XXXXXX'X FURNITURE, INC.
SERIES A CONVERTIBLE PREFERRED STOCK
SECURITIES PURCHASE AGREEMENT
Dated as of January 11, 2000
TABLE OF CONTENTS
PAGE
1. PURCHASE AND SALE OF THE SERIES A PREFERRED STOCK.............1
1.1. Authorization to Sell the Series A Preferred Stock............1
1.2. Closings......................................................1
1.3. Deliveries at Closings........................................2
1.4. Restructuring of Certain Indebtedness.........................3
1.5. Definitions...................................................3
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................3
2.1. Organization and Qualification................................3
2.2. Due Authorization.............................................3
2.3. Subsidiaries..................................................4
2.4. SEC Reports...................................................4
2.5. Financial Statements..........................................4
2.6. Actions Pending; Compliance with Laws.........................5
2.7. Title to Properties; Insurance................................5
2.8. Governmental Consents, etc....................................6
2.9. Holding Company Act and Investment Company Act................6
2.10. Taxes.........................................................6
2.11. Conflicting Agreements and Charter Provisions.................7
2.12. Capitalization................................................7
2.13. Issuance, Sale and Delivery of the Series A Preferred Stock...8
2.14. Registration Under Exchange Act...............................8
2.15. ERISA.........................................................9
2.16. Possession of Franchises, Licenses, etc.......................9
2.17. Environmental and Other Regulations..........................10
2.18. Patents and Trademarks.......................................10
2.19. Material Contracts and Obligations...........................10
2.20. Books and Records............................................11
2.21. Transactions with Related Parties............................11
2.22. Brokers......................................................11
2.23. Accuracy of Information......................................11
2.24. Offering of Series A Preferred Stock.........................12
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............12
3.1. Organization and Qualification...............................12
3.2. Due Authorization............................................12
3.3. Conflicting Agreements and Other Matters.....................13
3.4. Acquisition for Investment...................................13
3.5. Brokers or Finders...........................................13
3.6. Accredited Investor..........................................13
4. COVENANTS OF THE COMPANY.....................................13
4.1. Limitation on Senior Equity Securities ......................14
4.2. Compliance with Laws.........................................14
4.3. Preservation of Franchises and Existence.....................14
4.4. Use of Proceeds..............................................14
4.5. Insurance....................................................14
4.6. Payment of Taxes and Other Charges...........................14
4.7. Effect of Breach.............................................15
4.8. ERISA........................................................15
4.9. Financial Statements and Other Reports.......................16
4.10. Inspection of Property.......................................17
4.11. Lost, Stolen, Damaged and Destroyed Stock Certificates.......18
4.12. Related Party Transactions...................................18
4.13. Operations in Accordance with Business Plan..................18
4.14. Reservation of Shares........................................18
4.15. Notice of Breach.............................................19
4.16. Limitation on Dividends .....................................19
4.17 Right of First Refusal.......................................19
5. RESTRICTIONS ON TRANSFER.....................................20
6. EVENT OF DEFAULT AND REMEDIES................................20
6.1. Event of Default.............................................21
6.2. Remedies.....................................................21
6.3. Conduct no Waiver............................................21
6.4 Remedies Cumulative..........................................22
7. CONDITIONS...................................................22
7.1 Conditions to Each Party's Obligations to Effect the
Transactions Contemplated Hereby.............................22
7.2 Conditions to Purchasers' Obligations to Effect the
Transactions Contemplated Hereby.............................23
8. INTERPRETATION...............................................24
8.1. Definitions..................................................24
8.2. Accounting Principles........................................27
9. MISCELLANEOUS................................................27
9.1. Severability.................................................27
9.2. Specific Enforcement.........................................28
9.3. Entire Agreement.............................................28
9.4. Counterparts.................................................28
9.5. Notices and Other Communications.............................28
9.6. Amendments...................................................29
9.7. Cooperation..................................................30
9.8. Successors and Assigns.......................................30
9.9. Expenses and Remedies........................................30
9.10. Survival of Representations and Warranties...................32
9.11. Transfer of Series A Preferred Stock.........................32
9.12. Governing Law; Consent to Jurisdiction.......................33
9.13. Publicity....................................................34
9.14. Signatures...................................................34
Exhibit A - Form of Amended and Restated Stockholders' Agreement
Exhibit B - Form of Opinion of Xxxxxxxx & Xxxxxxxx LLP
Exhibit C - Form of Amended and Restated Registration Rights Agreement
Exhibit D - Form of Indebtedness Amendment
This Securities Purchase Agreement, dated as of January 11, 2000 (this
"Agreement"), between Xxxxxx'x Furniture, Inc., a Delaware corporation
(including its predecessors, the "Company") and the purchasers listed on
the signature pages hereto (each a "Purchaser", and collectively, the
"Purchasers").
WHEREAS, the Purchasers wish to severally purchase from the Company,
and the Company wishes to sell to the Purchasers, an aggregate of 380,000
shares of the Company's Series A Convertible Preferred Stock, par value
$.001 per share (the "Series A Preferred Stock"), at an aggregate purchase
price of $19,000,000.
WHEREAS, in connection with the purchase and sale of the Series A
Preferred Stock, the Purchasers, the Company and the stockholders listed on
the signature pages thereof, will enter into an amended and restated
Stockholders Agreement, substantially in the form attached hereto as
Exhibit A (the "Stockholders Agreement").
WHEREAS, the Purchasers and the Company desire to provide for such
purchase and sale and to establish various rights and obligations in
connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as
follows:
SECTION 1. PURCHASE AND SALE OF THE SERIES A PREFERRED STOCK.
1.1 Authorization to Sell the Series A Preferred Stock. Subject to the
terms and conditions of this Agreement, the Company has duly authorized the
issuance and sale of the Series A Preferred Stock.
1.2 Closings. The transactions contemplated hereby will take place in
two closings. The first closing shall be held on or prior to January 18,
2000 (the "First Closing") at the offices of Skadden, Arps, Slate, Xxxxxxx
& Xxxx LLP ("SASM&F"), 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000-0000 at 9:00 a.m., or at such place, date and time as
shall be mutually agreed by the Company and the Initial Purchasers (the
"First Closing Date"). The second closing shall be held on or prior to
January 18, 2000 (the "Second Closing" and together with the First Closing,
the "Closings") at SASM&F, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000-0000, at 9:00 a.m, or such place, date and time as shall be mutually
agreed by the Company and the Individual Purchasers (the "Second Closing
Date" and together with the First Closing Date, the "Closing Dates").
1.3 Deliveries at Closings.
----------------------
(a) At the First Closing:
(i) the Company shall execute and deliver an Amended and Restated
Stockholders Agreement in the form of Exhibit A hereto;
(ii) Xxxxxxxx & Xxxxxxxx LLP, counsel to the Company, shall
deliver to the Initial Purchasers an opinion dated the First Closing
Date substantially in the form of Exhibit B hereto;
(iii) the Company shall execute and deliver an Amended and
Restated Registration Rights Agreement substantially in the form of
Exhibit C hereto (the "Registration Rights Agreement");
(iv) the Company shall deliver to each Initial Purchaser stock
certificates representing the number of shares of Series A Preferred
Stock to be purchased by such Initial Purchaser, as set forth under
its signature on the signature pages hereto, registered in the name of
such Initial Purchaser or its designee or nominee;
(v) each Initial Purchaser shall pay to the Company, by wire
transfer of immediately available funds, the purchase price for the
Series A Preferred Stock being purchased by such Initial Purchaser;
and
(vi) the Company shall deliver evidence of the restructuring of
certain indebtedness of the Company as described in Section 1.4 below
in form and substance satisfactory to the Initial Purchasers.
(b) At the Second Closing:
(i) Xxxxxxxx & Xxxxxxxx LLP, counsel to the Company, shall
deliver to the Individual Purchasers an opinion dated the Second
Closing Date substantially in the form of Exhibit B hereto;
(ii) the Company shall deliver to each Individual Purchaser stock
certificates representing the number of shares of Series A Preferred
Stock to be purchased by such Individual Purchaser, as set forth under
its signature on the signature pages hereto, registered in the name of
such Individual Purchaser or its designee or nominee; and
(iii) each Individual Purchaser shall pay to the Company, by wire
transfer of immediately available funds, the purchase price for the
Series A Preferred Stock being purchased by such Individual Purchaser.
1.4 Restructuring of Certain Indebtedness. On or before the First
Closing Date, the Company shall execute and deliver an Amendment to the
Note Agreement substantially in the form of Exhibit D hereto (the
"Indebtedness Amendment").
1.5 Definitions. Certain capitalized terms used in this Agreement are
defined in Section 8 hereof.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants as follows:
2.1 Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized and existing in good standing
under the laws of the jurisdiction in which it is incorporated and has the
power to own its respective property and to carry on its respective
business as now being conducted. Each of the Company and its Subsidiaries
is duly qualified as a foreign corporation to do business and in good
standing in every jurisdiction in which the nature of the respective
business conducted or property owned by it makes such qualification
necessary and where the failure so to qualify would be material to the
Company or such Subsidiary, as the case may be.
2.2 Due Authorization. The execution and delivery of this Agreement,
the Stockholders Agreement and the Registration Rights Agreement, and the
issuance and sale of the Series A Preferred Stock by the Company and
compliance by the Company with all the provisions of this Agreement, the
Stockholders Agreement and the Registration Rights Agreement (i) are within
the corporate power and authority of the Company; (ii) do not and will not
require any approval or consent of the stockholders of the Company or any
other Person, other than approvals and consents which have been duly
obtained or which will be obtained pursuant to Section 4.14; and (iii) have
been authorized by all requisite corporate proceedings on the part of the
Company. This Agreement, the Stockholders Agreement and the Registration
Rights Agreement have been duly executed and delivered by the Company and
constitute valid and binding agreements of the Company, enforceable in
accordance with their respective terms, except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought. The Company has furnished to the Purchasers true and correct
copies of the Company's Certificate of Incorporation and By-laws as in
effect on the date of this Agreement.
