UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Amendment No. 1
Under the Securities Exchange Act of 1934
Finlay Enterprises, Inc.
(Name of Issuer)
Common Stock, $.01 par value per share
(Title of Class of Securities)
317884 20 3
(CUSIP Number)
Andrew D. Flaster
Thomas H. Lee Company, 75 State Street, Boston, MA 02109 (617) 227-1050
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 22, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 317884 20 3
1. NAME OF REPORTING PERSON - Thomas H. Lee
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON -
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3. SEC USE ONLY
4. SOURCE OF FUNDS
N/A
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
7. SOLE VOTING POWER
254,751
NUMBER OF
SHARES 8. SHARED VOTING POWER
BENEFICIALLY 1,801,510
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER
REPORTING 254,751
PERSON WITH
10. SHARED DISPOSITIVE POWER
1,801,510
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,056,261
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.0%
14. TYPE OF REPORTING PERSON
IN
<PAGE>
SCHEDULE 13D
Item 1. Security and Issuer
The class of equity securities to which this statement relates is the
common stock, $0.01 par value per share (the "Shares") of Finlay Enterprises,
Inc., a Delaware corporation (the "Issuer"). The principal executive offices of
the Issuer are located at 521 Fifth Avenue, New York, New York, 10175.
Item 2. Identity and Background.
(a) - (c) and (f)
This Schedule 13D is being filed jointly on behalf of the following persons
(collectively, the "Reporting Persons"): (1) Thomas H. Lee Equity Partners,
L.P., a Delaware limited partnership ("Equity Partners"), (2) THL Equity
Advisors Limited Partnership, a Delaware limited partnership ("Equity
Advisors"), (3) THL Equity Trust, a Massachusetts business trust ("Equity
Trust"), and (4) Thomas H. Lee ("Mr. Lee").
The address of each of Equity Partners, Equity Advisors and Equity Trust is
c/o Thomas H. Lee Company, 75 State Street, Boston, Massachusetts 02109. The
address of Mr. Lee is c/o Thomas H. Lee Capital, L.L.C., 590 Madison Avenue, New
York, New York 10022.
Equity Partners is principally engaged in the business of investment in
securities. Equity Advisors is principally engaged in the business of serving as
general partner of Equity Partners. Equity Trust is principally engaged in the
business of serving as general partner of Equity Advisors. Mr. Lee's principal
occupation is sole proprietor of the Thomas H. Lee Company and Thomas H. Lee
Capital, L.L.C.
Due to an existing arrangement between Equity Partners, Equity Advisors and
Equity Trust, each of Equity Partners, Equity Advisors and Equity Trust could be
deemed to be the beneficial owner of all Shares beneficially owned by Equity
Partners. Equity Advisors and Equity Trust each disclaim beneficial ownership of
such Shares.
Mr. Lee could also be deemed to beneficially own all of the Shares
beneficially owned by Equity Partners. Mr. Lee disclaims beneficial ownership of
such Shares.
Attached as Schedule A to this Schedule 13D is information concerning the
Reporting Persons and other persons and entities as to which such information is
required to be disclosed in response to Item 2 and General Instruction C to
Schedule 13D.
<PAGE>
(d) and (e)
None of the Reporting Persons or any of their officers or trustees has been
convicted in a criminal proceeding during the past five years (excluding traffic
violations and similar misdemeanors).
None of the Reporting Persons or any of their officers or trustees has been
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction during the past five years as a result of which it was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
Each of Equity Partners and Mr. Lee received certain Shares pursuant to a
recapitalization of the Issuer in May, 1993. Mr. Lee's shares are held of record
by the 1989 Thomas H. Lee Nominee Trust (the "Nominee Trust") as further
explained below in Item 5. In April, 1995, in connection with the Issuer's
Initial Public Offering, Equity Partners and the Nominee Trust purchased
additional Shares, as described in the Issuer's Registration Statement on Form
S-1 (No. 33-88938).
Item 4. Purpose of Transactions.
Equity Partners and the Nominee Trust purchased the Shares for general
investment purposes. Equity Partners and the Nominee Trust retain the right to
change their investment intent. Subject to market conditions and other factors,
Equity Partners and the Nominee Trust may acquire or dispose of shares of the
Issuer from time to time in future open-market, privately negotiated or other
transactions.
Except as set forth herein, the Reporting Persons do not have any plans or
proposals which would relate to or result in any of the transactions described
in subparagraphs (a) through (j) of Item 4 of Schedule 13D.
On October 16, 1997 Equity Partners, the Nominee Trust and other
stockholders and the Issuer entered into an Underwriting Agreement (the
"Underwriting Agreement") (referenced hereto as Exhibit 2) with Goldman, Sachs &
Co., Donaldson, Lufkin & Jenrette Securities Corporation and SBC Warburg Dillon
Read Inc., as representatives of the several underwriters (the "Underwriters")
named therein. Pursuant to the terms of the Underwriting Agreement, the Selling
Stockholders (as defined therein) agreed to sell an aggregate of 3,000,000
Shares to the public. The Underwriters were also granted an over-allotment
option to purchase an additional 300,000 of the Selling Stockholders' Shares
pursuant to the Underwriting Agreement.
<PAGE>
Equity Partners and the Nominee Trust sold Shares pursuant to such
over-allotment option on October 22, 1997. In connection with the sale, Equity
Partners and the Nominee Trust sold an aggregate of 274,953 Shares at a price of
$19.00 per share. Of such Shares, 247,298 were sold by Equity Partners and
27,655 were sold by the Nominee Trust.
Immediately prior to this sale, the Nominee Trust sold 16,315 Shares to
certain employees of the Thomas H. Lee Company pursuant to Option Agreements (a
form of which is attached hereto as Exhibit 5) between the Nominee Trust and
those employees.
This Amendment No. 1 to Schedule 13D relates to the sales made by the
Reporting Persons pursuant to the Underwriting Agreement, as described above.
Item 5. Interest in Securities of the Issuer.
(a) and (b)
Equity Partners holds 1,801,510 Shares representing approximately 18.7% of
the outstanding Shares. Equity Partners has shared voting power and shared
dispositive power with respect to such Shares.
Each of Equity Advisors, Equity Trust and Mr. Lee could be deemed to share
the power to vote or to direct the voting of, and may be deemed, pursuant to the
attribution rules of Rule 13d-3 of the Exchange Act, to share the power to
dispose or to direct the disposition of the Shares held by Equity Partners. Each
of Equity Advisors, Equity Trust and Mr. Lee disclaim beneficial ownership of
such Shares.
Mr. Lee holds 254,751 Shares pursuant to the Nominee Trust, representing
approximately 2.3% of the outstanding Shares. Mr. Lee is general partner of the
Thomas H. Lee 1989 Nominee Trust Limited Partnership, the beneficiary of the
Nominee Trust. Mr. Lee has sole voting and dispositive power with respect to
such Shares, and shared voting and dispositive power with respect to the Shares
held by Equity Partners, as described above.
(c) The responses to Items 3 and 4 of this Schedule 13D are incorporated
herein.
(d) Not applicable.
(e) Not applicable.
<PAGE>
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
The responses to Items 3, 4, and 5 of this Schedule 13D and the Exhibits to
this Schedule 13D are incorporated herein by reference.
Except for the agreements described below, to the best of knowledge of the
Reporting Persons, there are no contracts, arrangements, understandings or
relationships (legal or otherwise) between the persons enumerated in Item 2, and
any other person, with respect to any securities of the Issuer, including, but
not limited to, transfer or voting of any of the securities, finder's fees,
joint ventures, loan or option arrangements, put or calls, guarantees of profits
division of profits or less, or the giving or withholding of proxies.
Prior to completion of the Initial Public Offering of the Issuer, the Lee
Investors (including Equity Partners and the Nominee Trust), the Desai
Investors, the Management Stockholders (each term as defined therein), all
employees holding options to purchase Shares, certain private investors and the
Issuer entered into an Amended and Restated Stockholders Agreement (the
"Stockholders' Agreement") (attached hereto as Exhibit 3 and as amended by the
Omnibus Amendment to the Registration Rights and Stockholders' Agreement
referenced hereto as Exhibit 4), which sets forth certain rights and obligations
of the parties with respect to the Shares and corporate governance of the
Issuer. Any employees of the Issuer not parties to the Stockholders' Agreement
who received options to purchase Shares in connection with their employment have
been, and will continue to be, required to become parties to the Stockholders'
Agreement.
The Stockholders' Agreement, as amended, provides that the parties thereto
must vote their Shares to fix the number of members of the Board of Directors of
the Issuer at eight and to vote in favor of six directors who are nominated at
follows: two by the Lee Investors; one by the Desai Investors; two by Mr. David
B. Cornstein (one of whom must be a management employee of the Issuer); and one
by Mr. Arthur E. Reiner. Notwithstanding the foregoing, the right of various
persons to designate directors will be reduced or eliminated at such time as
they own less than certain specified percentages of Shares then outstanding or
in certain cases are no longer an employee of the Issuer. The designees of the
Lee Investors currently serving on the Board of Directors are Mr. Lee and Mr.
