As filed with the Securities and Exchange Commission on June 20, 1996
Registration No. 2-93668-FW
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CURTIS MATHES HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Texas 3651 75-1975147
(Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation) Classification Code Number) Identification No.)
10911 Petal Street, Dallas, Texas 75238
(214) 503-8880
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Billy J. Robinson
Vice President, Secretary and General Counsel
Curtis Mathes Holding Corporation
10911 Petal Street, Dallas, Texas 75238
(214) 503-8880
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public:
From time to time after the registration statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please
check the following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
Title of Each Proposed
Class of Maximum Amount of
Securities to Aggregate Registration
be Registered Offering Price* Fee
Common Stock, $.01 par value $4,166,303 $1,436.66
* Estimated solely for the purpose of calculating the registration
fee. Pursuant to Rule 457(c), the offering price and registration fee
are calculated upon the basis of the average of the closing bid and
asked price of the Common Stock as reported by the NASDAQ SmallCap
Market on June 17, 1996.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until this Registration Statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
776,865 of Common Stock Offered for Resale;
Up to 519,000 Shares of Common Stock Underlying Warrants,
Which Shares are being Registered for Resale upon Exercise of the
Warrants;
Up to 916,668 Shares of Common Stock Convertible from Preferred Stock,
Which Shares are being Registered for Resale upon Conversion of the
Preferred Stock.
CURTIS MATHES HOLDING CORPORATION
This Prospectus covers an aggregate total of 2,212,533 shares of
Common Stock, par value $.01 per share (the "Shares") of Curtis Mathes
Holding Corporation, a Texas corporation (the "Company.") 776,865
Shares are being offered for the account of security holders in a
secondary offering; 519,000 Shares underlying Warrants are being
registered for resale upon exercise of the Warrants; and 916,668 Shares
convertible from Preferred Stock are being registered for resale upon
conversion of the Preferred Stock. The common and preferred security
holders and warrant holders are hereinafter referred to as the "Selling
Stockholders." See "Selling Stockholders" and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale by the
Selling Stockholders of the Shares to which this Prospectus relates.
The Company will only receive an economic benefit upon conversion of the
Preferred Stock and exercise of the warrants held by the Selling
Stockholders.
ANY INVESTMENT IN THE SECURITIES OFFERED HEREIN INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Proceeds to Company
Public Discounts or other Persons
Per Share (1) (2) (3)
Total Maximum (4) (1) (2) (3)
(1) The Selling Stockholders may from time to time effect the sale of
their Shares at prices and at terms then prevailing or at prices
related to the then-current market price. The Common Stock of the
Company is traded on the NASDAQ SmallCap Market under the symbol
"CRTM." On June 17, 1996, the average closing bid and asked price
of the Common Stock as reported by the NASDAQ SmallCap Market was
$1.77 per share.
(2) The Selling Stockholders may pay regular brokers' commissions in
cash at the time(s) of the sale of their Shares.
(3) The Company will not receive any proceeds from the sales of the
Shares to which this Prospectus relates. The Selling Stockholders
will receive proceeds based on the market price of the Shares at
the time(s) of sale.
(4) Without deduction of expenses for the offering (all of which will
be borne by the Company), estimated to be approximately $7,262.94.
The date of this Prospectus is ______________________.
<PAGE>
(Inside front cover page of Prospectus)
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
a c c ordance therewith files reports, proxy statements and other
i n f o r mation with the Securities and Exchange Commission (the
"Commission"). The reports, proxy statements and other information
filed by the Company with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade
Center, Suite 1300, New York, New York 10048 and 500 W. Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material also can
be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a Registration Statement
on Form S-3 (together with all amendments thereto, the "Registration
Statement") under the Securities Act, with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained
in this Prospectus as to the contents of any contract or other document
referred to herein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or to documents incorporated
therein by reference, each such statement being qualified in all
respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated
herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1995, as amended, dated March 27, 1996 (the
"1995 10-K/A Report.")
(2) The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, dated November 17, 1995 (the
"September 10-Q Report.")
(3) The Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1995, dated February 13, 1995 (the
"December 10-Q Report.")
(4) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996, dated April 30, 1996 (the "March 10-Q
Report.")
Any documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof
from the date of filing of such documents.
<PAGE>
Any statement contained in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
To the extent that any proxy statement is incorporated by reference
herein, such incorporation shall not include any information contained
in such proxy statement which is not, pursuant to the Commission's
rules, deemed to be "filed" with the Commission or subject to the
liabilities of Section 18 of the Exchange Act.
The Company will provide without charge to each person, including
any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits to such
d o cuments unless such exhibits are specifically incorporated by
reference into such documents). Any such request should be directed to
the Company's principal executive offices: Curtis Mathes Holding
Corporation, 10911 Petal Street, Dallas, Texas 75238, Attention:
Investor Relations; telephone number (214) 503-8880.
The Offering
Common Stock Offered by the Selling
Stockholders 776,865 Shares
Common Stock Offered by the Company
Upon Exercise of Warrants Up to 519,000 Shares
Common Stock Offered by the Company
Upon Conversion of Preferred Stock Up to 916,668 Shares
Common Stock Outstanding After the
Offering (1) 25,746,856
Use of Proceeds from Exercise of Working capital and general
Warrants corporate purposes
NASDAQ SmallCap Market Symbol CRTM
Risk Factors For a description of certain risks inherent in
an investment in the Common Stock,
see "RISK FACTORS"
(1) Assumes the exercise of outstanding warrants to purchase 40,000
Shares at $4.50 per share, the exercise of outstanding warrants to
purchase 75,000 Shares at $3.28 per share, the exercise of
outstanding warrants to purchase 100,000 Shares at $3.125 per
share, the exercise of outstanding warrants to purchase 55,000
Shares at $3.00 per share, the exercise of outstanding warrants to
purchase 105,000 Shares at $1.25 per share, the exercise of
outstanding warrants to purchase 124,000 Shares at $1.00 per share,
and the exercise of outstanding warrants to purchase 20,000 Shares
at $0.50 per share. Also assumes the conversion of Preferred Stock
into 916,668 Shares at a minimum conversion price of $1.50.
<PAGE>
RISK FACTORS
The following factors should be considered, together with the other
information in this Prospectus, in evaluating an investment in the
Company.
Prior Claims on Future Earnings
One of the Company's primary operating subsidiaries, Curtis Mathes
Corporation (CMC), is currently operating under a six-year plan of
reorganization effective October 1, 1992 (the "Plan.") Accordingly,
upon acquiring CMC, the Company assumed the responsibility for certain
claims associated with CMC. Under the Plan CMC is required to pay 1% of
gross revenue on a monthly basis to Deutsche Financial Services
Corporation ("DFS")(formerly ITT Commercial Finance Corp.) as a priority
creditor under the Plan. In addition, CMC is required to pay one half
of one percent of gross revenue to a "Liquidating Trustee," which has
been designated by the Bankruptcy Court to administer such payments on
behalf of unsecured creditors in the order of priority. Finally, CMC is
required to pay $8,000 per month until July, 1996, then pay $22,823.51
per month under the Plan until June, 1997 for property taxes in arrears
at the effective date of the Plan. Until expiration of the Plan period
or until these pre-existing obligations are otherwise settled, CMC's
p r o fitability will be affected to the extent of the required
expenditures.
Increases in Cost of Finished Goods
CMC and Curtis Mathes Marketing Corporation ("CMMC") are both
dependent upon outside sources (original equipment manufacturers) for
manufacturing and assembly of all finished goods, and are therefore
subject to increases in the cost of such goods. Such costs are
typically stable in the short term because such goods are provided to
CMC and CMMC pursuant to seasonal contracts with suppliers at an agreed
cost. However, there can be no assurance that such costs will not
increase significantly in the future. Any such increase in cost could
be reflected in the sale price of the products at the consumer level,
which could in turn affect product sales levels.
Variable Economy
The consumer electronics industry is influenced significantly by
general economic conditions, including consumer behavior and consumer
confidence, the level of personal discretionary spending, interest rates
and credit availability. Variations in the general economy affecting
expendable consumer dollars impacts a consumer s willingness to expend
m o nies for the Company s product lines, which translates into
fluctuations in sales volumes for the Company. There can be no
assurance that a prolonged economic downturn would not have a material
adverse effect upon the profitability of the Company.
<PAGE>
Excessive Inventory Levels
The market for consumer electronics products continues to be driven
by technological changes that are inherent to the industry. Management
makes every effort to maintain ample inventory to meet short term sale
requirements. However, the Company is in the same position as other
consumer electronics companies in attempting to accurately gauge
consumer demand, and there can be no assurance of sufficient consumer
reaction and demand upon the Company's product lines in the future to
avoid accumulating excessive inventory levels. In the event that
consumer demand is less than reasonably estimated, inventory on hand
could exceed the minimally acceptable levels, resulting in reduced cash
flows and a further restriction on the use of the Company's capital
which is dedicated to the inventory. Excessive inventory levels could
also lead to inventory obsolesence, which is discussed in the following
section.
Inventory Obsolescence
Closely tied to excessive inventory levels is the risk of inventory
obsolescence. If inventory on hand reaches such a level that new models
of products cannot be rotated for sale to the consumer within a
reasonable period of time, the risk will increase that the Company may
not be able to sell the older models at the expected margin, resulting
i s markdowns to move the products, all of which affects the
profitability of the Company.
Seasonality of the Industry
CMC is subject to decreased sales and profitability during the
first and second quarters of each calendar year, resulting from the
seasonal effect of the consumer buying season. CMC operations must be
supplemented during such periods through its reserves or through other
operations of the Company. Although the Company typically plans ahead
for this seasonal variation in product sales, there can be no assurance
that past budgetary expectations will be adequate to cover such periods
in the future.
Highly Competitive Industry
The industry in which CMC operates is highly competitive and
includes a large number of both domestic and foreign manufacturers of
consumer electronics products. Competition occurs principally in the
areas of style, quality, functionality, service, design and price. CMC
has positioned itself over the years in a niche market of high-end
consumer electronics home entertainment products made up primarily of
31" or larger televisions and has chosen to compete primarily on
quality, rather than price and volume. However, competition from
certain of CMC s competitors, with greater sales volumes and greater
financial resources than CMC, could adversely affect CMC s operating
results by forcing it to reduce its sales prices, offer enhanced credit
arrangements including longer payment terms, increase customer discounts
o r i n centives, increase spending for co-operative advertising
arrangements with customers, incur additional shipping costs, or provide
other services which could adversely affect the profitability of the
Company.
<PAGE>
Excessive Warranty Claims
CMC continues to provide a four-year warranty on all finished goods
sold. Provision for these claims is reserved at 2.5% of the total
product sales price. Although management believes that the 2.5% reserve
is adequate to meet claim requirements based upon historical data, there
can be no assurance that this amount will always cover warranty claims
filed during any particular period. If warranty claims during any
particular period exceed projections, the Company must cover such claims
out of current cash flow or other operating capital, thereby reducing
the profitability of the Company during such periods.
Off-Balance Sheet Risks
An "off-balance sheet risk" is one in which the ultimate obligation
of the Company may exceed the amount reported in the liability section
of the financial statements and which may be triggered by the default of
a third party on an obligation upon which the Company is contingently
liable. CMC is a party to financial instruments with such off-balance
sheet risks to meet the financing requirements of CMC's dealers. In the
normal course of business, CMC has transferred receivables from
qualified dealers to Deutsche Financial Services Corporation ("DFS") and
Fidelity Funding, Inc. under a repurchase agreement. The agreement
requires CMC, in the event of default by the dealer, to repurchase
p r o p erty that is collateral (inventory consisting of consumer
electronics products) for the financing provided to the dealer. CMC is
contingently liable to DFS and Fidelity Funding, Inc. for the portion of
the receivable which is defaulted through nonpayment or nonrecovery of
the collateral.
Since CMC's reorganization in October, 1992, DFS has charged off
approximately $437,900 due to dealer defaults which has been charged
against CMC's reserve account maintained with DFS. This amount has been
partially offset by recovery of unsold products from such dealers, which
can then be resold by CMC. As dealer defaults occur in the future and
the Company honors its repurchase obligations, the profitability of the
Company could be reduced accordingly.
Absence of Profitable Operations in Recent Periods
The Company has reported a net loss in four out of its last five
fiscal years. The Company purchased CMC in November, 1993 and sold the
computer chip segment of its operations in December, 1994. In addition,
in late 1994, the Company acquired the rights to RealViewTM, a ten foot
square projection television used in commercial advertising
applications. Further, in April, 1996, the Company acquired the rights
to UniViewTM, an interactive television technology. Although the
character of the Company has changed over the past couple of years, and
management believes that operations can be improved, there is a limited
operating history for the Company in its present form and there can be
no assurance that the present combination of operating segments will be
profitable in the future.
<PAGE>
Limited Cash Flow
As of March 31, 1996, the Company had not achieved a positive cash
flow from operations. Accordingly, the Company relies on available
credit arrangements and continued sales of its common and preferred
stock to fund operations until a positive cash flow can be achieved. If
the Company is unable to achieve a positive cash flow, additional
financing or placements will be required. Management is currently
engaged in negotiations with various investors to raise additional
capital to finance future growth, without which, the Company's growth
and profitability could be restricted. Although management believes
that additional capital will be provided, there can be no assurance that
this will occur in the near future or that it will occur upon terms
favorable to the Company.
Possible Volatility of Stock Price
The stock market has recently experienced significant price and
v o lume fluctuations that could continue in the future. These
fluctuations could adversely affect the market price of the Common Stock
without regard to the Company s operating performance. The market price
for shares of Common Stock has varied significantly and may be volatile
d e p ending on news announcements and changes in general market
conditions. The Company believes that factors such as quarterly
variations in the Company s financial results or the financial results
of competitors, general industry conditions, including competitive
developments, and general economic conditions could also cause uncertain
price fluctuations in the Common Stock. In addition, registration of
the Common Stock in this offering could result in sales of a substantial
number of shares of Common Stock in the public market, which could
adversely affect the market price of the Common Stock.
Potential Dilution of Shareholders' Ownership Interests
As of June 17, 1996, there were 24,311,188 common shares of the
Company issued and outstanding. Assuming the issuance of 9,372,733
common shares in exchange for the total number of warrants outstanding
as of that date (without regard to whether such shares are being
registered hereunder), and the issuance of common shares in conversion
to Common Stock of all convertible preferred stock outstanding as of
that date (Preferred Stock convertible into 1,752,555 common shares),
there would be approximately 35,436,476 common shares outstanding. In
s u ch event, an existing shareholder before such issuance would
experience a dilution factor of approximately 31.4% by such issuance,
assuming such shareholder held none of the warrants or preferred stock
being exercised or converted. In other words, an existing 10%
shareholder before such issuance would become a 6.86% shareholder after
such issuance and other existing shareholders would experience a similar
dilution of their ownership interest in the Company.
<PAGE>
Further assuming the exercise of all outstanding warrants, the pro
forma net tangible book value of the Company would also increase by the
amount of the proceeds paid to the Company for the Common Stock
(approximately $16,184,490 or $0.46 per share.) "Pro forma net tangible
book value" represents the amount of total tangible assets less total
liabilities divided by the number of shares of Common Stock outstanding
after considering the issuance of Common Stock for outstanding warrants
and the conversion of Preferred Stock into Common Stock. The increase
results from giving effect to the receipt by the Company of the net
proceeds from the exercise of the warrants.
The likelihood that the warrants will be exercised increases as the
market price of the stock rises above the exercise price of the
warrants. (See page 14 herein for further discussion of the Warrants.)
Preferred Stock's Preference Over Common Stock
The Company's Preferred Stock has preferences over the Common Stock
in payment of dividends and in distributions to shareholders upon
dissolution of the Company. (See the description of Preferred Stock
beginning on page 13 herein for a more detailed description of these
p r e ferences.) During ongoing operation of the Company, these
preferences mean very little; payment of dividends to Preferred
Shareholders has no adverse effect upon Common Shareholders because the
Company has not in the past, and does not expect in the foreseeable
future, to declare any dividends on its Common Stock. However, in the
event it became necessary to dissolve the Company, to the extent of any
assets remaining after payment of all creditors of the Company,
Preferred Shareholders would receive the face amount and all accrued
dividends on their Preferred Stock before any distributions could be
made to Common Shareholders. In the event of a dissolution of the
Company at the currently outstanding levels of Common and Preferred
Stock, because of the Preferred Stock preferences, a Common Shareholder
could receive a distribution which is approximately $0.13 per share less
than it would otherwise receive if there were no shares of Preferred
Stock outstanding.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sales of
the Shares by Selling Stockholders. The likelihood of the Company
receiving any proceeds from the exercise of the warrants increases as
the market price of the Company's stock increases above the exercise
price of the warrants. If the market price of the stock does not
increase to the required levels, the Company will most likely not
receive any proceeds from this offering. Assuming the full exercise of
the warrants to purchase 40,000 Shares at $4.50 per share (expiring in
mid-1999), the exercise of outstanding warrants to purchase 75,000
Shares at $3.28 per share (expiring in mid-2001), the exercise of
outstanding warrants to purchase 100,000 Shares at $3.125 per share
(expiring in mid-1999), the exercise of outstanding warrants to purchase
55,000 Shares at $3.00 per share (expiring in mid-1999), the exercise of
outstanding warrants to purchase 105,000 Shares at $1.25 per share
(expiring in mid-2000), the exercise of outstanding warrants to purchase
124,000 Shares at $1.00 per share (expiring in mid-1999), and the
exercise of outstanding warrants to purchase 20,000 Shares at $0.50 per
share (expiring in mid-1999), the net proceeds to the Company from the
<PAGE>
sale of 519,000 Shares issuable upon exercise of the warrants would be
approximately $1,160,813 after deducting expenses payable by the
Company.
Any proceeds received by the Company upon exercise of the warrants
will be used for general corporate purposes, including, but not limited
to, operating and working capital requirements. Various uses of the
proceeds may include additional advertising and promotion, further
promotion and development of RealViewTM and UniViewTM. Potential other
uses of the proceeds may include acquisition of additional products or
technologies, although the Company currently has no commitments or
agreements with respect to any such transactions. Pending such uses,
the net proceeds would be invested in investment grade, interest-bearing
securities.
SELLING STOCKHOLDERS
This Prospectus relates to 200,000 Shares and an additional 916,668
Shares issuable upon the conversion of Preferred Stock, all of which
were issued pursuant to Securities Purchase Agreements (the "Securities
P u r c hase Agreements") between the Company and certain Selling
Stockholders. This Prospectus also relates to 60,000 Shares and an
additional 115,000 Shares issuable upon the exercise of warrants, which
were issued to M.J. Segal & Company/Private Investors Equity Group,
("MJS"), pursuant to an agreement dated June 1, 1995, (the "MJS
Agreement"), as consideration for $1,150,000 of capital raised by MJS
for the Company. This Prospectus also relates to 75,000 Shares issuable
upon the exercise of warrants, which were issued to M.J. Segal &
Associates, Michael D. Moore, and Shipley Raidy Capital Partners, L.P.,
pursuant to an agreement dated May 17, 1996, (the "Shipley Raidy
Agreement"), as consideration for $1,375,000 of capital raised by
Shipley Raidy for the Company. This Prospectus also relates to 516,865
Shares and an additional 329,000 Shares issuable upon the exercise of
warrants, which were issued to certain other Selling Stockholders
pursuant to other private placements in the past. See "Plan of
Distribution."
The "Number of Shares," the "Number of Shares Underlying Warrants,"
and the Maximum Number of Shares Convertible from Preferred Stock set
out in the table below represent the total number of Shares beneficially
owned by the Selling Stockholders before the offering. All of such
Shares are being offered for the account of the Selling Stockholders and
after the offering the Selling Stockholders will each own no Common
Stock of the Company.
