SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 14, 1997
CURTIS MATHES HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Texas 2-93668-FW 75-1975147
(State or other jurisdiction of Commission File Number (IRS Employer
incorporation) Identification No.)
10911 Petal Street, 75238
Dallas, Texas (Zip Code)
(Address of principal executive offices)
(214) 503-8880
(Registrant's telephone number, including area code)
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
On May 14, 1997 Registrant placed $1,500,000 of its Series L
Preferred Stock for cash pursuant to the exemption from registration
provided by Securities and Exchange Commission ("SEC") Rule 903.
Registrant paid aggregate fees of $75,000 pursuant to the transactions.
All Series L Preferred Stock placements were made with various accredited
investors in offshore transactions as defined in Rule 903. In accordance
with the terms and conditions of the Series L Certificate of Designation,
Series L Preferred Stock is convertible into shares of Registrant's $.01
par value Common Stock at various times. (A copy of the Certificate of
Designation showing terms of conversion and a form of subscription
agreement for Registrant's Series L Preferred Stock are filed herewith,
as reflected in the Exhibit Index of this Form 8-K.)
Further, on May 16, 1997, Registrant accessed for the first time its
$10 million line of credit by drawing $1,000,000 in cash in exchange for
its Convertible Revolving Credit Note. The placement was made pursuant to
the exemption from registration provided by Securities and Exchange
Commission ("SEC") Rule 903. Registrant paid aggregate fees of $50,000
pursuant to the transaction. The note was issued to an accredited
investor in an offshore transaction as defined in Rule 903. In
accordance with the terms and conditions of the line of credit and the
Convertible Revolving Credit Note, the note is convertible into shares of
Registrant's $.01 par value Common Stock at various times. (A form of
subscription agreement for a Convertible Revolving Credit Note, and a
form of a Convertible Revolving Credit Note, showing terms of conversion
are filed herewith, as reflected in the Exhibit Index of this Form 8-K.)
Further, on May 20, 1997, in connection with the issuance of its
Series K Preferred Stock, previously reported, Registrant issued warrants
exercisable into a total of 49,997 shares of Registrant's Common Stock.
The Warrants were issued to the accredited investors participating in the
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Series K Preferred Stock in offshore transactions as defined in Rule 903.
In accordance with the terms and conditions of the warrants, the warrants
are exercisable into shares of Registrant's $.01 par value Common Stock
at various times at exercise prices ranging from $1.1875 per share to
$1.25 per share. (A form of the warrants, showing conditions of exercise
is filed herewith, as reflected in the Exhibit Index of this Form 8-K.)
There are currently 35,091,532 shares of Registrant's Common Stock
outstanding.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Curtis Mathes Holding Corporation
(Registrant)
By: /s/ F. Shelton Richardson, Jr.
F. Shelton Richardson, Jr.
Vice President - Chief Financial Officer
(Principal Financial and Duly Authorized
Officer)
Date: May 23, 1997
CURTIS MATHES HOLDING CORPORATION
EXHIBIT INDEX
Exhibit Sequential
Number Description of Exhibits Page
4.1 Articles of Incorporation of the Company, as amended
(filed as Exhibit "4.1" to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended
September 30, 1996 and incorporated herein by reference.) N/A
4.2 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.) N/A
4.3 Form of Common Stock Certificate of the Company (filed
as Exhibit "4.2" to the Company's annual report on Form
10-K for the fiscal year ended June 30, 1994 and
incorporated herein by reference.) N/A
4.4* Form of warrant issued in connection with Series K
Preferred Stock. 5
4.5* Series L Preferred Stock terms and conditions. 8
4.6* Form of subscription agreement for Series L Preferred
Stock. 11
4.7* Form of subscription agreement for Convertible Revolving
Credit Note. 20
4.8* Form of Convertible Revolving Credit Note. 30
* Filed herewith.
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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
SECURITIES OR BLUE SKY LAWS OR EXEMPTIONS FROM SUCH
REGISTRATION.
_____________(Date) Warrant No. 1997-R-_____
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, or assigns, 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. If, at the time of exercise of this Warrant by the
Registered Owner, or assigns, the representations and warranties made by
the Registered Owner in the Subscription Agreement of even date herewith
are then current, or representations made by the then current owner of
this Warrant at the time of exercise reflect compliance with Regulation
S, the Company will undertake to cause the Underlying Stock to be issued
to the Registered Owner, or assigns, pursuant to Regulation S. The
certificates representing these shares of stock, unless the same are
registered prior to exercise of this Warrant, or unless the same are
exempt from registration under Regulation S, 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, or assigns, 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, or assigns, is
otherwise entitled to purchase.
(c) NUMBER OF SHARES. The total number of shares of Common Stock
of the Corporation that the registered Owner, or assigns, of this Warrant
is entitled to receive upon exercise of this Warrant is __________
(____________) shares, in whole or in part. 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. This Warrant may only be exercised
beginning on ___________, 1997 [41 days after date of warrant] and up to
and including _________, 1998 [one year after date of warrant, less one
day] (''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, by wire transfer, by
execution and delivery of a Subscription Agreement in the form attached
hereto, 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, or assigns, 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 as of ___________, 1997.
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. 1997-R-_____ heretofore issued to
______________ on ___________, 1997; (2) encloses payment of
$__________________ US 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: ____________________
INVESTOR NAME: ______________________
By: ______________________________
Printed Name: ____________________
Title: ____________________
Address: ____________________
____________________
Signature guaranteed by:
<PAGE>
CURTIS MATHES HOLDING CORPORATION
(the "Corporation")
CERTIFICATE OF DESIGNATION
FIXING THE NUMBER AND DESIGNATING THE RIGHTS, PRIVILEGES,
RESTRICTIONS AND CONDITIONS ATTACHING TO THE SERIES L 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 series of Class A Preference Shares;
NOW, THEREFORE, BE IT RESOLVED, THAT:
The series of the Class A Preference Shares (the "Series L Class A
Shares") of the Corporation shall consist of 1,500 shares and no
more and shall be designated as the Series L 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 class, the rights, privileges, restrictions and
conditions attaching to the Series L Class A Shares shall be as
follows:
Part 1 - Pre-emptive Rights.
1.1 The Series L 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 If the Corporation shall be voluntarily or involuntarily liquidated,
dissolved or wound up, at any times when any Series L Class A Shares
shall be outstanding, the holders of the then outstanding Series L 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 $1,000.00 consideration per Series L Class A Share; 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.
2.2 Subject to the provisions of Part 6 hereof, all amounts to be paid
as preferential distributions to the holders of Series L 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.
Part 3 - Dividends.
3.1 Holders of record of Series L Class A Shares shall not be entitled
to receive dividends on their Series L Class A Shares.
Part 4 - Conversion.
4.1 For the purposes of conversion, the Series L Class A Shares shall be
valued at $1,000 per share ("Value"), and, if converted, the Series L
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 L Class A Shares
being so converted by the "Conversion Price." For purposes of this Part
6, the "Conversion Price" means Seventy-five percent (75%) of the average
<PAGE>
daily closing bid price of Common Shares as reported on NASDAQ level 1 at
4:00 P.M. EST for the period of 5 consecutive trading days immediately
preceding the date of the conversion of the Series L Class A Shares in
respect of which such Conversion Price is determined. The number of
Conversion Shares so determined shall be rounded to the nearest whole
number of shares. Any holder of Series L Class A Shares (an "Eligible
Holder") may at any time commencing 41 days after the issuance of any
Series L Class A Shares convert any whole number of shares of Series L
Class A Shares in accordance with this Part.
