Exhibit 1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 15, 2004, between
Klaussner Furniture Industries, Inc., a North Carolina corporation ("KFI"), and
Xxxxxx X. Xxxxxxxxxx, a citizen and resident of the State of New York
("Greenfield").
WITNESSETH:
WHEREAS, KFI is the owner of 10,000 shares of the Series A Preferred
Stock (the "Preferred Stock") of Xxxxxxxx Convertibles, Inc., a Delaware
corporation ("JCI"); and
WHEREAS, JCI is a customer of KFI; and
WHEREAS, Greenfield is the Chief Executive Officer of JCI; and
WHEREAS, on the terms stated herein, KFI desires to provide Greenfield
with an incentive to remain Chief Executive Officer of JCI by granting him an
option to purchase 2,106 shares of the Preferred Stock owned by KFI for $712.25
per share (the equivalent of 300,000 shares of JCI Common Stock at $5.00 per
share if such shares of Preferred Stock were converted into Common Stock on the
date hereof); and
WHEREAS, the Board of Directors of JCI has approved and consented to
the option granted herein;
NOW, THEREFORE, KFI and Greenfield agree as follows:
1. Option. KFI hereby grants to Greenfield an option to purchase, on the
terms and subject to the conditions hereinafter set forth, all or any
part of an aggregate of 2,106 shares of the Preferred Stock owned by
KFI at the purchase price of $712.25 per share (the "Option").
2. Term. The Option may be exercised from and after the date hereof until
the earliest of:
(a) November 30, 2009;
(b) The consummation by JCI of any merger or consolidation in which it is
not the surviving corporation or pursuant to which its stockholders
exchange their common stock or the dissolution or liquidation of JCI or
the sale by JCI of all or substantially all of its assets;
(c) Greenfield ceasing to be Chief Executive Officer of JCI for any reason;
provided, however, that in the event of Greenfield's death while he is
Chief Executive Officer of JCI, then his estate shall have the right to
exercise the Option for a period of one year after his death, but in no
event after November 30, 2009, or the occurrence of any of the
transactions described in (b) above; or
(d) Fifteen (15) business days following written notice to Greenfield (or
his estate) that KFI has received a bona fide offer to purchase, on
terms satisfactory to KFI in its sole discretion, at least 5,000 shares
of Preferred Stock (or 712,250 shares of Common Stock upon conversion
of the Preferred Stock) in a single transaction or series of related
transactions.
Upon the earliest to occur of the foregoing events, the Option shall terminate
and all rights of Greenfield hereunder shall expire; provided, however, that if
notice is given by KFI pursuant to Section 2(d) and KFI does not consummate a
sale pursuant to the bona fide offer to purchase within 90 days after the notice
is given, then the Option shall be reinstated to the extent then exercisable,
subject to all of the terms of this Agreement (including Section 2(d) with
respect to any later bona fide offer to purchase).
3. Exercise of Option. The Option may be exercised from time to time by
Greenfield's delivery to KFI of written notice of exercise, which notice shall
specify the number of shares to be purchased and be accompanied by payment of
the purchase price in immediately available funds. The date of actual receipt by
KFI of such notice and such purchase price shall be deemed the date of exercise
of the option. Notwithstanding the foregoing, the Option shall not be exercised,
in whole or in part, and no transfer of shares of Preferred Stock subject to the
Option shall be made, if any requisite approval or consent of any governmental
authority having jurisdiction in the matter shall not have been secured or if
the transfer would violate any federal, state or local law, regulation or order.
4. Transfer of Shares Upon Exercise of Option. Upon exercise of the Option as
provided in Section 3 above, KFI shall take such action as may be reasonably
requested by Greenfield to effect a transfer of the shares of Preferred Stock
purchased thereby. However, Greenfield recognizes that neither the Option nor
the shares of Preferred Stock transferable upon its exercise have been
registered under any federal or state laws governing the issuance and sale of
securities and that KFI has no obligation to effect registration under any such
laws. Therefore, Greenfield agrees that any and all shares of Preferred Stock
purchased upon exercise of the Option shall be acquired for investment and not
with a view to, or for sale in connection with, any distribution thereof, and
that, at the time he exercises all or any portion of the Option, he will furnish
to KFI and JCI such documentation as either of them shall reasonably require in
order to assure compliance with all applicable securities laws in effect at the
time of exercise. Greenfield consents to such other action as KFI or JCI deems
necessary or appropriate in order to assure compliance with all such laws,
including but not limited to placing restrictive legends on certificates
evidencing the shares of Preferred Stock purchased upon exercise of the Option.
Notwithstanding the foregoing, subject to JCI's consent, KFI will not
unreasonably withhold its consent to the shares of JCI Common Stock transferred
or transferable upon exercise of the Option being included in any registration
statement filed pursuant to the Registration Rights Agreement dated December 11,
1997 between KFI and JCI; provided, however, that the filing of any such
registration statement shall be at the sole discretion of KFI.
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5. No Assignment. Except as provided in Section 2(c) with respect to the death
of Greenfield, the Option shall not be transferred, assigned, pledged or
hypothecated in any way, whether by operation of law or otherwise. In the event
of any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of
the Option or any right or privilege confirmed hereby contrary to the provisions
hereof, the Option and the rights and privileges of Greenfield hereunder shall
immediately become null and void.
6. Notices. Any notices to KFI under this Agreement shall be in writing and
delivered to KFI, c/o Senior Vice President and Chief Financial Officer, at 000
Xxxxxxxx Xxxxxx, Post Office Xxxxxx 000, Xxxxxxxx, Xxxxx Xxxxxxxx 00000, or at
such other address as may be specified by KFI from time to time. Any notices to
Greenfield hereunder shall be in writing and delivered to him at Xxxxxxxx
Convertibles, Inc., 000 Xxxxxxxxx Xxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000, or at
such other address as may be specified by Greenfield (or his estate) from time
to time.
7. Adjustments. The shares of stock subject to the Option and the option price
shall be adjusted in the event KFI converts the Preferred Stock into JCI Common
Stock and such adjustment shall reflect any increase or decrease in the Common
Stock of JCI that is effected after the date hereof as the result of any stock
dividend, subdivision, split-up, combination or similar recapitalization or
reclassification. If the Preferred Stock is converted, then the terms and
provisions of this Agreement shall apply to the Common Stock received by KFI on
conversion and the term "Common Stock" shall be substituted for "Preferred
Stock."
8. Binding Effect. This Option Agreement shall be binding upon and inure to the
benefit of Greenfield and his personal representatives, but neither this
Agreement nor any rights hereunder shall be assignable or otherwise transferable
except as expressly set forth in Section 2(c) of this Agreement.
IN WITNESS WHEREOF, this Stock Option Agreement is executed as of
December 15, 2004.
KLAUSSNER FURNITURE INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Senior
Vice President and Chief
Financial Officer
/s/ Xxxxxx X. Xxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxx
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