UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Levitz Furniture Incorporated
(Name of Issuer)
Common Stock
(Title of Class of Securities)
527482103
(CUSIP Number)
John F. Hartigan, Esq.
Morgan, Lewis & Bockius LLP
801 South Grand Avenue
Los Angeles, California 90017
(213) 612-2500
Copy to:
David A. Katz, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
(212) 403-1000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
July 1, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Sched-
ule 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 / /.
Check the following box if a fee is being paid with the state-
ment /X/. (A fee is not required only if the reporting person:
(1) has a previous statement on file reporting beneficial own-
ership of more than five percent of the class of securities
described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less
of such class.) (See Rule 13d-7.)<PAGE>
SCHEDULE 13D
CUSIP No. 527482103
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Apollo Investment Fund III, L.P. IRS ID #: 133830527
_______________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)/ /
(b)/ /
_______________________________________________________________
3 SEC USE ONLY
_______________________________________________________________
4 SOURCE OF FUNDS
OO
_______________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or (e) / /
_______________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
_______________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 4,558,132 shares of Common Stock
SHARES _______________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING _______________________________________________
PERSON 9 SOLE DISPOSITIVE POWER
WITH
4,558,132 shares of Common Stock
_______________________________________________
10 SHARED DISPOSITIVE POWER
_______________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
4,558,132 shares of Common Stock
_______________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
/ /
_______________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.89%
_______________________________________________________________
14 TYPE OF REPORTING PERSON
PN<PAGE>
SCHEDULE 13D
CUSIP No. 527482103
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Apollo Overseas Partners, III. L.P. IRS ID #: 980152709
_______________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)/ /
(b)/ /
_______________________________________________________________
3 SEC USE ONLY
_______________________________________________________________
4 SOURCE OF FUNDS
OO
_______________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or (e) / /
_______________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
_______________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 272,916 shares of Common Stock
SHARES _______________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING _______________________________________________
PERSON 9 SOLE DISPOSITIVE POWER
WITH
272,916 shares of Common Stock
_______________________________________________
10 SHARED DISPOSITIVE POWER
_______________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
272,916 shares of Common Stock
_______________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
/ /
_______________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.04%
_______________________________________________________________
14 TYPE OF REPORTING PERSON
PN<PAGE>
SCHEDULE 13D
CUSIP No. 527482103
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Apollo (U.K.) Partners, III. L.P. IRS ID #: 980152708
_______________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)/ /
(b)/ /
_______________________________________________________________
3 SEC USE ONLY
_______________________________________________________________
4 SOURCE OF FUNDS
OO
_______________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or (e) / /
_______________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
England
_______________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 168,952 shares of Common Stock
SHARES _______________________________________________
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH
REPORTING _______________________________________________
PERSON 9 SOLE DISPOSITIVE POWER
WITH
168,952 shares of Common Stock
_______________________________________________
10 SHARED DISPOSITIVE POWER
_______________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
168,952 shares of Common Stock
_______________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES
/ /
_______________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.64%
_______________________________________________________________
14 TYPE OF REPORTING PERSON
PN<PAGE>
Item 1. Security and Issuer.
This Statement on Schedule 13D relates to the Common
Stock, par value $.01 per share ("Common Shares"), of Levitz
Furniture Incorporated, a Delaware corporation (the "Company").
The principal executive offices of the Company are located at
6111 Broken Sound Parkway, N.W., Boca Raton, Florida, 33487.
Item 2. Identity and Background.
This Statement is filed jointly by Apollo Investment
Fund III, L.P., a Delaware limited partnership ("Fund III"),
Apollo Overseas Partners, III. L.P., a Delaware limited
partnership ("Overseas Partners"), and Apollo (U.K.) Partners,
III. L.P., a limited partnership organized under the laws of
England ("U.K. Partners"). The foregoing entities are
hereinafter referred to collectively as the "Reporting
Entities". Each of the Reporting Entities is principally
engaged in the business of investment in securities. The
principal office of each of the Reporting Entities is c/o
Apollo Advisors II, L.P., Two Manhattanville Road, Purchase,
New York, 10577.
Apollo Advisors II, L.P., a Delaware limited
partnership ("Advisors") is the general partner of Fund III and
the managing general partner of Overseas Partners and U.K.
Partners. Advisors is principally engaged in the business of
serving as managing general partner of the Reporting Entities.
Apollo Capital Management II, Inc., a Delaware
corporation, ("Apollo Capital") is the general partner of
Advisors. Apollo Capital is principally engaged in the
business of serving as general partner of Advisors.
Apollo Management, L.P., a Delaware limited
partnership ("Apollo Management"), serves as manager of the
Reporting Entities and manages their day-to-day operations.
The respective addresses of the principal office of
Advisors, Apollo Capital and Apollo Management are c/o Apollo
Advisors II, L.P., Two Manhattanville Road, Purchase, New York
10577.
Apollo Fund Administration II LDC, a Cayman Islands
LDC ("Administration"), is the administrative general partner
of each of Overseas Partners and UK Partners. Administration
is principally engaged in the business of serving as
administrative general partner of Overseas Partners and UK
Partners. The principal place of business of Administration is<PAGE>
Apollo Fund Administration II LDC, c/o CIBC Bank and Trust
Company (Cayman) Limited, Edward Street, Georgetown, Grand
Cayman, Cayman Islands, British West Indies.
Apollo Management (UK) Ltd., an English corporation
("Management UK"), is the resident general partner of UK
Partners. Management UK is principally engaged in the business
of serving as resident general partner of UK Partners. The
address of the principal business of Management UK is Hill
House, 1 Little New Street, London EC4A 3TR, England.
Attached as Schedule I to this Statement is
information concerning the Reporting Entities and other
entities as to which such information is required to be
disclosed in response to Item 2 and General Instruction C to
Schedule 13D.
None of the Reporting Entities, Advisors, Apollo
Capital nor any of the persons or entities referred to in
Schedule I has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations and similar
misdemeanors) or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and
as a result of such proceeding 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.
The Warrants (as defined in Item 4 below) acquired by
the Reporting Entities, which are exercisable for Common Shares
(subject to adjustment on the terms set forth in the Warrants),
were acquired by the Reporting Entities, together with notes
issued by subsidiaries of the Company, in connection with the
provision of an aggregate of $35,000,000 in financing to such
subsidiaries pursuant to a Credit Agreement, dated as of July
1, 1996, among Levitz Furniture Corporation, Levitz Furniture
Company of the Midwest, Inc., Levitz Furniture Company of the
Pacific, Inc., Levitz Furniture Company of Washington, Inc. and
John M. Smyth Company as Borrowers (the "Borrowers"), each of
the financial institutions initially a signatory thereto,
together with those assignees pursuant to Section 11.8 thereof,
as Lenders, with Levitz Furniture Corporation as LFC Funds<PAGE>
Administrator and BT Commercial Corporation, as Agent (the
"Credit Agreement").
Item 4. Purpose of Transaction.
In connection with the provision by the Reporting
Entities of financing in the aggregate amount of $35,000,000
(the "Financing") to subsidiaries of the Company under the
Credit Agreement, Fund III, Overseas Partners and U.K. Partners
received, respectively, 4,558,132, 272,916 and 168,952 warrants
to purchase Common Shares ("Warrants") on July 1, 1996. None
of the Reporting Entities, as of such date, was the "beneficial
owner" of any other Common Shares within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The Warrants acquired by each Reporting
Entity, and the Common Shares of which each Reporting Entity is
deemed to be the beneficial owner, were acquired in the
ordinary course of business for investment purposes and not
with the purpose of changing or influencing control of the
issuer. Each Warrant is subject to certain terms and
conditions, as described therein. Each Warrant is initially
exercisable for one Common Share at an exercise price of $4.15.
Both the exercise price and the number of Common Shares
issuable upon exercise of each Warrant are subject to
adjustment pursuant to antidilution and other adjustment
provided in the Warrants. The Warrants expire by their terms
five years from the date of issuance. The terms of the
Warrants received by the Reporting Entities are identical. The
foregoing summary of the Warrants is qualified in its entirety
by reference to the Warrant received by Fund III, the Warrant
received by Overseas Partners, and the Warrant received by U.K.
Partners, the full text of each of which is filed as Exhibits
1, 2, and 3 hereto, respectively, and are incorporated herein
by this reference.
In connection with the Financing, the Company entered
into a letter agreement (the "Letter Agreement") with Fund III
pursuant to which the Company agreed that, for so long as Fund
III and/or its affiliates beneficially own specified numbers of
Common Shares (including, for such purpose, Warrants and other
securities exercisable for or convertible into Common Shares),
the Company will, if Fund III at any time requests, cause one
representative designated by Fund III to be elected to the
Board of Directors of the Company. The foregoing summary of
the Letter Agreement is qualified in its entirety by reference
to the Letter Agreement, the full text of which is filed as<PAGE>
Exhibit 4 hereto and incorporated herein by this reference. As
of the date of this Statement, Fund III has not designated a
representative to the Company Board.
The Reporting Entities may change any of their
current intentions, acquire additional Common Shares or other
securities of the Company or sell or otherwise dispose of all
or any part of the Common Shares beneficially owned by it, or
take any other action with respect to the Company or any of its
debt or equity securities in any manner permitted by law.
Except as disclosed in this Item 4, the Reporting Entities have
no current plans or proposals which relate to or would result
in any of the events described in Items (a) through (j) of the
instructions to Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) The Reporting Entities acquired beneficial ownership
of the Common Shares to which this Statement relates
in connection with the consummation of the Financing,
as a result of which the Reporting Entities acquired
the Warrants.
As of the date of this Statement, as a result of
their respective ownership of 4,558,132, 272,916 and
168,952 Warrants, Fund III, Overseas Partners, and
U.K. Partners beneficially own 4,558,132, 272,916 and
168,952 Common Shares, respectively, representing
14.89%, 1.04% and 0.64%, respectively, of the
outstanding Common Shares, calculated in accordance
with Rule 13d-3.
(b) The number of Common Shares as to which there is sole
power to vote or to direct the vote, shared power to
vote or to direct the vote, sole power to dispose or
direct the disposition, or shared power to dispose or
direct the disposition for the Reporting Entities is
set forth in the cover pages and such information is
incorporated herein by this reference.
(c) Except as disclosed in Item 4 herein, there have been
no reportable transactions with respect to the Common
Shares within the last 60 days by the Reporting
Entities.
(d) Not applicable.<PAGE>
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relation-
ships With Respect to the Securities of the Issuer.
The responses to Item 3 and Item 4 are incorporated
herein by this reference.
Pursuant to a Registration Rights Agreement, dated as
of July 1, 1996, by and among the Company, each Reporting
Entity and Court Square Capital Limited (formerly known as
Citicorp Capital Investors, Ltd.) (the "Registration Rights
Agreement"), the Reporting Entities have the right to have
resales of securities of the Company beneficially owned by the
Reporting Entities registered, at the Company's expense, under
federal and state securities laws. The foregoing description
of the Registration Rights is qualified in its entirety by
reference to the Registration Rights Agreement, the full text
of which is filed as Exhibit 5 hereto and incorporated herein
by this reference. Apollo Management received an advisory fee
of $1,050,000 for advice provided to the Company and/or its
subsidiaries in connection with the Financing. In addition,
pursuant to an Indemnity Agreement, dated as of July 1, 1996
(the "Indemnity Agreement"), the Borrowers indemnified the
Reporting Entities from and against losses arising from the
Company's failure to perform its obligations in connection
with, among other things, the Warrants, the Registration Rights
Agreement, and the Letter Agreement. The foregoing description
of the Indemnity Agreement is qualified in its entirety by
reference to the Indemnity Agreement, the full text of which is
filed as Exhibit 6 hereto and incorporated herein by this
reference.
Item 7. Material to be Filed as Exhibits.
(1) Warrant, dated July 1, 1996, to purchase
4,558,132 Common Shares, issued by the Company
to Fund III.
(2) Warrant, dated July 1, 1996, to purchase 272,916
Common Shares, issued by the Company to Overseas
Partners. <PAGE>
(3) Warrant, dated July 1, 1996, to purchase 168,952
Common Shares, issued by the Company to U.K.
Partners.
(4) Letter Agreement.
(5) Registration Rights Agreement.
(6) Indemnity Agreement.<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowl-
edge and belief, I certify that the information set forth in
this statement is true, complete and correct and agree that
this statement may be filed jointly with Apollo Overseas
Partners III, L.P. and Apollo (U.K.) Partners III, L.P.
Dated: July 11, 1996
APOLLO INVESTMENT FUND III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital
Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
Name: Michael D. Weiner
Title: Vice President<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowl-
edge and belief, I certify that the information set forth in
this statement is true, complete and correct and agree that
this statement may be filed jointly with Apollo Investment Fund
III, L.P. and Apollo (U.K.) Partners III, L.P.
Dated: July 11, 1996
APOLLO OVERSEAS PARTNERS III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital
Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
Name: Michael D. Weiner
Title: Vice President<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowl-
edge and belief, I certify that the information set forth in
this statement is true, complete and correct and agree that
this statement may be filed jointly with Apollo Investment Fund
III, L.P. and Apollo Overseas Partners III, L.P.
Dated: July 11, 1996
APOLLO (U.K.) PARTNERS, III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital
Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
Name: Michael D. Weiner
Title: Vice President<PAGE>
SCHEDULE I
The following sets forth information with respect to
the general partners, executive officers, directors and princi-
pal shareholders of Fund III, Overseas Partners, U.K. Partners,
Advisors, Apollo Capital, Apollo Management, Administration and
Management UK. Capitalized terms used herein without
definition have the meanings assigned thereto in the Statement
to which this Schedule I relates. Except as otherwise
indicated in this Schedule I or in the Statement to which this
Schedule I relates, the principal business address of each
person or entity set forth below is c/o Apollo Advisors II,
L.P., Two Manhattanville Road, Purchase, New York 10577, and
each such person or entity is a citizen of the United States of
America.
The principal business of Advisors is to provide advice
regarding investments by the Reporting Entities, and the
principal business of Apollo Capital is that of serving as
general partner of Advisors.
The principal occupation of each of Messrs. Leon D. Black
and John J. Hannan is to act as an executive officer and
director of Apollo Capital. Messrs. Black and Hannan are
also limited partners of Advisors. Mr. Black is the
President and director of AIF III Management, Inc.
("Management Inc."), the general partner of Apollo
Management. Mr. Hannan is a Vice President and director
of Management Inc. Management Inc. is principally engaged
in the business of serving as general partner of Apollo
Management.
Messrs. Black and Hannan are also founding principals of
Apollo Advisors, L.P. ("Apollo Advisors"), Lion Advisors,
L.P. ("Lion") and Apollo Real Estate Advisors, L.P.
("AREA"). The principal business of Apollo Advisors and
Lion is to provide advice regarding investments in
securities and the principal business of AREA is to
provide advice regarding investments in real estate and
real estate-related investments. The business address of
each of Messrs. Black and Hannan is c/o Apollo
Management, L.P., 1301 Avenue of the Americas, New York,
New York 10019.<PAGE>
Peter Henry Larder, Michael Francis Benedict Gillooly, Ian
Thomas Patrick and Martin William Laidlaw, each of whom is
a British citizen, serve as directors of Administration.
Each of the above four individuals is principally employed
by CIBC Bank and Trust Company (Cayman) Limited ("CIBC")
in the following positions: Mr. Larder, Managing
Director; Mr. Gillooly, Deputy Managing Director; Mr.
Patrick, Manager-Accounting Services; and Mr. Laidlaw,
Senior Fund Accountant. CIBC is a Cayman Islands
corporation which is principally engaged in the provision
of trust, banking and corporate administration services,
the principal address of which is Edward Street, Grand
Cayman, Cayman Islands, British West Indies. It provides
accounting, administrative and other services to
Administration pursuant to a contract. Mr. Leon D. Black
is the beneficial owner of the stock of Administration.<PAGE>
INDEX TO EXHIBITS
Capitalized terms used herein without definition shall
have the meanings ascribed thereto in the Statement to
which this Index relates.
Exhibit
-------
(1) Warrant, dated July 1, 1996, to purchase
4,558,132 Common Shares, issued by the Company
to Fund III.
(2) Warrant, dated July 1, 1996, to purchase 272,916
Common Shares, issued by the Company to Overseas
Partners.
(3) Warrant, dated July 1, 1996, to purchase 168,952
Common Shares, issued by the Company to U.K.
Partners.
(4) Letter Agreement.
(5) Registration Rights Agreement.
(6) Indemnity Agreement.
4,558,132 Warrants Certificate No. W-1
WARRANT FOR THE PURCHASE OF
COMMON STOCK OF LEVITZ FURNITURE INCORPORATED
THE WARRANTS (AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF) REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE
OF SUCH REGISTRATION OR THE AVAILABILITY OF AN
EXEMPTION FROM SUCH REGISTRATION. THIS WARRANT MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON
COMPLIANCE WITH THE REQUIREMENTS FOR TRANSFER SET
FORTH HEREIN. THE WARRANTS AND SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE THEREOF ARE ENTITLED TO
THE BENEFITS OF A CERTAIN REGISTRATION RIGHTS AGREE-
MENT DATED AS OF JULY 1, 1996 BETWEEN THE COMPANY
AND THE OTHER PARTIES SIGNATORIES THERETO.
THIS IS TO CERTIFY THAT, for value received, APOLLO
INVESTMENT FUND III, L.P. ("Apollo"), or registered assigns
(collectively, the "Holder"), is the registered owner of the
number of Warrants set forth above, each of which entitles the
Holder, subject to the terms and conditions set forth
hereinafter, to purchase one share of Common Stock, par value
$.01 per share (the "Common Stock"), of Levitz Furniture
Incorporated, a corporation organized under the laws of the
State of Delaware (the "Company"), at a purchase price per
share referred to herein as the "Exercise Price". The number
of shares of Common Stock which may be received upon the
exercise of this certificate (this "Warrant Certificate") and
the Exercise Price for each such share of Common Stock are
subject to adjustment from time to time as hereinafter set
forth. Each share of Common Stock issuable upon the exercise
of each of the Warrants (collectively, the "Warrant Shares")
when issued and paid for pursuant to the provisions of this
Warrant shall be validly issued, fully paid and nonassessable,
shall be free from all taxes, liens and charges with respect to
the issuance thereof and shall be free of any preemptive or
similar rights. The Company shall use all reasonable efforts
to cause the Warrant Shares to be listed or eligible to be
quoted for trading on any stock exchange, on the NASDAQ
National Market or on any other market on which shares of<PAGE>
Common Stock are then listed or eligible to be quoted for
trading.
Each Warrant evidenced hereby is originally acquired
in connection with Apollo's participation as a lender under a
Credit Agreement, dated as of July 1, 1996, among Levitz
Furniture Corporation, Levitz Furniture Company of the Midwest,
Inc., Levitz Furniture Company of the Pacific, Inc., Levitz
Furniture Company of Washington, Inc. and John M. Smyth Company
as Borrowers, each of the financial institutions initially a
signatory thereto, together with those assignees pursuant to
Section 11.8 thereof, as Lenders, with Levitz Furniture
Corporation as LFC Funds Administrator and BT Commercial Corpo-
ration, as Agent (the "Credit Agreement"), for good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged. The Company and Apollo explicitly
acknowledge that additional restructuring transactions
involving the Company and/or its subsidiaries may be necessary,
and, as a result, the Company has specifically agreed to
provide Apollo the protection afforded by Section 8 of this
Warrant.
Each Warrant is subject to the following terms and
provisions:
Section 1. Exercise of Warrant.
(a) Subject to the provisions hereof, the Warrants
evidenced hereby may be exercised at the discretion of the
Holder in whole or in part at any time or from time to time on
or after July 1, 1996 (the "Initial Exercise Date") to and
including July 1, 2001 (the "Expiration Date") or, if either
day is not a Trading Day (as defined in Section 17), then on
the next succeeding Trading Day, by presentation and surrender
hereof to the Company at the office or agency of the Company
maintained for that purpose pursuant to Section 14 (the "War-
rant Office"), with the Notice of Election to Exercise (the
"Exercise Notice") attached hereto duly executed and accom-
panied by payment to the Company of the Exercise Price for the
number of Warrant Shares specified in such Exercise Notice.
(b) The Exercise Price for the shares of Common
Stock which each Warrant entitles the Holder to purchase shall
initially be equal to $4.125. The Exercise Price set forth in
the preceding sentence is subject to adjustment as set forth in
Sections 5, 6 and 8.
(c) Payment of the Exercise Price shall be made in
cash, certified bank check or by wire transfer, at the option
of the Holder; provided, however, that payment of the Exercise
-2-<PAGE>
Price may also be made, at the Holder's option, in whole or in
part, by surrendering to the Company, together with the related
Exercise Notice, the Term Note (as such term is defined in the
Credit Agreement), with the outstanding principal amount of
such Term Note, together with any accrued and unpaid interest
thereon (through the date of such surrender), being deemed for
all purposes of this Warrant to be the equivalent of a cash
payment of the Exercise Price. To the extent the aggregate
payment for the Exercise Price made pursuant to this paragraph
is less than the face amount of any Term Note (including all
accrued and unpaid interest with respect to such Term Note),
the Company shall credit all such accrued and unpaid interest
toward payment of the Exercise Price, and shall reissue to the
Holder a new Term Note with a face amount equal to (i) the face
amount of the Term Note so surrendered, plus (ii) the amount of
any accrued and unpaid interest on the Term Note that was
surrendered together with such Term Note as payment of the
Exercise Price, minus (iii) the aggregate Exercise Price paid
in connection with such exercise.
(d) Upon receipt by the Company of this Warrant Cer-
tificate at the Warrant Office, together with a properly com-
pleted Exercise Notice and payment of the Exercise Price as
provided above, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise, not-
withstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares
shall not then be actually delivered to the Holder. The Com-
pany shall deliver such certificates to the Holder as promptly
as possible thereafter, but in any event within 5 business days
of receipt of the Exercise Notice. The Company shall pay all
expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection
with the preparation, issue and delivery of stock certificates
under this Section 1 except that the Company shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of the Warrant
Shares in a name other than that of the Holder of the Warrant
evidenced hereby who shall have surrendered the same in
exercise of the subscription right evidenced hereby. In the
event Warrant Shares are issued prior to the time that an
appropriate registration statement with respect to the Warrant
Shares has become effective under the Securities Act, the
Warrant Shares so issued shall have stamped or imprinted
thereon a legend in the form of Exhibit A. Any holder of
Warrant Shares so legended shall be entitled to have such
legend removed, upon surrender of Warrant Shares to the Company
or the transfer agent for the Common Stock, upon effectiveness
of such a registration statement or upon receipt by the Company
-3-<PAGE>
of an opinion of counsel to the Holder to the effect that such
legend is no longer required.
(e) Upon any partial exercise of the number of War-
rants to which this Warrant Certificate entitles the Holder,
there shall be issued to the Holder hereof a new Warrant Cer-
tificate in respect of the shares as to which this Warrant Cer-
tificate shall not have been exercised, subject to the provi-
sions of Section 3. Such new Warrant Certificate shall be
identical to this Warrant Certificate, except as to the number
of shares of Common Stock covered thereby.
Section 2. Exchange, Transfer, Assignment or Loss of
Warrant Certificate; Temporary Warrant
Certificates.
(a) In case this Warrant Certificate shall be muti-
lated, lost, stolen, or destroyed, the Company may, in its dis-
cretion, issue and deliver in exchange and substitution for and
upon cancellation of the mutilated Warrant Certificate, or in
lieu of and substitution for the Warrant Certificate lost,
stolen, or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction and indemnification reasonably
satisfactory to it. An applicant for such a substitute Warrant
Certificate shall also comply with such other reasonable regu-
lations and pay such other reasonable charges as the Company
may prescribe.
(b) The Warrant Certificates shall be numbered and
shall be registered in a Warrant Register maintained by the
Company as they are issued. The registered owner on the War-
rant Register may be treated by the Company and all other per-
sons dealing with the Warrants evidenced hereby as the absolute
owner hereof for any purpose and as the person entitled to
exercise the right represented hereby, or to the transfer
hereof on the books of the Company, any notice to the contrary
notwithstanding and, until such transfer on such books, the
Company may treat the registered owner on the Warrant Register
as the owner for all purposes. The Company may require payment
of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any registration of
transfer of Warrant Certificates.
(c) This Warrant Certificate may be subdivided or
combined with other Warrant Certificates evidencing the same
rights as the rights evidenced hereby and thereby upon presen-
tation and surrender hereof at the Warrant Office together with
a written notice signed by the Holder hereof specifying the
-4-<PAGE>
denominations in which new Warrant Certificates are to be
issued. Upon presentation and surrender of any Warrant Cer-
tificates, together with such written notice, for subdivision
or combination, the Company will issue a new Warrant Certifi-
cate or Certificates, in the denominations requested, entitling
the holders thereof to purchase the same aggregate number of
shares of Common Stock as the Warrant Certificate or Certifi-
cates so surrendered. Such new Warrant Certificates will be
registered in the name of the Holder submitting such request
and delivered to such Holder. Any Warrant Certificate surren-
dered for subdivision or combination shall be cancelled
promptly upon the issuance of such new Warrant Certificate(s).
The term "Warrant Certificate" as used herein includes any War-
rant Certificates into which this Warrant Certificate may be
subdivided, combined or exchanged.
Section 3. Fractional Interests.
(a) The Company shall not be required to issue frac-
tions of Warrants or to issue Warrant Certificates which evi-
dence fractional Warrants.
(b) The Company shall not be required to issue frac-
tions of shares of Common Stock in the exercise of Warrants.
If any fraction of a Warrant Share would, except for the provi-
sions of this Section, be issuable on the exercise of any War-
rant (or specified portion thereof), the Company shall purchase
such fraction for an amount in cash equal to the same fraction
of the Current Market Price (as defined in Section 5(g)) per
share of Common Stock.
(c) The Holder, by the acceptance of this Warrant
Certificate, expressly waives his right to receive any frac-
tional Warrant or any fractional share upon exercise of a War-
rant.
Section 4. Reservation of Warrant Shares, etc.
The Company hereby agrees that at all times there
shall be reserved for issuance and/or delivery upon exercise of
the Warrants evidenced by this Warrant Certificate, free from
preemptive rights, such number of shares of authorized but
unissued or treasury shares of Common Stock, or other stock or
securities deliverable pursuant to Section 5, as shall be
required for issuance or delivery upon exercise of the Warrants
evidenced hereby. The Company further agrees (i) that it will
not, by amendment of its certificate of incorporation or
through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants,
-5-<PAGE>
stipulations or conditions to be observed or performed
hereunder by the Company and (ii) to promptly take all action
as may from time to time be reasonably required in order to
permit the Holder to exercise the Warrants evidenced hereby and
the Company duly and effectively to issue the Warrant Shares as
provided herein upon the exercise hereof. Without limiting the
generality of the foregoing, the Company agrees that it will
not take any action which would result in Warrant Shares when
issued not being validly and legally issued and fully paid and
nonassessable. The Company further agrees that it will not
increase the par value of the Common Stock while the Warrants
evidenced hereby are outstanding, although such par value may
be reduced at any time. The Company hereby represents that, as
of the date hereof, it has sufficient shares of Common Stock
reserved for issuance upon exercise of all outstanding
Warrants.
Section 5. Anti-Dilution.
The Exercise Price and the number of shares of Common
Stock purchasable upon the exercise hereof shall be subject to
adjustment from time to time as provided in this Section.
Unless otherwise indicated, all calculations under this Section
5 shall be made to the nearest $0.01 or 1/100th of a share, as
the case may be.
(a) In case the Company shall (i) declare a dividend
or make a distribution on the outstanding shares of Common
Stock in shares of capital stock of the Company, (ii) sub-
divide or reclassify the outstanding shares of Common
Stock into a greater number of shares (or into other
securities or property), or (iii) combine or reclassify
the outstanding shares of Common Stock into a smaller
number of shares (or into other securities or property),
the number of Warrant Shares issuable upon the exercise of
each Warrant shall be adjusted so that the Holder of each
Warrant shall be entitled to purchase the kind and number
of shares of Common Stock or other securities or property
of the Company determined by multiplying the number of
Warrant Shares issuable upon exercise of each Warrant
immediately prior to such event by a fraction, the
numerator of which shall be the total number of
outstanding shares of Common Stock immediately after such
event, and the denominator of which shall be the total
number of outstanding shares of Common Stock immediately
prior to such event. An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the
effective date of such event, retroactive to the record
date, if any, for such event. Any shares of Common Stock
issuable in payment of a dividend shall be deemed to have
-6-<PAGE>
been issued immediately prior to the time of the record
date for such dividend for purposes of calculating the
number of outstanding shares of Common Stock under
paragraphs (b) and (c) below. Adjustments pursuant to
this paragraph shall be made successively whenever any
event specified above shall occur. Whenever the number of
Warrant Shares issuable upon exercise of a Warrant is
adjusted pursuant to this paragraph, the Exercise Price
payable upon exercise of each Warrant shall be adjusted by
multiplying the Exercise Price in effect immediately prior
to such adjustment by a fraction, the numerator of which
shall be the number of Warrant Shares issuable upon the
exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the
number of Warrant Shares issuable immediately thereafter.
(b) In case the Company shall fix a record date for
the issuance of rights or warrants to all holders of Com-
mon Stock without any charge to such holders entitling
them (for a period expiring within 45 days after the
record date mentioned below) to subscribe for or purchase
shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) at a price per
share (or having an initial conversion price or exchange
price per share) less than the Current Market Price (as
defined in paragraph (g) below) of a share of Common Stock
of the Company on such record date, the number of Warrant
Shares thereafter issuable upon exercise of each Warrant
shall be determined by multiplying the number of Warrant
Shares theretofore issuable upon exercise of each Warrant
by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the
number of additional shares of Common Stock offered for
subscription or purchase in connection with such rights,
options or warrants, and the denominator of which shall be
the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants plus
the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common
Stock so offered would purchase at the Current Market
Price as of such record date. Such adjustment shall be
made whenever such rights, options or warrants are issued,
and shall become effective immediately after the record
date for the determination of stockholders entitled to
receive such rights, options or warrants. Whenever the
number of Warrant Shares issuable upon exercise of a
Warrant is adjusted pursuant to this paragraph, the
Exercise Price payable upon exercise of each Warrant shall
be adjusted by multiplying the Exercise Price in effect
-7-<PAGE>
immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of Warrant Shares
issuable upon the exercise of each Warrant immediately
prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares issuable immediately
thereafter.
(c) In case the Company shall fix a record date for
the making of a distribution to all holders of shares of
Common Stock (i) of shares of any class other than Common
Stock, (ii) of evidences of indebtedness of the Company or
any Subsidiary (as defined in Section 17)), (iii) of
assets or other property (other than cash dividends paid
out of current earnings at an annual rate per share not to
exceed 3% of the then Current Market Price of the Common
Stock) or (iv) of rights or warrants (excluding those
referred to in paragraph (b) above), then in each such
case the number of Warrant Shares thereafter issuable upon
exercise of each Warrant shall be determined by
multiplying the number of Warrants Shares theretofore
issuable upon the exercise of each Warrant by a fraction,
the numerator of which shall be the Current Market Price
per share of Common Stock as of the record date for such
distribution, and the denominator of which shall be the
then Current Market Price per share of Common Stock, less
the then fair market value (as determined by the Board of
Directors, whose determination shall be described in a
Board Resolution (as defined in Section 17) of the portion
of the securities, evidences of indebtedness, assets,
property or rights or warrants so distributed, the case
may be, which is applicable to one share of Common Stock.
Such adjustment shall be made successively whenever such a
record date is fixed. Whenever the number of Warrant
Shares issuable upon exercise of a Warrant is adjusted
pursuant to this paragraph, the Exercise Price payable
upon exercise of each Warrant shall be adjusted by
multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be
the number of Warrant Shares issuable upon the exercise of
each Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter.