4.2 The conversion right provided by the above section may be exercised
only by an Eligible Holder of Series L Class A Shares, in whole or in
part, by the surrender of the share certificate or share certificates
representing the Series L 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 L Class A
Shares so surrendered, if any, by (2) the Conversion Price. Each Series L
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 L 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 L
Class A Shares has been fully converted, a new share certificate
representing the Series L Class A Shares not so converted, if any, shall
also be delivered to such holder within 5 days of notice of conversion,
or carried on the Corporation's ledger, at holder's option. Any Eligible
Holder may exercise its right to convert the Series L 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 L Class
A Shares to the Corporation by express courier. Each date on which a
telecopied Notice of Conversion is 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 L Class A Shares (together with the
certificates representing the Series L 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 L Class A Shares certificate being so
converted by such date.
4.3 All Common Shares which may be issued upon conversion of Series L
Class A Shares will, upon issuance, be duly issued, fully paid and
nonassessable and free from all taxes, liens, and charges with respect to
the issue thereof. At all times that any Series L 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 L 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 L Class A Shares shall be proportionately increased.
<PAGE>
4.4 No Series L 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 L Class A Share.
Part 5 - Amendment.
5.1 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 L Class A
Shares, the rights, privileges, restrictions and conditions attaching to
the Series L 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 L Class A Shares or written consent by the holders
of a majority of the Series L Class A Shares then outstanding.
<PAGE>
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
1. Curtis Mathes Holding Corporation, a Texas corporation (the
"Company"), has offered for sale outside the United States (as that term
is defined in Regulation S) ("Regulation S") of the United States
Securities Act of 1933, as amended (the "Act"), and the undersigned
purchaser (the "Purchaser") hereby tenders this subscription and applies
for the purchase of Fifteen Hundred (1,500) shares of Series L, Class A
Preference Shares (the "Class A Preferred Stock") of the Company,
[together with the shares of the Company's common stock issuable upon
conversion of the Series L, Class A Preference Shares (the "Shares")] at
a purchase price per Share of $1,000 (the "Offering"). Together with
this Subscription Agreement, the Purchaser is delivering to the Escrow
Agent by wire transfer the full amount of the purchase price for the
Shares for which it is subscribing pursuant hereto ($1,500,000) against
delivery of the Class A Preferred Certificates. Time is of the essence
in connection with this Subscription Agreement.
2. Representations and Warranties of Purchaser. In order to
induce the Company to accept this subscription, the Purchaser hereby
represents and warrants to, and covenants with, the Company as follows:
A. (i) The Purchaser is not a U.S. person as that term is
defined under Regulation S;
(ii) At the time the buy order for the Class A Preferred
Stock was originated, Purchaser was outside the United States and is
outside of the United States as of the date of the execution and
delivery of this Agreement;
(iii) Purchaser is purchasing the Class A Preferred
Stock for its own account and not on behalf of any U.S. person or
any other person, and the transaction has not been pre-arranged with
a purchaser in the United States (see Appendix A attached hereto for
definitions of "U.S. person" and "United States" under Regulation S)
and Purchaser is acquiring the Class A Preferred Stock for
investment purposes and not with a view towards distribution and has
no present arrangement or intention to sell the Class A Preferred
Stock or the common stock issuable upon conversion of the Class A
Preferred Stock;
(iv) The Purchaser represents and warrants and hereby
agrees that all offers and sales of the Class A Preferred Stock
prior to the expiration of a period commencing on the date hereof
and ending 40 days thereafter (the "Restricted Period") shall only
be made in compliance with the safe harbor provisions contained in
Regulation S, with which Purchaser is familiar, or pursuant to the
registration of such securities under the Act or pursuant to an
exemption from registration under the Act, and the Purchaser shall
not take a short position directly or indirectly with respect to the
Company's common stock during the Restricted Period, and that all
offers and sales after the expiration of the Restricted Period in
the United States or to U.S. Person shall be made only pursuant to
such a registration or to such exemption from registration;
(v) The Purchaser acknowledges and agrees that the Class
A Preferred Stock has not been registered under the Act and may not
be offered or sold in the United States or to U.S. Persons unless
the Shares are registered under the Act or an exemption from the
registration requirements of the Act is available;
(vi) The Purchaser is not an officer, director or
"affiliate" (as that term is defined in Rule 405 under the Act) of
the Company;
B. (i) The purchaser has received and carefully reviewed the
Company's most recent Annual Report on Form 10-K, its subsequent
Quarterly Reports on Form 10-Q, and its Current Reports on Form 8-K
<PAGE>
(collectively, the "SEC Reports"), and a copy of the Certificate of
Designation for the Series L Class A Preferred Stock;
(ii) The Purchaser has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the
Company and the Offering, and all such questions, if any, have been
answered to the full satisfaction of the Purchaser;
(iii) The Purchaser is an accredited investor and has
such knowledge and expertise in financial and business matters that
the Purchaser is capable of evaluating the merits and risks involved
in an investment in the Class A Preferred Stock and acknowledges
that an investment in the Class A Preferred Stock entails a number
of very significant risks and funds should only be invested by
persons able to withstand the total loss of their investment;
(iv) Except as set forth in this Agreement, no
representations or warranties have been made to the Purchaser by the
Company or any agent, employee or affiliate of the Company and in
entering into this transaction the Purchaser is not relying upon any
information, other than that contained in this Agreement, the SEC
Reports and the results of independent investigation by the
Purchaser;
(v) The Purchaser understands that the Class A Preferred
Stock is being offered and sold to it in reliance on specific
exemptions from the registration requirements of the United States
Federal and State securities laws and that the Company is relying
upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the applicability of such
exemptions and the suitability of the Purchaser to acquire the Class
A Preferred Stock, and the Purchaser acknowledges that it is
Purchaser's responsibility to satisfy itself as to the full
observance by this Offering and the sale of the Class A Preferred
Stock to Purchaser of the laws of any jurisdiction outside the
United States and Purchaser has done so;
(vi) The Purchaser has full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder;
and this Agreement is a legally binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms; and
(vii) Purchaser understands that in the view of the
SEC the statutory basis for the exemption claimed for the
transaction would not be present if the Offering, although in
technical compliance with Regulation S, is part of a plan or scheme
to evade the registration provisions of the 1933 Act and Purchaser
confirms that its purchaser is not part of any such plan or scheme.
Purchaser is acquiring the Class A Preferred Stock for investment
purposes and has no present intention to sell the Class A Preferred
Stock in the United States or to a U.S. person or for the account or
benefit of a U.S. Person.
3. Representations of the Company. The Company represents and
warrants:
A. The Company is a Reporting Issuer as defined by Rule 902
of Regulation S. The Company is in full compliance, to the extent
applicable, with all reporting obligations under either Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
B. Offshore Transaction,
(i) The Company has not offered the Class A Preferred
Stock to any person in the United States or to any U.S. person as
that term is defined in Regulation S;
<PAGE>
(ii) At the time the buy order was received, the Company
and/or its agents reasonably believed that the purchasers in the
Offering were outside of the United States and were not U.S.
persons; and
(iii) The Company reasonably believes that the
purchase of the Class A Preferred Stock pursuant to the Offering has
not been pre-arranged with a purchaser in the United States;
C. In connection with the Offering neither the Company nor
any of its agents has engaged in any "directed selling efforts" (as
that term is defined in Regulation S) nor has the Company or any of
its agents conducted any general solicitation relating to the
Offering to persons residing within the United States or to U.S.
persons.