Warren C. Smith, Jr.; the designee of the Desai Investors is Mr. Rohit M. Desai;
the designees of Mr. Cornstein are Mr. Cornstein and Mr. James Martin Kaplan;
and Mr. Reiner is his own designee. The Stockholders' Agreement also provides
for the Executive Committee to consist of five directors, including one director
not a party to the Stockholders' Agreement selected by the Board of Directors,
one member designated by Mr. Lee (so long as the Lee Investors have the right to
designate a nominee for director), one member designated by the Desai Investors
(so long as the Desai Investors have the right to designate a nominee for
director) and two members designated by Mr. Cornstein (which number will be
reduced to one if Mr. Cornstein is only entitled to designate one nominee for
director and none if Mr. Cornstein ceases to have the right to designate a
<PAGE>
nominee for director). When a stockholder or group of stockholders loses the
right to designate a director, such director is to be designated instead by a
majority of the directors of the Issuer. The Executive Committee of the Issuer's
Board consists at present of Messrs. Lee, Desai, Cornstein, Kaplan and Mr.
Norman S. Matthews.
In addition, the Stockholders' Agreement provides that the parties thereto
have (i) certain "come along" rights allowing them to participate in private
sales of Shares by parties selling at least a majority of the outstanding Shares
of common stock and (ii) certain "take along" rights allowing parties who are
selling at least a majority of the outstanding Shares to require the other
parties to the Stockholders' Agreement to sell all or a portion of their Shares
to the same purchaser in the same transaction on the same terms.
Equity Partners and the Nominee Trust have certain registration rights
pursuant to a Registration Rights Agreement, dated as of May 23, 1993, by and
among the Issuer, Equity Partners, and certain other stockholders of the Issuer.
The Nominee Trust has executed Option Agreements (a form which is attached
hereto as Exhibit 5) with certain present and former employees of the Thomas H.
Lee Company, pursuant to which the employees, after giving effect to the
transactions described in this Schedule 13D, hold options to purchase in the
aggregate 53,295 Shares from the Nominee Trust.
Item 7. Material to be Filed as Exhibits.
Exhibit 1: Joint filing agreement among the Reporting Persons.
Exhibit 2: Underwriting Agreement, dated as of October 16, 1997, by
and among the Selling Stockholders (as defined therein)
and Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette
Securities Corporation and SBC Warburg Dillon Read Inc, as
representatives of the several underwriters, incorporated by
reference to Exhibit 1.1 of the Issuer's Registration
Statement on Form S-1 (No. 33-34949).
Exhibit 3: Amended and Restated Stockholders' Agreement dated as of
March 6, 1995 by and among the Issuer, Thomas H. Lee
Equity Partners, L.P., the 1989 Thomas H. Lee Nominee Trust
and other stockholders of the Issuer listed on the
signature pages therein.
Exhibit 4: Omnibus Amendment to Registration Rights and Stockholders'
Agreements, incorporated by reference to Exhibit 4.9(n) of
the Issuer's Registration Statement on Form S-1
(No. 33-34949).
Exhibit 5: Form of Stock Option Agreement.
<PAGE>
Schedule A
Each of the following individuals is a United States citizen, and with the
exception of John W. Childs, Glenn H. Hutchins and Steven G. Segal, is employed
by the Thomas H. Lee Company, 75 State Street, Boston, Massachusetts, 02109.
Steven G. Segal and John W. Childs are employed by JW Childs Associates,
One Federal Street, Boston, Massachusetts, 02110.
Glenn H. Hutchins is employed by the Blackstone Group, 345 Park Avenue, New
York, New York, 10154.
THL Equity Trust
Officers:
Chairman Thomas H. Lee
1 Old Farm Road, Lincoln, MA 01773
President David V. Harkins
8 Corn Point Road, Marblehead, MA 01945
Vice Presidents C. Hunter Boll
45 Fletcher Street, Winchester, MA 01890
Thomas R. Shepherd
172 Harvard Road, Stow, MA 01775
Anthony J. DiNovi
3 Ravine Road, Wellesley, MA 02181
Thomas M. Hagerty
256 Beacon Street, Apt #4, Boston, MA 02116
Joseph J. Incandela
139 Abbott Road, Wellesley Hills, MA 02181
Scott A. Schoen
191 Kings Grant Road, Weston, MA 02193
Warren C. Smith, Jr.
38 Coolidge Lane, Dedham, MA 02026
<PAGE>
Glenn H. Hutchins
c/o The Blackstone Group
345 Park Avenue, New York, NY, 10154
Steven G. Segal
42 Nobscot Road, Newton, MA 02159
Treasurer Wendy L. Masler
11 Waverly Street, #3, Brookline, MA 02115
Assistant Treasurer Andrew D. Flaster
4 Fairfield Drive, Lexington, MA 02173
Clerk Wendy L. Masler
11 Waverly Street, #3, Brookline, MA 02115
Assistant Clerks Charles W. Robins, Esq.
50 Lehigh Road, Wellesley, MA 02181
James Westra, Esq.
5 Stage Hill Road, Wenham, MA 01984
Jeffrey S. Wieand, Esq.
1695 Lowell Road, Concord, MA 01742
Trustees:
Thomas H. Lee 1 Old Farm Road, Lincoln, MA 01773
David V. Harkins 8 Corn Point Road, Marblehead, MA 01945
John W. Childs c/o JW Childs Associates,
One Federal Street, Boston, MA 02110
<PAGE>
Signatures
After reasonable inquiry and to the best knowledge and belief of each of
the undersigned, such person certifies that the information set forth in this
Statement with respect to such person is true, complete and correct.
THOMAS H. LEE EQUITY PARTNERS, L.P.
By: THL Equity Advisors Limited Partnership,
its General Partner
By: THL Equity Trust, its General Partner
By: /s/ Warren C. Smith, Jr.
Name: Warren C. Smith, Jr.
Title: Vice President
THOMAS H. LEE EQUITY ADVISORS
LIMITED PARTNERSHIP
By: THL Equity Trust, its General Partner
By: /s/ Warren C. Smith, Jr.
Name: Warren C. Smith, Jr.
Title: Vice President
THL EQUITY TRUST
By: /s/ Warren C. Smith, Jr.
Name: Warren C. Smith, Jr.
Title: Vice President
/s/ Thomas H. Lee
Thomas H. Lee
Exhibit 1 to Schedule 13D Amendment No. 1
Finlay Enterprises, Inc.
AGREEMENT
Agreement made this 7th day of November, 1997, by and between each of the
undersigned.
WHEREAS, each of the undersigned is required to file an amendment to a
Schedule 13D with respect to ownership of securities in Finlay Enterprises,
Inc.; and
WHEREAS, each of the undersigned is individually eligible to use this
Amendment No. 1 to Schedule 13D;
NOW, THEREFORE, the undersigned agree to file only one Amendment No. 1 to
Schedule 13D reflecting their combined beneficial ownership of securities in
Finlay Enterprises, Inc.
THOMAS H. LEE EQUITY PARTNERS, L.P.
By: THL Equity Advisors Limited Partnership,
its General Partner
By: THL Equity Trust, its General Partner
By: /s/ Warren C. Smith, Jr.
Name: Warren C. Smith, Jr.
Title: Vice President
THOMAS H. LEE EQUITY ADVISORS
LIMITED PARTNERSHIP
By: THL Equity Trust, its General Partner
By: /s/ Warren C. Smith, Jr.
Name: Warren C. Smith, Jr.
Title: Vice President
THL EQUITY TRUST
By: /s/ Warren C. Smith, Jr.
Name: Warren C. Smith, Jr.
Title: Vice President
/s/ Thomas H. Lee
Thomas H. Lee
FINLAY ENTERPRISES, INC.
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
<PAGE>
FINLAY ENTERPRISES, INC.
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
TABLE OF CONTENTS
Preamble Page
ARTICLE I Definitions 1
ARTICLE II Covenants and Conditions 6
Section 2.1 Come Along. . . . . . . . . . . . . . . . 6
Section 2.2 Take Along. . . . . . . . . . . . . . . . 7
Section 2.3 Corporate Governance. . . . . . . . . . . 7
Section 2.4 Reports Under 1993 Act. . . . . . . . . . 11
Section 2.5 Stock Split . . . . . . . . . . . . . . . 12
Section 2.6 Maintenance of Public Market. . . . . . . 12
Section 2.7 Listing of Shares . . . . . . . . . . . . 13
Section 2.8 Employment Agreement Amendment. . . . . . 13
ARTICLE III Miscellaneous 13
Section 3.1 Remedies. . . . . . . . . . . . . . . . . 13
Section 3.2 Entire Agreement. . . . . . . . . . . . . 13
Section 3.3 Amendment . . . . . . . . . . . . . . . . 13
Section 3.4 Severability. . . . . . . . . . . . . . . 14
Section 3.5 Notices . . . . . . . . . . . . . . . . . 14
Section 3.6 Binding Effect; Assignment. . . . . . . . 15
Section 3.7 Termination . . . . . . . . . . . . . . . 15
Section 3.8 Recapitalizations, Exchanges, Etc.. . . . 15
Section 3.9 Lee Representative. . . . . . . . . . . . 16
Section 3.10 Action Necessary to Effectuate
the Agreement . . . . . . . . . . . . . . 16
Section 3.11 Purchase for Investment; Legend
on Certificate. . . . . . . . . . . . . . 16
Section 3.12 Effectiveness of Transfers. . . . . . . . 17
Section 3.13 Additional Stockholders . . . . . . . . . 17
Section 3.14 No Waiver . . . . . . . . . . . . . . . . 18
Section 3.15 Counterparts. . . . . . . . . . . . . . . 18
Section 3.16 Headings. . . . . . . . . . . . . . . . . 18
Section 3.17 Governing Law . . . . . . . . . . . . . . 18
SCHEDULE A Schedule of Stockholders 23
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
This Amended and Restated Stockholders' Agreement (the "Agreement") is
entered into as of the 6th day of March, 1995, by and among Finlay Enterprises,
Inc., a Delaware corporation (the "Company"), David B. Cornstein, Arthur E.
