EXHIBIT (a)(2)(4)(iii)
FRANKLIN CAPITAL CORPORATION
SERIES A CONVERTIBLE PREFERRED STOCK,
$1.00 Par Value
PREFERRED STOCK PURCHASE AGREEMENT
February 22, 2000
TABLE OF CONTENTS
PAGE
1. Authorization of Stock................................................... 1
2. Sale and Purchase of Stock............................................... 1
3. Closing Date; Payment of Purchase Price.................................. 2
4. Closing Deliveries....................................................... 2
5. Representations and Warranties........................................... 2
5.1. Organization, Standing, etc........................................ 2
5.2. Subsidiaries....................................................... 2
5.3. Qualification...................................................... 3
5.4. Business; Financial Statements..................................... 3
5.5. Changes, etc....................................................... 3
5.6. Capital Stock and Related Matters.................................. 4
5.7. Tax Returns and Payments........................................... 4
5.8. Compliance With Laws............................................... 4
5.9. Litigation, etc.................................................... 4
5.10. Compliance with Other Instruments, etc............................. 5
5.11. Governmental Consents, etc......................................... 5
5.12. Offering of Securities............................................. 5
5.13. Certain Fees....................................................... 6
5.14. Disclosure......................................................... 6
5.15. Enforceability..................................................... 6
6. Investment Representations............................................... 6
6.1. Acquisition for Own Account........................................ 6
6.2. Ability to Protect Own Interests................................... 6
6.3. Accredited Investor................................................ 7
6.4. Access to Information.............................................. 7
6.5. No Brokers......................................................... 7
6.6. Compliance with Laws............................................... 7
6.7. Enforceability..................................................... 7
6.8. Litigation, etc.................................................... 7
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.9. No Violations; Consents............................................ 8
7. Affirmative Covenants.................................................... 8
7.1. Reservation of Common Stock........................................ 8
7.2. Availability of Information........................................ 8
8. Registration, Transfer and Substitution of Certificates for Stock........ 8
8.1. Stock Register; Ownership of Stock................................. 8
8.2. Replacement of Certificates........................................ 9
8.3. Restrictive Legends................................................ 9
8.4. Notice of Proposed Transfer; Opinions of Counsel...................10
8.5. Termination of Restrictions........................................10
9. Definitions..............................................................11
9.1. Certain Defined Terms...............................................11
9.2. Other Provisions Regarding Definitions..............................13
10. Expenses, etc............................................................13
11. Survival of Representations and Warranties and Indemnification; Certain
Limitations............................................................13
12. Amendments and Waivers...................................................14
13. Notices, etc.............................................................14
14. Indemnification..........................................................14
15. Miscellaneous............................................................15
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Franklin Capital Corporation
450 Park Avenue
New York, New York 10022
February 22, 2000
To the Purchasers listed on the signature page
Gentlemen:
Franklin Capital Corporation, a Delaware corporation (the "Company"),
agrees with the entities who are signing this Agreement as purchasers (together,
the "Purchasers") as follows:
1. AUTHORIZATION OF STOCK. The Company authorized 500,000 shares of its
Series A Convertible Preferred Stock, $1.00 par value, designated as its "Series
A Convertible Preferred Stock" (the "Stock"). The relative rights, preferences
and limitations of the Stock, including, without limitation, the right to
convert Stock into shares of the Company's common stock, par value $1.00 per
share (the "Common Stock"), are set forth in the form of the Certificate of
Designation of the Stock of the Company attached as Exhibit A hereto (the
"Certificate of Designation"). Certain capitalized terms used in this Agreement
are defined in Section 9; references to a "Schedule" or an "Exhibit" are, unless
otherwise specified, to a Schedule or an Exhibit attached to this Agreement and
references to a "section" are, unless otherwise specified, to one of the
sections of this Agreement.
2. SALE AND PURCHASE OF STOCK. Subject to the terms and conditions of this
Agreement, the Company issued and sold to the Purchasers, and the Purchasers
purchased from the Company, at the closing described in Section 3, 16,450 shares
of the Stock (collectively, the "Shares") free and clear of any Lien at a
purchase price of $100 per share (the "Purchase Price").
3. CLOSING DATE; PAYMENT OF PURCHASE PRICE. The sale of the Shares to the
Purchasers by the Company took place at the offices of Weil, Gotshal & Manges
LLP at 9:00 a.m., New York City time, at a closing (the "Closing") on February
22, 2000 (the "Closing Date").
The name or names in which the Company registered the Shares are as set
forth on the signature page of this Agreement. At the Closing, the Company
delivered the Shares to the Purchasers in the form of and in the number of
certificates previously requested by Purchasers, and each Purchaser tendered to
the Company, in immediately available funds, the Purchase Price for the amount
of Shares purchased by such Purchaser.