D. The execution, delivery and performance of this Agreement
by the Company and the performance of its obligations hereunder do
not and will not constitute a breach or violation of any of the
terms and provisions of, or constitute a default under or conflict
with or violate any provision of (i) the Company's Certificate of
Incorporation or By-laws, (ii) any indenture, mortgage, deed of
trust, agreement or other instrument to which the Company is a party
or by which it or any of its property is bound, (iii) any applicable
statute of regulation, (iv) or any judgment, decree or order of any
court or governmental body having jurisdiction over the Company or
any of its property.
E. The Company is a corporation duly organized, validly
existing and in good standing under the law of its jurisdiction of
incorporation and is duly qualified as a foreign corporation in all
jurisdictions where the failure to be so qualified would have a
materially adverse effect on its business, taken as a whole.
F. The execution, delivery and performance of this Agreement
and the consummation of the issuance of the Class A Preferred Stock
and the transactions contemplated by this Agreement are within the
Company's corporate powers and have been duly authorized by all
necessary corporate and stockholder action on behalf of the Company.
G. There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of the Company, threatened, against or
affecting the Company, or any of its properties, which might result
in any material adverse change in the condition (financial or
otherwise) or in the earnings, business affairs or business
prospects of the Company, or which might materially and adversely
affect the properties or assets thereof.
H. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust or
other material instrument or agreement to which it is a party or by
which it or its property may be bound; and neither the execution,
nor the delivery by the Company, nor the performance by the Company
of its obligations under, this Agreement or, the Class A Preferred
Stock will conflict with or result in the breach or violation of any
of the terms or provisions of, or constitute a default or result in
the creation or imposition of any lien or charge on any assets or
properties of the Company under, any material indenture, mortgage,
deed of trust or other material agreement or instrument to which the
Company is a party or by which it is bound or any statute or the
Certificate of Incorporation or Bylaws of the Company, or any
decree, judgment, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
its properties.
<PAGE>
I. None of the Company's filings with the Securities and
Exchange Commission contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statement therein in light of the
circumstances under which they were made, not misleading. The
Company has timely filed all requisite forms, reports and exhibits
thereto with the Securities and Exchange Commission.
J. There has been no material adverse change in the financial
condition, earnings, business affairs or business prospects of the
Company since the date of the Company's most recent Quarterly Report
on Form 10-Q, if applicable, filed with the Securities and Exchange
Commission.
K. As of the date hereof, the conduct of the business
complies in all material respects with all statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees
applicable thereto. The Company has not received notice of any
alleged violation of any statute, law, regulation ordinance, rule,
judgment, order or decree from any governmental authority which
would materially adversely affect the business of the Company.
L. There is no fact known to the Company (other than general
economic conditions known to the public generally) that has not been
disclosed in writing to the Purchaser that (i) could reasonably be
expected to have a material adverse effect on the condition
(financial or otherwise) or in the earnings, business affairs,
business prospects, properties or assets of the Company or (ii)
could reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations pursuant to this
Agreement and the Class A Preferred Stock.
M. Issuer will not engage in any similar offering of its
securities pursuant to Regulation S for a period of 120 days from
the date of the Closing of this transaction unless Subscriber has
been previously offered such Shares in writing on the same terms and
has refused to take up the offer within ten (10) days.
N. There is no action pending for delisting of the Common
Stock nor is the Company aware of any threatened action relating
thereto.
4. The Purchaser understands that this subscription is not binding
upon the Company until the Company accepts it, which acceptance is at the
sole discretion of the Company and is to be evidenced by the Company's
execution of this Agreement where indicated. This Agreement shall be
null and void if the Company does not accept it as aforesaid. Upon
acceptance by the Company and receipt of the total purchase price, the
Company will issue one or more certificates for the full number of shares
of Class A Preferred Stock subscribed for.
5. Covenants of the Company. For so long as any Class A Preferred
Stock held by the Purchaser remain outstanding, the Company covenants and
agrees with the Purchaser that:
(a) It will reserve from its authorized but unissued shares of
Common Stock a sufficient number of shares of Common Stock to permit
the conversion in full of the outstanding Class A Preferred Stock.
(b) It will maintain the listing of its Common Stock on
NASDAQ.
(c) It will not issue stock transfer instructions to its
transfer agent with respect to and will not place a restrictive
legend on the certificates representing shares of Common Stock
issued upon conversion of the Class A Preferred Stock.
<PAGE>
6. Conversion. For the purposes of conversion, the Series L
Class A Shares shall be valued at $1,000 per share ("Value"), and, if
converted, the Series L 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 L Class A Shares being so converted by the "Conversion Price."
For purposes of this Part 6, the "Conversion Price" means Seventy-five
percent (75%) of the average daily closing bid price of Common Shares as
reported on NASDAQ level 1 at 4:00 P.M. EST for the period of 5
consecutive trading days immediately preceding the date of the conversion
of the Series L Class A Shares in respect of which such Conversion Price
is determined. The number of Conversion Shares so determined shall be
rounded to the nearest whole number of shares. Any holder of Series L
Class A Shares (an "Eligible Holder") may at any time commencing 41 days
after the issuance of any Series L Class A Shares convert any whole
number of shares of Series L Class A Shares in accordance with this Part.
6.1 The conversion right provided by the above section may be
exercised only by an Eligible Holder of Series L Class A Shares, in whole
or in part, by the surrender of the share certificate or share
certificates representing the Series L 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 L
Class A Shares so surrendered, if any, by (2) the Conversion Price. Each
Series L 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 L 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 L Class A Shares has been fully converted, a new share
certificate representing the Series L Class A Shares not so converted, if
any, shall also be delivered to such holder within 5 days of notice of
conversion, or carried on the Corporation's ledger, at holder's option.
Any Eligible Holder may exercise its right to convert the Series L 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 L Class
A Shares to the Corporation by express courier. Each date on which a
telecopied Notice of Conversion is 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 L Class A Shares (together with the
certificates representing the Series L 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 L Class A Shares certificate being so
converted by such date.
6.2 All Common Shares which may be issued upon conversion of
Series L Class A Shares will, upon issuance, be duly issued, fully paid
and nonassessable and free from all taxes, liens, and charges with
respect to the issue thereof. At all times that any Series L 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 L Class A Shares then outstanding at the then
effective Conversion Price. Without limiting the generality of the
<PAGE>
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 L Class A Shares shall be proportionately increased.
7. Registration. If upon conversion of Class A Preferred Stock
effected by the Purchaser pursuant to the terms of this Agreement and the
terms of the Class A Preferred Stock the Company fails to issue
certificates for shares of Common Stock issuable upon such conversion
(the "Underlying Shares") to the Purchaser bearing no restrictive legend
for any reason other than (i) the Company's reasonable good faith belief
that the representations and warranties made by the Purchaser in this
Agreement or the Notice of Conversion were untrue when made, or (ii) the
inability of the Company to lawfully issue such Common Stock due to a
change in SEC regulations, then the Company shall be required, at the
request of the Purchaser and at the Company's expense, to effect the
registration of the Underlying Shares issuable upon conversion of the
Class A Preferred Stock under the Act and relevant Blue Sky laws as
promptly as is practicable. The Company and the Purchaser shall
cooperate in good faith in connection with the furnishing of information
required for such registration and the taking of such other actions as
may be legally or commercially necessary in order to effect such
registration. In such case, the Company shall file a registration
statement within 45 days of Purchaser's demand therefor and shall use its
best efforts to cause such registration statement to become effective as
soon as practicable thereafter. Such best efforts shall include, but not
be limited to, promptly responding to all comments received from the
staff of the Securities and Exchange Commission with respect to such
registration statement and promptly preparing and filing amendments to
such registration statement which are responsive to the comments received
from the staff of the Securities and Exchange Commission. Once declared
effective by the Securities and Exchange Commission the Company shall
cause such registration statement to remain effective until the earlier
of (i) the sale by the Purchaser of all Underlying Shares registered or
(ii) 120 days after the effective date of such registration statement.