2.3 Subsidiaries. The Subsidiaries of the Company, all of which are
wholly owned by the Company, together with their jurisdiction of
incorporation, are as set forth on Schedule 2.3 hereto.
2.4 SEC Reports. The Company and its predecessor have filed all proxy
statements, reports and other documents required to be filed by it under
the Exchange Act, since December 31, 1996; and the Company has furnished
the Purchasers copies of its Annual Report on Form 10-K for the fiscal year
ended January 31, 1999, and all proxy statements and reports under the
Exchange Act filed by the Company after such date, each as filed with the
Securities and Exchange Commission (the "Commission") (collectively, the
"SEC Reports"). Each SEC Report was in compliance in all material respects
with the requirements of its respective report form and did not on the date
of filing contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of the date hereof there is no fact not disclosed
in the SEC Reports which is material to the Company.
2.5 Financial Statements. The financial statements (including any
related schedules and/or notes) included in the SEC Reports have been
prepared in accordance with generally accepted accounting principles
consistently followed (except as indicated in the notes thereto) throughout
the periods involved and fairly present the consolidated financial
condition, results of operations, changes in stockholders' equity and cash
flows of the Company and its Subsidiaries as of the dates thereof and for
the periods ended on such dates (in each case subject, as to interim
statements, to changes resulting from year-end adjustments, which in the
aggregate will not be material in amount or effect). The Company and its
Subsidiaries have no material liabilities, contingent or otherwise, not
reflected in the Company's balance sheet as of January 31, 1999 that is
included in the SEC Reports or otherwise referred to in the SEC Reports or
otherwise disclosed to the Purchasers in writing prior to the date of this
Agreement, other than any such liabilities incurred in the ordinary course
of business, consistent with past practice, since January 31, 1999. Since
January 31, 1999, the Company and its Subsidiaries have operated their
respective businesses only in the ordinary course, consistent with past
practice, and no event has occurred that has or is reasonably likely to
have a material adverse effect on the business, financial condition,
operations, results of operations, assets, liabilities or prospects of the
Company or any of its Subsidiaries (a "Material Adverse Effect"), other
than changes disclosed or referred to in the SEC Reports or otherwise
disclosed to the Purchasers in writing prior to the date of this Agreement.
2.6 Actions Pending; Compliance with Laws. There is no action, suit,
investigation or proceeding pending or, to the knowledge of the Company,
threatened by any public official or governmental authority, against the
Company or any of its Subsidiaries or any of their respective properties or
assets by or before any court, arbitrator or governmental body, department,
commission, board, bureau, agency or instrumentality, which questions the
validity or enforceability of, or seeks to enjoin or invalidate this
Agreement, the Stockholders Agreement, the Registration Rights Agreement or
the Series A Preferred Stock or any action taken or to be taken pursuant
hereto or thereto, or, except as set forth in the SEC Reports or as
otherwise disclosed to the Purchasers in writing, which is reasonably
likely to be material to the Company or any of its Subsidiaries, and
neither the Company nor any of its Subsidiaries is in default in any
material respect with respect to any judgment, order, writ, injunction,
decree or award.
2.7 Title to Properties; Insurance. The Company and each of its
Subsidiaries have good and valid title to, or, in the case of property
leased by any of them as lessee, a valid and subsisting leasehold interest
in, their respective properties and assets, free of all liens and
encumbrances other than those referred to in the financial statements of
the Company (or the notes thereto) for the fiscal year ended January 31,
1999, included in the SEC Reports, except in each case for such defects in
title and such other liens and encumbrances which are disclosed in the SEC
Reports or which do not in the aggregate materially detract from the value
to the Company and its Subsidiaries of their respective properties and
assets. The Company and its Subsidiaries maintain insurance in such amounts
(to the extent available in the public market), including self-insurance,
retainage and deductible arrangements, and of such a character as is
reasonable for companies engaged in the same or similar business. All
insurance policies of the Company and its Subsidiaries are disclosed on
Schedule 2.7.
2.8 Governmental Consents, etc. The Company is not required to obtain
any consent, approval or authorization of, or to make any declaration or
filing with, any governmental authority or other Person as a condition to
or in connection with the valid execution, delivery and performance of this
Agreement, the Stockholders Agreement and the Registration Rights Agreement
and the valid offer, issue, sale or delivery of the Series A Preferred
Stock, or the performance by the Company of its obligations in respect
thereof, except for any filings required to effect any registration
pursuant to the Registration Rights Agreement and any filings required
pursuant to state and federal securities laws which will be timely made
after the applicable Closing hereunder.
2.9 Holding Company Act and Investment Company Act. Neither the
Company nor any Subsidiary is: (i) a "public utility company" or a "holding
company," or an "affiliate" or a "subsidiary company" of a "holding
company," or an "affiliate" of such a "subsidiary company," as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended,
or (ii) a "public utility," as defined in the Federal Power Act, as
amended, or (iii) an "investment company" or an "affiliated person" thereof
or an "affiliated person" of any such "affiliated person," as such terms
are defined in the Investment Company Act of 1940, as amended.
2.10 Taxes. (a)The Company and each of its Subsidiaries have filed or
caused to be filed all tax returns which are required to be filed by them,
and all such tax returns are true, complete and correct in all material
respects. The Company and each of its Subsidiaries have paid or caused to
be paid all taxes that have become due, except taxes the validity or amount
of which is being contested in good faith by appropriate proceedings and
with respect to which adequate reserves have been set aside in accordance
with generally accepted accounting principles. The federal income tax
returns of the Company and its Subsidiaries have been examined and reported
on by the Internal Revenue Service (or closed by applicable statutes) and
all tax liabilities including additional assessments have been satisfied
for all fiscal years prior to and including the fiscal year ended December
31, 1993 for the Company and its Subsidiaries. The Company and its
Subsidiaries have paid or caused to be paid, or have established reserves
in accordance with generally accepted accounting principles that the
Company reasonably believes are adequate, for all federal income tax
liabilities and state income tax liabilities applicable to the Company or
any of its Subsidiaries for all fiscal years which have not been examined
and reported on by the taxing authorities (or closed by applicable
statutes).
(b) As of January 31, 1999, the Company did not have any
accumulated "earnings and profits" as determined under section 312 of the
Internal Revenue Code of 1986, as amended (the "Code"). To the best
knowledge and belief of the Company, the Company does not anticipate having
any material current earnings and profits, as determined under section 312
of the Code, for its current taxable year. As of the date hereof, the
Company is not a "United States real property holding corporation" within
the meaning of section 897(c)(2) of the Code. The Company shall not become
a United States real property holding corporation.
2.11 Conflicting Agreements and Charter Provisions. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement
or subject to any charter or bylaw provision or judgment or decree which
has or is reasonably likely to have a Material Adverse Effect. None of (i)
the execution and delivery of this Agreement, the Shareholders Agreement
and the Registration Rights Agreement and the issuance of the Series A
Preferred Stock and (ii) the fulfillment of and compliance with the terms
and provisions hereof and thereof and of the Series A Preferred Stock will
conflict with or result in a breach of the terms, conditions or provisions
of, or give rise to a right of termination under, or constitute a default
under, or result in any violation of, the Certificate of Incorporation or
By-laws of the Company or any Subsidiary or any mortgage, agreement,
instrument, order, judgment, decree, statute, law, rule or regulation to
which the Company or any Subsidiary or any of their respective properties
is subject. Neither the Company nor any of its Subsidiaries (i) is in
default under any outstanding indenture or other debt instrument or with
respect to the payment of principal of or interest on any outstanding
obligation for borrowed money, or (ii) is in default under any of their
respective contracts or agreements, or under any instrument by which the
Company or any of its Subsidiaries is bound which default, in the case of
this clause (ii), individually or in the aggregate with all other such
defaults, would be material to the Company or any of its Subsidiaries.
2.12 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of: (a) 35,000,000 shares of Common Stock,
par value $0.001 per share (the "Common Stock" and, together with the
Series A Preferred Stock, the "Stock"), of which 22,050,328 shares are
validly issued and outstanding, fully paid and nonassessable; (b) warrants
to purchase 2,712,045 shares of Common Stock which are validly issued and
outstanding, fully paid and nonassessable; (c) options to purchase
2,823,458 shares of Common Stock and deferred stock units representing the
right to receive 85,225 shares of Common Stock, all of which are validly
issued and outstanding, fully paid and nonassessable; and (d) 666,667
shares of Preferred Stock, par value $.001 per share, of which no shares
are outstanding, as of the date hereof, and 380,000 shares designated as
Series A Convertible Preferred Stock will be issued and outstanding on the
Second Closing Date after consummation of the transactions contemplated
hereby. All of the outstanding shares of Common Stock have been validly
issued and are fully paid and nonassessable. Except as set forth in the
Stockholders Agreement, no class of capital stock of the Company is
entitled to preemptive rights. Except for the options and warrants listed
above, there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
securities or rights convertible into, shares of any class of capital stock
of the Company, or contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares of
its capital stock or options, warrants or rights to purchase or acquire any
shares of its capital stock. Since August 1, 1996, the Company has not
changed the amount of its authorized capital stock or subdivided or
otherwise changed any shares of any class of its capital stock, whether by
way of reclassification, recapitalization, stock split or otherwise, or
issued or reissued, or agreed to issue or reissue, any of its capital
stock.