4. CLOSING DELIVERIES. (a) All proceedings taken and all documents
executed and delivered by the parties at the Closing were deemed taken and
executed simultaneously, and no proceedings was deemed taken nor any document
executed or delivered until all were taken, executed and delivered.
(b) At the Closing, the Company delivered or caused to be delivered
to the Purchasers the following:
(i) the Certificate of Designation in the form attached hereto as
Exhibit A, which Exhibit was filed contemporaneously with the Secretary of State
of Delaware; and
(ii) the Registration Rights Agreement in the form attached hereto
as Exhibit B.
(c) At the Closing, the Purchasers delivered or caused to be
delivered to the Company via wire transfer, in immediately available funds, the
aggregate Purchase Price for the Shares.
5. REPRESENTATIONS AND WARRANTIES. Except as disclosed in Exhibit C, the
Company represents and warrants that:
5.1. ORGANIZATION, STANDING, ETC. The Company is a corporation validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now conducted and as proposed to be conducted, to
enter into and perform all of its obligations under this Agreement and each of
the Collateral Agreements, to issue and sell the Shares and to carry out the
transactions contemplated hereby and thereby.
5.2. SUBSIDIARIES. Exhibit D correctly lists as to each Subsidiary of the
Company on the date of this Agreement (a) its name, (b) the jurisdiction of its
incorporation and (c) the percentage of its issued and outstanding shares owned
by the Company. Each Subsidiary of the Company is a corporation validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted. All the outstanding shares of capital stock of each Subsidiary of the
Company are validly issued, fully paid and nonassessable, and all such shares
indicated in Exhibit D as owned by the Company are so owned beneficially and of
record by the Company, free and clear of any Lien.
5.3. QUALIFICATION. Each of the Company and its Subsidiaries is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction (other than the jurisdiction of its incorporation)
in which the nature of its activities or the character of the properties it owns
or leases makes
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such qualification necessary and in which the failure to so qualify would have
a Material Adverse Effect.
5.4. BUSINESS; FINANCIAL STATEMENTS. The audited balance sheet of the
Company and the related statements of operations, cash flows and changes in net
assets included in the Company's Annual Report on Form 10K for the year ended
December 31, 1998 (collectively, the "Financial Statements") have been prepared
in accordance with GAAP consistently applied throughout the periods involved
(except as otherwise specified therein) and present fairly the financial
position of the Company as of the respective dates specified and the results of
its operations and changes in financial position for the respective periods
specified. The Company has also delivered to the Purchasers complete and correct
copies of its balance sheet as of September 30, 1999, and the related statements
of operations, cash flows and changes in net assets for the three month period
ended on such date (the "Unaudited Statements"). The Unaudited Statements have
been prepared in accordance with GAAP consistently applied throughout the
periods involved (except as otherwise specified therein) and present fairly the
financial position of the Company as of the respective dates specified, and the
results of its operations and changes in cash flows for the respective periods
specified.
5.5. CHANGES, ETC. Since September 30, 1999, neither the Company nor any
of the Subsidiaries has sustained any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree which would be material to the Company and the Subsidiaries taken as a
whole, otherwise than as reserved for as disclosed in the Company's financials
statements; and there has not been any change in the capital stock of the
Company or increase in the long-term debt (other than accretion or scheduled
repayments thereof) of the Company and the Subsidiaries taken as a whole, or any
material adverse change which has had a Material Adverse Effect.
5.6. CAPITAL STOCK AND RELATED MATTERS. After giving effect to the
transactions contemplated by this Agreement, the authorized capital stock of the
Company on the date hereof will consist of (a) 10,000,000 shares of Common
Stock, of which 730,588 shares will be outstanding and (b) 500,000 shares of
Stock, of which 16,450 shares shall be outstanding. The Common Stock and the
Stock are hereinafter collectively referred to as "Capital Stock". All of the
outstanding shares of Capital Stock are, as of the date hereof, validly issued
and outstanding, fully paid and non-assessable. Except as set forth above, the
Company has no outstanding stock or securities convertible into or exchangeable
for any shares of its Capital Stock, or any outstanding rights (either
preemptive or other) to subscribe for or to purchase, or any outstanding options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any outstanding calls, commitments or claims of any character
relating to, any Capital Stock or any stock or securities convertible into or
exchangeable for any Capital Stock of the Company. Except as set forth above,
the
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Company is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its Capital Stock or any
convertible securities, rights or options of the type described in the preceding
sentence. Neither the Company nor any of its Subsidiaries is a party to, or has
knowledge of, any agreement restricting the transfer of any shares of the
Capital Stock which would affect the transferability of the Common Stock
issuable upon conversion of the Stock.