(d) In case the Company shall issue shares of its
Common Stock for a consideration per share less than the
Current Market Price per share on the date the Company
fixes the offering price of such additional shares, the
Exercise Price shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying
the Exercise Price in effect immediately prior thereto by
-8-<PAGE>
a fraction, of which the numerator shall be the total num-
ber of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares plus the
number of shares of Common Stock which the aggregate con-
sideration received (determined as provided in paragraph
(f) below) for the issuance of such additional shares
would purchase at the Current Market Price per share, and
the denominator shall be the number of shares of Common
Stock outstanding immediately after the issuance of such
additional shares. Such adjustment shall be made succes-
sively whenever such an issuance is made; provided, how-
ever, that the provisions of this paragraph shall not
apply to Common Stock issued (i) to the Company's employ-
ees under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common
Stock if required by law, if such Common Stock would
otherwise be covered by this paragraph (but only to the
extent that the aggregate number of shares excluded hereby
shall not exceed, on a cumulative basis since July 1,
1996, 4,000,000 (including 700,000 shares as of July 1,
1996 to be issued pursuant to two employment agreements
and 1,451,500 options outstanding as of July 1, 1996 to
purchase Common Stock, adjusted, as appropriate, in
connection with any stock split, merger, recapitalization
or similar transaction)), (ii) in a bona fide public
offering pursuant to a firm commitment underwriting or a
bona fide private placement in which the issue price is
not less than the Current Market Price of the Common Stock
as of the Trading Day immediately preceding the date of
the issuance of such Common Stock or (iii) in a
transaction subject to adjustment pursuant to Section 8.
(e) Subject to the provisions of Section 8, in case
the Company shall issue any securities convertible into or
exchangeable for Common Stock (excluding securities issued
in transactions described in paragraphs (b) and (c) above
and upon conversion of the securities) for a consideration
per share of Common Stock initially deliverable upon
conversion or exchange of such securities (determined as
provided in paragraph (f) below) less than the Current
Market Price per share in effect immediately prior to the
issuance of such securities, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the
price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, of which
the numerator shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of
such securities plus the number of shares of Common Stock
which the aggregate consideration received (determined as
provided in paragraph (f) below) for such securities would
-9-<PAGE>
purchase at the Current Market Price per share, and the
denominator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the
maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for such securities at the
initial conversion or exchange price or rate. Such
adjustment shall be made successively whenever such an
issuance is made.
Upon the termination of the right to convert or
exchange such securities, the Exercise Price shall forth-
with be readjusted to such Exercise Price as would have
been obtained had the adjustments made upon the issuance
of such convertible or exchangeable securities been made
upon the basis of the delivery of only the number of
shares of Common Stock actually delivered upon conversion
or exchange of such securities and upon the basis of the
consideration actually received by the Company (determined
as provided in paragraph (f) below) for such securities.
(f) For purposes of any computation respecting con-
sideration received pursuant to paragraphs (d) and (e)
above, the following shall apply:
(i) in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the
amount of such cash, provided that in no case shall
any deductions be made for any commissions, discounts
or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection
therewith;
(ii) in the case of the issuance of shares of
Common Stock for a consideration in whole or in part
other than cash, the consideration other than cash
shall be deemed to be the fair market value thereof
as determined by the Board of Directors, whose rea-
sonable determination shall be described in a Board
Resolution; and
(iii) in the case of the issuance of securities
convertible into or exchangeable for shares of Common
Stock, the aggregate consideration received therefor
shall be deemed to be the consideration received by
the Company for the issuance of such securities plus
the additional minimum consideration, if any, to be
received by the Company upon the conversion or
exchange thereof (the consideration in each case to
be determined in the same manner as provided in
clauses (i) and (ii) of this paragraph (f)).
-10-<PAGE>
(g) For the purpose of any computation under this
Warrant, the "Current Market Price" per share at any date
shall be deemed to be the average of the daily Sale Price
for the Common Stock for the 10 consecutive Trading Days
commencing 14 Trading Days before such date.
(h) In any case in which this Section shall require
that an adjustment shall become effective immediately
after a record date for an event, the Company may defer
until the occurrence of such event (i) issuing to the
Holder of any Warrant exercised after such record date and
before the occurrence of such event the additional shares
of Common Stock issuable upon such exercise by reason of
the adjustment required by such event over and above the
shares of Common Stock issuable upon such exercise before
giving effect to such adjustment and (ii) paying to such
Holder an amount in cash in lieu of a fractional share of
Common Stock pursuant to Section 3; provided, however,
that the Company shall deliver to such Holder a due bill
or other appropriate instrument evidencing such Holder's
rights to receive such additional shares of Common Stock,
and such cash, upon the occurrence of the event requiring
such adjustment.
(i) No adjustment in the Exercise Price shall be
required with respect to shares of Common Stock issued
upon exercise of the Warrants unless such adjustment would
require a decrease of at least $.02; provided, however,
that any such adjustment which is not required to be made
shall be carried forward and taken into account in any
subsequent adjustment.
(j) The Company may make such reductions in the
Exercise Price, in addition to those required pursuant to
other paragraphs of this Section, as it considers to be
advisable in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(k) In case of any consolidation with or merger of
the Company into another corporation, or in case of any
sale, lease or conveyance of assets to another corporation
of the property of the Company as an entirety or
substantially as an entirety, such successor, leasing or
purchasing corporation, as the case may be, shall execute
and deliver to the Holder hereof simultaneously therewith
a new Warrant Certificate, reasonably satisfactory in form
and substance to such Holder, providing that the Holder of
each Warrant then outstanding shall have the right
thereafter to exercise such Warrant solely for the kind
-11-<PAGE>
and amount of shares of stock, other securities, property
or cash or any combination thereof receivable upon such
consolidation, merger, sale, lease or conveyance by a
holder of the number of shares of Common Stock for which
such Warrant might have been exercised immediately prior
to such consolidation, merger, sale, lease or conveyance.
(l) In case of any reclassification or change of the
shares of Common Stock issuable upon exercise of the War-
rants (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combi-
nation, but including any change in the shares of Common
Stock into two or more classes or series of shares), or in
case of any consolidation or merger of another corporation
into the Company in which the Company is the continuing
corporation and in which there is a reclassification or
change (including a change to the right to receive cash or
other property) of the shares of Common Stock (other than
a change in par value, or from par value to no par value,
or as a result of a subdivision or combination, but
including any change in the shares of Common Stock into
two or more classes or series of shares), the Company
shall execute and deliver to the Holder hereof simulta-
neously therewith a new Warrant Certificate, satisfactory
in form and substance to such Holder, providing that the
Holder of each Warrant then outstanding shall have the
right thereafter to exercise such Warrant solely for the
kind and amount of shares of stock, other securities,
property or cash or any combination thereof receivable
upon such reclassification, change, consolidation or
merger by a holder of the number of shares of Common Stock
for which such Warrant might have been exercised immedi-
ately prior to such reclassification, change, consolida-
tion or merger.
(m) The foregoing paragraphs (k) and (1), however,
shall not in any way affect the rights a Holder may other-
wise have, pursuant to this Section, to receive
securities, evidences of indebtedness, assets, property
rights or warrants upon exercise of a Warrant.
(n) Whenever there shall be any change in the Exer-
cise Price under any paragraph of this Section, and no
specific means of adjusting the number of Warrant Shares
issuable upon exercise of each Warrant is provided in such
paragraph, then there shall be an adjustment (to the
nearest hundredth of a share) in the number of shares of
Common Stock purchasable upon exercise of this Warrant
Certificate, which adjustment shall become effective at
the time such change in the Exercise Price becomes
-12-<PAGE>
effective and shall be made by multiplying the number of
shares of Common Stock purchasable upon exercise of this
Warrant Certificate immediately before such change in the
Exercise Price by a fraction, the numerator of which is
the Exercise Price immediately before such change, and the
denominator of which is the Exercise Price immediately
after such change. In the event that, following the
declaration of a record date for the distribution of any
rights, warrants or other securities or property to be
distributed to holders of Common Stock, such rights,
warrants or other securities or property are not so
issued, the Exercise Price then in effect shall be
readjusted, effective as of the date when the Board of
Directors determines not to issue such rights or warrants,
to the Exercise Price which would then be in effect if a
record date for such issuance had not been fixed.
(o) In the event of a dividend or other distribution
by the Company pursuant to paragraph (c) of this Section
5, then in lieu of an adjustment pursuant to such
paragraph, the Holder of each Warrant, at such Holder's
option, upon the exercise thereof at any time after such
dividend or distribution, shall be entitled to receive
from the Company, such subsidiary or both as the Company
shall determine, the shares, evidences of indebtedness,
assets, property or rights or warrants to which such
holder would have been entitled if such holder had
exercised such Warrant immediately prior thereto, all
subject to further adjustment as provided in this Section
5, provided, however, that no adjustment in respect of any
such distribution shall be made during the term of a
Warrant or upon the exercise of a Warrant if such option
is chosen in lieu of an adjustment. The Holder may select
its alternative under the preceding sentence of this
paragraph by delivering to the Company a written notice of
such exercise within 7 days of its receipt of notice of
the applicable adjustment event pursuant to Section 7(a).
The Company shall provide the Holder with notice if, in
the Company's reasonable judgment, it is not feasible to
retain or set aside the shares, evidences of indebtedness,
assets, property or rights or warrants to be distributed
pursuant to paragraph (c) of this Section 5, in which case
each Warrant shall be adjusted in respect of such
distribution.
(p) If the Company repurchases any shares of Common
Stock for a per share consideration which exceeds the
Current Market Price of a share of Common Stock of the
Company on the date immediately prior to such repurchase,
then the Company shall issue additional Warrants to the
-13-<PAGE>
holder having the Exercise Price in effect on the Trading
Day immediately prior to such repurchase. The additional
Warrants issued pursuant to the preceding sentence shall
entitle the Holder to purchase the number of shares of
Common Stock equal to the result obtained by dividing (A)
the product of (w) the number of shares of Common Stock
repurchased at a price in excess of the Current Market
Price and (x) the amount by which the per-share repurchase
price exceeds such Current Market Price, by (B) the amount
by which (y) such Current Market Price exceeds (z) the
Exercise Price in effect as of the date immediately
preceding such repurchase.
(q) If any event occurs as to which the foregoing
provisions of this Section are not strictly applicable or,
if strictly applicable, would not, in the good faith judg-
ment of the Board of Directors of the Company, fairly pro-
tect the purchase rights of the Warrants in accordance
with the essential intent and principles of such provi-
sions, then such Board shall make such adjustments in the
application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of such Board, to
protect such purchase rights as aforesaid, but in no event
shall any such adjustment have the effect of increasing
the Exercise Price or decreasing the number of shares of
Common Stock subject to purchase upon exercise of this
Warrant, or otherwise adversely affect the Holders. Under
no circumstances, other than (A) a reverse stock split;
(B) a recapitalization in which all holders of Common
Stock (and securities exercisable for or convertible into
Common Stock, with respect to such exercise or conversion
provisions) are treated equally; or (C) a merger; in each
case in which each outstanding share of Common Stock is
converted into less than one share of Common Stock
(including, in the case of a merger, of the entity
surviving such merger), shall any adjustment pursuant to
this Section have the effect of raising the Exercise Price
or lowering the number of Warrant Shares issuable upon
exercise of a Warrant.
(r) If, after one or more adjustments to the
Exercise Price pursuant to this Section 5, the Exercise
Price cannot be reduced further without falling below the
greater of (i) $.01 or (ii) the lowest positive exercise
price legally permissible for warrants to acquire shares
of Common Stock, the Company shall make further adjustment
to compensate the holder, consistent with the foregoing
principles, as the Board of Directors, acting in good
faith, deems necessary, including an increase in the
-14-<PAGE>
number of Warrant Shares issuable upon exercise of
outstanding Warrants and/or a cash payment to the Holder.
Section 6. Additional Adjustment of Exercise
Price .
(a) To the extent that (i) the Current Market Price,
measured as of the Trading Day immediately preceding each
anniversary of the Initial Exercise Date (each, an "Anniversary
Date") set forth below is less than (ii) the reference price
(each, a "Reference Price") set forth below next to each such
Anniversary Date, the Exercise Price then in effect shall be
reduced, effective as of the applicable Anniversary Date, by
the amount by which the Reference Price exceeds the Current
Market Price in effect on the immediately preceding Trading
Day; provided, however, that, under no circumstance shall any
adjustment on any Anniversary Date, taking into account all
prior adjustments pursuant to this Section, result in an
Exercise Price of less than $0.01.
Anniversary of the Reference
Initial Exercise Date Price
--------------------- ---------
First Anniversary $ 5.50
Second Anniversary 7.00
Third Anniversary 10.00
Fourth Anniversary 13.00
Fifth Anniversary 16.50
All reductions of the Exercise Price pursuant to this paragraph
(a) shall be cumulative and shall not be reversed due to
changes in the Current Market Price or the Sale Price following
any such reduction. Subject to the provisions of paragraph (c)
of this Section, the Exercise Price in effect following any
adjustment pursuant to this paragraph (a) shall be treated as
the Exercise Price for all purposes hereof, until further
adjustment pursuant to this Section or Section 5.
Notwithstanding the foregoing, if, at the time any Warrant is
exercised, the Current Market Price is greater than the
Reference Price applicable at the Anniversary Date immediately
following the date of such exercise, the Exercise Price with
respect to each Warrant being exercised (and no other Warrants)
shall be increased (a "Special Increase") immediately prior to
such exercise by the amount by which such Current Market Price
exceeds the Exercise Price then in effect, provided that the
Special Increase for each such Warrant being exercised shall
under no circumstances be greater than the aggregate dollar
amount by which the Exercise Price of such Warrant has actually
been decreased previously pursuant to this Section 6 (without
giving effect to any adjustment pursuant to Sections 5 or 8).
-15-<PAGE>
(b) In the event that the Exercise Price is adjusted
for any reason pursuant to Section 5 (but in no event taking
account of any adjustment pursuant to this Section 6), each
Reference Price set forth in paragraph (a) of this Section
shall be adjusted by multiplying such Reference Price by a
fraction, the numerator of which shall be the Exercise Price in
effect immediately following the adjustment made pursuant to
Section 5, and the denominator of which shall be the Exercise
Price in effect prior to such adjustment. Reference Prices
that have been adjusted pursuant to this paragraph shall be
treated for all purposes as the applicable Reference Prices for
purposes of paragraph (a) of this Section, until further
adjusted pursuant to this paragraph (b).
(c) In the event that (X) the Exercise Price
requires adjustment pursuant to Section 5 and (Y) the event
giving rise to such adjustment falls on an Anniversary Date,
the Exercise Price shall be adjusted by first making any
adjustment required pursuant to this Section 6, and, there-
after, further adjusting such Exercise Price pursuant to Sec-
tion 5, such that the Exercise Price deemed to be in effect
prior to the Section 5 adjustment is the price resulting from
the Section 6 adjustment, and the Exercise Price deemed to be
in effect prior to the Section 6 adjustment is the Exercise
Price in effect immediately prior to the applicable Anniversary
Date.
(d) In the event that the Company is involved in a
merger, consolidation or similar transaction, or to the extent
that all or substantially all of the assets of the Company are
sold, then an adjustment shall be made pursuant to this Section
6 as though such transaction occurred on an Anniversary Date,
and the Holder shall be given full credit for an adjustment to
the Exercise Price pursuant to this Section. Such adjustment
shall be based upon the Current Market Price immediately
preceding the date such transaction is to be consummated (the
"Determination Date"). To the extent such a transaction occurs
on a date other than an Anniversary Date, the Reference Price
used in connection with any adjustment under this paragraph
shall be calculated by interpolating between the Reference
Prices set forth in paragraph (a) which are applicable on the
Anniversary Dates occurring immediately before and after the
Determination Date. Such interpolation shall be proportionate
based upon the number of days elapsed between the two
Anniversary Dates, such that, for example, if the Determination
Date were July 1, the adjusted Reference Price would be the
midpoint between the Reference Prices applicable on such
Anniversary Dates.
-16-<PAGE>
(e) No adjustment shall be made to the number of
Warrant Shares issuable upon exercise of a Warrant as a result
of an adjustment to the Exercise Price pursuant to this Section
6, provided, however, that this paragraph shall not prevent
adjustments otherwise required pursuant to another Section of
this Warrant from being made.
Section 7. Notice of Adjustments.
(a) Prior to the earlier to occur of (i) the decla-
ration of a record date for, or (ii) the announcement and/or
consummation of, any event or action that would result in an
adjustment pursuant to this Section, Section 6 or Section 8,
the Company shall notify the Holder of such intended record
date, announcement, event or action. Such notice must be
reasonably calculated to be delivered not less than 20 nor more
than 90 days prior to the applicable event.
(b) Whenever the Exercise Price is adjusted as pro-
vided in Section 5 or Section 6:
(i) the Company shall compute the adjusted
Exercise Price in accordance with Section 5 or Sec-
tion 6 and shall prepare a certificate signed by the
chief financial officer of the Company setting forth
the adjusted Exercise Price and showing in reasonable
detail the facts upon which such adjustment is based,
including, if appropriate, a statement of the consid-
eration received or to be received by the Company
for, and setting forth the amount of, any additional
shares of Common Stock issued since the last such
adjustment and the number of shares of Common Stock
for which the Warrants evidenced hereby are exercis-
able at the then Exercise Price, and such certificate
shall forthwith be filed at the Warrant Office; and
(ii) a notice stating that the Exercise Price
and number of shares for which each Warrant may be
exercised have been adjusted and setting forth the
adjusted Exercise Price and number of shares for
which each Warrant may be exercised shall be commu-
nicated by telegram, telex, telecopier or any other
means of electronic communication capable of produc-
ing a written record, or shall be delivered by hand
or mailed as soon as practicable by the Company to
the Holder at its last address as it shall appear
upon the Warrant Register provided for in Section 2.
-17-<PAGE>
Section 8. Additional Issuance in the Event of a
Debt/Equity Exchange.
Notwithstanding any other provision of this Warrant,
in the event that the Company issues shares of Common Stock
(and/or securities convertible into Common Stock) in exchange
for debt securities of the Company or any of its subsidiaries,
whether in connection with a restructuring, workout, exchange
offer or other transaction (any such transaction hereinafter
being referred to as a "Debt/Equity Exchange"), the number of
Warrant Shares issuable upon the exercise of each Warrant shall
be adjusted so that the Holder of each Warrant shall be
entitled to purchase the kind and number of shares of Common
Stock or other securities or property of the Company determined
by multiplying the number of Warrant Shares issuable upon
exercise of each Warrant immediately prior to such Debt/Equity
Exchange by a fraction, (i) the numerator of which shall be the
total number of outstanding shares of Common Stock immediately
after such Debt/Equity Exchange (assuming full conversion of
any convertible securities issued in connection with such Debt/
Equity Exchange at the maximum exchange ratio, whether or not
applicable at the time of the Debt/Equity Exchange), and (ii)
the denominator of which shall be the total number of
outstanding shares of Common Stock immediately prior to such
Debt/Equity Exchange. An adjustment made pursuant to this
Section shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for
such event. To the extent that, at the time of any Debt/Equity
Exchange, the Warrants are convertible into property or
securities other than Common Stock, appropriate steps shall be
taken to ensure that, upon exercise of the Warrants, the Holder
is issued the property and/or other securities to which the
Holder would have been entitled had the Holder owned Common
Stock at the time such Common Stock was changed into such
property and/or other securities. Whenever the number of
Warrant Shares issuable upon exercise of a Warrant is adjusted
pursuant to this paragraph, the Exercise Price payable upon
exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Warrant
Shares issuable upon the exercise of each Warrant immediately
prior to such adjustment, and the denominator of which shall be
the number of Warrant Shares purchasable immediately
thereafter. For purposes of this Section, a Debt/Equity
Exchange shall also include (i) any issuance by the Company of
shares of Common Stock (and/or securities convertible into
Common Stock), the proceeds of which are used, directly or
indirectly, in one or a series of related or unrelated
transactions, to redeem, repurchase or otherwise retire debt
securities within 12 months of the date of such new issuance,
-18-<PAGE>
and (ii) any exchange or other distribution of equity in
connection with a waiver, modification, forbearance, delay in
payment or other similar transaction or event involving
outstanding indebtedness of the Company. The adjustment
provisions of this Section shall not apply, and no adjustment
pursuant to this Section shall be required, in connection with
any particular Debt/Equity Exchange, to the extent that the
Current Market Price as of the date which is 30 days after
consummation of such Debt/Equity Exchange is at least equal to
the greater of (i) $8.00 or (ii) the Reference Price applicable
as of the next Anniversary Date. In the event that a Debt/
Equity Exchange would give rise to an adjustment pursuant to
this Section and Section 5, the adjustment required by this
Section shall be made and no adjustment shall be made pursuant
to Section 5.
Section 9. No Rights as Shareholders; Notice to
Holder.
Nothing contained herein shall be construed as con-
ferring upon the Holder the right to vote or to receive divi-
dends or to receive notice as shareholders in respect of the
meetings of shareholders for the election of directors of the
Company or any other matter, or any rights whatsoever as share-
holders of the Company. If, however, at any time prior to the
expiration of the Warrants and prior to their exercise, any of
the following shall occur:
(a) The Company shall authorize the issuance to all
holders of Common Stock of rights, options or warrants to
subscribe for or purchase Common Stock, or of any other
subscription rights or warrants; or
(b) The Company shall authorize the distribution to
all holders of Common Stock of evidences of its indebted-
ness or assets (other than cash dividends or cash distri-
butions payable out of consolidated earnings or earned
surplus or dividends payable in Common Stock); or
(c) The Company shall propose any consolidation or
merger to which the Company is a party and for which
approval of any stock of the Company is required, or the
conveyance or transfer of properties and assets of the
Company substantially as an entirety (whether by sale,
lease or other disposition), or any reclassification or
change of outstanding Common Stock issuable upon exercise
of the Warrants (other than a change in par value or from
par value to no par value); or
-19-<PAGE>
(d) The Company shall propose the voluntary or
involuntary dissolution, liquidation or winding up of the
Company;
then the Company shall cause to be given to the Holder at its
address appearing on the Warrant Register, at least 15 days
prior to the applicable record date hereinafter specified, by
first class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common
Stock entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the date on which
any such consolidation, merger, conveyance, transfer, dissolu-
tion, liquidation or winding up is expected to become effective
or consummated, and the date as of which it is expected that
the holders of record of shares of Common Stock shall be enti-
tled to exchange their shares for securities or other property,
if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or wind-
ing up. The failure to give the notice required by this Sec-
tion or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consoli-
dation, merger, conveyance, transfer, dissolution, liquidation
or winding up, or the vote upon any action.
Section 10. Restrictions on Transfer of the
Warrants and Warrant Shares.
Until such time as an appropriate registration state-
ment covering the Warrants or the Warrant Shares has become
effective under the Securities Act, the Holder will not dispose
of either the Warrants evidenced hereby or the Warrant Shares,
as the case may be, unless (i) the transferee has agreed to be
bound by the restrictions contained herein on such Warrants or
Warrant Shares, as the case may be, and (ii) except in the case
of a transfer by the Holder to an Affiliate (as defined in Sec-
tion 17), the Company shall have received an opinion of counsel
(both such opinion and such counsel to be reasonably satisfac-
tory to the Company) to the effect that the sale or other pro-
posed disposition of the Warrants or Warrant Shares may be
accomplished without such registration (or perfection of an
exemption) under, the Securities Act, which opinion may be con-
ditioned upon (x) acceptance by the transferee of a Warrant
Certificate or Certificates or Warrant Shares bearing a legend
similar to that set forth in Exhibit A and (y) a certificate of
the transferee stating that the Warrant(s) or Warrant Share(s)
being acquired by such transferee are being acquired by such
transferee for its own account and not with a view to, or for
resale in connection with, the distribution thereof in viola-
tion of the Securities Act.
-20-<PAGE>
Section 11. Representations and Warranties.
The Company represents and warrants that, as of the
date of this Warrant and as of the date of any future issuance
of Warrants or securities issuable upon exercise thereof:
(i) It and each of its material subsidiaries is a
corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and
is in good standing as a foreign corporation in each
jurisdiction where ownership of its properties or the con-
duct of its business requires it to be so, and has all
power and authority under such laws and its certificate of
incorporation and all material governmental licenses,
authorizations, consents and approvals required to carry
on its business as now conducted.
(ii) It has the corporate power and authority to
execute, sell and perform its obligations under, and to
consummate the transactions contemplated by, the Warrants,
and has by proper action duly authorized the execution and
delivery of this Warrant.
(iii) Neither the execution and delivery of this War-
rant nor the consummation of the transactions contemplated
by this Warrant, nor the performance of and compliance
with the terms and provisions hereof will: (i) violate or
conflict with any provision of its Certificate of Incorpo-
ration or By-laws; (ii) violate any law, regulation,
order, writ, judgment, injunction, decree or permit
applicable to it; (iii) violate or materially conflict
with any contractual provisions of, or cause an event of
default under, any indenture, loan agreement, mortgage,
deed of trust, contract or other agreement or instrument
to which it or any of its subsidiaries or properties may
be bound; or (iv) result in or require the creation of any
lien, security interest or other charge or encumbrance
(other than those contemplated in or in connection with
this Warrant) upon or with respect to its subsidiaries or
properties.
(iv) No consent, approval, authorization or order
of, or filing, registration or qualification with, any
court or governmental authority or other person or entity
is required in connection with the execution, delivery or
performance of the Company's obligations under this War-
rant, other than any filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "H-S-R
-21-<PAGE>
Act") which may be required after the date of this
Warrant.
(v) The Warrant has been duly executed and deliv-
ered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable in accor-
dance with its terms, subject, as to enforcement, to bank-
ruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general
equity principles.
(vi) All representations and warranties of the
Company and it subsidiaries contained in the Credit
Agreement are hereby incorporated by reference into this
Warrant and are true and correct as of July 1, 1996.
(vii) The authorized capital stock of the Company
consists of (a) 60,000,000 shares of Common Stock, of
which 26,046,966 shares were outstanding as of June 30,
1996, (b) 3,700,000 shares of Non-Voting Common Stock, par
value $.01 per share, of which 3,573,662 shares were
outstanding as of June 30, 1996 and (c) 2,500,000 shares
of Preferred Stock, par value $1.00 per share, of which no
shares were outstanding as of June 30, 1996. All out-
standing shares of Common Stock are duly authorized, val-
idly issued, fully paid and nonassessable (except for
700,000 shares of restricted stock to be issued to two
officers of the Company), and no class of capital stock or
other securities of the Company is entitled to preemptive
or similar rights. There are outstanding on the date
hereof no options, warrants or other rights to acquire
capital stock from the Company (including pursuant to the
terms of any securities convertible into capital stock of
the Company), except (i) 29,620,628 outstanding Rights
("Rights") to purchase one one-hundredth of a share of the
Company's Series A Junior Participating Preferred Stock,
par value $1.00 per share, which Rights are issued under
the Rights Agreement, dated as of July 7, 1993, between
the Company and Harris Trust Company of New York, as
Rights Agent (as such agreement may be amended or
supplemented or replaced from time to time, the "Rights
Agreement"), (ii) options representing in the aggregate
the right to purchase up to 1,451,500 shares of Common
Stock pursuant to the Company's employee benefit plans and
(iii) warrants representing in the aggregate the right to
purchase up to 283,972 shares of Common Stock at an
exercise price of $3.89. All outstanding shares of
capital stock of all material subsidiaries of the Company
are owned by the Company or a direct or indirect wholly
-22-<PAGE>
owned subsidiary of the Company, free and clear of all
liens, charges, encumbrances, claims and options of any
nature, other than those contemplated or permitted by the
Credit Agreement.
(viii) The Company and its Board of Directors shall
take all action necessary to prevent any future
acquisition of securities of the Company by Apollo and/or
its affiliates solely as a result of ownership of this
Warrant or as a result of exercise of Warrants from
causing Apollo or its affiliates to be deemed an
"Acquiring Person" (as such term is defined in the Rights
Agreement), and to prevent any "Distribution Date" (as
defined in the Rights Agreement) from occurring as a
result of exercise of the Warrants.
(ix) The Company's Board of Directors has approved
Apollo's acquisition of Warrants and Warrant Shares for
purposes of Section 203(a)(1) of the General Corporation
Law of the State of Delaware. The Company will continue
to take any action necessary to exempt Apollo from the
operation of such statute or any successor thereto solely
as a result of Apollo's ownership of Warrants or Warrant
Shares.
Section 12. No Voting Rights.
No Holder shall be entitled to any voting rights as a
stockholder of the Company by virtue of such Holder's ownership
of Warrants, provided that Holders who also hold voting securi-
ties of the Company, including Warrant Shares, shall be enti-
tled to vote such securities on any matter upon which other
holders of such class of securities are entitled to vote.
Section 13. Execution of Warrant Certificates.
Each Warrant Certificate shall be executed on behalf
of the Company by the manual or facsimile signature of the
present or any future Chairman of the Board of Directors,
President or Vice President of the Company.
Section 14. Maintenance of Office or Agency.
The Company will maintain a Warrant Office in New
York, New York, where this Warrant Certificate may be presented
or surrendered for subdivision, combination, registration of
transfer, or exchange and where notices and demands to or upon
the Company in respect of the Warrants evidenced hereby may be
served. The Company hereby initially designates American Stock
-23-<PAGE>
Transfer & Trust Company as the agency of the Company for such
purpose.
Section 15. Severability.
In the event that any one or more of the provisions
contained herein, or the application thereof in any circum-
stances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality, and enforce-
ability of any such provision in every other respect and the
other remaining provisions hereof shall not be in any way
impaired or affected, it being intended that all of the Hold-
er's rights and privileges shall be enforceable to the fullest
extent permitted by law.
Section 16. Governing Law.
The Warrants shall be governed by and construed in
accordance with the laws of the State of New York, except to
the extent that the laws of Delaware shall be mandatorily
applicable hereto.
Section 17. Definitions.
For all purposes of this Warrant Certificate, in
addition to the other terms defined elsewhere herein, unless
the context otherwise requires:
"Affiliate" of any specified person means any other
person directly or indirectly controlling or controlled by
or under direct or indirect common control with such spec-
ified person. For the purposes of this definition, "con-
trol" when used with respect to any specified person means
the power to direct the management and policies of such
person, directly or indirectly, whether through the owner-
ship of voting securities, by contract or otherwise.
"Appraisal Procedure" means a procedure whereby two
independent appraisers, one chosen by the Company and one
by the Holder entitled to use the Appraisal Procedure (or,
to the extent more than one Holder is so entitled, by a
majority in interest of the Holders so entitled), shall
mutually agree upon the determinations then the subject of
appraisal. Each party shall deliver a notice to the other
appointing its appraiser within 15 days after the Ap-
praisal Procedure is invoked. If within 30 days after
appointment of the two appraisers they are unable to agree
upon the amount in question, a third independent appraiser
shall be chosen within 10 days thereafter by the mutual
-24-<PAGE>
consent of such first two appraisers or, if such first two
appraisers fail to agree upon the appointment of a third
appraiser, such appointment shall be made by the American
Arbitration Association, or any organization successor
thereto, from a panel of arbitrators having experience in
the appraisal of the subject matter to be appraised. The
decision of the third appraiser so appointed and chosen
shall be given within 30 days after the selection of such
third appraiser. If three appraisers shall be appointed
and the determination of one appraiser is disparate from
the middle determination by more than twice the amount by
which the other determination is disparate from the middle
determination, then the determination of such appraiser
shall be excluded, the remaining two determinations shall
be averaged and such average shall be binding and conclu-
sive on the Company and the Holders; otherwise the average
of all three determinations shall be binding and conclu-
sive on the Company and the Holders. The costs of con-
ducting any Appraisal Procedure shall be borne by the
Holders requesting such Appraisal Procedure, except (a)
the fees and expenses of the appraiser appointed by the
Company and any costs incurred by the Company shall be
borne by the Company and (b) if such Appraisal Procedure
shall result in a determination that is disparate by 10%
or more from the Company's initial determination, all
costs of conducting such Appraisal Procedure shall be
borne by the Company.
