of Series A Preferred Stock; provided, however, that
Trefoil may sell or enter into an agreement to sell its shares of Series A
Preferred Stock at any time prior to the twentieth day prior to the date
scheduled for the Shareholders' Meeting and in connection therewith assign
rights hereunder with respect thereto (a "Transfer") if: (i) the person so
acquiring shares of Series A Preferred Stock (the "Transferee") agrees in
writing to be bound by the terms of this Agreement, (ii) the Transfer will not
impede or delay in any material respect consummation of the transactions
contemplated under this Agreement (it being understood and agreed that
compliance by the Company with any requirement that any proxy or other
solicitating material for use in connection with the Shareholders' Meeting be
supplemented, modified, recirculated, and/or redistributed, or filed, cleared
or declared effective with or by any governmental entity or the NYSE, on
account of a Transfer shall not be deemed to impede or delay in any material
respect consummation of the transactions contemplated under this
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Agreement within the meaning of this clause (ii) provided that Trefoil and the
Transferee cooperate with the Company in connection therewith), and (iii)
Trefoil agrees in writing to remain liable hereunder for any breach of its
obligations or the obligations of the Transferee under this Agreement.
Notwithstanding anything to the contrary herein, if Trefoil Transfers any
Series A Preferred Stock, Trefoil shall reimburse the Company for all
additional out of pocket expenses incurred by the Company in complying with its
obligations under this Agreement directly or indirectly as a result of a
Transfer up to an aggregate amount of $50,000.
SECTION 4.06. Election of Directors.
Trefoil hereby agrees that, until termination of this
Agreement, it shall not exercise the right, as set forth in Article III,
Section 3.d.(i) of the Articles of Incorporation and triggered by the
non-payment of dividends payable in an amount equal to three full quarterly
dividends, to elect four directors in addition to the three directors to which
the Series A Preferred Stockholders are currently entitled.
SECTION 4.07 Certain Anti-Dilution Adjustments.
If, at any time during the period between the date hereof and
the Closing Date (the "Adjustment Period"), the Company shall issue any shares
of Common Stock (or rights, warrants or other securities convertible into
Common Stock) or make any distributions to holders of Common Stock under
circumstances which would have required an adjustment to the Conversion Price
and the Conversion Ratio (as such terms are defined in the Certificate of
Determination) pursuant to Section 8.g.(2) of the Certificate of Determination
if the Series B Preferred Stock had been issued at the beginning of the
Adjustment Period, then the Conversion Price and the Conversion Ratio in the
Certificate of Determination as filed with the Secretary of State of the State
of California shall be adjusted, prior to the Closing Date, in respect of such
issuance as if the Series B Preferred Stock had been outstanding at the
beginning of the Adjustment Period.
ARTICLE V - CLOSING CONDITIONS
SECTION 5.01. Conditions to Obligations of Each Party Under
This Agreement.
The respective obligations of each party to effect the
Exchange shall be subject to the satisfaction at or prior to the Closing Date
of the following conditions, any or all of which may be waived, in whole or in
part, to the extent permitted by applicable law:
(a) No Order. No Governmental Entity or federal or state
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which
is in effect and which restricts, prevents or prohibits consummation of the
Exchange.
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(b) Government Consents. All consents, waivers,
approvals and authorizations required to be obtained, and all filings or
notices required to be made, by the Company and Trefoil prior to consummation
of the transactions contemplated in this Agreement shall have been obtained
from and made with all required Governmental Entities, and all requirements of
any Law.
(c) Shareholder Vote. This Agreement and the Exchange
shall have been approved and adopted by the Requisite Vote of the shareholders
of the Company.
(d) Fairness Opinion. The Fairness Opinion described in
Section 3.07 shall not have been modified, rescinded or otherwise withdrawn.
SECTION 5.02. Additional Conditions to Obligations of Trefoil.
The obligations of Trefoil to effect the Exchange shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Representations and Warranties. Each of the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects (except that where any statement
in a representation or warranty expressly includes a standard of materiality,
such statement shall be true and correct in all respects giving effect to such
standard) when made and as of the Closing Date as though made on and as of the
Closing Date, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct in all
material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) as of such
date. Trefoil shall have received a certificate of an executive officer of the
Company, as of the Closing Date, to such effect.
(b) Agreements and Covenants. The Company shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing Date. Trefoil shall have received a certificate of an
executive officer of the Company, as of the Closing Date, to that effect.
(c) Legal Opinion. Trefoil shall have received the
written legal opinion, dated the Closing Date, of Fried, Frank, Harris, Xxxxxxx
& Xxxxxxxx substantially in the form of Exhibit B.
(d) Registration Rights Amendment. The amendment to the
Registration Rights Agreement, dated as of May 27, 1991, between the Company
and Trefoil (the "Registration Rights Amendment") shall have been executed and
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delivered by the Company at or prior to the Closing Date, substantially in the
form attached hereto as Exhibit C.
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(e) NYSE Listing. The shares of the Common Stock
issuable upon conversion of the Series B Preferred Stock shall have been
approved for listing on the NYSE as of the Closing Date.
SECTION 5.03. Additional Conditions to Obligations of the
Company.
The obligations of the Company to effect the Exchange shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) Representations and Warranties. Each of the
representations and warranties of Trefoil contained in this Agreement shall be
true and correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving effect to such
standard) when made and as of the Closing Date as though made on and as of the
Closing Date, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct in all
material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) as of such
date. The Company shall have received a certificate of an executive officer of
the general partner of Trefoil, as of the Closing Date, to such effect.
(b) Agreements and Covenants. Trefoil shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing Date. The Company shall have received a certificate of
an executive officer of the general partner of Trefoil, as of the Closing Date,
to that effect.
(c) Consent. The Company shall have obtained the consent
of the Bank (as defined in Section 7.03 below) pursuant to the Credit Agreement
to the transactions contemplated herein, including but not limited to the
Exchange, and the waiver of any provisions of the Credit Agreement which may be
deemed to prohibit such transactions.
ARTICLE VI - TERMINATION, AMENDMENT AND WAIVER
SECTION 6.01. Termination.
This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of the Company and Trefoil;
(b) by Trefoil, upon a material breach of any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue in any material respect;
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(c) by the Company, upon a material breach of any
representation, warranty, covenant or agreement on the part of Trefoil set
forth in this Agreement, or if any representation or warranty of the Trefoil
shall have become untrue in any material respect;
(d) by either Trefoil or the Company, if there shall be
any final, non-appealable order or injunction imposed by a court of competent
jurisdiction preventing the consummation of the Exchange;
(e) by either Trefoil or the Company, if the Exchange
shall not have been consummated on or before April 15, 1996; provided, however,
Trefoil shall have no right to terminate this Agreement pursuant to this clause
(e) prior to May 15, 1996 if the Exchange shall not have been consummated prior
to April 15, 1996 as a direct or indirect result of a Transfer; and
(f) by Trefoil at any time prior to the Mailing Date if
Trefoil shall have theretofore received a bona fide offer to acquire from
Trefoil, or Trefoil shall have entered into an agreement or agreements to sell,
or sold, not less than a majority of the outstanding shares of Series A
Preferred Stock.
SECTION 6.02. Amendment.
This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 6.03. Early Termination.
If Trefoil terminates this Agreement pursuant to clause (f) of
Section 6.01, Trefoil and the Transferee shall (i) irrevocably consent and
agree to extend each mandatory redemption date contained in Section 5(b) of
Article 3 of the Company's Restated Articles of Incorporation for a period of
an additional 16 months from the date so specified, (ii) if and as requested by
the Company take all the actions specified in Section 4.04 hereof with respect
to all shares of Common Stock and the Series A Preferred Stock held by Trefoil
or such Transferee in connection with the adoption or approval of an amendment
of such Section 5(b) effecting the extension described in clause (i) of this
Section 6.03 and (iii) if and as requested by the Company take all other
actions reasonably necessary to effect such extension. This Section 6.03 shall
survive termination of the Agreement pursuant to Section 6.01(f).