5.7. TAX RETURNS AND PAYMENTS. The Company and each of the Subsidiaries
have filed all necessary-material federal, state, local and foreign income,
payroll, franchise and other tax returns (after giving effect to extensions) and
have paid all taxes shown as due thereon (except where the failure to so file or
pay would not, singly or in the aggregate, have a Material Adverse Effect), and
there is no tax deficiency that has been, or to the knowledge of the Company is
likely to be, asserted against the Company, any of the Subsidiaries or any of
their properties or assets that would result in a Material Adverse Effect,
except for taxes that are being contested in good faith by appropriate
proceedings and with respect to which the Company has established adequate
reserves in accordance with United States GAAP.
5.8. COMPLIANCE WITH LAWS. The Company and each of the Subsidiaries are in
material compliance with all laws applicable to the Company and the Subsidiaries
or to the conduct of the business or operations of the Company and the
Subsidiaries, except for such non-compliances as would not have a Material
Adverse Effect. The Company and each of the Subsidiaries have all permits from
Governmental Authorities which are required for the Company and each of the
Subsidiaries to operate its business, except for those the absence of which
would not result in a Material Adverse Effect.
5.9. LITIGATION, ETC. There is no action, proceeding or investigation
pending or (to the knowledge of the Company) threatened which questions the
validity of this Agreement, the Shares or any action taken or to be taken
pursuant to this Agreement, the Shares or the Collateral Agreements. There are
no legal or governmental proceedings pending to which the Company or any of the
Subsidiaries is a party or of which any property of the Company or the
Subsidiaries is the subject, which if determined adversely to the Company or any
of the Subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and, to the Company's knowledge, no such proceedings which would
in the aggregate have a Material Adverse Effect are threatened or contemplated
by Governmental Authorities or threatened by others.
5.10. COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the Company nor any
of the Subsidiaries is in violation of any term of its certificate or articles
of incorporation or by-laws. The compliance by the Company with all of the
provisions of this Agreement and the Registration Rights Agreement, the
execution, delivery and performance by the Company of this Agreement and the
Registration Rights Agreement, the issuance by the Company of the Common Stock
upon the conversion
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of the Shares, and the compliance with the terms of the Certificate of
Designation will not conflict with or result in a breach or violation of any of
the material terms and provisions of, or constitute a material default under,
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries is bound or to which
any of the property or assets of the Company or any of the Subsidiaries is
subject, nor will such actions result in any violation of the provisions of the
certificate of incorporation or bylaws of the Company or any of the Subsidiaries
or any statute or any order, rule or regulation of any court or Governmental
Authority having jurisdiction over the Company or any of the Subsidiaries or any
of their properties except in each case as would not, individually or in the
aggregate have a Material Adverse Effect.
5.11. GOVERNMENTAL CONSENTS, ETC. No consent, approval or authorization
of, or declaration or filing with, any Governmental Authority on the part of the
Company is required for the valid execution and delivery of this Agreement, the
valid offer, issue, sale and delivery of the Shares pursuant to this Agreement
or the valid issue and delivery of shares of Common Stock issuable upon
conversion of the Stock. Except for (a) applicable state securities or blue sky
laws, and (b) any consents, approvals, filings or notices given on or prior to
the date hereof, neither the Company nor any of its Subsidiaries is required to
obtain any consent, approval or authorization of, or to make any declaration or
filing with, any Governmental Authority as a condition to the valid execution,
delivery or performance of any of the Collateral Agreements or the consummation
of the transactions contemplated thereby.
5.12. OFFERING OF SECURITIES. Neither the Company nor any Person acting on
behalf of the Company has taken or will take any action which would subject the
offering, issuance or sale of any of the Stock to the provisions of Section 5 of
the Securities Act.
5.13. CERTAIN FEES. No broker's or finder's fees or commissions will be
payable by the Company with respect to the transactions contemplated by this
Agreement and the Collateral Agreements.
5.14. Disclosure. None of the Financial Statements, the Annual Report on
Form 10K for the year ended December 31, 1998 or any document filed by the
Company with the Securities and Exchange Commission pursuant to the Exchange Act
since the Annual Report on Form 10K for the year ended December 31, 1998,
contains (in each case, as of its date) any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not misleading.
5.15. ENFORCEABILITY. This Agreement and the Registration Rights Agreement
have been duly authorized and validly executed and delivered by the Company and
(assuming the due authorization, execution and delivery thereof by the other
parties thereto) constitute the valid and binding obligations of the Company,
5
enforceable in accordance with their respective terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including, without limitation,
all laws relating to fraudulent transfers), reorganization, moratorium or other
similar laws relating to or affecting enforcement of creditors' rights
generally, or by general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity).