<PAGE>
<TABLE>
Maximum
Relationship Number of Number of
to Number Shares Shares
Selling the of Underlying Convertible from
Stockholder Company Shares Warrants Preferred Stock
SECURITIES ACQUIRED PURSUANT TO A SECURITIES PURCHASE AGREEMENT:
<S> <C> <C> <C> <C>
Bulldog Capital
Partners,L.P. Private Investor 200,000 N/A N/A
John Eastman
Clark Private Investor N/A N/A 133,333
DC Investments
Partners
Opportunity
Fund, L.P. Private Investor N/A N/A 250,000
Generation
Capital
Associates Private Investor N/A N/A 66,667
Daniel German Private Investor N/A N/A 66,667
HCA Enterprises
Worldwide, LLC Private Investor N/A N/A 233,333
JDN Partners, L.P. Private Investor N/A N/A 66,667
Warren E. Palitz Private Investor N/A N/A 16,667
Pine Street Asset
Management,L.P. Private Investor N/A N/A 66,667
Elizabeth D. Ryan Private Investor N/A N/A 16,667
SUBTOTAL 200,000 N/A 916,668
COMMON STOCK AND WARRANTS ACQUIRED PURSUANT TO THE MJS AGREEMENT:
M.J. Segal
& Associates(1) Finder 27,750 53,625 N/A
Michael D. Moore(1) Finder 27,750 53,625 N/A
Private Investors
Equity Group(1) Finder 4,500 7,750 N/A
SUBTOTAL 60,000 115,000 N/A
WARRANTS ACQUIRED PURSUANT TO THE SHIPLEY RAIDY AGREEMENT:
M.J. Segal
& Associates(2) Finder N/A 11,250 N/A
Michael D. Moore(2) Finder N/A 11,250 N/A
Shipley Raidy
Capital Partners,
L.P. (2) Finder N/A 52,500 N/A
SUBTOTAL N/A 75,000 N/A
</TABLE>
<PAGE>
<TABLE>
COMMON STOCK AND WARRANTS ACQUIRED PURSUANT TO PAST PRIVATE PLACEMENTS:
<S> <C> <C> <C> <C>
Bernard S. Appel, Director 50,000 N/A N/A
Associates Affiliated
Funding with a 10%
Group, Inc., Beneficial Owner 136,865 N/A N/A
Josephine Amason, Employee 500 N/A N/A
Alissa M. Baker Employee 250 N/A N/A
Dan Blanton Employee 350 N/A N/A
Malissa A. Bonnin Employee 3,500 N/A N/A
Kenneth D.Caviness Employee 1,500 N/A N/A
Charlotte Cravey Employee 400 N/A N/A
Catherine J. Emery Employee 250 N/A N/A
Cynthia D. Greenlee Employee 750 N/A N/A
Jack Roy Houser Employee 250 N/A N/A
Doris J. Lake Employee 750 N/A N/A
Reagan Melton Employee 350 N/A N/A
Nancy J. Parker Employee 400 N/A N/A
Patricia Richards Former Employee 1,500 N/A N/A
F. Shelton
Richardson, Jr. Current Officer 15,000 N/A N/A
Elena Y. Rohweder Former Employee 1,500 N/A N/A
Mary E. Stout Employee 250 N/A N/A
Mary E. Wood Employee 2,500 N/A N/A
John Beardmore Private Investor N/A 40,000 N/A
Ralph L. Colosimo Private Investor N/A 14,000 N/A
Scott D. Cook (3) Private Investor 50,000 N/A N/A
Ivor J. Flannery Private Investor N/A 25,000 N/A
Charles Hays Private Investor N/A 80,000 N/A
Philip A. LaBarbera Private Investor N/A 40,000 N/A
Donald F.
Moorehead, Jr. Private Investor N/A 40,000 N/A
George Moorehead and
Nancy Moorehead Private Investor N/A 20,000 N/A
North-South Capital
Partners, Ltd. Private Investor 250,000 N/A N/A
Dwight Romanica and
Nancy Romanica Private Investor N/A 50,000 N/A
Jeff Webb and
Gina Webb Private Investor N/A 20,000 N/A
SUBTOTAL 516,865 329,000 N/A
TOTAL 776,865 519,000 916,668
GRAND TOTAL 2,212,533
(1) These Shares and warrants were issued by the Company to M.J. Segal
& Associates, Michael D. Moore, and Private Investors Equity Group
pursuant to the MJS Agreement.
(2) These warrants were issued by the Company to M.J. Segal &
Associates, Michael D. Moore, and Shipley Raidy Capital Partners,
L.P. pursuant to the Shipley Raidy Agreement.
(3) Scott D. Cook is a director of First Southwest Company, which is a
former financial advisor of the Company.
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
Securities Being Registered
The following securities are covered by this Prospectus:
1. The resale of 200,000 Shares owned by those security holders
who purchased Common Stock of the Company pursuant to a Securities
Purchase Agreement.
2. The resale of 60,000 Shares owned by MJS, who acquired Common
Stock of the Company pursuant to the MJS Agreements.
3. The resale of 516,865 Shares owned by certain security holders
who acquired Common Stock of the Company pursuant to past private
placements.
4. The resale by MJS of up to 115,000 Shares that may be acquired
upon the exercise of warrants issued pursuant to the MJS Agreement to
purchase 20,000 Shares at $0.50 per share, 55,000 Shares at $3.00 per
share, and 40,000 Shares at $4.50 per share.
5. The resale by M.J. Segal & Associates, Michael D. Moore, and
Shipley Raidy Capital Partners, L.P. of up to 75,000 Shares that may be
acquired upon the exercise of warrants issued pursuant to the Shipley
Raidy Agreement to purchase 75,000 Shares at $3.28 per share.
6. The resale by the respective holders thereof of up to 329,000
Shares that may be acquired upon the exercise of warrants issued
pursuant to past private placements to purchase 100,000 Shares at $3.125
per share, 105,000 Shares at $1.25 per share, and 124,000 Shares at
$1.00 per share.
7. The resale by the respective holders thereof of up to 916,668
Shares that may be acquired upon the conversion of Preferred Stock
issued pursuant to a Securities Purchase Agreement to acquire up to
916,668 Shares at a minimum conversion price of $1.50 per share.
Plan of Distribution
The Shares being registered hereunder may be sold from time to time
by any of the Selling Stockholders, or by pledgees, donees, transferees
or other successors in interest, or by additional selling stockholders.
The Shares may be disposed of from time to time in one or more
transactions through any one or more of the following: (I) to
purchasers directly, (ii) in ordinary brokerage transactions and
transactions in which the broker solicits purchasers, (iii) through
underwriters or dealers who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Stockholders or such successors in interest and/or from the purchasers
of the Shares for whom they may act as agent, (iv) the pledge of the
Shares as security for any loan or obligation, including pledges to
brokers or dealers who may, from time to time, themselves effect
distributions of the Shares or interests therein, (v) purchases by a
broker or dealer as principal and resale by such broker or dealer for
its own account pursuant to this Prospectus, (vi) a block trade in which
the broker or dealer so engaged will attempt to sell the Shares as agent
but may position and resell a portion of the block as principal to
<PAGE>
facilitate the transaction and (vii) an exchange distribution in
accordance with the rules of such exchange, including the NASDAQ
SmallCap Market, prices and at terms then prevailing or at prices
related to the then current market price or at negotiated prices and
terms. In effecting sales, brokers or dealers may arrange for other
brokers or dealers to participate. The Selling Stockholders or such
successors in interest, and any underwriters, brokers, dealers or agents
that participate in the distribution of the Shares, may be deemed to be
"underwriters" within the meaning of the Securities, Act, and any profit
on the sale of the Shares by them and any discounts, commissions or
concessions received by any such underwriters, brokers, dealers or
agents may be deemed to be underwriting commissions or discounts under
the Securities Act.
The Company will pay all of the expenses incident to the offering
and sale of the Shares to the public other than underwriting discounts
or commissions, brokers' fees and the fees and expenses of any counsel
to the Selling Stockholders related thereto.
In the event of a material change in the plan of distribution
disclosed in this Prospectus, the Selling Stockholders will not be able
to effect transactions in the Shares pursuant to this Prospectus until
such time as a post-effective amendment to the Registration Statement is
filed with, and declared effective by, the Commission.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized by its articles of incorporation, as
amended, to issue up to 40,000,000 shares of Common Stock, $.01 par
value, of which 24,311,188 shares were outstanding as of June 17, 1996.
Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the shareholders and do not have
cumulative voting rights in the election of directors. Accordingly, the
holders of a majority of the outstanding Common Stock can, if they so
choose, elect all directors. The vote of the holders of a majority of
the shares entitled to vote, present in person or represented by proxy,
shall decide any question brought before a meeting of the Company's
shareholders at which a quorum is present. A quorum consists of a
majority of the issued and outstanding shares of the Common Stock
entitled to vote. The articles of incorporation of the Company specify
that a majority vote of shareholders shall be determinative regardless
of provisions requiring more than a majority vote under the Texas
Business Corporation Act.
All of the outstanding shares of Common Stock are, and the shares
issuable upon exercise of warrants and conversion of preferred stock
will be fully paid and nonassessable. Holders of the Common Stock have
no preemptive or other subscription rights, and shares of Common Stock
have no redemption, sinking fund, or conversion privileges. Holders of
Common Stock are entitled to receive dividends when, as and if declared
by the board of directors of the Company, out of funds legally available
therefor. In the event of liquidation or dissolution of the Company,
holders of Common Stock are entitled to share ratably in all assets
available for distribution to such shareholders.
<PAGE>
Preferred Stock
The Company is authorized to issue up to 1,000,000 shares of
Preferred Stock, $1.00 par value, in one or more series, which, if
issued, would have certain preferences over the Common Stock. The
articles of incorporation of the Company vest the board of directors
with authority to establish and designate series of Preferred Stock and
to fix and determine the relative rights and preferences of any series
so established. As of June 17, 1996, outstanding Preferred Stock
consisted of (a) 140,000 shares of Series A Preferred Stock with an
annual dividend rate of 6%, a redemption value of $1.00 per share, and
no right to convert into Common Stock; (b) 117,305 shares of Series G
Preferred Stock with an annual dividend rate of 14%, a redemption value
of $1,173,050, and the right to convert such Preferred Stock into
469,220 shares of Common Stock at $2.50 per share; (c) 55 shares of
Series H Preferred Stock with an annual dividend rate of 5%, a
redemption value of $1,375,000, and the right to convert such Preferred
Stock into 916,668 shares of Common Stock at a minimum conversion price
of $1.50 per share; and (d) 550 shares of Series I Preferred Stock with
an annual dividend rate of 0%, a redemption value of $550,000, and the
right to convert such Preferred Stock into 366,667 shares of Common
Stock at a minimum conversion price of $1.50 per share.
Such Preferred Stock has no voting rights. It has preference over
the Common Stock as to dividends, and no dividends can be declared or
paid on the Common Stock unless full dividends on all Preferred Stock
then outstanding for all past dividend periods and for the current
period had been declared and paid. Dividends on all Preferred Stock,
regardless of series, are cumulative. No dividend may be declared on
shares of any series of Preferred Stock for any dividend period unless
all dividends accumulated for all prior dividend periods have been
declared on all Preferred Stock then outstanding and a dividend for the
same period is declared at the same time upon all Preferred Stock
outstanding in like proportions to the dividend rate then declared. In
the event of dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary, the holders of each series of the then
outstanding Preferred Stock would be entitled to receive the amount
fixed for such purpose in the resolution of the board of directors
establishing the respective series of Preferred Stock plus a sum equal
to the amount of all accumulated and unpaid dividends thereon. After
such payment to the holders of Preferred Stock, the remaining assets and
funds of the Company could be distributed pro rata among the holders of
the Common Stock. The whole or any part of outstanding Preferred Stock
may be called for redemption and redeemed at any time at the option of
the Company, exercisable by the board of directors upon thirty days'
notice by mail to the holders of such shares as are to be redeemed.
Warrants
As of June 17, 1996, the Company had outstanding warrants held by
various investors exercisable for a total of 9,372,733 shares of Common
Stock. Exercise prices of the warrants range from a high of $3.94 per
share, to a low of $0.50 per share. Such warrants have expiration dates
ranging from July, 1997 through June, 2001.
Debentures
As of June 17, 1996, the Company had no outstanding debentures.
<PAGE>
The transfer agent and registrar for Common Stock is KeyCorp
Shareholder Services, Inc., 1201 Elm Street, Suite 5050, Dallas, Texas
75270.
RECENT DEVELOPMENTS
Except as discussed below, there have been no material changes in
the Company's affairs since the filing of the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996 which report has been
incorporated herein by reference.
On April 23, 1996, the Company entered into an exclusive licensing
agreement with Interactive Video Publishing, Inc. ( IVP ) for the built-
in application in its large-screen home theater products and specialized
VCRs of certain interactive television technology ( UniViewTM ), which
allows a typical family to access the Internet through their television
set, as well as providing other features, such as e-mail, fax, easy
parental channel blocking, plus a variety of on-screen information
services and a high quality speaker phone. The agreement provides for a
royalty payment to IVP of three percent (3%) of the net sales of the
Licensed Products, with an advance royalty payment of $500,000, an
initial term of five (5) years, and provisions for renewal of the
license under certain conditions. The Company expects to market set-top
units containing the UniViewTM technology during the Fall of 1996, and
to introduce its new line of UniViewTM televisions in time for the
holiday season.
Major funding for the development and production of the UniViewTM
system has been generated by private placements of common and preferred
stock, as well as the exercise of outstanding stock purchase warrants by
existing shareholders of the Company. The funding will also be used in
the initial phases of distribution, advertising and for further
development of the UniViewTM technology.
LEGAL MATTERS
Certain legal matters in connection with the validity of the
securities offered hereby have been passed upon for the Company by Billy
J. Robinson. Mr. Robinson is an attorney who acts as counsel to the
Company. Mr. Robinson is also a director and owns 65,000 shares of
Common Stock.
<PAGE>
EXPERTS
The financial statements and the related financial statement
schedules incorporated in this prospectus by reference from the
Company's Annual Report on Form 10-K/A for the fiscal years ended June
30, 1995 and on 1994 have been audited by King, Burns & Company, P.C.,
independent certified public accountants, as stated in their report
which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The report of Hein + Associates LLP on its audits of the
consolidated statements of operations, changes in stockholders' equity
and cash flows of Curtis Mathes Holding Corporation (formerly Enhanced
Electronics Corporation) and Subsidiaries for the year ended June 30,
1993, has been incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission registration fee $1,436.66
Transfer agent's fees 500.00
Costs of printing 2,500.00
Legal fees and expenses 1,500.00
Accounting fees and expenses 500.00
Blue sky fees and expenses 500.00
Miscellaneous expenses 1,000.00
Total estimated fees $7,936.66
All amounts estimated except for Securities and Exchange Commission
registration.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02(16) and 2.02-1 of the Texas Business Corporation Act
empowers a corporation to indemnify its directors and officers or former
directors or officers and to purchase insurance with respect to
liability arising out of their capacity or status as directors and
officers.
Article XIII of the Company's Articles of Incorporation, as
amended, provides that a director of the Company shall not be personally
liable to the Company or its shareholders for monetary damages for any
act or omission in his capacity as a director, except to the extent
otherwise expressly provided by a statute of the State of Texas.
Article IX of the Company's Bylaws provides for indemnification of
officers and directors. The Company has to date entered into no
Indemnity Agreements with any of its officers or directors, although it
is permitted to do so.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
<PAGE>
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein
by reference.
Exhibit
Number Description of Exhibit
4.1 Articles of Incorporation of the Company, as amended, defining
the rights of security holders.
4.2 Series G Preferred Stock terms and conditions (filed as
Exhibit "4.2" to the Company's Registration Statement on Form
S-3 originally filed with the Commission on August 7, 1995 and
incorporated herein by reference.)
4.3 Series A Preferred Stock terms and conditions (filed as
Exhibit "4.3" to the Company's annual report on Form 10-K for
the fiscal year ended June 30, 1994 and incorporated herein by
reference.)
4.4 Series H Preferred Stock terms and conditions.
4.5 Series I Preferred Stock terms and conditions.
4.6 Bylaws of the Company, as amended (filed as Exhibit "3(ii)" to
the Company's annual report on Form 10-K for the fiscal year
ended June 30, 1994 and incorporated herein by reference.)
5 Opinion of Billy J. Robinson.
23.1 Consent of King, Burns & Company, P.C.
23.2 Consent of Hein + Associates LLP.
23.3 Consent of Billy J. Robinson (included in his opinion filed as
Exhibit 5).
24 Powers of Attorney (included on the Signature Page of the
Registration Statement.)
99.1 A g r e ement between the Company and M.J. Segal &
Company/Private Investors Equity Group dated June 1, 1995
(the "MJS Agreement")(filed as Exhibit "99.1" to the
Company's Registration Statement on Form S-3 originally
f i led with the Commission on August 7, 1995 and
incorporated herein by reference.)
99.2 Form of the Securities Purchase Agreement for 200,000 Shares.
99.3 Form of the Securities Purchase Agreement for up to 916,668
Shares issuable upon the conversion of Preferred Stock.
99.4 Form of the Registration Rights Agreement covering up to
916,668 Shares issuable upon the conversion of Preferred
Stock.
<PAGE>
99.5 Form of Warrant.
99.6 Agreement between the Company and Shipley Raidy Capital
Partners, L.P., dated May 17, 1996 (the Shipley Raidy
Agreement. )
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the Registration Statement;
(iii) To include any material information with respect to
t h e plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes that: (1) F o r
purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
<PAGE>
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on
June 20, 1996.
CURTIS MATHES HOLDING CORPORATION
By: s/ PAT CUSTER
Patrick A. Custer
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Patrick A. Custer and F.
Shelton Richardson, Jr., each of whom may act without joinder of the
other, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign, execute and file with the
Commission and any state securities regulatory board or commission any
documents relating to the proposed issuance and registration of the
securities offered pursuant to this Registration Statement on Form S-3
under the Securities Act of 1933, including any amendment or amendments
relating thereto, which amendments may make such changes in the
Registration Statement as such attorney may deem appropriate, with all
exhibits and any and all documents required to be filed with respect
thereto with any regulatory authority, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his substitute or substitutes,
may lawfully do or cause to be done.
P u r suant to the requirements of the Securities Act, this
Registration Statement on Form S-3 has been signed by the following
persons in the capacities and on the dates indicated.
Principal Executive Officer
/s/ PAT CUSTER Chairman of the Board, June 20, 1996
Patrick A. Custer President, Chief Executive Officer
and Director
Principal Financial and Accounting Officer
/s/ F. SHELTON RICHARDSON, JR. Vice President, June 20, 1996
F. Shelton Richardson, Jr. Chief Financial Officer
<PAGE>
Additional Directors
/s/ BILLY J. ROBINSON Vice President, Secretary, June 20, 1996
Billy J. Robinson General Counsel and Director
/s/ BERNARD S. APPEL Director June 20, 1996
Bernard S. Appel
EXHIBIT INDEX
Sequential
Page
Exhibit Number Number
4.1* Articles of Incorporation of the Company, as amended,
defining the rights of security holders.
4.2 Series G Preferred Stock terms and conditions (filed as
Exhibit "4.2" to the Company's Registration Statement on
Form S-3 originally filed with the Commission on August
7, 1995 and incorporated herein by reference.)
4.3 Series A Preferred Stock terms and conditions (filed as
Exhibit "4.3" to the Company's annual report on Form 10-K
for the fiscal year ended June 30, 1994 and incorporated
herein by reference.)
4.4* Series H Preferred Stock terms and conditions.
4.5* Series I Preferred Stock terms and conditions.
4.6 Bylaws of the Company, as amended (filed as Exhibit
"3(ii)" to the Company's annual report on Form 10-K for
the fiscal year ended June 30, 1994 and incorporated
herein by reference.)
5* Opinion of Billy J. Robinson.
23.1* Consent of King, Burns & Company, P.C.
23.2* Consent of Hein + Associates LLP.
23.3* Consent of Billy J. Robinson (included in his opinion
filed as Exhibit 5).
24* Powers of Attorney (included on the Signature Page of the
Registration Statement.)
99.1 A g r e ement between the Company and M.J. Segal &
Company/Private Investors Equity Group dated June 1, 1995
(the "MJS Agreement")(filed as Exhibit "99.1" to the
Company's Registration Statement on Form S-3 originally
f i led with the Commission on August 7, 1995 and
incorporated herein by reference.)
99.2* Form of the Securities Purchase Agreement for 200,000
Shares.
<PAGE>
99.3* Form of the Securities Purchase Agreement for up to
916,668 Shares issuable upon the conversion of
Preferred Stock.
99.4* Form of the Registration Rights Agreement covering
up to 916,668 Shares issuable upon the conversion
of Preferred Stock.
99.5* Form of Warrant.
99.6* Agreement between the Company and Shipley Raidy
Capital Partners, L.P., dated May 17, 1996 (the
Shipley Raidy Agreement.)
_________________
* Filed herewith.
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF
CURTIS MATHES HOLDING CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned Corporation adopts the following
Article of Amendment to its Articles of Incorporation:
ARTICLE ONE: The name of the Corporation is Curtis Mathes Holding
Corporation.
ARTICLE TWO: The following amendment to the Articles of
Incorporation was adopted by resolution of the Board of Directors of
the Corporation and on December 1, 1995 was submitted to the
shareholders of the Corporation for a vote by consent without a
shareholders' meeting:
"ARTICLE IV (The first paragraph): The total number of shares of
all classes of stock which the Corporation shall be authorized to
issue is 41,000,000 shares, divided into the following: (i)
1,000,000 shares of preferred stock, of the par value of $1.00
per share (hereinafter called "Preferred Stock"); and (ii)
40,000,000 shares of common stock, of the par value of $.01 per
share (hereinafter called "Common Stock.")"
ARTICLE THREE: The number of shares of the Corporation outstanding and
entitled to vote on the amendment as of the Record Date of November
15, 1995 was 16,901,973. Pursuant to the Articles of Incorporation of
the Corporation, a simple majority of the voting shares is required
for amendment of the Articles of Incorporation.
ARTICLE FOUR: As of January 17, 1996, the number of shares that had
a f firmatively consented to the amendment was 8,973,580, which
represents a majority of the voting shares and is greater than the
minimum number of votes that would be necessary to take the action if
it had been taken at a shareholders' meeting at which the holders of
all shares entitled to vote on the action were present and voted. As
of January 17, 1996, the number of shares that had voted against the
amendment was 20,100 and the number of shares that had responded, but
abstained was 2,015. The remaining shares had not responded as of
January 17, 1996.