ARTICLE VII - GENERAL PROVISIONS
SECTION 7.01. Company Approval.
Any waiver, consent or amendment of this Agreement by the
Company shall not be effective unless approved by the Special Committee, as
defined in Section 7.03 below, of the Company's Board of Directors, and by the
holders of a majority of the Series A Preferred Stock.
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SECTION 7.02. Notices.
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission (provided that a
confirmation copy is sent by another approved means) to the telecopier number
specified below:
(a) If to the Company:
L.A. Gear, Inc.
0000 Xxxxx Xxxx Xxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
Xxxxxxx X. Xxxxxxx, Chairman of the Special Committee
c/o Xxxxx Xxxxxx Inc.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telecopier No.: (000) 000-0000
with a copy to each of:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
Xxxxxx, Xxxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx, Esq.
Telecopier No.: (000) 000-0000
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(b) If to Trefoil Capital Investors, L.P.:
Trefoil Capital Investors, L.P.:
0000 Xxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
Sanders, Barnet, Xxxxxxx, Xxxxxx & Mosk
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
SECTION 7.03. Certain Definitions.
For purposes of this Agreement, the term:
"Affiliate" means, with respect to any Person, a Person,
directly or indirectly, through one or more intermediaries, controlling,
controlled by, or under common control with such Person; the term
"control," as used in this definition, means, with respect to a Person,
the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of the Person.
"business day" means any day other than a day on which banks
in the State of California are authorized or obligated to be closed.
"Bank" means BankAmerica Business Credit, Inc.
"Credit Agreement" means the Loan and Security Agreement
between L.A. Gear California, Inc. and the Bank, dated as of November
22, 1993, as amended to date.
"Encumbrance" means, with respect to any real or personal,
tangible or intangible property, any lien, charge, reservation, right of
entry, possibility of reverter, encroachment, easement, right of way,
restrictive covenant, lease, security interest (whether based on common
law, statute or contract and, including without limitation, any interest
arising from any capitalized lease, conditional sale, trust receipt or
deposit interest), option, right of first refusal, right of first offer
or any other imperfection of title or right by any person to assert a
claim with respect to such property.
"Interested Director" shall mean a director of the Company
within the meaning given to the term "Interested Director" used in or
construed under Section 310 of the California Corporations Code.
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"Mailing Date" means the date on which the Company first mails
or distributes to its shareholders a proxy statement with respect to the
Shareholders' Meeting.
"Person" means an individual, partnership, joint venture,
corporation, trust, unincorporated association or other entity or
association.
"Requisite Vote" means the affirmative vote of a majority of
the shares of Common Stock present and voting (excluding any rights of
Series A Preferred Stock to vote together with the Common Stock, and
excluding any shares of Common Stock owned by Trefoil or any Interested
Director) at a meeting duly held for approval of the Exchange, at which
a quorum is present (excluding any rights of Series A Preferred Stock to
vote together with the Common Stock, and excluding any shares of Common
Stock owned by Trefoil or any Interested Director).
"Special Committee" means the committee established by the
Company's Board of Directors in connection with the transactions
contemplated herein, whose members, as of the date hereof, are Messrs.
Dalshaug, Davis, Xxxxxxx and Xx. Xxxxxx.
SECTION 7.04. Legend.
On the date hereof, certificates representing all shares of
the Series A Preferred Stock have been delivered to the Company and shall
promptly hereafter be returned to Trefoil bearing the following legend:
THE SHARES OR INTERESTS REPRESENTED BY THIS CERTIFICATE AND THE
TRANSFER OF SUCH SHARES OR INTERESTS ARE RESTRICTED BY THE TERMS
AND CONDITIONS OF A SHARE EXCHANGE AGREEMENT DATED AS OF DECEMBER
12, 1995 AMONG TREFOIL CAPITAL INVESTORS, L.P. AND L.A. GEAR,
INC., A COPY OF WHICH IS AVAILABLE UPON REQUEST AT THE OFFICES OF
THE COMPANY.
SECTION 7.05. Headings.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 7.06. Severability.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
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adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 7.07. Entire Agreement.
This Agreement, together with the Exhibits hereto, constitute
the entire agreement of the parties and supersede all prior agreements and
undertakings, both written and oral, between the parties, or any of them, with
respect to the subject matter hereof.
SECTION 7.08. Assignment.
Except as expressly permitted hereunder, this Agreement shall
not be assigned by any party hereto.
SECTION 7.09. Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, its successors and permitted assignees and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
SECTION 7.10. Failure or Indulgence Not Waiver; Remedies
Cumulative.
No failure or delay on the part of any party hereto in the
exercise of any right hereunder shall impair such right or be construed to be a
waiver of, or acquiescence in, any breach of any representation, warranty or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 7.11. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, California Law without regard to rules respecting conflicts of
law.
SECTION 7.12. Counterparts.
This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
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SECTION 7.13. Construction.
All section and article references are to this Agreement,
unless otherwise expressly provided. As used in this Agreement, (a) "hereof",
"hereunder", "herein" and words of like import shall be deemed to refer to this
Agreement in its entirety and not just a particular section of this Agreement
and (b) unless the context otherwise requires, words in the singular number or
in the plural number shall each include the singular number or the plural
number, words of the masculine gender shall include the feminine and neuter,
and, when the sense so indicates, words of the neuter gender shall refer to any
gender.
SECTION 7.14. Expenses.
Except as otherwise provided in Section 4.05 hereof, each
party hereto shall bear its own expenses in connection with the Exchange
contemplated by this Agreement; provided, however, that unless this Agreement
is terminated pursuant to Section 6.01(f) hereof, the Company shall pay the
reasonable out of pocket expenses incurred by Trefoil in connection with the
Exchange contemplated by this Agreement, up to an aggregate amount of $17,500.
SECTION 7.15. Specific Enforcement.
The Company and Trefoil acknowledge and agree 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 the parties shall be entitled to an
injunction or injunctions to prevent or cure 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 court of the State of California located in
Los Angeles, California, having jurisdiction, this being in addition to any
other remedy to which they may be entitled by law or equity.
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IN WITNESS WHEREOF, the Company and Trefoil have caused this
Agreement to be executed as of the date first written above by their respective
officers and representatives thereunto duly authorized.
L.A. GEAR, INC.
By: /s/ XXXXXXX X. XXXXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
TREFOIL CAPITAL INVESTORS, L.P.
By: TREFOIL INVESTORS, INC., its
general partner
By: /s/ XXXXXX X. XXXXXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Managing Director
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EXHIBIT A
L.A. GEAR, INC.
CERTIFICATE OF DETERMINATION OF SERIES B CONVERTIBLE PREFERRED STOCK
SETTING FORTH THE RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF SUCH SERIES OF PREFERRED STOCK
The undersigned, Xxxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx, President
and Secretary, respectively, of L.A. Gear, Inc., a California corporation, do
hereby certify:
FIRST: The Restated Articles of Incorporation of the corporation
authorize the issuance of Ten Million (10,000,000) shares of stock designated
"Preferred Stock," of which Nine Million (9,000,000) are issuable from time to
time in one or more series, and authorized the Board of Directors to determine
or alter the rights, preferences, privileges and restrictions granted to or
imposed on any wholly unissued series of such Preferred Stock, and the number
of shares constituting any such series and the designation thereof, of any or
all of them.
SECOND: The Board of Directors of the corporation, pursuant to the
authority of Section 401 of the California General Corporation Law, did duly
adopt the resolution attached hereto as Exhibit A and incorporated herein by
this reference, authorizing and providing for the creation of a series of
Preferred Stock to be known as "Series B Preferred Stock," consisting of One
Million _____________ (_________) shares, none of the shares of such series
having been issued.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of our own knowledge.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this _____
day of _________, 1996.