Reiner, Robert S. Lowenstein and Ronald B. Grudberg, those persons listed as
Investor Stockholders on the signature pages hereof (the "Investor Holders"),
those persons listed as Lee Holders on the signature pages hereof (the "Lee
Holders") and those persons listed as ELI Holders on the signature pages hereof
(the "ELI Holders"). The Management Holders, the Investor Holders, the Lee
Holders, and the ELI Holders are sometimes collectively referred to herein as
the "Stockholders." Certain terms used in this Agreement as defined terms are
defined in Article I hereof.
WHEREAS, certain parties hereto entered into a Stockholders Agreement
dated as of May 26, 1993 (as amended, the "Original Agreement") for the purpose
of regulating certain aspects of their relationships with each other and with
the Company;
WHEREAS, the Company has sold or is in the process of selling shares of
its Common Stock pursuant to a registration under the 1933 Act pursuant to a
Registration Statement filed on Form S-1 (No. 33-88938) (the "Offering"); and
WHEREAS, certain remaining parties to the Original Agreement desire
to amend and restate the Original Agreement;
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the parties to this
Agreement mutually agree that if the Offering has been consummated on or before
June 1, 1995, then upon (and only upon) the consummation of the Offering, the
Original Agreement shall be amended and restated in its entirety as follows:
ARTICLE I
Definitions
<PAGE>
For the purposes of this Agreement, the following terms shall be defined
as follows:
The "1933 Act" shall mean the Securities Act of 1933, as amended, and
the rules, regulations and interpretations thereunder.
The "1934 Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules, regulations and interpretations thereunder.
An "Affiliate" of a specified person, corporation or other entity shall
mean a person, corporation or other entity which, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the corporation or other entity specified.
"Applicable Lee Holder" and "Applicable ELI Holder" shall mean the
Original Lee Holders and the Equity-Linked Investors, respectively, and (a) the
following transferees of Shares pursuant to a Transfer by a Lee Holder: Lee or
the officers, employees or consultants of Lee (who spend at least fifty percent
(50%) of their business hours consulting for Lee and maintain an office at Lee)
or a corporation or corporations or a partnership or partnerships (or other
entity for collective investment, such as a fund) which is (and continues to be)
controlled by, controlling or under common control with Lee, or any other Person
listed as a Lee Holder on a Signature Page attached hereto as of the date of
this Agreement; (b), the following transferees of Shares pursuant to a Transfer
by an ELI Holder or Lee Equity Partners: any present or future general or
limited partner of either of the Equity-Linked Investors or Lee Equity Partners,
respectively (other than any person which becomes a partner solely to enable it
to be an Applicable Lee Holder or Applicable ELI Holder of the Shares); (c) the
following transferees of Shares pursuant to a Transfer by an ELI Holder or a Lee
Holder: an Institutional Investor; or (d) the following transferees of Shares
pursuant to a Transfer by an ELI Holder: any entity which is (and continues to
be) directly or indirectly controlled by such ELI Holder, which does (and will
continue to) directly or indirectly control such ELI Holder or which is (and
continues to be) directly or indirectly controlled by a Person or entity which
also does (and will continue to) directly or indirectly control such ELI Holder.
"Business Day" shall mean any day, other than a Saturday, Sunday or
legal holiday, on which banks in New York, New York are open for business.
"Common Stock" shall mean the Company's common stock, par value $.01 per
share, that the Company may be authorized to issue from time to time and any
stock into which such Common Stock may hereafter be changed or for which such
Common Stock may be exchanged after giving effect to the terms of such change or
exchange (by way of reorganization, recapitalization, merger, consolidation or
otherwise) and shall also include any common stock of the Company hereafter
authorized and any capital stock of the Company of any other class hereafter
authorized which is not preferred as to dividends or distribution of assets in
<PAGE>
liquidation over any other class of capital stock of the Company or which has
ordinary voting power for the election of directors of the Company.
The "Company" shall mean Finlay Enterprises, Inc., a Delaware
corporation, and its successors and assigns.
"Cornstein Beneficiaries" shall mean, collectively, after the death of
David B. Cornstein, the estate of David B. Cornstein and the spouse and children
of David B. Cornstein holding Shares.
"ELI Holders" shall have the meaning set forth in the first paragraph of
this Agreement and shall also include transferees of the ELI Holders unless
prior to such Transfer such transferee was a Management Holder, Investor Holder
or a Lee Holder.
"ELI Nominees" shall have the meaning set forth in Section 2.3(a).
"Equity-Linked Investors" shall mean Equity-Linked Investors, L.P. and
Equity-Linked Investors - II.
"Institutional Investor" shall mean an insurance company, financial
institution, investment fund or other institutional investor.
"Investor Holders" shall have the meaning set forth in the first
paragraph of this Agreement and shall also include transferees of the Investor
Holders unless prior to such Transfer such transferee was a Management Holder, a
Lee Holder or an ELI Holder.
"Lee" shall mean Thomas H. Lee Company.
"Lee Equity Partners" means Thomas H. Lee Equity Partners, L.P., a
Delaware limited partnership.
"Lee Holders" shall have the meaning set forth in the first paragraph of
this Agreement and shall also include transferees of the Lee Holders unless
prior to such Transfer such transferee was an Investor Holder, a Management
Holder or an ELI Holder.
"Lee Representative" shall have the meaning set forth in Section 3.9.
"Management Holders" shall mean Ronald B. Grudberg, David B. Cornstein,
Arthur E. Reiner and the Estate of Robert S. Lowenstein and other employees of
the Company or the Operating Company who from time to time sign a counterpart
signature page hereto as Management Holders and their transferees unless prior
to such Transfer such transferee was an Investor Holder, a Lee Holder or an ELI
Holder.
<PAGE>
"Original Agreement" shall mean the Stockholders' Agreement dated as of
May 26, 1993, as amended, by and among the Company and certain of the other
parties hereto.
"Operating Company" shall mean Finlay Fine Jewelry Corporation, a
Delaware corporation, and its successors and assigns.
"Original Lee Holders" shall mean the Lee Holders as of the date of this
Agreement.
A "Permitted Transferee" shall mean a transferee of Shares from any
Management Holder who is a natural person and (i) such Management Holder's
spouse, children, parents or siblings or a trust for the benefit of any of them,
provided that the Management Holder retains, as trustee or by some other means,
the sole authority to vote such Shares, and (ii) such Management Holder's
personal representative upon his death for purposes of administration of his
estate or upon his disability for purposes of protection and management of his
assets.
"Person" means an individual, corporation, partnership, trust, or
unincorporated association, or a government or any agency or political
subdivision thereof.
A "Public Offering" shall mean the completion of a sale of Common Stock
pursuant to a registration statement which has become effective under the 1933
Act, excluding registration statements on Form S-4, S-8 or similar limited
purpose forms.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of May 26, 1993 among the Company and the Lee Holders, ELI Holders,
Investor Holders and Management Holders, as amended from time to time.
"Rule 144 Transaction" means a transfer of Shares (A) complying with
Rule 144 under the 1933 Act as such Rule or a successor thereto is in effect on
the date of such transfer (but not including a sale other than pursuant to a
"brokers transaction" as defined in clauses (i) and (ii) of paragraph (g) of
Rule 144 as in effect on the date hereof) and (B) occurring at a time when
Shares are registered pursuant to Section 12 of the 1934 Act.
"Schedule" shall refer to the Schedule of Stockholders attached hereto
as Schedule A.
"Shares" shall mean all (i) shares of Common Stock held by Stockholders
from time to time (other than shares of Common Stock acquired from the public),
and (ii) securities of the Company or any of its Subsidiaries issued in exchange
for, upon reclassification of, or as a distribution in respect of, any of the
foregoing. For purposes of this Agreement (other than Section 2.3 hereof),
"Shares" shall include (i) outstanding options, warrants and other rights to
purchase Common Stock held by any Stockholder and (ii) Common Stock purchasable
upon exercise of outstanding exercisable options, warrants and other rights to
purchase Common Stock held by each Stockholder. For purposes of this Agreement,
<PAGE>
when calculating the percentage of Shares held by any holder, such calculation
shall give effect to any stock splits, distributions, combinations or other
recapitalization events involving the Shares.
"Stockholder" shall mean any party hereto other than the Company.
"Stockholder Group" shall mean any of (A) the ELI Holders taken as a
group, (B) the Lee Holders taken as a group, (C) the Management Holders taken as
a group, and (D) the Investor Holders taken as a group. The Company shall not in
any case be deemed to be a member of any Stockholder Group (whether or not the
Company holds or repurchases any Shares).
"Subsidiary" with respect to any entity (the "parent") shall mean any
corporation, firm, association or trust of which such parent, at the time in
respect of which such term is used, (i) owns directly or indirectly more than
fifty percent (50%) of the equity or beneficial interest, on a consolidated
basis, or (ii) owns directly or controls with power to vote, indirectly through
one or more Subsidiaries, shares of capital stock or beneficial interest having
the power to cast at least a majority of the votes entitled to be cast for the
election of directors, trustees, managers or other officials having powers
analogous to those of directors of a corporation. Unless otherwise specifically
indicated, when used herein the term Subsidiary shall refer to a direct or
indirect Subsidiary of the Company.
"Third Party" means any Person (including such Person's Affiliates)
other than the Company.
"Transfer" shall mean to transfer, sell, assign, pledge, hypothecate,
give, create a security interest in or lien on, place in trust (voting or
otherwise), assign or in any other way encumber or dispose of, directly or
indirectly and whether or not by operation of law or for value, any Shares.