2.13 Issuance, Sale and Delivery of the Series A Preferred Stock. The
shares of Series A Preferred Stock being issued to the Initial Purchasers
at the First Closing and the shares of Series A Preferred Stock being
issued to the Individual Purchasers at the Second Closing are duly
authorized and when issued and delivered in accordance herewith will be,
validly issued, fully paid and nonassessable. The 17,272,727 shares of
Common Stock to be issued upon conversion of the Series A Preferred Stock,
when issued and delivered upon such conversion in accordance with the terms
of the Certificate of Designation, will be validly issued, fully paid and
nonassessable. The Company will take all action necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient to reserve shares of Common Stock for issuance upon
conversion of the Series A Preferred Stock, including, without limitation,
obtaining the requisite stockholder approval of any necessary amendment to
the Company's Certificate of Incorporation.
2.14 Registration Under Exchange Act. The Company has not registered
the Series A Preferred Stock as a class pursuant to Section 12 of the
Exchange Act.
2.15 ERISA. No accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Pension Plan (as defined in Section 11) (other than a
Multiemployer Plan (as defined below)). No liability to the PBGC has been,
or is reasonably likely to be, incurred with respect to any Pension Plan
(other than a Multiemployer Plan) by the Company, any of its Subsidiaries
or any ERISA Affiliate (as defined below) which is or would be materially
adverse to the Company, its Subsidiaries and any ERISA Affiliate. Neither
the Company nor any of its Subsidiaries and any ERISA Affiliate has
incurred, or is reasonably likely to incur, any withdrawal liability under
Title IV of ERISA with respect to any Multiemployer Plan which is or would
be materially adverse to the Company, its Subsidiaries and its ERISA
Affiliates and if the Company, its Subsidiaries and ERISA Affiliates, were
to completely withdraw as of the date hereof from each Multiemployer Plan
in which they participate, the Company, its Subsidiaries and its ERISA
Affiliates would not incur any material withdrawal liability under Title IV
of ERISA. Neither the Company nor any of its Subsidiaries has any
obligation to provide post-retirement health benefits to any employee or
former employee. No fiduciary of any employee benefit plan (as defined in
Section 3(3) of ERISA) maintained or contributed to by the Company or any
of its subsidiaries, for the benefit of their respective employees (each an
"Employee Plan") has engaged or caused any Employee Plan to engage in any
transaction prohibited by Section 4975 of the Code or Section 406 of ERISA
which is reasonably likely to subject the Company or any Subsidiary or any
entity the Company or any Subsidiary has an obligation to indemnify to any
tax or penalty imposed under Section 4975 of the Code or Section 502 of
ERISA. Each Employee Plan has been maintained and administered in
compliance with all applicable law including ERISA and the Code in all
material respects. An "ERISA Affiliate" for purposes of this Section is any
trade or business, whether or not incorporated, which, together with the
Company, is under common control, as described in Section 414(b) or (c) of
the Code, and the term "Multiemployer Plan" shall mean any Pension Plan
which is a "multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA).
2.16 Possession of Franchises, Licenses, Etc. The Company and its
Subsidiaries possess all franchises, certificates, licenses, permits and
other authorizations from governmental or political subdivisions or
regulatory authorities and all patents, trademarks, service marks, trade
names, copyrights, licenses and other rights, free from burdensome
restrictions, that are necessary in any material respect to the Company or
any of its Subsidiaries for the ownership, maintenance and operation of
their respective properties and assets, and neither the Company nor any of
its Subsidiaries is in violation of any thereof in any material respect.
2.17 Environmental and Other Regulations. The Company and its
Subsidiaries are in compliance with all applicable laws and regulations
relating to protection of the environment and human health, and are in
compliance in all material respects with all other applicable laws and
regulations, including, without limitation, those relating to equal
employment opportunity and employment safety. There are no claims, notices,
civil, criminal or administrative actions, suits, hearings, investigations,
inquiries or proceedings pending or, to the best knowledge of the Company,
threatened against the Company or any Subsidiary that are based on or
related to any environmental matters, including any disposal of hazardous
substances at any place, or the failure to have any required environmental
permits, and there are no past or present conditions that are likely to
give rise to any liability or other obligations of the Company or any
Subsidiary under any environmental laws.
2.18 Patents and Trademarks. Set forth on Schedule 2.18 is a true and
complete list of all patents, patent applications, trademarks, service
marks, trademark and service xxxx applications, trade names, copyrights and
licenses presently used by the Company or any Subsidiary or necessary for
the conduct of the business of the Company and its Subsidiaries as
conducted and as proposed to be conducted (the "Intellectual Property
Rights"). The Company owns, or has the right to use under the agreements or
upon the terms described on Schedule 2.18, all of the Intellectual Property
Rights. To the best of the Company's knowledge, the business conducted or
proposed to be conducted by the Company and its Subsidiaries does not
infringe or violate any of the patents, trademarks, service marks, trade
names, copyrights, licenses, trade secrets or other proprietary rights of
any other Person. Except as set forth on Schedule 2.18, to the Company's
knowledge, no other Person has any right to or interest in any inventions,
improvements, discoveries or other confidential information utilized by the
Company or any Subsidiary in its business.
2.19 Material Contracts and Obligations. Schedule 2.19 sets forth a
list of the following agreements or commitments of any nature to which the
Company or any Subsidiary is a party or by which it is bound: (a) any
agreement relating to material Intellectual Property Rights, (b) all
employment and consulting agreements, and all employee benefit, bonus,
pension, profit-sharing, stock option, stock purchase and similar plans and
arrangements (other than plans or arrangements providing for less than
$10,000 per employee), (c) all manufacturing, distributor and sales
representative agreements and all agreements with suppliers or vendors if
the value of the payments thereunder is in excess of $100,000, (d) all
agreements or commitments that materially restrict the ability of the
Company or any Subsidiary or Affiliate to engage in any business or line of
business in any location, (e) all agreements or commitments relating to
indebtedness or guarantees of the Company or any Subsidiary if the value of
the payments thereunder is in excess of $100,000 and (f) any other
agreement or commitment which requires future payments by or to the Company
or any Subsidiary in excess of $100,000 or which is otherwise material to
the Company or any of its Subsidiaries. The Company has delivered or made
available to the Purchasers copies of all of the foregoing agreements and
commitments. To the best knowledge of the Company, all of such agreements
and commitments are valid, binding and in full force and effect.
2.20 Books and Records. All the books, records and accounts of the
Company and its Subsidiaries are in all material respects true and
complete, are maintained in accordance with good business practice and all
laws applicable to its business, and accurately present and reflect in all
material respects all of the transactions therein described. The Company
has previously delivered to the Purchasers true and complete texts of all
of the minutes relating to meetings of the stockholders, boards of
directors and committees of the Company and each Subsidiary for the past
five years.
2.21 Transactions with Related Parties. Schedule 2.21 sets forth a
true and complete list of the amounts and other essential terms of any
contract, arrangement or transaction currently in effect or effected during
the past five years between the Company or any Subsidiary and any Related
Party, other than (i) arrangements for the payment of salary, including
bonuses, for services rendered to the Company, which arrangements have
previously been disclosed to the Purchasers, (ii) other arrangements with
any such Person which in the aggregate do not involve more than $10,000 or
(iii) as previously disclosed in the SEC Reports.
2.22 Brokers. Neither the Company nor any Subsidiary has engaged any
finder, broker or investment adviser, and has no obligation to pay any
fees, in connection with the transactions contemplated hereby.
2.23 Accuracy of Information. None of the representations and
warranties of the Company contained herein or the information, documents or
other materials (other than projections) which have been furnished in
writing by the Company or any of its representatives to the Purchasers in
connection with the transactions contemplated by this Agreement contains
any material misstatement of fact, or omits any material fact necessary to
make the statements herein and therein, in light of the circumstances under
which they were made, not misleading. All projections furnished in writing
by the Company (i) have been prepared by management of the Company after a
careful analysis of all material data, (ii) are based on reasonable
assumptions by management of the Company and (iii) represent the best
estimate by management of the Company, based upon current reasonable
assumptions, as to the financial performance of the Company and its
Subsidiaries for the periods indicated, but do not represent any guarantee
or assurance of the future financial results of the Company and its
Subsidiaries.
2.24 Offering of Series A Preferred Stock. Neither the Company nor any
Person acting on its behalf has offered any of the Series A Preferred Stock
or any similar securities of the Company for sale to, solicited any offers
to buy any of the Series A Preferred Stock or any similar securities of the
Company from or otherwise approached or negotiated with respect to the
Company with any Person other than the Purchasers and other "Accredited
Investors" (as defined in Rule 501(a) under the Securities Act). Neither
the Company nor any Person acting on its behalf has taken or will take any
action (including, without limitation, any offering of any securities of
the Company under circumstances which would require the integration of such
offering with the offering of any of the Series A Preferred Stock under the
Securities Act and the rules and regulations of the Commission thereunder)
which could reasonably be expected to subject the offering, issuance or
sale of any of the Series A Preferred Stock to the registration
requirements of Section 5 of the Securities Act.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser represents and warrants as follows:
3.1 Organization and Qualification. Such Purchaser is either (a) (i)
duly organized and existing in good standing under the laws of the
jurisdiction of its formation and has the power to own its respective
property and to carry on its respective business as now being conducted and
(ii) duly qualified to do business and in good standing in every
jurisdiction in which the nature of the respective business conducted or
property owned by it makes such qualification necessary, except where the
failure to so qualify would not prevent consummation of the transactions
contemplated hereby or have a material adverse effect on such Purchaser's
ability to perform its obligations hereunder or (b) a natural person with
the capacity to enter into this Agreement and to consummate the
transactions contemplated hereby.