In the event the Company fails to issue Common Stock to the Purchaser in
accordance with paragraph 6, the current twenty-five percent (25%)
discount provided in the Conversion Price shall increase by two percent
(2%) and such discount shall continue to increase by two percent (2%) for
each thirty (30) day period thereafter until the Registration Statement
is declared effective by the SEC, or until the discount reached is thirty-
five percent (35%), and additional Common Stock shall be issued to the
Purchaser in accordance with such additional discounts.
8. Indemnification.
A. The Purchaser agrees to indemnify the Company and hold it
harmless from and against any and all losses, damages, liabilities,
costs and expenses which it may sustain or incur in connection with
the breach by the Purchaser of any representation, warranty or
covenant made by it herein.
B. The Company agrees to indemnify the Purchaser and hold it
harmless from and against any and all losses, damages, liabilities,
costs and expenses which it may sustain or incur in connection with
the breach by the Company of any representation, warranty or
covenant made by it herein.
9. Neither this Agreement nor any of the rights of the Purchaser
hereunder may be transferred or assigned by the Purchaser.
10. This Agreement (i) may only be modified by a written instrument
executed by the Purchaser and the Company; (ii) sets forth the entire
agreement of the Purchaser and the Company with respect to the subject
matter hereof; (iii) shall be governed by the laws of Texas applicable to
contracts made and to be wholly performed therein; and (iv) shall inure
<PAGE>
to the benefit of, and be binding upon the Company and the Purchaser and
their respective heirs, legal representatives, successors and permitted
assigns.
11. Unless the context otherwise requires, all personal pronouns
used in this Agreement, whether in the masculine, feminine or neuter
gender, shall include all other genders.
12. All notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered
personally or mailed by certified or registered mail, return receipt
requested, postage prepaid, as follows: If to Purchaser, to the address
set forth on the signature page of this Agreement and if to the Company,
to Curtis Mathes Holding Corporation, 10911 Petal Street, Dallas, Texas
75238, or to such other address as the Company or the Purchaser shall
have designated to the other by like notice.
13. Restricted Period; Legend. The transaction restriction in
connection with this offshore offer and sale restrict Purchaser from
offering and selling the Class A Preferred Stock to U.S. persons or for
the account or benefit of a U.S. person for the Restricted Period. Rule
903(c)(2) governs the Restricted Period. Purchaser understands that the
Company will instruct its transfer agent to place a stop transfer order
(which shall be effective to prohibit transfers to U.S. persons or for
the account or benefit of U.S. persons solely during the Restricted
Period) with respect to the certificates representing the Class A
Preferred Stock and that such certificates will bear the following
legend: "The shares represented by this certificate have been issued
pursuant to Regulation S promulgated under the Securities Act of 1933, as
amended ("Act"), and have not been registered under the Act. These
shares may not be offered or sold within the United States or to, or for
the account of a "U.S. Person" (as that term is defined in Regulation S)
until after the 40th day following completion of the offering. After
such date, this legend shall have no further effect." Following the
expiration of the Restricted Period, the Company will, at the request of
the Purchaser, cause its transfer agent to issue certificates
representing the Class A Preferred Stock or the common stock as may be
applicable without any restrictive legend or stop transfer instructions.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of May _______, 1997.
The Purchaser declares under penalty of perjury that the statements,
representations and warranties contained in the foregoing Securities
Purchase Agreement and in the following Purchaser Acknowledgments are
true, correct and complete.
Investor
______________________________
(Signature)
______________________________
(Print Name)
______________________________
(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 Series L Preferred Stock Purchased: 1,500
Amount $1,500,000
AGREED AND ACCEPTED:
CURTIS MATHES HOLDING CORPORATION
By:______________________________
<PAGE>
APPENDIX "A"
Pursuant to Rule 902(o) and (p) of Regulation S, the terms "U.S.
Person" and "United States" are defined as follows:
(o) U.S. Person. (1) "U.S. Person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or incorporated
under the laws of the United States;
(iii) Any estate of which any executor or administrator is
a U.S. person;
(iv) Any trust of which any trustee is a U.S. person;
(v) Any agency or branch of a foreign entity located in the
United States;
(vi) Any non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary
organized, incorporated or (if an individual) resident in the United
States; and
(vii) Any partnership or corporation if: (A) organized or
incorporated under the laws of any foreign jurisdiction; and (B)
formed by a U.S. person principally for the purpose of investing in
securities not registered under the Securities Act of 1933, unless
it is organized or incorporated and owned, by accredited investors
(as defined in Rule 501(a)) who are not natural persons, estates or
trusts.
(1) Notwithstanding paragraph (o)(1) of this rule, any
discretionary account or similar account (other than an estate or trust)
held for the benefit or account of a non-U.S. person by a dealer or other
professional fiduciary organized, incorporated, or (if an individual)
resident in the United States shall not be deemed a "U.S. person."
(2) Notwithstanding paragraph (o)(1); any estate of which any
professional fiduciary acting as executor or administrator is a U.S.
person shall not be deemed a U.S. person if:
(i) An executor or administrator of the estate who is not a
U.S. person has sole or shared investment discretion with respect to
the corpus of the estate; and
(ii) The estate is governed by foreign law.
(3) Notwithstanding paragraph (o)(1), any trust of which any
professional fiduciary acting as trustee is a U.S. person shall not be
deemed a U.S. person if a trustee who is not a U.S. person has sole or
shared investment discretion with respect to the trust assets, and no
beneficiary of the trust (and no settlor if the trust is revocable) is a
U.S. person.
(4) Notwithstanding paragraph (o)(1), an employee benefit plan
established and administered in accordance with the law of a country
other than the United States and customary practices and documentation of
such country shall not be deemed a U.S. person.
(5) Notwithstanding paragraph (o)(1), any agency or branch of a
U.S. person located outside the United States shall not be deemed a "U.S.
person" if:
(i) The agency or branch operates for valid business reasons;
and
(ii) The agency or branch is engaged in the business of
insurance or banking and is subject to substantive insurance or
banking regulation, respectively, in the jurisdiction where located.
(6) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank, the
Asian Development Bank, the African Development Bank, the United Nations,
and their agencies, affiliates and pension plans, any other similar
international organizations, their agencies, affiliates and pension plans
shall not be deemed "U.S. persons."
<PAGE>
(p) United States. "United States" means the United States of
America, its territories and possessions, any State of the United States,
and the District of Columbia.
<PAGE>
OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT
FOR PROMISSORY NOTE CONVERTIBLE INTO COMMON SHARES
This Offshore Securities Subscription Agreement (the "Agreement") is
executed in reliance upon the transaction exemption afforded by
Regulation S ("Regulation S") under the Securities Act of 1933, as
amended (the "Securities Act'), as promulgated by the Securities and
Exchange Commission (the "SEC").