ARTICLE II
Covenants and Conditions
2.1 Come Along. No Stockholder or group of Stockholders shall Transfer
Shares constituting a majority of the outstanding shares of Common Stock in one
or a series of related transactions to a Third Party without complying with the
terms and conditions set forth in this Section 2.1.
(a) The Stockholder or group of Stockholders (collectively, the
"Initiating Stockholder") desiring to Transfer such Shares shall give
not less than twenty (20) days prior written notice of such intended
Transfer to each other Stockholder ("Participating Offeree") and to the
Company. Such notice (the "Participation Notice") shall set forth terms
and conditions of such proposed Transfer, including the name of the
<PAGE>
prospective transferee, the number of Shares proposed to be
transferred (the "Participation Securities") by the Initiating
Stockholder, the purchase price per Share proposed to be paid therefor
and the payment terms and type of Transfer to be effectuated. Each
Participating Offeree may, by notice in writing to the Initiating
Stockholder and to the Company given within ten (10) days following
the delivery of the Participation Notice to such Participating
Offeree, have the opportunity and right to sell to the purchasers in
such proposed Transfer (upon the same terms and conditions as the
Initiating Stockholder) up to that number of Shares owned by such
Participating Offeree as shall equal the product of (x) a fraction,
the numerator of which is the number of Shares owned by such
Participating Offeree as of the date of such proposed Transfer and the
denominator of which is the aggregate number of Shares owned as of the
date of such Participation Notice by each Initiating Stockholder and
by all Participating Offerees, multiplied by (y) the number of
Participation Securities. The amount of Participation Securities to be
sold by any Initiating Stockholder shall be reduced to the extent
necessary to provide for such sales of Shares by Participating
Offerees.
(b) At the closing of any proposed Transfer in respect of which
a Participation Notice has been delivered, the Initiating Stockholder,
together with all Participating Offerees electing to sell Shares who
have delivered the notice referred to in paragraph (a) above, shall
deliver to the proposed transferee certificates evidencing the Shares to
be sold thereto duly endorsed with stock powers and shall receive in
exchange therefor the consideration to be paid or delivered by the
proposed transferee in respect of such Shares as described in the
Participation Notice.
(c) The provisions of this Section 2.1 shall not apply to any
Rule 144 Transaction or to any Transfer by a Lee Holder or an Applicable
Lee Holder to an Applicable Lee Holder or a Transfer by an ELI Holder or
an Applicable ELI Holder to an Applicable ELI Holder, other than, in
each case, a Person described in Section (c) (and not Section (a), (b)
or (d)) of the definition of "Applicable Lee Holder" and "Applicable ELI
Holder."
2.2 Take Along. If Stockholders holding at least a majority of the then
outstanding Common Stock (the "Take Along Group") determine to sell or exchange
(in a business combination or otherwise) in one or a series of related bona fide
arms-length transactions to an unrelated and unaffiliated Third Party all of the
Shares held by them, then, upon thirty (30) days written notice from the Take
Along Group to the other Stockholders, which notice shall include reasonable
details of the proposed sale or exchange including the proposed time and place
of closing and the consideration to be received by the Stockholders (such notice
being referred to as the "Sale Request"), each other Stockholder shall be
obligated to, and shall (i) sell, transfer and deliver, or cause to be sold,
transferred and delivered, to such Third Party, all of his Shares in the same
transaction at the closing thereof (and will deliver certificates for all of his
Shares at the closing, free and clear of all claims, liens and encumbrances),
and each Stockholder shall receive the same consideration per share of Common
<PAGE>
Stock upon such sale and (ii) if stockholder approval of the transaction is
required, vote his Shares in favor thereof. The provisions of this Section 2.2
shall not apply to any Transfer pursuant to a Public Offering.
2.3 Corporate Governance. Until the tenth anniversary of the date
hereof, the Company and Stockholders shall take all action, including but not
limited to (i) the Stockholders instructing their director designees provided
herein to take such actions and (ii) the Stockholders voting, or executing
written consents with respect to, their Shares, so that:
(a) Election of Directors. Subject to Sections 2.3(c) and 2.3(d)
below, the Company's and the Operating Company's Boards of Directors
shall be fixed at ten (10) members, of which one member shall be
designated by Arthur E. Reiner (which member shall be Mr. Reiner
himself) (the "Reiner Nominee"), two members (one of which members shall
be either Mr. Cornstein himself, or if Mr. Cornstein is no longer an
employee of the Company, a management employee of the Company) shall be
designated by David B. Cornstein (the "Cornstein Nominees"), two members
shall be designated by the Applicable ELI Holders (the "ELI Nominees"),
and two members shall be designated by the Applicable Lee Holders (the
"Lee Nominees"). The directors shall be divided into classes. The
initial term of one Desai Nominee and one Lee Nominee shall expire in
1996; the initial term of the Reiner Nominee and the Cornstein Nominees
shall expire in 1997; and the initial term of the other Lee Nominee and
other Desai Nominee shall expire in 1998. At the option of the
Applicable Lee Holders and the Applicable ELI Holders, respectively, the
Lee Nominee(s) or the ELI Nominee(s), respectively, shall be reduced by
one or by two, and such Lee Nominee(s) or ELI Nominee(s), as the case
may be, shall be removed from the Board of Directors and, during such
time as the Applicable Lee Holders and the Applicable ELI Holders,
respectively, would otherwise have had the right to designate a Director
hereunder, a representative of the Applicable Lee Holders or the
Applicable ELI Holders, as the case may be, shall continue to have the
right to attend meetings of the Board of Directors of the Company and
the Operating Company as an observer without a vote or other rights as a
director (except the right to receive sufficient notice to enable such
attendance and the right to receive all other communications,
information and materials furnished, from time to time, to Directors of
the Company and the Operating Company and the right to receive
reimbursement for travel expenses to the same extent as Directors of the
Company and the Operating Company). In addition to any other rights
under this Agreement, (x) any transferee of any of the Lee Holders, the
ELI Holders and David B. Cornstein, who is an Institutional Investor and
who holds pursuant to one or more Transfers Shares constituting at least
ten percent (10%) of the Shares then outstanding and (y) a
representative of the Cornstein Beneficiaries, so long as they hold,
collectively, at least five percent (5%) of the issued and outstanding
shares of Common Stock of the Company (and have not designated a
director pursuant to this Section 2.3(a)), shall have the right to
attend meetings of the Boards of Directors of the Company and its
<PAGE>
Subsidiaries, and, in the case of the Cornstein Beneficiaries, the
Executive Committee, as an observer without a vote or other rights as a
director (except the right to receive sufficient notice to enable such
attendance and the right to receive all other communications,
information and materials furnished, from time to time, to Directors of
the Company and its Subsidiaries, and the Executive Committee, as the
case may be, and the right to receive reimbursement for travel expenses
to the same extent as Directors of the Company and its Subsidiaries).
(b) Designation of Director Nominees. One of the Lee Nominees
shall be designated by the vote or consent of a majority of the then
outstanding Shares owned by Lee Equity Partners and its transferees who
are Applicable Lee Holders and one of the Lee Nominees shall be
designated by the vote or consent of a majority of the then outstanding
Shares owned by the Applicable Lee Holders other than Lee Equity
Partners. The Cornstein Nominees shall be designated by the vote or
consent of a majority of the then outstanding Shares owned by David B.
Cornstein and his Permitted Transferees. The ELI Nominees shall be
designated by the vote or consent of a majority of the then outstanding
Shares owned by the Applicable ELI Holders. Any group of Stockholders
entitled to designate directors hereunder shall also be entitled to
require that the director designated by that group pursuant to this
Section 2.3 be removed or replaced by another designee of such group.
(c) Termination of Right to Elect Directors. The number of
directors which Arthur E. Reiner, David B. Cornstein, the Applicable ELI
Holders, and the Applicable Lee Holders shall have the right to
designate to the Board of Directors of the Company and its Subsidiaries
shall be reduced as follows: Mr. Reiner's right to designate a director
shall terminate on the date that Mr. Reiner is no longer an employee of
the Company. Mr. Cornstein's right to designate one director shall
terminate when Mr. Cornstein and his Permitted Transferees own less than
fifty percent (50%) of the Shares held by him on the date hereof, and
his right to designate the other director shall terminate when he owns
less than five percent (5%) of the Common Stock of the Company then
outstanding. The Applicable Lee Holders' right to designate one director
shall terminate when the Applicable Lee Holders collectively own less
than fifty percent (50%) of the Shares held by them on the date hereof,
and their right to designate the other director (which shall be the
director designated by Lee Equity Partners in accordance with Section
2.3(b)) shall terminate when the Applicable Lee Holders collectively own
less than five percent (5%) of the Common Stock of the Company then
outstanding. The Applicable ELI Holders right to designate one director
shall terminate when the Applicable ELI Holders collectively own less
than fifty percent (50%) of the Shares held by them on the date hereof,
and their right to designate the other director shall terminate when the
Applicable ELI Holders collectively own less than five percent (5%) of
the Common Stock of the Company then outstanding.