6. INVESTMENT REPRESENTATIONS. Each Purchaser understands that neither the
Shares nor any Common Stock issuable upon conversion, if any, of the Shares has
been registered under the Securities Act and that the certificates for the
Shares and such Common Stock will bear a legend to that effect. Each Purchaser
also understands that the Shares are being offered and sold pursuant to an
exemption from registration contained in the Securities Act, based in part upon
their representations contained in this Agreement. Each Purchaser hereby
severally represents and warrants to the Company as follows:
6.1. ACQUISITION FOR OWN ACCOUNT. Such Purchaser is acquiring the Shares
for its own account for investment and not with a view toward distribution in a
manner which would violate the Securities Act.
6.2. ABILITY TO PROTECT OWN INTERESTS. Such Purchaser represents that by
reason of its business or financial experience, or the business and financial
experience of its management, such Purchaser has the capacity to protect its own
interests in connection with the transaction contemplated in this Agreement.
Such Purchaser is not a corporation formed for the specific purpose of
consummating this transaction.
6.3. ACCREDITED INVESTOR. Such Purchaser represents that it is an
"accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
6.4. ACCESS TO INFORMATION. Such Purchaser has been given access to all
Company documents, records, and other information, has received physical
delivery of all those which Purchaser has requested, and has had adequate
opportunity to ask questions of, and receive answers from, the Company's
officers, employees, agents, accountants and representatives concerning the
Company's business, operations, financial condition, assets, liabilities, and
all other matters relevant to its investment in the Shares.
6.5. NO BROKERS. No broker's or finder's fees or commissions will be
payable by such Purchaser with respect to the transactions contemplated by this
Agreement and the Collateral Agreements, and such Purchaser hereby severally
indemnifies and holds the Company harmless from any claim, demand or liability
for broker's or finder's fees alleged to have been incurred by such Purchaser,
its affiliates or agents or any Person acting on behalf of or at the request of
such Purchaser, its affiliates or agents.
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6.6. COMPLIANCE WITH LAWs. Such Purchaser and its transferees will comply
with all filing and other reporting obligations under all Requirements of Law
which shall be applicable to such Purchaser with respect to the Shares and to
the Common Stock issuable or issued on conversion of the Shares.
6.7. ENFORCEABILITY. This Agreement and the Registration Rights Agreement
has been duly authorized and when validly executed and delivered by such
Purchaser (assuming the due authorization, execution and delivery thereof by the
other parties thereto) shall constitute the valid and binding obligations of
such Purchaser, enforceable in accordance with their respective terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
6.8. LITIGATION, ETC. There is no action, proceeding or investigation
pending or (to the knowledge of each Purchaser) threatened which questions the
validity of this Agreement, the Shares or any action taken or to be taken
pursuant to this Agreement, the Shares or the Collateral Agreements. There are
no legal or governmental proceedings pending to which any Purchaser is a party
or of which any property of a Purchaser is the subject, which if determined
adversely to such Purchaser, would individually or in the aggregate have a
material adverse effect on the consummation of the transactions contemplated
hereby; and, to such Purchaser's knowledge, no such proceedings which would in
the aggregate have such a material adverse effect are threatened or contemplated
by Governmental Authorities or threatened by others.
6.9. NO VIOLATIONS; CONSENTS. No consent, waiver, approval, order, permit
or authorization of, or declaration or filing with, or notification to, any
Person, including, without limitation, any Governmental Authority, is required
on the part of any Purchaser in connection with the execution and delivery of
this Agreement or the Registration Rights Agreement, or the compliance by such
Purchaser with any of the provisions hereof or thereof, except, in each case,
for violations, conflicts, breaches or defaults which individually or in the
aggregate would not have a material adverse effect on the transactions
contemplated hereby.
7. AFFIRMATIVE COVENANTS. The Company covenants that from and after the
date of this Agreement:
7.1. RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon conversion of the
Stock, the number of shares of Common Stock from time to time issuable upon
conversion of all shares of the Stock at the time outstanding. All shares of
Common
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Stock issuable upon conversion of the Stock shall be duly authorized and, when
issued upon such conversion, shall be validly issued, fully paid and
non-assessable.
7.2. AVAILABILITY OF INFORMATION. Insofar as required by law, the Company
will comply with the reporting requirements of Sections 13 and 15(d) of the
Exchange Act and will comply with all other public information reporting
requirements of the Securities and Exchange Commission (including Rule 144 under
the Securities Act) from time to time in effect and relating to the availability
of an exemption from the Securities Act for the sale of any Restricted
Securities. The Company will also reasonably cooperate with each holder of any
Restricted Securities in supplying such information as may be necessary for such
holder to complete and file any information reporting forms presently or
hereafter required by the Securities and Exchange Commission as a condition to
the availability of an exemption from the Securities Act for the sale of any
Restricted Securities.