3.2 Due Authorization. Such Purchaser has all right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Purchaser and the consummation by such Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary action on
behalf of such Purchaser. This Agreement has been duly executed and
delivered by the Purchaser and constitutes a valid and binding agreement of
the Purchaser enforceable in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors, rights, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
3.3 Conflicting Agreements and Other Matters. Neither the execution
and delivery of this Agreement nor the performance by the Purchaser of its
obligations hereunder will conflict with, result in a breach of the terms,
conditions or provisions of, constitute a default under, or require any
consent, approval or other action by or any notice to or filing with any
court or administrative or governmental body pursuant to, the
organizational documents or agreements of the Purchaser or any mortgage,
agreement, instrument, order, judgment, decree, statute, law, rule or
regulation to which the Purchaser or any of its respective properties are
subject.
3.4 Acquisition for Investment. The Purchaser is acquiring the Series
A Preferred Stock being purchased by it for its own account for the purpose
of investment and not with a view to or for sale in connection with any
distribution thereof, and the Purchaser has no present intention or plan to
effect any distribution thereof. The Purchaser acknowledges that the Series
A Preferred Stock has not been registered under the Securities Act and may
be sold or disposed of in the absence of such registration only pursuant to
an exemption from such registration.
3.5 Brokers or Finders. No agent, broker, investment banker or other
firm or Person, including any of the foregoing that is an Affiliate of the
Purchasers, is or will be entitled to any broker's fee or any other
commission or similar fee from the Purchaser in connection with any of the
transactions contemplated by this Agreement that the Company will be
responsible for pursuant to Section 9.9.
3.6 Accredited Investor. The Purchaser is an "Accredited Investor"
within the meaning of Rule 501 promulgated under the Securities Act.
SECTION 4. COVENANTS OF THE COMPANY.
4.1 Limitation on Senior Equity Securities. Without the consent of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock, the Company will not issue any equity securities or any rights,
options, warrants or other securities which are exercisable for,
exchangeable for or convertible into shares of any class of capital stock
ranking pari passu or senior as to dividends or upon liquidation to the
Series A Preferred Stock.
4.2 Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply with all applicable statutes, rules, regulations and
orders of all governmental authorities, with respect to the conduct of its
business and the ownership of its properties, including without limitation,
those relating to protection of the environment and human health, equal
employment opportunity, employee safety, ERISA and international trade laws
and regulations, and apply for obtain and maintain all permits necessary
for the conduct of its business and the ownership of its properties.
4.3 Preservation of Franchises and Existence. The Company will (i)
maintain its corporate existence, rights and franchises in full force and
effect, and (ii) cause the Subsidiaries to maintain their respective
corporate existences, rights and franchises in full force and effect;
provided that nothing in this Section 4.3 shall prevent the Company or any
Subsidiary from discontinuing its operations in any particular state or at
any particular location or locations within the state, or prevent the
corporate existence, rights and franchises of any Subsidiary from being
terminated if, in the opinion of the Board of Directors, the preservation
thereof is no longer desirable in the conduct of the business of the
Company and its Subsidiaries and the loss thereof is not disadvantageous in
any material respect to the holders of Series A Preferred Stock.
4.4 Use of Proceeds. The Company will only use the Proceeds for
Permitted Proceeds Uses; provided that, in the case of Retail Proceeds, the
Company may, pending any Retail Proceeds Uses, use Retail Proceeds to pay
down long-term indebtedness so long as the Company has the right to
immediately reborrow such amounts.
4.5 Insurance. The Company will, and will cause each of the
Subsidiaries to, maintain with insurers believed by the Company to be
responsible such insurance, in such amounts and of such types as are
customarily carried under similar circumstances by companies engaged in the
same or a similar business or having similar properties similarly situated.
4.6 Payment of Taxes and Other Charges. The Company will pay or
discharge, and will cause each of the Subsidiaries to pay or discharge,
before the same shall become delinquent, (i) all taxes, assessments and
other governmental charges or levies imposed upon it or any of its
properties or income (including, without limitation, such as may arise
under Sections 4062, 4063, or 4064 of ERISA or any similar provision of
law), and (ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which, in the case of either
clause (i) or clause (ii), if unpaid, might result in the creation of a
material lien upon any of its properties, provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith pursuant to
appropriate proceedings.
4.7 Effect of Breach. In addition to the rights of THLi under the
Stockholders Agreement, upon the occurrence of an Event of Default and
notification by THLi prior to the two-year anniversary of the First Closing
Date of its desire to add directors in accordance with Section 6.2, then
the Board of Directors shall take all necessary action to increase or
decrease the size of the Board of Directors and to appoint to the Board of
Directors a number of additional members (the "Additional Members")
designated by THLi that, when added to any directors then in office
designated solely by THLi, will result in directors designated by THLi
constituting a majority of the entire Board of Directors. THLi shall be
entitled to designate the Additional Members and, for so long as such Event
of Default continues, at each subsequent annual meeting, THLi shall be
entitled to propose (and the Board of Directors shall nominate and
recommend) Persons reasonably acceptable to the Board of Directors as the
Additional Members of the Board of Directors. In the event of any vacancy
arising by reason of the resignation, death, removal or inability to serve
of any Additional Member, THLi shall be entitled to designate a successor
to fill such vacancy for the remaining term of such director. At such times
as such Event of Default shall have been cured or waived, the rights of
THLi under this Section 4.7 shall terminate (and THLi shall cause such
Additional Directors to resign from the Board of Directors), subject to
revesting in the event of each and every subsequent Event of Default.
4.8 ERISA. Neither the Company nor any Subsidiary shall incur any
material liability with respect to retiree medical or death benefits or
unfunded benefits payable after termination of employment. All employee
benefit plans and arrangements maintained or contributed to by the Company,
any Subsidiary or any ERISA Affiliate shall be maintained in compliance in
all material respects with all applicable law, including any reporting
requirements. With respect to any plan maintained by or contributed to by
the Company or any Subsidiary, neither the Company nor any Subsidiary will
fail to make any contribution due from it under the terms of such plan or
as required by law. Neither the Company nor any ERISA Affiliate will permit
a Pension Plan to incur an accumulated funding deficiency (as such term is
defined in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, cause a lien or a security interest to attach to any asset of the
Company or any Subsidiary for the benefit of any Plan, or incur any
liability which would be material to the Company or any of its Subsidiaries
under Title IV of ERISA, including withdrawal liability (other than the
payment of premiums, none of which are overdue). Neither the Company nor
any Subsidiary, nor any other Person including any fiduciary, will engage
in any transaction prohibited by Section 406 of ERISA or Section 4975 of
the Code which is reasonably likely to subject the Company, any Subsidiary
or any entity that the Company or any Subsidiary has an obligation to
indemnify to any tax or penalty imposed under Section 4975 of the Code or
Section 502 of ERISA.
4.9 Financial Statements and Other Reports.
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(a) The Company will, as soon as practicable and in any event
within 60 days after the end of each quarterly period (other than the
last quarterly period) in each fiscal year, furnish to THLi statements
of consolidated net income and cash flows and a statement of changes
in consolidated stockholders' equity of the Company and its
Subsidiaries for the period from the beginning of the then current
fiscal year to the end of such quarterly period, and a consolidated
balance sheet of the Company and its Subsidiaries as of the end of
such quarterly period, setting forth in each case in comparative form
figures for the corresponding period or date in the preceding fiscal
year, all in reasonable detail and certified by an authorized
financial officer of the Company, subject to changes resulting from
year-end adjustments; provided, however, that delivery pursuant to
clause (iii) below of a copy of the Quarterly Report on Form 10-Q of
the Company for such quarterly period filed with the Commission shall
be deemed to satisfy the requirements of this clause (i);
(b) The Company will, as soon as practicable and in any event
within 100 days after the end of each fiscal year, furnish to THLi
statements of consolidated net income and cash flows and a statement
of changes in consolidated stockholders' equity of the Company and its
Subsidiaries for such year, and a consolidated balance sheet of the
Company and its Subsidiaries as of the end of such year, setting forth
in each case in comparative form the corresponding figures from the
preceding fiscal year, all in reasonable detail and examined and
reported on by independent public accountants of recognized national
standing selected by the Company; provided, however, that delivery
pursuant to clause (iii) below of a copy of the Annual Report on Form
10-K of the Company for such fiscal year filed with the Commission
shall be deemed to satisfy the requirements of this clause (ii);
(c) The Company will, promptly upon transmission thereof, furnish
to each Purchaser copies of all such financial statements, proxy
statements, notices and reports as it shall send to its stockholders
and copies of all such registration statements (without exhibits),
other than registration statements relating to employee benefit or
dividend reinvestment plans, and all such regular and periodic reports
as it shall file with the Commission;
(d) The Company will, promptly after such package becomes
available, furnish to THLi copies of all financial reporting packages
prepared for management of the Company; and
(e) Until the two-year anniversary of the First Closing Date, the
Company will, as soon as practicable, and in any event within 5 days
after the end of each month, furnish to THLi and GECC detailed
reports, and any other information THLi and GECC may reasonably
request, relating to (i) the use of Proceeds by the Company and its
Subsidiaries and (ii) the Company's compliance with the Retail Plan
and the E-Commerce Plan;
(f) The Company will promptly furnish to THLi copies of any
reports furnished to GECC pursuant to the Note Agreement; and
(g) The Company will promptly furnish to THLi copies of any
compliance certificates furnished to lenders in respect of
indebtedness of the Company and its Subsidiaries and, with reasonable
promptness, furnish to each Purchaser such other financial and other
data of the Company and its Subsidiaries as such Purchaser may
reasonably request, including, but not limited to, operating financial
information for each retail store owned or operated by the Company or
any of its Subsidiaries.