ARTICLE FIVE: Except as set forth above and in prior amendments, the
Articles of Incorporation of the Corporation remain unchanged.
Dated: January 17, 1996
CURTIS MATHES HOLDING CORPORATION
By:___Billy J. Robinson_________________
Billy J. Robinson, Secretary
<PAGE>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
CURTIS MATHES HOLDING CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following
Article of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is CURTIS MATHES HOLDING CORPORATION.
ARTICLE TWO
The following amendment to the Articles of Incorporation was
adopted by resolution of the Board of Directors of the Corporation and
was submitted to the shareholders of the Corporation for vote at the
Annual Shareholders' Meeting held on April 8, 1995:
"ARTICLE VII: (UNCHANGED) If with respect to any action taken by
the shareholders of the corporation, any provision of the Texas
Business Corporation Act would, but for this Article VII, require
the vote or concurrence of the holders of shares having more than a
majority of the votes entitled to be cast thereon, or of any class
or series thereof, the vote or concurrence of the holders of shares
having only a majority of the votes entitled to be cast thereon, or
of any class or series thereof, shall be required with respect to
any such action.
(AMENDMENT ADDED) Any shareholder action required by the Texas
Business Corporation Act to be taken at any annual or special
meeting of shareholders, or any action which may be taken at any
annual or special meeting of shareholders, may be taken without a
meeting, without prior notice, and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be
signed by the holder or holders of shares having not less than the
minimum number of votes that would be necessary to take such action
at a meeting at which the holders of all shares entitled to vote on
the action were present and voted.
ARTICLE THREE
The number of shares of the corporation outstanding and entitled to
vote on the amendment at the time of the adoption was 9,194,800.
ARTICLE FOUR
The number of shares that voted for the amendment was 4,703,412;
and the number of the shares that voted against the amendment was
82,950.
ARTICLE FIVE
Except as set forth above and in prior amendments, the Articles of
Incorporation of the corporation remain unchanged.
Dated: July 24, 1995
CURTIS MATHES HOLDING CORPORATION
By__Billy J. Robinson________
Billy J. Robinson, Secretary
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ENHANCED ELECTRONICS CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation.
ARTICLE ONE
The name of the corporation is ENHANCED ELECTRONICS CORPORATION.
ARTICLE TWO
The following amendments to the Articles of Incorporation were
adopted and ratified by the shareholders of the Corporation effective
April 1, 1994:
"ARTICLE I: The name of the corporation is Curtis Mathes Holding
Corporation.
ARTICLE THREE
The number of shares of the Corporation outstanding and entitled to
vote at the time of the adoption was 8,412,000. The number of shares
voting for the amendment was 4,280,815.
ARTICLE FOUR
Except as set forth above, the Articles of Incorporation of the
corporation remain unchanged.
Dated: Effective April 1, 1994.
ENHANCED ELECTRONICS CORPORATION
By____Phillip L. Scheldt_______
Phillip L. Scheldt
Executive Vice President/Secretary
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
DONNY OSMOND ENTERTAINMENT CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation.
ARTICLE ONE
T h e name of the corporation is Donny Osmond Entertainment
Corporation.
ARTICLE TWO
The following amendments to the Articles of Incorporation were
unanimously adopted by the shareholders of the corporation on April 4,
1989.
The Articles of Incorporation are hereby amended so to read as
follows:
"ARTICLE I
The name of the corporation is Entertainment Equity
Corporation.
ARTICLE X
The address of its registered office is 8080 North
Central Expressway, Suite 1600, Lock Box 46, Dallas, Texas
75206, and the name of its registered agent at such address is
Diane M. Given.
ARTICLE XIII
A director of the Corporation shall not be person-ally
liable to the Corporation or its shareholders for monetary
damages for any act or omission in his capacity as a director,
except to the extent otherwise expressly provided by a statute
of the State of Texas. Any repeal or modification of this
Article shall be prospective only, and shall not adversely
affect any limitation of the personal liability of a director
of the Corporation existing at the time of the repeal or
modification.
The number of shares outstanding and entitled to vote on this
amendment at the time of its adoption was 6,253,900 and the
number of shares voting for this amendment was 5,200,000."
<PAGE>
ARTICLE THREE
Except as set forth above, the Articles of Incorporation of the
corporation remain unchanged.
Dated: May 31, 1989
ENTERTAINMENT EQUITY CORPORATION,
previously, Donny Osmond Entertainment
Corporation
By: Patrick A. Custer
Patrick A. Custer, President
Helen Williams
Helen Williams, Secretary
State of Texas )
)
County of Dallas )
The undersigned notary public does hereby certify that on this 31st
day of May, 1989, personally appeared before me Patrick A. Custer who,
being by me first duly sworn, declared that he is the president of
Entertainment Equity Corporation, that he signed the foregoing document
as president of the corporation, and that the statements herein
contained are true.
[Notarial Seal] Anne G. Thomas
Notary Public in and for the State
of Texas
My commission expires: 2-19-92
State of Texas )
)
County of Dallas )
The undersigned notary public does hereby certify that on this 31st
day of May, 1989, personally appeared before me Helen Williams who,
being by me first duly sworn, declared that she is the secretary of
Entertainment Equity Corporation, that she signed the foregoing document
as secretary of the corporation, and that the statements herein
contained are true.
[Notarial Seal] Anne G. Thomas
Notary Public in and for the State
of Texas
My commission expires: 2-19-92
<PAGE>
ARTICLES OF INCORPORATION
OF
DONNY OSMOND ENTERTAINMENT CORPORATION
ARTICLE I.
The name of the corporation is Donny Osmond Entertainment
Corporation.
ARTICLE II.
The period of its duration is perpetual.
ARTICLE III.
The purpose or purposes for which this corporation is
organized are the transaction of any and all lawful business for which
corporations may be incorporated under the Texas Business Corporation
Act.
ARTICLE IV.
The total number of shares of all classes of stock which the
corporation shall be authorized to issue is 11,000,000 shares, divided
into the following: (i) 1,000,000 shares of preferred stock, of the par
value of $1.00 per share (hereinafter called "Preferred Stock"); and
(ii) 10,000,000 shares of common stock, of the par value of $.01 per
share (hereinafter called "Common Stock").
A description of the respective classes of stock and a
statement of the designations, preferences, limitations and relative
rights of such classes of stock and the limitations on or denial of the
voting rights of the shares of such classes of stock are as follows:
<PAGE>
A. PREFERRED STOCK
1. Issuance in Series. The Preferred stock may be divided
into and issued in one or more series. The board of directors is hereby
vested with authority from time to time to establish and designate such
series, and within the limitations prescribed by law or set forth
herein, to fix and determine the relative rights and preferences of the
shares of any series so established, but all shares of Preferred Stock
shall be identical except as to the following relative rights and
preferences as to which there may be variations between different
series: (a) the rate of dividend; (b) the price and at the terms and
conditions on which shares may be redeemed; (c) the amount payable upon
shares in event of involuntary liquidation; (d) the amount payable upon
shares in event of voluntary liquidation; (e) sinking fund provisions
for the redemption or purchase of shares; (f) the terms and conditions
on which shares may be converted, if the shares of any series are issued
with the privilege of conversion; and (g) voting rights. The board of
directors shall exercise such authority by the adoption of a resolution
as prescribed by law.
2. Dividends. The holders of each series of Preferred Stock
at the time outstanding shall be entitled to receive, when and as
declared to be payable by the board of directors, out of any funds
legally available for the payment thereof, dividends at the rate
theretofore affixed by the board of directors for such series of
Preferred Stock that have theretofore been established, and no more,
payable quarterly on the first days of January, April, July and October
in each year.
<PAGE>
3. Preferred Dividends Cumulative. Dividends on all Preferred
Stock, regardless of series, shall be cumulative. No dividends shall be
declared on shares of any series of Preferred Stock for any dividend
period unless all dividends accumulated for all prior dividend periods
shall have been declared or shall then be declared at the same time upon
all Preferred Stock then outstanding. No dividends shall be declared on
the shares of any series of Preferred Stock unless a dividend for the
same period shall be declared at the same time upon all Preferred Stock
outstanding at the time of such declaration in like proportion to the
dividend rate then declared. No dividends shall be declared or paid on
the Common Stock unless full dividends on all Preferred Stock then
outstanding for all past dividend periods and for the current dividend
period shall have been declared and the corporation shall have paid such
dividends or shall have set apart a sum sufficient for the payment
thereof.
4. Preference on Liquidation. In the event of any
dissolution, liquidation or winding up of the corporation, whether
voluntary or involuntary, the holders of each series of the then
outstanding Preferred Stock shall be entitled to receive the amount
fixed for such purpose in the resolution or resolutions of the board of
directors establishing the respective series of Preferred Stock that
might then be outstanding together with a sum equal to the amount of all
accumulated and unpaid dividends thereon at the dividend rate fixed
therefor in the aforesaid resolution or resolutions. After such payment
to such holders of Preferred Stock, the remaining assets and funds of
the corporation shall be distributed pro rata among the holders of the
Common Stock. A consolidation, merger or reorganization of the
corporation with any other corporation or corporations or a sale of all
<PAGE>
or substantially all of the assets of the corporation shall not be
considered a dissolution, liquidation or winding up on the corporation
within the meaning of these provisions.
5. Redemption. The whole or any part of the outstanding
Preferred Stock or the whole or any part of any series thereof may be
called for redemption and redeemed at any time at the option of the
corporation, exercisable by the board of directors upon thirty (30)
days' notice by mail to the holders of such shares as are to be
redeemed, by paying therefor in cash the redemption price fixed for such
shares in the resolution or resolutions of the board of directors
establishing the respective series of which the shares to be redeemed
are a part together with a sum equal to the amount of all accumulated
and unpaid dividends thereon at the dividend rate fixed therefor in the
aforesaid resolution or resolutions to the date fixed for such
redemption. The corporation may redeem the whole or any part of the
shares of any series, or of several series, without redeeming the whole
or any part of the shares of any other series; provided, however, that
if at any time less than the whole of the Preferred Stock of any
particular series then outstanding shall be called for redemption, the
particular shares called for redemption shall be determined by lot or by
such other equitable method as may be determined by the board of
directors. If, on the redemption date specified in any such notice,
funds necessary for such redemption shall have been set aside by the
corporation, separate and apart from its other funds, in trust for the
pro rate benefit of the holders of the Preferred Stock so called for
redemption, then, notwithstanding that any certificate for shares so
called for redemption shall not have been surrendered for cancellation,
the shares so called for redemption shall no longer be deemed to be
<PAGE>
outstanding, the right to receive dividends thereon shall cease to
accrue from and after the date so fixed, and all rights of holders of
Preferred Stock so called for redemption shall forthwith after such
redemption date cease and terminate, excepting only the right of the
holders thereof to receive the redemption price thereof, but without
interest; and if, before the redemption date specified in any notice of
the redemption of any Preferred Stock, the corporation shall deposit
with the bank or trust company in the City of Dallas, Texas, having a
capital and surplus of at least $50,000,000 according to its last
published statement of condition, in trust to be applied to the
redemption of the Preferred Stock so called for redemption, the funds
necessary for such redemption, then, from and after the date of such
deposit, the shares so called for redemption shall no longer be deemed
to be outstanding and all rights of holders of the shares so called for
redemption shall cease and terminate, excepting only the rights of
holders thereof to receive the redemption price thereof, but without
interest. Any interest accrued on funds so deposited shall be paid to
the corporation from time to time. In case the holder of shares shall
have been called for the redemption shall not, within six (6) years
after the making of such deposit, claim the amount deposited with
respect to the redemption of such shares, the bank or trust company in
which such deposit was made shall upon demand pay over to the
corporation such unclaimed amounts and thereupon such bank or trust
company shall be relieved of all responsibility in respect thereof to
such holder. Preferred Stock redeemed or otherwise retired by the
corporation shall, upon the filing of such statement as may be required
by law, assume the status of authorized by unissued Preferred Stock and
may thereafter be reissued in the same manner as other authorized but
<PAGE>
unissued Preferred Stock, except that any shares of any series purchased
or redeemed pursuant to the requirements of any sinking fund or purchase
fund provided for such series shall not be reissued.
B. COMMON STOCK
1. Dividends. Subject to all the rights of the Preferred
Stock or any series thereof, and on the conditions set forth in Part A
of this Article Four or in any resolution of the board of directors
providing for the issuance of any series of Preferred Stock, the holders
of the Common Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available
therefor, dividends payable in cash, stock or otherwise.
ARTICLE V.
The corporation will not commence business until it has
received fro the issuance of its shares consideration of the value of
not less than $1,000.00.
ARTICLE VI.
No holder of securities of the corporation shall be entitled
as a matter of right, preemptive or otherwise, to subscribe for or
purchase any securities of the corporation now or hereafter authorized
to be issued, or securities held in the treasury of the corporation,
whether issued or sold for cash or other consideration or as a dividend
or otherwise. Any such securities may be issued or disposed of by the
board of directors to such persons and on such terms as in its
discretion it shall deem advisable.
ARTICLE VII.
If with respect to any action taken by the shareholders of the
corporation, any provision of the Texas Business Corporation Act would,
but for this Article VII, require the vote or concurrence of the holders
of shares having more than a majority of the votes entitled to be cast
<PAGE>
thereon, or of any class or series thereof, the vote or concurrence of
the holders of shares having only a majority of the votes entitled to be
cast thereon, or of any class or series thereof, shall be required with
respect to any such action.
ARTICLE VIII.
At each election for directors every shareholder entitled to
vote at such election shall have the right to vote, in person or by
proxy, the number of shares owned by him for as many persons as there
are directors to be elected and for whose election he has a right to
vote. It is expressly prohibited for any shareholder to cumulate his
votes in any election of directors.
ARTICLE IX.
The corporation, without vote of shareholders, may purchase,
directly or indirectly, its own shares to the extent of the aggregate of
u n restricted capital surplus available therefor and unrestricted
reduction surplus available therefor.
ARTICLE X.
The address of its registered office is 5001 LBJ Freeway,
Suite 912, Dallas, Texas 75234, and the name of its registered agent at
such address is Patrick A. Custer.
ARTICLE XI.
The number of initial directors is three (3), and the names
and addresses of the directors are:
NAME ADDRESS
Donald C. Osmond 1420 East 800 North
Orem, Utah 84059
William L. Waite III 1420 East 800 North
Orem, Utah 84059
Patrick A. Custer 5001 LBJ Freeway, Suite 912
Dallas, Texas 75234
<PAGE>
ARTICLE XII.
The name and address of the incorporator is Cynthia A. Smith, 5400
Allied Bank Plaza, 1000 Louisiana Street, Houston, Texas 77002.
Cynthia A. Smith
Cynthia A. Smith
SWORN TO ON THIS 12th day of July, 1984, by the above-named
incorporator.
Susan Powers
Notary Public in and for
the State of T E X A S
My commission expires:
May 20, 1985
CURTIS MATHES HOLDING CORPORATION
(the "Company")
RESOLUTION OF THE BOARD OF DIRECTORS
FIXING THE NUMBER AND DESIGNATING THE RIGHTS, PRIVILEGES,
RESTRICTIONS AND CONDITIONS ATTACHING TO THE SERIES H CLASS A
PREFERENCE SHARES
WHEREAS:
A. The Company's share capital includes 1,000,000 Preference Shares
par value, $1.00 per share which Preference Shares may be issued in
one or more series with the Directors of the Company (the "Board")
being entitled by resolution to fix the number of shares in each
series and to designate the rights, privileges, restrictions and
conditions attaching to the share of each series; and
B. It is in the best interests of the Company for the Board to create
another series of Class A Preference Shares;
NOW, THEREFORE, BE IT RESOLVED, THAT:
Series H of the Class A Preference Shares (the "Series H Class A
Shares") of the Company shall consist of 70 shares and no more and
shall be designated as the Series H Class A Preference Shares and
in addition to the preferences, rights, privileges, restrictions
and conditions attaching to all the Class A Preference Shares as a
c l a ss, the rights, privileges, restrictions and conditions
attaching to the Series H Class A Shares shall be as follows:
Part 1 - Pre-emptive Rights.
1.1 The Series H Class A Shares shall not give their holders any pre-
emptive rights to acquire any other securities issued by the Company at
any time in the future.
Part 2 - Liquidation Rights.
2.1 If the Company shall be voluntarily or involuntarily liquidated,
dissolved or wound up, at any times when any Series H Class A Shares
shall be outstanding, the holders of the then outstanding Series H Class
A Shares shall have a preference in distribution of the Company's
property available for distribution to the holders of the Common Shares
equal to $25,000 consideration per share of Series H Class A Shares,
together with an amount equal to all unpaid dividends accrued thereon,
if any, to the date of payment of such distribution, whether or not
declared by the Board; provided, however, that the amalgamation of the
Company with any corporation or corporations, the sale or transfer by
the Company of all or substantially all of its property, or any
reduction of the authorized or issued capital of the Company of any
class, whether now or hereafter authorized, shall be deemed to be a
liquidation of the Company within the meaning of any of the provisions
of this Part 2.
<PAGE>
2.2 Subject to the provisions of Part 6 hereof, all amounts to be paid
as preferential distributions to the holders of Series H Class A Shares
as provided in this Part 2 shall be paid or set apart for payment before
the payment or setting apart for payment of any amount for, or the
distribution of any of the Company's property to the holders of Common
Shares, whether now or hereafter authorized, in connection with such
liquidation, dissolution or winding up.
2.3 The liquidation rights of the holders of Series H Class A Shares
are pari passu with the liquidation rights of the holders of all other
outstanding series and classes of preferred shares heretofore or
hereafter issued by the Company.
Part 3 - Dividends.
3.1 Holders of record of Series H Class A Shares, out of funds legally
available therefor and to the extent permitted by law, shall be entitled
to receive dividends on their Series H Class A Shares in the amount of
five percent (5%) per annum, payable semi-annually in arrears, payable
at the sole option of the Company in cash or in Common Shares of the
Company. Dividends shall cease upon conversion of the Series H Class A
Shares.
Part 4 - Redemption.
4.1 At any time after twelve (12) months from the issuance of any
Series H Class A Shares, the Company may, at its sole option, but shall
not be obligated to, redeem, in whole or in part, the then outstanding
Series H Class A Shares at a price per share of $25,000 plus accrued
dividends thereon.
4.2 Five (5) days prior to any date stipulated by the Company for the
redemption of Series H Class A Shares (the "Redemption Date"), written
notice (the "Redemption Notice") shall be mailed to each holder of
record on such notice date of the Series H Class A Shares. The
Redemption Notice shall state (I) the Redemption Date of such Shares
(ii) the number of Series H Class A Shares to be redeemed from the
holder to whom the Redemption Notice is addressed (iii) instructions for
surrender to the Company, in the manner and at the place designated of a
share certificate or share certificates representing the number of
Series H Class Shares to be redeemed from such holder and (iv)
instructions as to how to specify to the Company the number of Series H
Class A Shares to be redeemed as provided in this Part 4 and the number
of shares to be converted into Common Shares as provided in Part 5
hereof.
4.3 Upon receipt of the Redemption Notice, any Eligible Holder (as
defined in Section 5.2 hereof) shall have the right to convert into
Common Shares that number of Series H Class A Shares not called for
redemption in the Redemption Notice.
<PAGE>
4.4 On or before the Redemption Date in respect of any Series H Class A
Shares, each holder of such shares shall surrender the required
certificate or certificates representing such shares to the Company, in
the manner and at the place designated in the Redemption Notice, and
upon the Redemption Date, the Redemption Price for such shares shall be
made payable, in the manner provided in Section 5.5 hereof, to the order
of the person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered share certificate shall be
canceled and retired. If a share certificate is surrendered and all the
shares evidenced thereby are not being redeemed (as described below),
the Company shall cause the Series H Class A Shares which are not being
redeemed to be registered in the names of the persons whose names appear
as the owners on the respective surrendered share certificates and
deliver such certificate to such person.
4.5 On the Redemption Date in respect of any Series H Class A Shares or
prior thereto, the Company shall deposit with any bank or trust company
having a capital and surplus of at least $50,000,000, as a trust fund, a
sum equal to the aggregate Redemption Price of all such shares called
for redemption (less the aggregate Redemption Price for those Series H
Class A Shares in respect of which the Company has received notice from
the Eligible Holder thereof of its election to convert Series H Class A
Shares into Common Shares), with irrevocable instructions and authority
to the bank or trust company to pay, on or after the Redemption Date,
the Redemption Price to the respective holders upon the surrender of
their share certificates. The deposit shall constitute full payment for
the shares to their holders, and from and after the date of the deposit
the redeemed shares shall be deemed to be no longer outstanding, and
holders thereof shall cease to be shareholders with respect to such
shares and shall have no rights with respect thereto except the rights
to receive from the bank or trust company payments of the Redemption
Price of the shares, without interest, upon surrender of their
certificates thereof. Any funds so deposited and unclaimed at the end
of one year following the Redemption Date shall be released or repaid to
the Company, after which the former holders of shares called for
redemption shall be entitled to receive payment of the Redemption Price
in respect of their shares only from the Company.