"Board of Directors" means either the Board of
Directors of the Company or any duly authorized committee
of that board.
"Board Resolution" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of
the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date
of such certification and delivered to each of the Holders
of the Warrants.
"Common Stock" means any stock of any class of
the Company which has no preference in respect of divi-
dends or of amounts payable in the event of any voluntary
or involuntary liquidation, dissolution or winding up of
the Company, and which is not subject to redemption by the
Company. However, subject to Section 5, shares issuable
on exercise of the Warrants evidenced hereby, as
contemplated by the first paragraph of this Warrant
Certificate, shall include only shares of the class
designated as Common Stock of the Company as of the date
of this Warrant or shares of any class or classes
-25-<PAGE>
resulting from any reclassification or reclassifications
thereof and which have no preference in respect of divi-
dends or of amounts payable in the event of any voluntary
or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the
Company; provided that if at any time there shall be more
than one such resulting class, the shares of each such
class then so issuable shall be substantially in the pro-
portion which the total number of shares of such class
resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from
all such reclassifications. As used in this Warrant Cer-
tificate, "shares" shall include fractions thereof to the
extent that fractional shares of the Company are outstand-
ing.
"Person" shall mean any individual, firm, partner-
ship, association, group (as such term is used in Rule
13d-5 under the Securities Exchange Act of 1934, as
amended, as in effect on the date of this Warrant), corpo-
ration or other entity.
"Sale Price" of the Common Stock means the closing
price (or if no closing price is reported, the average of
the high and low bid prices) as reported in the composite
transactions for the principal United States securities
exchange on which the Common Stock is traded or, if the
Common Stock is not listed on a United States national or
regional stock exchange, as reported by the NASDAQ
National Market or the National Quotation Bureau
Incorporated.
"Subsidiary" means any subsidiary of the Company, a
majority of whose capital stock with voting power, under
ordinary circumstances, to elect directors is at the time,
directly or indirectly owned by the Company, by one or
more subsidiaries of the Company or by the Company and one
or more subsidiaries of the Company.
"Trading Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday, other than any day on
which securities are not traded on the exchange or market
where the Warrants are listed or sold.
Section 18. Fees and Expenses.
All fees and expenses incurred by the Holder in con-
nection with the Holder's ownership of Warrants and securities
or other property received upon exercise thereof which relate
to (i) filings under the H-S-R Act; (ii) any other required
-26-<PAGE>
regulatory filings; (iii) registration fees; (iv) stock
exchange listing fees; and (v) reasonable fees and expenses of
counsel in connection with the foregoing shall be paid by the
Company.
Section 19. Contest and Appraisal Rights.
Upon each determination of fair market value or other
valuation required hereunder, the Company shall promptly give
notice thereof to all Holders, setting forth in reasonable
detail the calculation of such fair market value or valuation
and the method and basis of determination thereof, as the case
may be. If any Holder of Warrants to purchase at least
1,000,000 shares of Common Stock (including, for purposes of
determining such level of ownership, all Warrants owned by
affiliates of such Holder) shall disagree with such
determination and shall, by notice to the Company given within
15 days after the Company's notice of such determination, elect
to dispute such determination, such dispute shall be resolved
in accordance with the Appraisal Procedure (as defined in
Section 17).
Section 20. Additional Warrants to be Issued at
Current Exercise Price.
Notwithstanding any other provision of this Warrant,
to the extent the Holder is entitled to receive additional
Warrants in accordance with the terms hereof, the Warrants so
issued shall have terms identical to this Warrant, except that
(i) the initial Exercise Price for such additional Warrants
shall be deemed to be the Exercise Price in effect on the date
such additional Warrants are issued and (ii) the amount and
kind of securities and/or other property issuable upon exercise
of such Warrants shall be deemed to be the amount and kind of
securities and/or other property issuable upon exercise of the
Warrants outstanding immediately prior to issuance of such
additional Warrants.
Dated: July 1, 1996 LEVITZ FURNITURE INCORPORATED
By: /s/ Edward P.Zimmer
Name: Edward P. Zimmer
Title: Vice President and
General Counsel
-27-<PAGE>
NOTICE OF ELECTION TO EXERCISE
The undersigned hereby irrevocably elects to exercise
the within Warrant to the extent of purchasing ______ shares of
Common Stock and hereby makes payment of the Exercise Price
(check and complete appropriate clause):
___
/ / in cash in the amount of $_________;
or
___
/ / by surrendering herewith all or a
portion of the Term Note (as defined
in the within Warrant) having an
outstanding principal amount (plus
accrued interest) of $_________.
NAME OF HOLDER:
_____________________________
(Please Print)
By___________________________
Date:_________________, 199_.
Instructions for Registration of Stock
Name________________________________________
(please type or print in block letters)
Address_____________________________________
-28-<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF SUCH REGISTRATION OR THE AVAILABILITY OF
AN EXEMPTION FROM SUCH REGISTRATION. SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON COMPLIANCE WITH THE
REQUIREMENTS FOR TRANSFER SET FORTH HEREIN.
272,916 Warrants Certificate No. W-2
WARRANT FOR THE PURCHASE OF
COMMON STOCK OF LEVITZ FURNITURE INCORPORATED
THE WARRANTS (AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF) REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE
OF SUCH REGISTRATION OR THE AVAILABILITY OF AN
EXEMPTION FROM SUCH REGISTRATION. THIS WARRANT MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON
COMPLIANCE WITH THE REQUIREMENTS FOR TRANSFER SET
FORTH HEREIN. THE WARRANTS AND SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE THEREOF ARE ENTITLED TO
THE BENEFITS OF A CERTAIN REGISTRATION RIGHTS AGREE-
MENT DATED AS OF JULY 1, 1996 BETWEEN THE COMPANY
AND THE OTHER PARTIES SIGNATORIES THERETO.
THIS IS TO CERTIFY THAT, for value received, APOLLO
OVERSEAS PARTNERS III, L.P. ("Apollo"), or registered assigns
(collectively, the "Holder"), is the registered owner of the
number of Warrants set forth above, each of which entitles the
Holder, subject to the terms and conditions set forth
hereinafter, to purchase one share of Common Stock, par value
$.01 per share (the "Common Stock"), of Levitz Furniture
Incorporated, a corporation organized under the laws of the
State of Delaware (the "Company"), at a purchase price per
share referred to herein as the "Exercise Price". The number
of shares of Common Stock which may be received upon the
exercise of this certificate (this "Warrant Certificate") and
the Exercise Price for each such share of Common Stock are
subject to adjustment from time to time as hereinafter set
forth. Each share of Common Stock issuable upon the exercise
of each of the Warrants (collectively, the "Warrant Shares")
when issued and paid for pursuant to the provisions of this
Warrant shall be validly issued, fully paid and nonassessable,
shall be free from all taxes, liens and charges with respect to
the issuance thereof and shall be free of any preemptive or
similar rights. The Company shall use all reasonable efforts
to cause the Warrant Shares to be listed or eligible to be
quoted for trading on any stock exchange, on the NASDAQ
National Market or on any other market on which shares of<PAGE>
Common Stock are then listed or eligible to be quoted for
trading.
Each Warrant evidenced hereby is originally acquired
in connection with Apollo's participation as a lender under a
Credit Agreement, dated as of July 1, 1996, among Levitz
Furniture Corporation, Levitz Furniture Company of the Midwest,
Inc., Levitz Furniture Company of the Pacific, Inc., Levitz
Furniture Company of Washington, Inc. and John M. Smyth Company
as Borrowers, each of the financial institutions initially a
signatory thereto, together with those assignees pursuant to
Section 11.8 thereof, as Lenders, with Levitz Furniture
Corporation as LFC Funds Administrator and BT Commercial Corpo-
ration, as Agent (the "Credit Agreement"), for good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged. The Company and Apollo explicitly
acknowledge that additional restructuring transactions
involving the Company and/or its subsidiaries may be necessary,
and, as a result, the Company has specifically agreed to
provide Apollo the protection afforded by Section 8 of this
Warrant.
Each Warrant is subject to the following terms and
provisions:
Section 1. Exercise of Warrant.
(a) Subject to the provisions hereof, the Warrants
evidenced hereby may be exercised at the discretion of the
Holder in whole or in part at any time or from time to time on
or after July 1, 1996 (the "Initial Exercise Date") to and
including July 1, 2001 (the "Expiration Date") or, if either
day is not a Trading Day (as defined in Section 17), then on
the next succeeding Trading Day, by presentation and surrender
hereof to the Company at the office or agency of the Company
maintained for that purpose pursuant to Section 14 (the "War-
rant Office"), with the Notice of Election to Exercise (the
"Exercise Notice") attached hereto duly executed and accom-
panied by payment to the Company of the Exercise Price for the
number of Warrant Shares specified in such Exercise Notice.
(b) The Exercise Price for the shares of Common
Stock which each Warrant entitles the Holder to purchase shall
initially be equal to $4.125. The Exercise Price set forth in
the preceding sentence is subject to adjustment as set forth in
Sections 5, 6 and 8.
(c) Payment of the Exercise Price shall be made in
cash, certified bank check or by wire transfer, at the option
of the Holder; provided, however, that payment of the Exercise
-2-<PAGE>
Price may also be made, at the Holder's option, in whole or in
part, by surrendering to the Company, together with the related
Exercise Notice, the Term Note (as such term is defined in the
Credit Agreement), with the outstanding principal amount of
such Term Note, together with any accrued and unpaid interest
thereon (through the date of such surrender), being deemed for
all purposes of this Warrant to be the equivalent of a cash
payment of the Exercise Price. To the extent the aggregate
payment for the Exercise Price made pursuant to this paragraph
is less than the face amount of any Term Note (including all
accrued and unpaid interest with respect to such Term Note),
the Company shall credit all such accrued and unpaid interest
toward payment of the Exercise Price, and shall reissue to the
Holder a new Term Note with a face amount equal to (i) the face
amount of the Term Note so surrendered, plus (ii) the amount of
any accrued and unpaid interest on the Term Note that was
surrendered together with such Term Note as payment of the
Exercise Price, minus (iii) the aggregate Exercise Price paid
in connection with such exercise.
(d) Upon receipt by the Company of this Warrant Cer-
tificate at the Warrant Office, together with a properly com-
pleted Exercise Notice and payment of the Exercise Price as
provided above, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise, not-
withstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares
shall not then be actually delivered to the Holder. The Com-
pany shall deliver such certificates to the Holder as promptly
as possible thereafter, but in any event within 5 business days
of receipt of the Exercise Notice. The Company shall pay all
expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection
with the preparation, issue and delivery of stock certificates
under this Section 1 except that the Company shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of the Warrant
Shares in a name other than that of the Holder of the Warrant
evidenced hereby who shall have surrendered the same in
exercise of the subscription right evidenced hereby. In the
event Warrant Shares are issued prior to the time that an
appropriate registration statement with respect to the Warrant
Shares has become effective under the Securities Act, the
Warrant Shares so issued shall have stamped or imprinted
thereon a legend in the form of Exhibit A. Any holder of
Warrant Shares so legended shall be entitled to have such
legend removed, upon surrender of Warrant Shares to the Company
or the transfer agent for the Common Stock, upon effectiveness
of such a registration statement or upon receipt by the Company
-3-<PAGE>
of an opinion of counsel to the Holder to the effect that such
legend is no longer required.
(e) Upon any partial exercise of the number of War-
rants to which this Warrant Certificate entitles the Holder,
there shall be issued to the Holder hereof a new Warrant Cer-
tificate in respect of the shares as to which this Warrant Cer-
tificate shall not have been exercised, subject to the provi-
sions of Section 3. Such new Warrant Certificate shall be
identical to this Warrant Certificate, except as to the number
of shares of Common Stock covered thereby.
Section 2. Exchange, Transfer, Assignment or Loss of
Warrant Certificate; Temporary Warrant
Certificates.
(a) In case this Warrant Certificate shall be muti-
lated, lost, stolen, or destroyed, the Company may, in its dis-
cretion, issue and deliver in exchange and substitution for and
upon cancellation of the mutilated Warrant Certificate, or in
lieu of and substitution for the Warrant Certificate lost,
stolen, or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction and indemnification reasonably
satisfactory to it. An applicant for such a substitute Warrant
Certificate shall also comply with such other reasonable regu-
lations and pay such other reasonable charges as the Company
may prescribe.
(b) The Warrant Certificates shall be numbered and
shall be registered in a Warrant Register maintained by the
Company as they are issued. The registered owner on the War-
rant Register may be treated by the Company and all other per-
sons dealing with the Warrants evidenced hereby as the absolute
owner hereof for any purpose and as the person entitled to
exercise the right represented hereby, or to the transfer
hereof on the books of the Company, any notice to the contrary
notwithstanding and, until such transfer on such books, the
Company may treat the registered owner on the Warrant Register
as the owner for all purposes. The Company may require payment
of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any registration of
transfer of Warrant Certificates.
(c) This Warrant Certificate may be subdivided or
combined with other Warrant Certificates evidencing the same
rights as the rights evidenced hereby and thereby upon presen-
tation and surrender hereof at the Warrant Office together with
a written notice signed by the Holder hereof specifying the
-4-<PAGE>
denominations in which new Warrant Certificates are to be
issued. Upon presentation and surrender of any Warrant Cer-
tificates, together with such written notice, for subdivision
or combination, the Company will issue a new Warrant Certifi-
cate or Certificates, in the denominations requested, entitling
the holders thereof to purchase the same aggregate number of
shares of Common Stock as the Warrant Certificate or Certifi-
cates so surrendered. Such new Warrant Certificates will be
registered in the name of the Holder submitting such request
and delivered to such Holder. Any Warrant Certificate surren-
dered for subdivision or combination shall be cancelled
promptly upon the issuance of such new Warrant Certificate(s).
The term "Warrant Certificate" as used herein includes any War-
rant Certificates into which this Warrant Certificate may be
subdivided, combined or exchanged.
Section 3. Fractional Interests.
(a) The Company shall not be required to issue frac-
tions of Warrants or to issue Warrant Certificates which evi-
dence fractional Warrants.
(b) The Company shall not be required to issue frac-
tions of shares of Common Stock in the exercise of Warrants.
If any fraction of a Warrant Share would, except for the provi-
sions of this Section, be issuable on the exercise of any War-
rant (or specified portion thereof), the Company shall purchase
such fraction for an amount in cash equal to the same fraction
of the Current Market Price (as defined in Section 5(g)) per
share of Common Stock.
(c) The Holder, by the acceptance of this Warrant
Certificate, expressly waives his right to receive any frac-
tional Warrant or any fractional share upon exercise of a War-
rant.
Section 4. Reservation of Warrant Shares, etc.
The Company hereby agrees that at all times there
shall be reserved for issuance and/or delivery upon exercise of
the Warrants evidenced by this Warrant Certificate, free from
preemptive rights, such number of shares of authorized but
unissued or treasury shares of Common Stock, or other stock or
securities deliverable pursuant to Section 5, as shall be
required for issuance or delivery upon exercise of the Warrants
evidenced hereby. The Company further agrees (i) that it will
not, by amendment of its certificate of incorporation or
through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants,
-5-<PAGE>
stipulations or conditions to be observed or performed
hereunder by the Company and (ii) to promptly take all action
as may from time to time be reasonably required in order to
permit the Holder to exercise the Warrants evidenced hereby and
the Company duly and effectively to issue the Warrant Shares as
provided herein upon the exercise hereof. Without limiting the
generality of the foregoing, the Company agrees that it will
not take any action which would result in Warrant Shares when
issued not being validly and legally issued and fully paid and
nonassessable. The Company further agrees that it will not
increase the par value of the Common Stock while the Warrants
evidenced hereby are outstanding, although such par value may
be reduced at any time. The Company hereby represents that, as
of the date hereof, it has sufficient shares of Common Stock
reserved for issuance upon exercise of all outstanding
Warrants.
Section 5. Anti-Dilution.
The Exercise Price and the number of shares of Common
Stock purchasable upon the exercise hereof shall be subject to
adjustment from time to time as provided in this Section.
Unless otherwise indicated, all calculations under this Section
5 shall be made to the nearest $0.01 or 1/100th of a share, as
the case may be.
(a) In case the Company shall (i) declare a dividend
or make a distribution on the outstanding shares of Common
Stock in shares of capital stock of the Company, (ii) sub-
divide or reclassify the outstanding shares of Common
Stock into a greater number of shares (or into other
securities or property), or (iii) combine or reclassify
the outstanding shares of Common Stock into a smaller
number of shares (or into other securities or property),
the number of Warrant Shares issuable upon the exercise of
each Warrant shall be adjusted so that the Holder of each
Warrant shall be entitled to purchase the kind and number
of shares of Common Stock or other securities or property
of the Company determined by multiplying the number of
Warrant Shares issuable upon exercise of each Warrant
immediately prior to such event by a fraction, the
numerator of which shall be the total number of
outstanding shares of Common Stock immediately after such
event, and the denominator of which shall be the total
number of outstanding shares of Common Stock immediately
prior to such event. An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the
effective date of such event, retroactive to the record
date, if any, for such event. Any shares of Common Stock
issuable in payment of a dividend shall be deemed to have
-6-<PAGE>
been issued immediately prior to the time of the record
date for such dividend for purposes of calculating the
number of outstanding shares of Common Stock under
paragraphs (b) and (c) below. Adjustments pursuant to
this paragraph shall be made successively whenever any
event specified above shall occur. Whenever the number of
Warrant Shares issuable upon exercise of a Warrant is
adjusted pursuant to this paragraph, the Exercise Price
payable upon exercise of each Warrant shall be adjusted by
multiplying the Exercise Price in effect immediately prior
to such adjustment by a fraction, the numerator of which
shall be the number of Warrant Shares issuable upon the
exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the
number of Warrant Shares issuable immediately thereafter.
(b) In case the Company shall fix a record date for
the issuance of rights or warrants to all holders of Com-
mon Stock without any charge to such holders entitling
them (for a period expiring within 45 days after the
record date mentioned below) to subscribe for or purchase
shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) at a price per
share (or having an initial conversion price or exchange
price per share) less than the Current Market Price (as
defined in paragraph (g) below) of a share of Common Stock
of the Company on such record date, the number of Warrant
Shares thereafter issuable upon exercise of each Warrant
shall be determined by multiplying the number of Warrant
Shares theretofore issuable upon exercise of each Warrant
by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the
number of additional shares of Common Stock offered for
subscription or purchase in connection with such rights,
options or warrants, and the denominator of which shall be
the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants plus
the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common
Stock so offered would purchase at the Current Market
Price as of such record date. Such adjustment shall be
made whenever such rights, options or warrants are issued,
and shall become effective immediately after the record
date for the determination of stockholders entitled to
receive such rights, options or warrants. Whenever the
number of Warrant Shares issuable upon exercise of a
Warrant is adjusted pursuant to this paragraph, the
Exercise Price payable upon exercise of each Warrant shall
be adjusted by multiplying the Exercise Price in effect
-7-<PAGE>
immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of Warrant Shares
issuable upon the exercise of each Warrant immediately
prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares issuable immediately
thereafter.
(c) In case the Company shall fix a record date for
the making of a distribution to all holders of shares of
Common Stock (i) of shares of any class other than Common
Stock, (ii) of evidences of indebtedness of the Company or
any Subsidiary (as defined in Section 17)), (iii) of
assets or other property (other than cash dividends paid
out of current earnings at an annual rate per share not to
exceed 3% of the then Current Market Price of the Common
Stock) or (iv) of rights or warrants (excluding those
referred to in paragraph (b) above), then in each such
case the number of Warrant Shares thereafter issuable upon
exercise of each Warrant shall be determined by
multiplying the number of Warrants Shares theretofore
issuable upon the exercise of each Warrant by a fraction,
the numerator of which shall be the Current Market Price
per share of Common Stock as of the record date for such
distribution, and the denominator of which shall be the
then Current Market Price per share of Common Stock, less
the then fair market value (as determined by the Board of
Directors, whose determination shall be described in a
Board Resolution (as defined in Section 17) of the portion
of the securities, evidences of indebtedness, assets,
property or rights or warrants so distributed, the case
may be, which is applicable to one share of Common Stock.
Such adjustment shall be made successively whenever such a
record date is fixed. Whenever the number of Warrant
Shares issuable upon exercise of a Warrant is adjusted
pursuant to this paragraph, the Exercise Price payable
upon exercise of each Warrant shall be adjusted by
multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be
the number of Warrant Shares issuable upon the exercise of
each Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter.
(d) In case the Company shall issue shares of its
Common Stock for a consideration per share less than the
Current Market Price per share on the date the Company
fixes the offering price of such additional shares, the
Exercise Price shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying
the Exercise Price in effect immediately prior thereto by
-8-<PAGE>
a fraction, of which the numerator shall be the total num-
ber of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares plus the
number of shares of Common Stock which the aggregate con-
sideration received (determined as provided in paragraph
(f) below) for the issuance of such additional shares
would purchase at the Current Market Price per share, and
the denominator shall be the number of shares of Common
Stock outstanding immediately after the issuance of such
additional shares. Such adjustment shall be made succes-
sively whenever such an issuance is made; provided, how-
ever, that the provisions of this paragraph shall not
apply to Common Stock issued (i) to the Company's employ-
ees under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common
Stock if required by law, if such Common Stock would
otherwise be covered by this paragraph (but only to the
extent that the aggregate number of shares excluded hereby
shall not exceed, on a cumulative basis since July 1,
1996, 4,000,000 (including 700,000 shares as of July 1,
1996 to be issued pursuant to two employment agreements
and 1,451,500 options outstanding as of July 1, 1996 to
purchase Common Stock, adjusted, as appropriate, in
connection with any stock split, merger, recapitalization
or similar transaction)), (ii) in a bona fide public
offering pursuant to a firm commitment underwriting or a
bona fide private placement in which the issue price is
not less than the Current Market Price of the Common Stock
as of the Trading Day immediately preceding the date of
the issuance of such Common Stock or (iii) in a
transaction subject to adjustment pursuant to Section 8.
(e) Subject to the provisions of Section 8, in case
the Company shall issue any securities convertible into or
exchangeable for Common Stock (excluding securities issued
in transactions described in paragraphs (b) and (c) above
and upon conversion of the securities) for a consideration
per share of Common Stock initially deliverable upon
conversion or exchange of such securities (determined as
provided in paragraph (f) below) less than the Current
Market Price per share in effect immediately prior to the
issuance of such securities, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the
price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, of which
the numerator shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of
such securities plus the number of shares of Common Stock
which the aggregate consideration received (determined as
provided in paragraph (f) below) for such securities would
-9-<PAGE>
purchase at the Current Market Price per share, and the
denominator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the
maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for such securities at the
initial conversion or exchange price or rate. Such
adjustment shall be made successively whenever such an
issuance is made.
Upon the termination of the right to convert or
exchange such securities, the Exercise Price shall forth-
with be readjusted to such Exercise Price as would have
been obtained had the adjustments made upon the issuance
of such convertible or exchangeable securities been made
upon the basis of the delivery of only the number of
shares of Common Stock actually delivered upon conversion
or exchange of such securities and upon the basis of the
consideration actually received by the Company (determined
as provided in paragraph (f) below) for such securities.
(f) For purposes of any computation respecting con-
sideration received pursuant to paragraphs (d) and (e)
above, the following shall apply:
(i) in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the
amount of such cash, provided that in no case shall
any deductions be made for any commissions, discounts
or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection
therewith;
(ii) in the case of the issuance of shares of
Common Stock for a consideration in whole or in part
other than cash, the consideration other than cash
shall be deemed to be the fair market value thereof
as determined by the Board of Directors, whose rea-
sonable determination shall be described in a Board
Resolution; and
(iii) in the case of the issuance of securities
convertible into or exchangeable for shares of Common
Stock, the aggregate consideration received therefor
shall be deemed to be the consideration received by
the Company for the issuance of such securities plus
the additional minimum consideration, if any, to be
received by the Company upon the conversion or
exchange thereof (the consideration in each case to
be determined in the same manner as provided in
clauses (i) and (ii) of this paragraph (f)).
-10-<PAGE>
(g) For the purpose of any computation under this
Warrant, the "Current Market Price" per share at any date
shall be deemed to be the average of the daily Sale Price
for the Common Stock for the 10 consecutive Trading Days
commencing 14 Trading Days before such date.
(h) In any case in which this Section shall require
that an adjustment shall become effective immediately
after a record date for an event, the Company may defer
until the occurrence of such event (i) issuing to the
Holder of any Warrant exercised after such record date and
before the occurrence of such event the additional shares
of Common Stock issuable upon such exercise by reason of
the adjustment required by such event over and above the
shares of Common Stock issuable upon such exercise before
giving effect to such adjustment and (ii) paying to such
Holder an amount in cash in lieu of a fractional share of
Common Stock pursuant to Section 3; provided, however,
that the Company shall deliver to such Holder a due bill
or other appropriate instrument evidencing such Holder's
rights to receive such additional shares of Common Stock,
and such cash, upon the occurrence of the event requiring
such adjustment.
(i) No adjustment in the Exercise Price shall be
required with respect to shares of Common Stock issued
upon exercise of the Warrants unless such adjustment would
require a decrease of at least $.02; provided, however,
that any such adjustment which is not required to be made
shall be carried forward and taken into account in any
subsequent adjustment.
(j) The Company may make such reductions in the
Exercise Price, in addition to those required pursuant to
other paragraphs of this Section, as it considers to be
advisable in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(k) In case of any consolidation with or merger of
the Company into another corporation, or in case of any
sale, lease or conveyance of assets to another corporation
of the property of the Company as an entirety or
substantially as an entirety, such successor, leasing or
purchasing corporation, as the case may be, shall execute
and deliver to the Holder hereof simultaneously therewith
a new Warrant Certificate, reasonably satisfactory in form
and substance to such Holder, providing that the Holder of
each Warrant then outstanding shall have the right
thereafter to exercise such Warrant solely for the kind
-11-<PAGE>
and amount of shares of stock, other securities, property
or cash or any combination thereof receivable upon such
consolidation, merger, sale, lease or conveyance by a
holder of the number of shares of Common Stock for which
such Warrant might have been exercised immediately prior
to such consolidation, merger, sale, lease or conveyance.
(l) In case of any reclassification or change of the
shares of Common Stock issuable upon exercise of the War-
rants (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combi-
nation, but including any change in the shares of Common
Stock into two or more classes or series of shares), or in
case of any consolidation or merger of another corporation
into the Company in which the Company is the continuing
corporation and in which there is a reclassification or
change (including a change to the right to receive cash or
other property) of the shares of Common Stock (other than
a change in par value, or from par value to no par value,
or as a result of a subdivision or combination, but
including any change in the shares of Common Stock into
two or more classes or series of shares), the Company
shall execute and deliver to the Holder hereof simulta-
neously therewith a new Warrant Certificate, satisfactory
in form and substance to such Holder, providing that the
Holder of each Warrant then outstanding shall have the
right thereafter to exercise such Warrant solely for the
kind and amount of shares of stock, other securities,
property or cash or any combination thereof receivable
upon such reclassification, change, consolidation or
merger by a holder of the number of shares of Common Stock
for which such Warrant might have been exercised immedi-
ately prior to such reclassification, change, consolida-
tion or merger.
(m) The foregoing paragraphs (k) and (1), however,
shall not in any way affect the rights a Holder may other-
wise have, pursuant to this Section, to receive
securities, evidences of indebtedness, assets, property
rights or warrants upon exercise of a Warrant.
(n) Whenever there shall be any change in the Exer-
cise Price under any paragraph of this Section, and no
specific means of adjusting the number of Warrant Shares
issuable upon exercise of each Warrant is provided in such
paragraph, then there shall be an adjustment (to the
nearest hundredth of a share) in the number of shares of
Common Stock purchasable upon exercise of this Warrant
Certificate, which adjustment shall become effective at
the time such change in the Exercise Price becomes
-12-<PAGE>
effective and shall be made by multiplying the number of
shares of Common Stock purchasable upon exercise of this
Warrant Certificate immediately before such change in the
Exercise Price by a fraction, the numerator of which is
the Exercise Price immediately before such change, and the
denominator of which is the Exercise Price immediately
after such change. In the event that, following the
declaration of a record date for the distribution of any
rights, warrants or other securities or property to be
distributed to holders of Common Stock, such rights,
warrants or other securities or property are not so
issued, the Exercise Price then in effect shall be
readjusted, effective as of the date when the Board of
Directors determines not to issue such rights or warrants,
to the Exercise Price which would then be in effect if a
record date for such issuance had not been fixed.
(o) In the event of a dividend or other distribution
by the Company pursuant to paragraph (c) of this Section
5, then in lieu of an adjustment pursuant to such
paragraph, the Holder of each Warrant, at such Holder's
option, upon the exercise thereof at any time after such
dividend or distribution, shall be entitled to receive
from the Company, such subsidiary or both as the Company
shall determine, the shares, evidences of indebtedness,
assets, property or rights or warrants to which such
holder would have been entitled if such holder had
exercised such Warrant immediately prior thereto, all
subject to further adjustment as provided in this Section
5, provided, however, that no adjustment in respect of any
such distribution shall be made during the term of a
Warrant or upon the exercise of a Warrant if such option
is chosen in lieu of an adjustment. The Holder may select
its alternative under the preceding sentence of this
paragraph by delivering to the Company a written notice of
such exercise within 7 days of its receipt of notice of
the applicable adjustment event pursuant to Section 7(a).
The Company shall provide the Holder with notice if, in
the Company's reasonable judgment, it is not feasible to
retain or set aside the shares, evidences of indebtedness,
assets, property or rights or warrants to be distributed
pursuant to paragraph (c) of this Section 5, in which case
each Warrant shall be adjusted in respect of such
distribution.
(p) If the Company repurchases any shares of Common
Stock for a per share consideration which exceeds the
Current Market Price of a share of Common Stock of the
Company on the date immediately prior to such repurchase,
then the Company shall issue additional Warrants to the
-13-<PAGE>
holder having the Exercise Price in effect on the Trading
Day immediately prior to such repurchase. The additional
Warrants issued pursuant to the preceding sentence shall
entitle the Holder to purchase the number of shares of
Common Stock equal to the result obtained by dividing (A)
the product of (w) the number of shares of Common Stock
repurchased at a price in excess of the Current Market
Price and (x) the amount by which the per-share repurchase
price exceeds such Current Market Price, by (B) the amount
by which (y) such Current Market Price exceeds (z) the
Exercise Price in effect as of the date immediately
preceding such repurchase.
(q) If any event occurs as to which the foregoing
provisions of this Section are not strictly applicable or,
if strictly applicable, would not, in the good faith judg-
ment of the Board of Directors of the Company, fairly pro-
tect the purchase rights of the Warrants in accordance
with the essential intent and principles of such provi-
sions, then such Board shall make such adjustments in the
application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of such Board, to
protect such purchase rights as aforesaid, but in no event
shall any such adjustment have the effect of increasing
the Exercise Price or decreasing the number of shares of
Common Stock subject to purchase upon exercise of this
Warrant, or otherwise adversely affect the Holders. Under
no circumstances, other than (A) a reverse stock split;
(B) a recapitalization in which all holders of Common
Stock (and securities exercisable for or convertible into
Common Stock, with respect to such exercise or conversion
provisions) are treated equally; or (C) a merger; in each
case in which each outstanding share of Common Stock is
converted into less than one share of Common Stock
(including, in the case of a merger, of the entity
surviving such merger), shall any adjustment pursuant to
this Section have the effect of raising the Exercise Price
or lowering the number of Warrant Shares issuable upon
exercise of a Warrant.