________________________________________
Name: Xxxxxxx X. Xxxxxxx
Title: President
________________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Secretary
19
EXHIBIT A
RESOLUTION OF THE BOARD OF DIRECTORS OF L.A. GEAR, INC. ESTABLISHING A SERIES
OF PREFERRED STOCK TO BE KNOWN AS SERIES B PREFERRED STOCK
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
conferred upon the Board of Directors by Article Four of the Restated Articles
of Incorporation of this corporation, there is hereby established a series of
the authorized Preferred Stock of the corporation, which series shall be
designated as "Series B Preferred Stock" and which series shall consist of One
Million __________ (______) shares and shall have the following rights,
preferences, privileges and restrictions:
Section 1. Stated Value.
The Series B Preferred Stock shall have a stated
value of $100 per share (the "Stated Value").
Section 2. Dividends and Distributions.
a. The holders of shares of Series B Preferred Stock, in
preference to the holders of shares of Junior Dividend Stock (as defined in
Section 11 hereof), shall be entitled to receive, when, as and if declared by
the Board of Directors, out of the assets of the corporation legally available
therefor, cumulative dividends at an annual rate of 7.50% (arrearages of
dividends shall bear additional dividends compounded quarterly at a rate of
8.625% per annum, through the date of payment of such arrearages) from and
after the Issue Date (as defined in Section 11 hereof) as long as the shares of
Series B Preferred Stock remain outstanding, and subject to paragraph (b) of
this Section 2, no more. Dividends shall be payable in cash or additional
shares of Series B Preferred Stock, as provided in paragraph (c) of this
Section 2. Dividends shall be computed on the basis of the Stated Value, and
shall accrue and be payable quarterly, in arrears, on the last Business Day (as
defined in Section 11) of February, May, August and November in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the Issue Date.
b. Dividends payable pursuant to paragraph (a) of this Section 2
shall begin to accrue and be cumulative from the Issue Date, whether or not
earned or declared. The amount of dividends so payable shall be determined on
the basis of twelve 30-day months and a 360-day year. Dividends paid on the
shares of Series B Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series B Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall be no
more than sixty days prior to the date fixed for the payment thereof.
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c. With respect to dividends paid on or prior to November 30,
1996, dividends on the Series B Preferred Stock shall be payable, at the option
of the Company, in whole shares of Series B Preferred Stock valued at $100 per
share or in cash; thereafter, dividends on the Series B Preferred Stock shall
be payable in cash.
d. The holders of shares of Series B Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided
herein.
Section 3. Voting Rights. In addition to any voting rights
provided by law, the holders of shares of Series B Preferred Stock shall have
the following voting rights:
a. In addition to voting rights provided elsewhere in this
Section 3, and as long as any of the Series B Preferred Stock is outstanding,
each share of Series B Preferred Stock shall entitle the holder thereof to vote
on all matters, including with respect to the election of directors, voted on
by holders of the Company's Common Stock, no par value (the "Common Stock")
voting together as a single class with other shares entitled to vote at all
meetings of the shareholders of the corporation. With respect to any such
vote, each share of Series B Preferred Stock shall entitle the holder thereof
to cast the number of votes equal to the number of votes which could be cast in
such vote by a holder of the shares of capital stock of the corporation into
which such share of Series B Preferred Stock is convertible on the record date
for such vote; provided, however, that if more than one share of Series B
Preferred Stock shall be held by any holder of shares of Series B Preferred
Stock, the total number of votes which such holder shall be entitled to cast
pursuant to this Section 3(a) shall be computed on the basis of conversion of
the total number of shares of Series B Preferred Stock held by such holder,
with any then remaining fractional share disregarded for the purposes of this
Section 3(a).
b. In addition to the voting rights provided elsewhere in this
Section 3, the affirmative vote of the holders of at least a majority of the
outstanding shares of Series B Preferred Stock, voting separately as a single
series, in person or by proxy, at a special or annual meeting of shareholders
called for the purpose, shall be necessary to (A) authorize, increase the
authorized number of shares of, or issue (including on conversion or exchange
of any convertible or exchangeable securities or by reclassification), any
shares of any class or classes, or any series of any class or classes, of the
corporation's capital stock ranking pari passu with or prior to (either as to
dividends or upon voluntary or involuntary liquidation, dissolution or winding
up) the Series B Preferred Stock, (B) except as contemplated pursuant to
Section 2(c), increase the authorized number of shares of, or issue (including
on conversion or exchange of any convertible or exchangeable securities or by
reclassification) any shares of, Series B Preferred Stock or (C) alter, amend
or repeal any of the provisions of the Restated Articles of Incorporation (as
defined in Section 11 hereof) of the corporation which in any manner would
alter, change or otherwise adversely affect in any way the powers, preferences
or rights of the Series B Preferred Stock.
c. (1) The rights of holders of shares of Series B Preferred
Stock to take any actions as provided in this Section 3 may be exercised,
subject to the CGCL (as defined in Section 11 hereof), at any annual meeting of
shareholders or at a special meeting of shareholders
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held for such purpose as hereinafter provided or at any adjournment or
postponement thereof, or by the written consent, delivered to the Secretary of
the corporation, of the holders of the minimum number of shares required to
take such action.
As long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), the Chairman of the Board of the corporation may call, and
upon the written request of holders of record of 20% of the outstanding shares
of Series B Preferred Stock, addressed to the Secretary of the corporation at
the principal office of the corporation, shall call, a special meeting of the
holders of shares entitled to vote as provided herein. The corporation shall
use its best efforts to hold such meeting within thirty-five, but in any event
not later than sixty, days after delivery of such request to the Secretary of
the corporation, at the place and upon the notice provided by law and in the
By-laws of the corporation for the holding of meetings of shareholders.
(2) At each meeting of shareholders at which the holders
of shares of Series B Preferred Stock shall have the right, voting separately
as a single series, to take any action, the presence in person or by proxy of
the holders of record of a majority of the total number of shares of Series B
Preferred Stock then outstanding and entitled to vote on the matter shall be
necessary and sufficient to constitute a quorum. At any such meeting or at any
adjournment or postponement thereof, in the absence of a quorum of the holders
of shares of Series B Preferred Stock, holders of a majority of such shares
present in person or by proxy shall have the power to adjourn the meeting as to
the actions to be taken by the holders of shares of Series B Preferred Stock
from time to time and place to place without notice other than announcement at
the meeting until a quorum shall be present.
For the taking of any action as provided in paragraph (b) of this
Section 3 by the holders of shares of Series B Preferred Stock, each such
holder shall have one vote for each share of Series B Preferred Stock standing
in his name on the transfer books of the corporation as of any record date
fixed for such purpose or, if no such date be fixed, at the close of business
on the Business Day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the Business Day next preceding
the day on which the meeting is held.