This Agreement has been executed by the undersigned in connection
with the issuance of a Promissory Note ("Securities") convertible into
shares of common stock ("Common Stock") of
CURTIS MATHES HOLDING CORPORATION
= = = = = = = = = = = = = = = = = = = = = = = = = = =
10911 Petal Street
Dallas, Texas 75238
National Association of Securities Automated Quotation System Symbol
("CRTM"), a corporation organized under the laws of Texas, United States
of America (the "Issuer").
The undersigned:
NAME:
ADDRESS:
a non "U.S. person" (the "Subscriber"),
hereby represents and warrants to, and agrees with, the Issuer as
follows:
1. The Offering.
a. The Securities. The undersigned hereby subscribes for a
Promissory Note convertible, in whole or in part, into 1,066,666
shares of Common Stock at a Conversion Price of $0.9375 per share of
Common Stock payable in United States Dollars, representing a total
consideration of One Million and No/100 Dollars ($1,000,000) (the
"Subscription Proceeds").
b. Form of Payment. Subscriber shall pay the Subscription
Proceeds due upon issuance of the Note by delivering good funds by
wire transfer in United States Dollars on or before May 15, 1997
into the escrow account as follows:
(the "Offering Escrow Account")
2. Subscriber Representations; Access to Information; Independent
Investigation.
a. Offshore Transaction. Subscriber represents and warrants to
Issuer as follows:
(i) Neither Subscriber nor any person or entity for whom
Subscriber is acting as fiduciary is a U. S. person. A U.S.
person means any one of the following:
<PAGE>
(1) any natural person resident in the United States of
America;
(2) any partnership or corporation organized or
incorporated under the laws of the United States;
(3) any estate of which any executor or administrator is
a U. S. person;
(4) any trust of which any trustee is a U.S. person;
(5) any agency or branch of a foreign entity located in
the United States;
(6) any non-discretionary account or similar account
(other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person;
(7) any discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary organized, incorporated or (if an individual)
resident in the United States; and
(8) any partnership or corporation if:
(A) organized or incorporated under the laws of any
foreign jurisdiction; and
(B) formed by a U.S. person principally for the
purpose of investing in securities not registered
under the Securities Act, unless it is organized or
incorporated, and owned, by accredited investors (as
defined in Rule 501(a) under the Securities Act) who
are not natural persons, estates or trusts.
(ii) At the time the buy order was originated, Subscriber
was outside the United States and is outside of the United
States as of the date of the execution and delivery of
this Agreement. No offer to purchase Securities was made
in the United States.
(iii) Subscriber is purchasing the Securities for its own
account or for the account of beneficiaries for whom
Subscriber has full investment discretion with respect to
the Securities and whom Subscriber has full authority to
bind so that each such beneficiary is bound hereby as if
such beneficiary were a direct Subscriber hereunder and
all representations, warranties and agreements herein were
made directly by such beneficiary. Subscriber is not
purchasing the Securities on behalf of any U.S. person and
the sale has not been prearranged with a purchaser in the
United States.
(iv) Each distributor participating in the offering of
the Securities, if any, has agreed in writing that all
offers and sales of the Securities prior to the expiration
of a period commencing on the date of the Closing of the
purchase and sale of the Securities subscribed for
hereunder and ending 40 days thereafter shall only be made
<PAGE>
(A) in compliance with the safe harbor contained in
Regulation S; (B) pursuant to registration of the
Securities under the Securities Act; or (C) pursuant to an
exemption from registration.
(v) Subscriber represents, warrants and hereby agrees
that all offers and sales of the Securities shall only be
made (A) in compliance with the safe harbor contained in
Regulation S; (B) pursuant to a registration of securities
under the Securities Act; or (C) pursuant to an exemption
from such registration.
(vi) The Offering Documents (as defined herein) received
by Subscriber include statements to the effect that the
Securities have not been registered under the Securities
Act and may not be offered or sold in the United States,
to U.S. persons or for the account or benefit of a U.S.
person (other than distributors as defined in Regulation
S) unless the Securities are registered under the
Securities Act or an exemption from the registration
requirements is available.
(vii) Subscriber acknowledges that the purchase of the
Securities involves a high degree of risk and acknowledges
further that it can bear the economic risk of the purchase
of such Securities, including the total loss of its
investment. Subscriber acknowledges that it has obtained
the advice of competent legal counsel in its domicile
jurisdiction that it is qualified under the laws of its
domicile to purchase the Securities and that the offer and
sale of such Securities will not violate the laws of its
domicile jurisdiction.
(viii) Subscriber understands that the Securities are
being offered and sold to it in reliance on a specific
exemption from the registration requirements of federal
and state securities laws and that Issuer is relying upon
the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of
Subscriber set forth herein to determine the applicability
of such exemptions and the suitability of Subscriber to
acquire the Securities.
(ix) Subscriber is sufficiently experienced in financial
and business matters as to be capable of evaluating the
merits and risks of its investments and to make an
informed decision relating thereto.
(x) In evaluating its investment, Subscriber has
consulted its own investment and/or legal and/or tax
advisors.
(xi) Subscriber understands that, in he view of the SEC,
the statutory basis for the exemption claimed for this
transaction would not be present if the offering of the
Securities, although in technical compliance with
Regulation S, is part of a plan or scheme to evade the
registration provision of the Securities Act. Subscriber
is acquiring the Securities for investment proposes and
<PAGE>
has no present intention to sell such Securities in the
United States, to a U.S. person or for the account or
benefit of a U.S. person. Subscriber hereby confirms that
the purpose of including the Subscriber Representation
Letter (Appendix "A" hereto) to facilitate the transfer of
the certificates representing the Securities into street
name is to enable Subscriber to comply with the
requirements of certain offshore portfolio management
regulations and the security requirements of offshore
lenders for margin loans.
(xii) Subscriber is not an underwriter of, or dealer in,
the Securities. Subscriber is not participating, pursuant
to a contractual agreement, in the distribution of the
Securities.
(xiii) Subscriber represents and warrants that neither it
nor any of its affiliates will directly or indirectly
maintain any short position in Common Stock of Issuer
during the forty day (40) transaction restriction period.
If Subscriber is purchasing the Securities subscribed for hereby in
a representative or fiduciary capacity, the representations and
warranties in this Agreement shall be deemed to have been made on behalf
of the person or persons for whom Subscriber is so purchasing.
The foregoing representations and warranties are true and accurate
as of the date hereof, shall be true and accurate as of the date of the
acceptance by Issuer of Subscriber's subscription and shall survive
thereafter. If Subscriber has knowledge, prior to the acceptance of this
Agreement by Issuer, that any such representation and warranty shall not
be true and accurate in any respect then Subscriber, prior to such
acceptance, will give written notice of such fact to Issuer specifying
which representation and warranty is not true and accurate and the
reasons therefor.
b. Current Public Information. Subscriber acknowledges that he,
she or it has been furnished with or has acquired copies of Issuer's
most recent Annual Report on Form 10-K and any form 10-Q or form 8-K
filed thereafter (collectively, the "SEC Filings") and other
publicly available documents, together with attachments thereto, as
same may be supplemented (together with the SEC Filings, the
"Offering Documents"). Subscriber has reviewed the Offering
Documents.
c. Independent Investigation: Access. Subscriber acknowledges
that, in making the decision to purchase the Securities subscribed
for, Subscriber has relied upon independent investigations made by
it and its purchase representatives, if any, and Subscriber and such
representatives, if any, have, prior to any sale to Subscriber, been
given access and the opportunity to examine all material books and
records of the Issuer, all material contracts and documents relating
to this offering of Securities and an opportunity to ask questions
of, and to receive answers from, Issuer or any person acting on its
behalf concerning the terms and conditions of this offering of
Securities. Subscriber and its advisors, if any, have been
furnished with access to all publicly available materials relating
to the business, finances and operation of the Issuer and materials
relating to the offer and sale of the Securities which have been
<PAGE>
requested. Subscriber and its advisors, if any, have received
complete satisfactory answers to any such inquiries.
d. No Government Recommendation or Approval. Subscriber
understands that no federal or state agency has made or will make
any finding or determination relating to the fairness for public
investment in the Securities or has passed or made, or will pass on
or make, any recommendation or endorsement of the Securities.
e. Entity Purchases. If Subscriber is a partnership, corporation
or trust, the person executing this Agreement on its behalf
represents and warrants that:
(i) He or she has made due inquiry to determine the
truthfulness of the representations and warranties made
pursuant to this Agreement.