<PAGE>
(d) Executive Committee. The Board of Directors of the Company
and the Operating Company shall have an Executive Committee empowered,
to the fullest extent possible by law, to take all actions which can be
taken by the full Board of Directors of the Company and the Operating
Company. Each such Executive Committee shall consist of five (5)
directors, one of which will be designated by Thomas H. Lee (so long as
the Applicable Lee Holders have a right to designate one director
pursuant to Section 2.3(a) above), one of which will be designated by
the Applicable ELI Holders, (so long as the Applicable ELI Holders have
a right to designate one director pursuant to Section 2.3(a) above), two
of which (including one management employee of the Company) will be
designated by David B. Cornstein, so long as David B. Cornstein has the
right to designate two directors pursuant to Section 2.3(a) above, and
thereafter only one of which will be designated by David B. Cornstein
(so long as David B. Cornstein has the right to designate one director
pursuant to Section 2.3(a) above), and one of which will be an
independent director designated by the Board of Directors of the
Company. If any Stockholder or group of Stockholders loses its right to
designate a member of the Executive Committee in accordance with the
foregoing provisions of this Section 2.3(d), such member shall be
designated by the Board of Directors of the Company. Notwithstanding any
other provision of this Agreement, if all of the members of the
Executive Committee vote to remove a director, each Stockholder agrees
to vote his or its Shares (whether at a meeting or by written consent)
to effectuate such removal.
(e) Restrictions on Other Agreements. No Stockholder shall grant
any proxy or enter into or agree to be bound by any voting trust with
respect to the Shares, nor shall any Stockholder enter into any
stockholders agreements or arrangements of any kind with any person with
respect to the Shares on terms which conflict with the provisions of
this Agreement (whether or not such agreements and arrangements are with
other Stockholders or holders of Shares that are not parties to this
Agreement), including but not limited to, agreements or arrangements
with respect to the acquisition, disposition or voting of Shares
inconsistent herewith.
(f) Stockholder Action. Each Stockholder agrees that, in such
Stockholder's capacity as a stockholder of the Company, such Stockholder
will vote, or grant proxies relating to such shares to vote, all of such
Stockholder's shares of Common Stock in favor of any transaction
pursuant to Section 2.2 hereof (other than a transaction with an
Affiliate) if, and to the extent that, approval of the Company's
stockholders is required in order to effect such transaction.
2.4 Reports Under 1934 Act. With a view to making available to the
Stockholders and their transferees the benefits of Rule 144 and Rule 144A
promulgated under the 1933 Act and any other rule or regulation of the
Commission that may at any time permit a Stockholder to sell securities of the
Company or the Operating Company to the public without registration, the Company
agrees to use and to cause the Operating Company to use its best efforts to take
<PAGE>
all action that may be required as a condition to the availability of Rule 144,
Rule 144A or such other rules or regulations, including without limitation to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times subsequent to
ninety (90) days after the effective date of the first registration
statement covering an underwritten Public Offering filed by the Company
or the Operating Company;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company or the Operating Company under
the 1933 Act and the 1934 Act (including, without limitation, under
Section 13 or Section 15 of the 1934 Act); and
(c) furnish to any Stockholder forthwith upon request a written
statement by the Company or the Operating Company that it has complied
with the reporting requirements of Rule 144 (at any time after ninety
(90) days after the effective date of said first registration statement
filed by the Company or the Operating Company), and of the 1933 Act and
the 1934 Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of
the Company or the Operating Company, and such other reports and
documents so filed by the Company or the Operating Company as may be
reasonably requested in availing any Stockholder of any rule or
regulation of the Commission permitting the selling of any securities
without registration.
2.5 Stock Split. If, on or after the receipt by the Company of a request
for registration of a Public Offering pursuant to the Registration Rights
Agreement, the proposed managing underwriter or underwriters of such offering
reasonably believes that the number of shares to be registered is less than the
minimum number necessary for the success of such offering, the Company will
promptly prepare and submit to its Board of Directors, use its best efforts to
cause to be adopted by its Board of Directors and stockholders, and, if so
adopted, file and cause to become effective, an amendment to its Restated
Certificate of Incorporation so as to cause each share of its outstanding Common
Stock to be converted into such number of shares of such Common Stock so that
the number of shares of Registrable Securities (as defined in the Registration
Rights Agreement) to be registered is equal to at least the minimum number which
such managing underwriter or underwriters reasonably believes is necessary for
the success of such offering. Each Stockholder, together with such Stockholder's
Transferees, hereby agrees to vote the Shares held by such Stockholder in favor
of adopting such amendment and to cause its director designees pursuant to
Section 2.3(a), if any, to vote for such amendment.
2.6 Maintenance of Public Market. The Company will not proceed with a
program of acquisition of its own Common Stock, initiate a corporate
reorganization or recapitalization or authorize or consent to any action which
would have the effect of:
<PAGE>
(a) removing the Company from registration with the
Commission under the 1934 Act, or
(b) reducing substantially or eliminating the public market
for shares of Common Stock of the Company.
However, this Section 2.6 shall apply only as long as there are at least five
percent (5%) of the Shares still outstanding and such Shares have not been
transferred in a Public Offering of Common Stock of the Company pursuant to a
registration statement under the 1933 Act or transferred pursuant to a Rule 144
Transaction.
2.7 Listing of Shares. If any shares of the Company's Common Stock are
listed on any national securities exchange (or on the National Association of
Securities Dealers Inc., Automated Quotation System or comparable system), then
the Company will take such action as may be necessary, from time to time, to
list Common Stock included in the Shares on such exchange (or system as the case
may be), subject to official notice of issuance, with respect to shares of
Common Stock not then issued.
2.8 Employment Agreement Amendments. No amendment may be made to Section
7 or 8 of the Employment Agreement, dated as of January 3, 1995, among the
Company, the Operating Company and Arthur E. Reiner without the consent of the
holders of a majority of the then outstanding shares held by each of the
Applicable ELI Holders and the Applicable Lee Holders.
ARTICLE III
Miscellaneous
3.1 Remedies. The parties to this Agreement acknowledge and agree that
the covenants of the Company and the Stockholders set forth in this Agreement
may be enforced in equity by a decree requiring specific performance. Without
limiting the foregoing, if any dispute arises concerning the sale or other
disposition of any of the Shares subject to this Agreement or concerning any
other provisions hereof or the obligations of the parties hereunder, the parties
to this agreement agree that an injunction may be issued in connection therewith
(including, without limitation, restraining the sale or other disposition of
such Shares or rescinding any such sale or other disposition). Such remedies
shall be cumulative and non-exclusive and shall be in addition to any other
rights and remedies the parties may have under this Agreement or otherwise.
3.2 Entire Agreement. This Agreement, the Stock Purchase Agreement and
the Registration Rights Agreement, together with the Exhibits hereto, sets forth
the entire understanding of the parties, and supersedes all prior agreements and
all other arrangements and communications, whether oral or written, with respect
to the subject matter hereof.
<PAGE>
3.3 Amendment. The Schedule may be amended to reflect changes in the
composition of the Stockholders and changes in stock ownership that may occur
from time to time as a result of Transfers of Shares not restricted under
Section 2.1 or 2.2 hereof. Amendments to the Schedule reflecting Transfers of
Shares not restricted under Section 2.1 or 2.2 hereof shall become effective
when the amended Schedule, and a copy of the Agreement as executed by any new
transferee in accordance with Section 3.13, are filed with the Company.
Amendments to the Schedule reflecting Transfers pursuant to waivers under
Article II hereof shall become effective when a copy of each of (i) the amended
Schedule, (ii) the waivers, as executed by the holders of a majority of the
Shares held by each of the ELI Holders, the Management Holders, the Investor
Holders and the Lee Holders (or by the Lee Representative), voting separately,
and (iii) the counterpart signature page to this Agreement as executed by any
new transferee, are delivered to the Company and to the ELI Holders and the Lee
Holders (or the Lee Representative), provided that, for purposes of this
sentence, "Management Holders" shall exclude each Management Holder who holds
less than 5,000 Shares. Any other amendment, revision or termination of this
Agreement shall require the prior written consent of the holders of a majority
of the Shares held by each of the ELI Holders, Management Holders, Investor
Holders and the Lee Holders (or the Lee Representative), voting separately.
3.4 Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if the invalid or
unenforceable provision were omitted.
3.5 Notices. All notices and other communications necessary or
contemplated under this Agreement shall be in writing and shall be delivered in
the manner specified herein or, in the absence of such specification, shall be
deemed to have been duly given three business days after mailing by certified
mail, when delivered by hand, upon confirmation of receipt by telecopy, or one
day after sending by overnight delivery service, to the respective addresses of
the parties set forth below:
(a) for notices and communications to the Company:
Finlay Enterprises, Inc.
521 Fifth Avenue
New York, NY 10175
FAX: (212) 557-3848
ATTN: President
(b) For notices and communications to the Stockholders, to the
respective addresses set forth in the Schedule,
(c) with a copy in the case of the Lee Holders to:
<PAGE>
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
FAX: (617) 951-1295
ATTN: Jeffrey S. Wieand
and in the case of the Company to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
FAX: (212) 757-3990
ATTN: Edwin S. Maynard
and in the case of the ELI Holders to:
Morgan, Lewis & Bockius
101 Park Avenue
New York, NY 10178
FAX: (212) 309-6273
ATTN: Christopher Hilbert
and in the case of Cornstein to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, NY 10022
FAX: (212) 223-1151
Attn: James Martin Kaplan
By notice complying with the foregoing provisions of this Section 3.5, each
party shall have the right to change the mailing address for future notices and
communications to such party.
3.6 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties thereto and to their respective transferees,
successors, assigns, heirs and administrators; provided, however, that the
rights under this Agreement may not be assigned except as expressly provided
herein. No such assignment shall relieve an assignor of its obligations
hereunder.
3.7 Termination. Without affecting any other provision of this Agreement
requiring termination of any rights in favor of any Stockholder, or any
transferee of Shares, the provisions of Article II of this Agreement shall
<PAGE>
terminate as to such Stockholder, or transferee, when, pursuant to and in
accordance with this Agreement, such Stockholder, or transferee, as the case may
be, no longer owns any Shares.