Section 4. Certain Restrictions.
a. Whenever quarterly dividends payable on shares of Series B
Preferred Stock as provided in Section 2 hereof are not paid in full,
thereafter and until all unpaid dividends payable, whether or not declared, on
the outstanding shares of Series B Preferred Stock shall have been paid in
full, or prior to June 1, 1997 without the affirmative vote of the holders of
at least a majority of the outstanding shares of Series B Preferred Stock,
voting separately as a single series, in person or by proxy, at a special or
annual meeting of shareholders, the corporation shall not: (A) declare or pay
dividends, or make any other distributions, on any shares of Junior Dividend
Stock other than dividends or distributions payable in Junior Dividend Stock;
or (B) declare or pay dividends, or make any other distributions, on any shares
of Parity Dividend Stock (as defined in Section 11 hereof), except (1)
dividends or distributions payable in Junior Dividend Stock and (2) dividends
or distributions paid ratably on the Series B Preferred
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Stock and all Parity Dividend Stock on which dividends are payable or in
arrears, in proportion to the total amounts to which the holders of all shares
of the Series B Preferred Stock and such Parity Dividend Stock are then
entitled.
b. Whenever quarterly dividends payable on shares of Series B
Preferred Stock as provided in Section 2 hereof are not paid in full,
thereafter and until all unpaid dividends payable, whether or not declared, on
the outstanding shares of Series B Preferred Stock shall have been paid in
full, or prior to June 1, 1997 without the affirmative vote of the holders of
at least a majority of the outstanding shares of Series B Preferred Stock,
voting separately as a single series, in person or by proxy, at a special or
annual meeting of shareholders, the corporation shall not: (A) redeem, purchase
or otherwise acquire for consideration any shares of Junior Dividend Stock or
Junior Liquidation Stock (as defined in Section 11 hereof) or Parity Dividend
Stock or Parity Liquidation Stock (as defined in Section 11 hereof); provided,
however, that (1) the corporation may at any time redeem, purchase or otherwise
acquire shares of Junior Liquidation Stock or Parity Liquidation Stock in
exchange for any shares of capital stock of the corporation that rank junior to
the Series B Preferred Stock as to dividends and upon liquidation, dissolution
and winding up; (2) the corporation may accept shares of any Parity Liquidation
Stock for conversion into shares of capital stock of the corporation that rank
junior to the Series B Preferred Stock as to dividends and upon liquidation,
dissolution and winding up; and (3) the corporation may at any time redeem,
purchase or otherwise acquire shares as may be required pursuant to the
corporation's 1986 Stock Option Plan, 1992 Stock Option Plan For Eligible Non
Employee Directors, 1993 Stock Incentive Plan or Employee Stock Savings Plan,
as they may be amended from time to time, or similar employee stock plans
hereafter adopted; or (B) redeem or purchase or otherwise acquire for
consideration any shares of Series B Preferred Stock; provided, however, that
the corporation (1) may accept shares of Series B Preferred Stock surrendered
for conversion into shares of capital stock of the corporation pursuant to
Section 8 hereof, and (2) may elect to redeem all outstanding shares of Series
B Preferred Stock pursuant to Section 5(a) hereof.
c. The corporation shall not permit any Subsidiary (as defined in
Section 11 hereof) of the corporation to purchase or otherwise acquire for
consideration any shares of capital stock of the corporation unless the
corporation could, pursuant to paragraph (b) of this Section 4, purchase such
shares at such time and in such manner.
Section 5. Redemption.
a. The corporation shall have the right, at its sole option and
election made in accordance with paragraph (d) of this Section 5, to redeem,
out of funds legally available therefor, shares of Series B Preferred Stock, in
whole or in part, in integral multiples having an aggregate Stated Value of at
least $5,000,000, at any time and from time to time, at a redemption price
equal to the Stated Value, plus an amount per share equal to all accrued and
unpaid dividends, whether or not declared, to the date of redemption (the
"Redemption Price"); provided, however, that the corporation shall not have any
such right unless (A) all quarterly dividends payable on shares of Series B
Preferred Stock pursuant to Section 2 hereof shall have been paid in full and
(B) the Current Market Price (as defined in Section 11 hereof) of the
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Common Stock is equal to at least 150% of the Conversion Price (as defined in
Section 11 hereof) for thirty consecutive Trading Days (as defined in Section
11 hereof).
b. If less than all shares of Series B Preferred Stock at the
time outstanding are to be redeemed, the shares to be redeemed shall be
selected pro rata.
c. Notice of any redemption of shares of Series B Preferred Stock
pursuant to this Section 5 shall be mailed at least forty-five, but not more
than seventy-five, days prior to the date fixed for redemption to each holder
of shares of Series B Preferred Stock to be redeemed, at such holder's address
as it appears on the transfer books of the corporation. In order to facilitate
the redemption of shares of Series B Preferred Stock, the Board of Directors
may fix a record date for the determination of Series B Preferred Stock to be
redeemed, or may cause the transfer books of the corporation for the Series B
Preferred Stock to be closed, not more than sixty days or less than thirty days
prior to the date fixed for such redemption.
d. On the date of any redemption being made pursuant to this
Section 5 which is specified in a notice given pursuant to paragraph (c) of
this Section 5, the corporation shall, and at any time after such notice shall
have been mailed and before the date of redemption the corporation may, deposit
for the benefit of the holders of shares of Series B Preferred Stock to be
redeemed the funds necessary for such redemption, including the amount
necessary to pay all accrued and unpaid dividends to the date of redemption,
with a bank or trust company in the City of Los Angeles having a capital and
surplus of at least $1,000,000,000. Any moneys so deposited by the corporation
and unclaimed at the end of one year from the date designated for such
redemption shall revert to the general funds of the corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and any holder of
shares of Series B Preferred Stock to be redeemed shall look only to the
corporation for the payment of the Redemption Price. In the event that moneys
are deposited pursuant to this paragraph (d) in respect of shares of Series B
Preferred Stock that are converted in accordance with the provisions of Section
8, such moneys shall, upon such conversion, revert to the general funds of the
corporation and, upon demand, such bank or trust company shall pay over to the
corporation such moneys and shall be relieved of all responsibility to the
holders of such converted shares in respect thereof. Any interest accrued on
funds deposited pursuant to this paragraph (d) shall be paid from time to time
to the corporation for its own account.
e. Notice of redemption having been given as aforesaid, upon the
deposit of funds pursuant to paragraph (d) in respect of shares of Series B
Preferred Stock to be redeemed pursuant to this Section 5, notwithstanding that
any certificates for such shares shall not have been surrendered for
cancellation, from and after the date of redemption designated in the notice of
redemption (i) the shares represented thereby shall no longer be deemed
outstanding, (ii) the rights to receive dividends thereon shall cease to
accrue, and (iii) all rights of the holders of shares of Series B Preferred
Stock to be redeemed shall cease and terminate, excepting only the right to
receive the Redemption Price therefor, and the right to convert such shares
into shares of
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Common Stock until the close of business on the Business Day next preceding the
date of redemption, in accordance with Section 8 hereof.
Section 6. Reacquired Shares. Any shares of Series B Preferred
Stock converted, redeemed, purchased or otherwise acquired by the corporation
in any manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares of Series B Preferred Stock shall upon
their cancellation, in accordance with the CGCL, become authorized but unissued
shares of Preferred Stock of the corporation and may be reissued as part of
another series of Preferred Stock of the corporation, subject to the conditions
or restrictions on issuance set forth herein.
Section 7. Liquidation, Dissolution or Winding Up.
a. If the corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the corporation or of any substantial part of its property, or
make an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or if a decree or
order for relief in respect of the corporation shall be entered by a court
having jurisdiction in the premises in an involuntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of ninety consecutive days and on account of any such event the
corporation shall liquidate, dissolve or wind up, or if the corporation shall
otherwise liquidate, dissolve or wind up, no distribution shall be made (i) to
the holders of shares of Junior Liquidation Stock unless, prior thereto, the
holders of shares of Series B Preferred Stock, subject to Section 8, shall have
received the Liquidation Preference (as defined in Section 11 hereof) with
respect to each share, or (ii) to the holders of shares of Parity Liquidation
Stock, except distributions made ratably to the holders of the Series B
Preferred Stock and the Parity Liquidation Stock in proportion to the total
amounts to which the holders of all such shares of Series B Preferred Stock and
Parity Liquidation Stock would be entitled upon such liquidation, dissolution
or winding up. Upon any such liquidation, dissolution or winding up, the
holders of shares of Series B Preferred Stock shall be entitled to receive the
Liquidation Preference with respect to each such share and no more.
b. Neither the merger or other business combination of the
corporation with or into any other Person (as defined in Section 11 hereof) or
Persons nor the sale of all or substantially all the assets of the corporation
shall be deemed to be a liquidation, dissolution or winding up of the
corporation for purposes of this Section 7.