(r) If, after one or more adjustments to the
Exercise Price pursuant to this Section 5, the Exercise
Price cannot be reduced further without falling below the
greater of (i) $.01 or (ii) the lowest positive exercise
price legally permissible for warrants to acquire shares
of Common Stock, the Company shall make further adjustment
to compensate the holder, consistent with the foregoing
principles, as the Board of Directors, acting in good
faith, deems necessary, including an increase in the
-14-<PAGE>
number of Warrant Shares issuable upon exercise of
outstanding Warrants and/or a cash payment to the Holder.
Section 6. Additional Adjustment of Exercise
Price .
(a) To the extent that (i) the Current Market Price,
measured as of the Trading Day immediately preceding each
anniversary of the Initial Exercise Date (each, an "Anniversary
Date") set forth below is less than (ii) the reference price
(each, a "Reference Price") set forth below next to each such
Anniversary Date, the Exercise Price then in effect shall be
reduced, effective as of the applicable Anniversary Date, by
the amount by which the Reference Price exceeds the Current
Market Price in effect on the immediately preceding Trading
Day; provided, however, that, under no circumstance shall any
adjustment on any Anniversary Date, taking into account all
prior adjustments pursuant to this Section, result in an
Exercise Price of less than $0.01.
Anniversary of the Reference
Initial Exercise Date Price
--------------------- ---------
First Anniversary $ 5.50
Second Anniversary 7.00
Third Anniversary 10.00
Fourth Anniversary 13.00
Fifth Anniversary 16.50
All reductions of the Exercise Price pursuant to this paragraph
(a) shall be cumulative and shall not be reversed due to
changes in the Current Market Price or the Sale Price following
any such reduction. Subject to the provisions of paragraph (c)
of this Section, the Exercise Price in effect following any
adjustment pursuant to this paragraph (a) shall be treated as
the Exercise Price for all purposes hereof, until further
adjustment pursuant to this Section or Section 5.
Notwithstanding the foregoing, if, at the time any Warrant is
exercised, the Current Market Price is greater than the
Reference Price applicable at the Anniversary Date immediately
following the date of such exercise, the Exercise Price with
respect to each Warrant being exercised (and no other Warrants)
shall be increased (a "Special Increase") immediately prior to
such exercise by the amount by which such Current Market Price
exceeds the Exercise Price then in effect, provided that the
Special Increase for each such Warrant being exercised shall
under no circumstances be greater than the aggregate dollar
amount by which the Exercise Price of such Warrant has actually
been decreased previously pursuant to this Section 6 (without
giving effect to any adjustment pursuant to Sections 5 or 8).
-15-<PAGE>
(b) In the event that the Exercise Price is adjusted
for any reason pursuant to Section 5 (but in no event taking
account of any adjustment pursuant to this Section 6), each
Reference Price set forth in paragraph (a) of this Section
shall be adjusted by multiplying such Reference Price by a
fraction, the numerator of which shall be the Exercise Price in
effect immediately following the adjustment made pursuant to
Section 5, and the denominator of which shall be the Exercise
Price in effect prior to such adjustment. Reference Prices
that have been adjusted pursuant to this paragraph shall be
treated for all purposes as the applicable Reference Prices for
purposes of paragraph (a) of this Section, until further
adjusted pursuant to this paragraph (b).
(c) In the event that (X) the Exercise Price
requires adjustment pursuant to Section 5 and (Y) the event
giving rise to such adjustment falls on an Anniversary Date,
the Exercise Price shall be adjusted by first making any
adjustment required pursuant to this Section 6, and, there-
after, further adjusting such Exercise Price pursuant to Sec-
tion 5, such that the Exercise Price deemed to be in effect
prior to the Section 5 adjustment is the price resulting from
the Section 6 adjustment, and the Exercise Price deemed to be
in effect prior to the Section 6 adjustment is the Exercise
Price in effect immediately prior to the applicable Anniversary
Date.
(d) In the event that the Company is involved in a
merger, consolidation or similar transaction, or to the extent
that all or substantially all of the assets of the Company are
sold, then an adjustment shall be made pursuant to this Section
6 as though such transaction occurred on an Anniversary Date,
and the Holder shall be given full credit for an adjustment to
the Exercise Price pursuant to this Section. Such adjustment
shall be based upon the Current Market Price immediately
preceding the date such transaction is to be consummated (the
"Determination Date"). To the extent such a transaction occurs
on a date other than an Anniversary Date, the Reference Price
used in connection with any adjustment under this paragraph
shall be calculated by interpolating between the Reference
Prices set forth in paragraph (a) which are applicable on the
Anniversary Dates occurring immediately before and after the
Determination Date. Such interpolation shall be proportionate
based upon the number of days elapsed between the two
Anniversary Dates, such that, for example, if the Determination
Date were July 1, the adjusted Reference Price would be the
midpoint between the Reference Prices applicable on such
Anniversary Dates.
-16-<PAGE>
(e) No adjustment shall be made to the number of
Warrant Shares issuable upon exercise of a Warrant as a result
of an adjustment to the Exercise Price pursuant to this Section
6, provided, however, that this paragraph shall not prevent
adjustments otherwise required pursuant to another Section of
this Warrant from being made.
Section 7. Notice of Adjustments.
(a) Prior to the earlier to occur of (i) the decla-
ration of a record date for, or (ii) the announcement and/or
consummation of, any event or action that would result in an
adjustment pursuant to this Section, Section 6 or Section 8,
the Company shall notify the Holder of such intended record
date, announcement, event or action. Such notice must be
reasonably calculated to be delivered not less than 20 nor more
than 90 days prior to the applicable event.
(b) Whenever the Exercise Price is adjusted as pro-
vided in Section 5 or Section 6:
(i) the Company shall compute the adjusted
Exercise Price in accordance with Section 5 or Sec-
tion 6 and shall prepare a certificate signed by the
chief financial officer of the Company setting forth
the adjusted Exercise Price and showing in reasonable
detail the facts upon which such adjustment is based,
including, if appropriate, a statement of the consid-
eration received or to be received by the Company
for, and setting forth the amount of, any additional
shares of Common Stock issued since the last such
adjustment and the number of shares of Common Stock
for which the Warrants evidenced hereby are exercis-
able at the then Exercise Price, and such certificate
shall forthwith be filed at the Warrant Office; and
(iii) a notice stating that the Exercise Price
and number of shares for which each Warrant may be
exercised have been adjusted and setting forth the
adjusted Exercise Price and number of shares for
which each Warrant may be exercised shall be commu-
nicated by telegram, telex, telecopier or any other
means of electronic communication capable of produc-
ing a written record, or shall be delivered by hand
or mailed as soon as practicable by the Company to
the Holder at its last address as it shall appear
upon the Warrant Register provided for in Section 2.
-17-<PAGE>
Section 8. Additional Issuance in the Event of a
Debt/Equity Exchange.
Notwithstanding any other provision of this Warrant,
in the event that the Company issues shares of Common Stock
(and/or securities convertible into Common Stock) in exchange
for debt securities of the Company or any of its subsidiaries,
whether in connection with a restructuring, workout, exchange
offer or other transaction (any such transaction hereinafter
being referred to as a "Debt/Equity Exchange"), the number of
Warrant Shares issuable upon the exercise of each Warrant shall
be adjusted so that the Holder of each Warrant shall be
entitled to purchase the kind and number of shares of Common
Stock or other securities or property of the Company determined
by multiplying the number of Warrant Shares issuable upon
exercise of each Warrant immediately prior to such Debt/Equity
Exchange by a fraction, (i) the numerator of which shall be the
total number of outstanding shares of Common Stock immediately
after such Debt/Equity Exchange (assuming full conversion of
any convertible securities issued in connection with such Debt/
Equity Exchange at the maximum exchange ratio, whether or not
applicable at the time of the Debt/Equity Exchange), and (ii)
the denominator of which shall be the total number of
outstanding shares of Common Stock immediately prior to such
Debt/Equity Exchange. An adjustment made pursuant to this
Section shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for
such event. To the extent that, at the time of any Debt/Equity
Exchange, the Warrants are convertible into property or
securities other than Common Stock, appropriate steps shall be
taken to ensure that, upon exercise of the Warrants, the Holder
is issued the property and/or other securities to which the
Holder would have been entitled had the Holder owned Common
Stock at the time such Common Stock was changed into such
property and/or other securities. Whenever the number of
Warrant Shares issuable upon exercise of a Warrant is adjusted
pursuant to this paragraph, the Exercise Price payable upon
exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Warrant
Shares issuable upon the exercise of each Warrant immediately
prior to such adjustment, and the denominator of which shall be
the number of Warrant Shares purchasable immediately
thereafter. For purposes of this Section, a Debt/Equity
Exchange shall also include (i) any issuance by the Company of
shares of Common Stock (and/or securities convertible into
Common Stock), the proceeds of which are used, directly or
indirectly, in one or a series of related or unrelated
transactions, to redeem, repurchase or otherwise retire debt
securities within 12 months of the date of such new issuance,
-18-<PAGE>
and (ii) any exchange or other distribution of equity in
connection with a waiver, modification, forbearance, delay in
payment or other similar transaction or event involving
outstanding indebtedness of the Company. The adjustment
provisions of this Section shall not apply, and no adjustment
pursuant to this Section shall be required, in connection with
any particular Debt/Equity Exchange, to the extent that the
Current Market Price as of the date which is 30 days after
consummation of such Debt/Equity Exchange is at least equal to
the greater of (i) $8.00 or (ii) the Reference Price applicable
as of the next Anniversary Date. In the event that a Debt/
Equity Exchange would give rise to an adjustment pursuant to
this Section and Section 5, the adjustment required by this
Section shall be made and no adjustment shall be made pursuant
to Section 5.
Section 9. No Rights as Shareholders; Notice to
Holder.
Nothing contained herein shall be construed as con-
ferring upon the Holder the right to vote or to receive divi-
dends or to receive notice as shareholders in respect of the
meetings of shareholders for the election of directors of the
Company or any other matter, or any rights whatsoever as share-
holders of the Company. If, however, at any time prior to the
expiration of the Warrants and prior to their exercise, any of
the following shall occur:
(a) The Company shall authorize the issuance to all
holders of Common Stock of rights, options or warrants to
subscribe for or purchase Common Stock, or of any other
subscription rights or warrants; or
(b) The Company shall authorize the distribution to
all holders of Common Stock of evidences of its indebted-
ness or assets (other than cash dividends or cash distri-
butions payable out of consolidated earnings or earned
surplus or dividends payable in Common Stock); or
(c) The Company shall propose any consolidation or
merger to which the Company is a party and for which
approval of any stock of the Company is required, or the
conveyance or transfer of properties and assets of the
Company substantially as an entirety (whether by sale,
lease or other disposition), or any reclassification or
change of outstanding Common Stock issuable upon exercise
of the Warrants (other than a change in par value or from
par value to no par value); or
-19-<PAGE>
(d) The Company shall propose the voluntary or
involuntary dissolution, liquidation or winding up of the
Company;
then the Company shall cause to be given to the Holder at its
address appearing on the Warrant Register, at least 15 days
prior to the applicable record date hereinafter specified, by
first class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common
Stock entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the date on which
any such consolidation, merger, conveyance, transfer, dissolu-
tion, liquidation or winding up is expected to become effective
or consummated, and the date as of which it is expected that
the holders of record of shares of Common Stock shall be enti-
tled to exchange their shares for securities or other property,
if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or wind-
ing up. The failure to give the notice required by this Sec-
tion or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consoli-
dation, merger, conveyance, transfer, dissolution, liquidation
or winding up, or the vote upon any action.
Section 10. Restrictions on Transfer of the
Warrants and Warrant Shares.
Until such time as an appropriate registration state-
ment covering the Warrants or the Warrant Shares has become
effective under the Securities Act, the Holder will not dispose
of either the Warrants evidenced hereby or the Warrant Shares,
as the case may be, unless (i) the transferee has agreed to be
bound by the restrictions contained herein on such Warrants or
Warrant Shares, as the case may be, and (ii) except in the case
of a transfer by the Holder to an Affiliate (as defined in Sec-
tion 17), the Company shall have received an opinion of counsel
(both such opinion and such counsel to be reasonably satisfac-
tory to the Company) to the effect that the sale or other pro-
posed disposition of the Warrants or Warrant Shares may be
accomplished without such registration (or perfection of an
exemption) under, the Securities Act, which opinion may be con-
ditioned upon (x) acceptance by the transferee of a Warrant
Certificate or Certificates or Warrant Shares bearing a legend
similar to that set forth in Exhibit A and (y) a certificate of
the transferee stating that the Warrant(s) or Warrant Share(s)
being acquired by such transferee are being acquired by such
transferee for its own account and not with a view to, or for
resale in connection with, the distribution thereof in viola-
tion of the Securities Act.
-20-<PAGE>
Section 11. Representations and Warranties.
The Company represents and warrants that, as of the
date of this Warrant and as of the date of any future issuance
of Warrants or securities issuable upon exercise thereof:
(i) It and each of its material subsidiaries is a
corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and
is in good standing as a foreign corporation in each
jurisdiction where ownership of its properties or the con-
duct of its business requires it to be so, and has all
power and authority under such laws and its certificate of
incorporation and all material governmental licenses,
authorizations, consents and approvals required to carry
on its business as now conducted.
(ii) It has the corporate power and authority to
execute, sell and perform its obligations under, and to
consummate the transactions contemplated by, the Warrants,
and has by proper action duly authorized the execution and
delivery of this Warrant.
(iii) Neither the execution and delivery of this War-
rant nor the consummation of the transactions contemplated
by this Warrant, nor the performance of and compliance
with the terms and provisions hereof will: (i) violate or
conflict with any provision of its Certificate of Incorpo-
ration or By-laws; (ii) violate any law, regulation,
order, writ, judgment, injunction, decree or permit
applicable to it; (iii) violate or materially conflict
with any contractual provisions of, or cause an event of
default under, any indenture, loan agreement, mortgage,
deed of trust, contract or other agreement or instrument
to which it or any of its subsidiaries or properties may
be bound; or (iv) result in or require the creation of any
lien, security interest or other charge or encumbrance
(other than those contemplated in or in connection with
this Warrant) upon or with respect to its subsidiaries or
properties.
(iv) No consent, approval, authorization or order
of, or filing, registration or qualification with, any
court or governmental authority or other person or entity
is required in connection with the execution, delivery or
performance of the Company's obligations under this War-
rant, other than any filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "H-S-R
-21-<PAGE>
Act") which may be required after the date of this
Warrant.
(v) The Warrant has been duly executed and deliv-
ered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable in accor-
dance with its terms, subject, as to enforcement, to bank-
ruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general
equity principles.
(vi) All representations and warranties of the
Company and it subsidiaries contained in the Credit
Agreement are hereby incorporated by reference into this
Warrant and are true and correct as of July 1, 1996.
(vii) The authorized capital stock of the Company
consists of (a) 60,000,000 shares of Common Stock, of
which 26,046,966 shares were outstanding as of June 30,
1996, (b) 3,700,000 shares of Non-Voting Common Stock, par
value $.01 per share, of which 3,573,662 shares were
outstanding as of June 30, 1996 and (c) 2,500,000 shares
of Preferred Stock, par value $1.00 per share, of which no
shares were outstanding as of June 30, 1996. All out-
standing shares of Common Stock are duly authorized, val-
idly issued, fully paid and nonassessable (except for
700,000 shares of restricted stock to be issued to two
officers of the Company), and no class of capital stock or
other securities of the Company is entitled to preemptive
or similar rights. There are outstanding on the date
hereof no options, warrants or other rights to acquire
capital stock from the Company (including pursuant to the
terms of any securities convertible into capital stock of
the Company), except (i) 29,620,628 outstanding Rights
("Rights") to purchase one one-hundredth of a share of the
Company's Series A Junior Participating Preferred Stock,
par value $1.00 per share, which Rights are issued under
the Rights Agreement, dated as of July 7, 1993, between
the Company and Harris Trust Company of New York, as
Rights Agent (as such agreement may be amended or
supplemented or replaced from time to time, the "Rights
Agreement"), (ii) options representing in the aggregate
the right to purchase up to 1,451,500 shares of Common
Stock pursuant to the Company's employee benefit plans and
(iii) warrants representing in the aggregate the right to
purchase up to 283,972 shares of Common Stock at an
exercise price of $3.89. All outstanding shares of
capital stock of all material subsidiaries of the Company
are owned by the Company or a direct or indirect wholly
-22-<PAGE>
owned subsidiary of the Company, free and clear of all
liens, charges, encumbrances, claims and options of any
nature, other than those contemplated or permitted by the
Credit Agreement.
(viii) The Company and its Board of Directors shall
take all action necessary to prevent any future
acquisition of securities of the Company by Apollo and/or
its affiliates solely as a result of ownership of this
Warrant or as a result of exercise of Warrants from
causing Apollo or its affiliates to be deemed an
"Acquiring Person" (as such term is defined in the Rights
Agreement), and to prevent any "Distribution Date" (as
defined in the Rights Agreement) from occurring as a
result of exercise of the Warrants.
(ix) The Company's Board of Directors has approved
Apollo's acquisition of Warrants and Warrant Shares for
purposes of Section 203(a)(1) of the General Corporation
Law of the State of Delaware. The Company will continue
to take any action necessary to exempt Apollo from the
operation of such statute or any successor thereto solely
as a result of Apollo's ownership of Warrants or Warrant
Shares.
Section 12. No Voting Rights.
No Holder shall be entitled to any voting rights as a
stockholder of the Company by virtue of such Holder's ownership
of Warrants, provided that Holders who also hold voting securi-
ties of the Company, including Warrant Shares, shall be enti-
tled to vote such securities on any matter upon which other
holders of such class of securities are entitled to vote.
Section 13. Execution of Warrant Certificates.
Each Warrant Certificate shall be executed on behalf
of the Company by the manual or facsimile signature of the
present or any future Chairman of the Board of Directors,
President or Vice President of the Company.
Section 14. Maintenance of Office or Agency.
The Company will maintain a Warrant Office in New
York, New York, where this Warrant Certificate may be presented
or surrendered for subdivision, combination, registration of
transfer, or exchange and where notices and demands to or upon
the Company in respect of the Warrants evidenced hereby may be
served. The Company hereby initially designates American Stock
-23-<PAGE>
Transfer & Trust Company as the agency of the Company for such
purpose.
Section 15. Severability.
In the event that any one or more of the provisions
contained herein, or the application thereof in any circum-
stances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality, and enforce-
ability of any such provision in every other respect and the
other remaining provisions hereof shall not be in any way
impaired or affected, it being intended that all of the Hold-
er's rights and privileges shall be enforceable to the fullest
extent permitted by law.
Section 16. Governing Law.
The Warrants shall be governed by and construed in
accordance with the laws of the State of New York, except to
the extent that the laws of Delaware shall be mandatorily
applicable hereto.
Section 17. Definitions.
For all purposes of this Warrant Certificate, in
addition to the other terms defined elsewhere herein, unless
the context otherwise requires:
"Affiliate" of any specified person means any other
person directly or indirectly controlling or controlled by
or under direct or indirect common control with such spec-
ified person. For the purposes of this definition, "con-
trol" when used with respect to any specified person means
the power to direct the management and policies of such
person, directly or indirectly, whether through the owner-
ship of voting securities, by contract or otherwise.
"Appraisal Procedure" means a procedure whereby two
independent appraisers, one chosen by the Company and one
by the Holder entitled to use the Appraisal Procedure (or,
to the extent more than one Holder is so entitled, by a
majority in interest of the Holders so entitled), shall
mutually agree upon the determinations then the subject of
appraisal. Each party shall deliver a notice to the other
appointing its appraiser within 15 days after the Ap-
praisal Procedure is invoked. If within 30 days after
appointment of the two appraisers they are unable to agree
upon the amount in question, a third independent appraiser
shall be chosen within 10 days thereafter by the mutual
-24-<PAGE>
consent of such first two appraisers or, if such first two
appraisers fail to agree upon the appointment of a third
appraiser, such appointment shall be made by the American
Arbitration Association, or any organization successor
thereto, from a panel of arbitrators having experience in
the appraisal of the subject matter to be appraised. The
decision of the third appraiser so appointed and chosen
shall be given within 30 days after the selection of such
third appraiser. If three appraisers shall be appointed
and the determination of one appraiser is disparate from
the middle determination by more than twice the amount by
which the other determination is disparate from the middle
determination, then the determination of such appraiser
shall be excluded, the remaining two determinations shall
be averaged and such average shall be binding and conclu-
sive on the Company and the Holders; otherwise the average
of all three determinations shall be binding and conclu-
sive on the Company and the Holders. The costs of con-
ducting any Appraisal Procedure shall be borne by the
Holders requesting such Appraisal Procedure, except (a)
the fees and expenses of the appraiser appointed by the
Company and any costs incurred by the Company shall be
borne by the Company and (b) if such Appraisal Procedure
shall result in a determination that is disparate by 10%
or more from the Company's initial determination, all
costs of conducting such Appraisal Procedure shall be
borne by the Company.
"Board of Directors" means either the Board of
Directors of the Company or any duly authorized committee
of that board.
"Board Resolution" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of
the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date
of such certification and delivered to each of the Holders
of the Warrants.
"Common Stock" means any stock of any class of
the Company which has no preference in respect of divi-
dends or of amounts payable in the event of any voluntary
or involuntary liquidation, dissolution or winding up of
the Company, and which is not subject to redemption by the
Company. However, subject to Section 5, shares issuable
on exercise of the Warrants evidenced hereby, as
contemplated by the first paragraph of this Warrant
Certificate, shall include only shares of the class
designated as Common Stock of the Company as of the date
of this Warrant or shares of any class or classes
-25-<PAGE>
resulting from any reclassification or reclassifications
thereof and which have no preference in respect of divi-
dends or of amounts payable in the event of any voluntary
or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the
Company; provided that if at any time there shall be more
than one such resulting class, the shares of each such
class then so issuable shall be substantially in the pro-
portion which the total number of shares of such class
resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from
all such reclassifications. As used in this Warrant Cer-
tificate, "shares" shall include fractions thereof to the
extent that fractional shares of the Company are outstand-
ing.
"Person" shall mean any individual, firm, partner-
ship, association, group (as such term is used in Rule
13d-5 under the Securities Exchange Act of 1934, as
amended, as in effect on the date of this Warrant), corpo-
ration or other entity.
"Sale Price" of the Common Stock means the closing
price (or if no closing price is reported, the average of
the high and low bid prices) as reported in the composite
transactions for the principal United States securities
exchange on which the Common Stock is traded or, if the
Common Stock is not listed on a United States national or
regional stock exchange, as reported by the NASDAQ
National Market or the National Quotation Bureau
Incorporated.
"Subsidiary" means any subsidiary of the Company, a
majority of whose capital stock with voting power, under
ordinary circumstances, to elect directors is at the time,
directly or indirectly owned by the Company, by one or
more subsidiaries of the Company or by the Company and one
or more subsidiaries of the Company.
"Trading Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday, other than any day on
which securities are not traded on the exchange or market
where the Warrants are listed or sold.
Section 18. Fees and Expenses.
All fees and expenses incurred by the Holder in con-
nection with the Holder's ownership of Warrants and securities
or other property received upon exercise thereof which relate
to (i) filings under the H-S-R Act; (ii) any other required
-26-<PAGE>
regulatory filings; (iii) registration fees; (iv) stock
exchange listing fees; and (v) reasonable fees and expenses of
counsel in connection with the foregoing shall be paid by the
Company.
Section 19. Contest and Appraisal Rights.
Upon each determination of fair market value or other
valuation required hereunder, the Company shall promptly give
notice thereof to all Holders, setting forth in reasonable
detail the calculation of such fair market value or valuation
and the method and basis of determination thereof, as the case
may be. If any Holder of Warrants to purchase at least
1,000,000 shares of Common Stock (including, for purposes of
determining such level of ownership, all Warrants owned by
affiliates of such Holder) shall disagree with such
determination and shall, by notice to the Company given within
15 days after the Company's notice of such determination, elect
to dispute such determination, such dispute shall be resolved
in accordance with the Appraisal Procedure (as defined in
Section 17).
Section 20. Additional Warrants to be Issued at
Current Exercise Price.
Notwithstanding any other provision of this Warrant,
to the extent the Holder is entitled to receive additional
Warrants in accordance with the terms hereof, the Warrants so
issued shall have terms identical to this Warrant, except that
(i) the initial Exercise Price for such additional Warrants
shall be deemed to be the Exercise Price in effect on the date
such additional Warrants are issued and (ii) the amount and
kind of securities and/or other property issuable upon exercise
of such Warrants shall be deemed to be the amount and kind of
securities and/or other property issuable upon exercise of the
Warrants outstanding immediately prior to issuance of such
additional Warrants.
Dated: July 1, 1996 LEVITZ FURNITURE INCORPORATED
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President and
General Counsel
-27-<PAGE>
NOTICE OF ELECTION TO EXERCISE
The undersigned hereby irrevocably elects to exercise
the within Warrant to the extent of purchasing ______ shares of
Common Stock and hereby makes payment of the Exercise Price
(check and complete appropriate clause):
___
/ / in cash in the amount of $_________;
or
___
/ / by surrendering herewith all or a
portion of the Term Note (as defined
in the within Warrant) having an
outstanding principal amount (plus
accrued interest) of $_________.
NAME OF HOLDER:
_____________________________
(Please Print)
By___________________________
Date:_________________, 199_.
Instructions for Registration of Stock
Name________________________________________
(please type or print in block letters)
Address_____________________________________
-28-<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF SUCH REGISTRATION OR THE AVAILABILITY OF
AN EXEMPTION FROM SUCH REGISTRATION. SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON COMPLIANCE WITH THE
REQUIREMENTS FOR TRANSFER SET FORTH HEREIN.
168,952 Warrants Certificate No. W-3
WARRANT FOR THE PURCHASE OF
COMMON STOCK OF LEVITZ FURNITURE INCORPORATED
THE WARRANTS (AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE THEREOF) REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED OR SOLD IN THE ABSENCE
OF SUCH REGISTRATION OR THE AVAILABILITY OF AN
EXEMPTION FROM SUCH REGISTRATION. THIS WARRANT MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON
COMPLIANCE WITH THE REQUIREMENTS FOR TRANSFER SET
FORTH HEREIN. THE WARRANTS AND SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE THEREOF ARE ENTITLED TO
THE BENEFITS OF A CERTAIN REGISTRATION RIGHTS AGREE-
MENT DATED AS OF JULY 1, 1996 BETWEEN THE COMPANY
AND THE OTHER PARTIES SIGNATORIES THERETO.
THIS IS TO CERTIFY THAT, for value received, APOLLO
(U.K.) PARTNERS III, L.P. ("Apollo"), or registered assigns
(collectively, the "Holder"), is the registered owner of the
number of Warrants set forth above, each of which entitles the
Holder, subject to the terms and conditions set forth
hereinafter, to purchase one share of Common Stock, par value
$.01 per share (the "Common Stock"), of Levitz Furniture
Incorporated, a corporation organized under the laws of the
State of Delaware (the "Company"), at a purchase price per
share referred to herein as the "Exercise Price". The number
of shares of Common Stock which may be received upon the
exercise of this certificate (this "Warrant Certificate") and
the Exercise Price for each such share of Common Stock are
subject to adjustment from time to time as hereinafter set
forth. Each share of Common Stock issuable upon the exercise
of each of the Warrants (collectively, the "Warrant Shares")
when issued and paid for pursuant to the provisions of this
Warrant shall be validly issued, fully paid and nonassessable,
shall be free from all taxes, liens and charges with respect to
the issuance thereof and shall be free of any preemptive or
similar rights. The Company shall use all reasonable efforts
to cause the Warrant Shares to be listed or eligible to be
quoted for trading on any stock exchange, on the NASDAQ
National Market or on any other market on which shares of<PAGE>
Common Stock are then listed or eligible to be quoted for
trading.
Each Warrant evidenced hereby is originally acquired
in connection with Apollo's participation as a lender under a
Credit Agreement, dated as of July 1, 1996, among Levitz
Furniture Corporation, Levitz Furniture Company of the Midwest,
Inc., Levitz Furniture Company of the Pacific, Inc., Levitz
Furniture Company of Washington, Inc. and John M. Smyth Company
as Borrowers, each of the financial institutions initially a
signatory thereto, together with those assignees pursuant to
Section 11.8 thereof, as Lenders, with Levitz Furniture
Corporation as LFC Funds Administrator and BT Commercial Corpo-
ration, as Agent (the "Credit Agreement"), for good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged. The Company and Apollo explicitly
acknowledge that additional restructuring transactions
involving the Company and/or its subsidiaries may be necessary,
and, as a result, the Company has specifically agreed to
provide Apollo the protection afforded by Section 8 of this
Warrant.
Each Warrant is subject to the following terms and
provisions:
Section 1. Exercise of Warrant.
(a) Subject to the provisions hereof, the Warrants
evidenced hereby may be exercised at the discretion of the
Holder in whole or in part at any time or from time to time on
or after July 1, 1996 (the "Initial Exercise Date") to and
including July 1, 2001 (the "Expiration Date") or, if either
day is not a Trading Day (as defined in Section 17), then on
the next succeeding Trading Day, by presentation and surrender
hereof to the Company at the office or agency of the Company
maintained for that purpose pursuant to Section 14 (the "War-
rant Office"), with the Notice of Election to Exercise (the
"Exercise Notice") attached hereto duly executed and accom-
panied by payment to the Company of the Exercise Price for the
number of Warrant Shares specified in such Exercise Notice.
(b) The Exercise Price for the shares of Common
Stock which each Warrant entitles the Holder to purchase shall
initially be equal to $4.125. The Exercise Price set forth in
the preceding sentence is subject to adjustment as set forth in
Sections 5, 6 and 8.
(c) Payment of the Exercise Price shall be made in
cash, certified bank check or by wire transfer, at the option
of the Holder; provided, however, that payment of the Exercise
-2-<PAGE>
Price may also be made, at the Holder's option, in whole or in
part, by surrendering to the Company, together with the related
Exercise Notice, the Term Note (as such term is defined in the
Credit Agreement), with the outstanding principal amount of
such Term Note, together with any accrued and unpaid interest
thereon (through the date of such surrender), being deemed for
all purposes of this Warrant to be the equivalent of a cash
payment of the Exercise Price. To the extent the aggregate
payment for the Exercise Price made pursuant to this paragraph
is less than the face amount of any Term Note (including all
accrued and unpaid interest with respect to such Term Note),
the Company shall credit all such accrued and unpaid interest
toward payment of the Exercise Price, and shall reissue to the
Holder a new Term Note with a face amount equal to (i) the face
amount of the Term Note so surrendered, plus (ii) the amount of
any accrued and unpaid interest on the Term Note that was
surrendered together with such Term Note as payment of the
Exercise Price, minus (iii) the aggregate Exercise Price paid
in connection with such exercise.