(ii) He or she is duly authorized (if the undersigned is a
trust, by the trust agreement) to make this investment and to
enter into and execute this Agreement on behalf of such entity.
3. Issuer Representations.
Issuer represents and warrants to the Subscriber as follows:
a. Reporting Company Status. Issuer is a reporting issuer as
defined by Rule 902 of Regulations S. Issuer is in full compliance
with all reporting obligations under Sections 13 or 15(d) of the
Securities Exchange Act of 1934, as amended.
b. Offshore Transaction. Issuer has not offered these Securities
to any person in the United States or to any U.S. person or for the
account or benefit of any U.S. person. At the time the buy order
was originated, Issuer and/or its agent reasonably believed that
Subscriber was outside of the United States and was not a U.S.
person. Issuer and/or its agent reasonably believe that the
transaction has not been prearranged with a Subscriber in the United
States.
c. No Directed Selling Efforts. In regard to this transaction,
Issuer has not conducted any "directed selling efforts" as that term
is defined in Rule 902 of Regulation S nor has Issuer conducted any
general solicitation relating to the offer and sale of the within
securities to U.S. persons residing within the United States or
elsewhere.
d. The Common Stock. The Common Stock, when issued and delivered
upon conversion of the Securities, will be duly and validly
authorized and issued, fully paid and non-assessable and will not
subject the holders thereof to any liability solely by reason of
being such holders.
e. Subscription Agreement. This Agreement, when acknowledged by
the signature of an officer of Issuer, has been duly authorized,
validly executed and delivered on behalf of Issuer and is a valid
and binding agreement in accordance with its terms.
<PAGE>
f. Non-contravention. Except as otherwise disclosed by the
Issuer, the execution and delivery of this Agreement, the
consummation of the issuance of the Securities and the transactions
contemplated hereunder do not and will not conflict with or result
in a breach by Issuer of any of the terms or provisions of, or
constitute a default under, the certificate of incorporation or by-
laws of Issuer (or any equivalent documents thereto) or any
indenture, mortgage, deed of trust or other material agreement or
instrument to which Issuer is a party or by which it or any of its
properties or assets are bound or any existing applicable law, rule
or regulation or any applicable decrees, judgments or orders of any
court, federal or state regulatory body, administrative agency or
other governmental body having jurisdictions over Issuer or any of
its properties or assets.
g. Securities Law Compliance. With respect to the Company's
actions, the offer and the sale of Securities shall conform in all
respects with the requirements of Regulation S and with the
requirements of all other published rules and regulations of the SEC
currently in effect relating to "private offerings" to non-residents
of the United States of the type contemplated herein. Neither the
offer, sale of delivery of the Securities in conformity with the
terms hereof will violate Section 5 of the Securities Act, as
presently in effect.
4. Expiration of Restricted Period. The transaction restriction in
connection with this offshore offer and sale restricts the Subscriber
from offering and selling to U.S. persons or for the account or benefit
of a U.S. person for a forty (40) day period. Rule 903(c)(2) governs the
forty (40) day transaction restriction. In the event that multiple
subscriptions are accepted by Issuer, each separate subscription
agreement shall be deemed to be a separate offering under Regulation S
and the forty (40) day restriction period shall begin for each
transaction separately on the date payment is made to Issuer for that
specific transaction. Title to the Securities may be transferred by
Subscriber to other non-United States persons or entities in accordance
with Regulation S.
5. Exemption: Reliance on Representation. Subscriber understands that
the offer and sale of the Securities is not being registered under the
Securities Act. Issuer is relying on the rules governing offers and
sales made outside the United States pursuant to Regulation S. Rules 901
though 903 of Regulation S govern this transaction.
6. Transfer Agent Instructions.
a. Legends on Certificates. The transaction restriction in
connection with this offshore offer and sale restricts Subscriber
from offering and selling to U.S. persons, or for the account or
benefit of a U.S. person, for a forty (40) day period. The rules do
not require the placement of such a restrictive legend on the
Securities and the transfer agent is hereby instructed to see that
such legend, if any, is attached to the share certificate by means
of stapling. Such legend shall be in the precise form of Appendix
"B" hereto. Rule 903(c)(2) governs the forty day transaction
restriction.
<PAGE>
b. Subscriber Representation Letter. Issuer agrees to accept a
Subscriber Representation Letter from the Subscriber, or assigns, in
form of Appendix "A" hereto as sole and sufficient evidence that
Subscriber, or assigns, has complied with applicable securities laws
and upon receipt of such a letter shall promptly instruct its
transfer agent to transfer the Common Stock into "Street Name" upon
conversion of the Securities, if so requested by Subscriber, as
expeditiously as practical after receipt of the certificates and the
Subscriber Representation Letter; provided, Issuer shall not be
required to deliver such instructions if it knows, or reasonably
believes, any of the representations made in the Subscriber
Representation Letter are false.
7. Transfer Agent Instructions. Issuer's transfer agent will be
instructed upon conversion of the Securities to issue one or more share
certificates representing Common Stock in the names of qualified
purchasers to be specified. All of the Common Stock so issued by the
transfer agent will be issued pursuant to Regulation S. Issuer warrants
further that no instructions have been given to the transfer agent and
that the Common Stock shall be freely transferable on the books and
records of Issuer subject to compliance with applicable securities laws
and the terms of this Agreement.
8. Closing Date and Escrow Agent. The date of the issuance of the
Securities in the name of Subscriber (the "Closing") shall be the date
upon which the Company issues the Note, or such mutually agreed date
thereafter as the parties shall determine. Closing shall be effectuated
following delivery of funds to (the "Escrow Agent"), to the account
designated in Section 1c hereof. Subscriber instructs the Escrow Agent
and gives the Escrow Agent its good and sufficient authority to release
funds from the Offering Escrow Account to Issuer and all other necessary
parties including, without limitation, the payment of all placement agent
fees and commissions, facilitation fees in connection with the purchase
of Securities and expenses of the offering of Securities contemplated by
the Offering Documents. Subscriber agrees that the Escrow Agent, in its
capacity as Escrow Agent, has no liability as a result of any fraudulent
or unlawful conduct of any other party and agrees to hold the Escrow
Agent harmless.
9. Conditions to Issuer's Obligation to Sell. Issuer reserves the
right, in its complete discretion, to reject this Agreement prior to
execution by Issuer. Subscriber understands that Issuer's obligation to
sell the Securities subscribed for hereunder is conditioned upon:
a. the receipt and acceptance by Issuer of this Agreement for all
Securities as evidenced by execution of this Agreement by the
President, any Vice President or any Director of Issuer. The
acceptance of funds by Issuer shall be deemed to be constructive
acceptance of this Agreement. Subscriber understands that this
Agreement is irrevocable; and
b. delivery to the Escrow Agent by Subscriber of good funds, as
payment in full for the purchase of the Securities subscribed for,
all fees and commissions.