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Section 8. Conversion.
a. Subject to the provisions for adjustment hereinafter set
forth, each share of Series B Preferred Stock shall be convertible at the
option of the holder thereof into fully paid and nonassessable shares of Common
Stock. The number of shares of Common Stock deliverable upon conversion of a
share of Series B Preferred Stock, adjusted as hereinafter provided, is
referred to herein as the "Conversion Ratio." The Conversion Ratio shall
initially be 14.815 and the Conversion Price shall initially be $6.75. The
Conversion Ratio and the Conversion Price are subject to adjustment from time
to time pursuant to paragraph (g) of this Section 8.
b. Conversion of the Series B Preferred Stock may be effected by
any such holder upon the surrender to the corporation at the principal office
of the corporation in the State of California (the "Transfer Agent") or at the
office of any agent or agents of the corporation, as may be designated by the
Board of Directors of the corporation, of the certificate for such Series B
Preferred Stock to be converted accompanied by a written notice stating that
such holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this Section 8 and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in such
name or names. Other than such taxes, the corporation will pay any and all
issue and other taxes (other than taxes based on income) that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
Series B Preferred Stock pursuant hereto. As promptly as practicable, and in
any event within five Business Days after the surrender of such certificate or
certificates and the receipt of such notice relating thereto and, if
applicable, payment of all transfer taxes (or the demonstration to the
satisfaction of the corporation that such taxes have been paid), the
corporation shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Common Stock to which the holder of shares of Series B Preferred
Stock being converted shall be entitled and (ii) if less than the full number
of shares of Series B Preferred Stock evidenced by the surrendered certificate
or certificates is being converted, a new certificate or certificates, of like
tenor, for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares being converted. Such conversion shall
be deemed to have been made at the close of business on the date of giving such
notice and of such surrender of the certificate or certificates representing
the shares of Series B Preferred Stock to be converted (the "Conversion Date")
so that the rights of the holder thereof as to the shares being converted shall
cease except for the right to receive shares of Common Stock in accordance
herewith, and the Person entitled to receive the shares of Common Stock shall
be treated for all purposes as having become the record holder of such shares
of Common Stock at such time. The corporation shall not be required to
convert, and no surrender of shares of Series B Preferred Stock shall be
effective for that purpose, while the transfer books of the corporation for the
Common Stock are closed for any purpose (but not for any period in excess of
five days); but the surrender of shares of Series B Preferred Stock for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if
the conversion had been made
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on the date such shares of Series B Preferred Stock were surrendered, and at
the Conversion Ratio in effect at the date of such surrender.
c. In case any shares of Series B Preferred Stock are to be
redeemed pursuant to Section 5, such right of conversion shall cease and
terminate as to the shares of Series B Preferred Stock to be redeemed at the
close of business on the Business Day next preceding the date fixed for
redemption unless the corporation shall default in the payment of the
Redemption Price.
d. The Conversion Ratio shall be subject to adjustment from time
to time in certain instances as hereinafter provided. Upon conversion, the
holder of shares of Series B Preferred Stock shall be entitled to receive any
accrued and unpaid dividends on the shares of Series B Preferred Stock
surrendered for conversion to the Conversion Date. Such accrued and unpaid
dividends shall be payable by the corporation if the Conversion Date is (i) on
or prior to November 30, 1996, then, at the option of the Corporation, in cash
or in shares of Common Stock valued at the Conversion Price; or (ii) after
November 30, 1996, in cash (to the extent funds are legally available
therefor); provided, however, that if any such required cash payment in respect
of accrued and unpaid dividends is not paid on the Conversion Date, the holder
shall thereafter have the option to (i) convert such unpaid dividends into
shares of Common Stock at a per share price equal to the Conversion Price in
effect on the Conversion Date (adjusted for any changes in the Conversion Ratio
after the Conversion Date pursuant to Section 8(g)(1)) of the shares of Series
B Preferred Stock in respect of which such dividends accrued or (ii) permit
such unpaid funds to continue to be treated as accrued and unpaid dividends for
all purposes hereunder (including the accrual of additional dividends thereon
in accordance with Section 2(a) hereof and the restrictions of Section 4
hereof) until paid by the Corporation or converted in accordance herewith.
e. In connection with the conversion of any shares of Series B
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied
by the Current Market Price per share of Common Stock on the Trading Day on
which such shares of Series B Preferred Stock are deemed to have been
converted. If more than one share of Series B Preferred Stock shall be
surrendered for conversion by the same holder at the same time, the number of
full shares of Common Stock issuable on conversion thereof shall be computed on
the basis of the total number of shares of Series B Preferred Stock so
surrendered.
f. The corporation shall at all times reserve and keep available
for issuance upon the conversion of the Series B Preferred Stock, free from any
preemptive rights, such number of its authorized but unissued shares of Common
Stock as will from time to time be sufficient to permit the conversion of all
outstanding shares of Series B Preferred Stock, and shall take all action
required to increase the authorized number of shares of Common Stock if
necessary to permit the conversion of all outstanding shares of Series B
Preferred Stock.
g. The Conversion Ratio will be subject to adjustment from time
to time as follows:
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(1) In case the corporation shall at any time or from
time to time after the Issue Date (A) pay a dividend, or make a distribution,
on the outstanding shares of Common Stock in shares of Common Stock, (B)
subdivide the outstanding shares of Common Stock, (C) combine the outstanding
shares of Common Stock into a smaller number of shares or (D) issue by
reclassification of the shares of Common Stock any shares of capital stock of
the corporation, then, and in each such case, the Conversion Ratio in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the holder of any shares of Series B
Preferred Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock or other securities of the
corporation which such holder would have owned or have been entitled to receive
after the happening of any of the events described above, had such shares of
Series B Preferred Stock been surrendered for conversion immediately prior to
the happening of such event or the record date therefor, whichever is earlier.
An adjustment made pursuant to this clause (i) shall become effective (x) in
the case of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares of
Common Stock entitled to receive such dividend or distribution, or (y) in the
case of such subdivision, reclassification or combination, at the close of
business on the day upon which such corporate action becomes effective. No
adjustment shall be made pursuant to this clause (i) in connection with any
transaction to which paragraph (h) applies.