4.10 Inspection of Property. The Company will permit representatives
of THLi to visit and inspect, at THLi's expense, any of the properties of
the Company and its Subsidiaries, to examine the corporate books and make
copies or extracts therefrom and to discuss the affairs, finances and
accounts of the Company and its Subsidiaries with the principal officers of
the Company, all at such reasonable times, upon reasonable notice and as
often as such Purchaser may reasonably request.
4.11 Lost, Stolen, Damaged and Destroyed Stock Certificates. Upon
receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any certificate for shares of Series A
Preferred Stock (or any certificate for the shares of Common Stock into
which the Series A Preferred Stock is convertible) and in the case of loss,
theft or destruction, upon delivery of an indemnity satisfactory to the
Company (which, in the case of any Purchaser, may be an undertaking by such
Purchaser so to indemnify the Company), or, in the case of mutilation, upon
surrender and cancellation thereof, the Company will issue a new
certificate of like tenor for a number of shares of Series A Preferred
Stock (or, if applicable, shares of Common Stock into which the Series A
Preferred Stock is convertible) equal to the number of shares of such stock
represented by the certificate lost, stolen, destroyed or mutilated.
4.12 Related Party Transactions. The Company shall not, directly or
indirectly, and shall not permit any of its Subsidiaries to, directly or
indirectly, enter into, amend or terminate any contract, arrangement or
transaction with a Related Party, other than (i) any action to terminate
the Consumer Credit Card Agreement by and among Xxxxxx'x Sofa Factory,
Xxxxxx Convertible Corporation and Monogram Credit Bank of Georgia, dated
as of April 27, 1997 and (ii) the payment of salary and benefits pursuant
to employment agreements entered into in the ordinary course of business.
4.13 Operations in Accordance with Business Plan. The business and
operations of the Company and its Subsidiaries shall be conducted in all
material respects in accordance with the Company's annual business plan as
approved by a majority of the Board of Directors, which majority must
include the GECC Designee and the THLi Designees (each as defined in the
Stockholders Agreement), except for such changes which shall have been
approved in accordance with Section 2.2(u) of the Stockholders Agreement.
The Company shall submit the E-Commerce Plan to the Board of Directors for
approval no later than 90 days from the First Closing Date.
4.14 Reservation of Shares. From and after the 15th day following the
first meeting of stockholders of the Company occurring on or after the
First Closing Date, the Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock solely
for the purpose of effecting the conversion of the shares of the Series A
Preferred Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding
shares of the Series A Preferred Stock.
4.15 Notice of Breach. As promptly as practicable, and in any event
not later than ten Business Days after senior management of the Company
becomes aware of any breach by the Company of any provision of this
Agreement, including, without limitation, this Article 4, the Company shall
provide the Purchasers with written notice specifying the nature of such
breach and any actions proposed to be taken by the Company to cure such
breach.
4.16 Limitation on Dividends. The Company shall not pay any dividends
on Common Stock so long as any shares of Series A Preferred Stock remain
outstanding.
4.17 Right of First Refusal. Subject to the terms and conditions
specified in this Section 4.17, the Company hereby grants to THLi or any of
its designees (collectively, the "First Refusal Stockholders") a right of
first offer with respect to future sales by the Company of its Offered
Shares (as hereinafter defined).
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable or exchangeable for any shares of, any
class of its capital stock ("Offered Shares"), the Company shall first make
an offering of such Offered Shares to the First Refusal Stockholders in
accordance with the following provisions:
(a) The Company shall deliver a notice in accordance with Section
9.5 of this Agreement ("Notice") to THLi stating (i) its bona fide
intention to offer such Offered Shares, (ii) the number of such
Offered Shares to be offered, and (iii) the price and terms, if any,
upon which it proposes to offer such Offered Shares.
(b) Within 15 days after delivery of the Notice, the First
Refusal Stockholders may elect to purchase or obtain, at the price and
on the terms specified in the Notice, up to that portion of such
Offered Shares that equals the proportion that the number of shares of
Common Stock issued and held (or issuable upon conversion and exercise
of all convertible or exercisable securities then held by THLi and its
Affiliates) bears to the total number of shares of Common Stock then
outstanding (assuming full conversion and exercise of all outstanding
convertible or exercisab1e securities).
(c) The right of first offer in this Section 4 shall not be
applicable to any issuance or sale of any of the following securities:
(i) Common Stock issued pursuant to any stock split, dividend or
distribution payable in additional shares of Common Stock or other
securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly, additional shares of Common Stock
without payment of any consideration by such holder, provided that all
holders of capital stock of the Company and options or warrants or
other securities exercisable or exchangeable for or convertible into,
capital stock of the Company receive their pro rata share (on a common
equivalent basis) of such Common Stock,
(ii) Common Stock issuable or issued to employees, consultants or
directors of the Company directly or pursuant to a stock option plan
or restricted stock plan, or other similar arrangements related to
compensation for services in effect on the date of this Agreement, or
thereafter approved by a majority vote of THLi Designees;
(iii) capital stock issued upon conversion or exercise of
warrants, options or other securities outstanding immediately
following the First Closing; or
(iv) Common Stock issued in a bona fide firm commitment
underwritten offering to the public.
SECTION 5. RESTRICTIONS ON TRANSFER. Neither the Purchasers or any of
their respective Affiliates shall, directly or indirectly, sell, transfer,
pledge, encumber or otherwise dispose of (collectively, a "Transfer") any
of the Series A Preferred Stock or Common Stock received upon conversion of
the Series A Preferred Stock, except for: (a) Transfers to or between
Affiliates who agree to be bound by the provisions of this Agreement; (b)
Transfers of Series A Preferred Stock or Common Stock received upon
conversion of the Series A Preferred Stock pursuant to the exercise of the
registration rights set forth in the Registration Rights Agreement; or (c)
other Transfers that comply with the provisions of the Securities Act. The
Company may require, in connection with any Transfer pursuant to the
preceding clause (c), an opinion of counsel to the Purchaser that such
Transfer complies with the provisions of the Securities Act.
SECTION 6. EVENT OF DEFAULT AND REMEDIES.
6.1 Event of Default. The occurrence of any of the events set forth on
Schedule 6.1 prior to the two-year anniversary of the First Closing Date
shall constitute an Event of Default under this Agreement.
6.2 Remedies. The Company shall notify the Purchasers immediately upon
becoming aware of any Event of Default. If an Event of Default occurs and
is continuing, then in every such case:
(a) THLi at its option, shall have the right to either:
(i) demand immediate redemption of up to its Maximum Number
(as such term is defined in the Certificate of Designation) of shares of
Series A Preferred Stock pursuant to paragraph 5(c) of the Certificate of
Designation, or
(ii) nominate and designate additional members of the Board
of Directors pursuant to Section 4.7 hereof; and
(b) without limiting the foregoing, any Purchaser may enforce its
rights by suit in equity, by action at law, or by any other appropriate
proceedings, whether for the specific performance (to the extent permitted
by law) of any covenant or agreement contained in this Agreement or the
Certificate of Incorporation or in aid of the exercise of any power granted
in this Agreement or the Certificate of Incorporation.
If THLi elects to demand redemption pursuant to clause (a)(i) above,
each other holder of Series A Preferred Stock shall also be entitled to
demand immediate redemption of such shares of Series A Preferred Stock
permitted under paragraph 5(c) of the Certificate of Designation.
6.3 Conduct no Waiver. No course of dealing on the part of any holder,
nor any delay or failure on the part of any holder to exercise any of its
rights, shall operate as a waiver of such right or otherwise prejudice such
holder's rights, powers and remedies.
6.4 Remedies Cumulative. No right or remedy conferred upon or reserved
to the holders of Series A Preferred Stock under this Agreement is intended
to be exclusive of any other right or remedy, and every right and remedy
shall be cumulative and in addition to every other right and remedy given
hereunder or now and hereafter existing under applicable law. Every right
and remedy given by this Agreement or by applicable law to the holders of
Series A Preferred Stock may be exercised from time to time and as often as
may be deemed expedient by the holders.
SECTION 7. CONDITIONS.
7.1 Conditions to Each Party's Obligations to Effect the Transactions
Contemplated Hereby. The respective obligations of each party to effect the
transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the applicable Closing Date of the following
conditions:
(a) No temporary restraining order, preliminary or permanent
injunction or other order or decree by any court of competent
jurisdiction which prevents the consummation of the transactions
contemplated hereby or imposes material conditions with respect
thereto shall have been issued and remain in effect (each party
agreeing to use its reasonable efforts to have any such injunction,
order or decree lifted).
(b) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or Federal government
or governmental agency which would prevent the consummation of the
transactions contemplated by this Agreement or imposes material
conditions with respect thereto.
(c) All consents and approvals of governmental entities legally
required for the consummation of the transactions contemplated by this
Agreement shall have been obtained and be in effect at the applicable
Closing Date, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have a
Material Adverse Effect or materially impair the ability of any party
to this Agreement to consummate the transactions contemplated by this
Agreement.
7.2 Conditions to Purchasers' Obligations to Effect the Transactions
Contemplated Hereby. The obligations of the Purchasers to effect the
transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the applicable Closing Date of the following
additional conditions:
(a) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or
prior to the applicable Closing Date, and the representations and
warranties of the Company contained in this Agreement shall be true
and correct in all material respects (if not qualified by materiality)
and true and correct (if so qualified) on and as of the date of this
Agreement and at and as of the applicable Closing Date as if made at
and as of the applicable Closing Date, except to the extent that any
such representation or warranty expressly relates to another date (in
which case, as of such date).
(b) The consent or approval of each third party whose consent or
approval shall be required in connection with the transactions
contemplated hereby shall have been obtained.
(c) The Company and the stockholders listed on the signature
pages thereto shall have executed and delivered the Stockholders
Agreement substantially in the form attached hereto as Exhibit A.