(d) Upon receipt by the Company of this Warrant Cer-
tificate at the Warrant Office, together with a properly com-
pleted Exercise Notice and payment of the Exercise Price as
provided above, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise, not-
withstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares
shall not then be actually delivered to the Holder. The Com-
pany shall deliver such certificates to the Holder as promptly
as possible thereafter, but in any event within 5 business days
of receipt of the Exercise Notice. The Company shall pay all
expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection
with the preparation, issue and delivery of stock certificates
under this Section 1 except that the Company shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of the Warrant
Shares in a name other than that of the Holder of the Warrant
evidenced hereby who shall have surrendered the same in
exercise of the subscription right evidenced hereby. In the
event Warrant Shares are issued prior to the time that an
appropriate registration statement with respect to the Warrant
Shares has become effective under the Securities Act, the
Warrant Shares so issued shall have stamped or imprinted
thereon a legend in the form of Exhibit A. Any holder of
Warrant Shares so legended shall be entitled to have such
legend removed, upon surrender of Warrant Shares to the Company
or the transfer agent for the Common Stock, upon effectiveness
of such a registration statement or upon receipt by the Company
-3-<PAGE>
of an opinion of counsel to the Holder to the effect that such
legend is no longer required.
(e) Upon any partial exercise of the number of War-
rants to which this Warrant Certificate entitles the Holder,
there shall be issued to the Holder hereof a new Warrant Cer-
tificate in respect of the shares as to which this Warrant Cer-
tificate shall not have been exercised, subject to the provi-
sions of Section 3. Such new Warrant Certificate shall be
identical to this Warrant Certificate, except as to the number
of shares of Common Stock covered thereby.
Section 2. Exchange, Transfer, Assignment or Loss of
Warrant Certificate; Temporary Warrant
Certificates.
(a) In case this Warrant Certificate shall be muti-
lated, lost, stolen, or destroyed, the Company may, in its dis-
cretion, issue and deliver in exchange and substitution for and
upon cancellation of the mutilated Warrant Certificate, or in
lieu of and substitution for the Warrant Certificate lost,
stolen, or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent right or interest, but only upon
receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction and indemnification reasonably
satisfactory to it. An applicant for such a substitute Warrant
Certificate shall also comply with such other reasonable regu-
lations and pay such other reasonable charges as the Company
may prescribe.
(b) The Warrant Certificates shall be numbered and
shall be registered in a Warrant Register maintained by the
Company as they are issued. The registered owner on the War-
rant Register may be treated by the Company and all other per-
sons dealing with the Warrants evidenced hereby as the absolute
owner hereof for any purpose and as the person entitled to
exercise the right represented hereby, or to the transfer
hereof on the books of the Company, any notice to the contrary
notwithstanding and, until such transfer on such books, the
Company may treat the registered owner on the Warrant Register
as the owner for all purposes. The Company may require payment
of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any registration of
transfer of Warrant Certificates.
(c) This Warrant Certificate may be subdivided or
combined with other Warrant Certificates evidencing the same
rights as the rights evidenced hereby and thereby upon presen-
tation and surrender hereof at the Warrant Office together with
a written notice signed by the Holder hereof specifying the
-4-<PAGE>
denominations in which new Warrant Certificates are to be
issued. Upon presentation and surrender of any Warrant Cer-
tificates, together with such written notice, for subdivision
or combination, the Company will issue a new Warrant Certifi-
cate or Certificates, in the denominations requested, entitling
the holders thereof to purchase the same aggregate number of
shares of Common Stock as the Warrant Certificate or Certifi-
cates so surrendered. Such new Warrant Certificates will be
registered in the name of the Holder submitting such request
and delivered to such Holder. Any Warrant Certificate surren-
dered for subdivision or combination shall be cancelled
promptly upon the issuance of such new Warrant Certificate(s).
The term "Warrant Certificate" as used herein includes any War-
rant Certificates into which this Warrant Certificate may be
subdivided, combined or exchanged.
Section 3. Fractional Interests.
(a) The Company shall not be required to issue frac-
tions of Warrants or to issue Warrant Certificates which evi-
dence fractional Warrants.
(b) The Company shall not be required to issue frac-
tions of shares of Common Stock in the exercise of Warrants.
If any fraction of a Warrant Share would, except for the provi-
sions of this Section, be issuable on the exercise of any War-
rant (or specified portion thereof), the Company shall purchase
such fraction for an amount in cash equal to the same fraction
of the Current Market Price (as defined in Section 5(g)) per
share of Common Stock.
(c) The Holder, by the acceptance of this Warrant
Certificate, expressly waives his right to receive any frac-
tional Warrant or any fractional share upon exercise of a War-
rant.
Section 4. Reservation of Warrant Shares, etc.
The Company hereby agrees that at all times there
shall be reserved for issuance and/or delivery upon exercise of
the Warrants evidenced by this Warrant Certificate, free from
preemptive rights, such number of shares of authorized but
unissued or treasury shares of Common Stock, or other stock or
securities deliverable pursuant to Section 5, as shall be
required for issuance or delivery upon exercise of the Warrants
evidenced hereby. The Company further agrees (i) that it will
not, by amendment of its certificate of incorporation or
through reorganization, consolidation, merger, dissolution or
sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants,
-5-<PAGE>
stipulations or conditions to be observed or performed
hereunder by the Company and (ii) to promptly take all action
as may from time to time be reasonably required in order to
permit the Holder to exercise the Warrants evidenced hereby and
the Company duly and effectively to issue the Warrant Shares as
provided herein upon the exercise hereof. Without limiting the
generality of the foregoing, the Company agrees that it will
not take any action which would result in Warrant Shares when
issued not being validly and legally issued and fully paid and
nonassessable. The Company further agrees that it will not
increase the par value of the Common Stock while the Warrants
evidenced hereby are outstanding, although such par value may
be reduced at any time. The Company hereby represents that, as
of the date hereof, it has sufficient shares of Common Stock
reserved for issuance upon exercise of all outstanding
Warrants.
Section 5. Anti-Dilution.
The Exercise Price and the number of shares of Common
Stock purchasable upon the exercise hereof shall be subject to
adjustment from time to time as provided in this Section.
Unless otherwise indicated, all calculations under this Section
5 shall be made to the nearest $0.01 or 1/100th of a share, as
the case may be.
(a) In case the Company shall (i) declare a dividend
or make a distribution on the outstanding shares of Common
Stock in shares of capital stock of the Company, (ii) sub-
divide or reclassify the outstanding shares of Common
Stock into a greater number of shares (or into other
securities or property), or (iii) combine or reclassify
the outstanding shares of Common Stock into a smaller
number of shares (or into other securities or property),
the number of Warrant Shares issuable upon the exercise of
each Warrant shall be adjusted so that the Holder of each
Warrant shall be entitled to purchase the kind and number
of shares of Common Stock or other securities or property
of the Company determined by multiplying the number of
Warrant Shares issuable upon exercise of each Warrant
immediately prior to such event by a fraction, the
numerator of which shall be the total number of
outstanding shares of Common Stock immediately after such
event, and the denominator of which shall be the total
number of outstanding shares of Common Stock immediately
prior to such event. An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the
effective date of such event, retroactive to the record
date, if any, for such event. Any shares of Common Stock
issuable in payment of a dividend shall be deemed to have
-6-<PAGE>
been issued immediately prior to the time of the record
date for such dividend for purposes of calculating the
number of outstanding shares of Common Stock under
paragraphs (b) and (c) below. Adjustments pursuant to
this paragraph shall be made successively whenever any
event specified above shall occur. Whenever the number of
Warrant Shares issuable upon exercise of a Warrant is
adjusted pursuant to this paragraph, the Exercise Price
payable upon exercise of each Warrant shall be adjusted by
multiplying the Exercise Price in effect immediately prior
to such adjustment by a fraction, the numerator of which
shall be the number of Warrant Shares issuable upon the
exercise of each Warrant immediately prior to such
adjustment, and the denominator of which shall be the
number of Warrant Shares issuable immediately thereafter.
(b) In case the Company shall fix a record date for
the issuance of rights or warrants to all holders of Com-
mon Stock without any charge to such holders entitling
them (for a period expiring within 45 days after the
record date mentioned below) to subscribe for or purchase
shares of Common Stock (or securities convertible into or
exchangeable for shares of Common Stock) at a price per
share (or having an initial conversion price or exchange
price per share) less than the Current Market Price (as
defined in paragraph (g) below) of a share of Common Stock
of the Company on such record date, the number of Warrant
Shares thereafter issuable upon exercise of each Warrant
shall be determined by multiplying the number of Warrant
Shares theretofore issuable upon exercise of each Warrant
by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants plus the
number of additional shares of Common Stock offered for
subscription or purchase in connection with such rights,
options or warrants, and the denominator of which shall be
the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants plus
the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common
Stock so offered would purchase at the Current Market
Price as of such record date. Such adjustment shall be
made whenever such rights, options or warrants are issued,
and shall become effective immediately after the record
date for the determination of stockholders entitled to
receive such rights, options or warrants. Whenever the
number of Warrant Shares issuable upon exercise of a
Warrant is adjusted pursuant to this paragraph, the
Exercise Price payable upon exercise of each Warrant shall
be adjusted by multiplying the Exercise Price in effect
-7-<PAGE>
immediately prior to such adjustment by a fraction, the
numerator of which shall be the number of Warrant Shares
issuable upon the exercise of each Warrant immediately
prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares issuable immediately
thereafter.
(c) In case the Company shall fix a record date for
the making of a distribution to all holders of shares of
Common Stock (i) of shares of any class other than Common
Stock, (ii) of evidences of indebtedness of the Company or
any Subsidiary (as defined in Section 17)), (iii) of
assets or other property (other than cash dividends paid
out of current earnings at an annual rate per share not to
exceed 3% of the then Current Market Price of the Common
Stock) or (iv) of rights or warrants (excluding those
referred to in paragraph (b) above), then in each such
case the number of Warrant Shares thereafter issuable upon
exercise of each Warrant shall be determined by
multiplying the number of Warrants Shares theretofore
issuable upon the exercise of each Warrant by a fraction,
the numerator of which shall be the Current Market Price
per share of Common Stock as of the record date for such
distribution, and the denominator of which shall be the
then Current Market Price per share of Common Stock, less
the then fair market value (as determined by the Board of
Directors, whose determination shall be described in a
Board Resolution (as defined in Section 17) of the portion
of the securities, evidences of indebtedness, assets,
property or rights or warrants so distributed, the case
may be, which is applicable to one share of Common Stock.
Such adjustment shall be made successively whenever such a
record date is fixed. Whenever the number of Warrant
Shares issuable upon exercise of a Warrant is adjusted
pursuant to this paragraph, the Exercise Price payable
upon exercise of each Warrant shall be adjusted by
multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be
the number of Warrant Shares issuable upon the exercise of
each Warrant immediately prior to such adjustment, and the
denominator of which shall be the number of Warrant Shares
purchasable immediately thereafter.
(d) In case the Company shall issue shares of its
Common Stock for a consideration per share less than the
Current Market Price per share on the date the Company
fixes the offering price of such additional shares, the
Exercise Price shall be adjusted immediately thereafter so
that it shall equal the price determined by multiplying
the Exercise Price in effect immediately prior thereto by
-8-<PAGE>
a fraction, of which the numerator shall be the total num-
ber of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares plus the
number of shares of Common Stock which the aggregate con-
sideration received (determined as provided in paragraph
(f) below) for the issuance of such additional shares
would purchase at the Current Market Price per share, and
the denominator shall be the number of shares of Common
Stock outstanding immediately after the issuance of such
additional shares. Such adjustment shall be made succes-
sively whenever such an issuance is made; provided, how-
ever, that the provisions of this paragraph shall not
apply to Common Stock issued (i) to the Company's employ-
ees under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common
Stock if required by law, if such Common Stock would
otherwise be covered by this paragraph (but only to the
extent that the aggregate number of shares excluded hereby
shall not exceed, on a cumulative basis since July 1,
1996, 4,000,000 (including 700,000 shares as of July 1,
1996 to be issued pursuant to two employment agreements
and 1,451,500 options outstanding as of July 1, 1996 to
purchase Common Stock, adjusted, as appropriate, in
connection with any stock split, merger, recapitalization
or similar transaction)), (ii) in a bona fide public
offering pursuant to a firm commitment underwriting or a
bona fide private placement in which the issue price is
not less than the Current Market Price of the Common Stock
as of the Trading Day immediately preceding the date of
the issuance of such Common Stock or (iii) in a
transaction subject to adjustment pursuant to Section 8.
(e) Subject to the provisions of Section 8, in case
the Company shall issue any securities convertible into or
exchangeable for Common Stock (excluding securities issued
in transactions described in paragraphs (b) and (c) above
and upon conversion of the securities) for a consideration
per share of Common Stock initially deliverable upon
conversion or exchange of such securities (determined as
provided in paragraph (f) below) less than the Current
Market Price per share in effect immediately prior to the
issuance of such securities, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the
price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction, of which
the numerator shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of
such securities plus the number of shares of Common Stock
which the aggregate consideration received (determined as
provided in paragraph (f) below) for such securities would
-9-<PAGE>
purchase at the Current Market Price per share, and the
denominator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the
maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for such securities at the
initial conversion or exchange price or rate. Such
adjustment shall be made successively whenever such an
issuance is made.
Upon the termination of the right to convert or
exchange such securities, the Exercise Price shall forth-
with be readjusted to such Exercise Price as would have
been obtained had the adjustments made upon the issuance
of such convertible or exchangeable securities been made
upon the basis of the delivery of only the number of
shares of Common Stock actually delivered upon conversion
or exchange of such securities and upon the basis of the
consideration actually received by the Company (determined
as provided in paragraph (f) below) for such securities.
(f) For purposes of any computation respecting con-
sideration received pursuant to paragraphs (d) and (e)
above, the following shall apply:
(i) in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the
amount of such cash, provided that in no case shall
any deductions be made for any commissions, discounts
or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection
therewith;
(ii) in the case of the issuance of shares of
Common Stock for a consideration in whole or in part
other than cash, the consideration other than cash
shall be deemed to be the fair market value thereof
as determined by the Board of Directors, whose rea-
sonable determination shall be described in a Board
Resolution; and
(iii) in the case of the issuance of securities
convertible into or exchangeable for shares of Common
Stock, the aggregate consideration received therefor
shall be deemed to be the consideration received by
the Company for the issuance of such securities plus
the additional minimum consideration, if any, to be
received by the Company upon the conversion or
exchange thereof (the consideration in each case to
be determined in the same manner as provided in
clauses (i) and (ii) of this paragraph (f)).
-10-<PAGE>
(g) For the purpose of any computation under this
Warrant, the "Current Market Price" per share at any date
shall be deemed to be the average of the daily Sale Price
for the Common Stock for the 10 consecutive Trading Days
commencing 14 Trading Days before such date.
(h) In any case in which this Section shall require
that an adjustment shall become effective immediately
after a record date for an event, the Company may defer
until the occurrence of such event (i) issuing to the
Holder of any Warrant exercised after such record date and
before the occurrence of such event the additional shares
of Common Stock issuable upon such exercise by reason of
the adjustment required by such event over and above the
shares of Common Stock issuable upon such exercise before
giving effect to such adjustment and (ii) paying to such
Holder an amount in cash in lieu of a fractional share of
Common Stock pursuant to Section 3; provided, however,
that the Company shall deliver to such Holder a due bill
or other appropriate instrument evidencing such Holder's
rights to receive such additional shares of Common Stock,
and such cash, upon the occurrence of the event requiring
such adjustment.
(i) No adjustment in the Exercise Price shall be
required with respect to shares of Common Stock issued
upon exercise of the Warrants unless such adjustment would
require a decrease of at least $.02; provided, however,
that any such adjustment which is not required to be made
shall be carried forward and taken into account in any
subsequent adjustment.
(j) The Company may make such reductions in the
Exercise Price, in addition to those required pursuant to
other paragraphs of this Section, as it considers to be
advisable in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(k) In case of any consolidation with or merger of
the Company into another corporation, or in case of any
sale, lease or conveyance of assets to another corporation
of the property of the Company as an entirety or
substantially as an entirety, such successor, leasing or
purchasing corporation, as the case may be, shall execute
and deliver to the Holder hereof simultaneously therewith
a new Warrant Certificate, reasonably satisfactory in form
and substance to such Holder, providing that the Holder of
each Warrant then outstanding shall have the right
thereafter to exercise such Warrant solely for the kind
-11-<PAGE>
and amount of shares of stock, other securities, property
or cash or any combination thereof receivable upon such
consolidation, merger, sale, lease or conveyance by a
holder of the number of shares of Common Stock for which
such Warrant might have been exercised immediately prior
to such consolidation, merger, sale, lease or conveyance.
(l) In case of any reclassification or change of the
shares of Common Stock issuable upon exercise of the War-
rants (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combi-
nation, but including any change in the shares of Common
Stock into two or more classes or series of shares), or in
case of any consolidation or merger of another corporation
into the Company in which the Company is the continuing
corporation and in which there is a reclassification or
change (including a change to the right to receive cash or
other property) of the shares of Common Stock (other than
a change in par value, or from par value to no par value,
or as a result of a subdivision or combination, but
including any change in the shares of Common Stock into
two or more classes or series of shares), the Company
shall execute and deliver to the Holder hereof simulta-
neously therewith a new Warrant Certificate, satisfactory
in form and substance to such Holder, providing that the
Holder of each Warrant then outstanding shall have the
right thereafter to exercise such Warrant solely for the
kind and amount of shares of stock, other securities,
property or cash or any combination thereof receivable
upon such reclassification, change, consolidation or
merger by a holder of the number of shares of Common Stock
for which such Warrant might have been exercised immedi-
ately prior to such reclassification, change, consolida-
tion or merger.
(m) The foregoing paragraphs (k) and (1), however,
shall not in any way affect the rights a Holder may other-
wise have, pursuant to this Section, to receive
securities, evidences of indebtedness, assets, property
rights or warrants upon exercise of a Warrant.
(n) Whenever there shall be any change in the Exer-
cise Price under any paragraph of this Section, and no
specific means of adjusting the number of Warrant Shares
issuable upon exercise of each Warrant is provided in such
paragraph, then there shall be an adjustment (to the
nearest hundredth of a share) in the number of shares of
Common Stock purchasable upon exercise of this Warrant
Certificate, which adjustment shall become effective at
the time such change in the Exercise Price becomes
-12-<PAGE>
effective and shall be made by multiplying the number of
shares of Common Stock purchasable upon exercise of this
Warrant Certificate immediately before such change in the
Exercise Price by a fraction, the numerator of which is
the Exercise Price immediately before such change, and the
denominator of which is the Exercise Price immediately
after such change. In the event that, following the
declaration of a record date for the distribution of any
rights, warrants or other securities or property to be
distributed to holders of Common Stock, such rights,
warrants or other securities or property are not so
issued, the Exercise Price then in effect shall be
readjusted, effective as of the date when the Board of
Directors determines not to issue such rights or warrants,
to the Exercise Price which would then be in effect if a
record date for such issuance had not been fixed.
(o) In the event of a dividend or other distribution
by the Company pursuant to paragraph (c) of this Section
5, then in lieu of an adjustment pursuant to such
paragraph, the Holder of each Warrant, at such Holder's
option, upon the exercise thereof at any time after such
dividend or distribution, shall be entitled to receive
from the Company, such subsidiary or both as the Company
shall determine, the shares, evidences of indebtedness,
assets, property or rights or warrants to which such
holder would have been entitled if such holder had
exercised such Warrant immediately prior thereto, all
subject to further adjustment as provided in this Section
5, provided, however, that no adjustment in respect of any
such distribution shall be made during the term of a
Warrant or upon the exercise of a Warrant if such option
is chosen in lieu of an adjustment. The Holder may select
its alternative under the preceding sentence of this
paragraph by delivering to the Company a written notice of
such exercise within 7 days of its receipt of notice of
the applicable adjustment event pursuant to Section 7(a).
The Company shall provide the Holder with notice if, in
the Company's reasonable judgment, it is not feasible to
retain or set aside the shares, evidences of indebtedness,
assets, property or rights or warrants to be distributed
pursuant to paragraph (c) of this Section 5, in which case
each Warrant shall be adjusted in respect of such
distribution.
(p) If the Company repurchases any shares of Common
Stock for a per share consideration which exceeds the
Current Market Price of a share of Common Stock of the
Company on the date immediately prior to such repurchase,
then the Company shall issue additional Warrants to the
-13-<PAGE>
holder having the Exercise Price in effect on the Trading
Day immediately prior to such repurchase. The additional
Warrants issued pursuant to the preceding sentence shall
entitle the Holder to purchase the number of shares of
Common Stock equal to the result obtained by dividing (A)
the product of (w) the number of shares of Common Stock
repurchased at a price in excess of the Current Market
Price and (x) the amount by which the per-share repurchase
price exceeds such Current Market Price, by (B) the amount
by which (y) such Current Market Price exceeds (z) the
Exercise Price in effect as of the date immediately
preceding such repurchase.
(q) If any event occurs as to which the foregoing
provisions of this Section are not strictly applicable or,
if strictly applicable, would not, in the good faith judg-
ment of the Board of Directors of the Company, fairly pro-
tect the purchase rights of the Warrants in accordance
with the essential intent and principles of such provi-
sions, then such Board shall make such adjustments in the
application of such provisions, in accordance with such
essential intent and principles, as shall be reasonably
necessary, in the good faith opinion of such Board, to
protect such purchase rights as aforesaid, but in no event
shall any such adjustment have the effect of increasing
the Exercise Price or decreasing the number of shares of
Common Stock subject to purchase upon exercise of this
Warrant, or otherwise adversely affect the Holders. Under
no circumstances, other than (A) a reverse stock split;
(B) a recapitalization in which all holders of Common
Stock (and securities exercisable for or convertible into
Common Stock, with respect to such exercise or conversion
provisions) are treated equally; or (C) a merger; in each
case in which each outstanding share of Common Stock is
converted into less than one share of Common Stock
(including, in the case of a merger, of the entity
surviving such merger), shall any adjustment pursuant to
this Section have the effect of raising the Exercise Price
or lowering the number of Warrant Shares issuable upon
exercise of a Warrant.
(r) If, after one or more adjustments to the
Exercise Price pursuant to this Section 5, the Exercise
Price cannot be reduced further without falling below the
greater of (i) $.01 or (ii) the lowest positive exercise
price legally permissible for warrants to acquire shares
of Common Stock, the Company shall make further adjustment
to compensate the holder, consistent with the foregoing
principles, as the Board of Directors, acting in good
faith, deems necessary, including an increase in the
-14-<PAGE>
number of Warrant Shares issuable upon exercise of
outstanding Warrants and/or a cash payment to the Holder.
Section 6. Additional Adjustment of Exercise
Price .
(a) To the extent that (i) the Current Market Price,
measured as of the Trading Day immediately preceding each
anniversary of the Initial Exercise Date (each, an "Anniversary
Date") set forth below is less than (ii) the reference price
(each, a "Reference Price") set forth below next to each such
Anniversary Date, the Exercise Price then in effect shall be
reduced, effective as of the applicable Anniversary Date, by
the amount by which the Reference Price exceeds the Current
Market Price in effect on the immediately preceding Trading
Day; provided, however, that, under no circumstance shall any
adjustment on any Anniversary Date, taking into account all
prior adjustments pursuant to this Section, result in an
Exercise Price of less than $0.01.
Anniversary of the Reference
Initial Exercise Date Price
First Anniversary $ 5.50
Second Anniversary 7.00
Third Anniversary 10.00
Fourth Anniversary 13.00
Fifth Anniversary 16.50
All reductions of the Exercise Price pursuant to this paragraph
(a) shall be cumulative and shall not be reversed due to
changes in the Current Market Price or the Sale Price following
any such reduction. Subject to the provisions of paragraph (c)
of this Section, the Exercise Price in effect following any
adjustment pursuant to this paragraph (a) shall be treated as
the Exercise Price for all purposes hereof, until further
adjustment pursuant to this Section or Section 5.
Notwithstanding the foregoing, if, at the time any Warrant is
exercised, the Current Market Price is greater than the
Reference Price applicable at the Anniversary Date immediately
following the date of such exercise, the Exercise Price with
respect to each Warrant being exercised (and no other Warrants)
shall be increased (a "Special Increase") immediately prior to
such exercise by the amount by which such Current Market Price
exceeds the Exercise Price then in effect, provided that the
Special Increase for each such Warrant being exercised shall
under no circumstances be greater than the aggregate dollar
amount by which the Exercise Price of such Warrant has actually
been decreased previously pursuant to this Section 6 (without
giving effect to any adjustment pursuant to Sections 5 or 8).
-15-<PAGE>
(b) In the event that the Exercise Price is adjusted
for any reason pursuant to Section 5 (but in no event taking
account of any adjustment pursuant to this Section 6), each
Reference Price set forth in paragraph (a) of this Section
shall be adjusted by multiplying such Reference Price by a
fraction, the numerator of which shall be the Exercise Price in
effect immediately following the adjustment made pursuant to
Section 5, and the denominator of which shall be the Exercise
Price in effect prior to such adjustment. Reference Prices
that have been adjusted pursuant to this paragraph shall be
treated for all purposes as the applicable Reference Prices for
purposes of paragraph (a) of this Section, until further
adjusted pursuant to this paragraph (b).
(c) In the event that (X) the Exercise Price
requires adjustment pursuant to Section 5 and (Y) the event
giving rise to such adjustment falls on an Anniversary Date,
the Exercise Price shall be adjusted by first making any
adjustment required pursuant to this Section 6, and, there-
after, further adjusting such Exercise Price pursuant to Sec-
tion 5, such that the Exercise Price deemed to be in effect
prior to the Section 5 adjustment is the price resulting from
the Section 6 adjustment, and the Exercise Price deemed to be
in effect prior to the Section 6 adjustment is the Exercise
Price in effect immediately prior to the applicable Anniversary
Date.
(d) In the event that the Company is involved in a
merger, consolidation or similar transaction, or to the extent
that all or substantially all of the assets of the Company are
sold, then an adjustment shall be made pursuant to this Section
6 as though such transaction occurred on an Anniversary Date,
and the Holder shall be given full credit for an adjustment to
the Exercise Price pursuant to this Section. Such adjustment
shall be based upon the Current Market Price immediately
preceding the date such transaction is to be consummated (the
"Determination Date"). To the extent such a transaction occurs
on a date other than an Anniversary Date, the Reference Price
used in connection with any adjustment under this paragraph
shall be calculated by interpolating between the Reference
Prices set forth in paragraph (a) which are applicable on the
Anniversary Dates occurring immediately before and after the
Determination Date. Such interpolation shall be proportionate
based upon the number of days elapsed between the two
Anniversary Dates, such that, for example, if the Determination
Date were July 1, the adjusted Reference Price would be the
midpoint between the Reference Prices applicable on such
Anniversary Dates.
-16-<PAGE>
(e) No adjustment shall be made to the number of
Warrant Shares issuable upon exercise of a Warrant as a result
of an adjustment to the Exercise Price pursuant to this Section
6, provided, however, that this paragraph shall not prevent
adjustments otherwise required pursuant to another Section of
this Warrant from being made.
Section 7. Notice of Adjustments.
(a) Prior to the earlier to occur of (i) the decla-
ration of a record date for, or (ii) the announcement and/or
consummation of, any event or action that would result in an
adjustment pursuant to this Section, Section 6 or Section 8,
the Company shall notify the Holder of such intended record
date, announcement, event or action. Such notice must be
reasonably calculated to be delivered not less than 20 nor more
than 90 days prior to the applicable event.
(b) Whenever the Exercise Price is adjusted as pro-
vided in Section 5 or Section 6:
(i) the Company shall compute the adjusted
Exercise Price in accordance with Section 5 or Sec-
tion 6 and shall prepare a certificate signed by the
chief financial officer of the Company setting forth
the adjusted Exercise Price and showing in reasonable
detail the facts upon which such adjustment is based,
including, if appropriate, a statement of the consid-
eration received or to be received by the Company
for, and setting forth the amount of, any additional
shares of Common Stock issued since the last such
adjustment and the number of shares of Common Stock
for which the Warrants evidenced hereby are exercis-
able at the then Exercise Price, and such certificate
shall forthwith be filed at the Warrant Office; and
(ii) a notice stating that the Exercise Price
and number of shares for which each Warrant may be
exercised have been adjusted and setting forth the
adjusted Exercise Price and number of shares for
which each Warrant may be exercised shall be commu-
nicated by telegram, telex, telecopier or any other
means of electronic communication capable of produc-
ing a written record, or shall be delivered by hand
or mailed as soon as practicable by the Company to
the Holder at its last address as it shall appear
upon the Warrant Register provided for in Section 2.
-17-<PAGE>
Section 8. Additional Issuance in the Event of a
Debt/Equity Exchange.
Notwithstanding any other provision of this Warrant,
in the event that the Company issues shares of Common Stock
(and/or securities convertible into Common Stock) in exchange
for debt securities of the Company or any of its subsidiaries,
whether in connection with a restructuring, workout, exchange
offer or other transaction (any such transaction hereinafter
being referred to as a "Debt/Equity Exchange"), the number of
Warrant Shares issuable upon the exercise of each Warrant shall
be adjusted so that the Holder of each Warrant shall be
entitled to purchase the kind and number of shares of Common
Stock or other securities or property of the Company determined
by multiplying the number of Warrant Shares issuable upon
exercise of each Warrant immediately prior to such Debt/Equity
Exchange by a fraction, (i) the numerator of which shall be the
total number of outstanding shares of Common Stock immediately
after such Debt/Equity Exchange (assuming full conversion of
any convertible securities issued in connection with such Debt/
Equity Exchange at the maximum exchange ratio, whether or not
applicable at the time of the Debt/Equity Exchange), and (ii)
the denominator of which shall be the total number of
outstanding shares of Common Stock immediately prior to such
Debt/Equity Exchange. An adjustment made pursuant to this
Section shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for
such event. To the extent that, at the time of any Debt/Equity
Exchange, the Warrants are convertible into property or
securities other than Common Stock, appropriate steps shall be
taken to ensure that, upon exercise of the Warrants, the Holder
is issued the property and/or other securities to which the
Holder would have been entitled had the Holder owned Common
Stock at the time such Common Stock was changed into such
property and/or other securities. Whenever the number of
Warrant Shares issuable upon exercise of a Warrant is adjusted
pursuant to this paragraph, the Exercise Price payable upon
exercise of each Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of Warrant
Shares issuable upon the exercise of each Warrant immediately
prior to such adjustment, and the denominator of which shall be
the number of Warrant Shares purchasable immediately
thereafter. For purposes of this Section, a Debt/Equity
Exchange shall also include (i) any issuance by the Company of
shares of Common Stock (and/or securities convertible into
Common Stock), the proceeds of which are used, directly or
indirectly, in one or a series of related or unrelated
transactions, to redeem, repurchase or otherwise retire debt
securities within 12 months of the date of such new issuance,
-18-<PAGE>
and (ii) any exchange or other distribution of equity in
connection with a waiver, modification, forbearance, delay in
payment or other similar transaction or event involving
outstanding indebtedness of the Company. The adjustment
provisions of this Section shall not apply, and no adjustment
pursuant to this Section shall be required, in connection with
any particular Debt/Equity Exchange, to the extent that the
Current Market Price as of the date which is 30 days after
consummation of such Debt/Equity Exchange is at least equal to
the greater of (i) $8.00 or (ii) the Reference Price applicable
as of the next Anniversary Date. In the event that a Debt/
Equity Exchange would give rise to an adjustment pursuant to
this Section and Section 5, the adjustment required by this
Section shall be made and no adjustment shall be made pursuant
to Section 5.
Section 9. No Rights as Shareholders; Notice to
Holder.