8. REGISTRATION, TRANSFER AND SUBSTITUTION OF CERTIFICATES FOR STOCK.
8.1. STOCK REGISTER; OWNERSHIP OF STOCK. (a) Each Purchaser agrees that it
will not sell, assign, transfer or otherwise dispose of (collectively, a
"Transfer") any Shares prior to the first anniversary of the Closing Date other
than a Transfer to any Affiliate of such Purchaser. The Company will keep at its
principal office a register in which the Company will provide for the
registration of the Stock and the registration of transfers or conversion of the
Stock. The Company may treat the Person in whose name any of the Shares or
shares issued upon conversion of any of the Stock are registered on such
register as the owner thereof and the Company shall not be affected by any
notice to the contrary. All references in this Agreement to a "holder" of any
Shares or shares issued upon conversion of any of the Stock shall mean the
Person in whose name such Shares or shares issued upon conversion of any of the
Stock are at the time registered on such register.
(b) Upon the surrender of any certificate for Stock, properly
endorsed, for registration of transfer or for conversion at the office of the
Company maintained pursuant to subdivision (a) of this Section 8.1, the Company
at its expense will (subject to compliance with Section 8.2 hereof, if
applicable) execute and deliver to or upon the order of the holder thereof (i) a
new certificate or certificates for the same aggregate number of shares of Stock
less the number of shares of Stock being converted, if any, in the name of such
holder or as such holder (upon payment by such holder of any applicable transfer
taxes) may direct, and (ii) a certificate or certificates for the number of
shares of Common Stock to be issued upon conversion of the shares of Stock so
surrendered.
8.2. REPLACEMENT OF CERTIFICATES. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
certificate representing shares of Stock or Common Stock issued upon the
conversion of shares of Stock and, in the case of any such loss, theft or
destruction of
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any certificate representing shares of Stock or Common Stock issued upon the
conversion of shares of Stock held by a Person other than the Purchasers, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such certificate
representing shares of Stock or Common Stock issued upon the conversion of
shares of Stock for cancellation at the office of the Company maintained
pursuant to subdivision (a) of Section 8.1 hereof, the Company at its expense
will execute and deliver, in lieu thereof, a new certificate representing shares
of Stock or Common Stock of like tenor.
8.3. RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section 8,
each certificate for Stock (including each certificate for Stock issued upon the
transfer of any certificate for Stock) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"The shares represented by this
Certificate and any shares of Common Stock
issuable upon conversion of any such
shares have not been registered under the
Securities Act of 1933 and may not be
transferred in the absence of such
registration or an exemption therefrom
under such Act. Such shares and any such
shares of Common Stock may be transferred
only in compliance with the conditions
specified in the Preferred Stock Purchase
Agreement dated February 22, 2000 between
Franklin Capital Corporation (the
"Company") and the purchasers identified
therein. A complete and correct copy of
such Agreement is available for inspection
at the principal office of the Company and
will be furnished without charge to the
holder of such shares upon written
request."
Except as otherwise permitted by this Section 8, each certificate for Common
Stock issued upon the conversion of any of the Stock, and each certificate
issued upon the transfer of any such Common Stock, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this
certificate have not been registered under
the Securities Act of 1933 and may not be
transferred in the absence of such
registration or an exemption therefrom
under such Act. Such shares may be
transferred only in compliance with the
conditions specified in the Preferred
Stock Purchase Agreement dated February
22, 2000 between Franklin Capital
Corporation (the "Company") and the
purchasers identified therein. A complete
and correct copy of such Agreement is
available for inspection at the principal
9
office of the Company and will be
furnished without charge to the holder of
such shares upon written request."
8.4. NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL. Prior to any
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this Section 8.4. Each
such notice shall describe the manner and circumstances of the proposed transfer
and shall be accompanied by an opinion of counsel for such holder, which counsel
and opinion shall each be reasonably satisfactory to the Company, that the
proposed transfer may be effected without registration of such shares of
Restricted Securities under the Securities Act. Such holder shall thereupon be
entitled to transfer such shares in accordance with the terms of the notice
delivered by such holder to the Company. Each certificate representing such
shares issued upon or in connection with such transfer shall bear the
restrictive legends required by Section 8.3, unless the related restrictions on
transfer shall have ceased and terminated as to such shares pursuant to Section
8.5 hereof.
8.5. TERMINATION OF RESTRICTIONS. The restrictions imposed by this Section
8 upon the transferability of Restricted Securities shall cease and terminate as
to any particular Restricted Securities when such restrictions are no longer
required in order to insure compliance with the Securities Act. Whenever such
restrictions shall cease and terminate as to any Restricted Securities, the
holder thereof shall be entitled to receive from the Company, without expense
(other than applicable transfer taxes, if any), new certificates for such
securities of like tenor not bearing the applicable legends required by Section
8.3 hereof.