(d) Purchasers shall have received an opinion of Xxxxxxxx &
Xxxxxxxx LLP, counsel to the Company, substantially in the form
attached hereto as Exhibit B.
(e) The Company and the stockholders listed on the signature
pages thereto shall have executed and delivered the Registration
Rights Agreement substantially in the form attached hereto as Exhibit
C.
(f) Since the date of this Agreement, there shall not have been
any change or events which have resulted or would in reasonable
probability result in a Material Adverse Effect.
(g) The Company, GECC and JOL shall have executed and delivered
the Indebtedness Amendment substantially in the form attached hereto
as Exhibit D.
(h) The Company shall have filed the Certificate of Designation
substantially in the form attached hereto as Exhibit E with the
Delaware Secretary of State.
(i) Purchasers shall have completed their business, legal and
financial due diligence review and the results of such review shall be
satisfactory to Purchasers in their sole judgment.
SECTION 8. INTERPRETATION.
8.1 Definitions.
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"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act.
"beneficially own" with respect to any Series A Preferred Stock shall
mean having "beneficial ownership" of such Series A Preferred Stock (as
determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing.
"Board of Directors" shall mean the board of directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Certificate of Designation" shall mean the Certificate of Designation
of Series A Convertible Preferred Stock of the Company substantially in the
form attached hereto as Exhibit E.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consolidated" or "consolidated," when used with reference to any
financial term in this Agreement (but not when used with respect to any tax
return or tax liability), shall mean the aggregate for two or more Persons
of the amounts signified by such term for all such Persons, with
inter-company items eliminated and, with respect to earnings, after
eliminating the portion of earnings properly attributable to minority
interests, if any, in the capital stock of any such Person or attributable
to shares of preferred stock of any such Person not owned by any other such
Person.
"E-Commerce Plan" shall mean a business plan setting forth the
Company's planned business to business and E-commerce activities, including
detailed information with respect to E-Commerce Proceed Uses, strategy,
implementation of strategy, milestone targets and a timeline with respect
thereto, as such business plan may be amended from time to time in
accordance with Section 2.2(u) of the Stockholders Agreement.
"E-Commerce Proceed Uses" shall mean the use of Proceeds to build
infrastructure and sales and marketing capabilities for (including the
recruitment of appropriate talent associated with) business-to-business
activities and e-commerce activities, including commerce related to
transactions on the Internet and such further uses described in the
E-Commerce Plan.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor Federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Exchange Act of 1934,
as amended, shall include reference to the comparable section, if any, of
any such successor Federal statute.
"GECC" shall mean, collectively, General Electric Capital Corporation,
a New York corporation and GE Capital Equity Investments, Inc., a Delaware
corporation.
"Individual Purchasers" shall mean the Purchasers other than THLi,
GECC and Permal.
"Initial Purchasers" shall mean THLi, GECC and Permal.
"JOL" shall mean Japan Omnibus Ltd., an international business
corporation incorporated in the British Virgin Islands.
"Note Agreement" shall mean, collectively, the Securities Purchase
Agreement dated as of August 26, 1996 between the Company and GECC and the
Supplemental Securities Purchase Agreement, dated as of August 14, 1997,
among the Company GECC and JOL, in each case, as amended.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Pension Plan" shall mean any multiemployer plan or single employer
plan, as defined in Section 4001 of ERISA, that is subject to Title IV of
ERISA, that the Company, any Subsidiary or any ERISA Affiliate maintains or
is or ever has been obligated to contribute to for the benefit of employees
or former employees of the Company, any Subsidiary or any ERISA Affiliate.
"Permal" shall mean those entities and individuals constituting the
Permal Group as set forth on Schedule C to the Stockholders Agreement.
"Permitted Proceeds Uses" shall mean Retail Proceed Uses or E-Commerce
Proceed Uses.
"Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor (by merger or otherwise) of
such entity.
"Proceeds" shall mean the proceeds from the sale of the Series A
Preferred Stock pursuant to this Agreement.
"Related Party" shall mean any officer, director or beneficial holder
of 3% or more of the outstanding shares of capital stock of the Company or
any Subsidiary, any spouse, former spouse, child, parent, parent of a
spouse, sibling or grandchild of any such officer, director or beneficial
holder of the Company or any Subsidiary, and any Affiliate or Associate of
any of the foregoing Persons; provided, however, that neither THLi nor GECC
shall be deemed to be a Related Party.
"Retail Plan" shall mean a business plan setting forth the Company's
planned retail activities, including detailed information with respect to
Retail Proceed Uses, Strategy, implementation of Strategy, milestone
targets and a time line with respect thereto, as such business plan may be
amended from time to time in accordance with section 2.2(a) of the
Stockholders Agreement.
"Retail Proceed Uses" shall mean the use of Proceeds to (i) repay the
Loan and Security Agreement, dated as of January 20, 1995, as amended, by
and between Congress Financial Corporation (Western), Xxxxxx'x Sofa Factory
and Xxxxxx Convertible Corporation (the "Credit Agreement"), (ii) make
capital expenditures related to the opening of new stores, (iii) for
working capital purposes in connection with the Company's retail business
and (iv) for such further uses described in the Retail Plan.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power or the Voting Securities or equity
interest is owned, directly or indirectly, by such Person.
"THLi" shall mean, collectively, TH Xxx.Xxxxxx Internet Partners, L.P.
and TH Xxx.Xxxxxx Internet Parallel Partners, L.P., together with their
affiliates.
"Voting Securities" of any Person shall mean at any time shares of any
class of capital stock of such Person which are then entitled to vote
generally in the election of directors.
8.2 Accounting Principles. The character or amount of any asset,
liability, capital account or reserve and of any item of income or expense
required to be determined pursuant to this Agreement, and any consolidation
or other accounting computation required to be made pursuant to this
Agreement, and the construction of any definition in this Agreement
containing a financial term, shall be determined or made, as the case may
be, in accordance with generally accepted accounting principles, to the
extent applicable, unless such principles are inconsistent with the express
requirements of this Agreement. References in this Agreement to a fiscal
year refer to the period ending on the last Sunday of January of the
following calendar year as determined by the 52/53 retail fiscal year. (For
example, 1998 fiscal year refers to the fiscal year ending January 31,
1999.)
SECTION 9. MISCELLANEOUS.
9.1 Severability. If any term, provision, covenant or restriction of
this Agreement or any exhibit hereto is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement and such
exhibits shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to
be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
which may be hereafter declared invalid, void or unenforceable.
9.2 Specific Enforcement. Each Purchaser, on the one hand, and the
Company, on the other, 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 to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which they may be entitled at law or
equity.
9.3 Entire Agreement. This Agreement (including the documents set
forth in the exhibits hereto) contains the entire understanding of the
parties with respect to the transactions contemplated hereby.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each party and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
9.5 Notices and other Communications. All notices, consents, requests,
instructions, approvals, financial statements, proxy statements, reports
and other communications provided for herein shall be in writing and shall
be delivered personally, by facsimile or sent by prepaid overnight courier
service, to:
The Company:
Xxxxxx'x Furniture, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxx, XX 00000-0000
Facsimile #: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
With a copy to:
Xxxxxx'x Furniture, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxx, XX 00000-0000
Facsimile #: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esq.
and
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxx 0xx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000-0000
Facsimile #: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, Esq.
Each Purchaser:
At the address or facsimile number set forth on the signature
pages hereto.
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
or to such other address as any party may, from time to time, designate in
a written notice given in a like manner.
9.6 Amendments. This Agreement may be amended as to the Purchasers and
their successors and assigns, and the Company may take any action herein
prohibited, or omit to perform any act required to be performed by it, if
the Company shall obtain (i) the written consent of the Purchasers and/or
such successors and assigns who are the registered holders of not less than
a majority of the outstanding shares of Series A Preferred Stock then held
by the Purchasers and their successors or assigns and (ii) the written
consent of THLi; provided, however, that without the consent of each holder
affected, however, no amendment or waiver may (with respect to any shares
of Series A Preferred Stock held by a nonconsenting holder of shares of
Series A Preferred Stock):
(a) reduce the aggregate number of shares of Series A Preferred
Stock whose holders must consent to an amendment or waiver of any
provision of this Agreement; or
(b) make any change in the foregoing amendment and waiver
provisions.
This Agreement may not be waived, changed, modified, or discharged
orally, but only by an agreement in writing signed by the party or parties
against whom enforcement of any waiver, change, modification or discharge
is sought or by parties with the right to consent to such waiver, change,
modification or discharge on behalf of such party.
9.7 Cooperation. Each Purchaser and the Company agree to take, or
cause to be taken, all such further or other actions as shall reasonably be
necessary to make effective and consummate the transactions contemplated by
this Agreement.
9.8 Successors and Assigns. All covenants and agreements contained
herein shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns. Any Purchaser may (but shall not be
required to) assign any or all of its rights under this Agreement to any
transferee of any Series A Preferred Stock; provided that THLi may only
assign its rights under Section 4 to a transferee of at least 30% of the
Stock held by THLi as of the date of this Agreement (calculated as if all
shares of Series A Preferred Stock had been converted into shares of Common
Stock as of the date of such calculation). If THLi assigns any or all of
its rights under Section 4, such rights shall only be exercised by holders
of more than 50% of the Stock held by THLi as of the date of this Agreement
(calculated as if all shares of Series A Preferred Stock had been converted
into shares of Common Stock as of the date of such calculation). This
Agreement may not be assigned by the Company.
9.9 Expenses and Remedies.
---------------------
(a) The Company agrees to pay THLi for all reasonable outside
legal and consulting fees of THLi in connection with this Agreement
and the consummation of all transactions contemplated hereby, which
costs shall not exceed $50,000, and all costs and expenses relating to
any future amendment or supplement to this Agreement or the Series A
Preferred Stock (or any proposal by the Company for such amendment or
supplement) whether or not consummated or any waiver or consent with
respect thereto (or any proposal for such waiver or consent) whether
or not consummated, and all costs and expenses of THLi relating to the
enforcement of this Agreement, the Registration Rights Agreement or
the Series A Preferred Stock.