Nothing contained herein shall be construed as con-
ferring upon the Holder the right to vote or to receive divi-
dends or to receive notice as shareholders in respect of the
meetings of shareholders for the election of directors of the
Company or any other matter, or any rights whatsoever as share-
holders of the Company. If, however, at any time prior to the
expiration of the Warrants and prior to their exercise, any of
the following shall occur:
(a) The Company shall authorize the issuance to all
holders of Common Stock of rights, options or warrants to
subscribe for or purchase Common Stock, or of any other
subscription rights or warrants; or
(b) The Company shall authorize the distribution to
all holders of Common Stock of evidences of its indebted-
ness or assets (other than cash dividends or cash distri-
butions payable out of consolidated earnings or earned
surplus or dividends payable in Common Stock); or
(c) The Company shall propose any consolidation or
merger to which the Company is a party and for which
approval of any stock of the Company is required, or the
conveyance or transfer of properties and assets of the
Company substantially as an entirety (whether by sale,
lease or other disposition), or any reclassification or
change of outstanding Common Stock issuable upon exercise
of the Warrants (other than a change in par value or from
par value to no par value); or
-19-<PAGE>
(d) The Company shall propose the voluntary or
involuntary dissolution, liquidation or winding up of the
Company;
then the Company shall cause to be given to the Holder at its
address appearing on the Warrant Register, at least 15 days
prior to the applicable record date hereinafter specified, by
first class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common
Stock entitled to receive any such rights, options, warrants or
distribution are to be determined, or (ii) the date on which
any such consolidation, merger, conveyance, transfer, dissolu-
tion, liquidation or winding up is expected to become effective
or consummated, and the date as of which it is expected that
the holders of record of shares of Common Stock shall be enti-
tled to exchange their shares for securities or other property,
if any, deliverable upon such reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or wind-
ing up. The failure to give the notice required by this Sec-
tion or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consoli-
dation, merger, conveyance, transfer, dissolution, liquidation
or winding up, or the vote upon any action.
Section 10. Restrictions on Transfer of the
Warrants and Warrant Shares.
Until such time as an appropriate registration state-
ment covering the Warrants or the Warrant Shares has become
effective under the Securities Act, the Holder will not dispose
of either the Warrants evidenced hereby or the Warrant Shares,
as the case may be, unless (i) the transferee has agreed to be
bound by the restrictions contained herein on such Warrants or
Warrant Shares, as the case may be, and (ii) except in the case
of a transfer by the Holder to an Affiliate (as defined in Sec-
tion 17), the Company shall have received an opinion of counsel
(both such opinion and such counsel to be reasonably satisfac-
tory to the Company) to the effect that the sale or other pro-
posed disposition of the Warrants or Warrant Shares may be
accomplished without such registration (or perfection of an
exemption) under, the Securities Act, which opinion may be con-
ditioned upon (x) acceptance by the transferee of a Warrant
Certificate or Certificates or Warrant Shares bearing a legend
similar to that set forth in Exhibit A and (y) a certificate of
the transferee stating that the Warrant(s) or Warrant Share(s)
being acquired by such transferee are being acquired by such
transferee for its own account and not with a view to, or for
resale in connection with, the distribution thereof in viola-
tion of the Securities Act.
-20-<PAGE>
Section 11. Representations and Warranties.
The Company represents and warrants that, as of the
date of this Warrant and as of the date of any future issuance
of Warrants or securities issuable upon exercise thereof:
(i) It and each of its material subsidiaries is a
corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation and
is in good standing as a foreign corporation in each
jurisdiction where ownership of its properties or the con-
duct of its business requires it to be so, and has all
power and authority under such laws and its certificate of
incorporation and all material governmental licenses,
authorizations, consents and approvals required to carry
on its business as now conducted.
(ii) It has the corporate power and authority to
execute, sell and perform its obligations under, and to
consummate the transactions contemplated by, the Warrants,
and has by proper action duly authorized the execution and
delivery of this Warrant.
(iii) Neither the execution and delivery of this War-
rant nor the consummation of the transactions contemplated
by this Warrant, nor the performance of and compliance
with the terms and provisions hereof will: (i) violate or
conflict with any provision of its Certificate of Incorpo-
ration or By-laws; (ii) violate any law, regulation,
order, writ, judgment, injunction, decree or permit
applicable to it; (iii) violate or materially conflict
with any contractual provisions of, or cause an event of
default under, any indenture, loan agreement, mortgage,
deed of trust, contract or other agreement or instrument
to which it or any of its subsidiaries or properties may
be bound; or (iv) result in or require the creation of any
lien, security interest or other charge or encumbrance
(other than those contemplated in or in connection with
this Warrant) upon or with respect to its subsidiaries or
properties.
(iv) No consent, approval, authorization or order
of, or filing, registration or qualification with, any
court or governmental authority or other person or entity
is required in connection with the execution, delivery or
performance of the Company's obligations under this War-
rant, other than any filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "H-S-R
-21-<PAGE>
Act") which may be required after the date of this
Warrant.
(v) The Warrant has been duly executed and deliv-
ered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable in accor-
dance with its terms, subject, as to enforcement, to bank-
ruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general
equity principles.
(vi) All representations and warranties of the
Company and it subsidiaries contained in the Credit
Agreement are hereby incorporated by reference into this
Warrant and are true and correct as of July 1, 1996.
(vii) The authorized capital stock of the Company
consists of (a) 60,000,000 shares of Common Stock, of
which 26,046,966 shares were outstanding as of June 30,
1996, (b) 3,700,000 shares of Non-Voting Common Stock, par
value $.01 per share, of which 3,573,662 shares were
outstanding as of June 30, 1996 and (c) 2,500,000 shares
of Preferred Stock, par value $1.00 per share, of which no
shares were outstanding as of June 30, 1996. All out-
standing shares of Common Stock are duly authorized, val-
idly issued, fully paid and nonassessable (except for
700,000 shares of restricted stock to be issued to two
officers of the Company), and no class of capital stock or
other securities of the Company is entitled to preemptive
or similar rights. There are outstanding on the date
hereof no options, warrants or other rights to acquire
capital stock from the Company (including pursuant to the
terms of any securities convertible into capital stock of
the Company), except (i) 29,620,628 outstanding Rights
("Rights") to purchase one one-hundredth of a share of the
Company's Series A Junior Participating Preferred Stock,
par value $1.00 per share, which Rights are issued under
the Rights Agreement, dated as of July 7, 1993, between
the Company and Harris Trust Company of New York, as
Rights Agent (as such agreement may be amended or
supplemented or replaced from time to time, the "Rights
Agreement"), (ii) options representing in the aggregate
the right to purchase up to 1,451,500 shares of Common
Stock pursuant to the Company's employee benefit plans and
(iii) warrants representing in the aggregate the right to
purchase up to 283,972 shares of Common Stock at an
exercise price of $3.89. All outstanding shares of
capital stock of all material subsidiaries of the Company
are owned by the Company or a direct or indirect wholly
-22-<PAGE>
owned subsidiary of the Company, free and clear of all
liens, charges, encumbrances, claims and options of any
nature, other than those contemplated or permitted by the
Credit Agreement.
(viii) The Company and its Board of Directors shall
take all action necessary to prevent any future
acquisition of securities of the Company by Apollo and/or
its affiliates solely as a result of ownership of this
Warrant or as a result of exercise of Warrants from
causing Apollo or its affiliates to be deemed an
"Acquiring Person" (as such term is defined in the Rights
Agreement), and to prevent any "Distribution Date" (as
defined in the Rights Agreement) from occurring as a
result of exercise of the Warrants.
(ix) The Company's Board of Directors has approved
Apollo's acquisition of Warrants and Warrant Shares for
purposes of Section 203(a)(1) of the General Corporation
Law of the State of Delaware. The Company will continue
to take any action necessary to exempt Apollo from the
operation of such statute or any successor thereto solely
as a result of Apollo's ownership of Warrants or Warrant
Shares.
Section 12. No Voting Rights.
No Holder shall be entitled to any voting rights as a
stockholder of the Company by virtue of such Holder's ownership
of Warrants, provided that Holders who also hold voting securi-
ties of the Company, including Warrant Shares, shall be enti-
tled to vote such securities on any matter upon which other
holders of such class of securities are entitled to vote.
Section 13. Execution of Warrant Certificates.
Each Warrant Certificate shall be executed on behalf
of the Company by the manual or facsimile signature of the
present or any future Chairman of the Board of Directors,
President or Vice President of the Company.
Section 14. Maintenance of Office or Agency.
The Company will maintain a Warrant Office in New
York, New York, where this Warrant Certificate may be presented
or surrendered for subdivision, combination, registration of
transfer, or exchange and where notices and demands to or upon
the Company in respect of the Warrants evidenced hereby may be
served. The Company hereby initially designates American Stock
-23-<PAGE>
Transfer & Trust Company as the agency of the Company for such
purpose.
Section 15. Severability.
In the event that any one or more of the provisions
contained herein, or the application thereof in any circum-
stances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality, and enforce-
ability of any such provision in every other respect and the
other remaining provisions hereof shall not be in any way
impaired or affected, it being intended that all of the Hold-
er's rights and privileges shall be enforceable to the fullest
extent permitted by law.
Section 16. Governing Law.
The Warrants shall be governed by and construed in
accordance with the laws of the State of New York, except to
the extent that the laws of Delaware shall be mandatorily
applicable hereto.
Section 17. Definitions.
For all purposes of this Warrant Certificate, in
addition to the other terms defined elsewhere herein, unless
the context otherwise requires:
"Affiliate" of any specified person means any other
person directly or indirectly controlling or controlled by
or under direct or indirect common control with such spec-
ified person. For the purposes of this definition, "con-
trol" when used with respect to any specified person means
the power to direct the management and policies of such
person, directly or indirectly, whether through the owner-
ship of voting securities, by contract or otherwise.
"Appraisal Procedure" means a procedure whereby two
independent appraisers, one chosen by the Company and one
by the Holder entitled to use the Appraisal Procedure (or,
to the extent more than one Holder is so entitled, by a
majority in interest of the Holders so entitled), shall
mutually agree upon the determinations then the subject of
appraisal. Each party shall deliver a notice to the other
appointing its appraiser within 15 days after the Ap-
praisal Procedure is invoked. If within 30 days after
appointment of the two appraisers they are unable to agree
upon the amount in question, a third independent appraiser
shall be chosen within 10 days thereafter by the mutual
-24-<PAGE>
consent of such first two appraisers or, if such first two
appraisers fail to agree upon the appointment of a third
appraiser, such appointment shall be made by the American
Arbitration Association, or any organization successor
thereto, from a panel of arbitrators having experience in
the appraisal of the subject matter to be appraised. The
decision of the third appraiser so appointed and chosen
shall be given within 30 days after the selection of such
third appraiser. If three appraisers shall be appointed
and the determination of one appraiser is disparate from
the middle determination by more than twice the amount by
which the other determination is disparate from the middle
determination, then the determination of such appraiser
shall be excluded, the remaining two determinations shall
be averaged and such average shall be binding and conclu-
sive on the Company and the Holders; otherwise the average
of all three determinations shall be binding and conclu-
sive on the Company and the Holders. The costs of con-
ducting any Appraisal Procedure shall be borne by the
Holders requesting such Appraisal Procedure, except (a)
the fees and expenses of the appraiser appointed by the
Company and any costs incurred by the Company shall be
borne by the Company and (b) if such Appraisal Procedure
shall result in a determination that is disparate by 10%
or more from the Company's initial determination, all
costs of conducting such Appraisal Procedure shall be
borne by the Company.
"Board of Directors" means either the Board of
Directors of the Company or any duly authorized committee
of that board.
"Board Resolution" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of
the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date
of such certification and delivered to each of the Holders
of the Warrants.
"Common Stock" means any stock of any class of
the Company which has no preference in respect of divi-
dends or of amounts payable in the event of any voluntary
or involuntary liquidation, dissolution or winding up of
the Company, and which is not subject to redemption by the
Company. However, subject to Section 5, shares issuable
on exercise of the Warrants evidenced hereby, as
contemplated by the first paragraph of this Warrant
Certificate, shall include only shares of the class
designated as Common Stock of the Company as of the date
of this Warrant or shares of any class or classes
-25-<PAGE>
resulting from any reclassification or reclassifications
thereof and which have no preference in respect of divi-
dends or of amounts payable in the event of any voluntary
or involuntary liquidation, dissolution or winding up of
the Company and which are not subject to redemption by the
Company; provided that if at any time there shall be more
than one such resulting class, the shares of each such
class then so issuable shall be substantially in the pro-
portion which the total number of shares of such class
resulting from all such reclassifications bears to the
total number of shares of all such classes resulting from
all such reclassifications. As used in this Warrant Cer-
tificate, "shares" shall include fractions thereof to the
extent that fractional shares of the Company are outstand-
ing.
"Person" shall mean any individual, firm, partner-
ship, association, group (as such term is used in Rule
13d-5 under the Securities Exchange Act of 1934, as
amended, as in effect on the date of this Warrant), corpo-
ration or other entity.
"Sale Price" of the Common Stock means the closing
price (or if no closing price is reported, the average of
the high and low bid prices) as reported in the composite
transactions for the principal United States securities
exchange on which the Common Stock is traded or, if the
Common Stock is not listed on a United States national or
regional stock exchange, as reported by the NASDAQ
National Market or the National Quotation Bureau
Incorporated.
"Subsidiary" means any subsidiary of the Company, a
majority of whose capital stock with voting power, under
ordinary circumstances, to elect directors is at the time,
directly or indirectly owned by the Company, by one or
more subsidiaries of the Company or by the Company and one
or more subsidiaries of the Company.
"Trading Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday, other than any day on
which securities are not traded on the exchange or market
where the Warrants are listed or sold.
Section 18. Fees and Expenses.
All fees and expenses incurred by the Holder in con-
nection with the Holder's ownership of Warrants and securities
or other property received upon exercise thereof which relate
to (i) filings under the H-S-R Act; (ii) any other required
-26-<PAGE>
regulatory filings; (iii) registration fees; (iv) stock
exchange listing fees; and (v) reasonable fees and expenses of
counsel in connection with the foregoing shall be paid by the
Company.
Section 19. Contest and Appraisal Rights.
Upon each determination of fair market value or other
valuation required hereunder, the Company shall promptly give
notice thereof to all Holders, setting forth in reasonable
detail the calculation of such fair market value or valuation
and the method and basis of determination thereof, as the case
may be. If any Holder of Warrants to purchase at least
1,000,000 shares of Common Stock (including, for purposes of
determining such level of ownership, all Warrants owned by
affiliates of such Holder) shall disagree with such
determination and shall, by notice to the Company given within
15 days after the Company's notice of such determination, elect
to dispute such determination, such dispute shall be resolved
in accordance with the Appraisal Procedure (as defined in
Section 17).
Section 20. Additional Warrants to be Issued at
Current Exercise Price.
Notwithstanding any other provision of this Warrant,
to the extent the Holder is entitled to receive additional
Warrants in accordance with the terms hereof, the Warrants so
issued shall have terms identical to this Warrant, except that
(i) the initial Exercise Price for such additional Warrants
shall be deemed to be the Exercise Price in effect on the date
such additional Warrants are issued and (ii) the amount and
kind of securities and/or other property issuable upon exercise
of such Warrants shall be deemed to be the amount and kind of
securities and/or other property issuable upon exercise of the
Warrants outstanding immediately prior to issuance of such
additional Warrants.
Dated: July 1, 1996 LEVITZ FURNITURE INCORPORATED
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President and
General Counsel
-27-<PAGE>
NOTICE OF ELECTION TO EXERCISE
The undersigned hereby irrevocably elects to exercise
the within Warrant to the extent of purchasing ______ shares of
Common Stock and hereby makes payment of the Exercise Price
(check and complete appropriate clause):
___
/ / in cash in the amount of $_________;
or
___
/ / by surrendering herewith all or a
portion of the Term Note (as defined
in the within Warrant) having an
outstanding principal amount (plus
accrued interest) of $_________.
NAME OF HOLDER:
_____________________________
(Please Print)
By___________________________
Date:_________________, 199_.
Instructions for Registration of Stock
Name________________________________________
(please type or print in block letters)
Address_____________________________________
-28-<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR
SOLD IN THE ABSENCE OF SUCH REGISTRATION OR THE AVAILABILITY OF
AN EXEMPTION FROM SUCH REGISTRATION. SUCH SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED EXCEPT UPON COMPLIANCE WITH THE
REQUIREMENTS FOR TRANSFER SET FORTH HEREIN.
LEVITZ FURNITURE INCORPORATED
6111 BROKEN SOUND PARKWAY, N.W.
BOCA RATON, FL 33487
July 1, 1996
Apollo Investment Fund III, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attention: Mr. Joshua J. Harris
Ladies and Gentlemen:
In connection with the Credit Agreement, dated as of
July 1, 1996, among Levitz Furniture Corporation, Levitz
Furniture Company of the Midwest, Inc., Levitz Furniture
Company of the Pacific, Inc., Levitz Furniture Company of
Washington, Inc. and John M. Smyth Company as Borrowers, each
of the financial institutions initially a signatory thereto,
together with those assignees pursuant to Section 11.8 thereof,
as Lenders, with Levitz Furniture Corporation as LFC Funds
Administrator and BT Commercial Corporation, as Agent, and for
other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Levitz Furniture
Incorporated (the "Company") hereby agrees that it shall, for
so long as Apollo Investment Fund III, L.P. ("Apollo") and/or
its affiliates beneficially own, directly or indirectly, at
least 2,500,000 shares of the Company's common stock, par value
$.01 per share ("Common Stock") (as such number may be adjusted
from time to time in connection with any stock split, merger,
recapitalization or similar transaction, the "Required
Number"):
1. If Apollo at any time requests, cause to be provided
to Apollo or its designated representative copies of
all materials, information and communications
delivered to members of the Boards of Directors of
the Company and any of its significant subsidiaries,<PAGE>
Apollo Investment Fund III, L.P.
July 1, 1996
Page 2
concurrently with the delivery of such materials to
the Board members;
2. If Apollo at any time requests, (i) cause one
representative designated by Apollo (the "Apollo
Representative") to be elected to the Board of
Directors of the Company and (ii) unless Apollo so
requests, cause the Apollo Representatives (or his or
her replacement as designated by Apollo) to be
nominated for reelection to such Board and use its
best efforts to cause the Apollo Representative to be
reelected;
3. If Apollo at any time requests, at any time when
there is no Apollo Representative, cause one
representative designated by Apollo (the "Apollo
Observer") to be permitted to attend as an observer
all meetings (including meetings of any committee) of
the Board of Directors of the Company;
4. To provide the Apollo Observer, if any, timely notice
of all Board meetings (including committee meetings)
and copies of all materials described in paragraph
(1) above, in the manner so described, as though the
Apollo Observer were a Board or committee member, as
the case may be; and
5. Indemnify the Apollo Representative (if any), to the
same extent indemnification is provided to other
directors of the Company and its subsidiaries, and
provide the Apollo Representative with the identical
kind and amount of liability insurance coverage and
other benefits, if any, afforded other Board members.
It is understood that, for purposes of determining
whether Apollo and its affiliates own the Required Number, all
warrants, options, or other securities exercisable for or
convertible into Common Stock owned by Apollo and its
affiliates shall be treated as though they had been exercised
or converted immediately prior to any date of determination, so
that Apollo and its affiliates are deemed to own the Common
Stock underlying such securities. To the extent the Common
Stock is changed into another security by reason of merger,
consolidation, recapitalization or other transaction,
appropriate adjustment shall be made consistent with the intent
of this letter.
The parties recognize and agree that if for any
reason any of the provisions of this letter agreement are not<PAGE>
Apollo Investment Fund III, L.P.
July 1, 1996
Page 3
performed in accordance with their specific terms or are
otherwise breached, immediate and irreparable harm or injury
would be caused for which money damages would not be an
adequate remedy. Accordingly, each party agrees that, in
addition to other remedies, the other party shall be entitled
to seek an injunction restraining any violation or threatened
violation of the provisions of this letter agreement. In the
event that any action should be brought in equity to enforce
the provisions of the letter agreement, neither party shall
allege, and each party hereby waives the defense, that there is
adequate remedy at law.
Please acknowledge your acceptance of the foregoing
by signing both copies of this letter and returning it to the
Company to the attention of the undersigned.
LEVITZ FURNITURE INCORPORATED
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President and
General Counsel
AGREED TO AND ACCEPTED BY:
APOLLO INVESTMENT FUND III, L.P.
By: Apollo Advisors II, L.P.
Its General Partner
By: Apollo Capital Management II, Inc.
Its General Partner
By: /s/ Joshua Harris
Name: Joshua Harris
Title: Vice President
REGISTRATION RIGHTS AGREEMENT
by and among
LEVITZ FURNITURE INCORPORATED
and
The Entities Listed on
the Signature Pages Hereof
Dated as of July 1, 1996
<PAGE>
TABLE OF CONTENTS
Section Page
1. Definitions......................................... 2
2. Registration Under the Securities Act............... 5
(a) Required Registration.......................... 5
(b) Incidental Registration........................ 9
(c) Expenses....................................... 12
(d) Effective Registration Statement; Suspension... 12
(e) Selection of Underwriters...................... 13
3. Holdback Arrangements............................... 13
(a) Restrictions on Public Sale by
Holders of Registrable Securities............ 13
(b) Restrictions on Public Sale by the Company..... 14
4. Registration Procedures............................. 15
5. Indemnification; Contribution....................... 21
(a) Indemnification by the Company................. 21
(b) Indemnification by Holders..................... 22
(c) Conduct of Indemnification Proceedings......... 23
(d) Contribution................................... 24
6. Miscellaneous....................................... 25
(a) No Inconsistent Agreements..................... 25
(b) Amendments and Waivers......................... 27
(c) Notices........................................ 27
(d) Successors and Assigns......................... 27
(e) Recapitalizations, Exchanges, etc., Affecting
Registrable Securities....................... 28
(f) Counterparts................................... 28
(g) Descriptive Headings, Etc...................... 28
(h) Severability................................... 29
(i) Governing Law.................................. 29
(j) Specific Performance........................... 29
(k) Entire Agreement............................... 29
(i)<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement")
dated as of July 1, 1996, by and among (i) LEVITZ FURNITURE
INCORPORATED, a Delaware corporation (the "Company"); (ii)
Apollo Investment Fund III, L.P., Apollo Overseas Partners
III, L.P., Apollo (U.K.) Partners III, L.P. (each, an "Apollo
Entity" and collectively, "Apollo"); and (iii) Court Square
Capital Limited (formerly known as Citicorp Capital
Investors, Ltd.) ("Citicorp"), each Apollo Entity and
Citicorp, along with their respective Affiliates and succes-
sors who from and after the date hereof acquire or are other-
wise the transferee of any Registrable Securities (as herein-
after defined), being hereinafter referred to as an "Initial
Holder"); and (iv) any other Person that shall from and after
the date hereof acquire or otherwise be the transferee of any
Registrable Securities and who shall be a Permitted Trans-
feree (as hereinafter defined) of an Initial Holder (herein
referred to collectively as the "Holders" and individually as
a "Holder").
WHEREAS, in connection with a certain Credit Agree-
ment, dated of even date herewith, among Levitz Furniture
Corporation, Levitz Furniture Company of the Midwest, Inc.,
Levitz Furniture Company of the Pacific, Inc., Levitz Furni-
ture Company of Washington, Inc. and John M. Smyth Company as
Borrowers, each of the financial institutions initially a
signatory thereto, together with those assignees pursuant to
Section 11.8 thereof, as Lenders, with Levitz Furniture Cor-
poration as LFC Funds Administrator and BT Commercial Corpo-
ration, as Agent (the "Credit Agreement"), Apollo and/or its
Affiliates have agreed to provide financing to certain af-
filiates of the Company (the "Financing");
WHEREAS, in consideration of its participation in
the Financing, Apollo has received warrants to acquire shares
of common stock of the Company (the "Warrants");
WHEREAS, in order to induce the Apollo to enter
into the Credit Agreement, the Company has agreed to provide
registration rights to Apollo on the terms and subject to the
conditions provided herein; and
WHEREAS, in order to induce Citicorp to relinquish
its rights under a certain Stockholders Agreement dated De-
cember 15, 1986, among the Company, Citicorp and the other
stockholders party thereto (the "Stockholders Agreement"),
the Company has agreed to provide registration rights to
Citicorp on the terms and subject to the conditions provided
herein.
NOW THEREFORE, in consideration of the premises and
the representations, warranties and agreements contained<PAGE>
herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound hereby, the parties hereto
agree as follows:
Section 1. Definitions.
(a) As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" shall have the meaning set forth in
Rule 12b-2 promulgated under the Exchange Act.
"Beneficially owns", when used with respect to a
Person in connection with such Person's ownership of Common
Shares or Warrants to acquire Common Shares, shall mean that
such Person is the "beneficial owner" (as such term is de-
fined in Rules 13d-3 and 13d-5 under the Exchange Act) of
such Common Shares or Warrants.
"Common Shares" shall mean shares of Common Stock,
par value $.01 per share, of the Company.
"Company" shall have the meaning set forth in the
preamble and shall also include the Company's successors.
"Credit Agreement" shall have the meaning set forth
in the preamble.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
"Financing" shall have the meaning set forth in the
preamble.
"Holder" shall have the meaning set forth in the
preamble.
"Incidental Registration" shall mean a registration
required to be effected by the Company pursuant to Section
2(b).
"Incidental Registration Statement" shall mean a
registration statement of the Company, as provided in Section
2(b), which covers any of the Registrable Securities on an
appropriate form in accordance with the Securities Act and
all amendments and supplements to such registration state-
ment, including post-effective amendments, in each case in-
cluding the Prospectus contained therein, all exhibits there-
to and all material incorporated by reference therein.
-2-<PAGE>
"Initial Holder" shall have the meaning set forth
in the preamble.
"Majority Holders" shall mean Holders of Common
Shares representing in the aggregate a majority of the aggre-
gate number of outstanding Common Shares beneficially owned
by Holders or, if applicable, a majority of the aggregate
number of outstanding Common Shares beneficially owned by any
class of Holders.
"NYSE" shall mean the New York Stock Exchange.
"NASD" shall mean the National Association of Secu-
rities Dealers, Inc.
"NASDAQ" shall mean the NASDAQ Stock Market of the
NASD.
"Permitted Transferee" shall mean any Person which
would be a "qualified institutional buyer" within the meaning
of Rule 144A under the Securities Act.
"Person" shall mean any individual, limited or gen-
eral partnership, corporation, trust, joint venture, associa-
tion, joint stock company, limited liability company or unin-
corporated organization.
"Prospectus" shall mean the prospectus included in
a Registration Statement, including any preliminary Prospec-
tus, and any such Prospectus as amended or supplemented by
any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities and by
all other amendments and supplements to such Prospectus, in-
cluding post-effective amendments, and in each case including
all material incorporated by reference therein.
"Registrable Securities" shall mean Warrants or
Common Shares beneficially owned by any Holder, but shall not
include any Warrant or Common Share (i) which has been ef-
fectively registered under the Securities Act and disposed of
in accordance with a Registration Statement covering such se-
curity or (ii) which has been distributed to the public pur-
suant to Rule 144 under the Securities Act.
"Registration Expenses" shall mean any and all ex-
penses incident to performance of or compliance with this
Agreement by the Company and its subsidiaries, including,
without limitation (i) all SEC, stock exchange, NYSE, NASD
and other registration, listing and filing fees, (ii) all
fees and expenses incurred in connection with compliance with
-3-<PAGE>
state securities or blue sky laws and compliance with the
rules of the NYSE or any stock exchange (including reasonable
fees and disbursements of counsel in connection such compli-
ance and the preparation of a Blue Sky Memorandum and legal
investment survey), (iii) all expenses of any Persons in pre-
paring or assisting in preparing, printing, distributing,
mailing and delivering any Registration Statement, any Pro-
spectus, any underwriting agreements, transmittal letters,
securities sales agreements, securities certificates and
other documents relating to the performance of and compliance
with this Agreement, (iv) the reasonable fees and disburse-
ments of (x) counsel for the Company, (y) one counsel for
Citicorp and one counsel for Apollo or, if Citicorp and
Apollo are not participating in a particular registration,
one (but not more than one) counsel for all of the Holders in
connection with such registration and (z) the independent
public accountants of the Company, including the expenses of
any "cold comfort" letters required by or incident to such
performance and compliance, (v) the fees and expenses of any
trustee, transfer agent, registrar, escrow agent or custo-
dian, (vi) the fees and expenses of any special experts or
other persons retained by the Company in connection with any
Registration Statement, (vii) the expenses incurred in con-
nection with making road show presentations and holding meet-
ings with potential investors to facilitate the distribution
and sale of Registrable Securities which are customarily
borne by the issuer, and (viii) all internal expenses of the
Company (including all salaries and expenses of officers and
employees performing legal or accounting duties); provided,
however, Registration Expenses shall not include discounts
and commissions payable to underwriters, selling brokers,
managers or other similar Persons engaged in the distribution
of any of the Registrable Securities.
"Registration Statement" shall mean any registra-
tion statement of the Company which covers any Registrable
Securities and all amendments and supplements to any such
Registration Statement, including post-effective amendments,
in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference
therein.
"Required Registration" shall mean a registration
required to be effected pursuant to Section 2(a).
"Required Registration Statement" shall mean a Reg-
istration Statement which covers the Registrable Securities
requested to be included therein pursuant to the provisions
of Section 2(a) on an appropriate form (in accordance with
Section 4(a) hereof) pursuant to the Securities Act, and
-4-<PAGE>
which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods
of distribution thereof, and all amendments and supplements
to such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated
by reference therein.
"SEC" shall mean the Securities and Exchange Com-
mission.
"Securities Act" shall mean the Securities Act of
1933, as amended from time to time.
"Stockholders Agreement" shall have the meaning set
forth in the preamble.
"Underwriter" shall have the meaning set forth in
Section 5(a).
"Underwritten Offering" shall mean a sale of secu-
rities of the Company to an Underwriter or Underwriters for
reoffering to the public.
"Warrants" shall mean the warrants issued to Apollo
in connection with the Financing, as described in the Credit
Agreement, together with any additional warrants issued in
accordance with the terms thereof.
Section 2. Registration Under the Securities Act.
(a) Required Registration.
(i) Right to Require Registration. At any time
prior to the sixth anniversary of the execution of the Credit
Agreement, any of the Apollo Entities and their Permitted
Transferees, on the one hand, and Citicorp and its Permitted
Transferees, on the other hand, shall have the right to re-
quest in writing (a "Request") (which request shall specify
the Registrable Securities intended to be disposed of by such
Holders and the intended method of distribution thereof) that
the Company register such Holders' Registrable Securities by
filing with the SEC a Required Registration Statement. Upon
the receipt of such a Request, the Company will, by the fifth
business day thereafter, give written notice of such re-
quested registration to all Holders of Registrable Securi-
ties, and, as soon as practicable after the receipt of such a
Request by the Company, the Company will cause to be filed
with the SEC a Required Registration Statement covering the
-5-<PAGE>
Registrable Securities which the Company has been so request-
ed to register in such Request and all other Registrable Se-
curities which the Company has been requested to register by
Holders thereof other than the Holder initiating the Request
by written request given to the Company within nine business
days after the giving of such written notice by the Company,
providing for the registration under the Securities Act of
the Registrable Securities which the Company has been so re-
quested to register by all such Holders, to the extent neces-
sary to permit the disposition of such Registrable Securities
so to be registered in accordance with the intended methods
of distribution thereof specified in such Request or further
requests, and shall use its best efforts to have such Re-
quired Registration Statement declared effective by the SEC
as soon as practicable thereafter and to keep such Required
Registration Statement continuously effective for a period of
at least 60 calendar days following the date on which such
Required Registration Statement is declared effective (or
such shorter period which will terminate when all of the Reg-
istrable Securities covered by such Required Registration
Statement have been sold pursuant thereto), including, if
necessary, by filing with the SEC a post-effective amendment
or a supplement to the Required Registration Statement or the
related Prospectus or any document incorporated therein by
reference or by filing any other required document or other-
wise supplementing or amending the Required Registration
Statement, if required by the rules, regulations or instruc-
tions applicable to the registration form used by the Company
for such Required Registration Statement or by the Securities
Act, the Exchange Act, any state securities or blue sky laws,
or any rules and regulations thereunder. Notwithstanding the
provisions of the preceding sentence, (A) the Company shall,
on one occasion, if any Apollo Entity so requests, have the
Required Registration Statement declared effective by the SEC
and keep such Required Registration Statement continuously
effective for a period of not less than 360 calendar days and
(B) the Company shall, on one occasion, if Citicorp so re-
quests, have the Required Registration Statement declared ef-
fective by the SEC and keep such Required Registration State-
ment continuously effective for a period of not less than 360
calendar days. Notwithstanding the foregoing, the Company
shall not be required to file a registration statement pursu-
ant to this Section 2(a) unless Registrable Securities having
an expected market value of at least $1,500,000 are to be
registered.