(2) In case the corporation shall issue shares of Common
Stock (or rights, warrants or other securities convertible into or exchangeable
for shares of Common Stock) after the Issue Date at a price per share (or
having a conversion price per share) less than the Current Market Price as of
the date of issuance of such shares or of such convertible securities, then,
and in each such case, the Conversion Ratio shall be adjusted so that the
holder of each share of Series B Preferred Stock shall be entitled to receive,
upon the conversion thereof, the number of shares of Common Stock determined by
multiplying (A) the applicable Conversion Ratio on the day immediately prior to
such date by (B) a fraction, the numerator of which shall be the sum of (1) the
number of shares of Common Stock outstanding on such date and (2) the number of
additional shares of Common Stock issued (or into which the convertible
securities may convert), and the denominator of which shall be the sum of (x)
the number of shares of Common Stock outstanding on such date and (y) the
number of shares of Common Stock which the aggregate consideration receivable
by the corporation for the total number of shares of Common Stock so issued (or
into which the rights, warrants or other convertible securities may convert)
would purchase at the Current Market Price on such date. An adjustment made
pursuant to this clause (2) shall be made on the next Business Day following
the date on which any such issuance is made and shall be effective
retroactively immediately after the close of business on such date. For
purposes of this clause (2), the aggregate consideration receivable by the
corporation in connection with the issuance of shares of Common Stock or of
rights, warrants or other securities convertible into shares of Common Stock
shall be deemed to be equal to the sum of the aggregate offering price (before
deduction of underwriting discounts or commissions and expenses payable to
third parties) of all such Common Stock, rights, warrants and convertible
securities plus the minimum aggregate amount, if any, payable upon exercise or
conversion of any such, rights, warrants and convertible securities into shares
of Common Stock. The issuance
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of any shares of Common Stock pursuant to (a) a dividend or distribution on, or
subdivision, combination or reclassification of, the outstanding shares of
Common Stock requiring an adjustment in the Conversion Ratio pursuant to clause
(1) of this paragraph (g), or (b) any employee benefit or stock option plan or
program of the corporation, or (c) any employment or option agreement with an
officer of the corporation (or any of its Subsidiaries) hired after the Issue
Date and approved by the Board of Directors or (d) any option, warrant, right,
or convertible security outstanding as of the date hereof, or (e) the terms of
a joint venture agreement approved by the Board of Directors, if immediately
after such issuance, the aggregate number of shares of Common Stock issued
pursuant to this subclause (e) does not exceed 600,000 shares, shall not be
deemed to constitute an issuance of Common Stock or convertible securities by
the corporation to which this clause (2) applies. In addition, (A) Common
Stock or convertible securities issued to acquire, or in the acquisition of,
all or any portion of a business as a going concern, in an arm's length
transaction between the Company and a third party which is not an Affiliate of
the Company, whether such acquisition shall be effected by purchase of assets,
exchange of securities, merger, consolidation or otherwise, or (B) Common Stock
or convertible securities issued in a bona fide public offering pursuant to a
firm commitment underwriting, shall not be deemed to constitute an issuance of
Common Stock or convertible securities by the corporation to which this clause
(2) applies. Upon the expiration unexercised of any options, warrants or
rights to convert any convertible securities for which an adjustment has been
made pursuant to this clause (2), the adjustments shall forthwith be reversed
to effect such rate of conversion as would have been in effect at the time of
such expiration or termination had such options, warrants or rights or
convertible securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued. No adjustment shall be made
pursuant to this clause (2) in connection with any transaction to which
paragraph (h) applies.
(3) In case the corporation shall at any time or from
time to time after the Issue Date declare, order, pay or make a dividend or
other distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for securities
of the corporation or any of its Subsidiaries by way of dividend or spinoff),
on its Common Stock, other than dividends or distributions of shares of Common
Stock which are referred to in clause (1) of this paragraph (g) or cash
dividends declared pursuant to a regular dividend policy adopted by the Board
of Directors of the Company and paid out of Current Retained Earnings, as
defined in Section 11 hereof, then the Conversion Ratio shall be adjusted so
that the holder of each share of Series B Preferred Stock shall be entitled to
receive, upon the conversion thereof, the number of shares of Common Stock
determined by multiplying (1) the applicable Conversion Ratio on the day
immediately prior to the record date fixed for the determination of
shareholders entitled to receive such dividend or distribution by (2) a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock for the period of twenty Trading Days preceding such record date,
and the denominator of which shall be such Current Market Price per share of
Common Stock less the Fair Market Value (as defined in Section 11 hereof) per
share of Common Stock (as determined in good faith by the Board of Directors of
the corporation, a certified resolution with respect to which shall be mailed
to each holder of shares of Series B Preferred Stock) of such dividend or
distribution; provided, however, that in the event of a distribution of capital
stock of a Subsidiary of the corporation (a "Spin-Off") made to holders of
shares of Common Stock, the numerator of such fraction shall be the
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sum of the Current Market Price per share of Common Stock for the period of
twenty Trading Days preceding the thirty-fifth Trading Day after the effective
date of such Spin-Off and the Current Market Price of the number of shares (or
the fraction of a share) of capital stock of the Subsidiary which is
distributed in such Spin-Off in respect of one share of Common Stock for the
period of twenty Trading Days preceding such thirty-fifth Trading Day and the
denominator of which shall be the Current Market Price per share of Common
Stock for the period of twenty Trading Days preceding such thirty-fifth Trading
Day. An adjustment made pursuant to this clause (3) shall be made upon the
opening of business on the next Business Day following the date on which any
such dividend or distribution is made and shall be effective retroactively
immediately after the close of business on the record date fixed for the
determination of shareholders entitled to receive such dividend or
distribution; provided, however, that if the proviso to the preceding sentence
applies, then such adjustment shall be made and be effective as of such
thirty-fifth Trading Day after the effective date of such Spin-Off. No
adjustment shall be made pursuant to this clause (3) in connection with any
transaction to which paragraph (h) applies.
(4) For purposes of this paragraph (g), the number of
shares of Common Stock at any time outstanding shall not include any shares of
Common Stock then owned or held by or for the account of the corporation.
(5) The term "dividend," as used in this paragraph (g)
shall mean a dividend or other distribution upon Common Stock of the
corporation.
(6) Anything in this paragraph (g) to the contrary
notwithstanding, the corporation shall not be required to give effect to any
adjustment in the Conversion Ratio unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Ratio by at least
one one-hundredth of one share of Common Stock, and when the cumulative net
effect of more than one adjustment so determined shall be to change the
Conversion Ratio by a least one one-hundredth of one share of Common Stock,
such change in Conversion Ratio shall thereupon be given effect.
(7) The certificate of any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
corporation (which may be the firm of independent public accountants regularly
employed by the corporation) shall be presumptively correct for any computation
made under this paragraph (g).
(8) If the corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the number of shares of
Common Stock issuable upon exercise of the right of conversion granted by this
paragraph (g) or in the Conversion Ratio then in effect shall be required by
reason of the taking of such record.
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(9) There shall be no adjustment of the Conversion Ratio
in case of the issuance of any stock of the corporation in a merger,
reorganization, acquisition or other similar transaction except as set forth in
paragraphs (g)(1), (g)(2) and (h) of this Section 8.
h. In case of any capital reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
paragraph (g)(1) of this Section 8), or in case of any merger of the
corporation with or into another corporation, or in case of any sale or
conveyance to another corporation of all or substantially all of the assets or
property of the corporation (each of the foregoing being referred to as a
"Transaction"), at the option of the holder of any shares of Series B Preferred
Stock (i) each share of Series B Preferred Stock then outstanding shall
thereafter be convertible into, in lieu of the Common Stock issuable upon such
conversion prior to consummation of such Transaction, the kind and amount of
shares of stock and other securities and property receivable (including cash or
securities of the Surviving Person (as defined in Section 11 hereof)) upon the
consummation of such Transaction by a holder of that number of shares of Common
Stock into which one share of Series B Preferred Stock was convertible
immediately prior to such Transaction (including, on a pro rata basis, the
cash, securities or property received by holders of Common Stock in any tender
or exchange offer that is a step in such Transaction), or (ii) each share of
Series B Preferred Stock shall entitle the holder thereof to receive, upon
presentation of the certificate therefor to the Surviving Person (as defined in
Section 11 hereof) at any time subsequent to the consummation of such
Transaction (1) if the Surviving Person is a Qualified Person (as defined in
Section 11 hereof), that number of shares of Survivor Common Stock (as defined
in Section 11 hereof) of the Surviving Person determined by multiplying the
number of shares of Common Stock into which such share of Series B Preferred
Stock was convertible immediately prior to the consummation of such Transaction
by a fraction, the numerator of which is the Current Market Price of the Common
Stock immediately prior to the consummation of such Transaction and the
denominator of which is the Current Market Price of the Survivor Common Stock
of the Surviving Person for the twenty Trading Days preceding the consummation
of the Transaction giving rise to the adjustment in this paragraph (h) or (2)
if the Surviving Person is not a Qualified Person, cash equal to the Fair
Market Value, as of the consummation of such Transaction (computed with
interest), of the securities or other property to which it would have been
entitled under clause (i) above, as determined by an independent investment
banking firm (with an established national reputation as a valuer of equity
securities); provided, however, that in the event that the per share
consideration receivable by the holders of Common Stock upon the consummation
of such Transaction is equal to at least 125% of the Conversion Price, each
share of Series B Preferred Stock then outstanding shall be convertible in
accordance with clause (i) of this Section 8(h), whether or not the Surviving
Person is a Qualified Person. In any such case, if necessary, appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions set forth in this Section 8 with respect to
rights and interests thereafter of the holders of shares of Series B Preferred
Stock to the end that the provisions set forth herein for the protection of the
conversion rights of the Series B Preferred Stock shall thereafter be
applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of the shares of
Series B Preferred Stock remaining outstanding (with such adjustments in the
conversion price and number of shares issuable upon conversion and such other
adjustments in the provisions hereof as the Board
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of Directors shall determine to be appropriate). In case securities or
property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 8 shall be deemed
to apply, so far as appropriate and as nearly as may be, to such other
securities or property.