9. DEFINITIONS.
9.1. CERTAIN DEFINED TERMS. As used in this Agreement the following terms
have the following respective meanings:
AFFILIATE: With respect to any entity, any other entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such specified entity. For purposes of this definition, the term
"control" means (i) the power to direct the management and policies of an
entity, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract or otherwise or (ii) without
limiting the foregoing, the beneficial ownership of 50% or more of the voting
power of the voting common equity of such entity (on a fully diluted basis).
CAPITAL STOCK: As defined in Section 5.6 of this Agreement.
CERTIFICATE OF DESIGNATION: As defined in Section 1 of this Agreement.
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CLOSING: As defined in Section 3 of this Agreement.
CLOSING DATE: As defined in Section 3 of this Agreement.
COLLATERAL AGREEMENTS: The Registration Rights Agreement and the
Certificate of Designation.
COMMON STOCK: As defined in Section 1 of this Agreement.
COMPANY: As defined in the introduction to this Agreement.
EXCHANGE ACT: At any time, the Securities Exchange Act of 1934 as then in
effect or any similar federal statute then in effect, and any reference to a
particular Section of such Act shall be deemed to include a reference to the
comparable section, if any, in any such similar federal statute.
FINANCIAL STATEMENTS: As defined in Section 5.4 of this Agreement.
GAAP: Generally accepted accounting principles set forth in the Opinions
of the Accounting Principles Board of the American Institute of Certified Public
Accountants and in statements by the Financial Accounting Standards Board or in
such other statement by such other entity as may be approved by a significant
segment of the accounting profession; and the requisite that such principles be
applied on a consistent basis shall mean that the accounting principles observed
in a current period are comparable in all material respects to those applied in
a preceding period.
GOVERNMENTAL AUTHORITY: Any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
LIEN: Any mortgage, pledge, hypothecation, assignment, security interest,
lien, charge or encumbrance, or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effects as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction).
MATERIAL ADVERSE EFFECT: Any effect that is materially adverse to the
properties, business, results of operations or financial condition of the
Company and its Subsidiaries taken as a whole.
MAJORITY IN INTEREST: At any time, the holders of a majority, by number of
shares, of the outstanding Shares and the outstanding shares of Common Stock
issued upon conversion of any Shares, such majority to be determined by
reference to
11
the number of shares of Common Stock into which all outstanding Shares are at
the time convertible.
PERSON: An individual, a partnership, a joint venture, a corporation, a
limited thereof.
REGISTRATION RIGHTS AGREEMENT: As defined in Section (b)(ii) of this
Agreement.
REQUIREMENT OF LAW: As to any Person, the Certificate of Incorporation and
By-Laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
RESTRICTED SECURITIES: All of the following: (a) any certificates for
Stock bearing the applicable legend or legends referred to in Section 8.3
hereof, (b) any shares of Common Stock which have been issued upon the
conversion of any of the Stock and which are evidenced by a certificate or
certificates bearing the applicable legend or legends referred to in such
Section and (c) unless the context otherwise requires, any shares of Common
Stock which are at the time issuable upon the conversion of Stock and which,
when so issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
SECURITIES ACT: At any time, the Securities Act of 1933 as then in effect
or any similar federal statute then in effect, and any reference to a particular
Section of such Act shall be deemed to include a reference to the comparable
section, if any, in any such similar federal statute.
SHARES: As defined in Section 2 of this Agreement.
STOCK: As defined in Section 1 of this Agreement.
SUBSIDIARIES: With respect to any Person, any corporation with respect to
which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned by such Person or by one or
more Subsidiaries of such Person or by such Person and one or more Subsidiaries
of such Person.
Any of the above-defined terms may, unless the context otherwise requires,
be used in the singular or plural depending on the reference.
9.2. OTHER PROVISIONS REGARDING DEFINITIONS. (a) Unless otherwise defined
therein, all terms defined in this Agreement shall have the defined meanings
12
when used in any certificate, report or other document made or delivered
pursuant to this Agreement.
(b) The words "hereof", "herein", and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
10. EXPENSES, ETC. Whether or not the transactions contemplated by this
Agreement shall be consummated, each party will bear all of its own expenses in
connection with such transactions and in connection with any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement or the Shares purchased by the Purchasers hereunder.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION;
CERTAIN LIMITATIONS. The Company's indemnification obligations and all
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement, any investigation at any time made by
the Purchasers or on their behalf and the purchase of the Shares by the
Purchasers under this Agreement and any conversion of any of the Stock or any
disposition of any shares of Common Stock issued upon conversion of any of the
Stock; provided that all representations and warranties (and the indemnities in
respect thereof with respect to claims not made prior to such date) shall expire
60 days after the date hereof. No written or oral statements made by or on
behalf of the Company, other than those express representations and warranties
contained in this Agreement, shall constitute representations or warranties
within the meaning of this Agreement. In no event shall Purchasers be entitled
to the remedy of rescission.
12. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended or
modified and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and a Majority in Interest.
13. NOTICES, ETC. Except as otherwise provided in this Agreement, notices
and other communications under this Agreement shall be in writing and shall be
delivered, or mailed by first-class mail, postage pre-paid, addressed, (a) if to
the Purchasers, at the address set forth on the signature pages hereto, or at
such other address as the Purchasers shall have furnished to the Company in
writing, or (b) if to any other holder of any Shares or shares of Common Stock
into which any of the Shares have been converted, at such address as such other
holder shall have furnished to the Company in writing, or, until any such other
holder so furnishes to the Company an address, then to and at the address of the
last holder of such Shares or shares of Common Stock into which such Shares have
been converted who has furnished an address to the Company, or (c) if to the
Company at the address of the Company set forth at the beginning of this
Agreement, to the attention of its President, or at such
13
other address, or to the attention of such other officer, as the Company shall
have furnished to the Purchasers and each such other holder in writing.
14. INDEMNIFICATION. (a) The Company shall indemnify, defend and hold
harmless the Purchasers, their affiliates, partners, officers, employees and
agents (each, an "Indemnified Person") from and against any and all losses,
liabilities, damages, judgments, settlements and expenses (including reasonable
attorneys' fees and expenses incurred in the investigation or defense of any of
the same or in asserting, preserving or enforcing any of rights hereunder), that
arise out of any breach by the Company of any of its representations and
warranties or covenants contained in this Agreement.
(b) The Purchasers shall give the Company prompt notice of any
third-party claim that may give rise to any indemnification obligation under
this Section 14 and the Company shall (except as set forth below) have the right
to assume and control the defense (at its expense) and settlement of any such
claim through the Company's own counsel or through other counsel reasonably
acceptable to the Purchasers. The Purchasers, together with any other purchaser
who may have asserted a similar claim under any other preferred stock purchase
agreement relating to the Preferred Stock, may retain one additional counsel to
represent the interests of all of such purchasers at their own expense if, under
applicable standards of professional conduct, a conflict with respect to any
significant issue between such purchasers and the Company exists in respect of
such third-party claim. In such event, the Company shall not assume the defense
of such claim and shall also pay the reasonable fees and expenses of one counsel
selected by such purchasers in respect of such claim. Notwithstanding the
foregoing, without such purchasers' consent, the Company will not settle any
action or proceeding which does not provide such purchasers a full,
unconditional release from all liability with respect to such claim by each
claimant or plaintiff in a form reasonably acceptable to such purchasers'
counsel, nor will the Company consent to any injunctive or other non-monetary
relief affecting any Indemnified Person.
15. MISCELLANEOUS. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto, whether so expressed or not, and, in particular, shall inure to
the benefit of and be enforceable by any holder or holders at the time of the
Shares or shares of Common Stock into which any of the Shares have been
converted. Except as aforesaid, this Agreement shall not inure to the benefit of
any third party. This Agreement embodies the entire agreement and understanding
between the Purchasers and the Company and supersedes all prior agreements and
understandings relating to the subject matter hereof (including all term sheets
relating thereto). This Agreement shall be construed and enforced in accordance
with and governed by the law of the State of New York without regard to the
principles regarding conflicts of laws. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. This Agreement may be executed in any number
14
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
15
If the Purchasers are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterparts of this letter and return one
of the same to the Company, whereupon this letter shall become a binding
agreement between the Purchasers and the Company.
Very truly yours,
FRANKLIN CAPITAL CORPORATION
By: /s/
-----------------------------
Spencer L. Brown
Secretary
The foregoing Agreement is hereby
agreed to as of the date hereof.
COPLEY FUND, INC.
By: /s/
-------------------------------------
Name: Irving Levine
Title: Chairman
Address and Telecopy Number
for Notices
Copley Fund, Inc.
Att: Irving Levine
315 Pleasant Street, 5th Floor
Fall River, MA 02722
(___)
-------------------------------
Number of Shares Purchased: 4750
Conversion Rate: $20
16
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
KUBY GOTTLIEB SPECIAL VALUE FUND
By: /s/
-------------------------------------------
Name: Peter Gottlieb
Title: Portfolio Manager
Address and Telecopy Number
for Notices
c/o First Albany Asset Mgmt
500 W. Madison #2740
Chicago, IL 60661
(___)
--------------------------------------
Number of Shares Purchased: 4000
Conversion Rate: $20
MARSHALL RATTNER INC.
By: /s/
-------------------------------------------
Name: Mark Rattner
Title: Chief Executive Officer
Address and Telecopy Number
for Notices
c/o Professional Indemnity Agency, Inc. of N.Y.