The Company shall not be required to effect, pur-
suant to this Section 2(a), more than six registrations in
the aggregate, of which not more than three Requests for a
Required Registration shall be initiated by Apollo and its
-6-<PAGE>
Permitted Transferees and of which not more than three Re-
quests for a Required Registration shall be initiated by
Citicorp and its Permitted Transferees.
A Request may be withdrawn prior to the filing of
the Required Registration Statement by the Holder which made
such Request (a "Withdrawn Request") and a Required Registra-
tion Statement may be withdrawn prior to the effectiveness
thereof by the Holders of a majority of the Registrable Secu-
rities included therein (a "Withdrawn Required Registra-
tion"), and, in either such event, such withdrawal shall be
treated as a Required Registration which shall have been ef-
fected pursuant to the immediately preceding paragraph, un-
less the applicable Holder or Holders reimburse the Company
for its reasonable out of pocket expenses relating to the
preparation and filing of such Required Registration State-
ment (to the extent actually incurred).
No Holder shall, without the Company's consent, be
entitled to deliver a Request for a Required Registration af-
ter the completion of the initial Required Registration if
less than 150 calendar days have elapsed since (A) the last
day that a prior Required Registration Statement remained ef-
fective (or, if earlier, the day on which the last of the
Registrable Securities covered by the Required Registration
Statement were sold) or (B) the date of withdrawal of a With-
drawn Required Registration.
Notwithstanding the foregoing, the Company may de-
lay the filing of a registration statement required pursuant
to this Section 2(a) only if the Board of Directors of the
Company determines that such action is in the best interests
of the Company's stockholders and only for a period not to
exceed 45 days (a "Blackout Period"); provided that after any
initial Blackout Period the Company may not invoke a subse-
quent Blackout Period until 6 months elapse from the end of
any previous Blackout Period and the number of days in each
Blackout Period shall be deemed to effect a day-for-day ex-
tension of the six-year period referred to in the first sen-
tence of this Section 2(a) and the first sentence of Section
2(b) and the three- and two-year periods referred to in the
proviso to the first sentence of Section 6(a).
The registration rights granted pursuant to the
provisions of this Section 2(a) shall be in addition to the
registration rights granted pursuant to the other provisions
of this Section 2. Notwithstanding the foregoing, (a) the
Apollo Entities and their Permitted Transferees shall cease
to have the Required Registration rights set forth in this
Section 2(a) if the Apollo Entities and their Permitted
-7-<PAGE>
Transferees beneficially own in the aggregate fewer than
500,000 Warrants and/or Common Shares and (b) Citicorp and
its Permitted Transferees shall cease to have the Required
Registration rights set forth in this Section 2(a) if Citi-
corp and its Permitted Transferees beneficially own in the
aggregate fewer than 500,000 Warrants and/or Common Shares,
in each case as the same may be adjusted as a result of any
stock split, stock dividend, recapitalization or similar
event.
(ii) Priority in Required Registrations. If a Re-
quired Registration pursuant to this Section 2(a) involves an
Underwritten Offering, and the sole Underwriter or the lead
managing Underwriter, as the case may be, of such Underwrit-
ten Offering shall advise the Company in writing (with a copy
to each Holder requesting registration) on or before the date
5 business days prior to the date then scheduled for such of-
fering that, in its opinion, the amount of Registrable Secu-
rities requested to be included in such Required Registration
exceeds the amount which can be sold in such offering without
adversely affecting the distribution of the Registrable Secu-
rities being offered, the Company will include in such Re-
quired Registration only the amount of Registrable Securities
that the Company is so advised can be sold in such offering;
provided, however, that the Company shall be required to in-
clude in such Required Registration first, all Registrable
Securities requested to be included in the Required Registra-
tion by the Holders and, to the extent not all such Regis-
trable Securities can be included in such Required Registra-
tion, the number of Registrable Securities to be included
shall be allocated pro rata on the basis of the aggregate
number of Warrants and Common Shares beneficially owned at
that time by all the Holders requesting to participate in the
Required Registration or on such other basis as shall be
agreed among the Holders, by agreement of the Majority Hold-
ers within each class of Holders which are affected thereby;
second, if all Registrable Securities requested to be in-
cluded in the Required Registration by the Holders can be so
included, the holders of all other securities requesting, in
accordance with any registration rights which are granted in
compliance with Section 6(a), to be included in such Required
Registration which are of the same class as the Registrable
Securities and, to the extent not all such securities can be
included in such Required Registration, the number of securi-
ties to be included shall be allocated pro rata among the
holders thereof requesting inclusion in such Required Regis-
tration on the basis of the number of securities requested to
be included by all such holders; and third, all Registrable
Securities required to be included in such Required Registra-
tion by the Company. In the event the Company will not, by
-8-<PAGE>
virtue of this paragraph, include in any Required Registra-
tion all of the Registrable Securities of any Holder re-
quested to be included in such Required Registration, such
Holder may, upon written notice to the Company given within
five days of the time such Holder first is notified of such
matter, reduce the amount of Registrable Securities it de-
sires to have included in such Required Registration, where-
upon only the Registrable Securities, if any, it desires to
have included will be so included and the Holders not so re-
ducing shall be entitled to a corresponding increase in the
amount of Registrable Securities to be included in such Re-
quired Registration.
(b) Incidental Registration.
(i) Right to Include Registrable Securities. If
at any time prior to the sixth anniversary of the execution
of this Agreement (subject to extension in accordance with
the penultimate paragraph of Section 2(a)(i) and Section
3(a)) the Company proposes to register any of its Common
Shares under the Securities Act (other than (A) any regis-
tration of public sales or distributions solely by and for
the account of the Company of securities issued (x) pursuant
to any employee benefit or similar plan or any dividend rein-
vestment plan or (y) in any acquisition by the Company, or
(B) pursuant to Section 2(a) hereof), either in connection
with a primary offering for cash for the account of the Com-
pany or a secondary offering, the Company will, each time it
intends to effect such a registration, give written notice to
all Holders of Registrable Securities at least 10 business
days prior to the initial filing of a Registration Statement
with the SEC pertaining thereto, informing such Holders of
its intent to file such Registration Statement and of the
Holders' rights to request the registration of the Regis-
trable Securities held by the Holders under this Section 2(b)
(the "Company Notice"). Upon the written request of any
Holder made within seven business days after any such Company
Notice is given (which request shall specify the Registrable
Securities intended to be disposed of by such Holder and, un-
less the applicable registration is intended to effect a pri-
mary offering of Common Shares for cash for the account of
the Company, the intended method of distribution thereof),
the Company will use all reasonable efforts to effect the
registration under the Securities Act of all Registrable Se-
curities which the Company has been so requested to register
by such Holders to the extent required to permit the disposi-
tion (in accordance with the intended methods of distribution
thereof or, in the case of a registration which is intended
to effect a primary offering for cash for the account of the
Company, in accordance with the Company's intended method of
-9-<PAGE>
distribution) of the Registrable Securities so requested to
be registered, including, if necessary, by filing with the
SEC a post-effective amendment or a supplement to the Inci-
dental Registration Statement or the related Prospectus or
any document incorporated therein by reference or by filing
any other required document or otherwise supplementing or
amending the Incidental Registration Statement, if required
by the rules, regulations or instructions applicable to the
registration form used by the Company for such Incidental
Registration Statement or by the Securities Act, any state
securities or blue sky laws, or any rules and regulations
thereunder; provided, however, that if, at any time after
giving written notice of its intention to register any secu-
rities and prior to the effective date of the Incidental Reg-
istration Statement filed in connection with such registra-
tion, the Company shall determine for any reason not to reg-
ister or to delay registration of such securities, the Com-
pany may, at its election, give written notice of such deter-
mination to each Holder of Registrable Securities and, there-
upon, (A) in the case of a determination not to register, the
Company shall be relieved of its obligation to register any
Registrable Securities in connection with such registration
(but not from its obligation to pay the Registration Expenses
incurred in connection therewith), and (B) in the case of a
determination to delay such registration, the Company shall
be relieved of its obligation to register any Registrable Se-
curities requested to be included in such Incidental Regis-
tration Statement unless the Holders elect to continue such
registration as a Required Registration.
The registration rights granted pursuant to the
provisions of this Section 2(b) shall be in addition to the
registration rights granted pursuant to the other provisions
of this Section.
(ii) Priority in Incidental Registrations. If a
registration pursuant to this Section 2(b) involves an Under-
written Offering of the securities so being registered, whe-
ther or not for sale for the account of the Company, and the
sole Underwriter or the lead managing Underwriter, as the
case may be, of such Underwritten Offering shall advise the
Company in writing (with a copy to each Holder of Registrable
Securities requesting registration) on or before the date
five days prior to the date then scheduled for such offering
that, in its opinion, the amount of securities (including
Registrable Securities) requested to be included in such reg-
istration exceeds the amount which can be sold in (or during
the time of) such offering without adversely affecting the
distribution of the securities being offered, then the Com-
pany will include in such registration first, (x) in the case
-10-<PAGE>
of a sale for the account of the Company, all the securities
entitled to be sold pursuant to such Incidental Registration
Statement without reference to the incidental registration
rights of any holder (including Holders), and (y) in the case
of a sale other than for the account of the Company, all of
the securities requested to be sold pursuant to such regis-
tration statement by (A) the holder who causes the Company to
file such registration statement and (B) any Registrable Se-
curities requested to be included in such registration by
Holders, including with reference to the incidental registra-
tion rights of any Holder and any holder (other than Citi-
corp) whose registration rights were granted pursuant to the
Stockholders Agreement ("Prior Holders"), but without refer-
ence to the incidental registration rights of any other
holder, in each case allocated, if necessary, pro rata among
the holders thereof requesting such registration on the basis
of the number of the securities beneficially owned at the
time by the holders requesting inclusion of their securities;
second, (x) in the case of a sale for the account of the Com-
pany, the amount of other securities (including Registrable
Securities) requested by Holders or Prior Holders to be in-
cluded in such registration that the Company is so advised
can be sold in (or during the time of) such offering, al-
located, if necessary, pro rata among such Holders and Prior
Holders thereof requesting such registration on the basis of
the number of the securities (including Registrable Securi-
ties) beneficially owned at the time by such Holders and
Prior Holders requesting inclusion of their securities, and
(y) in the case of a sale other than for the account of the
Company, the amount of other securities requested to be in-
cluded by the Company for its own account in such registra-
tion that the Company is so advised can be sold in (or during
the time of) such offering; and third, in all cases, the
amount of other securities requested to be included in such
registration that the Company is so advised can be sold in
(or during the time of) such offering, allocated, if neces-
sary, pro rata among the holders thereof requesting such reg-
istration on the basis of the number of the securities ben-
eficially owned at the time by the holders requesting inclu-
sion of their securities; provided, however, that in the
event the Company will not, by virtue of this paragraph, in-
clude in any such registration all of the Registrable Securi-
ties of any Holder requested to be included in such registra-
tion, such Holder may, upon written notice to the Company
given within three days of the time such Holder first is no-
tified of such matter, reduce the amount of Registrable Secu-
rities it desires to have included in such registration,
whereupon only the Registrable Securities, if any, it desires
to have included will be so included and the Holders not so
reducing shall be entitled to a corresponding increase in the
-11-<PAGE>
amount of Registrable Securities to be included in such reg-
istration.
(c) Expenses. The Company agrees to pay all Reg-
istration Expenses in connection with (i) each of six regis-
trations requested pursuant to Section 2(a) and (ii) each
registration as to which Holders request inclusion of Regis-
trable Securities pursuant to Section 2(b). Each Holder
shall pay all discounts and commissions payable to underwrit-
ers, selling brokers, managers or other similar Persons re-
lated to the sale or disposition of such Holder's Registrable
Securities pursuant to any registration pursuant to this Sec-
tion.
(d) Effective Registration Statement; Suspension.
Subject to the third paragraph of Section 2(a)(i), a Regis-
tration Statement pursuant to Section 2(a) will not be deemed
to have become effective (and the related registration will
not be deemed to have been effected) unless it has been de-
clared effective by the SEC prior to a request by the Holders
of a majority of the Registrable Securities included in such
registration that such Registration Statement be withdrawn;
provided, however, that if, after it has been declared effec-
tive, the offering of any Registrable Securities pursuant to
such Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or
any other governmental agency or court, such Registration
Statement will be deemed not to have become effective and the
related registration will not be deemed to have been ef-
fected.
Any period during which the Company fails to keep
any Required Registration Statement effective and usable for
resale of Registrable Securities shall be referred to as a
"Suspension Period." A Suspension Period shall commence on
and include the date that the Company gives notice that any
Required Registration Statement is no longer effective or us-
able for resale of Registrable Securities and shall continue
until and including the date when each Holder of Registrable
Securities covered by such Required Registration Statement
either receives the copies of the supplemented or amended
Prospectus contemplated by Section 4(j) or is advised in
writing by the Company that the use of the Prospectus may be
resumed. In the event of one or more Suspension Periods, the
applicable time period referenced in the first paragraph of
Section 2(a)(i) shall be extended by the number of days in-
cluded in each such Suspension Period, and, in the event any
Suspension Period occurs sooner than 30 days after the end of
the previous Suspension Period or 30 days after the initial
effectiveness of any Required Registration Statement, none of
-12-<PAGE>
the days between such Suspension Periods or prior to such
Suspension Period shall be included in computing such ap-
plicable time period.
(e) Selection of Underwriters. At any time or
from time to time, the Holders of a majority of the Regis-
trable Securities covered by a Required Registration State-
ment may elect to have such Registrable Securities sold in an
Underwritten Offering and may select the investment banker or
investment bankers and manager or managers that will serve as
lead managing Underwriter or sole Underwriter with respect to
the offering of such Registrable Securities as long as such
Underwriter or Underwriters are reasonably acceptable to the
Company. No Holder may participate in any Underwritten Of-
fering hereunder unless such Holder (a) agrees to sell such
Holder's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, custody agreements, in-
demnities, underwriting agreements and other documents re-
quired under the terms of such Underwritten Offering.
Section 3. Holdback Arrangements.
(a) Restrictions on Public Sale by Holders of Reg-
istrable Securities. (i) Each Holder of Registrable Securi-
ties agrees, if the applicable offering is a primary Under-
written Offering of Common Shares for cash for the account of
the Company as to which such Holder is eligible to partici-
pate pursuant to Section 2(b), the requirements of the imme-
diately following sentence are satisfied, and the sole Under-
writer or lead managing Underwriter in such Offering so re-
quests, not to effect any public sale or distribution of Reg-
istrable Securities (including any sales pursuant to Rule 144
under the Securities Act) during the period commencing on the
date such Holder receives the Company Notice pursuant to Sec-
tion 2(b) and continuing until 90 days after the effective
date of the Registration Statement or any shorter period
which the sole or lead managing Underwriter shall request
(except to the extent permitted for sales of such Holder's
Registrable Securities pursuant to the Registration State-
ment). The Holders shall not be obligated to agree to the
restrictions set forth in this Section 3(a)(i) (A) unless the
registration statement for the offering by the Company is
filed with the SEC within 20 calendar days after giving the
Company Notice and relates to a primary offering for cash of
Common Shares for net proceeds of at least $15 million for
the account of the Company (based upon the closing price of
the Common Shares in the principal trading market therefor as
-13-<PAGE>
of the close of trading on the trading date immediately pre-
ceding the date of the Company Notice with respect to such
offering), the Company uses all reasonable efforts to have
such registration statement declared effective by the SEC as
soon as practicable after filing and such registration state-
ment is declared effective no later than the 90th calendar
day after giving the Company Notice, (B) unless at least 180
calendar days have elapsed since the expiration or termina-
tion of the Holders' agreement pursuant to this Section
3(a)(i) with respect to any prior Company registration to
which the restrictions of this Section 3(a)(i) apply (except
in the case of the initial such Company registration) and (C)
unless the Holders continue to own in the aggregate more than
5% of the outstanding Common Shares. The period of time dur-
ing which any agreement provided by this Section 3(a)(i) is
in effect shall be deemed to effect a day-for-day extension
of the six-year period referred to in the first sentence of
Section 2(a) and the first sentence of Section 2(b) and the
three- and two-year periods referred to in the proviso to the
first sentence of Section 6(a).
(ii) Each Holder of Registrable Securities agrees
with each other Holder, if the applicable offering is a Re-
quired Registration for an Underwritten Offering and the sole
Underwriter or lead managing Underwriter so requests, not to
effect any public sale or distribution of Registrable Securi-
ties (including any sales pursuant to Rule 144 under the Se-
curities Act) during the period commencing on the date the
Company receives a Request from a Holder and continuing until
90 days after the commencement of the Underwritten Offering
or any shorter period which the sole or lead managing Under-
writer shall request, except for sale of such Holder's Regis-
trable Securities pursuant to the applicable Required Regis-
tration Statement.
(b) Restrictions on Public Sale by the Company.
The Company agrees not to effect any public sale or distribu-
tion (other than public sales or distributions solely by and
for the account of the Company of securities issued pursuant
to any employee benefit or similar plan or any dividend rein-
vestment plan) of any securities during the period commencing
on the date the Company receives a Request from a Holder and
continuing until 90 days after the commencement of an Under-
written Offering, if requested by the sole Underwriter or
lead managing Underwriter in such Underwritten Offering, or
for such shorter period as the sole or lead managing Under-
writer shall request, provided, however, that the Company
shall not be required to comply with this Section 3(b) on
more than one occasion in any 12-month period.
-14-<PAGE>
Section 4. Registration Procedures.
In connection with the obligations of the Company
pursuant to Section 2, the Company shall use all reasonable
efforts to effect or cause to be effected the registration of
the Registrable Securities under the Securities Act to permit
the sale of such Registrable Securities by the Holders in ac-
cordance with their intended method or methods of distribu-
tion, and the Company shall:
(a) (i) prepare and file a Registration Statement
with the SEC which (x) shall be on Form S-3 (or any successor
to such form), if available, or a form selected by the re-
questing Holders for which the Company qualifies and which
the Company approves (such approval not to be unreasonably
withheld), (y) shall be available for the sale or exchange of
the Registrable Securities in accordance with the intended
method or methods of distribution by the selling Holders
thereof, and (z) shall comply as to form with the require-
ments of the applicable form and include all financial state-
ments required by the SEC to be filed therewith and all other
information reasonably requested by the lead managing Under-
writer or sole Underwriter, if applicable, to be included
therein, (ii) use all reasonable efforts to cause such Reg-
istration Statement to become effective and remain effective
in accordance with Section 2, (iii) use all reasonable ef-
forts to not take any action that would cause a Registration
Statement to contain a material misstatement or omission or
to be not effective and usable for resale of Registrable Se-
curities during the period that such Registration Statement
is required to be effective and usable, and (iv) cause each
Registration Statement and the related Prospectus and any
amendment or supplement thereto, as of the effective date of
such Registration Statement, amendment or supplement (x) to
comply in all material respects with any requirements of the
Securities Act and the rules and regulations of the SEC and
(y) not to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading;
(b) subject to paragraph (j) of this Section 4,
prepare and file with the SEC such amendments and post-effec-
tive amendments to each such Registration Statement, as may
be necessary to keep such Registration Statement effective
for the applicable period; cause each such Prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Secu-
rities Act; and comply with the provisions of the Securities
Act with respect to the disposition of all securities covered
by each Registration Statement during the applicable period
-15-<PAGE>
in accordance with the intended method or methods of distri-
bution by the selling Holders thereof, as set forth in such
registration statement;
(c) furnish to each Holder of Registrable Securi-
ties and to each Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, as many cop-
ies of each Prospectus, including each preliminary Prospec-
tus, and any amendment or supplement thereto and such other
documents as such Holder or Underwriter may reasonably re-
quest in order to facilitate the public sale or other dispo-
sition of the Registrable Securities; the Company hereby con-
sents to the use of the Prospectus, including each prelimi-
nary Prospectus, by each Holder of Registrable Securities and
each Underwriter of an Underwritten Offering of Registrable
Securities, if any, in connection with the offering and sale
of the Registrable Securities covered by the Prospectus or
the preliminary Prospectus (the Holders hereby agreeing not
to make a broad public dissemination of a form of preliminary
Prospectus which is designed to be a "quiet filing" without
the Company's consent, such consent not to be withheld unrea-
sonably);
(d) (i) use all reasonable efforts to register or
qualify the Registrable Securities, no later than the time
the applicable Registration Statement is declared effective
by the SEC, under all applicable state securities or blue sky
laws of such jurisdictions as each Underwriter, if any, or
any Holder of Registrable Securities covered by a Registra-
tion Statement, shall reasonably request; (ii) use all rea-
sonable efforts to keep each such registration or qualifi-
cation effective during the period such Registration State-
ment is required to be kept effective; and (iii) do any and
all other acts and things which may be reasonably necessary
or advisable to enable each such Underwriter, if any, and
Holder to consummate the disposition in each such jurisdic-
tion of such Registrable Securities owned by such Holder;
provided, however, that the Company shall not be obligated to
qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to
consent to be subject to general service of process (other
than service of process in connection with such registration
or qualification or any sale of Registrable Securities in
connection therewith) in any such jurisdiction;
(e) notify each Holder of Registrable Securities
promptly, and, if requested by such Holder, confirm such ad-
vice in writing, (i) when a Registration Statement has become
effective and when any post-effective amendments and supple-
ments thereto become effective, (ii) of the issuance by the
-16-<PAGE>
SEC or any state securities authority of any stop order, in-
junction or other order or requirement suspending the effec-
tiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iii) if, between the effective
date of a Registration Statement and the closing of any sale
of securities covered thereby pursuant to any agreement to
which the Company is a party, the representations and war-
ranties of the Company contained in such agreement cease to
be true and correct in all material respects or if the Com-
pany receives any notification with respect to the suspension
of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation of any proceeding for
such purpose, (iv) of the happening of any event during the
period a Registration Statement is effective as a result of
which such Registration Statement or the related Prospectus
contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or nec-
essary to make the statements therein not misleading;
(f) furnish counsel for each such Underwriter, if
any, and for the Holders of Registrable Securities copies of
any comments received from or any request by the SEC or any
state securities authority for amendments or supplements to a
Registration Statement and Prospectus or for additional in-
formation;
(g) use all reasonable efforts to obtain the with-
drawal of any order suspending the effectiveness of a Regis-
tration Statement at the earliest possible time;
(h) upon request, furnish to the sole Underwriter
or lead managing Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, at least one
signed copy of each Registration Statement and any post-effe-
ctive amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference
and all exhibits; and furnish to each Holder of Registrable
Securities, without charge, at least one conformed copy of
each Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(i) cooperate with the selling Holders of Regis-
trable Securities and the sole Underwriter or lead managing
Underwriter of an Underwritten Offering of Registrable Secu-
rities, if any, to facilitate the timely preparation and de-
livery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends; and enable
-17-<PAGE>
such Registrable Securities to be in such denominations (con-
sistent with the provisions of the governing documents there-
of) and registered in such names as the selling Holders or
the sole Underwriter or lead managing Underwriter of an Un-
derwritten Offering of Registrable Securities, if any, may
reasonably request at least three business days prior to any
sale of Registrable Securities;
(j) upon the occurrence of any event contemplated
by paragraph (e)(iv) of this Section, use all reasonable ef-
forts to prepare a supplement or post-effective amendment to
a Registration Statement or the related Prospectus, or any
document incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus
will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(k) enter into customary agreements (including, in
the case of an Underwritten Offering, underwriting agreements
in customary form, and including provisions with respect to
indemnification and contribution in customary form and con-
sistent with the provisions relating to indemnification and
contribution contained herein) and take all other customary
and appropriate actions in order to expedite or facilitate
the disposition of such Registrable Securities and in connec-
tion therewith:
(1) make such representations and warranties to
the Holders of such Registrable Securities and the Un-
derwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in similar
underwritten offerings;
(2) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to
the lead managing Underwriter, if any, and the Majority
Holders of the Registrable Securities being sold) ad-
dressed to each selling Holder and the Underwriters, if
any, covering the matters customarily covered in opi-
nions requested in sales of securities or underwritten
offerings and such other matters as may be reasonably
requested by such Holders and Underwriters;
(3) use best efforts to obtain "cold comfort" let-
ters and updates thereof from the Company's independent
certified public accountants addressed to the selling
-18-<PAGE>
Holders of Registrable Securities, if permissible, and
the Underwriters, if any, which letters shall be custom-
ary in form and shall cover matters of the type custom-
arily covered in "cold comfort" letters to underwriters
in connection with primary underwritten offerings;
(4) to the extent requested and customary for the
relevant transaction, enter into a securities sales
agreement with the Holders and such representative of
the selling Holders as the Majority Holders of the Reg-
istrable Securities covered by any Registration State-
ment relating to the Registration and providing for,
among other things, the appointment of such representa-
tive as agent for the selling Holders for the purpose of
soliciting purchases of Registrable Securities, which
agreement shall be customary in form, substance and
scope and shall contain customary representations, war-
ranties and covenants; and
(5) deliver such customary documents and certifi-
cates as may be reasonably requested by the Majority
Holders of the Registrable Securities being sold or by
the managing Underwriters, if any.
The above shall be done (i) at the effectiveness of such Reg-
istration Statement (and each post-effective amendment there-
to) in connection with any registration, and (ii) at each
closing under any underwriting or similar agreement as and to
the extent required thereunder;
(l) make available for inspection by representa-
tives of the Holders of the Registrable Securities and any
Underwriters participating in any disposition pursuant to a
Registration Statement and any counsel or accountant retained
by such Holders or Underwriters (subject to the terms of cus-
tomary confidentiality agreements, if any), all relevant fi-
nancial and other records, pertinent corporate documents and
properties of the Company and cause the respective officers,
directors and employees of the Company to supply all informa-
tion reasonably requested by any such representative, Under-
writer, counsel or accountant in connection with a Registra-
tion Statement;
(m) (i) within a reasonable time prior to the
filing of any Registration Statement, any Prospectus, any
amendment to a Registration Statement or amendment or supple-
ment to a Prospectus, provide copies of such document to the
Holders of Registrable Securities and to counsel to such
Holders and to the Underwriter or Underwriters of an Under-
written Offering of Registrable Securities, if any; fairly
-19-<PAGE>
consider such reasonable changes in any such document prior
to or after the filing thereof as the counsel to the Holders
or the Underwriter or the Underwriters may request and not
file any such document in a form to which the Majority Hold-
ers of any class of Registrable Securities being registered
or any Underwriter shall reasonably object; and make such of
the representatives of the Company as shall be reasonably re-
quested by the Holders of Registrable Securities being regis-
tered or any Underwriter available for discussion of such
document;
(ii) within a reasonable time prior to the filing
of any document which is to be incorporated by reference into
a Registration Statement or a Prospectus, provide copies of
such document to counsel for the Holders; fairly consider
such reasonable changes in such document prior to or after
the filing thereof as counsel for such Holders or such Under-
writer shall request; and make such of the representatives of
the Company as shall be reasonably requested by such counsel
available for discussion of such document;
(n) cause all Registrable Securities to be quali-
fied for inclusion in or listed on the NYSE, the NASDAQ or
any securities exchange or market on which securities of the
same class issued by the Company are then so qualified or
listed or eligible to be quoted if so requested by the Major-
ity Holders of Registrable Securities covered by a Registra-
tion Statement, or if so requested by the Underwriter or Un-
derwriters of an Underwritten Offering of Registrable Securi-
ties, if any;
(o) otherwise use all reasonable efforts to comply
with all applicable rules and regulations of the SEC, includ-
ing making available to its security holders an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule
158 thereunder;
(p) cooperate and assist in any filings required
to be made with the NYSE, NASDAQ, NASD or any other exchange
and in the performance of any due diligence investigation by
any Underwriter in an Underwritten Offering and any Holder of
Registrable Securities; and
(q) use all reasonable efforts to facilitate the
distribution and sale of any Registrable Securities to be of-
fered pursuant to this Agreement, including without limita-
tion by making road show presentations, holding meetings with
potential investors and taking such other actions as shall be
reasonably requested by the Majority Holders of Registrable
-20-<PAGE>
Securities covered by a Registration Statement or the lead
managing Underwriter of an Underwritten Offering.
Each selling Holder of Registrable Securities as to
which any registration is being effected pursuant to this
Agreement agrees, as a condition to the registration obliga-
tions with respect to such Holder provided herein, to furnish
to the Company such information regarding such Holder re-
quired to be included in the Registration Statement, the own-
ership of Registrable Securities by such Holder and the pro-
posed distribution by such Holder of such Registrable Securi-
ties as the Company may from time to time reasonably request
in writing.
Each Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind
described in paragraph (e)(iv) of this Section, such Holder
will forthwith discontinue disposition of Registrable Securi-
ties pursuant to the affected Registration Statement until
such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by paragraph (j) of this Sec-
tion, and, if so directed by the Company, such Holder will
deliver to the Company (at the expense of the Company), all
copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering
such Registrable Securities which was current at the time of
receipt of such notice.
Section 5. Indemnification; Contribution.
(a) Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Person who parti-
cipates as an underwriter (any such Person being an "Under-
writer"), each Holder and their respective partners, direc-
tors, officers and employees and each Person, if any, who
controls any Holder or Underwriter within the meaning of Sec-
tion 15 of the Securities Act or Section 20 of the Exchange
Act as follows:
(i) against any and all losses, liabilities,
claims, damages, judgments and reasonable expenses what-
soever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained
in any Registration Statement pursuant to which Regis-
trable Securities were registered under the Securities
Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom
of a material fact required to be stated therein or nec-
essary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue
-21-<PAGE>
statement of a material fact contained in any Prospec-
tus, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom
of a material fact necessary in order to make the state-
ments therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all losses, liabilities,
claims, damages, judgments and reasonable expenses what-
soever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, investiga-
tion or proceeding by any governmental agency or body,
commenced or threatened, or of any other claim whatso-
ever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of
the Company; and
(iii) against any and all reasonable expense what-
soever, as incurred (including fees and disbursements of
counsel), incurred in investigating, preparing or de-
fending against any litigation, investigation or pro-
ceeding by any governmental agency or body, commenced or
threatened, in each case whether or not such Person is a
party, or any claim whatsoever based upon any such un-
true statement or omission, or any such alleged untrue
statement or omission, to the extent that any such ex-
pense is not paid under sub-paragraph (i) or (ii) above;
provided, however, that this indemnity agreement does not ap-
ply to any Holder or Underwriter with respect to any loss,
liability, claim, damage, judgment or expense to the extent
arising out of any untrue statement or alleged untrue state-
ment of a material fact contained in any Prospectus, or the
omission or alleged omission therefrom of a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in
any such case made in reliance upon and in conformity with
written information furnished to the Company by such Holder
or Underwriter expressly for use in a Registration Statement
(or any amendment thereto) or any Prospectus (or any amend-
ment or supplement thereto).