Notwithstanding anything contained herein to the contrary, the
corporation will not effect any Transaction unless, prior to the consummation
thereof, the Surviving Person thereof shall assume, by written instrument
mailed to each holder of shares of Series B Preferred Stock, the obligation to
deliver to such holder such cash, property or securities to which, in
accordance with the foregoing provisions, such holder is entitled.
i. In case at any time or from time to time the corporation shall
pay any dividend or make any other distribution to the holders of its Common
Stock, or shall offer for subscription pro rata to the holders of its Common
Stock any additional shares of stock of any class or any other right, or there
shall by any capital reorganization or reclassification of the Common Stock of
the corporation or merger of the corporation with or into another corporation,
or any sale or conveyance to another corporation of the property of the
corporation as an entirety or substantially as an entirety, or there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the
corporation, then, in any one or more of said cases the corporation shall give
at least twenty days prior written notice (the time of mailing of such notice
shall be deemed to be the time of giving thereof) to the registered holders of
the Series B Preferred Stock at the addresses of each as shown on the books of
the corporation maintained by the transfer agent thereof as of the date on
which (i) the books of the corporation shall close or a record shall be taken
for such stock dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, merger, sale or conveyance, dissolution,
liquidation or winding up shall take place, as the case may be, provided that
in the case of any Transaction to which paragraph (h) applies the corporation
shall give at least thirty days prior written notice as aforesaid. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall participate in said dividend, distribution or subscription rights
or shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger, sale
or conveyance or participate in such dissolution, liquidation or winding up, as
the case may be. Failure to give such notice shall not invalidate any action
so taken.
Section 9. Reports as to Adjustments. Upon any adjustment of
the Conversion Ratio then in effect and any increase or decrease in the number
of shares of Common Stock issuable upon the operation of the conversion set
forth in Section 8 hereof, then, and in each such case, the corporation shall
promptly deliver to the transfer agent of the Series B Preferred Stock and
Common Stock, a certificate signed by the President or a Vice President and by
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the corporation setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was calculated
and specifying the Conversion Ratio then in effect following such adjustment
and the increased or decreased number of shares issuable upon the conversion
set forth in Section 8 hereof. The corporation shall also promptly after the
making of such adjustment give written notice to the registered holders of the
Series B Preferred Stock at the address of each holder as
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shown on the books of the corporation maintained by the Transfer Agent thereof,
which notice shall state the Conversion Ratio then in effect, as adjusted, and
the increased or decreased number of shares issuable upon the exercise of the
right of conversion granted by Section 8 hereof, and shall set forth in
reasonable detail the method of calculation of each and a brief statement of
the facts requiring such adjustment. Where appropriate, such notice to holders
of the Series B Preferred Stock may be given in advance and included as part of
the notice required under the provisions of Section 8(i) hereof.
Section 10. Certain Covenants. Any registered holder of Series B
Preferred Stock may proceed to protect and enforce its rights and the rights of
such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of
any provision in this Article Three, or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
Section 11. Definitions. The following terms shall have the
meanings indicated:
"Adjustment Period" shall mean the period of five consecutive Trading
Days preceding the date as of which the Fair Market Value of a security is to
be determined.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by agreement or otherwise.
"Business Day" shall mean any day other than Saturday, Sunday or a day
on which banking institutions in the State of California are authorized or
obligated by law or executive order to close.
"CGCL" shall mean the California General Corporation Law, as amended.
"Conversion Price" shall mean an amount equal to the Stated Value
divided by the Conversion Ratio (as adjusted pursuant to paragraph (g) of
Section 8 hereof).
"Current Market Price," when used with reference to shares of Common
Stock or other securities on any date, shall mean the closing price per share
of Common Stock or such other securities on such date and, when used with
reference to shares of Common Stock or other securities for any period shall
mean the average of the daily closing prices per share of Common Stock or such
other securities for such period. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted
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to trading on the New York Stock Exchange or, if the Common Stock or such other
securities are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Common Stock or such other securities are listed or
admitted to trading. If the Common Stock is not listed or admitted to trading
on any national securities exchange, the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or,
if on any such date the Common Stock or such other securities are not quoted by
any such organization, the average of the closing bid and asked prices are
furnished by a professional market maker making a market in the Common Stock or
such other securities selected by the Board of Directors of the corporation.
If the Common Stock or such other securities are not publicly held or so listed
or publicly traded, "Current Market Price" shall mean the Fair Market Value per
share of Common Stock or of such other securities as determined in good faith
by the Board of Directors of the corporation based on an opinion of an
independent investment banking firm with an established national reputation as
a valuer of securities, which opinion may be based on such assumptions as such
firm shall deem to be necessary and appropriate.
"Current Retained Earnings" means cumulative retained earnings earned
in the four fiscal quarters immediately preceding the quarter in which the
dividend is paid to the extent such earnings have not previously been paid as
dividends.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Exchange Act
shall include reference to the comparable section, if any, of any such similar
Federal statute.
"Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the corporation or any other
issue which are publicly traded, the average of the Current Market Prices of
such shares or securities for each day of the Adjustment Period. The "Fair
Market Value" of any security which is not publicly traded or of any other
property shall mean the fair value thereof as determined by an independent
investment banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors of the
corporation or a committee thereof, or, if no such investment banking or
appraisal firm is in the good faith judgment of the Board of Directors or such
committee available to make such determination, as determined in good faith by
the Board of Directors of the corporation or such committee.
"Issue Date" shall mean the first date on which shares of Series B
Preferred Stock are issued.
"Junior Dividend Stock" shall mean (i) the Common Stock and (ii) any
other capital stock of the corporation which ranks junior as to dividends to
the Series B Preferred Stock.
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"Junior Liquidation Stock" shall mean (i) the Common Stock and (ii)
any other capital stock of the corporation which ranks junior upon liquidation,
dissolution or winding up to the Series B Preferred Stock.
"Liquidation Preference" with respect to a share of Series B Preferred
Stock shall mean the Stated Value per share, plus an amount equal to all
accrued but unpaid dividends.
"Parity Dividend Stock" shall mean any capital stock of the
corporation ranking on a parity as to dividends with the Series B Preferred
Stock.
"Parity Liquidation Stock" shall mean any capital stock of the
corporation ranking on a parity upon liquidation, dissolution or winding up
with the Series B Preferred Stock.
"Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Qualified Person" shall mean any Person that, immediately after
giving effect to the applicable Transaction, (i) is a solvent corporation or
other entity organized under the laws of any State of the United States of
America having its common stock or, in the case of an entity other than a
corporation, equivalent equity securities, listed on the New York Stock
Exchange or the American Stock Exchange or quoted by the NASDAQ National Market
System or any successor thereto or comparable system, and such common stock or
equivalent equity security continues to meet the requirements for such listing
or quotation and (ii) is required to file, and in each of its three fiscal
years immediately preceding the consummation of the applicable Transaction (or
since its inception) has filed, reports with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Exchange Act.