Part 5 - Conversion.
5.1 For the purposes of conversion, the Series H Class A Shares shall
be valued at $25,000 per share ("Value"), and, if converted, the Series
H Class A Shares shall be converted into such number of Common Shares
(the "Conversion Shares") as is obtained by dividing the aggregate Value
of the shares of Series H Class A Shares being so converted by the
Conversion Price per share of the Conversion Shares, subject to
adjustment pursuant to the provisions of this Part 5. For purposes of
this Part 5, the "Conversion Price" means the price, expressed in
dollars per share of Common Shares, equal to eighty percent (80%) of the
five day average closing bid price, as reported by NASD, immediately
prior to the conversion date, as adjusted if and as appropriate pursuant
to the provisions of this Part 5, subject to a Maximum Conversion Limit
of $4.00 per Common Share and a Minimum Conversion Limit of $1.50 per
Common Share.
<PAGE>
5.2 Any holder of Series H Class A Shares (an "Eligible Holder") may at
any time commencing 50 days after the issuance of any Series H Class A
Shares convert any amount of its holdings of Series H Class A Shares, in
increments of $50,000, in accordance with this Part 5.
5.3 If the average closing bid price of the Company's Common Shares, as
reported by NASD, equals or exceeds $6.00 per share for twenty (20) days
out of any thirty (30) day period, the Company may, at its sole option,
require the Eligible Holders of Series H Class A Shares to convert their
shares at the Conversion Price.
5.4 The conversion right provided by Section 5.2 hereof may be
exercised only by an Eligible Holder of Series H Class A Shares, in
whole or in part, by the surrender of the share certificate or share
certificates representing the Series H Class A Shares to be converted at
the principal office of the Company (or at such other place as the
Company may designate in a written notice sent to the holder by first-
class mail, postage prepaid, at its address shown on the books of the
Company) against delivery of that number of whole Common Shares as shall
be computed by dividing (1) the aggregate Value of the Series H Class A
Shares so surrendered plus any accrued but unpaid dividends thereon, if
any, by (2) the Conversion Price in effect at the date of the
conversion. At the time of conversion of a Series H Class A Shares, the
Company shall pay in cash to the holder thereof an amount equal to all
unpaid dividends, if any, accrued thereon to the date of conversion, or,
at the Company's option, issue that number of whole Common Shares which
is equal to the product of dividing the amount of such unpaid dividends
by the Conversion Price whether or not declared by the Board. Each
Series H Class A Share certificate surrendered for conversion shall be
endorsed by its holder. In the event of any exercise of the conversion
right of the Series H Class A Shares granted herein (I) share
certificates representing the Common Shares purchased by virtue of such
exercise shall be delivered to such holder within 5 days of notice of
conversion, and (ii) unless the Series H Class A Shares has been fully
converted, a new share certificate representing the Series H Class A
Shares not so converted, if any, shall also be delivered to such holder
within 5 days of notice of conversion. Any Eligible Holder may exercise
its right to convert the Series H Class A Shares by telecopying an
executed and completed Notice of Conversion to the Company, and within
72 hours thereafter, delivering the original Notice of Conversion and
the certificate representing the Series H Class A Shares to the Company
by express courier. Each date on which a Notice of Conversion is
telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a conversion date. The Company will
transmit the Common Shares certificates issuable upon conversion of any
Series H Class A Shares (together with the certificates representing the
Series H Class A Shares not so converted) to the Eligible Holder via
express courier within five business days after the conversion date if
the Company has received the original Notice of Conversion and Series H
Class A Shares certificate being so converted by such date.
<PAGE>
5.5 All Common Shares which may be issued upon conversion of Series H
Class A Shares will, upon issuance, be duly issued, fully paid and
nonaccessible and free from all taxes, liens, and charges with respect
to the issue thereof. At all times that any Series H Class A Shares are
outstanding, the Company shall have authorized, and shall have reserved
for the purpose of issuance upon such conversion, a sufficient number of
Common Shares to provide for the conversion into Common Shares of all
Series H Class A Shares then outstanding and accrued but unpaid
dividends thereon at the then effective Conversion Price. Without
limiting the generality of the foregoing, if, at any time, the
Conversion Price is decreased, the number of Common Shares authorized
and reserved for issuance upon the conversion of the Series H Class A
Shares shall be proportionately increased.
5.6 The number of Common Shares issued upon conversion of Series H
Class A Shares and the Conversion Price shall be subject to adjustment
from time to time; if at any time the Company shall:
(1) take a record of the holders of its Common
Stock for the purpose of entitling them to receive a
dividend payable in, or other distribution of,
Additional Shares of Common Stock;
(2) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common
Stock; or
(3) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock;
then in each such case the Conversion Price in effect immediately prior
thereto shall be adjusted so that the Holder of any Series H Class A
Shares thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock that such Holder would have
owned or have been entitled to receive after the happening of any of the
events described above had such Series H Class A Shares been converted
immediately prior to the happening of such event.
5.7 Whenever the Conversion Price shall be adjusted pursuant to Part
5.6, the Company shall forthwith prepare a certificate to be executed by
the chief financial officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment and the method by which such
adjustment was calculated, specifying the Conversion Price and (if
applicable) describing the number and kind of any other shares of stock
or Other Property into which Series H Class A Shares may be converted,
and any change in the purchase price or prices thereof, after giving
effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder. The
Company shall keep at its chief executive office copies of all such
certificates and cause the same to be available for inspection at said
office during normal business hours by any Holder or any prospective
purchaser of Series H Class A Shares designated by a Holder thereof.
5.8 No fractional Common Shares shall be issued in connection with any
conversion of Series H Class A Shares, but in lieu of such fractional
shares, the Company shall make a cash payment therefor equal in amount
to the product of the applicable fraction multiplied by the Conversion
Price then in effect.
<PAGE>
5.9 No Series H Class A Shares which have been converted into Common
Shares shall be reissued by the Company; provided, however, that each
such share, after being retired and canceled, shall be restored to the
status of an authorized but unissued Class A Preference Share without
designation as to series and may thereafter be issued as a Class A
Preference Share not designated as Series H Class A Share.
5.10 Prior to the issuance of Common Stock upon conversion, the Holders
shall not be entitled to any rights of a shareholder with respect to the
Common Stock, including (without limitation) the right to vote such
Common Stock, receive dividends or other distributions thereon, exercise
preemptive rights or be notified of shareholder meetings, and such
Holders shall not be entitled to any notice or other communication
c o n c erning the business or affairs of the Company except as
contractually agreed to by the Company.
Part 6 - Parity with Other Shares of Class A Preference Shares.
6.1 If any cumulative dividends or accounts payable or return of
capital in respect of Series H Class A Shares are not paid in full, the
owners of all series of Class A Preference Shares shall participate
rateably in respect of accumulated dividends and return of capital.
Part 7 - Amendment.
7.1 In addition to any requirement for a series vote pursuant to the
General Corporation Laws in respect of any amendment to the rights,
privileges, restrictions and conditions attaching to the Series H Class
A Shares, the rights, privileges, restrictions and conditions attaching
to the Series H Class A Shares may be amended only if the Company has
obtained the affirmative vote at a duly called and held meeting of a
majority of the Series H Class A Shares or written consent by the
holders of a majority of the Series H Class A Shares then outstanding.
June 20, 1996
Curtis Mathes Holding Corporation
10911 Petal Street
Dallas, Texas 75238
Gentlemen:
I have acted as counsel to Curtis Mathes Holding Corporation, a
Texas corporation (the "Company") in connection with the proposed public
offering of up to 2,212,533 shares of the Company's Common Stock, $.01
par value (the "Common Stock"), as described in the Registration
Statement on Form S-3 filed with the Securities and Exchange Commission
on the date hereof (the "Registration Statement").
I have, as counsel, as I have deemed necessary examined such
corporate records, certificates and other documents and reviewed such
questions of law as I have deemed necessary, relevant or appropriate to
enable me to render the opinions expressed below. In rendering such
opinions, I have assumed the genuineness of all signatures and the
authenticity of all documents examined by me. As to various questions
of fact material to such opinions, I have relied upon representations of
the Company.
Based upon such examination and representations, I advise you that,
in my opinion:
A. The shares of Common Stock which are to be sold and delivered
b y c ertain selling stockholders of the Company (the "Selling
Stockholders") as contemplated by the Plan of Distribution specified in
the Registration Statement, have been duly and validly authorized by the
Company and have been validly issued and are fully paid and non-
assessable.
B. The shares of Common Stock which are to be sold and delivered
by the Company pursuant to the exercise of the warrants and the
conversion of preferred stock, when issued and delivered in accordance
with the terms of the warrants, will be validly issued, fully paid, and
non-assessable.
I consent to the filing of this opinion as Exhibit "5" to the
Registration Statement and to the reference to myself under the caption
"Legal Matters" in the prospectus contained therein.
Sincerely,
/s/ Billy J. Robinson
Billy J. Robinson, General Counsel
Curtis Mathes Holding Corporation<PAGE>
Exhibit 23.1
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Curtis Mathes Holding Corporation on Form S-3 of our report
dated September 25, 1995, appearing in the Annual Report on Form 10-K/A
of Curtis Mathes Holding Corporation for the fiscal years ended June 30,
1995 and 1994 and to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
KING, BURNS & COMPANY, P.C.
Dallas, Texas
June 20, 1996
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Curtis Mathes Holding Corporation on Form S-3 of our report
dated August 24, 1993, on our audits of the consolidated statements of
operations, changes in stockholders' equity and cash flows of Curtis
Mathes Holding Corporation (formerly Enhanced Electronics Corporation)
and Subsidiaries for the year ended June 30, 1993, appearing in the
Annual Report on Form 10-K/A of Curtis Mathes Holding Corporation for
the fiscal year ended June 30, 1995 and to the reference to us under the
heading "Experts" in the Prospectus, which is part of this Registration
Statement.
HEIN + ASSOCIATES LLP
Certified Public Accountants
Dallas, Texas
June 20, 1996
THE SHARES OF COMMON STOCK (THE "COMMON SHARES") OFFERED
HEREIN ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS ON
TRANSFERABILITY.
SECURITIES PURCHASE AGREEMENT
CURTIS MATHES HOLDING CORPORATION
Private Offering of Common Stock
In connection with the offer (the "Offering") and proposed issuance
of common shares, $0.01 par value per share ("Common Shares"), of Curtis
Mathes Holding Corporation, 10911 Petal Street, Dallas, Texas 75238 (the
"Company") at a price of $0.75 per share, the undersigned prospective
investor (the "Investor") and the Company hereby agree as follows:
1. Subscription. The Investor hereby subscribes for the purchase
of the Common Shares and agrees to purchase the aggregate
number of Common Shares set forth in Paragraph 12 of this
agreement. The Company, in its sole discretion and for any
reason, may accept or reject this purchase in whole or in part
at any time not later than 10 days after the receipt of this
agreement (the "Closing Date").
2. Restricted Shares. Investor recognizes that the Common
Shares, when issued, will not have been registered for public
sale under the Securities Act of 1933 (the "Securities Act")
or the securities laws of any state and that the share
certificate will bear a "Restricted Stock" legend as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
( 1 ) AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER SAID ACT, OR (2) AN OPINION OF COMPANY
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."
3. Registration Rights. In connection with the issuance of
the Common Shares offered pursuant to this agreement, the
Company will undertake to file a Registration Statement with
the Securities and Exchange Commission ("SEC") for
registration of the Common Shares on or before June 15, 1996,
and will use its best efforts to have such Registration
Statement declared effective at the earliest possible date.
4. Payment of Purchase Price. The Investor shall pay for the
Common Shares by wire transfer of funds to the Escrow Agent on
or before May 8, 1996 in accordance with the following
instructions:
American Pacific State Bank
15260 Ventura Boulevard
Sherman Oaks, California 91403
Routing #122229439
Credit to the Account:
Nemecek & Cole Trust Account - Re: Curtis Mathes
Account #03017133
The parties hereby agree that the funds from payment of the
purchase price shall be held in escrow by the law firm of
Nemecek & Cole (the "Escrow Agent") until the Escrow Agent has
received notification from the Company, consisting of a
facsimile copy of the Common Share certificate(s) that have
been issued in the Investor's name, along with a written
certification by the Company's General Counsel that the
original Common Share certificate(s) have been placed with an
overnight delivery service for expedited delivery to the
Investor. Upon receipt of said documentation, the parties
hereto instruct the Escrow Agent to disburse the funds to the
Company in accordance with its instructions. The parties
hereby acknowledge and agree that the Escrow Agent is acting
solely as an escrow agent in connection with the transaction,
has not participated in the offer or sale of the subject
shares, has conducted no investigation of the transaction or
<PAGE>
of either party, has not provided any advice nor made any
representation or warranty with respect to this Subscription
Agreement and/or the transaction and has not advised or made
a n y r epresentation or warranty with respect to the
transaction's compliance with federal, state or foreign law.
5. Company's Conditions. The Company's obligation to issue and
sell the Common Shares shall be subject to the satisfaction
(or waiver by it) of the following conditions precedent:
(a) Performance. The Investor shall have tendered payment
for the Common Shares.
(b) Representations. Each representation and warranty made
by the Investor in this agreement shall be true and
correct in all material respects as though made on and as
of the Closing Date.
(c) Legality. No change shall have occurred in any law, rule
or regulation that would prohibit the consummation of any
transaction contemplated hereby.
(d) Litigation. No action, proceeding or investigation
shall have been commenced or threatened, nor shall any
other judgment or decree have been issued or be proposed
to be issued by any court, agency or authority to set
aside, restrain, enjoin or prevent the consummation of
any transaction contemplated hereby.
6. Representations and Warranties. T h e Investor makes the
representations, declarations and warranties set forth in this
Section with the intent that the same may be relied upon in
determining the Investor's suitability as a purchaser of the
Common Shares. If the Investor includes or consists of more
than one person or entity, the obligations of the Investor
shall be joint and several and the representations and
warranties herein contained shall be deemed to be made by and
be binding upon each such person or entity and their
r e s pective legal representatives, heirs, executors,
administrators, successors and assigns.
(a) No Regulatory Review. The Investor is aware that this
is a limited private offering and that no federal, state
or other agency has made any finding or determination as
t o the fairness of the investment nor made any
recommendation or endorsement of the Common Shares.
(b) Ability to Evaluate. The Investor, by reason of the
Investor's knowledge and experience in financial and
business matters, is capable of evaluating the risks and
merits of an investment in the Common Shares.
(c) Investment Intent. The Investor acknowledges that the
purchase of the Common Shares hereunder is being made for
the Investor's own account, or investment purposes only
and not with the present intention of distributing or
reselling the Common Shares in whole or in part. The
<PAGE>
Investor further understands that the Common Shares are
n o t being sold to the Investor in a transaction
registered under the Securities Act of 1933, as amended
(the "Act"), or any other state securities laws. As a
result, the Investor understands that there will be
restrictions on the transfer and sale of the Common
Shares. The Investor further understands that the
Company has agreed to file a Registration Statement with
the SEC with respect to the Common Shares no later than
June 15, 1996. The Investor hereby agrees not to sell or
otherwise transfer the Common Shares until the Investor
h a s r eceived notice from the Company that the
Registration Statement has been declared effective.
Investor hereby agrees to exercise the registration
rights granted hereby, and to sell the Common Shares
pursuant to the registration, only in a manner consistent
with the representations and warranties made by Investor
to the Company hereunder. Investor understands that the
SEC may in its discretion comment on certain aspects of
the Registration Statement and the transaction and that
such comments may cause delay in the Registration
Statement becoming effective. The Company shall have no
liability to Investor on account of any such delay
initiated by the SEC.
(d) Investment Information. The investor has received and
reviewed pertinent information regarding the Company,
including the most recent SEC Forms 10-K and 10-Q prior
to the execution of this Agreement and is capable of
understanding and evaluating the information contained
therein. Specifically, the Investor is fully aware of
the risks relating to the business of the Company and
purchase of the Common Shares. The Investor will rely
solely upon its independent investigation and analysis in
making the decision to purchase the Common Shares. In
particular, and without limiting the generality of the
foregoing, the Investor has not relied on, and the
Investor's decision to subscribe for Common Shares has
not been influenced by: (i) newspaper, magazine or other
media articles or reports related to the Company or its
business; (ii) promotional literature or other materials
used by the Company for sales or marketing purposes, or
(iii) any other written or oral statement of the Company
or persons purporting to represent the Company. The
Investor has had the opportunity to discuss all aspects
of this transaction with management of the Company, has
made or has had the opportunity to make such inspection
of the books and records of the Company as the Investor
has deemed necessary in connection with this investment,
and any questions asked have been answered to the
satisfaction of the Investor.
(e) Confidentiality. The Investor understands that the
O f f ering is confidential. The Investor has not
distributed information on the Offering to anyone other
than such legal or financial advisors as the Investor has
deemed necessary for purposes of evaluating an investment
in the Common Shares.
<PAGE>
(f) Authorization and Formation of Investor. The
Investor, if a corporation, partnership, trust or other
form of business entity, is authorized and otherwise duly
qualified to purchase and hold the Common Shares and such
entity has not been formed for the specific purposes of
acquiring Common Shares in the Offering. If the Investor
is one of the aforementioned entities, it hereby agrees
that upon request of the Company it will supply the
Company with any additional written information that may
be requested by the Company.
(g) Accredited Investor Status. The Investor is an
"accredited investor" as such term is defined in Rule
501(a) of Regulation D under the Act and within the
meaning of similar regulations under state securities
l a w s for the reasons indicated in the "Investor
Acknowledgments" accompanying this Agreement. If the
Investor is an individual, he or she is of majority age
and his or her marital status is as indicated in the
"Investor Acknowledgments." If the Investor is an
entity, the person executing this Securities Purchase
Agreement on behalf of the Investor is of majority age.
7. Reliance on Representations and Warranties: Indemnity.
The Investor understands that the Company will rely on the
representations and warranties of the Investor herein in
determining whether a sale of the Common Shares to the
Investor is in compliance with federal and applicable state
securities laws. The Investor hereby agrees to indemnify the
Company and its affiliates, and hold the Company and its
affiliates and agents harmless from and against any and all
liability, damage, cost or expense (including reasonable
attorneys' fees) incurred on account of or arising out of:
(a) any inaccuracy in the Investor's declarations,
representations and warranties set forth in this Subscription
Agreement; (b) the disposition of any of the Common Shares
which the Investor will receive, contrary to the Investor's
declarations, representations and warranties in this
Subscription Agreement; (c) any lawsuit or proceeding based
upon a claim that said declarations, representations or
warranties were inaccurate or misleading or otherwise cause
for obtaining damages or redress from the Company or any of
its affiliates or the disposition of all or any part of the
Investor's Common Shares; and (d) the Investor's failure to
fulfill any or all of the Investor's obligations herein.
8. Updating Information. All of the information set forth
herein with respect to the Investor, including, without
limitation, all of the representations and warranties set
forth in Paragraph 6 of this agreement, is correct and
complete as of the date hereof and, if there should be any
material change in such information prior to the acceptance of
t h i s subscription by the Company, the Investor will
immediately furnish the revised or corrected information to
the Company.
<PAGE>
9. Notices. Any notice or other communications required or
permitted hereunder shall be sufficiently given if in writing
and sent by registered or certified mail, postage prepaid,
return receipt requested, if to the Company at the address set
forth on the first page of this Subscription Agreement, and to
Investor, at the address set forth in Paragraph 12 of this
Subscription Agreement, or, to such other address as either
the Company or the Investor shall designate to the other by
notice in writing in accordance with this Paragraph 9.
10. Governing Law. This Subscription Agreement shall be governed
by and construed in accordance with the laws of Texas.
11. Representations and Warranties of the Company. The Company
represents and warrants to Investor as follows:
(a) The Company has legal capacity, power and authority to
enter into and perform this Agreement and to consummate
the transaction contemplated hereby.
(b) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a legal, valid
and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(c) The execution and delivery of this agreement and the
performance of the obligations imposed hereunder will not
result in a violation of any order, decree or judgment of
any court or governmental agency having jurisdiction over
Company or Company's properties, will not conflict with,
constitute a default under, or result in the breach of,
any contract agreement or other instrument to which the
Company is a party or is otherwise bound and no consent,
authorization or order of, or filing or registration
with, any court or governmental agency is required for
t h e execution, delivery and performance of this
agreement.
(d) There is no litigation or proceeding or, to the best of
the Company's knowledge, threatened, against the Company
which would affect the validity or performance of this
agreement.
(e) Upon consummation of the transaction contemplated hereby,
the Investor will own the Common Shares free and clear of
all liens, claims, charges and other encumbrances and the
delivery of the Common Shares to Investor pursuant to
this agreement will transfer legal and valid title
thereto, free and clear of all liens, claims, charges and
other encumbrances.
(f) The Company will pay all transfer fees and expenses.
(g) The Common Shares when issued and delivered will be duly
a n d validly authorized and issued fully-paid and
nonassessable and will not subject the holders thereof to
personal liability by reason of being such holders.