(b) Indemnification by Holders. (i) Each selling
Holder severally agrees to indemnify and hold harmless the
Company, each Underwriter and the other selling Holders, and
each of their respective partners, directors, officers and
employees (including each officer of the Company who signed
the Registration Statement), and each Person, if any, who
controls the Company, any Underwriter or any other selling
-22-<PAGE>
Holder within the meaning of Section 15 of the Securities
Act, against any and all losses, liabilities, claims, dam-
ages, judgments and expenses described in the indemnity con-
tained in paragraph (a) of this Section (provided that any
settlement of the type described therein is effected with the
written consent of such selling Holder), as incurred, but
only with respect to untrue statements or alleged untrue
statements of a material fact contained in any Prospectus or
the omissions, or alleged omissions therefrom of a material
fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not mislead-
ing, in any such case made in reliance upon and in conformity
with written information furnished to the Company by such
selling Holder expressly for use in such Registration State-
ment (or any amendment thereto) or such Prospectus (or any
amendment or supplement thereto).
(c) Conduct of Indemnification Proceedings. Each
indemnified party or parties shall give reasonably prompt no-
tice to each indemnifying party or parties of any action or
proceeding commenced against it in respect of which indemnity
may be sought hereunder, but failure so to notify an indemni-
fying party or parties shall not relieve it or them from any
liability which it or they may have under this indemnity
agreement, except to the extent that the indemnifying party
is materially prejudiced by such failure to give notice. If
the indemnifying party or parties so elects within a reason-
able time after receipt of such notice, the indemnifying par-
ty or parties may assume the defense of such action or pro-
ceeding at such indemnifying party's or parties' expense with
counsel chosen by the indemnifying party or parties and ap-
proved by the indemnified party defendant in such action or
proceeding, which approval shall not be unreasonably with-
held; provided, however, that, if such indemnified party or
parties determine in good faith that a conflict of interest
exists and that therefore it is advisable for such indemni-
fied party or parties to be represented by separate counsel
or that, upon advice of counsel, there may be legal defenses
available to it or them which are different from or in addi-
tion to those available to the indemnifying party, then the
indemnifying party or parties shall not be entitled to assume
such defense and the indemnified party or parties shall be
entitled to separate counsel (limited in each jurisdiction to
one counsel for all Underwriters and another counsel for all
other indemnified parties under this Agreement) at the indem-
nifying party's or parties' expense. If an indemnifying
party or parties is not so entitled to assume the defense of
such action or does not assume such defense, after having re-
ceived the notice referred to in the first sentence of this
paragraph, the indemnifying party or parties will pay the
-23-<PAGE>
reasonable fees and expenses of counsel for the indemnified
party or parties (limited in each jurisdiction to one counsel
for all Underwriters and another counsel for all other indem-
nified parties under this Agreement). No indemnifying party
or parties will be liable for any settlement effected without
the written consent of such indemnifying party or parties,
which consent shall not be unreasonably withheld. If an in-
demnifying party is entitled to assume, and assumes, the de-
fense of such action or proceeding in accordance with this
paragraph, such indemnifying party or parties shall not, ex-
cept as otherwise provided in this subsection (c), be liable
for any fees and expenses of counsel for the indemnified par-
ties incurred thereafter in connection with such action or
proceeding.
(d) Contribution. (i) In order to provide for
just and equitable contribution in circumstances in which the
indemnity agreement provided for in this Section is for any
reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms in respect
of any losses, liabilities, claims, damages, judgments and
expenses suffered by an indemnified party referred to there-
in, each applicable indemnifying party, in lieu of indemnify-
ing such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such
losses, liabilities, claims, damages, judgments and expenses
in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and of the liable sell-
ing Holders (including, in each case, that of their respec-
tive officers, directors, employees and agents) on the other
in connection with the statements or omissions which resulted
in such losses, liabilities, claims, damages, judgments or
expenses, as well as any other relevant equitable consider-
ations. The relative fault of the Company on the one hand
and of the liable selling Holders (including, in each case,
that of their respective officers, directors, employees and
agents) on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omis-
sion to state a material fact relates to information supplied
by the Company, on the one hand, or by or on behalf of the
selling Holders, on the other, and the parties' relative in-
tent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, liabil-
ities, claims, damages, judgments and expenses referred to
above shall be deemed to include, subject to the limitations
set forth in paragraph (c) of this Section, any legal or
other fees or expenses reasonably incurred by such party in
-24-<PAGE>
connection with investigating or defending any action or
claim.
(ii) The Company, and each Holder of Registrable
Securities agree that it would not be just and equitable if
contribution pursuant to this paragraph (d) were determined
by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations
referred to in sub-paragraph (i) above. Notwithstanding the
provisions of this paragraph (d), in the case of distribu-
tions to the public, an indemnifying Holder shall not be re-
quired to contribute any amount in excess of the amount by
which (A) the total price at which the Registrable Securities
sold by such indemnifying Holder and its affiliated indemni-
fying Holders and distributed to the public were offered to
the public exceeds (B) the amount of any damages which such
indemnifying Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrep-
resentation (within the meaning of Section 11(f) of the Secu-
rities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iii) For purposes of this Section, each Person,
if any, who controls a Holder or an Underwriter within the
meaning of Section 15 of the Securities Act (and their re-
spective partners, directors, officers and employees) shall
have the same rights to contribution as such Holder or Under-
writer; and each director of the Company, each officer of the
Company who signed the Registration Statement, and each Per-
son, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, shall have the same rights
to contribution as the Company.
Section 6. Miscellaneous.
(a) No Inconsistent Agreements. The Company will
not on or after the date of this Agreement enter into any
agreement which conflicts with the provisions of this Agree-
ment or which grants registration or similar rights nor has
the Company entered into any such agreement other than the
Stockholders Agreement (under which agreement Citicorp has
agreed to forego all of its rights); provided, however, that
nothing in this sentence shall prohibit the Company from
granting registration rights which are exercisable on or
after the beginning of the thirty-first month following the
execution of this Agreement to any Person (a "Third Party")
who becomes an owner of Common Shares after the date hereof
(including granting incidental registration rights with
respect to any Registration Statement required to be filed or
-25-<PAGE>
maintained hereunder) if, and only if, (i) any registration
pursuant to the Third Party's registration rights permits the
Holders of Registrable Securities to participate in any such
registration on the terms set forth in Section 2(b), (ii) the
Third Party's incidental registration rights with respect to
any registration required to be effected pursuant hereto
relate only to the Third Party's securities of the same class
as those actually registered in any such registration
hereunder, utilize the method of disposition utilized by the
selling Holders and contain priority in registration
provisions no more favorable to the Third Party who may seek
to participate through its incidental registration rights in
any registration initiated pursuant to Section 2(a) hereof or
in any registration as to which the Holders may participate
pursuant to Section 2(b) hereof than those incidental
registration rights contained in Section 2(b)(ii) hereof with
respect to holders of securities (other than the Holders)
participating in any registration not initiated pursuant to
this Agreement and (iii) require the Third Party to enter
into the agreements provided for in Section 3(b) hereof on
the terms and for the period applicable to the Company
(including preventing sales pursuant to Rule 144 under the
Securities Act) if requested by the sole Underwriter or lead
managing Underwriter in an Underwritten Offering initiated by
Holders of Registrable Securities pursuant to Section 2(a),
so long as the Holders of Registrable Securities agree to en-
ter into the agreements provided for in Section 3(a)(i)
hereof if the Third Party shall initiate a required registra-
tion of Common Shares for cash in an Underwritten Offering as
to which the Holders are entitled to participate pursuant to
Section 2(b) and if in connection therewith the sole Under-
writer or the lead managing Underwriter shall request the
Holders to enter into such agreements. The rights granted to
the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under
any such agreements. The Company represents and warrants
that there are no other holders of registration rights
relating to its securities other than (A) those rights
granted to the Prior Holders pursuant to the Stockholders
Agreement (which Prior Holders do not include Citicorp, which
has agreed to forego its rights under the Stockholders
Agreement) and (B) the registration rights applicable to the
holders of warrants issued by the Company on March 25, 1996,
which registration rights consist solely of an obligation on
the part of the Company to file a shelf registration
statement within 120 days of the issuance of such warrants
and to cause such registration statement to become effective
no later than six months following consummation of the
exchange offer pursuant to which such warrants were issued
(which registration statement the Holders will be able to
utilize pursuant to Section 2(b) of this Agreement).
-26-<PAGE>
(b) Amendments and Waivers. The provisions of
this Agreement, including the provisions of this sentence,
may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of
the Majority Holders and, if any such amendment, modifica-
tion, supplement, waiver or consent would adversely affect
the rights of any Holder hereunder, the written consent of
each class of Holders which is affected shall be obtained;
provided, however, that nothing herein shall prohibit any
amendment, modification, supplement, waiver or consent the
effect of which is limited only to those Holders who have
agreed to such amendment, modification, supplement, waiver or
consent.
(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing
by hand delivery, telex, telecopier, or any courier guaran-
teeing overnight delivery (i) if to any Apollo Entity, to
such Apollo Entity c/o Apollo Management, L.P., 38th Floor,
1301 Avenue of the Americas, New York, New York, 10019, At-
tention: Mr. Joshua J. Harris, telecopier number (212) 461-
4102, with a copy to David A. Katz, Esq., Wachtell, Lipton,
Rosen & Katz, 51 West 52nd Street, New York, New York 10019,
telecopier number (212) 403-2000; (ii) if to Citicorp, to
Court Square Capital Limited, 399 Park Avenue, 10th Floor,
New York, New York, 10019; (iii) and if to a Holder, at the
most current address given by such Holder to the Company by
means of a notice given in accordance with the provisions of
this paragraph (c) and with respect to each Holder who
becomes such after the date hereof, the address of such
Holder in the stock or warrant records of the Company; or
(iv) if to the Company at 6111 Broken Sound Parkway, N.W.,
Boca Raton, FL 33487-2799, telecopier number (407) 998-5615,
Attention: General Counsel, and thereafter at such other ad-
dress, notice of which is given in accordance with the pro-
visions of this paragraph (c).
All such notices and communications shall be deemed
to have been duly given: at the time delivered by hand, if
personally delivered; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and on the next busi-
ness day if timely delivered to a courier guaranteeing over-
night delivery. Notwithstanding the foregoing, nothing in
this Section 6(c) is intended to enlarge the class of Persons
which are Holders, as defined in the preamble of this Agree-
ment, and thus entitled to the rights granted hereunder.
(d) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors,
-27-<PAGE>
assigns and transferees of each of the parties, including,
without the need for an express assignment, subsequent Hold-
ers, provided that this agreement and the benefits and bur-
dens hereunder may not be transferred by any Holder to any
person or entity other than a Permitted Transferee. If any
successor, assignee or transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of
law or otherwise, such Registrable Securities shall be held
subject to all of the terms of this Agreement, and by taking
and holding such Registrable Securities such Person shall be
conclusively deemed to have agreed to be bound by and to per-
form all of the terms and provisions of this Agreement and to
receive the benefits hereof. Notwithstanding the foregoing,
nothing in this Section 6(d) is intended to enlarge the class
of Persons which are Holders, as defined in the preamble of
this Agreement, and thus entitled to the rights granted here-
under. For purposes of this Agreement, "successor" for any
entity other than a natural person shall mean a successor to
such entity as a result of such entity's merger, consolida-
tion, liquidation, dissolution, sale of substantially all of
its assets, or similar transaction.
(e) Recapitalizations, Exchanges, etc., Affecting
Registrable Securities. The provisions of this Agreement
shall apply, to the full extent set forth herein with respect
to the Registrable Securities, to any and all securities or
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 such Registrable Securities, by
reason of any dividend, split, issuance, reverse split, com-
bination, recapitalization, reclassification, merger, con-
solidation or otherwise. Upon the occurrence of any of such
events, Common Share amounts hereunder shall be appropriately
adjusted if necessary.
(f) Counterparts. This Agreement may be executed
in two or more counterparts, each of which, when so executed
and delivered, shall be deemed to be an original, but all of
which counterparts, taken together, shall constitute one and
the same instrument.
(g) Descriptive Headings, Etc. The headings in
this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning of terms con-
tained herein. Unless the context of this Agreement other-
wise requires: (1) words of any gender shall be deemed to
include each other gender; (2) words using the singular or
plural number shall also include the plural or singular num-
ber, respectively; (3) the words "hereof", "herein" and
-28-<PAGE>
"hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and Article, Sec-
tion and paragraph references are to the Articles, Sections
and paragraphs to this Agreement unless otherwise specified;
(4) the word "including" and words of similar import when
used in this Agreement shall mean "including, without limita-
tion," unless otherwise specified; (5) "or" is not exclusive;
and (6) provisions apply to successive events and transac-
tions.
(h) Severability. In the event that any one or
more of the provisions, paragraphs, words, clauses, phrases
or sentences contained herein, or the application thereof in
any circumstances, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and en-
forceability of any such provision, paragraph, word, clause,
phrase or sentence in every other respect and of the other
remaining provisions, paragraphs, words, clauses, phrases or
sentences hereof shall not be in any way impaired, it being
intended that all rights, powers and privileges of the par-
ties hereto shall be enforceable to the fullest extent per-
mitted by law.
(i) Governing Law. THIS AGREEMENT SHALL BE GOV-
ERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICTS OF
LAW PRINCIPLES THEREOF).
(j) Specific Performance. The parties hereto ac-
knowledge that there would be no adequate remedy at law if
any party fails to perform in any material respect any of its
obligations hereunder, and accordingly agree that each party,
in addition to any other remedy to which it may be entitled
at law or in equity, shall be entitled to seek to compel spe-
cific performance of the obligations of any other party under
this Agreement in accordance with the terms and conditions of
this Agreement in any court of the United States or any State
thereof having jurisdiction.
(k) Entire Agreement. This Agreement is intended
by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect
of the subject matter contained herein. This Agreement su-
persedes all prior agreements and understandings between the
Company and the other parties to this Agreement with respect
to such subject matter.
-29-<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the date first writ-
ten above.
LEVITZ FURNITURE INCORPORATED
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President and
General Counsel
APOLLO INVESTMENT FUND III, L.P.
By: Apollo Advisors II, L.P.
Its General Partner
By: Apollo Capital Management II, Inc.
Its General Partner
By: /s/ Joshua Harris
Name: Joshua Harris
Title: Vice President
APOLLO OVERSEAS PARTNERS III, L.P.
By: Apollo Advisors II, L.P.
Its Managing General Partner
By: Apollo Capital Management II, Inc.
Its General Partner
By: /s/ Joshua Harris
Name: Joshua Harris
Title: Vice President
APOLLO (U.K.) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.
Its Managing General Partner
By: Apollo Capital Management II, Inc.
Its General Partner
By: /s/ Joshua Harris
Name: Joshua Harris
Title: Vice President
-30-<PAGE>
COURT SQUARE CAPITAL LIMITED
By: /s/ RM Cashin
Name: RM Cashin
Title: President
-31-
THIS INDEMNITY AGREEMENT is made as of July 1, 1996, among
Levitz Furniture Corporation, a Florida corporation ("LFC"),
Levitz Furniture Company of the Midwest, Inc., a Colorado
corporation, Levitz Furniture Company of the Pacific, Inc., a
California corporation, Levitz Furniture Company of Washington,
Inc., a Washington corporation, and John M. Smyth Company,
Inc., an Illinois corporation (each of the foregoing, a "Bor-
rower" and, collectively, the "Borrowers") and Apollo
Investment Fund III, L.P. ("Apollo"), Apollo Overseas Partners
III, L.P. ("Apollo Overseas") and Apollo (U.K.) Partners III,
L.P. (collectively, with Apollo and Apollo Overseas, the
"Indemnitees").
Reference is made to (a)(i) the Warrant Certificates
Nos. W-1, W-2 and W-3 dated July 1, 1996 (as amended, restated,
supplemented, modified or waived from time to time, the "War-
rant"), issued by Levitz Furniture Incorporated, a Delaware
corporation and direct or indirect parent of Borrowers ("Par-
ent"), to the Indemnitees, (ii) the Registration Rights Agree-
ment dated as of July 1, 1996, among Parent and the Indemnitees
(as amended, restated, supplemented, modified or waived from
time to time, the "Registration Rights Agreement"), (iii) the
Board Representation Letter dated July 1, 1996, from Parent to
the Indemnitees (as amended, restated, supplemented, modified
or waived from time to time, the "Board Representation Letter")
and (iv) the Valuation of Warrants Letter dated July 1, 1996,
from Parent to the Indemnitees, as amended, restated, supple-
mented, modified or waived from time to time (collectively with
the Warrant, the Registration Rights Agreement and the Board
Representation Letter, the "Warrant Documents") and (b) the
Credit Agreement dated as of July 1, 1996 (as amended, re-
stated, supplemented, modified or waived from time to time, the
"Credit Agreement"), among the Borrowers, the financial insti-
tutions party thereto, as lenders (the "Lenders"), LFC as LFC
Funds Administrator and BT Commercial Credit Corporation, as
Agent (the "Agent"). Each capitalized term used but not
defined herein has the meaning assigned to it in the Credit
Agreement.
In accordance with the Credit Agreement, the Indemni-
tees have agreed to make Term Loans to the Borrowers. The ob-
ligations of the Indemnitees to make the Term Loans are condi-
tioned on, among other things, the execution and delivery by
Parent of the Warrant Documents and the execution and delivery
by Borrowers of this Agreement.
Accordingly, the parties hereto agree as follows:<PAGE>
SECTION 1. Indemnification. Each Borrower hereby
absolutely and unconditionally indemnifies, jointly with the
other Borrowers and severally, the Indemnitees for, and holds
the Indemnitees harmless from and against, any and all losses,
claims or damages of the Indemnitees arising from or relating
to Parent's failure to duly and punctually perform any of the
covenants, agreements, obligations and liabilities of Parent
under or pursuant to the Warrant Documents and all expenses
(including, without limitation, the reasonable fees and ex-
penses of counsel and other professional advisors) incurred
under or in connection with the Warrant Documents (collec-
tively, the "Obligations"). Each Borrower further agrees that
the Obligations may be modified, altered, extended or renewed,
in whole or in part, without notice to or further assent from
it, and that it will remain bound hereunder notwithstanding any
such modification, alteration, extension or renewal of any
Obligation.
Anything contained in this Agreement to the contrary
notwithstanding, the obligations of each Borrower hereunder
shall be limited to a maximum aggregate amount equal to the
largest amount that would not render its obligations hereunder
subject to avoidance as a fraudulent transfer or conveyance
under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively,
the "Fraudulent Transfer Laws"), in each case after giving ef-
fect to all other liabilities of such Borrower, contingent or
otherwise, that are relevant under the Fraudulent Transfer Laws
(specifically excluding, however, any liabilities of such Bor-
rower in respect of intercompany indebtedness to Parent or any
other Borrower to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by such
Borrower hereunder) and after giving effect as assets to the
value (as determined under the applicable provisions to the
Fraudulent Transfer Laws) of any rights to subrogation,
contribution, reimbursement, indemnity or similar rights of
such Borrower pursuant to applicable law.
SECTION 2. Obligations Not Waived. To the fullest
extent permitted by applicable law, each Borrower waives pre-
sentment to, demand of payment from and protest to Parent of
any of the Obligations, and also waives notice of acceptance of
its indemnity and notice of protest for nonpayment. To the
fullest extent permitted by applicable law, the obligations of
each Borrower hereunder shall not be affected by (a) the
failure of any one or more of the Indemnitees to assert any
claim or demand or to enforce any right or remedy against any
other Borrower or Parent under the provisions of this Agree-
ment, any Warrant Document or otherwise; (b) any rescission,
waiver, amendment or modification of, or any release from any
-2-<PAGE>
of the terms or provisions of this Agreement, any Warrant
Document, any guarantee or any other agreement; (c) the release
of any security held by the Indemnitees for the Obligations;
(d) the failure of any one or more of the Indemnitees to
perfect any security interest in, or the release by the
Indemnitees of, any of the security for the Obligations held by
or on behalf of the Indemnitees; or (e) the failure of any one
or more of the Indemnitees to exercise any right or remedy
against any other Borrower or guarantor of the Obligations.
SECTION 3. Security. The obligations of the
Borrowers hereunder are secured by, and entitled to the benefit
of, the Collateral Documents. Each Borrower authorizes each of
the Indemnitees, in accordance with and subject to the
Collateral Documents as in effect from time to time, to (a)
take and hold security for the payment and performance of this
indemnity or the Obligations and to exchange, enforce, waive
and release any such security, (b) apply such security and
direct the order or manner of sale thereof as they in their
sole discretion may determine and (c) release or substitute any
one or more indemnitors or other obligors.
SECTION 4. Guarantee of Payment. Each Borrower
further agrees that this indemnity constitutes a guarantee of
payment when due and not of collection, and waives any right to
require that any resort be had by any one or more of the
Indemnitees to any of the security held for payment of
performance of the Obligations.
SECTION 5. No Discharge or Diminishment of Indem-
nity. The obligations of each Borrower hereunder are not
subject to any reduction, limitation, impairment or termination
for any reason (other than the complete performance and
satisfaction in full of the Obligations), including any claim
of waiver, release, surrender, alteration or compromise of any
of the Obligations, and shall not be subject to any defense or
setoff, counterclaim, recoupment or termination whatsoever by
reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of
the foregoing, the obligations of each Borrower hereunder shall
not be discharged or impaired or otherwise affected by the
failure of any one or more of the Indemnitees to assert any
claim or demand or to enforce any remedy under the Warrant, any
other Warrant Document, any other indemnitee, guarantee or any
other agreement, by any waiver or modification of any provision
of any thereof, by any default, failure or delay, wilfull or
otherwise, in the performance of the Obligations, or by any
other act or omission that may or might in any manner or to any
extent vary the risk of any Borrower or that would otherwise
operate as a discharge of any Borrower as a matter of law or
-3-<PAGE>
equity (other than the complete performance and satisfaction in
full of all the Obligations).
SECTION 6. Defenses of Parent Waived. To the extent
permitted by applicable law, each Borrower waives any defense
based on or arising out of any defense of Parent or the unen-
forceability of the Obligations or any part thereof from any
cause, or the cessation from any cause of the liability of
Parent under the Warrant Documents, other than the complete
performance and satisfaction in full of the Obligations. The
Indemnitees may, at their election, foreclose on any security
one or more of them holds by one or more judicial or non-
judicial sales, or exercise any other right or remedy available
to them against Parent, or any security, without affecting or
impairing in any way the liability of any Borrower hereunder
except to the extent the Obligations are finally and fully
paid, performed and satisfied. Each Borrower waives any
defense arising out of any such election even though such
election operates to impair or to extinguish any security held
by such Borrower or any right of reimbursement or subrogation
or other right or remedy of such Borrower against Parent or any
other Borrower.
SECTION 7. Subordination. In furtherance of the
foregoing and not in limitation of any other right that any one
or more of the Indemnitees has at law or in equity against any
Borrower by virtue hereof, upon the failure of Parent to pay or
perform any Obligation when and as the same shall become due,
whether at maturity, by acceleration, after notice or other-
wise, each Borrower hereby promises to and will upon demand
forthwith pay, or cause to be paid, to the Indemnitees in cash
the amount of their losses, claims or damages arising from or
relating to Parent's failure to pay or perform such Obliga-
tions. Upon the payment by any Borrower of any such sums to
the Indemnitees as provided above, all rights of such Borrower
against Parent arising as a result thereof by way of right of
subrogation, contribution, reimbursement, indemnity or
otherwise, shall in all respects be subordinate and junior in
right of payment to the prior payment, performance and
satisfaction in full of all the Obligations. In addition, any
indebtedness of Parent now or hereafter held by any Borrower is
hereby subordinated in right of payment to the Obligations. If
any amount shall erroneously be paid to any Borrower on account
of such subrogation, contribution, reimbursement, indemnity or
similar right on account of any such indebtedness of Parent,
such Borrower shall hold such amount in trust for the benefit
of the Indemnitees and shall forthwith pay such amounts to the
Collateral Agent for the benefit of the Indemnitees as
collateral to secure the Obligations.
-4-<PAGE>
SECTION 8. Information. Each Borrower assumes all
responsibility for being and keeping itself informed of
Parent's financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks that
such Borrower assumes and incurs hereunder, and agrees that
none of the Indemnitees will have any duty to advise such
Borrower of information known to it regarding such cir-
cumstances or risks.
SECTION 9. Termination. Each Borrower's indemnity
obligations arising hereunder shall terminate when all the Ob-
ligations have been paid, performed and satisfied in full and
shall continue to be effective or be reinstated, as the case
may be, if at any time payment or performance, or any part
thereof, of any Obligation is rescinded or must otherwise be
restored by any of the Indemnitees upon the bankruptcy or reor-
ganization of Parent, any Borrower or otherwise.
SECTION 10. Binding Agreement; Assignments. When-
ever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and
agreements by or on behalf of the parties hereto that are con-
tained in this Agreement shall bind and inure to the benefit of
each party hereto and their respective successors and assigns.
This Agreement shall be binding upon the Borrowers and the
Indemnitees and their respective successors and assigns, and
shall inure to the benefit of each of the Borrowers and each of
the Indemnitees, and their respective successors and assigns,
except no Borrower may assign its rights hereunder or any
interest herein (and any such attempted assignment shall be
void) except as expressly permitted by each of the Indemnitees.
SECTION 11. Waivers; Amendment. (a) No failure or
delay of any one or more of the Indemnitees in exercising any
power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or pow-
er, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise
thereof or the exercise of any other right of power. The
rights and remedies of the Indemnitees hereunder and under the
Warrant Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver
of any provisions of this Agreement or consent to any departure
by any Borrower therefrom shall in any event be effective
unless the same is permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or de-
mand on any Borrower in any case entitles such Borrower to any
-5-<PAGE>
other or further notice or demand in similar or other circum-
stances.
(b) Neither this Agreement nor any provision hereof
may be waived, amended or modified except pursuant to a written
agreement entered into between each of the Borrowers and each
of the Indemnitees.
SECTION 12. Governing Law. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK.
SECTION 13. Notices. All communications and notices
hereunder shall be in writing and shall be deemed to have been
validly served, given or delivered (i) three (3) business days
after deposit in the United States mails, with proper postage
prepaid, (ii) one business day after delivery to a reputable
overnight carrier for next day delivery by courier or (iii)
upon transmission by telecopy and upon receipt by hand delivery
to the respective numbers and addresses set forth below the
signatures hereto.
SECTION 14. Survival of Agreement; Severability.
(a) All covenants, agreement, representations and warranties
made by the Borrowers herein and in the certificates or other
instruments prepared or delivered in connection with or pur-
suant to this Agreement or any Warrant Document shall be
considered to have been relied upon by each of the Indemnitees
and shall survive the making by the Lenders of the Loans,
regardless of any investigation made by any of the Indemnitees
or on their behalf, and shall continue in full force and effect
as long as any Obligations remain outstanding.
(b) If any one or more of the provisions contained
in this Agreement is held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby (it being understood that the in-
validity of a particular provision in a particular jurisdiction
shall not in and of itself affect the validity of such provi-
sion in any other jurisdiction). The parties shall endeavor in
good-faith negotiations to replace the invalid, illegal or un-
enforceable provisions with valid provisions the economic ef-
fect of which comes as close as possible to that of the in-
valid, illegal or unenforceable provisions.
SECTION 15. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall con-
stitute an original, but all of which, when taken together,
shall constitute but one instrument.
-6-<PAGE>
SECTION 16. Jurisdiction; Consent to Service of Pro-
cess. (a) Each Borrower hereby irrevocably and uncondition-
ally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the Warrant
Documents, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and uncondi-
tionally agrees that all claims in respect of any action or
proceeding may be heard and determined in such New York State
or, to the extent permitted by law, in such Federal court.
Each party hereto agrees that a final judgment in any such ac-
tion or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect
any right that the Indemnitees may otherwise have to bring any
action or proceeding relating to this Agreement or the Warrant
Documents against any Borrower or its properties in the courts
of any jurisdiction.
(b) Each Borrower hereby irrevocably and uncondi-
tionally waives, to the fullest extent it may legally and ef-
fectively do so, any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the Warrant
Documents in any New York State or Federal court. Each party
hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably con-
sents to service of process in the manner provided for notices
in Section 13. Nothing in this Agreement will affect the right
of any party to this Agreement to serve process in any other
manner permitted by law.
SECTION 17. Waiver of Jury Trial. Each party hereto
hereby waives, to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect of any
litigation directly or indirectly arising out of, under or in
connection with this Agreement. Each party hereto (a) certi-
fies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such other
party would not, in the event of litigation, seek to enforce
the foregoing waiver and (b) acknowledges that it and the other
parties hereto have been induced to enter into this Agreement
by, among other things, the mutual waivers and certifications
in this Section.
-7-<PAGE>
SECTION 18. Enforcement of Security. If Parent is
in breach of any of the Obligations, the Collateral Agent may,
for the benefit of the Indemnitees, elect to nonjudicially or
judicially foreclose against, or otherwise enforce its remedies
against or with respect to, any real or personal property
security it holds for the Obligations or any part thereof, or
accept an assignment of any such security in lieu of
foreclosure or enforcement or compromise or adjust any part of
the Obligations, or make any other accommodation with Parent,
or exercise any other remedy against Parent or any security, in
accordance with and subject to the provisions of the Warrant
Documents and the Collateral Documents. No such action by any
Indemnitee will release or limit the liability of any Borrower
to the Indemnitees.
IN WITNESS WHEREOF, the parties hereto have duly ex-
ecuted this Agreement as of the day and year first above writ-
ten.
LEVITZ FURNITURE CORPORATION, INC.,
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President
Address for notices:
6111 Broken Sound Parkway, N.W.
Boca Raton, FL 33487
Telecopier: 407-998-5615
Telephone: 407-994-5150
LEVITZ FURNITURE COMPANY OF THE
MIDWEST, INC.,
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President
Address for notices:
6111 Broken Sound Parkway, N.W.
Boca Raton, FL 33487
Telecopier: 407-998-5615
Telephone: 407-994-5150
-8-<PAGE>
LEVITZ FURNITURE COMPANY OF THE
PACIFIC, INC.,
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President
Address for notices:
6111 Broken Sound Parkway, N.W.
Boca Raton, FL 33487
Telecopier: 407-998-5615
Telephone: 407-994-5150
LEVITZ FURNITURE COMPANY OF WASHINGTON,
INC.,
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President
Address for notices:
6111 Broken Sound Parkway, N.W.
Boca Raton, FL 33487
Telecopier: 407-998-5615
Telephone: 407-994-5150
JOHN M. SMYTH COMPANY, INC.,
By: /s/ Edward P. Zimmer
Name: Edward P. Zimmer
Title: Vice President
Address for notices:
6111 Broken Sound Parkway, N.W.
Boca Raton, FL 33487
Telecopier: 407-998-5615
Telephone: 407-994-5150
-9-<PAGE>
APOLLO INVESTMENT FUND III, L.P.,
By: APOLLO ADVISORS II, L.P., its
General Partner
By: APOLLO CAPITAL MANAGEMENT II,
INC., its General Partner
By: /s/ Joshua Harris
Name: Joshua Harris
Title: Vice President
Address for notices:
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Joshua Harris
Telecopier: (212) 459-3301
Telephone: (212) 261-4000
APOLLO OVERSEAS PARTNERS III, L.P.
By: Apollo Advisors II, L.P.,
its Managing General Partner
By: Apollo Capital Management II,
Inc., its General Partner
By: /s/ Joshua Harris
Name: Joshua Harris
Title: Vice President
Address for notices:
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Joshua Harris
Telecopier: (212) 459-3301
Telephone: (212) 261-4000
-10-<PAGE>
APOLLO (U.K.) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.,
its Managing General Partner
By: Apollo Capital Management II,
Inc., its General Partner
By: /s/ Joshua Harris
Name: Joshua Harris
Title: Vice President
Address for notices:
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attn: Joshua Harris
Telecopier: (212) 459-3301
Telephone: (212) 261-4000
-11-