"Restated Articles of Incorporation" shall mean the Restated Articles
of Incorporation of the corporation, as amended from time to time.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"Surviving Person" shall mean the continuing or surviving Person of a
merger or other business combination, the Person receiving a transfer of all or
a substantial part of the properties and assets of the corporation, or the
Person merging into the corporation in a merger or other business combination
in which the corporation is the continuing or surviving Person, but in
connection with which the Series B Preferred Stock or Common Stock of the
corporation is exchanged or converted into the securities of any other Person
or cash or any other property; provided, however, if such surviving Person is a
direct or indirect Subsidiary of a Qualified Person, the parent entity that is
a Qualified Person shall be the Surviving Person.
"Survivor Common Stock" with respect to any Surviving Person shall
mean any shares of such Surviving Person of any class or series which has no
preference or priority in the payment
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of dividends or in the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Surviving Person and which is
not subject to redemption by such Surviving Person; provided, however, that if
at any time there shall be more than one such class or series, the shares of
each such class and series issuable upon conversion of the Series B Preferred
Stock then being converted shall be substantially in the proportion to the
total number of shares of each such class and series.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, a Business Day.
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EXHIBIT B
FORM OF OPINIONS TO BE RENDERED BY
FRIED, FRANK, HARRIS, XXXXXXX & XXXXXXXX
1. The Company is a corporation validly existing and in
good standing under the laws of the State of California and has the corporate
power and authority to own, lease and operate its properties and to carry on
its business as now conducted.
2. The Certificate of Determination for the Series B
Preferred Stock has been duly authorized and filed with the Secretary of State
of California. Upon issuance and delivery of the shares of Series B Preferred
Stock in accordance with the Share Exchange Agreement, the holder of such
shares shall be entitled to the powers, preferences and rights set forth in the
Certificate of Determination.
3. The Company has full corporate power and authority to
execute and deliver the Registration Rights Amendment, and to execute, deliver
and perform the Agreement and to consummate the transactions contemplated by
the Agreement.
4. The execution and delivery of the Registration Rights
Amendment, and the execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated by the Agreement, have been duly
and validly authorized by the Board of Directors of the Company and, as to the
Exchange, by the shareholders of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the Agreement
or to consummate the transactions contemplated by the Agreement.
5. The Agreement and the Registration Rights Amendment
have been duly and validly executed and delivered by the Company and each of
the Agreement and the Registration Rights Amendment is enforceable against the
Company in accordance with its respective terms (subject to (a) applicable
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
similar laws from time to time in effect affecting creditors' rights generally
and (b) general principles of equity (including, without limitation, standards
of materiality, good faith, fair dealing and reasonableness and limits on the
availability of equitable remedies), whether such principles are considered in
a proceeding at law or in equity).
6. The shares of Series B Preferred Stock being issued
to Trefoil pursuant to the Agreement are duly authorized and, when issued and
delivered in accordance with the Agreement, will be validly issued, fully paid
and nonassessable.
7. The number of shares of Common Stock initially
issuable upon conversion of the shares of Series B Preferred Stock to be issued
pursuant to the Agreement at the initial conversion price set forth in the
Certificate of Determination have been duly and validly authorized and reserved
for issuance and, when issued upon such conversion in accordance with the
Certificate of Determination, will be validly issued, fully paid and
nonassessable.
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EXHIBIT C
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT TO REGISTRATION RIGHTS AGREEMENT ("Amendment") is
entered into as of _________, 1996, by and between L.A. Gear, Inc., a
California corporation (the "Company"), and Trefoil Capital Investors, L.P., a
Delaware limited partnership (the "Investor").
WHEREAS, the Company and the Investor entered into a certain
Registration Rights Agreement, dated as of May 27, 1991 (the "Agreement").
WHEREAS, the Company and the Investor mutually desire to amend the
Agreement to facilitate the exchange of all of the Investor's shares of Series
A cumulative convertible preferred stock ("Series A Preferred Stock") and any
accrued and unpaid dividends thereon, for shares of Series B cumulative
convertible preferred stock ("Series B Preferred Stock") in accordance with the
Share Exchange Agreement, dated as of December __, 1995, between the Company
and the Investor (the "Exchange Agreement").
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and in the Exchange Agreement and intending to be legally bound, the
parties agree as follows:
SECTION ONE - BACKGROUND
1.1 The Background Section is hereby amended in its entirety to
read as follows:
Background. Pursuant to a Stock Purchase Agreement dated as
of May 27, 1991, as amended (the "Purchase Agreement"), between the
Company and the Investor, the Investor, subject to the terms and
conditions contained therein, purchased from the Company 1,000,000
shares of the Company's Series A Cumulative Convertible Preferred
Stock, no par value. Pursuant to a Share Exchange Agreement, dated as
of December __, 1995, between the Company and the Investor, the
Investor has, subject to the terms and conditions contained therein,
agreed to exchange its shares of the Series A Preferred Stock for one
million ______________ (__________) shares of Series B Cumulative
Convertible Preferred Stock (the "Preferred Stock"). The Preferred
Stock is convertible into shares of the Company's common stock, no par
value (the "Common Stock").
SECTION TWO - DEFINITIONS
2.1 The definition of "Certificate of Determination" in Section
Two is hereby amended in its entirety to read as follows:
"Certificate of Determination" means the Certificate of
Determination of Rights and Preferences of Series B Cumulative
Convertible Preferred Stock of the Company.
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2.2 The definition of "Conversion Shares" in Section Two is hereby
amended in its entirety to read as follows:
"Conversion Shares" means the shares of Common Stock issued or
issuable upon conversion of the Preferred Stock or upon conversion of
accrued dividends on Preferred Stock.
2.3 The definition of "Registrable Securities" in Section Two is
hereby amended in its entirety to read as follows:
"Registrable Securities" means (i) any Conversion Shares, (ii)
shares of Common Stock acquired by the Investor after the Closing Date
(as defined in the Purchase Agreement) and (iii) any shares of the
Preferred Stock. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when
(a) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act (as
defined below) and such securities shall have been disposed of in
accordance with such registration statement, (b) they shall have been
sold as permitted by, and in compliance with, the Securities Act, (c)
they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent public distribution of them
shall not require registration of them under the Securities Act, or
(d) they shall have ceased to be outstanding.
2.4 Section Two of the Agreement is hereby amended by the addition
of the following definition:
"Preferred Stock" means the Series B Cumulative Convertible
Preferred Stock.
SECTION THREE - REGISTRATION UNDER SECURITIES ACT, ETC.
3.1 Section 3.2(c) is hereby amended in its entirety to read as
follows:
Special Meaning of "Registrable Security". For purposes of
this Section 3.2, the term "Registrable Security" shall mean all
Conversion Shares and any other shares of Common Stock acquired by the
Investor prior to the third anniversary of the Closing Date (as
defined in the Purchase Agreement).
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SECTION EIGHT-ASSIGNMENT; CALCULATION OF PERCENTAGE
INTERESTS IN REGISTRABLE SECURITIES
4.1 Section 8(a) is hereby amended in its entirety to read as
follows:
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and, with respect
to the Company, its respective successors and assigns and, with
respect to the Investor, its respective successors and assigns, and
any holder of any Registrable Securities, subject to the provisions
respecting the minimum numbers of percentages of shares of Registrable
Securities required in order to be entitled to certain rights, or take
certain actions, contained herein. The Investor named in the first
paragraph of this Agreement (and not any other holder of Registrable
Securities or any other Person) shall be permitted, in connection with
a transfer or disposition of Registrable Securities, to impose
conditions or constraints on the ability of the transferee, as a
holder of Registrable Securities, to request a registration pursuant
to Section 3.1 and shall provide the Company with copies of such
conditions or constraints and the identity of such transferees.
3
40
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
L.A. GEAR, INC.
By: _________________________________
Name:
Title:
TREFOIL CAPITAL INVESTORS, L.P.
By: TREFOIL INVESTORS, INC., its
general partner
By: _________________________________
Name:
Title:
4