There are no preemptive rights of any shareholder of the
Company.
<PAGE>
(h) The Company hereby agrees to indemnity and hold harmless
the Investor from and against any liability, damage, cost
or expense incurred as a result of breach by the Company
of any representation, warranty or covenant of the
Company hereunder.
[Signatures follow]
12. Signatures. The Investor declares under penalty of perjury
that the statements, representations and warranties contained
herein and in the following Investor Acknowledgements are
true, correct and complete and that this Securities Purchase
Agreement was executed at:
__________________________ ________________________________
(City and State) (City and State)
Number of Common Shares _______________
Total Purchase Price $______________
Funds Should Be Wired in Accordance With Section 4 Of This
Agreement:
Exact Name(s) in which ownership of Common Shares is to be
registered:__________________________________________________
Address:_____________________________________________________________
City, State, Zip Code
___________________________________________________
Investor Joint Investor (if necessary)
______________________ _________________________________
(Print Name) (Print Name)
______________________ _________________________________
(Signature) (Signature)
______________________ _________________________________
(Title) (Title)
Date: _____________________ Date: ____________________
RECEIVED AND ACCEPTED:
Amount: $_____________________
Common Shares: ___________________________
Date: _________________________
CURTIS MATHES HOLDING CORPORATION
By: __________________________________
Patrick A. Custer, President
* Note that Common Shares will be sent to Investor by overnight Courier
to the address indicated, unless otherwise instructed.
<PAGE>
CURTIS MATHES HOLDING CORPORATION
INVESTOR ACKNOWLEDGMENTS
In order to induce the Company to accept the foregoing subscription
for Common Shares, the Investor expressly acknowledges the following by
placing his or her initials (or, if the Investor is a person other than
an individual, the initials of an individual duly empowered to act for
the Investor) in each of the spaces provided below:
THE INVESTOR HAS RECEIVED, HAS CAREFULLY REVIEWED INFORMATION ON
THE COMPANY AND HAS MADE AN INDEPENDENT INVESTIGATION AND ANALYSIS OF
THE INVESTMENT.
THE INVESTOR HAS CAREFULLY READ THE FOREGOING SECURITIES PURCHASE
AGREEMENT AND IN PARTICULAR, HAS CAREFULLY READ AND UNDERSTANDS THE
INVESTOR'S REPRESENTATIONS AND WARRANTIES MADE THEREIN AND CONFIRMS THAT
ALL SUCH REPRESENTATIONS AND WARRANTIES ARE TRUE AND CORRECT.
THE INVESTOR QUALIFIES UNDER THE FOLLOWING CATEGORY OR CATEGORIES
OF DEFINITIONS OF "ACCREDITED INVESTOR" (INDICATE EACH APPLICABLE
CATEGORY):
(1) The Investor is a natural person whose individual net worth,
or joint net worth with that person's spouse, exceeds
$1,000,000.
(______) Yes (______) No
(2) The Investor is a natural person who had an individual income
in excess of $200,000 in each of the two most recent years or
joint income with that person's spouse in excess of $300,000
in each of those years and has a reasonable expectation of
realizing the same income level in the current year.
(______) Yes (______) No
(3) The Investor is a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended.
(______) Yes (______) No
(4) The Investor is an insurance company, a registered securities
broker or dealer, a licensed Small Business Investment
C o m p any, a registered investment company, a business
development company as defined in Section 2(a)(48) of the
I n vestment Company Act of 1940 or a private business
development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
(______) Yes (______) No
(5) The Investor is an organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended, or a
corporation, Massachusetts or similar business trust or
partnership, not formed for the specific purpose of acquiring
the Common Shares, with total assets in excess of $5,000,000.
(______) Yes (______) No
<PAGE>
(6) The Investor is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Common Shares offered, whose purchase is directed by a
person who has such knowledge and experience that he or she is
capable of evaluating the merits and risks of the proposed
investment.
(______) Yes (______) No
(7) The Investor is a bank, savings and loan association or
similar institution acting in its individual or fiduciary
capacity, or an employee benefit plan with total assets in
excess of $5,000,000.
(______) Yes (______) No
(8) The Investor is a Plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality
of a state or its political subdivisions for the benefit of
its employees, with total assets in excess of $5,000,000.
(______) Yes (______) No
(9) The Investor is an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 ("ERISA"),
the investment decisions for which are made by a plan
fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance
company, or registered investment adviser, or is an employee
benefit plan that has total assets in excess of $5,000,000.
(______) Yes (______) No
(10) The Investor is an entity in which all of the equity owners
are accredited investors or individuals who are accredited
investors (as defined above).
(______) Yes (______) No
IN WITNESS WHEREOF, the Investor has executed and delivered this
Investor Acknowledgement as of the date shown below.
Official Signatory of Investor:
Name of Company: ___________________
By: _______________________________
(Signature)
Name Printed: _______________________
Title: ______________________________
Date: ______________________________
THE SECURITIES OFFERED HEREIN ARE SUBJECT TO SUBSTANTIAL
RESTRICTIONS ON TRANSFERABILITY.
SECURITIES PURCHASE AGREEMENT
CURTIS MATHES HOLDING CORPORATION
Private Placement of Class A Preferred Stock
(Total Offering up to $2,000,000)
SECURITIES PURCHASE AGREEMENT, dated as of May 24, 1996, by and
among Curtis Mathes Holding Corporation, a Texas corporation (the
"Company"), and the purchasers named on the signature pages hereto (the
"Purchasers").
PRELIMINARY STATEMENT
The Company desires to obtain funds by issuing to the Purchasers
Series H, Class A Preference Shares (the "Class A Preferred Stock") of
the Company, containing all the rights, obligations, and conditions as
more fully set out in the form of the Certificate of Designation of
Class A Preferred Stock attached hereto as Exhibit "A" and incorporated
herein for all purposes, and the Purchasers have indicated that each
desires to purchase such securities, subject to the terms and conditions
set forth in this Agreement. Together with this Agreement, the
Purchaser is delivering to the Company the full amount of the purchase
price for the Class A Preferred Stock being purchased by wire transfer
to the Company as hereinafter described.
ACCORDINGLY, in consideration of the preceding preliminary
statement and the mutual agreements, covenants, representations and
warranties contained in this Agreement, the parties hereto, intending to
be legally bound, now agree as follows:
STATEMENT OF AGREEMENT
ARTICLE 1. CERTAIN DEFINITIONS.
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Company after the Closing Date, other than Common
Stock issued upon conversion of the Class A Preferred Stock.
"Agreement" means this Securities Purchase Agreement, by and among
the Company and the Purchasers, as such may be amended, supplemented,
restated or otherwise modified from time to time.
"Bankruptcy Law" means Title 11, United States Code or any similar
federal or state law for the relief of debtors.
"Business Day" means any day that is not a Saturday or Sunday or,
as the context requires (i) a day on which the applicable stock exchange
or market is required or permitted to be closed, or (ii) a day on which
banks are required or permitted to be closed in Dallas, Texas.
"Closing" and "Closing Date" have the meanings given to such terms
in Section 2.1 of this Agreement.
<PAGE>
"Closing Bid Price" means the closing bid price of the Common Stock
as of any date as reported by NASD.
"Common Stock" means the common stock, par value $0.01 per share,
of the Company.
"Company" has the meaning given to such term in the preamble of
this Agreement.
"Conversion" means the conversion pursuant to the terms of this
Agreement of any Class A Preferred Stock or dividend thereon into Common
Stock.
"Conversion Price" means the price, expressed in dollars per share
of Common Stock, equal to eighty percent (80%) of the five day average
Closing Bid Price immediately prior to the conversion date, as adjusted
if and as appropriate pursuant to the provisions of Article 3, subject
to the Maximum Conversion Limit and the Minimum Conversion Limit.
" Distribution Event" means any insolvency, bankruptcy,
receivership, liquidation, reorganization or similar proceeding (whether
voluntary or involuntary) relating to the Company or its property, or
any proceeding for voluntary liquidation, dissolution or other winding
up of the Company, whether or not involving insolvency or bankruptcy.
"Documents" means this Agreement, the Certificate of Designation,
and the Securities, together with all amendments and supplements
thereto, all substitutions and replacements therefor, and all renewals,
extensions, increases, restatements, modifications, rearrangements and
waivers thereof from time to time.
"Event of Default" has the meaning given to such term in
Section 10.1 of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations
of the SEC thereunder, all as the same shall be in effect from time to
time.
"Holder" and "Holders" both mean, as the context requires, the
holder or holders of the Class A Preferred Stock from time to time under
the terms of this Agreement and the other Documents. As of the Closing
Date, the Purchasers are the only Holders.
"Indebtedness" means (i) all indebtedness of the Company for money
borrowed or evidenced by notes, bonds, debentures or similar evidences
of indebtedness of the Company, (ii) all indebtedness of the Company
under leases that are or should be capitalized under generally accepted
a c c ounting principles, (iii) all guarantees by the Company of
i n d e btedness of others, and (iv) indebtedness of the Company
representing the deferred and unpaid purchase price of goods or services
that is 120 or more days past due.
"Majority Holders" means the Holders of a majority of the shares of
Class A Preferred Stock then outstanding.
"Maximum Conversion Limit" means $4.00 per share of Common Stock.
"Minimum Conversion Limit" means $1.50 per share of Common Stock.
<PAGE>
"NASD" means the National Association of Securities Dealers, Inc.,
or any successor thereto.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Private Placement Agent" has the meaning given to such term in
Section 2.2 of this Agreement.
"Purchase Price" with respect to Class A Preferred Stock, means
$25,000 for each share of Class A Preferred Stock.
"Purchasers" has the meaning given to such term in the preamble of
this Agreement.
"SEC" means the Securities and Exchange Commission of the United
States of America or any successor to the rights and duties thereof.
"Securities" means the Class A Preferred Stock.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor U.S. Federal statute, and all rules and regulations
thereunder.
"TIA" means the Trust Indenture Act of 1939, as amended, or any
s u c cessor U.S. Federal statute, and all rules and regulations
thereunder.
"Value" with respect to Class A Preferred Stock, means $25,000 for
each share of Class A Preferred Stock.
ARTICLE 2. ISSUANCE OF SECURITIES.
Section 2.1 Closing. Time is of the essence of this
Agreement. The closing contemplated by this Agreement (the "Closing")
shall take place at the offices of the Company, 10911 Petal Street,
Dallas, Texas 75238, at Noon Dallas Time on or before May 30, 1996 or on
such other date or at such other time as the issuance of the Securities
and the payment of the Purchase Price therefor shall actually occur (the
"Closing Date"). At the Closing, the Company will deliver to each
Purchaser the Class A Preferred Stock certificates purchased by such
Purchaser as noted on the signature page hereof, each registered in the
name of such Purchaser. At the Closing, the Purchase Price shall be
paid by wire transfer to the Company as follows:
Curtis Mathes Holding Corporation
Bank One, Texas, N.A.
Dallas, Texas
ABA #111000614
Credit: Curtis Mathes Holding Corporation
Account #0100113794
Section 2.2 Private Placement Fees. At the Closing, the
Company shall pay to Shipley Raidy Capital Partners, LP (the "Private
Placement Agent") previously agreed fees. The Company hereby
indemnifies the Purchasers against such fees.
<PAGE>
ARTICLE 3. CONVERSION.
Section 3.1 Right of Conversion. Any Holder shall have the
right, at any time after 50 days after the Closing Date and from time to
time, at such Holder's option, to convert, subject to the terms and
provisions of this Article 3, any or all of the Class A Preferred Stock
and/or accrued but unpaid dividends thereon into fully paid and
nonassessable shares of Common Stock at the Conversion Price. The
purchaser recognizes that the Common Stock, when issued, will not have
been registered for public sale under the Securities Act of 1933 (the
"Securities Act") or the securities laws of any state and that the share
certificate will bear a "Restricted Stock" legend as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER SAID ACT, OR (2) AN OPINION OF
COMPANY COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."
Prior to or simultaneously with the conversion of any of the Class A
Preferred Stock, all accrued but unpaid dividends on the Class A
Preferred Stock being converted must also be converted or paid in cash.
Section 3.2 Mechanics of Exercise. The right of Conversion
shall be exercised by the surrender of the share certificate or share
certificates representing the Class A Preferred Stock to be converted at
the principal office of the Company (or at such other place as the
Company may designate in a written notice sent to the holder by first-
class mail, postage prepaid, at its address shown on the books of the
Company) against delivery of that number of shares of whole Common Stock
as shall be computed by dividing (1) the aggregate Value of the Class A
Preferred Stock so surrendered plus any accrued but unpaid dividends
thereon, if any, by (2) the Conversion Price in effect at the date of
the conversion. At the time of conversion of any Class A Preferred
Stock, the Company shall pay in cash to the holder thereof an amount
equal to all unpaid dividends, if any, accrued thereon to the date of
conversion, or, at the Company's option, issue that number of shares of
whole Common Stock which is equal to the product of dividing the amount
of such unpaid dividends by the Conversion Price whether or not declared
by the Board. Each Class A Preferred Stock certificate surrendered for
conversion shall be endorsed by its holder. In the event of any
exercise of the conversion right of the Class A Preferred Stock granted
herein (i) share certificates representing the Common Stock purchased by
virtue of such exercise shall be delivered to such holder within 5 days
of notice of conversion, and (ii) unless the Class A Preferred Stock has
been fully converted, a new share certificate representing the Class A
Preferred Stock not so converted, if any, shall also be delivered to
such holder within 5 days of notice of conversion. Any Holder may
exercise its right to convert the Class A Preferred Stock by telecopying
an executed and completed Notice of Conversion to the Company, and
within 72 hours thereafter, delivering the original Notice of Conversion
and the certificate representing the Class A Preferred Stock to the
Company by express courier. Each date on which a Notice of Conversion
is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a conversion date. The Company will
transmit the Common Stock certificates issuable upon conversion of any
<PAGE>
Class A Preferred Stock (together with the certificates representing the
Class A Preferred Stock not so converted) to the Holder via express
courier within five business days after the conversion date if the
Company has received the original Notice of Conversion and the Class A
Preferred Stock certificate being so converted by such date.
Section 3.3 Issuance of Shares; Time of Conversion. To the
extent permitted by law, the rights of the Holders as Holders shall, to
the extent of Class A Preferred Stock and dividends converted, cease
with respect to such Class A Preferred Stock and dividends as of the
date of actual receipt by the Company of the surrendered Class A
Preferred Stock certificates and written conversion request, and the
Person entitled to receive the Common Stock certificate deliverable upon
such conversion shall be treated for all purposes as having become the
record holder of such Common Stock at such time.
Section 3.4 Adjustment of Conversion Price. The Conversion
Price, and consequently the number of shares of Common Stock into which
Class A Preferred Stock is convertible, shall be subject to adjustment
as follows:
(a) Stock Dividends, Subdivisions and Combinations. If at
any time the Company shall:
(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or
other distribution of, Additional Shares of Common Stock;
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into
a smaller number of shares of Common Stock;
then in each such case the Conversion Price in effect immediately prior
thereto shall be adjusted so that the Holder of any Class A Preferred
Stock thereafter surrendered for conversion shall be entitled to receive
the number of shares of Common Stock that such Holder would have owned
or have been entitled to receive after the happening of any of the
events described above had such Class A Preferred Stock been converted
immediately prior to the happening of such event.
(b) When Adjustment Not Required. If the Company shall take
a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution and shall, thereafter and
before the distribution to stockholders thereof, legally abandon its
plan to pay or deliver such dividend or distribution, then thereafter no
adjustment shall be required by reason of the taking of such record and
any such adjustment previously made in respect thereof shall be
rescinded and annulled.
<PAGE>
Section 3.5 N o F ractional Shares. Instead of any
fractional share of Common Stock that would otherwise be issuable upon
conversion of any Class A Preferred Stock, the Company may pay a cash
adjustment in respect of such fraction in an amount equal to the same
fraction of the Conversion Price. If more than one Class A Preferred
Stock certificate shall be surrendered for conversion by the same
Holder, the number of shares issuable upon conversion thereof shall be
computed on the basis of the aggregate amount of Class A Preferred Stock
a n d dividends on the Class A Preferred Stock certificates so
surrendered.
Section 3.6 Notice of Adjustments. Whenever the Conversion
Price shall be adjusted pursuant to Article 3, the Company shall
forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail, the event
requiring the adjustment and the method by which such adjustment was
c a lculated, specifying the Conversion Price and (if applicable)
describing the number and kind of any other shares of stock or Other
Property into which Class A Preferred Stock may be converted, and any
change in the purchase price or prices thereof, after giving effect to
such adjustment or change. The Company shall promptly cause a signed
copy of such certificate to be delivered to each Holder in accordance
with Section 10.6. The Company shall keep at its chief executive office
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or
any prospective purchaser of Class A Preferred Stock designated by a
Holder thereof.
Section 3.7 No Stockholder Rights. Prior to the issuance
of Common Stock upon conversion, the Holders shall not be entitled to
any rights of a shareholder with respect to the Common Stock, including
(without limitation) the right to vote such Common Stock, receive
dividends or other distributions thereon, exercise preemptive rights or
be notified of shareholder meetings, and such Holders shall not be
entitled to any notice or other communication concerning the business or
affairs of the Company except as contractually agreed to by the Company.
Section 3.8 Shares to be Reserved. The Company covenants that
it will at all times reserve and keep available out of its authorized
but unissued Common Stock, free from preemptive rights, solely for the
purpose of issue upon conversion of Class A Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all Class A Preferred Stock and accrued
but unpaid dividends on the then-outstanding Class A Preferred Stock.
The Company covenants that all Common Stock which shall be so issuable
shall, when issued, be duly and validly issued and fully paid and
nonassessable.
Section 3.9 No Registration or Listing of Shares. The shares
of Common Stock issuable on conversion are not registered with any
governmental authority or listed on any exchange, and, except as
provided hereinbelow, the Company shall have no obligation to register
or list any Common Stock. Until such stock is registered, the Company
may cause any Common Stock issued upon conversion of Class A Preferred
Stock to bear a restrictive legend describing limitations of the
transferability of such Common Stock.
<PAGE>
Section 3.10 Taxes and Charges. The issuance of certificates
for Common Stock upon the conversion of Class A Preferred Stock shall be
made without charge to the converting Holder of Class A Preferred Stock
for such certificates or for any tax in respect of the issuance of such
c e r t i ficates or the securities represented thereby, and such
certificates shall be issued in the respective names of, or in such
names as may be directed by, the Holders of the Class A Preferred Stock
being converted; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate in a name
other than that of the Holder of the Class A Preferred Stock converted,
and the Company shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the
issuance thereof shall have paid to the Company the amount of such tax
or shall have established to the satisfaction of the Company that such
tax has been paid.
ARTICLE 4. REGISTRATION RIGHTS
Section 4.1 The Securities issued through this private
o f f e ring are issued pursuant to an exemption from securities
registration afforded by Rule 506 under Regulation D of the Securities
Act. In connection with the issuance of the Class A Preferred Stock
offered pursuant to this Agreement, the Company will undertake to file a
Registration Statement with the SEC for registration of the Common Stock
underlying the Class A Preferred Stock, any dividends due thereon, and
the Common Stock underlying the Warrants issued to the Private Placement
Agent in connection with this transaction, on or before June 15, 1996,
and will use its best efforts to have such Registration Statement
declared effective at the earliest possible date. In the event that the
SEC does not declare such Registration Statement effective by the 90th
day from the date of filing, the current twenty percent (20%) discount
provided in the Conversion Price shall increase by two percent (2%) for
each thirty (30) day period beyond the 90th day of the date of filing
until the Registration Statement is declared effective by the SEC, or
until either the discount reached is thirty-five percent (35%) or the
Minimum Conversion Limit is reached.
Section 4.2 The Company and the Purchasers agree to enter
into a separate Registration Rights Agreement within 15 days of the date
of this Agreement pursuant to which, among other things, the Company
will agree to indemnify the Purchasers against any claims or losses
arising out of or based upon any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company in
connection with any Registration Statement.
ARTICLE 5. PURCHASERS' REPRESENTATIONS AND WARRANTIES.
Each Purchaser hereby represents and warrants (with respect to
itself only) to the Company as follows as of the date hereof and as of
the Closing Date:
Section 5.1 Organization and Powers. Each Purchaser is, if a
partnership or corporation, (i) duly organized, validly existing and in
good standing under the laws of the State of its formation, and (ii) has
the power and authority to execute, deliver and perform the Documents to
which it is a party.
<PAGE>
Section 5.2 Authorization. The execution, delivery and
performance by each Purchaser of the Documents to which it is a party
have been duly authorized by each Purchaser by all requisite action
necessary to be taken by it.
Section 5.3 Validity and Binding Nature. The Documents to
which each Purchaser is a party have been duly executed and delivered by
such Purchaser and each is a legal, valid and binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its
terms (except as enforcement thereof may be limited by bankruptcy,
reorganization, insolvency, moratorium or other laws or equitable
principles affecting the enforcement of creditors' rights generally).