37 Radio Circle Drive
Mount Kisco, NY 10549-5000
(___)
--------------------------------------
Number of Shares Purchased: 1000
Conversion Rate: $20
17
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
By: /s/
-------------------------------------------
Wendy S. Brown
Address and Telecopy Number
for Notices
220 East 72nd Street
Apartment 15C
New York, NY 10021
(___)
--------------------------------------
Number of Shares Purchased: 250
Conversion Rate: $20
By: /s/
-------------------------------------------
Peter Gottlieb
Address and Telecopy Number
for Notices
c/o PrivateBank & Trust
Attn: Lauren Hunzel
10 N. Dearborn
Chicago, IL 60202
(___)
--------------------------------------
Number of Shares Purchased: 500
Conversion Rate: $20
18
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
By: /s/
--------------------------------------------
Susan Gottlieb
Address and Telecopy Number
for Notices
c/o LaSalle National Trust
Attn: Gail Levine
135 S. LaSalle
Chicago, IL 60603
(___)
--------------------------------------
Number of Shares Purchased: 500
Conversion Rate: $20
By: /s/
--------------------------------------------
Daniel S. Kampel
Address and Telecopy Number
for Notices
c/o Daniel S. Kampel Associates, Inc.
600 Third Avenue
New York, NY 10016
(___)
--------------------------------------
Number of Shares Purchased: 500
Conversion Rate: $20
19
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
By: /s/
------------------------------------
Patricia Karpas
Address and Telecopy Number
For Notices
124 West 60th Street
New York, NY 10023
(___)-------------------------------
Number of Shares Purchased: 200
Conversion Rate: $20
By: /s/
------------------------------------
Hiram Lazar
Address and Telecopy Number
for Notices
2145 Wantagh Park Drive
Wantagh, NY 11793
(___)
-------------------------------
Number of Shares Purchased: 100
Conversion Rate: $20
20
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
By: /s/
------------------------------------
Jonathan A. Marshall
Address and Telecopy Number
for Notices
c/o Pennie & Edmonds
1155 6th Avenue, 22nd Fl.
New York, NY 10036
(___)
-------------------------------
Number of Shares Purchased: 500
Conversion Rate: $20
By: /s/
------------------------------------
David Meitus
Address and Telecopy Number
for Notices
c/o LaSalle National Trust
Attn: Gail Levine
135 S. LaSalle
Chicago, IL 60603
(___)
-------------------------------
Number of Shares Purchased: 500
Conversion Rate: $20
21
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
By: /s/
------------------------------------
Leslie Murdock
Address and Telecopy Number
for Notices
120 East 87th Street
Apartment R28A
New York, NY 10128
(___)
-------------------------------
Number of Shares Purchased: 250
Conversion Rate: $20
By: /s/
------------------------------------
John Nebens
Address and Telecopy Number
for Notices
2 Osborn Hill
San Antonio, TX 78209
(___)
--------------------------------
Number of Shares Purchased Jointly with Meg Nebens: 500
Conversion Rate: $20
22
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
By: /s/
------------------------------------
Meg Nebens
Address and Telecopy Number
For Notices
2 Osborn Hill
San Antonio, TX 78209
(___)--------------------------
Number of Shares Purchased Jointly with John Nebens: 500
Conversion Rate: $20
By: /s/
------------------------------------
Mark Rattner
Address and Telecopy Number
for Notices
c/o Professional Indemnity Agency, Inc. of N.Y.
37 Radio Circle Drive
Mount Kisco, NY 10549-5000
(___)
-------------------------------
Number of Shares Purchased: 1000
Conversion Rate: $20
23
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
By: /s/
------------------------------------
Gerry M. Ritterman
Address and Telecopy Number
for Notices
47 Lawrence Farms Crossway
Chappaqua, NY 10514
(___)
-------------------------------
Number of Shares Purchased: 1500
Conversion Rate: $20
By: /s/
------------------------------------
Edward Sheldon
Address and Telecopy Number
for Notices
20 Punchbowl Drive
Westport, CT 06880
(___)
-------------------------------
Number of Shares Purchased: 400
Conversion Rate: $20
24
EXHIBITS
Exhibit A Certificate of Designation
Exhibit B Form of Registration Rights Agreement
Exhibit C Exceptions to Representations and Warranties
Exhibit D Subsidiaries of the Company
EXHIBIT A
Certificate of Designation
See Exhibit 14(a)(2)(4)(i)
EXHIBIT B
Registration Rights Agreement
See Exhibit 14(a)(2)(4)(ii)
EXHIBIT C
Exceptions to Representations and Warranties
NONE
EXHIBIT D
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STATE OF EQUITY
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
- --------------------------------------------------------------------------------
eCom Capital Corporation Delaware 100%
- --------------------------------------------------------------------------------
eMattress.com Delaware 87.19%
- --------------------------------------------------------------------------------