10. Conditions to Subscriber's Obligation to Purchase. Issuer
understands that Subscriber's obligation to purchase the Securities
subscribed for hereunder is conditioned upon:
<PAGE>
a. execution and delivery of this Agreement; and
b. delivery of Securities.
11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
UNDER THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CHOICE OF LAW
PRINCIPLES.
12. Entire Agreement. This Agreement, along with the Escrow Agreement
among the Escrow Agent, the Company and the Subscriber, the Revolving
Credit Agreement, and the Convertible Revolving Credit note constitutes
the entire agreement among the parties hereof with respect to the subject
matter hereof and supersedes any and all prior or contemporaneous
representations, warranties, agreements and understandings in connection
therewith. This Agreement may be amended only by a writing executed by
all parties hereto.
13. Full Name and Address of Subscriber for Registration Purposes:
NAME:
ADDRESS: _________________________________________
_________________________________________
_________________________________________
Tel. No. _________________________________________
Fax No. _________________________________________
Contact
Name: _________________________________________
14. Delivery Instructions (if different from Registration Name):
NAME: ________________________________________
ADDRESS: ________________________________________
________________________________________
Tel. No. _________________________________________
Fax No. _________________________________________
Contact
Name: _________________________________________
Special
Instructions: _________________________________________
15. Issuer's Acceptance based upon Subscriber Representations. Issuer
is accepting this subscription based upon and in reliance upon the
representations and warranties of Subscriber contained, herein including,
without limitation, those contained in sections 2 a(v), (vi), (xi) and
(xii) and this Agreement would not be accepted by Issuer in the absence
of such representations and warranties.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Offshore
Securities Subscription Agreement as of the 13TH day of May, 1997.
Amount Subscribed for:
$1,000,000
_________________________________
(Signature of Subscriber)
_________________________________
(Name Typed or Printed)
_________________________________
(Title)
Type of Ownership:
(Check one)
Natural Persons
_____ Individual
_____ Joint tenants with
rights of survivorship
_____ Tenants in common
_____ Tenants by the entirety
Entities
_____ Corporation
_____ Partnership
_____ Trust
_____ Estate
_____ Other (specify) ____________________
Accepted as of the _______ day of May, 1997
By:________________________________________
CURTIS MATHES HOLDING CORPORATION
APPENDIX "A"
SUBSCRIBER REPRESENTATION LETTER
Dear Sirs:
The undersigned _____________________________, purchased on May
_____ 1997, a Convertible Revolving Credit Note ("Securities") of CURTIS
MATHES HOLDING CORPORATION (the "Company") with a conversion price of
$0.9375 per share. In connection with such purchase, the undersigned,
has heretofore executed and delivered a subscription agreement
("Subscription Agreement") of your design. As the forty (40) day
transaction restriction period has expired, the undersigned hereby
requests that the Common Stock be transferred into "Street Name" of
__________________________.
The undersigned represents and warrants as follows:
(1) The offer to purchase the Securities was made to it outside of the
United States and the undersigned was, at the time the Subscription
Agreement was executed and delivered, and is now, outside the United
States;
(2) It is not a U.S. Person (as such term is defined in Section 902(a)
of Regulation S ("Regulation S") promulgated under the United States
Securities Act of 1933 (the "Securities Act"), and it has purchased the
Securities for its own account and not for the account or benefit of any
U.S. person;
<PAGE>
(3) All offers and sales by the undersigned of the Common Stock shall be
made pursuant to an effective registration statement under the Securities
Act, or pursuant to an exemption from, or in a transaction not subject to
the registration requirements of, the Securities Act.
(4) It is familiar with and understands the terms, conditions and
requirements contained in Regulation S and definitions of U.S. persons
contained in Regulation S;
(5) The undersigned has not engaged in any "directed selling efforts"
(as such term is defined in Regulation S) with respect to the Securities;
and
(6) The undersigned purchased Securities with investment intent and
presently has no interest to sell, dispose of or otherwise transfer the
Common Stock. The purpose for this request is to facilitate the
management of the undersigned's investment accounts.
(7) The representations and warranties of the undersigned contained in
the Subscription Agreement are true and correct in all respects on and as
of the date hereof as though made on and as of the date hereof.
Dated this _______ day of the month of _____________, 199____.
__________________________ __________________________
____________________
Official Signature of Subscriber Title Country of
Execution
APPENDIX "B"
"The Securities covered hereby have not been registered under the
Securities Act of 1933, as amended (the "Act") and may not be offered or
sold within the United States or to or for the account or the benefit of
U.S. persons (i) as part of a distribution at any time or (ii) otherwise
until June 26, 1997 except, in either case, in accordance with Regulation
S under the Act. Terms used above have the meaning given to them by
Regulation S."
<PAGE>
This Note has not been registered under the
Securities Act of 1933, as amended, and may be
offered and sold only if so registered or, in
the opinion of counsel acceptable to
the Company, an exemption from
registration is available.
CURTIS MATHES HOLDING CORPORATION
CONVERTIBLE REVOLVING CREDIT NOTE
May __, 1997 Note No. _______
For value received, Curtis Mathes Holding Corporation, a Texas
corporation (the "Company"), hereby promises to pay to _____________,
(the "Holder"), or registered assigns, the principal sum of ONE MILLION
DOLLARS AND NO CENTS ($1,000,000), on the dates specified herein, with
interest as specified herein.
This Note is subject to the following additional provisions, terms
and conditions:
ARTICLE 1. DEFINITIONS.
1.1 Certain Definitions.
"Applicable Rate" means the annual rate of interest before maturity,
and shall be the equivalent of the rate described by the Wall Street
Journal as the prime rate in effect from time to time (computed on a
365-day basis) ("Prime Rate"), plus one and one-half percent (1.5%.)
"Credit Agreement" means that one certain Revolving Line of Credit
Agreement, dated as of October 1, 1996, by and between the Company and
the Lender named therein, and assigned to the Holder herein as of May 8,
1997, as such may be amended, supplemented, restated or otherwise
modified from time to time.
"Default Rate" means 13% per annum.
"Holder" has the meaning given to such term in the first paragraph
of this Note.
"Interest Payment Date" means each of June 30, 1997, September 30,
1997, December 31, 1997, and March 31, 1998.
"Maximum Rate" means the maximum nonusurious interest rate permitted
under applicable law.
"Note" or "Notes" means this Convertible Promissory Note made by the
Company payable to the Holder, together with all amendments and
supplements hereto, all substitutions and replacements herefor, and all
renewals, extensions, increases, restatements, modifications,
rearrangements and waivers hereof from time to time.
1.2 Incorporated Definitions. Capitalized terms used in this Note
and not otherwise defined herein shall have the meanings set forth in the
Credit Agreement.
<PAGE>
ARTICLE 2. BASIC TERMS.
2.1 Identification. This Note is one of the Notes referred to
in the Credit Agreement and is entitled to the benefits thereof,
including, but not limited to, Article VII thereof, which sets forth
certain Events of Default and remedies.
2.2 Principal. (a) Scheduled Repayment. The principal of this
Note shall be due and payable on May 13, 1998 (the "Maturity Date.")