Section 5.4 Acquisition for Investment. Each Purchaser is
acquiring the Securities (and all securities into which the Securities
are convertible or exercisable) solely 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 no Purchaser has a present intention
or plan to effect any distribution of the Securities (or such other
securities). Notwithstanding anything in this Section to the contrary,
the disposition of each Purchaser's property shall be at all times
within the control of each Purchaser and subject to the rights of each
Purchaser to dispose of all or any of the Securities (or such other
securities) pursuant to an effective registration statement under the
Securities Act or an exception available under the Securities Act. Each
Purchaser acknowledges that the Securities (and such other securities)
have 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.
Section 5.5 Accredited Investor; Sophistication. Either
(i) each Purchaser is an "accredited investor" within the meaning of
Rule 501 under the Securities Act or (ii) each Purchaser is able to bear
the economic risk of this investment, at the present time, and is able
to afford a complete loss of such investment. By reason of each
Purchaser's business and financial experience, and the business and
financial experience of those Persons retained to advise each Purchaser
with respect to its investment in the Securities, each Purchaser,
together with such advisors, has such knowledge, sophistication and
experience in business and financial matters that it is capable of
evaluating the merits and risks of the prospective investment.
Section 5.6 No General Solicitation. To each Purchaser's
knowledge, the Securities were not offered to such Purchaser by means of
general solicitations, publicly disseminated advertisements or sales
literature.
Section 5.7 Address. The true and correct address of each
Purchaser's principal place of business is as set forth in this
Agreement. Each Purchaser has supplied its federal tax identification
number to the Company. No Purchaser has a present intention of moving
its principal place of business to any other state or jurisdiction.
Section 5.8 No Brokers. Other than the Private Placement
Agent, no Purchaser has employed any broker, agent, finder or investment
banker in connection with any transaction contemplated by the Documents.
<PAGE>
ARTICLE 6. COMPANY'S REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Purchasers as
follows as of the date hereof and as of the Closing Date:
Section 6.1 Organization and Powers. The Company (i) is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Texas, (ii) has all requisite power and
authority to own its property and assets and to carry on its business as
now conducted and as proposed to be conducted, and (iii) has the power
and authority to execute, deliver and perform the Documents to which it
is a party.
Section 6.2 Authorization. The execution, delivery and
performance by the Company of the Documents to which it is a party
(i) have been duly authorized by the Company by all requisite action
necessary to be taken by it, (ii) will not violate and has not violated
in such a way as to have a material adverse effect on the Company
(A) any provision of law, statute, rule or regulation, (B) any
applicable judgment, writ, injunction, decree or other order of any
governmental authority, or (C) the articles of incorporation or bylaws
of the Company, or any material agreement to which the Company is a
party, and (iii) will not be or result in, and has not caused, a
conflict with, a breach of or (with notice or lapse of time or both) a
default under any material agreement to which the Company is a party.
Section 6.3 Validity and Binding Nature. This Agreement has
been duly executed and delivered by the Company and is, and each of the
other Documents, when executed and delivered by the Company will be, a
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms (except as enforcement thereof
may be limited by bankruptcy, reorganization, insolvency, moratorium or
other laws or equitable principles affecting the enforcement of
creditors' rights generally).
Section 6.4 Consents, Licenses, Filings, Etc. Except as
required under the Securities Act and applicable state securities laws,
no action, consent or approval of, license or permit from, or
registration or filing with, or any other action by any governmental
authority or any other Person was or is required in connection with the
execution, delivery and performance by the Company of the Documents.
Section 6.5 No Brokers. Other than the Private Placement
Agent, the Company has not employed any broker, agent, finder or
investment banker in connection with any transaction contemplated by the
Documents.
Section 6.6 Capitalization. As of May 16, 1996, the
authorized capital stock of the Company consisted of 40,000,000 shares
of Common Stock, of which 22,551,188 shares were issued and outstanding;
and 1,000,000 shares of Preferred Stock, of which 257,305 shares were
issued and outstanding which are convertible into 469,220 shares of
Common Stock. All of such outstanding shares have been validly issued
and are fully paid and non-assessable. There is currently no preemptive
or similar rights to purchase or otherwise acquire shares of capital
stock or other securities of the Company pursuant to any provision of
<PAGE>
law or the Company's articles of incorporation or bylaws. As of May 16,
1996 (i) there are no outstanding options to purchase any shares of
capital stock of the Company, and (ii) warrants (the "Warrants") to
purchase 9,782,733 shares of Common Stock were issued and outstanding.
Other than the above, there are currently no scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of
the Company. The Company has furnished to the Purchasers the Company's
annual report on Form 10-K/A for the fiscal year ended June 30, 1995 and
the Company's quarterly report on Form 10-Q for the fiscal quarter ended
March 31, 1996.
Section 6.7 Issuance of Shares. The Common Stock issuable
upon conversion of the Class A Preferred Stock has been duly authorized
and when issued in accordance with the terms of the Documents shall be
validly issued, fully paid and non-assessable.
Section 6.8 SEC Documents; Financial Statements. The Company
has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to herein
as the "SEC Documents"). The Company has delivered to the Purchaser
true and complete copies of such SEC Documents as Purchasers may have
r e quested, except for such exhibits, schedules and incorporated
documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the
rules and regulations of the SEC promulgated thereunder applicable to
such SEC Documents, and none of the SEC Documents, at the time they were
filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with
a p p licable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements
to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments).
Section 6.9 The Company hereby indemnifies the Private Placement
Agent against any claims or losses arising out of or based upon any of
the foregoing representations and warranties made by the Company in this
Article 6 being untrue when made or at the Closing hereof.
<PAGE>
ARTICLE 7. PURCHASERS' CONDITIONS TO CLOSING.
Each Purchaser's obligation to purchase and pay for Securities at
t h e Closing is subject to the fulfillment to such Purchaser's
satisfaction, on or before the Closing Date, of each of the following
conditions:
Section 7.1 Expiration Date. The Closing Date shall have
occurred on or before May 30, 1996.
Section 7.2 Securities. Each Purchaser shall have received
the Securities required to be delivered by the Company to such Purchaser
on the Closing Date pursuant to Article 2 of this Agreement, each duly
executed and delivered by the Company.
Section 7.3 Representations and Warranties; Covenants; Events
of Default. (i) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made on the Closing Date,
except to the extent of any changes caused by the transactions herein
contemplated, (ii) the Company shall not be in material breach of any
covenant contained in the Documents, (iii) no Event of Default shall
have occurred and be continuing, and (iv) the Company shall have
delivered to the Purchasers an officer's certificate to the effect of
clauses (i), (ii) and (iii) and to the effect that all of the conditions
to the Purchasers' obligation to purchase Securities at the Closing have
been fulfilled as of the Closing Date.
Section 7.4 Transactions Permitted by Applicable Laws. The
Closing and the other transactions contemplated by this Agreement shall
not violate any applicable law or governmental regulation or result in a
violation of any order of any court or governmental body applicable to
the Purchasers or the Company and shall not subject the Purchasers or
the Company to any tax, penalty or liability.
Section 7.5 No Adverse Action or Decision. There shall be no
action, suit, investigation or proceeding pending, or, to the best of
t h e Purchasers' knowledge, threatened against or affecting the
Purchasers or the Company or any of their respective properties that
(i) seeks to restrain, enjoin, prevent the consummation of or otherwise
affect the Closing or the other transactions contemplated by this
Agreement, or (ii) questions the validity or legality of any such
transactions or seeks to recover damages or to obtain other relief in
connection with any such transactions.
Section 7.6 Approvals and Consents. The Company shall have
d u ly received all authorizations, consents, approvals, licenses,
franchises, permits and certificates by or of, and shall have made all
filings and effected all registrations and qualifications with, all
federal, state and local governmental authorities and other Persons
necessary for the consummation of the Closing and the other transactions
contemplated by this Agreement, and all such matters shall be in full
force and effect as of the Closing Date.
Section 7.7 Proceedings. All corporate and other proceedings
to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in substance and form to the Purchasers.
<PAGE>
Section 7.8 Opinion of Counsel. The Private Placement Agent
shall have received an opinion of counsel, in the form attached hereto
as Exhibit "A," concerning the enforceability of the obligations and
covenants contained herein.
ARTICLE 8. COMPANY'S CONDITIONS TO CLOSING.
The obligation of the Company to issue and sell Securities to the
Purchasers is subject to the fulfillment to the satisfaction of the
Company, on or before the Closing Date, of each of the following
conditions:
Section 8.1 Purchase Price. The Company shall have received
payment in full of the Purchase Price for the Securities.
Section 8.2 Representations and Warranties; Covenants.
(i) The representations and warranties of each Purchaser contained in
this Agreement shall be true and correct in all material respects on and
a s of the Closing Date with the same effect as though such
representations and warranties had been made on the Closing Date, except
to the extent of any changes caused by the transactions herein
contemplated, and (ii) the Purchasers shall not be in material breach of
any covenant contained in the Documents.
Section 8.3 No Adverse Action or Decision. There shall be no
action, suit, investigation or proceeding pending, or, to the best of
the Company's knowledge, threatened against or affecting the Purchasers
or the Company or any of their respective properties before any court,
arbitrator or administrative or governmental body that (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise affect the
Closing or the other transactions contemplated by this Agreement, or
(ii) questions the validity or legality of any such transactions or
seeks to recover damages or to obtain other relief in connection with
any such transactions.
Section 8.4 Approvals and Consents. The Company shall have
d u ly received all authorizations, consents, approvals, licenses,
franchises, permits and certificates by or of, and shall have made all
filings and effected all registrations and qualifications with, all
federal, state and local governmental authorities and other Persons
necessary for the consummation of the Closing and the other transactions
contemplated by this Agreement, and all such matters shall be in full
force and effect as of the Closing Date.
ARTICLE 9. COVENANTS.
The Company hereby covenants and agrees with the Holders that,
except as may be limited herein, so long as the Class A Preferred Stock
or dividend on any Class A Preferred Stock shall be outstanding:
Section 9.1 Right of First Refusal. After Closing, and for
six (6) months after Closing, the Company will allow the Purchasers a
right of first refusal to participate in any proposed private placement
or private offering of convertible securities, the terms of which may
offer a conversion price lower than the Conversion Price provided
herein. This right of first refusal shall not apply to other
<PAGE>
transactions involving convertible securities currently under
negotiation between the Company and other accredited investors, with a
total face amount not exceeding $5,000,000, which are expected to close
concurrently with or within reasonable proximity to the Closing Date of
this transaction.
Section 9.2 Compliance with Law; Maintenance of Properties.
The Company will do or cause to be done all things necessary (i) to
preserve and keep in full force and effect at all times the Company's
existence, and all rights, licenses and franchises that are material to
its business, (ii) to cause the Company to comply in all material
respects with all applicable laws, and all applicable rules, regulations
and orders issued by any governmental authority, noncompliance with
which could have a material adverse effect on the business, operations,
prospects, assets and/or financial or other condition of the Company
(but the Company may contest in good faith by appropriate action any
alleged violation of any of the foregoing), and (iii) to preserve all
material property useful in the conduct of the Company's business and
keep the same in reasonably good repair, working order and condition,
normal wear and tear excepted, and from time to time make, or cause to
be made, all needful and proper repairs, renewals and replacements,
betterments and improvements thereto so that the business carried on in
connection therewith may be properly and advantageously conducted at all
times.
Section 9.3 Performance of Liabilities. The Company will
(i) duly pay and discharge all Indebtedness in such manner as shall be
necessary in order to prevent the occurrence of an Event of Default
under Section 8.1(d) hereof, and (ii) duly pay and discharge all taxes
before the same shall become in default, and all lawful claims for
labor, materials and supplies that have become due and payable which
taxes and other claims, if unpaid, might become a lien upon any of its
properties if the loss of such properties could have a material adverse
effect on the business, operations, prospects, assets and/or financial
or other condition of the Company.
Section 9.4 Inspection. The Company will permit, upon
written request therefor, any duly authorized representative of the
Majority Holders to visit and inspect any of the properties of the
Company, examine its books of record and accounts and take copies and
extracts therefrom, and conduct audits of such books of record and
accounts, all at such times and as often as the Majority Holders may
request.
Section 9.5 Reporting Requirements. To the extent publicly
available, the Company shall furnish to the Holders the following:
(a) Defaults. As soon as possible and in any event
within 10 days after obtaining knowledge of the occurrence of any Event
of Default, a statement of an appropriate officer of the Company setting
forth details of such Event of Default and the action that the Company
has taken or proposes to take with respect thereto.
(b) Financial Statements. As soon as available, a copy
of the annual audit report for each fiscal year for the Company,
including therein the balance sheet of the Company as of the end of such
fiscal year and related statements of income, shareholders' equity and
cash flows for such fiscal year.
<PAGE>
(c) Information Provided to Others. At the time
provided to any other holder of Indebtedness, all balance sheets,
statements of income, shareholders' equity and cash flows and other
financial and operational reports and statements provided to such other
holder of Indebtedness.
(d) Litigation. Notification in writing, promptly upon
the Company's learning thereof, but in no event later than 10 days after
learning thereof, of any litigation involving an amount in controversy
exceeding $1,000,000, whether or not the claim is considered by the
Company to be covered by insurance.
ARTICLE 10. DEFAULT AND REMEDIES.
Section 10.1 Events of Default. An "Event of Default" occurs
if:
(a) the Company defaults in the payment of dividends on the
Class A Preferred Stock when the same becomes due and payable and such
default continues for 5 days after the Company has received written
notice thereof;
(b) the Company shall fail to observe or perform any other
covenant or agreement contained in any Document and such default
continues for 30 days after the Company has received written notice
thereof;
(c) any material representation or warranty made by the
Company in any Document shall prove to have been false or misleading in
any material respect when made;
(d) the Company shall fail to make any payment of principal
of or interest on any Indebtedness when due after giving effect to any
applicable grace periods (whether due by acceleration or otherwise) and
t h e a ggregate amount of all past-due Indebtedness (including
Indebtedness accelerated pursuant to the terms thereof) shall be equal
to or greater than $1,000,000; or
(e) t h e Company (i) shall commence a voluntary case
concerning itself under any Bankruptcy Law now or hereafter in effect,
or any successor thereof; (ii) is the object of an involuntary case
under any Bankruptcy Law; or (iii) commences any Distribution Event or
is the object of an involuntary Distribution Event.
Section 10.2 Remedies.
(a) If any Event of Default shall have occurred and is
continuing, the Holders may, subject to the consent of the Majority
Holders, proceed to protect and enforce their rights either by suit in
equity or by action at law, or both.
<PAGE>
ARTICLE 11. MISCELLANEOUS.
Section 11.1 Payments. The Company agrees that, as long as
the Purchasers shall hold the Class A Preferred Stock, all payments to
be made on or in connection with the Class A Preferred Stock shall be
made to the Purchasers at the addresses set forth in this Agreement or
such other places as the Purchasers may designate in writing. All
payments referred to under this Agreement and the other Documents shall
be in immediately available funds in lawful money of the United States
of America. The Holders agree that prior to any delivery upon the sale
or other disposition of all or any part of the Class A Preferred Stock,
the Holders will promptly make or cause to be made a notation on the
Class A Preferred Stock certificates reflecting all payments thereon.
Section 11.2 Amendments. This Agreement and the other
Documents may be amended, modified, superseded or cancelled, and any of
the terms, covenants, representations, warranties or conditions hereof
and thereof may be waived, only by a written instrument executed by the
Company and the Majority Holders at such time. If any such proposed
amendment, modification or other action would require the consent of
holders of more than a majority in aggregate number of shares of
securities then outstanding if such action were proposed with respect to
securities issued pursuant to an indenture qualified under the TIA (such
percentage required under the TIA for such action being referred to
herein as the "Applicable Supermajority Percentage"), then such proposed
amendment, modification or other action with respect to this Agreement
and the other Documents shall require the consent of the Holders of the
Applicable Supermajority Percentage of the Class A Preferred Stock. If
any such proposed amendment, modification or other action would require
the consent of each affected holder if such action were proposed with
respect to securities issued pursuant to an indenture qualified under
the TIA, then such proposed amendment, modification or other action with
respect to this Agreement and the other Documents shall require the
consent of each affected Holder.
Section 11.3 No Waiver. The failure of any party at any time
or times to require performance of any provisions hereof shall in no
manner affect the right at a later time to enforce the same. No waiver
by any party of any condition, or of any breach of any term, covenant,
representation or warranty contained in this Agreement, in any one or
more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of any
other condition or of any breach of any other term, covenant,
representation or warranty.
Section 11.4 Survival of Representations and Warranties. All
representations, warranties, covenants, indemnities and agreements
contained herein or made in writing by the Company in connection
herewith shall survive the execution and delivery of this Agreement, the
sale and purchase of the Securities and any disposition thereof.
Section 11.5 Successors and Assigns. All covenants and
agreements in this Agreement made by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the Company, each
Purchaser and each Holder and their respective successors and permitted
assigns. The terms and provisions of this Agreement are intended solely
for the benefit of each party hereto and its respective successors and
permitted assigns, and it is not the intention of the parties to confer
<PAGE>
third-party beneficiary rights upon any other Person. The Holders may
not sell, assign (by operation of law or otherwise), transfer, pledge,
grant a security interest in, or otherwise dispose of this Agreement or
any other Document or any portion hereof or thereof or any rights or
obligations hereunder or thereunder unless (i) the Company has granted
its prior written consent (which consent shall not be unreasonably
withheld), and (ii) the Company shall have received a written opinion of
counsel reasonably acceptable to the Company, addressed to the Company,
to the effect that any such proposed transfer or other disposition
complies with all applicable Federal and state securities laws, or other
comfort reasonably acceptable to the Company to the same effect.
Section 11.6 Notices. All communications provided for
hereunder shall be sent by first class mail and (i) if to a Purchaser,
addressed to it at the address shown on the signature pages hereof, or
to such other address as such Purchaser may have designated to the
Company in writing, (ii) if to any subsequent Holder, addressed to such
Holder at the address of such Holder in the record books of the Company,
and (iii) if to the Company, addressed to it at 10911 Petal Street,
Dallas, Texas 75238, Attention: Patrick A. Custer, or to such other
address as the Company may have designated in writing to the Holder.
Section 11.7 Descriptive Headings. The descriptive headings
of the articles, sections, subsections and paragraphs of the Documents
are inserted for convenience only and do not constitute a part of the
Documents.
Section 11.8 Governing Law. This Agreement and the validity
and enforceability hereof shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas.
Section 11.9 Pro Rata Sharing. All payments made under this
Agreement shall be made to the Holders pro rata in accordance with the
number of shares of Class A Preferred Stock that such Holder owns. If
any Holder shall receive any payment in violation of this Section, such
Holder shall pay such excess funds over to other Holders or purchase
Class A Preferred Stock or interests therein from other Holders in order
to cause such excess payment to be shared by the Holders on a pro rata
basis.
Section 11.10 Entire Agreement. This Agreement and the other
Documents embody the entire agreement of the parties relating to the
subject matter hereof and supersede all prior proposals, negotiations,
agreements and understandings relating to such subject matter.
Section 11.11 Counterparts. This Agreement may be executed
in two or more counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which when taken
together shall constitute but one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year specified at the beginning hereof.
T h e Purchaser declares under penalty of perjury that the
statements, representations and warranties contained in the foregoing
S e c u r ities Purchase Agreement and in the following Purchaser
Acknowledgements are true, correct and complete.
Purchaser Joint Purchaser (if necessary)
__________________________ ________________________________
(Signature) (Signature)
__________________________ ________________________________
(Print Name) (Print Name)
__________________________ ________________________________
(Title) (Title)
Exact Name(s) in which ownership of Securities is to be registered:
______________________________________
Principal Place of Business: _________________________________________
_________________________________________
_________________________________________
Federal Tax ID Number: __________________________________________
Original Number of Shares of Class A Preferred Stock Purchased: ________
Amount $___________
AGREED AND ACCEPTED:
CURTIS MATHES HOLDING CORPORATION
By:______________________________
Patrick A. Custer
President and CEO
CURTIS MATHES HOLDING CORPORATION
PURCHASER ACKNOWLEDGMENTS
In order to induce the Company to accept the foregoing Securities
Purchase Agreement, the Purchaser expressly acknowledges the following
by placing his or her initials (or, if the Purchaser is a person other
than an individual, the initials of an individual duly empowered to act
for the Purchaser) in each of the spaces provided below:
THE PURCHASER HAS RECEIVED, HAS CAREFULLY REVIEWED INFORMATION ON
THE COMPANY AND HAS MADE AN INDEPENDENT INVESTIGATION AND ANALYSIS OF
THE INVESTMENT.
THE PURCHASER HAS CAREFULLY READ THE FOREGOING SECURITIES PURCHASE
AGREEMENT AND IN PARTICULAR, HAS CAREFULLY READ AND UNDERSTANDS THE
PURCHASER'S REPRESENTATIONS AND WARRANTIES MADE THEREIN AND CONFIRMS
THAT ALL SUCH REPRESENTATIONS AND WARRANTIES ARE TRUE AND CORRECT.
<PAGE>
THE PURCHASER QUALIFIES UNDER THE FOLLOWING CATEGORY OR CATEGORIES
OF DEFINITIONS OF "ACCREDITED INVESTOR" (INDICATE EACH APPLICABLE
CATEGORY):
(1) The Purchaser is a natural person whose individual net worth,
or joint net worth with that person's spouse, exceeds
$1,000,000.
(______) Yes (______) No
(2) The Purchaser is a natural person who had an individual income
in excess of $200,000 in each of the two most recent years or
joint income with that person's spouse in excess of $300,000
in each of those years and has a reasonable expectation of
realizing the same income level in the current year.
(______) Yes (______) No
(3) The Purchaser is a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended.
(______) Yes (______) No
(4) The Purchaser is an insurance company, a registered securities
broker or dealer, a licensed Small Business Investment
C o m p any, a registered investment company, a business
development company as defined in Section 2(a)(48) of the
I n vestment Company Act of 1940 or a private business
development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
(______) Yes (______) No
(5) T h e Purchaser is an organization described in Section
501(c)(3) of the Internal Revenue Code of 1986, as amended, or
a corporation, Massachusetts or similar business trust or
partnership, not formed for the specific purpose of acquiring
the Units, with total assets in excess of $5,000,000.
(______) Yes (______) No
(6) The Purchaser is a trust with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Units offered, whose purchase is directed by a person who
has such knowledge and experience that he or she is capable of
evaluating the merits and risks of the proposed investment.
(______) Yes (______) No
(7) The Purchaser is a bank, savings and loan association or
similar institution acting in its individual or fiduciary
capacity, or an employee benefit plan with total assets in
excess of $5,000,000.
(______) Yes (______) No
<PAGE>
(8) The Purchaser is a Plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality
of a state or its political subdivisions for the benefit of
its employees, with total assets in excess of $5,000,000.
(______) Yes (______) No
(9) The Purchaser is an employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974
("ERISA"), the investment decisions for which are made by a
plan fiduciary, as defined in Section 3(21) of ERISA, which is
either a bank, savings and loan association, insurance
company, or registered investment adviser, or is an employee
benefit plan that has total assets in excess of $5,000,000.
(______) Yes (______) No
(10) The Purchaser is an entity in which all of the equity owners
are accredited investors or individuals who are accredited
investors (as defined above).
(______) Yes (______) No
IN WITNESS WHEREOF, the Purchaser has executed and delivered this
Purchaser Acknowledgement as of the day and year specified at the
beginning hereof
Official Signatory of Purchaser:
Name of Company: ___________________
By: _______________________________
(Signature)
Name Printed: _______________________
Title: ______________________________
REGISTRATION RIGHTS AGREEMENT
SERIES H, CLASS A PREFERRED STOCK
REGISTRATION RIGHTS AGREEMENT, dated as of June 19, 1996 by and
among Curtis Mathes Holding Corporation, a Texas corporation (the
"Company"), and the purchasers named on the signature pages hereto (the
"Purchasers").
PRELIMINARY STATEMENT
Pursuant to the Purchase Agreement (as defined below), the
Purchasers have agreed to purchase the Series H, Class A Preference
Shares (as defined in the Purchase Agreement, "Class A Preferred Stock")
on the condition, among others, that the Company grant the registration
rights set forth in this Agreement.
ACCORDINGLY, to induce the Purchasers to purchase the Class A
Preferred Stock and in consideration of the mutual representations and
agreements set forth in this Agreement, the Company and the Purchasers,
intending to be legally bound, now agree as follows:
STATEMENT OF AGREEMENT
SECTION 1. DEFINITIONS.
1.1 Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Affiliate" means any entity controlling, controlled by or under
common control with a designated Person. For the purposes of this
definition, "control" shall have the meaning specified as of the date of
this Agreement for that word in Rule 405 promulgated by the SEC under
the Securities Act.
"Equity Security" shall mean any stock or similar security,
including without limitation securities containing equity features and
securities containing profit participation features, or any security
convertible or exchangeable, with or without consideration, into or for
any stock or similar security, or any security carrying any warrant or
right to subscribe to or purchase any stock or similar security, or any
such warrant or right.
"Purchase Agreement" shall mean the Securities Purchase Agreement
dated as of May 24, 1996 among the Company and the Purchasers.
"Registrable Securities" shall mean (i) the Common Stock issuable
upon conversion of the Class A Preferred Stock, (ii) the Common Stock
issuable upon exercise of the Warrants issued to the Private Placement
Agent, and (iii) any Common Stock issued with respect to the Common
Stock described in (i) or (ii) above by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization.
"Rule 144" means Rule 144 promulgated by the SEC under the Exchange
Act, as such rule may be amended from time to time, or any successor
rule thereto.
<PAGE>
1.2 Incorporated Definitions. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings set
forth in the Purchase Agreement.
SECTION 2. REGISTRATION.
2.1 In connection with the issuance of the Class A Preferred Stock
offered pursuant to the Purchase Agreement, the Company will file a
Registration Statement with the SEC for registration of the Common Stock
underlying the Class A Preferred Stock, any dividends due thereon, and
the Common Stock underlying the Warrants issued to the Private Placement
Agent in connection with this transaction, on or before June 20, 1996,
and will use its best efforts to have such Registration Statement
declared effective at the earliest possible date. In the event that the
SEC does not declare such Registration Statement effective by the 90th
day from the date of filing, the current twenty percent (20%) discount
provided in the Conversion Price shall increase by two percent (2%) for
each thirty (30) day period beyond the 90th day of the date of filing
until the Registration Statement is declared effective by the SEC, or
until either the discount reached is thirty-five percent (35%) or the
Minimum Conversion Limit is reached.
2.2 Method of Distribution. The Purchasers shall determine the
method of distribution of the Registrable Securities so included.
2.3 R e gistration Statement Form. Registrations under this
Section 2 shall be on such appropriate registration form of the SEC (i)
as shall be selected by the Company and as shall be reasonably
acceptable to the Purchasers, and (ii) as shall permit the disposition
of such Registrable Securities in accordance with the method or methods
of disposition selected pursuant to Section 2.2 hereof.
2.4 Expenses. Except as otherwise provided in this Section 2.4,
all expenses incurred in connection with the effective registration
pursuant to this Section 2 (excluding underwriting discounts and
commissions applicable to Registrable Securities and any expenses of
counsel to the Purchasers), including, without limitation, in each case,
all registration, filing and NASD fees; all fees and expenses of
complying with securities or blue sky laws; all word processing,
duplicating and printing expenses, messenger, delivery and shipping
expenses; fees and disbursements of the accountants and counsel for the
Company including the expenses of any special audits or "cold comfort"
letters or opinions required by or incident to such registrations; and
any fees and disbursements of underwriters customarily paid by issuers
or sellers of securities, but excluding underwriting discounts and
commissions, if any, shall be borne by the Company. In all cases, the
P u rchasers shall pay the underwriting discounts and commissions
applicable to the securities sold by the Purchasers.
2.5 Effective Registration Statement. A registration requested
pursuant to this Section 2 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become
e f f ective (unless a substantial cause of the failure of such
registration statement to become effective shall be attributable to the
Purchasers), (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or
requirement of the SEC or other governmental agency or court for any
<PAGE>
reason, resulting in a failure to consummate the offering of Registrable
Securities offered thereby, (iii) if after a registration statement with
respect thereto has become effective, the offering of Registrable
Securities offered thereby is not consummated due to factors beyond the
control of the Purchasers, other than the fact that the underwriters
have advised the Purchasers that the Registrable Securities cannot be
sold at a net price equal to or above the net price anticipated at the
time of filing of the preliminary prospectus, or (iv) if the conditions
to closing specified in the purchase agreement or underwriting agreement
entered into in connection with such registration are not satisfied
(unless a substantial cause of such conditions to closing not being
satisfied shall be attributable to the Purchasers).
2.6 Selection of Underwriters. If a registration pursuant to this
Section 2 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company with the approval
of the Purchasers, which approval shall not be unreasonably withheld.
SECTION 3. REGISTRATION PROCEDURES.
3.1 Procedures. If and whenever the Company is required to use
reasonable efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 2 hereof, the
C o m p any will, subject to the limitations provided herein, as
expeditiously as possible:
(a) prepare and file with the SEC the requisite registration
s t atement to effect such registration, and thereafter, use
reasonable efforts to cause such registration statement to become
e f f e ctive; provided that the Company may discontinue any
registration of its securities which are not Registrable Securities
(and, under the circumstances specified in Section 3.1 hereof, its
securities which are Registrable Securities) at any time prior to
the effective date of the registration statement relating thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used
i n connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time
as all of such securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement; provided,
however, that the Company shall not in any event be required to
keep the registration statement effective for a period of more than
twelve months after such registration statement becomes effective;
and provided further that the Company may, at any time, delay the
filing or suspend the effectiveness of any registration under this
Agreement, or without suspending such effectiveness, instruct the
Purchasers not to sell any Registrable Securities included in any
such registration, (i) if the Company shall have determined upon
the advice of counsel that the Company would be required to
disclose any actions taken or proposed to be taken by the Company
in good faith and for valid business reasons, including without
limitation, the acquisition or divestiture of assets, which
disclosure would have a material adverse effect on the Company or
on such actions, or (ii) if required by law, to update the
<PAGE>
prospectus relating to any such registration to include updated
financial statements (a "Suspension Period") by providing the
Purchasers with written notice of such Suspension Period and the
reasons therefor; provided, however, that the Company will not be
required to disclose such reasons with particularity if an
authorized executive officer of the Company certifies that the
Company believes it is required by law to delay the filing or
suspend the effectiveness of any such registration. In addition,
the Company shall not be required to keep any registration
effective, or may without suspending such effectiveness, instruct
the Purchasers if it has Registrable Securities included in such
registration not to sell such securities, during any period which
the Company is instructed, directed, ordered or otherwise requested
by any governmental agency or self-regulatory organization to stop
or suspend such trading or sales ("Supplemental Extension Period").
In the event of a Suspension Period or Supplemental Extension
Period, the period during which any registration under this
Agreement is to remain effective pursuant to this Section 3.1(b)
shall be tolled until the end of any such Suspension Period or
Supplemental Extension Period. The Company will use reasonable
efforts to restrict any Suspension Period or Supplemental Extension
Period to less than 30 days;
(c) furnish to the Purchasers such number of conformed copies
of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, and such other documents, as the Purchasers may
reasonably request;
(d) use its reasonable efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other United States Federal or state
governmental agencies or authorities as may be necessary to enable
the Purchasers to consummate the disposition of such Registrable
Securities;
(e) notify the Purchasers, if Registrable Securities are
covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under
which they were made, and at the request of the Purchasers prepare
and furnish to the Purchasers a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of
such securities, such prospectus shall not include an 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 not misleading in the light of the circumstances under
which they were made.
<PAGE>
(f) otherwise use reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to
its securityholders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months beginning
with the first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(g) provide and cause to be maintained a transfer agent for
all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such
registration statement; and
(h) use its reasonable efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Company's Common Stock is then listed.
3.2 Information Requirements. It shall be a condition precedent
to the obligations of the Company to take any action with respect to
registering the Purchasers' Registrable Securities pursuant to this
Section 3 that the Purchasers, furnish the Company in writing such
information regarding the Purchasers, the Registrable Securities and
other securities of the Company held by the Purchasers, and the
distribution of such securities as the Company may from time to time
reasonably request in writing. If a Purchaser refuses to provide the
Company with any of such information on the grounds that it is not
necessary to include such information in the registration statement, the
Company may exclude the Purchaser's Registrable Securities from the
registration statement unless such Purchaser provides the Company with
an opinion of counsel to the effect that such information need not be
included in the registration statement.
The Purchasers agree by acquisition of such Registrable Securities
that upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3.1(e), the Purchasers will
f o rthwith discontinue the Purchasers' disposition of Registrable
Securities pursuant to the registration statement relating to such
Registrable Securities until the Purchasers' receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3.1(e)
and, if so directed by the Company, will deliver to the Company copies,
other than permanent file copies then in the Purchasers' possession, of
the prospectus relating to such Registrable Securities current at the
time of receipt of such notice.
SECTION 4. UNDERWRITTEN OFFERINGS.
If requested by the underwriters for any underwritten offering of
Registrable Securities pursuant to a registration under Section 2
hereof, the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to be satisfactory in
substance and form to the Purchasers and the underwriters and to contain
such representations and warranties by the Company and such other terms
as are generally prevailing in agreements of this type, including,
without limitation, indemnities to the effect and to the extent provided
in Section 6 hereof. The Purchasers will cooperate with the Company in
t h e n egotiation of the underwriting agreement and will give
consideration to the reasonable requests of the Company regarding the
<PAGE>
form thereof, provided that nothing herein contained shall diminish the
foregoing obligations of the Company. The Purchasers shall not be
required to make any representations, warranties or agreements with the
Company other than representations, warranties or agreements regarding
the Purchasers, Purchasers' Registrable Securities and other securities
of the Company, the Purchasers' intended method of distribution, and any
representations, warranties or agreements required by law.
SECTION 5. PREPARATION.
In connection with the preparation and filing of the registration
statement under the Securities Act pursuant to this Agreement, and
subject to the rights and obligations of the Company under the
Securities Act and other applicable laws, the Purchasers shall have the
right to review and approve those portions of such registration
statement that directly pertain to the Purchasers.
SECTION 6. INDEMNIFICATION.
6.1 Indemnification by the Company. In the event any Registrable
S e curities are included in a registration statement under this
Agreement, to the extent permitted by law, the Company will, and hereby
does, indemnify and hold harmless each Purchaser, its directors and
officers, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls each Purchaser or any such underwriter within the meaning of
the Securities Act, against any losses, damages or liabilities, joint or
several, to which each Purchaser or any such director or officer or
u n derwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages or
liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement
thereto or any other document prepared in connection therewith, or any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and the Company will reimburse the Purchasers and each such
director, officer, underwriter and controlling person for any legal or
any other expenses reasonably incurred by them in connection with
i n vestigating or defending any such loss, liability, action or
proceeding; provided that the Company shall not be liable in any such
case to the extent that any such loss, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by the Purchasers, and
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter
within the meaning of the Securities Act, in any such case to the extent
that any such loss, damage, liability or expense arises out of such
Person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended to the Person asserting an
untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of
<PAGE>
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus and such delivery would have
mitigated liability. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the
Purchasers or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such seller.
6.2 Indemnification by the Purchasers. The Company may require,
a s a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 3 hereof, that the
Company shall have received an undertaking reasonably satisfactory to it
from each Purchaser to indemnify and hold harmless (in the same manner
and to the same extent as set forth in subdivision 6.1 of this
Section 6) each underwriter, each Person who controls such underwriter
within the meaning of the Securities Act, the Company, each director of
the Company, each officer of the Company and each other Person, if any,
who controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in such registration
statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement was made in reliance upon and in
strict conformity with written information furnished to the Company by
the Purchasers expressly for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement; provided that the Purchasers shall not be
liable to any Person who participates as an underwriter in the offering
or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, in
any such case to the extent that any such loss, damage, liability or
expense arises out of such Person's failure to send or give a copy of
the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement
at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement was corrected in such final
prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any underwriter,
the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such seller.
6.3 Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in Sections 6.1 and 6.2, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
c o mmencement of such action; provided that the failure of any
indemnified party to give notice as provided herein shall not relieve
t h e indemnifying party of its obligations under the preceding
subdivisions of this Section 6, except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party
<PAGE>
shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
6.4 Indemnification Payments. The indemnification required by
this Section 6 shall be made by periodic advancements of the amount
thereof as and when loss, damage or liability is incurred and evidence
of an indemnifiable expense is presented to the indemnifying party.
6.5 Contribution. If the indemnification provided for in this
Section 6 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities
or expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such loss, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue statement
of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result
of the losses, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in
Section 6.3 hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.6 were determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 6.6
no underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who
was not guilty of such fraudulent misrepresentation.
I f indemnification is available under this Section 6, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in Section 6.1 through Section 6.5 hereof without regard
to the relative fault of said indemnifying party or indemnified party or
any other equitable consideration provided for in this Section 6.6.
<PAGE>
SECTION 7. REPORTING REQUIREMENTS UNDER EXCHANGE ACT.
The Company shall use its best efforts to keep effective the
registration of its Common Stock under Section 12 of the Exchange Act
and shall timely file such information, documents and reports as the SEC
may require or prescribe under Section 13 of the Exchange Act. The
Company shall timely file such information, documents and reports which
a corporation, partnership or other entity subject to Section 13 or
15(d) (whichever is applicable) of the Exchange Act is required to file.
So long as the Company is subject to the reporting requirements of
either Section 13 or 15(d) of the Exchange Act, the Company shall
forthwith upon request furnish the Purchasers (i) a written statement by
the Company that it has complied with such reporting requirements,
(ii) a copy of the most recent annual or quarterly report of the
Company, and (iii) such other reports and documents filed by the Company
with the SEC as the Purchasers may reasonably request in availing itself
of an exemption for the sale of Registrable Securities without
registration under the Securities Act. The Company acknowledges and
agrees that the purpose of the requirements contained in this Section 7
are to enable the Purchasers to comply with the current public
information requirement contained in Paragraph (c) of Rule 144 under the
Securities Act should the Purchasers ever wish to dispose of any of the
Securities of the Company acquired by it without registration under the
Securities Act in reliance upon Rule 144 (or any other similar exemptive
provision). In addition, the Company shall take such other measures and
file such other information, documents and reports, as shall hereafter
be required by the SEC as a condition to the availability of Rule 144
under the Securities Act (or any similar exemptive provision hereafter
in effect).
SECTION 8. SHAREHOLDER INFORMATION.
The Company may require the Purchasers to furnish the Company such
i n formation in writing with respect to the Purchasers and the
distribution of its Registrable Securities as the Company may from time
to time reasonably request in writing and as shall be required by law or
by the SEC in connection therewith.
SECTION 9. FORMS.
A l l references in this Agreement to particular forms of
registration statements are intended to include, and shall be deemed to
include, references to all successor forms which are intended to
replace, or to apply to similar transactions as, the forms herein
referenced.
SECTION 10. TRANSFER OF REGISTRATION RIGHTS.
The registration rights granted to the Purchasers under this
Agreement may not be transferred without the prior written consent of
the Company.
SECTION 11. AMENDMENT.
This Agreement may be amended only by a written agreement signed by
the Company and the Purchasers.
<PAGE>
SECTION 12. NOTICES.
All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be delivered, or
mailed first-class postage prepaid, registered or certified mail,
(a) If to a Purchaser at its respective address as shown on
the books of the Company, or at such other address as such
Purchaser may specify by written notice to the Company, or
(b) If to the Company at 10911 Petal Street, Dallas, Texas
75238, Attention: Chief Executive Officer; or at such other
address as the Company may specify by written notice to the
Purchaser,
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if
delivered personally, or, if sent by mail, when received.
SECTION 13. COUNTERPARTS.
This Agreement may be executed concurrently in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 14. CHOICE OF LAW.
This Agreement and the validity and enforceability hereof shall be
governed by and construed and interpreted in accordance with the laws of
the State of Texas without giving effect to conflict of laws rules or
choice of laws rules thereof.
SECTION 15. SEVERABILITY.
Should any one or more of the provisions of this Agreement or any
agreement entered into pursuant to this Agreement be determined to be
illegal or unenforceable, all other provisions of this Agreement and of
each other agreement entered into pursuant to this Agreement, shall be
given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.
SECTION 16. WHOLE AGREEMENT.
This Agreement constitutes the complete agreement and understanding
by and among the parties hereto and shall supersede any prior
understanding, agreement or representation by or among the parties,
whether written or oral, related to the subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized representatives effective the
day and year first above written.
CURTIS MATHES HOLDING CORPORATION
By:
Patrick A. Custer
President and CEO
PURCHASERS:
__________________________________________
Print Name: ___________________________
__________________________________________
Print Name: ___________________________
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS. NEITHER
THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION UNDER SAID ACT AND UNDER APPLICABLE STATE
S E C URITIES OR BLUE SKY LAWS OR EXEMPTIONS FROM SUCH
REGISTRATION.
_________, 199__ Warrant No. ________
CURTIS MATHES HOLDING CORPORATION
STOCK PURCHASE WARRANT
Registered Owner:
For value received, CURTIS MATHES HOLDING CORPORATION, a Texas
corporation, (the ''Corporation'') grants the following rights to the
registered owner of this Warrant:
(a) RESTRICTED STOCK; REGISTRATION. The shares of Common Stock
of the Corporation purchased upon exercise of this Warrant (''Restricted
Stock'') or purchasable upon exercise of this Warrant (''Underlying
Stock'') shall not be transferable except upon the conditions stated
below, which are intended to insure compliance with federal and state
securities laws. The certificates representing these shares of stock,
unless the same are registered prior to exercise of this Warrant, shall
be stamped or otherwise imprinted with a legend in substantially the
following form:
''The securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state. The securities have been
acquired for investment and may not be sold, offered for sale
or transferred in the absence of an effective registration
under the Securities Act of 1933, as amended, and any
applicable state securities laws or an opinion of counsel
satisfactory in form and substance to counsel for the
Corporation that the transaction shall not result in a
violation of state or federal securities laws.''
(b) ISSUE. Upon tender to the Corporation (as defined in
paragraph (f) hereof), the Corporation shall issue to the registered
owner hereof up to the number of shares specified in paragraph (c)
hereof of fully paid and nonassessable shares of Common Stock of the
Corporation that the registered owner is otherwise entitled to purchase.
(c) NUMBER OF SHARES. The total number of shares of Common Stock
of the Corporation that the registered owner of this Warrant is entitled
to receive upon exercise of this Warrant is _______________ shares. The
Corporation shall at all times reserve and hold available sufficient
shares of Common Stock to satisfy all conversion and purchase rights
represented by outstanding convertible securities, options and warrants,
including this Warrant. The Corporation covenants and agrees that all
shares of Common Stock that may be issued upon the exercise of this
Warrant shall, upon issuance, be duly and validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect
to the purchase and the issuance of the shares.
<PAGE>
(d) EXERCISE PRICE. The exercise price of this Warrant, the
price at which the shares of stock purchasable upon exercise of this
Warrant may be purchased, is__________ per share.
(e) EXERCISE PERIOD. Provided, that this Warrant may only be
exercised on or before ____________ (''Exercise Period''). If not
exercised during this period, this Warrant and all rights granted under
this Warrant shall expire and lapse.
(f) TENDER. The exercise of this Warrant must be accomplished by
actual delivery of the Exercise Price in cash, certified check, or
official bank draft in lawful money of the United States of America, and
by actual delivery of a duly executed exercise form, a copy of which is
attached to this Warrant as Exhibit ''1'', properly executed by the
registered owner of this Warrant, and by surrender of this Warrant. The
payment and exercise form must be delivered, personally or by mail, to
the registered office of the Corporation. Documents sent by mail shall
be deemed to be delivered when they are received by the Corporation.
IN WITNESS WHEREOF, the Corporation has signed this Warrant by its
duly authorized officers effective this _____ day of ________, 199___.
CURTIS MATHES HOLDING CORPORATION
Corporate Seal By: ______________________________
Patrick A. Custer, President
EXHIBIT "1"
Warrant Exercise Form
TO: CURTIS MATHES HOLDING CORPORATION
The undersigned hereby: (1) irrevocably subscribes for and offers
to purchase______________ shares of Common Stock of CURTIS MATHES
HOLDING CORPORATION, pursuant to Warrant No. ___________ heretofore
issued to the undersigned on ____________; (2) encloses payment of
_______________ for these shares at a price of______________ per share;
and (3) requests that a certificate for the shares be issued in the name
of the undersigned and delivered to the undersigned at the address
specified below.
Date: ____________________
By: ______________________________
Printed Name: ____________________
Title: ____________________
Address: ____________________
____________________
Signature guaranteed by:
Curtis Mathes Holding Corporation
10911 Petal Street
Dallas, TX 75238
Shipley Raidy Capital Partners, LP
One Tower Bridge, Suite 1370
W. Conshohocken, PA 19428
Gentlemen:
We have engaged Shipley Raidy Capital Partners, LP ("Shipley
Raidy") on , 1996 to perform certain financial advisory
services for Curtis Mathes Holding Corporation (the "Company"). This
will confirm that in performing such services, Shipley Raidy will be
relying on information, documentation and reports provided to Shipley
Raidy by the Company and its respective representatives and that Shipley
Raidy cannot and will not assume responsibility for the accuracy or
completeness thereof. We understand that Shipley Raidy will not conduct
any independent investigation or any independent verification of any of
t h e information contained in the materials referred to above.
Accordingly, and in further consideration of the performance of Shipley
Raidy's services to the Company, this will confirm our agreement with
you as follows.
T h e Company agrees, promptly upon notification thereof, to
indemnify and hold harmless Shipley Raidy, each employee, officer or
director of Shipley Raidy, and each person who controls Shipley Raidy
within the meaning of the Securities Act of 1933, the Securities
Exchange Act of 1934, and all applicable state securities laws (such
persons are referred to herein as "Indemnitees"), from and against any
and all losses, claims, damages, expenses, liabilities, and actions to
which any of the Indemnitees may become subject arising from threatened
or pending claims or actions against any of them, or from investigations
involving the Company, based on any act or alleged act of, any failure
or alleged failure to act by, or any other theory of liability relating
to the Company (or any of its officers or directors), its agents,
counsel, affiliates, or any of the Indemnitees in connection with the
p e r f ormance of the services to be provided hereunder. Such
i n d emnification shall include payment or reimbursement to each
Indemnitee for the reasonable fees and costs of counsel of its choice
and other expenses reasonably incurred by it in investigating or
defending against, or appearing as a witness or deponent or in any other
capacity in connection with, any such claim, action or investigation;
all such payments or reimbursements shall be made directly to the
Indemnitee involved or, in the case of legal fees and related costs, to
its counsel. The Indemnification Agreement contained herein, however,
shall not extend to any loss, claim, damage, expense liability, or
action to any reimbursement arising by reason of any act or omission to
act involving negligence, bad faith, gross negligence, or willful
misconduct on the part of an Indemnitee.
This letter shall constitute a separate agreement between Shipley
Raidy and the Company, and shall be in addition to any other agreements
or arrangements between Shipley Raidy and the Company now existing or
entered into after the date hereof.
<PAGE>
If the foregoing correctly sets forth your understanding of our
agreement on the matter set forth herein, please confirm this by having
a duly authorized officer of Shipley Raidy, sign the enclosed copy of
this letter and return to us.
CURTIS MATHES HOLDING CORP.
BY: Pat Custer
TITLE: President
AGREED:
SHIPLEY RAIDY CAPITAL PARTNERS, LP
BY:
TITLE:
DATE:
Curtis Mathes Holding Corp.
Amount: $1,750,000
Type of Security: Convertible Preferred Stock
Conversion Price: At 20.0% discount from five day average bid price
immediately prior to conversion date
Maximum Conversion
Price: $4.00 per share
Minimum Conversion
Price: $1.50 per share
Dividend: 5% per annum payable in cash or in kind on Preferred
Stock; Dividend ceases upon conversion
Conversion
Privilege: Anytime after 50 days from the closing date
Transaction
Structure: An S-3 Regulation Statement to be filed with the
Securities and Exchange Commission on or before June
15, 1996 covering the underlying common stock as
well as that which may be used to pay dividends and
the warrants issued in this transaction.
Total Common Shares
That Can be
Issued: A maximum of 20% of the outstanding common shares of
Curtis Mathes can be issued through this transaction
as set forth in the rules of NASDAQ.
<PAGE>
Other: The effectiveness of the Registration Statement is
crucial for the investors. The investors do not
want two-year unregistered common stock. Therefore,
in the event that the SEC does not declare the S-3
Registration Statement effective by the 90th day
from the date of filing, the discount will be
increased by 2% for each thirty day period beyond
the 90th day of the date of filing until the
Registration Statement is declared effective by the
SEC, or until the discount reached is 35%.
Target Closing
Date: May 30, 1996
Cost of
Transaction: Accounting Expenses -0-
Printing Costs -0-
Road Show Expenses -0-
Escrow Agency Expenses -0-
Legal Expenses For Account of Issuer
Gross Spread: 6.0% plus 75,000 non-callable
warrants to purchase common stock at an exercise price of 125% of
the closing bid price on the date of closing with an expiration
date of 5/30/2001.
Other: Shipley Raidy Capital Partners, LP shall have the
right of first refusal to serve as the placement
agent for up to $5.0 million of similar placements
for six (6) months after closing under the terms and
conditions acceptable to the Company.
CURTIS MATHES HOLDING CORPORATION
(the "Corporation")
RESOLUTION OF THE BOARD OF DIRECTORS
FIXING THE NUMBER AND DESIGNATING THE RIGHTS, PRIVILEGES,
RESTRICTIONS AND CONDITIONS ATTACHING TO THE SERIES I CLASS A
PREFERENCE SHARES
WHEREAS:
A. The Corporation's share capital includes 1,000,000 Preference
Shares par value, $1.00 per share which Preference Shares may be
issued in one or more series with the directors of the Corporation
(the "Board") being entitled by resolution to fix the number of
shares in each series and to designate the rights, privileges,
restrictions and conditions attaching to the share of each series;
and
B. It is in the best interests of the Corporation for the Board to
create a first series of Class A Preference Shares;
NOW, THEREFORE, BE IT RESOLVED, THAT:
The first series of the Class A Preference Shares (the "Series I
Class A Shares") of the Corporation shall consist of 3,550 shares
and no more and shall be designated as the Series I Class A
Preference Shares and in addition to the preferences, rights,
privileges, restrictions and conditions attaching to all the Class
A P r eference Shares as a class, the rights, privileges,
restrictions and conditions attaching to the Series I Class A
Shares shall be as follows:
Part 1 - Pre-emptive Rights.
1.1 The Series I Class A Shares shall not give their holders any pre-
emptive rights to acquire any other securities issued by the Corporation
at any time in the future.
Part 2 - Liquidation Rights.
2.1 I f t he Corporation shall be voluntarily or involuntarily
liquidated, dissolved or wound up, at any times when any Series I Class
A Shares shall be outstanding, the holders of the then outstanding
Series I Class A Shares shall have a preference in distribution of the
Corporation's property available for distribution to the holders of the
Common Shares equal to $1000.00 consideration per Series I Class A
Shares, together with an amount equal to all unpaid dividends accrued
thereon, if any, to the date of payment of such distribution, whether or
not declared by the Board; provided, however, that the amalgamation of
the Corporation with any Corporation or corporations, the sale or
transfer by the Corporation of all or substantially all of its property,
or any reduction of the authorized or issued capital of the Corporation
of any class, whether now or hereafter authorized, shall be deemed to be
a liquidation of the Corporation within the meaning of any of the
provisions of this Part 2.
<PAGE>
2.2 Subject to the provisions of Part 6 hereof, all amounts to be paid
as preferential distributions to the holders of Series I Class A Shares
as provided in this Part 2 shall be paid or set apart for payment before
the payment or setting apart for payment of any amount for, or the
distribution of any of the Corporation's property to the holders of
Common Shares, whether now or hereafter authorized, in connection with
such liquidation, dissolution or winding up.<PAGE>
Part 3 - Dividends.
3.1 Holders of record of Series I Class A Shares shall not be entitled
to receive dividends on their Series I Class A Shares.
Part 4 - Redemption.
4.1 At any time, and from time to time, on and after 45 days from the
date of the issuance of any Series I Class A Shares, if, upon receipt of
a notice of conversion pursuant to Section 5 hereunder, the average of
the closing bid prices for the Common Shares for 5 consecutive trading
days shall be less that $1.50, the Corporation may, at its sole option,
but shall not be obligated to, redeem, in whole or in part, the then
outstanding Series I Class A Shares at a price per share of U.S. $1,250
each (the "Redemption Price") (such price to be adjusted proportionately
in the event of any change of the Series I Class A Shares into a
different number of Shares).
4.2 Five (5) days prior to any date stipulated by the Corporation for
the redemption of Series I Class A Shares (the "Redemption Date"),
written notice (the "Redemption Notice") shall be mailed to each holder
of record on such notice date of the Series I Class A Shares. The
Redemption Notice shall state (i) the Redemption Date of such Shares
(ii) the number of Series I Class A Shares to be redeemed from the
holder to whom the Redemption Notice is addressed (iii) instructions for
surrender to the Corporation, in the manner and at the place designated
of a share certificate or share certificates representing the number of
Series I Class Shares to be redeemed from such holder and (iv)
instructions as to how to specify to the Corporation the number of
Series I Class A Shares to be redeemed as provided in this Part 4 and
the number of shares to be converted into Common Shares as provided in
Part 5 hereof.
4.3 Upon receipt of the Redemption Notice, any Eligible Holder (as
defined in Section 5.2 hereof) shall have the right to convert into
Common Shares that number of Series I Class A Shares not called for
redemption in the Redemption Notice.
4.4 On or before the Redemption Date in respect of any Series I Class A
Shares, each holder of such shares shall surrender the required
certificate or certificates representing such shares to the Corporation,
in the manner and at the place designated in the Redemption Notice, and
upon the Redemption Date, the Redemption Price for such shares shall be
made payable, in the manner provided in Section 5.5 hereof, to the order
of the person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered share certificate shall be
canceled and retired. If a share certificate is surrendered and all the
shares evidenced thereby are not being redeemed (as described below),
the Corporation shall cause the Series I Class A Shares which are not
being redeemed to be registered in the names of the persons whose names
appear as the owners on the respective surrendered share certificates
and deliver such certificate to such person.
<PAGE>
4.5 On the Redemption Date in respect of any Series I Class A Shares or
prior thereto, the Corporation shall deposit with any bank or trust
company having a capital and surplus of at least U. S. $50,000,000, as a
trust fund, a sum equal to the aggregate Redemption Price of all such
shares called for redemption (less the aggregate Redemption Price for
those Series I Class A Shares in respect of which the Corporation has
received notice from the Eligible Holder thereof of its election to
convert Series I Class A Shares into Common Shares), with irrevocable
instructions and authority to the bank or trust company to pay, on or
after the Redemption Date, the Redemption Price to the respective
holders upon the surrender of their share certificates. The deposit
shall constitute full payment for the shares to their holders, and from
and after the date of the deposit the redeemed shares shall be deemed to
be no longer outstanding, and holders thereof shall cease to be
shareholders with respect to such shares and shall have no rights with
respect thereto except the rights to receive from the bank or trust
company payments of the Redemption Price of the shares, without
interest, upon surrender of their certificates thereof. Any funds so
deposited and unclaimed at the end of one year following the Redemption
Date shall be released or repaid to the Corporation, after which the
former holders of shares called for redemption shall be entitled to
receive payment of the Redemption Price in respect of their shares only
from the Corporation.
Part 5 - Conversion.
5.1 For the purposes of conversion, the Series I Class A Shares shall
be valued at $1000 per share ("Value"), and, if converted, the Series I
Class A Shares shall be converted into such number of Common Shares of
the Company $.01 par value (the "Conversion Shares") as is obtained by
dividing the aggregate Value of the shares of Series I Class A Shares
being so converted by the "Average Stock Price" per share of the
Conversion Shares (the "Conversion Price"), subject to adjustment
pursuant to the provisions of this Part 5. For purposes of this Part 5,
the "Average Stock Price" means .75 of the average daily closing bid
prices of Common Shares for the period of 5 consecutive trading days
immediately preceding the date of the conversion of the Series I Class A
Shares in respect of which such Average Stock Price is determined unless
the Average Stock Price for such period is in excess of $4.00 in which
case it shall be .70 of the Average Stock Price.
5.2 Any holder of Series I Class A Shares (an "Eligible Holder") may at
any time commencing 41 days after the issuance of any Series I Class A
Shares convert up to 50% of his holdings of Series I Class A Shares and
any unconverted balance after 60 days in accordance with this Part 5.
<PAGE>
5.3 The conversion right by Section 5.2 hereof may be exercised only by
an Eligible Holder of Series I Class A Shares, in whole or in part, by
t h e surrender of the share certificate or share certificates
representing the Series I Class A Shares to be converted at the
principal office of the Corporation (or at such other place as the
Corporation may designate in a written notice sent to the holder by
first-class mail, postage prepaid, at its address shown on the books of
the Corporation) against delivery of that number of whole Common Shares
as shall be computed by dividing (1) the aggregate Value of the Series I
Class A Shares so surrendered, if any, by (2) the Conversion Price in
effect at the date of the conversion. At the time of conversion of a
Series I Class A Shares, the Corporation shall pay in cash to the holder
thereof an amount equal to all unpaid dividends, if any, accrued thereon
to the date of conversion, or, at the Corporation's option, issue that
number of whole Common Shares which is equal to the product of dividing
the amount of such unpaid dividends by the Average Stock Price whether
or not declared by the Board. Each Series I Class A Share certificate
surrendered for conversion shall be endorsed by its holder. In the
event of any exercise of the conversion right of the Series I Class A
Shares granted herein (i) share certificates representing the Common
Shares purchased by virtue of such exercise shall be delivered to such
holder within 5 days of notice of conversion free of restrictive legend
or stop transfer orders, and (ii) unless the Series I Class A Shares has
been fully converted, a new share certificate representing the Series I
Class A Shares not so converted, if any, shall also be delivered to such
holder within 5 days of notice of conversion. Any Eligible Holder may
exercise its right to convert the Series I Class A Shares by telecopying
an executed and completed Notice of Conversion to the Corporation, and
within 72 hours thereafter, delivering the original Notice of Conversion
and the certificate representing the Series I Class A Shares to the
Corporation by express courier. Each date on which a Notice of
Conversion is telecopied to and received by the Corporation in
accordance with the provisions hereof shall be deemed a Conversion Date.
The Corporation will transmit the Common Shares certificates issuable
upon conversion of any Series I Class A Shares (together with the
certificates representing the Series I Class A Shares not so converted)
to the Eligible Holder via express courier within three business days
after the conversion date if the Corporation has received the original
Notice of Conversion and Series I Class A Shares certificate being so
converted by such date.
5.4 All Common Shares which may be issued upon conversion of Series I
Class A Shares will, upon issuance, be duly issued, fully paid and
nonaccessible and free from all taxes, liens, and charges with respect
to the issue thereof. At all times that any Series I Class A Shares are
outstanding, the Corporation shall have authorized, and shall have
reserved for the purpose of issuance upon such conversion, a sufficient
number of Common Shares to provide for the conversion into Common Shares
of all Series I Class A Shares then outstanding at the then effective
Conversion Price. Without limiting the generality of the foregoing, if,
at any time, the Conversion Price is decreased, the number of Common
Shares authorized and reserved for issuance upon the conversion of the
Series I Class A Shares shall be proportionately increased.
<PAGE>
5.5 The number of Common Shares issued upon conversion of Series I
Class A Shares and the Conversion Price shall be subject to adjustment
from time to time upon the happening of certain events, as follows:
5.5.1 Change of Designation of the Common Shares or the rights,
privileges, restrictions and conditions in respect of the Common
Shares or division of the Common Shares into Series. In the case
of any amendment to the Articles to change the designation of the
Common Shares or the rights, privileges, restrictions or conditions
in respect of the Common Shares or division of the Common Shares
into series the rights of the holders of the Series I Class A
Shares shall be adjusted so as to provide that upon conversion
thereof the holder of the Series I Class A Shares being converted
shall procure, in lieu of each Common Share theretofore issuable
upon such conversion, the kind and amount of shares, other
securities, money and property receivable upon such designation,
change or division by the holder of one Common Share issuable upon
such conversion had conversion occurred immediately prior to such
designation, change or division. The Series I Class A Shares shall
be deemed thereafter to provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided
for in this Part 5. The provisions of this subsection 5.5.1 shall
apply in the same manner to successive reclassifications, changes,
consolidations and mergers.
5.5.2. If the Corporation, at any time while any of the Series I
Class A Shares are outstanding, shall pay a dividend payable in
Common Shares, the Conversion Price shall be adjusted, as of the
date the Corporation shall take a record of the holders of its
Common Shares for the purpose of receiving such dividend, (or if no
such record is taken, as of the date of payment of such dividend),
to that price determined by multiplying the Conversion Price
therefor in effect by a fraction (1) the numerator of which shall
be the total number of Common Shares outstanding immediately prior
to such dividend, and (2) the denominator of which shall be the
total number of Common Shares outstanding immediately after such
dividend, (plus in the event that the Corporation paid cash for
fractional shares, the number of additional shares which would have
been outstanding had the Corporation issued fractional shares in
connection with said dividend.
5.6 Whenever the Conversion Price shall be adjusted pursuant to Section
5.5 hereof, the Corporation shall make a certificate signed by its
President or a Vice President and by its Treasurer, Assistant Treasurer,
Secretary of Assistant Secretary, setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description
of the basis on which the Board of Directors made any determination
hereunder), and the Conversion Price after giving effect to such
adjustment, and shall cause copies of such certificates to be mailed (by
first-class mail, postage prepaid) to each holder of Series I Class A
Shares at its address shown on the books of the Corporation. The
Corporation shall make such certificate and mail it to each such holder
promptly after each adjustment.
<PAGE>
5.7 No fractional Common Shares shall be issued in connection with any
conversion of Series I Class A Shares, but in lieu of such fractional
shares, the Corporation shall make a cash payment therefor equal in
amount to the product of the applicable fraction multiplied by the
Conversion Price then in effect.
5.8 No Series I Class A Shares which have been converted into Common
Shares shall be reissued by the Corporation; provided, however, that
each such share, after being retired and canceled, shall be restored to
the status of an authorized but unissued Class A Preference Share
without designation as to series and may thereafter be issued as a Class
A Preference Share not designated as Series I Class A Share.
Part 6 - Amendment.
6.1 In addition to any requirement for a series vote pursuant to the
General Corporation Laws in respect of any amendment to the rights,
privileges, restrictions and conditions attaching to the Series I Class
A Shares, the rights, privileges, restrictions and conditions attaching
to the Series I Class A Shares may be amended only if the Corporation
has obtained the affirmative vote at a duly called and held meeting of a
majority of the Series I Class A Shares or written consent by the
holders of a majority of the Series I Class A Shares then outstanding.