3.8 Recapitalizations, Exchanges, Etc. The provisions of this Agreement
shall apply, to the full extent set forth herein with respect to Shares, to any
and all shares of capital stock of the Company or any successor or assign of the
Company (whether by merger, consolidation, sale of assets or otherwise) which
may be issued in respect of, in exchange for, or in substitution of the Shares,
by reason of a stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. Upon the occurrence of any such events, amounts hereunder shall be
appropriately adjusted.
3.9 Lee Representative.
Each Lee Holder hereby designates and appoints (and each Permitted
Transferee (other than pursuant to an Institutional Transfer) of each such Lee
Holder is hereby deemed to have so designated and appointed) Warren C. Smith,
Jr., with full power of substitution (the "Lee Representative"), as the
representative of each such Person to perform all such acts as are required,
authorized or contemplated by this Agreement to be performed by any such Person
and hereby acknowledges that the Lee Representative shall be the only Person
authorized to take any action so required, authorized or contemplated by this
Agreement by each such Person. Each such Person further acknowledges that the
foregoing appointment and designation shall be deemed to be coupled with an
interest and shall survive the death or incapacity of such Person. Each such
Person hereby authorizes (and each such Permitted Transferee will be deemed to
have authorized) the other parties hereto to disregard any notice or other
action taken by such Person pursuant to this Agreement except for the Lee
Representative. The other parties hereto are and will be entitled to rely on any
action so taken or any notice given by the Lee Representative and are and will
be entitled and authorized to give notices only to the Lee Representative for
any notice contemplated by this Agreement to be given to any such Person. A
successor to the Lee Representative may be chosen by a majority of the Shares
held by the Lee Holders, provided that notice thereof is given by the new Lee
Representative to the Company and to the ELI Holders, the Investor Holders and
the Management Holders.
3.10. Action Necessary to Effectuate the Agreement.
The parties hereto agree to take or cause to be taken all such corporate
and other action as may be necessary to effect the intent and purposes of this
Agreement.
3.11. Purchase for Investment; Legend on Certificate.
Each of the parties acknowledges that all of the Shares held by such
party as shown on Exhibit A hereto are being (or have been) acquired for
<PAGE>
investment and not with a view to the distribution thereof and that no transfer,
hypothecation or assignment of Shares may be made except in compliance with
applicable federal and state securities laws. All the certificates of Shares of
the Company which are now or hereafter owned by the Stockholders and which are
subject to the terms of this Agreement shall have endorsed in writing, stamped
or printed, thereon the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS, INCLUDING RESTRICTION ON TRANSFER, OF A
STOCKHOLDERS' AGREEMENT DATED AS OF MAY 26, 1993, AS AMENDED FROM TIME
TO TIME, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
3.12. Effectiveness of Transfers.
All Shares transferred by a Stockholder (other than pursuant to an
effective registration statement under the 1933 Act or a Rule 144 Transaction)
shall be held by the transferee thereof pursuant to this Agreement. Such
transferee shall, except as otherwise expressly stated herein, have all the
rights and be subject to all of the obligations of a Stockholder under this
Agreement automatically and without requiring any further act by such transferee
or by any parties to this Agreement. Without affecting the preceding sentence,
if such transferee is not a Stockholder on the date of such transfer, then such
transferee, as a condition to such transfer, shall confirm such transferee's
obligations hereunder in accordance with Section 3.13 hereof. No Shares shall be
transferred on the Company's books and records, and no transfer of Shares shall
be otherwise effective, unless any such transfer is made in accordance with the
terms and conditions of this Section 3.12 and Sections 2.1, 2.2 and 3.13 hereof,
and the Company is hereby authorized by all of the Stockholders to enter
appropriate stop transfer notations on its transfer records to give effect to
this Agreement. Stockholders are, subject to applicable law, free to Transfer
Shares except as explicitly restricted by Sections 2.1, 2.2, 3.12 and 3.13
hereof.
3.13. Additional Stockholders.
Subject to the restrictions on transfers of Shares contained in Sections
2.1, 2.2 and 3.12 hereof, any Person acquiring Shares (except for transferees
acquiring Shares (a) in an offering registered under the 1933 Act or (b) in a
Rule 144 Transaction) shall, on or before the transfer or issuance to it of
Shares, sign a counterpart signature page hereto in form reasonably satisfactory
to the Company and shall thereby become a party to this Agreement. The Company
shall require each Person acquiring an option, warrant or other right to
purchase shares of Common Stock under any option or other equity participation
plan to execute a counterpart signature page hereto and to the Registration
Rights Agreement.
<PAGE>
3.14. No Waiver.
No course of dealing and no delay on the part of any party hereto in
exercising any right, power or remedy conferred by this Agreement shall operate
as waiver thereof or otherwise prejudice such party's rights, powers and
remedies. No single or partial exercise of any rights, powers or remedies
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
3.15. Counterparts.
This Agreement may be executed 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, and all signature need not appear on any one counterpart.
3.16. Headings.
All headings and captions in this Agreement are for purposes of
references only and shall not be construed to limit or affect the substance of
this Agreement.
3.17. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED UNDER
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE NEW YORK
PRINCIPLES OF CONFLICTS OF LAWS).
[Remainder of Page Intentionally Left Blank]
<PAGE>
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
Signature Page
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
FINLAY ENTERPRISES, INC.
By: /s/ David B. Cornstein
Name: David B. Cornstein
Title: President
MANAGEMENT HOLDERS: INVESTOR HOLDERS:
/s/ David B. Cornstein /s/Harold S. Geneen
David B. Cornstein Harold S. Geneen
/s/ Arthur E. Reiner /s/James Martin Kaplan
Arthur E. Reiner James Martin Kaplan
Executor of the will of
Robert S. Lowenstein
/s/Norman S. Mathews
Norman S. Mathews
/s/Ronald B. Grudberg
Ronald B. Grudberg
ELI HOLDERS:
EQUITY-LINKED INVESTORS, L.P.
By: Rohit M. Desai
Associates, General
Partner
By: /s/Rohit M. Desai
<PAGE>
EQUITY-LINKED INVESTORS - II
By: Rohit M. Desai
Associates - II,
General Partner
By: /s/Rohit M. Desai
LEE HOLDERS:
/s/Warren C. Smith, Jr.
Warren C. Smith, Jr., individually
and as Lee Representative for Thomas H.
Lee Equity Partners, L.P., 1989
Thomas H. Lee Nominee Trust, John W.
Childs, David V. Harkins, Thomas R.
Shepherd, C. Hunter Boll, Glenn H.
Hutchins, Scott A. Schoen, Joseph J.
Incandela, Steven G. Segal,
Wendy L. Schoen, Sheldon Schoen,
SGS Family Limited Partnership,
Anthony J. DiNovi, Thomas M. Hagerty,
Glenn A. Hopkins, Charles W. Robins,
James Westra, Todd M. Abbrecht,
Adam L. Suttin, Kent R. Weldon,
Andrew D. Flaster, Wendy L. Masler,
Kristina A. Weinberg and Terrence M.
Mullin
<PAGE>
Stockholders' Agreement
Management Holder Counterpart
Signature Page
IN WITNESS WHEREOF, the undersigned holder of equity securities of the
Company has executed this counterpart signature page to this Agreement as an
instrument under SEAL as of the date first above written and agrees to be bound
by the provisions hereof as a Management Holder.
Name:
Date:
<PAGE>
SCHEDULE A
Schedule of Stockholders
<TABLE>
<CAPTION>
Options, Warrants
and Other Rights
Number of Shares to Purchase
Stockholder of Common Stock * Common Stock
<S> <C> <C>
Thomas H. Lee Equity
Partners, L.P. 1,796,509 0
State Street Bank and
Trust Company as trustee
for 1989 Thomas H. Lee
Nominee Trust 99,823 0
John W. Childs 14,618 0
David V. Harkins 4,872 0
Thomas R. Shepherd 2,924 0
C. Hunter Boll 3,654 0
Scott A. Schoen 2,292 0
Warren C. Smith, Jr. 4,872 0
Joseph J. Incandela 1,603 0
Steven G. Segal 1,067 0
SGS Family Limited Partnership 1,125 0
Anthony J. DiNovi 2,192 0
Thomas M. Hagerty 2,192 0
Glenn A. Hopkins 730 0
Charles W. Robins 687 0
James Westra 687 0
Todd M. Abbrecht 274 0
Adam L. Suttin 550 0
Kent R. Weldon 91 0
Andrew D. Flaster 343 0
Wendy L. Masler 320 0
Kristina A. Weinberg 320 0
Terrence M. Mullin 687 0
Equity-Linked Investors, L.P. 318,379 0
c/o Desai Capital Management
Incorporated
540 Madison Avenue
New York, NY 10022
<PAGE>
Equity-Linked Investors-II 235,324 0
c/o Desai Capital Management
Incorporated
540 Madison Avenue
New York, NY 10022
David B. Cornstein 451,372 0
430 East 56th St.
New York, NY 10022
Ronald Grudberg 101,876 6,656
300 East 62nd St. #2302
New York, NY 10022
Estate of Robert S. Lowenstein 76,538 30,008
c/o Zimet, Haines, Friedman &
Kaplan
460 Park Avenue
New York, NY 10022
Harold S. Geneen 82,588 0
2 East 67th Street
New York, NY 10021
James Martin Kaplan 4,000 0
300 Lydecker Street
Englewood, NJ 07631
Jeffrey Branman 984 0
Financo, Inc.