(b) The Company further agrees to indemnify and save harmless
each Purchaser and each Purchaser's officers, directors, partners,
employees, trustees and agents, each Person who controls such
Purchaser within the meaning of the Securities Act or the Exchange
Act, from and against any and all costs, expenses, damages or other
liabilities resulting from any breach of this Agreement by the Company
or any legal, administrative or other proceedings arising out of the
transactions contemplated hereby (other than such costs, expenses,
damages or other liabilities resulting, directly or indirectly, (i)
from the breach by such Purchaser of any of its representations,
warranties or other agreements contained herein, (ii) from the gross
negligence or willful misconduct of such Purchaser or any of its
officers, directors, partners, employees or agents, or any Person who
controls such Purchaser within the meaning of the Securities Act or
the Exchange Act or (iii) from an ERISA violation resulting from any
action or inaction by such Purchaser, other than an ERISA violation
resulting from a breach by the Company of this Agreement); provided,
however, that, if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws.
(c) The indemnified party under this Section 9.9 will, promptly
after the receipt of notice of the commencement of any action against
such indemnified party in respect of which indemnity may be sought
from the Company on account of an indemnity agreement contained in
this Section 9.9 notify the Company in writing of the commencement
thereof. The omission of any indemnified party so to notify the
Company of any such action shall not relieve the Company from any
liability which it may have to such indemnified party except to the
extent the Company shall have been prejudiced by the omission of such
indemnified party so to notify the Company, pursuant to this Section
9.9. In case any such action shall be brought against any indemnified
party and it shall notify the Company of the commencement thereof, the
Company shall be entitled to participate therein and, to the extent
that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party, and after notice
from the Company to such indemnified party of its election so to
assume the defense thereof, the Company will not be liable to such
indemnified party under this Section 9.9 for any legal or other
expense subsequently incurred by such indemnified party in connection
with the defense thereof nor for any settlement thereof entered into
without the consent of the Company; provided, however, that (i) if the
Company shall elect not to assume the defense of such claim or action
or (ii) if the indemnified party reasonably determines (x) that there
may be a conflict between the positions of the Company and of the
indemnified party in defending such claim or action or (y) that there
may be legal defenses available to such indemnified party different
from or in addition to those available to the Company, then separate
counsel for the indemnified party shall be entitled to participate in
and conduct the defense, in the case of (i) and (ii) (x), or such
different defenses, in the case of (ii)(y), and the Company shall be
liable for any reasonable legal or other expenses incurred by the
indemnified party in connection with the defense. The obligations of
the Company to each indemnified party hereunder shall be separate
obligations, and the Company's liability to any such indemnified party
hereunder shall not be extinguished solely because any other
indemnified party is not entitled to indemnity hereunder. The
obligations of the Company under this Section 9.9 shall survive the
redemption or purchase by the Company of the shares of Series A
Preferred Stock purchased by any Purchaser, any transfer of the Series
A Preferred Stock by any Purchaser and the termination of this
Agreement, the Series A Preferred Stock, the Stockholders Agreement
and any of the other documents executed in connection herewith.
9.10 Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in
connection herewith shall survive the execution and delivery of this
Agreement and the issuance and delivery of the Series A Preferred Stock,
regardless of any investigation made by or on behalf of any party.
9.11 Transfer of Series A Preferred Stock. (a) Each Purchaser
understands and agrees that the Series A Preferred Stock has not been
registered under the Securities Act or the securities laws of any state and
that they may be sold or otherwise disposed of only in one or more
transactions registered under the Securities Act and, where applicable,
such laws or transactions as to which an exemption from the registration
requirements of the Securities Act and, where applicable, such laws are
available. Each Purchaser acknowledges that, except as provided in the
Registration Rights Agreement, such Purchaser has no right to require the
Company to register the Series A Preferred Stock. Each Purchaser
understands and agrees that each certificate representing the Series A
Preferred Stock shall bear legends substantially in the form as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS."
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY A STOCKHOLDERS AGREEMENT BY AND
AMONG XXXXXX'X FURNITURE, INC. (THE "COMPANY") AND THE
STOCKHOLDERS PARTIES THERETO (THE "STOCKHOLDERS AGREEMENT"),
A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY."
"IN ADDITION TO THE RESTRICTIONS SET FORTH IN THE
STOCKHOLDERS AGREEMENT, THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS SET FORTH IN A
SECURITIES PURCHASE AGREEMENT BY AND AMONG THE COMPANY AND
THE PURCHASERS LISTED ON THE SIGNATURE PAGES THERETO, A COPY
OF EACH OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY."
9.12 Governing Law; Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, including, without limitation, Sections 5-1401 and 5-1402 of the New
York General Obligations Law and New York Civil Practice Laws and Rules
327(b). Each of the parties hereto hereby irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the State
of New York and of the United States of America, in each case located in
the County of New York, for any action, proceeding or investigation in any
court or before any governmental authority ("litigation") arising out of or
relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such
courts), and further agrees that service of any process, summons, notice or
document by U.S. Registered Mail to its respective address set forth in
this Agreement shall be effective service of process for any litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any objection to the laying of venue
of any litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United
States of America, in each case located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such litigation brought in any
such court has been brought in an inconvenient forum. Each of the parties
irrevocably and unconditionally waives, to the fullest extent permitted by
applicable law, any and all rights to trial by jury in connection with any
litigation arising out of or relating to this Agreement or the transactions
contemplated hereby.
9.13 Publicity. Each of the parties hereto agrees that it will make no
statement regarding the transactions contemplated hereby which is
inconsistent with the press release agreed to by the parties hereto.
Notwithstanding the foregoing, each of the parties hereto may, in document
required to be filed by it with the Commission or other regulatory bodies,
make such statements with respect to the transactions contemplated hereby
as each may be advised is legally necessary upon advice of its counsel.
9.14 Signatures. This Agreement shall be effective upon delivery of
original signature pages or facsimile copies thereof executed by each of
the parties hereto.
IN WITNESS WHEREOF, the Company and the Purchasers have caused this
agreement to be executed and delivered by their respective officers
thereunto duly authorized.
XXXXXX'X FURNITURE, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice President and
Chief Financial Officer
TH XXX.XXXXXX INTERNET PARTNERS, L.P.
By: TH XXX.XXXXXX INTERNET FUND ADVISORS, L.P.,
its General Partner
By: TH XXX.XXXXXX INTERNET FUND
ADVISORS, LLC, its General Partner
By: /s/ Xxxxxxxxx Xxx
------------------------------------------------
Name: Xxxxxxxxx Xxx
Title: Vice President
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile #: (000) 000-0000
Attention: Xxxxxxxxx Xxx
Number of Shares: 134,000
Purchase Price: $6,700,000
TH XXX.XXXXXX INTERNET PARALLEL
PARTNERS, L.P.
By: TH XXX.XXXXXX INTERNET FUND ADVISORS, L.P.,
its General Partner
By: TH XXX.XXXXXX INTERNET FUND
ADVISORS, LLC, its General Partner
By: /s/ Xxxxxxxxx Xxx
-----------------------------------------------
Name: Xxxxxxxxx Xxx
Title: Vice President
Address: 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile #: (000) 000-0000
Attention: Xxxxxxxxx Xxx
Number of Shares: 126,000
Purchase Price: $6,300,000
GE CAPITAL EQUITY INVESTMENTS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx, Xx.
-----------------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx, Xx.
Title: Senior Vice President
Address: 000 Xxxx Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile #: (203)
Attention:
Number of Shares: 20,000
Purchase Price: $1,000,000
ASCEND PARTNERS, L.P.
By:
-----------------------------------------------
Name:
Title:
Address: Xxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx Xxxxxxxxx, c/o
Xxxxx Xxxx
Number of Shares: 6,500
Purchase Price: $325,000
ATCO DEVELOPMENT, INC.
By:
-----------------------------------------------
Name:
Title:
Address: 00000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile #:
Attention: Xxxxx Xxxxxxxxx
Number of Shares: 5,000
Purchase Price: $250,000
XXXXX XXXXX
By:
-----------------------------------------------
Address: c/o Black and Company
Xxx XX Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Facsimile #:
Number of Shares: 1,000
Purchase Price: $50,000
XXXXXXX REVOCABLE TRUST
By:
-----------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Trustee
By:
-----------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Trustee
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 300
Purchase Price: $15,000
XXXXXXX XXXXXXX XXXXXX - XXX
By:
-----------------------------------------------
Name:
Title:
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 2,000
Purchase Price: $100,000
XXXXXXX X. XXXXX
By:
-----------------------------------------------
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 900
Purchase Price: $45,000
XXXXX X. XXXXX, UTMA, CA
By:
-----------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Custodian
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 250
Purchase Price: $12,500
XXXXX X. XXXXX, UTMA, CA
By:
-----------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Custodian
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 250
Purchase Price: $12,500
XXXX X. XXX
By:
-----------------------------------------------
Address: 000 Xxxxx Xxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 500
Purchase Price: $25,000
XXXX XXXXXX
By:
-----------------------------------------------
Address: x/x Xxxxx Xxxxxxx
0000 Xxxxxx of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 1,250
Purchase Price: $62,500
DIAMOND A. PARTNERS, L.P.
By:
-----------------------------------------------
Name:
Title:
Address: Lawndale Capital Management, L.L.C.
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxx X. Xxxxxxx
Number of Shares: 2,625
Purchase Price: $131,250
J. XXXXXX XXXXXXX
By:
-----------------------------------------------
Address: Xxxxxxx Investment Group
00000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: J. Xxxxxx Xxxxxxx
Number of Shares: 6,250
Purchase Price: $312,500
XXXXX XXXXXXXXX - XXX
By:
-----------------------------------------------
Name:
Title:
Address: Xxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxx Xxxx
Number of Shares: 4,500
Purchase Price: $225,000
XXXXXXX XXXXXXXXX - XXX
By:
-----------------------------------------------
Name:
Title:
Address: Xxx Xxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxx Xxxx
Number of Shares: 1,500
Purchase Price: $75,000
XXXXXXX X. AND XXXXXXXX X. XXXXXX
By:
-----------------------------------------------
Name: Xxxxxxx X. Xxxxxx
By:
-----------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Address: 000 Xx Xxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 500
Purchase Price: $25,000
XXXXXXXX & XXXXX XXXXXX FAMILY TRUST
By:
-----------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Trustee
By:
-----------------------------------------------
Name: Xxxxx Xxxxx Xxxxxx
Title: Trustee
Address: 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention:
Number of Shares: 2,000
Purchase Price: $100,000
XXXXXX X. XXXXXX
By:
-----------------------------------------------
Address: 000 Xxxxx Xxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 200
Purchase Price: $10,000
XXXXXX X. XXXXXX
By:
-----------------------------------------------
Address: 000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 200
Purchase Price: $10,000
XXXXXXX XXXXX XXXXXX TRUST I
By:
-----------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
Address: 000 Xxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxx X. Xxxxxx
Number of Shares: 2,500
Purchase Price: $125,000
XXXXXXX XXXX XXXXXX TRUST I
By:
-----------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
Address: 000 Xxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxx X. Xxxxxx
Number of Shares: 2,500
Purchase Price: $125,000
XXXXXX FAMILY TRUST
By:
----------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
Address: 000 Xxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxx X. Xxxxxx
Number of Shares: 2,500
Purchase Price: $125,000
XXXXXXX XXXX XXXXXX TRUST I
By:
-----------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
Address: 000 Xxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxx X. Xxxxxx
Number of Shares: 2,500
Purchase Price: $125,000
XXXXXXX XXXXXX XXXXXX TRUST I
By:
-----------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Trustee
Address: 000 Xxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxx X. Xxxxxx
Number of Shares: 2,500
Purchase Price: $125,000
XX. XXXXXX XXXXXX, XX.
By:
-----------------------------------------------
Address: 000 Xxxxx Xxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile #:
Number of Shares: 1,250
Purchase Price: $62,500
XXXXXX X. XXXXXX
By:
-----------------------------------------------
Address: 000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 200
Purchase Price: $10,000
XXXXXXX XXXXX
By:
-----------------------------------------------
Address: 00 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 6,000
Purchase Price: $300,000
XXXXXXX XXXXXXX TRUST
By:
-----------------------------------------------
Name:
Title:
Address: 1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx Xxxxxxx
Number of Shares: 250
Purchase Price: $12,500
XXXXX XXXXXXX
By:
-----------------------------------------------
Address: 0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Facsimile #:
Number of Shares: 200
Purchase Price: $10,000
XXXXXXX X. XXXXXX
By:
-----------------------------------------------
Address: 000 Xxxxx Xxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 500
Purchase Price: $25,000
XXXXXXX X. XXXXXX
By:
-----------------------------------------------
Address: 00 Xxxx 00xx Xxxxxx, Xxx. 0X
Xxx Xxxx, Xxx Xxxx 00000
Facsimile #:
Attention: Xxxxxxxxx Xxxxxx
Number of Shares: 500
Purchase Price: $25,000
XXXXXXX X. XXXXXX PROFESSIONAL
CORPORATION DEFINED BENEFIT PLAN
By:
-----------------------------------------------
Name:
Title:
Address: 000 X. Xxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxxx
Number of Shares: 1,500
Purchase Price: $75,000
XXXX XXXXXXX
By:
-----------------------------------------------
Address: 11777 Xxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxxxx Xxxxxx
Number of Shares: 3,750
Purchase Price: $187,500
XXXXXX XXXXXX
By:
-----------------------------------------------
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 125
Purchase Price: $6,250
XXXXXXXX X. XXXXXXXXX
By:
-----------------------------------------------
Address: 00000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxxxx Xxxxxx
Number of Shares: 1,250
Purchase Price: $62,500
XXXXX XXXX
By:
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Address: 0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 2,000
Purchase Price: $100,000
XXXXXX LONDON
By:
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Address: Cruttenden Xxxx
000 Xxxxxxxx Xxxxxx, Xxxxx X
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxx London
Number of Shares: 6,000
Purchase Price: $300,000
XXXXXXX X. XXXXXX
By:
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Address: Coldwell Banker
000 Xxxx 000xx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxxx
Number of Shares: 625
Purchase Price: $31,250
THE MUHL FAMILY TRUST
By:
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Name: Xxxxxxx X. Xxxx
Title: Trustee
By:
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Name: Xxxxxxx X. Xxxx
Title: Trustee
Address: 000 Xxxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile #:
Attention: Xxxxxxx X. Xxxx or
Xxxxxxx X. Xxxx
Number of Shares: 625
Purchase Price: $31,250
PACIFIC SECURITY GROUP, INC.
By:
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Name:
Title:
Address: 0000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile #:
Attention: Xxxxxxx Xxxxxxxxx, c/o
Xxxxx Xxxx
Number of Shares: 500
Purchase Price: $25,000
PERMAL U.S. OPPORTUNITIES LTD.
By:
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Name:
Title:
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 1,000
Purchase Price: $50,000
PILOT HOLDINGS, L.P.
By: SHED INVESTMENTS, LLC, its General Partner
By: /s/ Xxxxxx X. XxXxxxx
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Name: Xxxxxx X. XxXxxxx
Title: Managing Member
Address: 000 Xxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile #: (000) 000-0000
Attention: Xxxxxx X. XxXxxxx
Number of Shares: 5,000
Purchase Price: $250,000
POINTE INVESTMENTS CAPITAL, LTD.
By:
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Name:
Title:
Address: 000 X. Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx Xxxxx
Number of Shares:2,000
Purchase Price: $100,000
POLLAT, XXXXX & CO., INC.
By:
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Name:
Title:
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 175
Purchase Price: $8,750
XXXXX AND XXXX XXXXXXXXX
By:
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Name: Xxxxx Xxxxxxxxx
By:
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Name: Xxxx Xxxxxxxxx
Address: 000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 200
Purchase Price: $10,000
XXXXXXX X. XXXXXXX, XX.
By:
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Address: 2029 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxx Xxxxxxx
Number of Shares: 625
Purchase Price: $31,250
XXXXXXX X. XXXXXXX, III
By:
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Address: 00000 Xxxx Xxxxxxx Xxx
Xxxxxxxxxx, Xxxxxxx 00000
Facsimile #:
Number of Shares: 625
Purchase Price: $31,250
G. XXXXX XXXXXXX
By:
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Address: 1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Number of Shares: 8,000
Purchase Price: $400,000
LORD XXXXX XXXXXXX
By:
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Address: Xxxx Xxxxx
Xxxxxx Xxxx
Xxxxxx
Xxxxxx Xxxxxx
XX00 0XX Xxxxxxx
Facsimile #:
Number of Shares: 250
Purchase Price: $12,500
XXXXXXX XXXXXXX XXXXXXX
By:
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Address: 000 X. XxXxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxx Xxxxxxx
Number of Shares: 2,500
Purchase Price: $125,000
WAVE ENTERPRISES, INC.
By:
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Name:
Title:
Address: 00000 Xxxxxxx Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Facsimile #:
Attention: Xxxx X. X'Xxxx
Number of Shares: 250
Purchase Price: $12,500
XXX XXXXXXXXXX
By:
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Address: Equity Communications
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxx Xxxxxxxxxx
Number of Shares: 625
Purchase Price: $31,250
X.X. XXXXX
By:
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Address: 0000 Xxxx 00 0/0
Xxxxxx, Xxxxxxxx 00000
Facsimile #:
Number of Shares: 250
Purchase Price: $12,500
ZAXIS PARTNERS, L.P.
By:
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Name:
Title:
Address: Apex Capital, LLC
Pine Grove
0 Xxxxxx Xxx, Xxxxx 000-X
Xxxxxx, Xxxxxxxxxx 00000
Facsimile #:
Attention: Xxxxxxx X. Xxxxx
Number of Shares: 5,000
Purchase Price: $250,000
SCHEDULE 6.1
EVENTS OF DEFAULT
-----------------
(a) the Company's breach of the covenant contained in the last
sentence of Section 4.13 of the Agreement;
(b) the failure of the Company to receive approval of the
E-Commerce Plan in accordance with Section 2.2(u) of the Stockholders
Agreement within 120 days from the First Closing Date;
(c) failure to use at least $10,000,000 of the Proceeds for
E-Commerce Proceed Uses during the term of the E-Commerce Plan; and
(d) the Company's material variance (positive or negative) from
the aggregate projected expenditures contained in the E-Commerce Plan
for any calendar month and the continuance of a material variance for
the period beginning on the first day of such month and ending 60 days
after written notice is given to the Company by THLi.
THLi shall be deemed to waive any Event of Default pursuant to clause
(c) or (d) above unless THLi has notified the Company in writing of such
Event of Default within 15 days of the later of (i) THLi's becoming aware
of such Event of Default and (ii) THLi's receipt of the monthly report
required by Section 4.9(e) of the Agreement. In addition, THLi may approve
deviations from the E-Commerce Plan (and such deviations will not be deemed
to be Events of Default) or waive any of the defaults listed above, in each
case by executing a written instrument specifying such waiver.