(b) Optional Prepayment. The Company may at any time and from
time to time prepay all or any part of the unpaid principal balance of
this Note without premium or penalty. All optional prepayments shall be
accompanied by all accrued interest on the principal amount being prepaid
to the date of prepayment and all partial prepayments shall be in the
amount of $10,000 of principal or more.
2.3 Interest. (a) The Company agrees to pay interest in respect of
the unpaid principal amount of this Note at a rate per annum equal to the
lesser of the Applicable Rate and the Maximum Rate. Notwithstanding the
preceding sentence, the Company agrees to pay interest in respect of
overdue principal, and, to the extent permitted by law, overdue interest,
at a rate per annum equal to the lesser of the Default Rate and the
Maximum Rate.
(b) Interest on the principal of this Note shall be due and
payable (i) on each Interest Payment Date and the Maturity Date, (ii)
upon the payment or prepayment, in full or in part, of any of the
principal of this Note, (iii) at the maturity of this Note (whether by
acceleration or otherwise), and (iv) after maturity (whether by
acceleration or otherwise), on demand.
(c) All computations of interest, both before and after
maturity, shall be made on the basis of a year of 365 days (or 366 days,
as applicable) for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest
is payable.
2.4 Conversion. (a) Conversion of any portion of principal or
interest that may be or become due on this Note shall be subject to (i)
the Offshore Securities Subscription Agreement between the Holder and the
Corporation dated _________, 1997, (ii) the provisions of Article II of
the Credit Agreement, reference to which is hereby made for a statement
of the rights and obligations of the Company and the Holder with respect
to conversion of this Note into Common Stock, and (iii) the following:
Beginning on June 26, 1997, Holder may convert any balance due on this
Note into such number of Common Shares of the Company $.01 par value (the
"Conversion Shares") as is obtained by dividing the aggregate balance
being so converted by Ninety-three and Three-quarter Cents ($0.9375) (the
"Conversion Price"), which represents Seventy-five percent (75%) of the
closing price of the Common Stock on May 7, 1997.
(b) The conversion right provided by Section (a) hereof may be
exercised only by the Holder of this Note, in whole or in part, by the
surrender of this Note 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 balance of
<PAGE>
the Note so surrendered, if any, by (2) the Conversion Price. In the
event of any exercise of the conversion right of the Note granted herein
(i) share certificates representing the Common Shares purchased by virtue
of such exercise shall be delivered to the Holder within 5 days of notice
of conversion free of restrictive legend or stop transfer orders, and
(ii) unless the Note has been fully converted, a new note representing
the balance of the Note not so converted, if any, shall also be delivered
to the Holder within 5 days of notice of conversion, or carried on the
Corporation's ledger, at Holder's option. The Holder may exercise its
right to convert the Note 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 Note to the
Corporation by express courier. Each date on which a telecopied Notice
of Conversion is 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
the Note (together with the note representing the balance not so
converted) to the Holder via express courier within three business days
after the conversion date if the Corporation has received the original
Notice of Conversion and the Note being so converted by such date.
(c) All Common Shares which may be issued upon conversion of the
Note will, upon issuance, be duly issued, fully paid and nonassessable
and free from all taxes, liens, and charges with respect to the issue
thereof. At all times that any balance on the Note is 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 the balance of
the Note then outstanding.
(d) No fractional Common Shares shall be issued in connection with
any conversion of the Note, 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.
2.5 General. Whenever any payment to be made under this Note
shall be stated to be due on a day that is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day, and,
with respect to payments of principal, interest thereon shall be payable
at the applicable rate during such extension. Each payment received by
the Holder shall be applied first to late charges and collection
expenses, if any, then to the payment of accrued but unpaid interest
hereunder, and then to the reduction of the unpaid principal balance
hereof
2.6 Surrender of Note on Prepayment or Conversion. Upon any
conversion of any or all of this Note to Common Stock or any partial
prepayment of this Note, this Note may, at the option of the Holder or if
requested by the Company, and shall, as a condition to transfer, be
surrendered to the Company in exchange for a new Note in a principal
amount equal to the principal amount remaining unpaid on the surrendered
Note, or made available to the Company for notation thereon of the
portion of the principal and interest so prepaid or converted. In case
the entire principal amount of this Note is prepaid or converted, this
Note shall be surrendered to the Company for cancellation and shall not
be reissued.
<PAGE>
ARTICLE 3. MISCELLANEOUS.
3.1 Amendment. This Note may be amended, modified, superseded
or canceled, and any of the terms, covenants, representations, warranties
or conditions hereof and thereof may be waived, only by a written
instrument that satisfies the requirements of the Subscription Agreement.
3.2 Successors and Assigns. (a) The rights and obligations
of the Company and the Holder under this Note shall be binding upon, and
inure to the benefit of, and be enforceable by, the Company and the
Holder, and their respective permitted successors and assigns.
(b) The Holder may not sell, assign (by operation of law or
otherwise), transfer, pledge, grant a security interest in, or otherwise
dispose of this Note or any portion hereof or any rights or obligations
hereunder except in compliance with the Subscription Agreement, which
contains certain restrictions on the transferability hereof.
(c) The registered owner of this Note may be treated as the
owner of it for all purposes.
3.3 Governing Law. This Note 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.
3.4 Waivers. Except as may be otherwise provided herein, the
makers, signers, sureties, guarantors and endorsers of this Note
severally waive demand, presentment, notice of dishonor, notice of intent
to demand or accelerate payment hereof, notice of acceleration, diligence
in collecting, grace, notice, and protest, and agree to one or more
extensions for any period or periods of time and partial payments, before
or after maturity, without prejudice to the Holder.
3.5 No Waiver by Holder. No failure or delay on the part of the
Holder in exercising any right, power or privilege hereunder and no
course of dealing between the Company and the Holder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.
3.6 Limitation on Interest. Notwithstanding any other provision of
this Note, interest on the indebtedness evidenced by this Note is
expressly limited so that in no contingency or event whatsoever, whether
by acceleration of the maturity of this Note or otherwise, shall the
interest contracted for, charged or received by the Holder exceed the
maximum amount permissible under applicable law. If from any
circumstances whatsoever fulfillment of any provisions of this Note or of
any other document evidencing, securing or pertaining to the indebtedness
evidenced hereby, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, then,
ipso facto, the obligation to be fulfilled shall be reduced to the limit
of such validity, and if from any such circumstances the Holder shall
ever receive anything of value as interest or deemed interest by
applicable law under this Note or any other document evidencing, securing
or pertaining to the indebtedness evidenced hereby or otherwise an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal
<PAGE>
amount owing under this Note or on account of any other indebtedness of
the Company to the Holder, and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of this Note
and such other indebtedness, such excess shall be refunded to the
Company. In determining whether or not the interest paid or payable with
respect to any indebtedness of the Company to the Holder, under any
specific contingency, exceeds the highest lawful rate, the Company and
the Holder shall, to the maximum extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee or premium
rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, (c) amortize, prorate, allocate and spread the total
amount of interest throughout the term of such indebtedness so that the
actual rate of interest on account of such indebtedness does not exceed
the maximum amount permitted by applicable law, and/or (d) allocate
interest between portions of such indebtedness, to the end that no such
portion shall bear interest at a rate greater than that permitted by
applicable law. The terms and provisions of this paragraph shall control
and supersede every other conflicting provision of this Note and all
other agreements between the Company and the Holder.
EXECUTED as of the date first written above.
CURTIS MATHES HOLDING CORPORATION
By:______________________________________
Patrick A. Custer, President