535 Madison Avenue
New York, New York
Arthur E. Reiner 138,525 69,263
29 E. 64th Street
Apt. 8B
New York, NY 10021
Norman S. Mathews 0 50,000
c/o Tanner & Co.
650 Madison Avenue
New York, NY 10022
</TABLE>
* This Schedule shall be deemed amended without any further action or
delivery by adding the shares issued in exchange for the outstanding
shares of the Company's 10% Series C Cumulative Redeemable Preferred
Stock.
FORM OF STOCK OPTION AGREEMENT
For the Purchase of Certain Shares of Common Stock,
$.01 par value per share
of
Finlay Enterprises, Inc.
Among
THE 1989 THOMAS H. LEE NOMINEE TRUST,
THOMAS H. LEE
and
"OPTIONEE"
THE OPTION REPRESENTED BY THIS AGREEMENT HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. IT MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
<PAGE>
OPTION AGREEMENT
Agreement dated as of May 26, 1993 by and among the 1989 Thomas H. Lee
Nominee Trust (the "Trust"), Thomas H. Lee ("Lee") and ___________ of
___________("Optionee").
WHEREAS, the Trust purchased 162,892 shares of the Common Stock, $.01
par value per share (the "Lee Shares") of Finlay Enterprises, Inc., a Delaware
corporation (the "Company"), pursuant to a Stock Purchase Agreement dated as of
May 26, 1993;
WHEREAS, Lee is the sole beneficiary of the Trust; and
WHEREAS, the Trust has agreed, subject to the terms and conditions of
this Agreement, to grant Optionee an option to purchase ___________ Lee Shares
and Optionee has agreed to accept such option.
ACCORDINGLY, in consideration of one dollar ($1.00) and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the Trust, the parties hereto agree as follows:
1. Grant of Option. The Trust hereby grants Optionee an Option
(the "Option") to purchase an aggregate of ___________ Lee Shares.
2. Exercise Price. The exercise price for the Lee Shares (the
"Exercise Price") covered by the Option shall be $4.88 per share, which Exercise
Price shall be equitably adjusted in the event of any stock split, combination,
reclassification or other similar event.
3. Time and Manner of Exercise.
(a) Subject to the provisions of this Section 3, termination as set
forth in Section 5 hereof and the mandatory exercise and co-sale provisions set
forth in Section 12 hereof, the Option shall be exercisable as follows:
<PAGE>
(i) during the first twelve (12) months from the date hereof, the
Option may be exercised as to twenty-five percent (25%) of the
Lee Shares covered thereby;
(ii) after twelve (12) months from the date hereof, the Option may be
exercised as to fifty percent (50%) of the Lee Shares covered
thereby;
(iii)after twenty-four (24) months from the date hereof, the Option
may be exercised as to seventy-five percent (75%) of the Lee
Shares covered thereby; and
(iv) after thirty-six (36) months from the date hereof, the Option may
be exercised as to all of the Lee Shares covered thereby.
(b) In the event that the Trust requests the holder of the Option to
exercise the Option pursuant to Section 12 hereof, the Option shall accelerate
and vest effective as of the date of the notice of such request and the Option
shall thereupon become immediately exercisable to the extent required in
connection with such request.
(c) If there is either (i) a sale of all of the issued and outstanding
capital stock of the Company or of all or substantially all the assets of the
Company or (ii) an underwritten offering of securities of the Company to the
public pursuant to a registration statement (other than on Form S-4, Form S-8 or
some other special or limited purpose form) filed under the Securities Act of
1933, as amended (the "Securities Act"), the Option shall accelerate and vest
and become fully exercisable as of the effective date of the events specified in
the preceding clauses (i) or (ii).
(d) To the extent that the right to exercise the Option has accrued and
is in effect, the Option may be exercised in full at one time or in part from
time to time by Optionee at any time during which Lee or the Trust retains
ownership of the Lee Shares by giving written notice of such exercise to the
Trust in the form of Exhibit A hereto stating the number of Lee Shares with
respect to which the Option is being exercised, accompanied by payment in full,
<PAGE>
in cash or by certified check, of the Exercise Price for all of the Lee Shares
covered by the Option; provided, however, that such exercise shall only be
permitted at any one time as to Lee Shares having an aggregate fair market value
of more than $50,000 at the time of exercise or as to all of the remaining Lee
Shares as to which the Option is then exercisable if the aggregate fair market
value of said Shares is less than $50,000 at time of exercise. Upon receipt of
such notice of exercise and payment in full of the Exercise Price, the Trust
shall, within ten (10) days, instruct the Company and its transfer agent, if
any, to transfer to Optionee the number of Lee Shares specified in the notice of
exercise, and shall execute and deliver to the Company and its transfer agent,
if any, certificates, stock powers, and other instruments of assignment as may
be reasonably required in order to reflect and confirm the transfer and
assignment of such Lee Shares to Optionee.
4. Withholding Tax. If, in connection with the grant or exercise of the
Option hereunder, either Lee or the Trust should determine in their sole
discretion that any federal or state withholding tax must be paid, Optionee
agrees on behalf of himself and his legal successors, upon the written request
of either Lee or the Trust, to pay any such withholding tax in full in the
amount determined by Lee or the Trust, as the case may be, in cash or certified
check, to the Thomas H. Lee Company for payment to the appropriate taxing
authority. Such withholding payment shall be paid within three (3) business days
from the receipt of the notice that such a withholding tax payment is due.
5. Term of Option. This Option shall terminate ___________ years
from the date hereof, subject to earlier termination as hereinafter set forth in
this Section 5:
(a) In the event that Optionee ceases to ___________ the
Thomas H. Lee Company or one of its controlled affiliates, the Option may be
<PAGE>
exercised prior to the expiration of the ___________ year term of the Option as
to the Lee Shares that are fully vested on the date of such termination but the
Option shall terminate as to all Lee Shares that have not vested as of the date
of such termination.
(b) In the event of the death of Optionee, the Option may be
exercised prior to the expiration of the ___________ year term of the Option as
to the Lee Shares that are fully vested on the date of death, by the estate of
Optionee or by any person or persons who acquire the right to exercise the
Option by bequest or inheritance or by reason of the death of Optionee, but the
Option shall terminate as to all Lee Shares that have not vested as of the date
of death.
6. Reservation of Shares. The Trust shall at all times during the term
of the Option reserve and keep available such number of Lee Shares as will be
sufficient to satisfy the requirements of the Option; provided that the Trust
may pledge the Lee Shares to a financial institution. Until the Option has been
duly exercised in accordance with the terms hereof, the Trust shall continue to
have all rights as the holder of the Lee Shares held by it, and Optionee shall
not have any of the rights of a stockholder in respect of the Lee Shares until a
certificate or certificates therefor shall be delivered to him upon due exercise
of the Option.
7. Representations and Covenants of the Trust and Lee. The Trust
warrants and represents that it is the sole owner of the Lee Shares held by it.
The Trust further warrants and represents that the Lee Shares are now, and at
all times during the term of the Option shall be, free of all encumbrances,
except for those imposed by (i) a pledge of the Lee Shares, (ii) Section 12
hereof, (iii) the Stockholders' Agreement, as defined in Section 10 below, or
(iv) certain stock option agreements entered into by Lee with Thomas H. Lee
Company employees or consultants concerning the Lee Shares in a form similar to
this Agreement; provided, however, that the representations and warranties
<PAGE>
contained in this Section 7 shall not apply to any Lee Shares transferred to
Thomas H. Lee Company employees or consultants. Lee covenants and agrees to
cause the Trust to recognize and honor the rights of the holder of the Option
hereunder and to comply with the terms hereof in the same manner as Lee with
respect to the Lee Shares held by the Trust.
8. Non-Transferability. The right of Optionee to exercise the Option
shall not be assignable or transferable by him except that any pledge to a
recognized financial institution or any sale, assignment, gift or other
disposition of the Option by Optionee for the benefit of the spouse or children
of Optionee and any transfer of the Option between Optionee and trustees of a
trust for the benefit of Optionee, his spouse or children shall be permitted. If
any such pledge, sale, assignment, gift or other disposition is made, the Option
shall in all respects and at all times be subject to all of the terms,
conditions and provisions of this Agreement, including, without limitation, the
mandatory exercise and co-sale provisions set forth in Section 12 hereof.
No sale, transfer, assignment, mortgage, pledge, bequest, gift, or
transfer by descent, by virtue of any execution or order of court or by
operation of law, or any other disposition, of the Option in violation of, or
contrary to, any of the terms, conditions or provisions hereof, shall be valid,
but every purchaser, assignee, transferee, mortgagee, pledgee, legatee, donee
and holder of the Option otherwise than in accordance with this Agreement shall
in all respects and at all times be subject to all of the terms, conditions and
provisions of this Agreement.
Except as hereinabove provided, the Option shall be null and void and
without effect upon any attempted assignment or transfer including without
limitation, any purported assignment, whether voluntary or by operation of law,
pledge, hypothecation or other disposition, attachment, trustee process or
similar process, whether legal or equitable, upon the Option.
<PAGE>
9. Delivery of Investment Representation. Notwithstanding any other
provision hereof, the Trust shall be under no obligation to cause or direct the
transfer of the Lee Shares with respect to which the Option has been exercised,
and the Company shall be under no obligation to make any transfer of such
Shares, unless and until Optionee shall give a written representation to the
Trust, to the Company, or to both of them, substantially in the form attached
hereto as Exhibit A, that Optionee is acquiring the Lee Shares transferred to
him upon exercise of the Option for investment and not with a view to, or for
sale in connection with, the distribution of any such Lee Shares in violation of
applicable federal or state securities laws, and that he will make no transfer
of the same except in compliance with the Securities Act and the rules and
regulations promulgated thereunder as then in force, and the Company may place
an "investment legend" upon any certificate for the Lee Shares transferred to
Optionee by reason of such exercise.
10. Execution of Shareholders' Agreement. Optionee acknowledges that, in
connection with his prior or future purchase of shares of the Common Stock, $.01
par value per share, of the Company, he has previously executed and delivered to
the Company a counterpart signature page to the Stockholders' Agreement, dated
as of May 26, 1993, as amended through the date hereof (the "Stockholders'
Agreement"), by and among the Company and the Purchasers named therein. Optionee
further agrees that all Lee Shares acquired by him upon exercise of the Option
will be subject to the terms and conditions of the Stockholders' Agreement.
11. Adjustments Upon Changes in Capitalization. In the event that
the Lee Shares are changed into or exchanged for a different number or kind of
shares or other securities of the Company or of another corporation by reason of
any reorganization, merger, consolidation, recapitalization, reclassification,
<PAGE>
stock split, combination of shares or dividend payable in capital stock,
appropriate adjustments shall be made in the number and kind of shares as to
which this Option shall be exercisable, to the end that the proportionate
interest of Optionee in the Lee Shares shall remain as before the occurrence of
such event; such adjustment in the Option shall be made without change in the
total price applicable to the unexercised portion of the Option and with a
corresponding adjustment in the Exercise Price per share.
12. Exit Right/Mandatory Exercise and Co-Sale.
(a) In the event that the Trust should propose to sell, exchange or
otherwise dispose of the Lee Shares held by it at any time during the term of
the Option or subsequent to its exercise by Optionee, the Trust shall give
Optionee reasonable notice of such sale and a reasonable opportunity to exercise
the Option, if it has not yet been exercised, and to participate in any such
sale. Optionee shall have the right to join in such sale at the same price per
share, on the same terms, to the same extent (in terms of the percentage of
Common Stock held) and to the same buyer; provided, however, that the rights and
obligations of clause (a) of this Section 12 shall not apply to a transfer of
Lee Shares to Thomas H. Lee Company employees or consultants or a person who has
acquired the rights of any such employee or consultant by reason of the death of
any such employee or consultant.
(b) In the event that (i) a pledgee of Lee Shares forecloses upon Lee
Shares that have been pledged to such pledgee and such pledgee does not
recognize the rights of the holder of the Option hereunder or (ii) the Trust
does not recognize the rights of the holder of the Option upon the due exercise
thereof, then Lee shall be personally obligated to pay and shall pay to such
holder an amount equal to the net fair market value of the Lee Shares covered by
the Option; provided, however, that any such payment shall be subject to the
withholding tax provisions set forth in Section 4 hereof. For purposes of this
<PAGE>
clause (b) of this Section 12, "net fair market value" shall be deemed to be the
difference between the exercise price per share of the Lee Shares covered by the
Option and the price per share paid, or deemed to have been paid, by the pledgee
with respect to the Lee Shares upon foreclosure.
(c) Upon the Trust's written request set forth in the Trust's notice of
sale, Optionee shall be obligated to exercise the Option and join in any sale
(including without limitation the sale of Lee Shares to a pledgee upon
foreclosure) at the same price, on the same terms, to the same extent (in terms
of the percentage of Common Stock held) and to the same buyer; provided further
that, except with respect to the sale of Lee Shares to a pledgee, Optionee shall
not have any obligation hereunder if and to the extent the sale is not at arm's
length.
(d) If the holder of the Option does not exercise the Option and
participate in a sale as provided in clause (c) of this Section 12, then the
Option shall automatically terminate as of the date of any such sale with
respect to the number of Lee Shares that could have been included in such sale
by the holder of the Option and the Optionee shall have no further rights,
obligations or liabilities with respect to the Option or to Lee Shares that
could have been included in such sale upon exercise of the Option.
13. Withdrawal of Lee Shares from Trust. Lee covenants and agrees that
if any of the Lee Shares are transferred, distributed or released to Lee by the
Trust, such Lee Shares shall remain subject to the terms and conditions of this
Agreement and Lee shall promptly execute and deliver any documents or
instruments necessary to grant to the Optionee the rights afforded by this
Agreement.
14. Notices. All notices required hereunder or given pursuant
hereto shall be effective when delivered by hand or mailed by certified mail
addressed as follows:
<PAGE>
If to the Trust to: Thomas H. Lee Nominee Trust
State Street Bank & Trust
Company of Connecticut, N.A.
750 Main Street, Suite 1114
Hartford, CT 06103
Attention: Virginia Glunt
If to Lee to: Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attention: Thomas H. Lee
With copies in each case to: Charles W. Robins
Hutchins & Wheeler
101 Federal Street
Boston, Massachusetts 02110
If to Optionee to: Optionee
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
unless and until notice of another or different address shall be given as
provided herein.
15. Modification. This Agreement constitutes the entire Agreement
between the parties hereto with regard to the subject matter hereof, superseding
all prior understandings and agreements, whether written or oral. This Agreement
may not be amended or revised except by a writing signed by the parties.
16. Governing Law. This Agreement shall be construed under and
governed by the laws of the Commonwealth of Massachusetts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK ]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands under seal
as of the date first above written.
State Street Bank & Trust Company of
Connecticut, N.A., not personally but as
Trustee for the 1989 Thomas H. Lee Nominee
Trust
Title:
Thomas H. Lee
Optionee:
<PAGE>
Exhibit A
[Date]
The 1989 Thomas H. Lee Nominee Trust
State Street Bank & Trust Company of Connecticut, N.A.
750 Main Street, Suite 1114
Hartford, CT 06103
Attention: Virginia Glunt
Finlay Enterprises, Inc.
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
P
ATTN: President
Re: Notice of Option Exercise
Gentlemen:
Reference is made to the Stock Option Agreement dated as of May 26,
1993, by and among the 1989 Thomas H. Lee Nominee Trust (the "Trust"), Thomas H.
Lee ("Lee") and [ Name of Optionee ] ("Optionee"). The Option Agreement pertains
to the Trust's grant to Optionee of an option to acquire from the Trust shares
of the Common Stock, par value $.01 per share, (the "Shares") of Finlay
Enterprises, Inc. (the "Company") at the Exercise Price of $4.88 per share with
respect to the Lee Shares. Capitalized terms used as defined terms herein,
unless otherwise defined, shall have the same meaning assigned to them in the
Option Agreement.
Pursuant to Section 3(d) and Section 13 of the Option Agreement,
Optionee hereby gives notice to Lee and the Trust of optionee's exercise of the
Option with respect to Lee Shares. Lee and the Trust hereby acknowledge receipt
of such written notice from Optionee pursuant to Section 3(d) of the Option
Agreement. Concurrently with his delivery of this notice of option exercise,
Optionee has hereby delivered to the Thomas H. Lee Company (i) the aggregate
Exercise Price of $ and (ii) the required Federal and state withholding taxes in
the amounts of $ and $ respectively, with respect to the Lee Shares.
In connection with the foregoing option exercise, the undersigned hereby
represents and warrants that he is purchasing said Shares with his own funds for
his own account for investment and not with a view to, or for sale in connection
with, any distribution thereof in violation of applicable Federal or state
securities laws and that he will make no transfer of the same except in
compliance with the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder as then in force (the "Securities Act"). The
<PAGE>
undersigned understands that you are relying upon such representation and
warranty in allowing the issuance and sale of said Shares to the undersigned
without registering the same under the Securities Act. In view of the
undersigned's representation and warranty, he agrees that there may be affixed
to the certificate for the Shares to be issued to the undersigned and to all
certificates issued hereafter representing such Shares (until in the opinion of
counsel, which opinion must be satisfactory to your counsel, it is no longer
necessary or required) a legend as follows:
TRANSFER RESTRICTED
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
AND CONDITIONS, INCLUDING RESTRICTION ON TRANSFER, OF A STOCKHOLDERS"
AGREEMENT DATED AS OF MAY 26, 1993, AS AMENDED FROM TIME TO TIME, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
THE SALE, TRANSFER OR OTHER DISTRIBUTION OF THE SHARES REPRESENTED BY
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE STATE
SECURITIES LAWS, AND SUCH SALE, TRANSFER OR DISTRIBUTION MAY NOT BE MADE
UNLESS REGISTERED UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES
LAWS OR AN EXEMPTION THEREFROM IS AVAILABLE.
The undersigned acknowledges that he has been informed by you that:
1. As the Shares to be acquired by the undersigned are unregistered,
they must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available;
2. Routine sales of these securities made in reliance upon Rule 144
under the Securities Act can be made only in limited amounts in accordance with
the terms and conditions of that Rule and, in the case of sales to which that
Rule is not applicable, compliance with Regulation A or some other disclosure
exemption under the Securities Act will be required;
<PAGE>
3. The availability of Rule 144 is dependent upon adequate current
public information with respect to the Company being available and, at the time
the undersigned may desire to make a routine trading transaction pursuant to the
Rule, the Company may not be able to comply with such requirement; and
4. The Company is under no obligation to register the Shares or to
comply with Regulation A or any other exemption under the Securities Act or to
supply information necessary to permit routine sales under Rule 144.
[Remainder of Page Intentionally Left Blank]
<PAGE>
SIGNATURE PAGE TO
NOTICE OF OPTION EXERCISE
Sincerely,
[Employee]
Lee Shares Remaining Under Option:
