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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 24, 1997
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RIVER OAKS FURNITURE, INC.
(Exact Name of Registrant as Specified in Its Charter)
MISSISSIPPI 0-22188 64-0749510
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification
Incorporation) Number)
3350 MCCULLOUGH BLVD.
BELDEN, MISSISSIPPI 38826
(Address of Principal Executive Offices) (Zip Code)
601-891-4550
(Registrant's Telephone Number, including Area Code)
NOT APPLICABLE
(Former Name)
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ITEM 5. OTHER EVENTS.
On October 24, 1997, and as consideration for the agreement of BNY
Financial Corporation ("BNYFC") to continue funding the overadvance feature of
the BNYFC Facility (as hereinafter defined), the Company granted BNYFC a warrant
to purchase 112,000 shares of the Company's Common Stock, exercisable until
October 23, 2002, for the lesser of (i) $2.00 per share or (ii) the closing bid
price per share of the Common Stock on the first day it is relisted for trading
on Nasdaq or any national exchange (the "First BNYFC Warrant"). The First BNYFC
Warrant contains antidilution protections and piggyback and demand registration
rights. A copy of the First BNYFC Warrant is attached to this Current Report on
Form 8-K as Exhibit 10.1. The Company's Revolving Credit and Term Loan Agreement
(the "Credit Agreement") with BNYFC and other lenders was amended as of November
10, 1997 by the execution and delivery of that certain Amendment No. 1 to Credit
Agreement (the "Amended Credit Agreement"). A copy of such amendment is attached
to this Current Report on Form 8-K as Exhibit 10.2.
The Amended Credit Agreement, together with related agreements, now
provides the Company and its direct and indirect subsidiaries with a $40.5
million revolving credit facility (with a $3 million overadvance sublimit), a $9
million term loan, and certain factoring arrangements (collectively, the "BNYFC
Facility").
Also on November 10, 1997, the Company and its direct and indirect
subsidiaries executed a $1,000,000 Promissory Note (the "$1.0 Million Note") and
a $2,000,000 Promissory Note (the "$2.0 Million Note") in favor of BNYFC. The
$1.0 Million Note bears interest at the Prime Rate (as defined in the Amended
Credit Agreement) plus 1% per annum, is secured by all of the Collateral (as
defined in the Amended Credit Agreement), and is payable in twelve consecutive,
monthly installments, commencing on February 1, 1999. The $2.0 Million Note
bears interest at 12% per annum, is secured by all of the Collateral, and is
payable on January 1, 1999. The $2.0 Million Note also permits BNYFC to require
the creation of a reserve account for cash collateral to be funded monthly in an
amount of $100,000 per month. A copy of each such Note is attached to this
Current Report on Form 8-K as Exhibit 10.3 and Exhibit 10.4.
In connection with the execution of the Amended Credit Agreement, the
$1.0 Million Note and the $2.0 Million Note, the Company granted BNYFC a second
warrant to purchase 112,000 shares of the Company's Common Stock, exercisable
until November 9, 2002, for the lesser of (i) $2.50 per share or (ii) the
closing bid price per share of the Common Stock on the first day it is relisted
for trading on Nasdaq or any national exchange (the "Second BNYFC Warrant"). The
Second BNYFC Warrant contains antidilution protections and piggyback and demand
registration rights. A copy of the Second BNYFC Warrant is attached to this
Current Report on Form 8-K as Exhibit 10.5.
On November 12, 1997, the Company issued 12% Subordinated Convertible
Notes Due November 12, 1998 in the aggregate principal amount of $1,000,000 to
certain of its directors and executive officers. The 12% Subordinated
Convertible Notes are convertible prior to repayment into shares of the
Company's Common Stock at $2.50 per share, as the same may be adjusted. A form
of 12% Subordinated Convertible Note is attached to this Current Report on Form
8-K as Exhibit 10.6.
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The Company also granted to holders of the Subordinated Notes warrants
to purchase an aggregate of 112,000 shares of the Company's Common Stock on the
same terms as set forth in the Second BNYFC Warrant. A form of such warrant is
attached to this Current Report on Form 8-K as Exhibit 10.7.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit No.
10.1 Warrant to purchase 112,000 shares of the Company's Common
Stock, granted October 24, 1997 to BNY Financial Corporation
("First BNYFC Warrant").
10.2 Amendment No. 1 to Credit Agreement, dated as of November 10,
1997, between the Company and BNY Financial Corporation.
10.3 $1,000,000 Promissory Note, dated as of November 10, 1997, in
favor of BNY Financial Corporation and payable in twelve
consecutive, monthly installments commencing on February 1,
1999.
10.4 $2,000,000 Promissory Note, dated as of November 10, 1997, in
favor of BNY Financial Corporation bearing interest at 12% per
annum and payable on January 1, 1999.
10.5 Warrant to purchase 112,000 shares of the Company's Common
Stock, granted November 10, 1997 to BNY Financial Corporation
("Second BNYFC Warrant").
10.6 Form of 12% Subordinated Convertible Notes issued to certain of
the Company's directors and executive officers on November 12,
1997.
10.7 Form of warrant granted to holders of 12% Subordinated
Convertible Notes to purchase an aggregate of 112,000 shares of
the Company's Common Stock.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RIVER OAKS FURNITURE, INC.
By: /s/ JOHNNY C. WALKER
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Johnny C. Walker
Chief Operating Officer and Chief
Financial Officer
Date: December 22, 1997
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Exhibit 10.1
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RIVER OAKS FURNITURE, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
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THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT
(i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME
EFFECTIVE AND IS CURRENT WITH RESPECT TO THE SECURITIES, OR (ii) PURSUANT TO
A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON THE HOLDER
HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY,
OR OTHER COUNSEL ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR SIMILAR SECURITIES LAW.
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October 24, 1997
RIVER OAKS FURNITURE, INC.
For good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by River Oaks Furniture, Inc., a Mississippi
corporation, with its principal office at 3350 McCullough Blvd., Belden,
Mississippi 38826 (the "Company"), BNY Financial Corporation (the "Holder" or
"BNY"), of 1290 Avenue of the Americas, New York, New York 10104, subject to the
terms and conditions of this Warrant, is hereby granted the right to purchase,
at the initial exercise price per share equal to the lesser of (i) $2.00; or
(ii) the closing bid price of the Common Stock of the Company on the first day
it is relisted for trading on NASDAQ or any national exchange at any one or more
times from the date hereof until 5:00 p.m. on October 23, 2002, in the
aggregate, one hundred twelve thousand (112,000) shares of Common Stock of the
Company, $.10 par value (the "Shares") subject to adjustment as provided in
Section 5 hereof.
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This Warrant initially is exercisable at a price per share equal to the
lesser of (i) $2.00; or (ii) the closing bid price of the Common Stock of the
Company on the first day it is relisted for trading on NASDAQ or any national
exchange payable in cash, by certified or official bank check in New York
Clearing House funds or other form of payment satisfactory to the Company,
subject to adjustment as provided in Section 5 hereof.
1. Exercise of Warrant. The purchase rights represented by this Warrant
are exercisable at the option of the Holder hereof, in whole or in part, at one
or more times during any period in which this Warrant may be exercised as set
forth above. The Holder shall not be deemed to have exercised its purchase
rights hereunder until the Company receives written notice of the Holder's
intent to exercise its purchase rights hereunder. The written notice shall be in
the form of the Subscription Form attached hereto and made a part hereof. Less
than all of the Shares may be purchased under this Warrant.
2. Issuance of Certificates. Upon the exercise of this Warrant, the
issuance of certificates for Shares underlying this Warrant shall be made
forthwith (and in any event within ten (10) business days after the Company's
receipt of (i) written notice hereunder as specified in Section 1 above) and
(ii) good funds in respect of the Purchase Price pursuant to Section 4 hereof
for the shares so exercised and such certificates shall be issued in the name of
the Holder hereof.
3. Restriction on Transfer and Registration Rights. Neither this
Warrant nor any Shares issuable upon exercise hereof have been registered under
the Securities Act of 1933, as amended (the "Act"), and neither may be sold or
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transferred in whole or in part unless the Holder shall have first given prior
written notice to the Company describing such sale or transfer and furnished to
the Company an opinion, satisfactory to counsel for the Company as determined by
such counsel in its sole discretion, to the effect that the proposed sale or
transfer may be made without registration under the Act; provided, however, that
the foregoing shall not apply if there is in effect a registration statement
with respect to this Warrant or the Shares issuable upon exercise hereof, as the
case may be, at the time of the proposed sale or transfer. Upon exercise, in
part or in whole, of this Warrant, each certificate issued representing the
Shares underlying this Warrant shall bear a legend to the foregoing effect. The
Holder shall have such rights to request the Company to register all or any of
the Shares issuable upon exercise of this Warrant as set forth in Annex B hereto
(the "Registration Rights") subject to the terms of Annex B.
4. Price.
4.1 Initial and Adjusted Purchase Price. The initial Purchase Price per
share shall be equal to the lesser of (i) $2.00; or (ii) the closing bid price
of the Common Stock of the Company on the first day it is relisted for trading
on NASDAQ or any national exchange. The adjusted Purchase Price shall be the
price which shall result from time to time from any and all adjustments of the
initial purchase price in accordance with the provisions of Section 5 hereof.
4.2 Purchase Price. The term "Purchase Price" herein shall mean the
initial purchase price or the adjusted purchase price, as the case may be.
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5. Adjustments of Purchase Price and Number of Shares. The Shares
subject to this Warrant and the Purchase Price thereof shall be appropriately
adjusted by the Company in accordance with the Statement of Rights to Warrants
included in Annex A hereto.
6. Replacement of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in case of such loss, theft, destruction or mutilation, of
indemnity or security reasonably satisfactory to it in its sole discretion, and
reimbursement to the Company of all expenses incidental or relating thereto, and
upon surrender and cancellation of this Warrant (unless lost, stolen or
destroyed), the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
7. Notices to Warrant Holder. Nothing contained in this Warrant shall
be construed as conferring upon the Holder hereof the right to vote or to
consent as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever as
a shareholder of the Company. The Company shall, however, during the term of
this warrant supply BNY with copies of all filings made with the SEC under the
Securities Exchange Act of 1934, as amended and of all documents delivered to
stockholders of the Company.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
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(a) If to the registered Holder of this Warrant, to the
address of such Holder as shown on the books of the Company.
(b) If to the Company, to the address set forth on the first
page of this Warrant or to such other address as the Company may
designate by notice to the Holder.
9. Successors. All the agreements contained in this Warrant shall bind
the parties hereto and their respective heirs, executors, administrators,
distributees, permitted successors and assigns. The Holder may assign this
Warrant without the Company's prior written consent provided that the Holder
complies with the provisions of this agreement and applicable securities laws.
Any attempted assignment in violation of the preceding sentence shall be void
and of no effect.
10. Headings. The headings in this Warrant are inserted for purposes of
convenience only and shall have no substantive effect.
11. Law Governing. This Warrant is delivered in the State of
Mississippi and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Mississippi, without giving effect to conflicts of
law principles.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its corporate name by, and such signature to be attested to by, a duly
authorized officer as of the date first above written.
RIVER OAKS FURNITURE, INC.
By: /s/ Stephen L. Simons
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Its: CEO
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Attest:
/s/ Thomas D. Keenum, Sr. - Sec.
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ANNEX A
STATEMENT OF RIGHTS TO WARRANTS
AND
FORMS OF SUBSCRIPTION AND ASSIGNMENT
(a) Adjustment to Purchase Price and Number of Shares. In case, prior
to the expiration of this Warrant by exercise or by its terms, the Company shall
issue any shares of its Common Stock as a stock dividend or subdivide the number
of outstanding shares of its Common Stock into a greater number of shares, then
in either of such cases, the then applicable purchase price per share of the
shares of Common Stock purchasable pursuant to this Warrant in effect at the
time of such action shall be proportionately reduced and the number of shares at
that time purchasable pursuant to this Warrant shall be proportionately
increased; and conversely, in the event the Company shall contract the number of
outstanding shares of Common Stock by combining such shares into a smaller
number of shares, then, in such case, the then applicable purchase price per
share of the shares of Common Stock purchasable pursuant to this Warrant in
effect at the time of such action shall be proportionately increased and the
number or shares of Common Stock purchasable pursuant to this Warrant shall be
proportionately decreased. If the Company shall, at any time during the term of
this Warrant, declare a dividend payable in cash on its Common Stock and shall,
at substantially the same time, offer to its stockholders a right to purchase
new Common Stock from the proceeds of such dividend or for an amount
substantially equal to the dividend, all Common Stock so issued shall, for the
purpose of this Warrant, be deemed to have been issued as a stock dividend. Any
dividend paid or distributed upon the Common Stock shall be treated as a
dividend paid in Common Stock to the extent that shares of Common Stock are
issuable upon conversion thereof.
(b) Purchase Price Reset Provision. In the event that prior to the
expiration of this Warrant the Company sells publicly or privately (i) shares of
its Common Stock, (ii) securities convertible into shares of its Common Stock,
or (iii) options or warrants to purchase shares of its Common Stock or
securities convertible into shares of its Common Stock at a sale, conversion or
exercise price per share (the "Issue Price"), as the case may be, less than the
Purchase Price then in effect, the Purchase Price shall be reset to the Issue
Price and the number of shares purchasable pursuant to this Warrant shall be
increased pro rata to the percentage reduction in the Purchase Price, provided,
however, that the reset provision shall not apply to
(i) any shares issued upon exercise or conversion of any
currently outstanding options, warrants or convertible securities,
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(ii) any Common Stock options or warrant issuable pursuant to
an employee stock option plan or other compensation arrangement or any
underlying Common Stock issued on the exercise thereof, or
(iii) one or more sales of any such securities which in the
aggregate do not equal 5% or more than the currently outstanding shares of
Common Stock after giving effect to the conversion or the exercise of all such
securities.
The Issue Price shall be calculated taking into account the
amount paid for the issuance of such Common Stock, option or warrant or
convertible security and the amount, if any, payable upon the exercise or
conversion thereof.
(c) Recapitalization. In case, prior to the expiration of this Warrant
by exercise or by its terms, the Company shall be recapitalized by reclassifying
its outstanding Common Stock, (other than a change in par value to no par
value), or the Company or a successor corporation shall consolidate or merge
with or convey all or substantially all of its or of any successor corporation's
property and assets to any other corporation or corporations (any such other
corporations being included within the meaning of the term "successor
corporation" hereinbefore used in the event of any consolidation or merger of
any such other corporation with, or the sale of all or substantially all of the
property of any such other corporation to, another corporation or corporations),
then, as a condition of such recapitalization, consolidation, merger or
conveyance, lawful and adequate provision shall be made whereby the Holder of
this Warrant shall thereafter have the right to purchase, upon the basis and on
the terms and conditions specified in this Warrant, in lieu of the shares of
Common Stock of the Company theretofore purchasable upon the exercise of this
Warrant, such shares of stock, securities or assets of the other corporation as
to which the Holder of this Warrant would have been entitled had this Warrant
been exercised immediately prior to such recapitalization, consolidation, merger
or conveyance; and in any such event, the rights of the Warrant Holder to any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of this Warrant, as hereinbefore provided, shall continue and be preserved in
respect of any stock which the Warrant Holder becomes entitled to purchase.
(d) Dissolution. In case the Company at any time while this Warrant
shall remain unexpired and unexercised shall sell all or substantially all of
its property or dissolve, liquidate or wind up its affairs, lawful provision
shall be made as part of the terms of any such sale, dissolution, liquidation or
winding up, so that the Holder of this Warrant may thereafter receive upon
exercise hereof in lieu of each share of Common Stock of the Company which he
would have been entitled to receive, the same kind and amount of any securities
or assets as may be issuable, distributable or payable upon any such sale,
dissolution, liquidation or winding up with respect to each share of Common
Stock of the Company; provided, however, that in any case of any such sale or of
dissolution, liquidation or winding up, the
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right to exercise this Warrant shall terminate on a date fixed by the Company.
Such date so fixed shall be no earlier than 3 P.M. New York City Time, on the
forty-fifth (45th) day next succeeding the date on which notice of such
termination of the right to exercise this Warrant has been given by mail to the
registered Holder of this Warrant at its address as it appears on the books of
the Company.
(e) No Fractional Shares. Upon any exercise of this Warrant by the
Warrant Holder, the Company shall not be required to deliver fractions of one
share, but adjustment in the purchase price payable by the Warrant Holder shall
be made in respect of any such fraction of one share on the basis of the
purchase price per share then applicable upon exercise of this Warrant.
(f) Notices. In the event that, prior to the expiration of this Warrant
by exercise or by its terms, the Company shall determine to take a record of its
stockholders for the purpose of determining stockholders entitled to receive any
dividend, stock dividend, distribution or other right whether or not it may
cause any change or adjustment in the number, amount, price or nature of the
securities or assets deliverable upon the exercise of this Warrant pursuant to
the foregoing provisions, the Company shall give at least ten (10) days' prior
written notice to the effect that it intends to take such record to the
registered Holder of this Warrant at its address as it appears on the books of
the Company, said notice to specify the date as of which such record is to be
taken, the purpose for which such record is to be taken, and the effect which
the action which may be taken will have upon this Warrant.
(g) Registered Owner. The Company may deem and treat the registered
Holder of the Warrant at any time as the absolute owner hereof for all purposes,
and shall not be affected by any notice to the contrary.
(h) Status. This Warrant shall not entitle any Holder thereof to any of
the rights of a stockholder, and shall not entitle any Holder thereof to any
dividend declared upon the Common Stock unless the Holder shall have exercised
the within Warrant and purchased the shares of Common Stock prior to the record
date fixed by the Board of Directors for the determination of Holders of Common
Stock entitled to exercise any such rights or receive said dividend.
(i) No Adjustment for Small Amounts. Anything in the Statement of
Rights to Warrants to the contrary notwithstanding, the Company shall not be
required to give effect to any adjustment in the Purchase Price unless and until
the net effect of one or more adjustments, determined as above provided, shall
have required a change of the Purchase Price by at least ten cents, but when the
cumulative net effect of more than one adjustment so determined shall be to
change the actual Purchase Price by at least ten cents, such change in the
Purchase Price shall thereupon be given effect.
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ASSIGNMENT
(To Be Executed By the Registered Holder
to Effect a Transfer of the Within Warrant)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto ____________________________
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(Name)
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(Address)
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the right to purchase Common Stock evidenced by the within Warrant, to the
extent _____________________ of shares of Common Stock, and does hereby
irrevocably constitute and appoint ________________________
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to transfer the said right on the books of the Company, with full power of
substitution.
Dated: ____________________________, 19___.
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(Signature)
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NOTICE: The signature to this assignment must correspond with the name
as written upon the case of the within Warrant in every particular,
without alteration or enlargement, or any change whatsoever and must
be guaranteed by a bank, other than a savings bank or trust company,
having an office or correspondent in New York, or by a firm having
membership on a registered national securities exchange and an office
in New York, New York.
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FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To River Oaks Furniture, Inc.
The undersigned, the Holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, ________(1) shares of Common Stock of River
Oaks Furniture, Inc. and herewith makes payment of $______________ therefor, and
requests that the certificate or certificates for such shares be issued in the
name of and delivered to the undersigned.
Dated
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(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrants)
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(Address)
- ----------------
(1) Insert here the maximum number of shares or, in the case of a partial
exercise, the portion thereof as to which the Warrant is being exercised.
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ANNEX B
REGISTRATION RIGHTS
(a) If, at any time prior to September 14, 2002 the Company proposes to
register any of its securities under the Securities Act of 1933 (the "Securities
Act") (other than securities to be issued pursuant to a stock option or other
employee benefit or similar plan or in connection with a transaction
contemplated by Rule 145 under the Securities Act, the Company shall, promptly
give written notice (the "Registration Notice.") to Holder of the Company's
intention to effect such registration. The Company also agrees that on two
occasions it will deliver such a Registration Notice to Holder within 30 days of
its receipt of a written demand from Holder for a Registration Notice. If,
within 15 days after receipt of such Registration Notice, Holder submits a
written request to the Company specifying the number of shares of Common Stock
which it will receive upon exercise of the Warrant and which it proposes to sell
or otherwise dispose of, (the "Subject Stock") the Company shall include the
Subject Stock in such registration statement, provided that any registration of
Subject Stock pursuant to such two-time demand and right shall be for not less
than 50% of the shares covered by the Warrant. Holder when requesting inclusion
of the Subject Stock in any such registration statement, may in its discretion
delay exercise of the Warrant and notify the Company that it will exercise its
Warrant as to the Subject Stock immediately upon the registration statement
becoming effective or for delivery upon closing of a related offering. The
Company shall keep each registration statement covering any Subject Stock in
effect until the earlier of (i) 90 days following the effectiveness of such
registration statement and (ii) the sale of the Subject Shares. Notwithstanding
the foregoing, if the offering of the Company's securities pursuant to such
registration statement is to be made by or through underwriters, the Company
shall not be required to include Subject Stock therein if and to the extent that
the underwater managing the offering advises the Company in writing that such
inclusion would materially adversely affect such offering and, in such event,
the Company may delay the effectiveness of the registration of or cause Holder
to delay the sale of the Subject Stock for a period of not more than 30 days
after completion of the distribution of securities being underwritten on behalf
of the Company (but in no event for more than 180 days after the registration
statement first becomes effective) and the Company shall thereupon promptly file
such supplements and post-effective amendments and take such other steps as may
be necessary to permit Holder to make its proposed offering following the end of
such period of delay.
(b) In connection with any offering of shares of Subject Stock registered
pursuant to this Annex B the Company (i) shall furnish to Holder such number of
copies of each registration statement, each prospectus and each preliminary
prospectus, and of each amendment and supplement to any thereof as Holder may
reasonably request in order to effect the offering and sale of the Subject
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Stock to be offered and sold, but only while the Company shall be required under
the provisions hereof to cause the registration statement to remain current and
(ii) take such action as shall be necessary to qualify the shares covered by
such registration statement under such blue sky or other state securities laws
for offer and sale as Holder shall request; provided, however, that the Company
shall not be obligated to qualify as a foreign corporation to do business under
the laws of any jurisdiction in which it shall not then be qualified or to file
any general consent to service of process in any jurisdiction in which such a
consent has not been previously filed. To the extent the Company shall enter
into an underwriting agreement (the "Agreement") with a managing underwater or
underwriters selected by it containing representations, warranties, indemnities
and agreements then customarily included by an issuer in underwriting agreements
with respect to secondary distributions, Holder agrees as a condition to
participation in such offering to make such representations and warranties with
respect to information as to it as selling stockholder, and as to its holdings,
which is furnished in writing to the underwriter for use in the registration
statement as are customary and appropriate. In connection with any offering of
Subject Stock registered pursuant to this Annex B, the Company shall furnish to
the underwater, at the Company's expense, unlegended certificates representing
ownership of the Subject Stock being sold in such denominations as requested and
instruct any transfer agent and registrar of the Subject Stock to release any
stop transfer orders with respect to such Subject Stock.
(c) In connection with any registration pursuant to this Annex B all
expenses of registration shall be borne by the Company (unless contrary to the
federal securities laws or the laws of any state where the Subject Stock is to
be offered), provided, however, in connection with any such registration, Holder
shall be obligated to pay any and all underwriter's and/or brokers commissions,
to the extent that such commissions would not have been so incurred in the
absence of the registration of such Subject Stock. Under no circumstances shall
the Company have any liability for any fees and expenses of underwriters,
counsel, accountants or other agents of Holder relating to the subject stock
with respect to any registration statement filed pursuant hereto, including but
not limited to any out-of-pocket expenses, securities liability insurance
policies, the costs of any investigations by or on behalf of Holder of the
accuracy and completeness of such registration statement or related to the
furnishing of information by Holder in connection with such registration
statement.
(d) For a period until the earlier of (i) ninety (90) days from and after
the effective date of any registration statement filed pursuant hereto in which
any of the Subject Stock is included and (ii) the sale of the Subject Shares,
the Company shall from time to time amend or supplement the registration
statement and the prospectus used in connection therewith as may be necessary to
permit such sale and disposition and to the extent necessary in order to keep
such registration statement effective and such prospectus current under the Act
so that
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neither the registration statement nor the prospectus contains any untrue
statement as to any material fact, omits any statements necessary to make the
statements contained therein not misleading.
(e) In the case of any offering registered pursuant to this Annex B, the
Company agrees to indemnify and hold harmless Holder and each controlling person
of Holder within the meaning of Section 15 of the Securities Act, and the
directors and officers of Holder, against any and all losses, claims, damages or
liabilities to which they or any of them may become subject under the Securities
Act or any other statute or common law or otherwise, and to reimburse them, from
time to time upon request, for any legal or other expenses reasonably incurred
by them in connection with investigating any claims and defending any actions,
insofar as any such losses, claims, damages, liabilities or actions shall arise
out of or shall be based upon any untrue statement or alleged untrue statement
contained in the registration statement relating to the sale of such Subject
Stock in any preliminary prospectus or in any prospectus or in any supplement or
amendment to any of the foregoing of a material fact, or the omission or alleged
omission to state therein a material fact required to be stated or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, provided, however, that the indemnification agreement
contained in this paragraph (e) shall not apply to such losses, claims, damages,
liabilities or actions which shall arise from (i) the sale of Subject Stock if
such losses, claims, damages, liabilities or actions shall arise out of or shall
be based upon any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission shall have been made
in reliance upon and in conformity with information furnished in writing to the
Company by Holder specifically for use in connection with the preparation of the
registration statement or any preliminary prospectus or prospectus contained in
the registration statement or any amendment thereof or supplement thereto; or
(ii) any actual or alleged untrue statement of a material fact or any actual or
alleged omission of a material fact required to be stated in any preliminary
prospectus if Holder sells Securities to a Person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented, whichever
is most recent, if the Company had previously furnished copies thereof to Holder
or its representatives and such final prospectus, as then amended or
supplemented, corrected any such misstatement or omission; or (iii) the use of
any preliminary, final or summary prospectus by or on behalf of Holder after the
Company has notified Holder that such prospectus contains an untrue statement of
a material fact or omits to state a material fact required to be stated therein,
in the light of the circumstances under which they were made, not misleading; or
(iv) the use of any final prospectus, as amended or supplemented, by or on
behalf of Holder after such time as the obligation of the Company under this
Annex B to keep the related registration statement effective has expired; or (v)
any violation of any federal or state securities laws, rules or regulations
committed by Holder (other than any violation that arises out of or is based
upon the
14
<PAGE> 16
circumstances described above and as to which Holder would otherwise be
entitled to indemnification hereunder).
(f) In connection with any registration statement in which Holder is
participating, Holder will indemnify, to the extent permitted by law, the
Company, controlling persons of the Company under Section 15 of the Securities
Act and its directors and officers against any and all losses, claims, damages,
liabilities and expenses resulting, and to reimburse them, from time to time
upon request, for any legal or other expenses reasonably incurred by them in
connection with investigating any claims and defending any actions, solely by
reason of (i) any untrue statement of a material fact or any omission of a
material fact necessary to make the statements therein not misleading, in the
registration statement or any prospectus or preliminary prospectus or any
amendment or supplement thereto, but only to the extent that such untrue
statement is contained in, or such omission is omitted from, information so
furnished to the Company by Holder in writing; (ii) the use of any prospectus by
or on behalf of Holder (x) after the Company has notified Holder that such
prospectus contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein, in light of the circumstances under
which they were made, not misleading or (y) after such time as the obligation of
the Company to keep the related registration statement effective and current has
expired; (iii) the failure to send or deliver to a party to whom Holder sells
the Securities, at or prior to the written confirmation of sale, a copy of the
final prospectus or of the final prospectus as then amended or supplemented,
whichever is most recent, if the Company had previously furnished copies thereof
to Holder or its representatives; or (iv) any violation by Holder of any federal
or state securities law or rule or regulation thereunder (other than any
violation that arises out of or is based upon the circumstances described above
and as to which Holder is entitled to indemnification hereunder); provided,
however, that Holder shall not be liable in the aggregate for any amounts
exceeding the product of the sale price minus the exercise price per share of
Subject Stock of Holder sold in such registered offering and the number of
shares of Subject Stock sold pursuant to such registration statement or
prospectus by Holder.
(g) Each party indemnified under paragraph (e) or (f) of this Annex B
shall, promptly after receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
hereunder, notify the indemnifying party in writing of the commencement thereof.
The omission of any indemnified party to so notify an indemnifying party of any
such action shall not relieve the indemnifying party from any liability in
respect of such action which it may have to such indemnifies party on account of
the indemnity agreement contained in paragraph (e) or (f) of this Annex B,
unless the indemnifying party was prejudiced by such omission, and in no event
shall relieve the indemnifying party from any other liability which it may have
to such indemnified party. In case any such action shall be brought against any
indemnified party and it shall notify an indemnifying party of the commencement
thereof, the
15
<PAGE> 17
indemnifying party shall be entitled to participate therein and, to the extent
that it may desire to assume the defense thereof through counsel satisfactory to
the indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under paragraph
(e) or (f) of this Annex B for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof, other than
reasonable costs of investigation (unless such indemnified party reasonably
objects to such assumption on the grounds that there may be defenses available
to it which are different from or in addition to such indemnifying party in
which event the indemnified party shall be reimbursed by the indemnifying party
for the expenses incurred in connection with retaining one separate legal
counsel).
(h) Nothing in paragraph (e) or (f) of this Annex B shall prevent the
indemnified party from retaining counsel of its own choosing, at its own
expense, to defend or cooperate in the defense or investigation of any claim in
respect of which indemnification is available hereunder. No indemnifying party
will consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(i) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as specified therein, the parties entitled
to indemnification by the terms thereof shall be entitled to contribution for
any and all losses, claims, damages, or liabilities, joint or several, and
expenses to which they may become subject, in such proportion as is appropriate
to reflect the relative fault of the parties entitled to indemnification, on the
one he and, and the indemnifying parties, on the other, in connection with the
matter out of which such losses, claims, damages, liabilities or expenses arise
or result from. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the parties' relative
knowledge and access to information concerning the matter with respect to which
the action was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate under the
circumstances. The Company and each Holder agrees that it would not be equitable
if the amount of such contribution were determined by pro rata or per capita
allocations. Notwithstanding the provisions of this Section (i) the Holder shall
not be required to contribute any amount in excess of the amount by which the
net proceeds received by such Holder from the sale of its Warrants or underlying
shares of Common Stock exceeds the amount of the exercise price of the Warrants
plus any damages that such Holder has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission.
(j) Notwithstanding the foregoing, Holder shall furnish to the Company such
information regarding Holder, its intended method of distribution of the
Securities and such other information as the Company may from time to time
16
<PAGE> 18
reasonably request for purposes of preparation of any registration statement
pursuant to this Annex B and to maintain the effectiveness of such registration
statement.
(i) At least five business days prior to any disposition of
Securities (other than pursuant to an underwritten offering) by Holder, Holder
will orally advise the Company (and promptly confirm such advise in writing) of
the dates on which such disposition is expected to commence and terminate, the
number of Securities expected to be sold, the method of disposition and such
other information as the Company may reasonably request in order to supplement
the prospectus contained in the registration statement in accordance with the
rules and regulations of the Commission. Promptly after receiving such advise,
the Company will, if necessary, (x) prepare a supplement to the prospectus based
upon such advice and file the same with the Commission pursuant to Rule 424(b)
under the Securities Act and (y), if necessary, qualify the Securities to be
sold under the securities or blue sky laws of such jurisdiction in the United
States as Holder shall reasonably request (subject to the proviso of Section (b)
of this Annex B).
(ii) Holder agrees that, upon receipt of any notice from the
Company of any event of the kind described in Section (d) of this Annex B,
Holder will forthwith discontinue disposition of the Securities pursuant to such
registration statement until receipt of copies of the supplemented or amended
prospectus contemplated by Section (d), and, if so directed by the Company, will
deliver to the Company all copies of the prospectus covering the Securities in
its possession at the time of receipt of such notice.
(iii) Holder shall, at any time it is engaged in a distribution
of Securities, comply with all applicable requirements of Rule M (or any
successor provisions then in force) promulgated under the Exchange Act and (x)
will not engage in any stabilization activity in connection with the securities
of the Company in contravention of such rules, (y) will distribute the
Securities solely in the manner described in the registration statement and (z)
will not bid for or purchase any securities of the Company or attempt to induce
any person to purchase any securities of the Company other than as permitted
under the Exchange Act.
(iv) Holder shall provide such information and materials, execute
all such documents and take all such other actions as the Company shall
reasonably request in order to permit the Company to comply with all applicable
requirements of law and to effect the registration of Holder's Securities.
(v) If Securities are registered for sale pursuant to Rule 415
under the Securities Act, Holder shall cease any distribution of such shares
under the registration statement twice a year, for up to 90 days each, upon the
request of the Company if: (x) such distribution would require the public
disclosure of material
17
<PAGE> 19
non-public information concerning any transaction or negotiations involving the
Company or any of its affiliates that, in the good faith judgment of the
Company's Board of Directors (or the executive committee thereof), would
materially interfere with such transaction or negotiations, (y) such
distribution would otherwise require premature disclosure of information that,
in the good faith judgment of the Company's Board of Directors, would adversely
affect or otherwise be detrimental to the Company or (z) the Company proposes to
file a registration statement under the Securities Act for the offering and sale
of securities for its own account in an underwritten offering and the managing
underwriter therefor shall advise the Company in writing that in its opinion the
continued distribution of the Securities would adversely affect the success of
the offering of the securities proposed to be registered for the account of the
Company. The Company shall promptly notify Holder at such time as (i) such
transactions or negotiations have been otherwise publicly disclosed or
terminated, (ii) such non-public information has been publicly disclosed or
counsel to the Company has determined that such disclosure is not required due
to subsequent events or (iii) the completion of such underwritten offering.
(vi) The Company shall be entitled to postpone once a year, for a
reasonable period of time not to exceed 90 days, the filing of a registration
statement otherwise require to be prepared and filed by it pursuant to Section
(a) of this Annex B if, at the time it receives the written demand, (y) such
registration would require the public disclosure of material non-public
information concerning any transaction or negotiations involving the Company or
any affiliate that, in the opinion of counsel to the Company, is not yet
required to be publicly disclosed and the Company's Board of Directors, in good
faith, determines that such disclosure would materially interfere with such
transaction or negotiations on (z) such registration would, in good faith
judgment of the Company, otherwise require premature disclosure of information
which would adversely affect or otherwise be detrimental to the Company.
18
<PAGE> 1
Exhibit 10.2
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "Amendment Agreement")
is made and entered into effective as of the 10th day of November, 1997, by and
among RIVER OAKS FURNITURE, INC., a Mississippi corporation having its principal
place of business in Belden, Mississippi ("River Oaks"), R.O. WEST, INC., a
Mississippi corporation having its principal place of business in Belden,
Mississippi ("R.O. West"), R.O. EAST, INC., a Mississippi corporation having its
principal place of business in Belden, Mississippi ("R.O. East"), GAINES
MANUFACTURING COMPANY, a Tennessee corporation having its principal place of
business in Belden, Mississippi ("Gaines") (River Oaks, R.O. West, R.O. East and
Gaines being referred to collectively as the "Borrowers" and individually as a
"Borrower"), BNY FINANCIAL CORPORATION, a corporation organized under the laws
of the State of New York ("BNYFC"), in its capacity as a Lender, and each other
financial institution which may hereafter execute and deliver an instrument of
assignment with respect to this Amendment (hereinafter such financial
institutions may be referred to individually as a "Lender" or collectively as
the "Lenders"), and BNY FINANCIAL CORPORATION, a corporation organized under the
laws of the State of New York, in its capacity as agent for the Lenders (the
"Agent") under the Credit Agreement (as defined below). Unless the context
otherwise requires, all terms used herein without definition shall have the
definitions provided therefor in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Agent, the Borrowers and the Lenders thereunder have
entered into that certain Revolving Credit and Term Loan Agreement dated as of
July 26, 1996 (as hereby and from time to time amended, supplemented or
replaced, the "Credit Agreement"), pursuant to which the Lenders have agreed to
make certain revolving and term credit facilities available to the Borrowers;
and
WHEREAS, the parties hereto desire to amend the Credit Agreement in the
manner herein set forth effective as of the date hereof.
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. The term "Credit Agreement" or "Agreement" (as the case
may be) as used herein and in any of the Loan Documents shall mean the Credit
Agreement as hereby amended and modified, and as further amended, modified,
restated or supplemented from time to time as permitted thereby.
2. Amendments. Subject to the conditions hereof, the Credit Agreement
is hereby amended, effective as of the date hereof, as follows:
(a) The definition of "Loan Documents" is hereby deleted in
its entirety and the following is inserted in replacement thereof:
"Loan Documents" means this Agreement; the Notes; the
Security Instruments; the Facility Guaranties; the Factoring
Documents; the $2,000,000 Term Note dated as of November 10,
1997 by the Borrowers in favor of BNYFC; the $1,000,000 Term
Note dated as of November 10, 1997 by the Borrowers in favor
of BNYFC; and all other instruments and documents heretofore
or hereafter executed or delivered to or in favor of any
Lender or the Agent in connection with the Loans made and
transactions contemplated under this Agreement or the
Factoring Agreement, as the same may be amended, supplemented
or replaced from the time to time.
<PAGE> 2
(b) The definition of Total Revolving Credit Commitment" is
hereby deleted in its entirety and the following is inserted in
replacement thereof:
"Total Revolving Credit Commitment" means a principal
amount equal to $40,500,000.
3. Limited Waiver. BNYFC hereby waives the breach of any covenant of
the Credit Agreement, including but not limited to Section 9.5 of the Credit
Agreement, that would otherwise result from (i) the execution by any of the
Borrowers of the $2,000,000 Term Note of even date herewith by the Borrowers in
favor of BNYFC, (ii) the execution by any of the Borrowers of the $1,000,000
Term Note of even date herewith by the Borrowers in favor of BNYFC or (iii) the
execution of this Amendment Agreement; provided, however, that this waiver is
limited to those covenants the breach of or non-compliance with which would, but
for this waiver, occur immediately on the date hereof by the incurrence of the
Indebtedness set forth in (i) and (ii) above or by the execution of this
Amendment Agreement, and this waiver does not and is not intended to waive any
breach of or non-compliance with any financial covenant set forth in Section 9.1
of the Credit Agreement or any other covenant the breach of or non-compliance
with which occurs at any time after the date hereof.
4. Guarantors. Each Guarantor hereby (i) consents and agrees to the
amendments to the Credit Agreement set forth herein and (ii) confirms its joint
and several guarantee of payment of all the Obligations pursuant to the Facility
Guaranty.
5. Representations and Warranties. Each of the Borrowers hereby
certifies that:
(a) The representations and warranties made by each Borrower
in Article VII of the Credit Agreement are true and correct in all
material respects on and as of the date hereof, with the same effect as
though such representations and warranties were made on the date
hereof, except to the extent that such representations and warranties
expressly relate to an earlier date.
(b) After application of the waiver set forth in Section 3
hereof, no event has occurred and no condition exists which, upon the
consummation of the transaction contemplated hereby, will constitute a
Default or an Event of Default on the part of any Borrower under the
Credit Agreement or any other Loan Document either immediately or with
the lapse of time or the giving of notice, or both.
6. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and not one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that, except
as otherwise expressly stated herein, no representations, warranties or
commitments, express or implied, have been made by any party to the other. None
of the terms or conditions of this Amendment Agreement may be changed, modified,
waived or canceled orally or otherwise, except by writing, signed by all the
parties hereto, specifying such change, modification, waiver or cancellation of
such terms or conditions, or of any proceeding or succeeding breach thereof.
7. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all of the other
Loan Documents are hereby confirmed and ratified in all respects and shall
remain in full force and effect according to their respective terms.
<PAGE> 3
8. Counterparts. This Amendment Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9. Governing Law. This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the state of New York.
10. Enforceability. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
11. Successors and Assigns. This Amendment Agreement shall be binding
upon and inure to the benefit of each of the Borrowers, the Lenders and the
Agent and their respective successors, assigns and legal representatives;
provided, however, that the Borrowers, without the prior consent of the Agent,
may not assign any rights, powers, duties or obligations hereunder.
12. Expenses. The Borrowers agree, jointly and severally, to pay to
the Agent and the Lenders all reasonable out-of-pocket expenses incurred or
arising in connection with the negotiation and preparation of this Amendment
Agreement.
[Signature pages follow.]
<PAGE> 4
BNY FINANCIAL CORPORATION
BY: /S/ TIMOTHY E. TYSINGER
---------------------------------
NAME: TIMOTHY E. TYSINGER
--------------------------------
TITLE: SR. VICE PRESIDENT
------------------------------
<PAGE> 1
Exhibit 10.3
Promissory Note
(Term Loan)
$1,000,000 New York, New York
November 10, 1997
FOR VALUE RECEIVED, RIVER OAKS FURNITURE, INC., a Mississippi
corporation having its principal place of business located in Fulton,
Mississippi, R. O. WEST, INC., a Mississippi corporation having its principal
place of business in Belden, Mississippi, R. O. EAST, INC., a Mississippi
corporation having its principal place of business in Belden, Mississippi, and
GAINES MANUFACTURING COMPANY, a Tennessee corporation having its principal place
of business in Belden, Mississippi (collectively, the "Borrowers"), jointly and
severally, hereby promise to pay to the order of BNY FINANCIAL CORPORATION (the
"Lender"), in its individual capacity as Lender, at its office located at 1290
Avenue of the Americas, New York, New York 10104 (or at such other place or
places as the Lender may designate in writing) in lawful money of the United
States of America, in immediately available funds, the principal amount of ONE
MILLION DOLLARS ($1,000,000) in twelve (12) consecutive, monthly installments,
the first eleven (11) of which Installments shall each be equal monthly
installments in the amount of Eighty-Three Thousand Three-Hundred and
Thirty-Three Dollars and 33/l00 ($83,333.33), commencing on February 1, 1999 and
on the first day of each month thereafter and a twelfth (12th) and final
installment of Eighty-Three Thousand Three Hundred and Thirty-Three Dollars and
37/100 ($83,333.37), which shall be due on January 1, 2000. The entire unpaid
principal balance hereof, together with all interest accrued thereon, shall be
payable on January 1, 2000 or such earlier date as may be required pursuant to
the terms of this Note or that certain Revolving Credit and Term Loan Agreement
dated as of July 26, 1996 among the Borrowers, the financial institutions party
thereto and BNY Financial Corporation in its capacity as Agent (as from time to
time amended, supplemented or replaced, the "Agreement" -- all capitalized terms
not otherwise defined herein shall have the respective meanings set forth in the
Agreement), and to pay interest in arrears on the last business day of this
month and each month hereafter, in like money, at said office.
The Borrowers agree that all Collateral that serves as security for the
Obligations under the Agreement, whether granted by the Agreement, the Security
Agreement, the Guaranties, any other Security Instrument, or any other Loan
Document, shall secure the obligations created under this Term Note.
If payment of any sums due under this Term Note or under the Agreement
or any Loan Document is accelerated under the terms of the Agreement or under
the terms of the other Loan Documents executed in connection with the Agreement,
the then remaining principal amount hereof and accrued but unpaid interest
thereon
<PAGE> 2
shall bear interest which shall be payable on demand at a per annum rate
equal to the Prime Rate (as defined in the Agreement) plus three percent (3%),
or the maximum rate permitted by applicable law, if lower. If any principal
payment, interest payment or other amount due under this Term Note is not paid
when due hereunder, the Lender may declare all amounts of principal, interest
and other amounts hereunder immediately due and payable or, in the event of any
acceleration of the Agreement or any Loan Document, this Term Note shall become
immediately due and payable, in each case without presentation, demand, protest
or notice of any kind, all of which are hereby waived by the Borrowers.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrowers agree, jointly and severally, to pay, in
addition to the principal and interest due hereunder, all costs of collection,
including reasonable attorneys' fees, and interest thereon at the rate set forth
in the immediately preceding paragraph.
Reference is hereby made to that certain Term Note of even date
herewith in the principal amount of $2,000,000 by the Borrowers in favor of the
Lender (the "First Term Note"). The Borrowers agree that no payments made to the
Lender by the Borrowers, or any other amounts received by the Lender on behalf
of any of the Borrowers' Obligations from any source whatsoever, may be applied
to reduce the principal amount of this Term Note under all interest, principal
and any other fees or costs under the First Term Note are paid in full and
satisfied.
Interest shall accrue on the outstanding principal amount under this
Term Note from the date hereof at a per annum rate equal to the Prime Rate (as
defined in the Agreement) plus one percent (1%).
All Persons bound on this obligation, whether primarily or secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent permitted by law the benefits of all provisions of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability hereon until judgment be obtained
and execution issues against any other of them and returned satisfied or until
it can be shown that the maker or any other party hereto had no property
available for the satisfaction of the debt evidenced by this instrument, or
until any other proceedings can be had against any of them, also their right, if
any, to acquire the holder hereof to hold as security for this Term Note any
collateral deposited by any of said Persons as security. Protest, notice of
protest, notice of dishonor, diligence or any other formality are hereby waived
by all parties bound hereon.
2
<PAGE> 3
IN WITNESS WHEREOF, the Borrowers have caused this Term Note to be
made, executed and delivered by its duly authorized representative as of the
date and year first above written, all pursuant to authority duly granted.
RIVER OAKS FURNITURE, INC.
By: /s/ Stephen L. Simons
----------------------------------
Name: Stephen L. Simons
---------------------------------
Title: Chairman and CEO
--------------------------------
R.O. WEST, INC.
By: /s/ Johnny Walker
-----------------------------------
Name: Johnny Walker
---------------------------------
Title: Vice President and CFO
--------------------------------
R.O. EAST, INC.
By: /s/ Johnny Walker
-----------------------------------
Name: Johnny Walker
---------------------------------
Title: Vice President and CFO
--------------------------------
GAINES MANUFACTURING COMPANY
By: /s/ Johnny Walker
-----------------------------------
Name: Johnny Walker
---------------------------------
Title: Vice President and CFO
--------------------------------
<PAGE> 1
Exhibit 10.4
Promissory Note
(Term Loan)
$2,000,000 New York, New York
November 10, 1997
FOR VALUE RECEIVED, RIVER OAKS FURNITURE, INC., a Mississippi
corporation having its principal place of business located in Fulton,
Mississippi R O. WEST, INC., a Mississippi corporation having its principal
place of business in Belden, Mississippi, R. O. EAST, INC., a Mississippi
corporation having its principal place of business in Belden, Mississippi, and
GAINES MANUFACTURING COMPANY, a Tennessee corporation having its principal place
of business in Belden, Mississippi (collectively, the "Borrowers"), jointly and
severally, hereby promise to pay to the order of BNY FINANCIAL CORPORATION (the
"Lender"), in its individual capacity as Lender, at its office located at 1290
Avenue of the Americas, New York, New York 10104 (or at such other place or
places as the Lender may designate in writing) in lawful money of the United
States of America, in immediately available funds, the principal amount of TWO
MILLION DOLLARS ($2,000,000) on January 1, 1999. The entire unpaid principal
balance hereof, together with all interest accrued thereon, shall be payable on
January 1, 1999 or such earlier date as may be required pursuant to the terms of
this Note or that certain Revolving Credit and Term Loan Agreement dated as of
July 26, 1996 among the Borrowers, the financial institutions party thereto and
BNY Financial Corporation, in its capacity as Agent (as from time to time
amended, supplemented or replaced, the "Agreement" -- all capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Agreement), and to pay interest in arrears on the last business day of this
month and each month hereafter, in like money, at said office.
The Lender may at any time, in its sole discretion, require the
creation of a reserve account for cash collateral (the "Reserve Account") to be
in the name, possession and control of the Lender, which Reserve Account is to
be funded monthly in an amount of $100,000 per month (the "Monthly Funding
Amount"), the Monthly Funding Amount to be adjustable at any time in the sole
discretion of the Lender. Upon creation thereof, the Lender may fund the Reserve
Account with Advances under the Revolving Credit Facility of the Agreement, such
Advances to be Base Rate Loans. The Borrowers grant to the Lender a security
interest in the Reserve Account and all monies contained therein, to secure the
Borrowers' obligations under this Note, all Obligations under the Agreement and
all other obligations of the Borrowers, or any of them, due and owing to the
Lender now or at any time hereafter.
The Borrowers agree that all Collateral that serves as security for
the Obligations under the Agreement, whether granted by the Agreement, the
Security Agreement, the Guaranties, any other Security Instrument, or any other
Loan Document, shall secure the obligations created under this Term Note.
<PAGE> 2
If payment of any sums due under this Term Note or under the
Agreement or any Loan Document is accelerated under the terms of the Agreement
or under the terms of the other Loan Documents executed in connection with the
Agreement, the then remaining principal amount hereof and accrued but unpaid
interest thereon shall bear interest which shall be payable on demand at the
rate of fourteen percent (14%) per annum, or the maximum rate permitted by
applicable law, if lower. If any principal payment, interest payment or other
amount due under this Term Note is not paid when due hereunder, the Lender may
declare all amounts of principal, interest and other amounts hereunder
immediately due and payable or, in the event of any acceleration of the
Agreement or any Loan Document, this Term Note shall become immediately due and
payable, in each case without presentation, demand, protest or notice of any
kind, all of which are hereby waived by the Borrowers.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrowers agree, jointly and severally, to pay, in
addition to the principal and interest due hereunder, all costs of collection,
including reasonable attorneys'fees, and interest thereon at the rate set forth
in the immediately preceding paragraph.
Reference is hereby made to that certain Term Note of even date
herewith in the principal amount of $1,000,000 by the Borrowers in favor of the
Lender (the "Second Term Note"). The Borrowers agree that no payments made to
the Lender by the Borrowers, or any other amounts received by the Lender on
behalf of any of the Borrowers' Obligations from any source whatsoever, may be
applied to reduce the principal amount of the Second Term Note until all
interest, principal and any other fees or costs under this Term Note are paid in
full and satisfied.
Interest shall accrue on the outstanding principal amount under this
Term Note from the date hereof at a rate of twelve percent (12%) per annum.
All Persons bound on this obligation, whether primarily or
secondarily liable as principals, sureties, guarantors, endorsers or otherwise,
hereby waive to the full extent permitted by law the benefits of all provisions
of law for stay or delay of execution or sale of property or other satisfaction
of 'udgment against any of them on account of liability hereon until judgment be
obtained and execution issues against any other of them and returned satisfied
or until it can be shown that the maker or any other party hereto had no
property available for the satisfaction of the debt evidenced by this
instrument, or until any other proceedings can be had against any of them, also
their right, if any, to require the holder hereof to hold as security for this
Term Note any collateral deposited by any of said Persons as security. Protest,
notice of protest, notice of dishonor, diligence or any other formality are
hereby waived by all parties bound hereon.
2
<PAGE> 3
IN WITNESS WHEREOF, the Borrowers have caused this Term Note to be
made, executed and delivered by its duly authorized representative as of the
date and year first above written, all pursuant to authority duly granted.
RIVER OAKS FURNITURE, INC.
By: /s/ Stephen L. Simons
-------------------------------
Name: Stephen L. Simons
-----------------------------
Title: Chairman and CEO
----------------------------
R.O. WEST, INC.
By: /s/ Johnny Walker
-------------------------------
Name: Johnny Walker
-----------------------------
Title: Vice President and CFO
----------------------------
R.O. EAST, INC.
By: /s/ Johnny Walker
-------------------------------
Name: Johnny Walker
-----------------------------
Title: Vice President and CFO
----------------------------
GAINES MANUFACTURING COMPANY
By: /s/ Johnny Walker
-------------------------------
Name: Johnny Walker
-----------------------------
Title: Vice President and CFO
----------------------------
3
<PAGE> 1
Exhibit 10.5
===============================================================================
RIVER OAKS FURNITURE, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
===============================================================================
<PAGE> 2
================================================================================
THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE
AND IS CURRENT WITH RESPECT TO THE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON THE HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY, OR OTHER COUNSEL
ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR
SECURITIES LAW.
================================================================================
November 10, 1997
RIVER OAKS FURNITURE, INC.
For good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by River Oaks Furniture, Inc., a Mississippi
corporation, with its principal office at 3350 McCullough Blvd., Belden,
Mississippi 38826 (the "Company"), BNY Financial Corporation (the "Holder" or
"BNY"), of 1290 Avenue of the Americas, New York, New York 10104, subject to the
terms and conditions of this Warrant, is hereby granted the right to purchase,
at the initial exercise price per share equal to the lesser of (i) $2.50; or
(ii) the closing bid price of the Common Stock of the Company on the first day
it is relisted for trading on NASDAQ or any national exchange at any one or more
times from the date hereof until 5:00 p.m. on November 9, 2002, in the
aggregate, one hundred twelve thousand (112,000) shares of Common Stock of the
Company, $.10 par value (the "Shares") subject to adjustment as provided in
Section 5 hereof.
<PAGE> 3
This Warrant initially is exercisable at a price per share equal to the
lesser of (i) $2.50; or (ii) the closing bid price of the Common Stock of the
Company on the first day it is relisted for trading on NASDAQ or any national
exchange payable in cash, by certified or official bank check in New York
Clearing House funds or other form of payment satisfactory to the Company,
subject to adjustment as provided in Section 5 hereof.
1. Exercise of Warrant. The purchase rights represented by this Warrant
are exercisable at the option of the Holder hereof, in whole or in part, at one
or more times during any period in which this Warrant may be exercised as set
forth above. The Holder shall not be deemed to have exercised its purchase
rights hereunder until the Company receives written notice of the Holder's
intent to exercise its purchase rights hereunder. The written notice shall be in
the form of the Subscription Form attached hereto and made a part hereof. Less
than all of the Shares may be purchased under this Warrant.
2. Issuance of Certificates. Upon the exercise of this Warrant, the
issuance of certificates for Shares underlying this Warrant shall be made
forthwith (and in any event within ten (10) business days after the Company's
receipt of (i) written notice hereunder as specified in Section 1 above) and
(ii) good funds in respect of the Purchase Price pursuant to Section 4 hereof
for the shares so exercised and such certificates shall be issued in the name of
the Holder hereof.
3. Restriction on Transfer and Registration Rights. Neither this
Warrant nor any Shares issuable upon exercise hereof have been registered under
the Securities Act of 1933, as amended (the "Act"), and neither may be sold or
2
<PAGE> 4
transferred in whole or in part unless the Holder shall have first given prior
written notice to the Company describing such sale or transfer and furnished to
the Company an opinion, satisfactory to counsel for the Company as determined by
such counsel in its sole discretion, to the effect that the proposed sale or
transfer may be made without registration under the Act; provided, however, that
the foregoing shall not apply if there is in effect a registration statement
with respect to this Warrant or the Shares issuable upon exercise hereof, as the
case may be, at the time of the proposed sale or transfer. Upon exercise, in
part or in whole, of this Warrant, each certificate issued representing the
Shares underlying this Warrant shall bear a legend to the foregoing effect. The
Holder shall have such rights to request the Company to register all or any of
the Shares issuable upon exercise of this Warrant as set forth in Annex B hereto
(the "Registration Rights") subject to the terms of Annex B.
4. Price.
4.1 Initial and Adjusted Purchase Price. The initial Purchase Price per
share shall be equal to the lesser of (i) $2.50; or (ii) the closing bid price
of the Common Stock of the Company on the first day it is relisted for trading
on NASDAQ or any national exchange. The adjusted Purchase Price shall be the
price which shall result from time to time from any and all adjustments of the
initial purchase price in accordance with the provisions of Section 5 hereof.
4.2 Purchase Price. The term "Purchase Price" herein shall mean the
initial purchase price or the adjusted purchase price, as the case may be.
3
<PAGE> 5
5. Adjustments of Purchase Price and Number of Shares. The Shares
subject to this Warrant and the Purchase Price thereof shall be appropriately
adjusted by the Company in accordance with the Statement of Rights to Warrants
included in Annex A hereto.
6. Replacement of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in case of such loss, theft, destruction or mutilation, of
indemnity or security reasonably satisfactory to it in its sole discretion, and
reimbursement to the Company of all expenses incidental or relating thereto, and
upon surrender and cancellation of this Warrant (unless lost, stolen or
destroyed), the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
7. Notices to Warrant Holder. Nothing contained in this Warrant shall
be construed as conferring upon the Holder hereof the right to vote or to
consent as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever as
a shareholder of the Company. The Company shall, however, during the term of
this warrant supply BNY with copies of all filings made with the SEC under the
Securities Exchange Act of 1934, as amended and of all documents delivered to
stockholders of the Company.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
4
<PAGE> 6
(a) If to the registered Holder of this Warrant, to the
address of such Holder as shown on the books of the Company.
(b) If to the Company, to the address set forth on the first
page of this Warrant or to such other address as the Company may
designate by notice to the Holder.
9. Successors. All the agreements contained in this Warrant shall bind
the parties hereto and their respective heirs, executors, administrators,
distributees, permitted successors and assigns. The Holder may assign this
Warrant without the Company's prior written consent provided that the Holder
complies with the provisions of this agreement and applicable securities laws.
Any attempted assignment in violation of the preceding sentence shall be void
and of no effect.
10. Headings. The headings in this Warrant are inserted for purposes of
convenience only and shall have no substantive effect.
11. Law Governing. This Warrant is delivered in the State of
Mississippi and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Mississippi, without giving effect to conflicts of
law principles.
5
<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its corporate name by, and such signature to be attested to by, a duly
authorized officer as of the date first above written.
RIVER OAKS FURNITURE, INC.
By: /s/ Stephen L. Simons
-------------------------------
Its: CEO
------------------------------
Attest:
/s/ Thomas D. Keenum
- ------------------------------
6
<PAGE> 8
ANNEX A
STATEMENT OF RIGHTS TO WARRANTS
AND
FORMS OF SUBSCRIPTION AND ASSIGNMENT
(a) Adjustment to Purchase Price and Number of Shares. In case, prior
to the expiration of this Warrant by exercise or by its terms, the Company shall
issue any shares of its Common Stock as a stock dividend or subdivide the number
of outstanding shares of its Common Stock into a greater number of shares, then
in either of such cases, the then applicable purchase price per share of the
shares of Common Stock purchasable pursuant to this Warrant in effect at the
time of such action shall be proportionately reduced and the number of shares at
that time purchasable pursuant to this Warrant shall be proportionately
increased; and conversely, in the event the Company shall contract the number of
outstanding shares of Common Stock by combining such shares into a smaller
number of shares, then, in such case, the then applicable purchase price per
share of the shares of Common Stock purchasable pursuant to this Warrant in
effect at the time of such action shall be proportionately increased and the
number or shares of Common Stock purchasable pursuant to this Warrant shall be
proportionately decreased. If the Company shall, at any time during the term of
this Warrant, declare a dividend payable in cash on its Common Stock and shall,
at substantially the same time, offer to its stockholders a right to purchase
new Common Stock from the proceeds of such dividend or for an amount
substantially equal to the dividend, all Common Stock so issued shall, for the
purpose of this Warrant, be deemed to have been issued as a stock dividend. Any
dividend paid or distributed upon the Common Stock shall be treated as a
dividend paid in Common Stock to the extent that shares of Common Stock are
issuable upon conversion thereof.
(b) Purchase Price Reset Provision. In the event that prior to the
expiration of this Warrant the Company sells publicly or privately (i) shares of
its Common Stock, (ii) securities convertible into shares of its Common Stock,
or (iii) options or warrants to purchase shares of its Common Stock or
securities convertible into shares of its Common Stock at a sale, conversion or
exercise price per share (the "Issue Price"), as the case may be, less than the
Purchase Price then in effect, the Purchase Price shall be reset to the Issue
Price and the number of shares purchasable pursuant to this Warrant shall be
increased pro rata to the percentage reduction in the Purchase Price, provided,
however, that the reset provision shall not apply to
(i) any shares issued upon exercise or conversion of any
currently outstanding options, warrants or convertible securities,
7
<PAGE> 9
(ii) any Common Stock options or warrant issuable pursuant to
an employee stock option plan or other compensation arrangement or any
underlying Common Stock issued on the exercise thereof, or
(iii) one or more sales of any such securities which in the
aggregate do not equal 5% or more than the currently outstanding shares of
Common Stock after giving effect to the conversion or the exercise of all such
securities.
The Issue Price shall be calculated taking into account the
amount paid for the issuance of such Common Stock, option or warrant or
convertible security and the amount, if any, payable upon the exercise or
conversion thereof.
(c) Recapitalization. In case, prior to the expiration of this Warrant
by exercise or by its terms, the Company shall be recapitalized by reclassifying
its outstanding Common Stock, (other than a change in par value to no par
value), or the Company or a successor corporation shall consolidate or merge
with or convey all or substantially all of its or of any successor corporation's
property and assets to any other corporation or corporations (any such other
corporations being included within the meaning of the term "successor
corporation" hereinbefore used in the event of any consolidation or merger of
any such other corporation with, or the sale of all or substantially all of the
property of any such other corporation to, another corporation or corporations),
then, as a condition of such recapitalization, consolidation, merger or
conveyance, lawful and adequate provision shall be made whereby the Holder of
this Warrant shall thereafter have the right to purchase, upon the basis and on
the terms and conditions specified in this Warrant, in lieu of the shares of
Common Stock of the Company theretofore purchasable upon the exercise of this
Warrant, such shares of stock, securities or assets of the other corporation as
to which the Holder of this Warrant would have been entitled had this Warrant
been exercised immediately prior to such recapitalization, consolidation, merger
or conveyance; and in any such event, the rights of the Warrant Holder to any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of this Warrant, as hereinbefore provided, shall continue and be preserved in
respect of any stock which the Warrant Holder becomes entitled to purchase.
(d) Dissolution. In case the Company at any time while this Warrant
shall remain unexpired and unexercised shall sell all or substantially all of
its property or dissolve, liquidate or wind up its affairs, lawful provision
shall be made as part of the terms of any such sale, dissolution, liquidation or
winding up, so that the Holder of this Warrant may thereafter receive upon
exercise hereof in lieu of each share of Common Stock of the Company which he
would have been entitled to receive, the same kind and amount of any securities
or assets as may be issuable, distributable or payable upon any such sale,
dissolution, liquidation or winding up with respect to each share of Common
Stock of the Company; provided, however, that in any case of any such sale or of
dissolution, liquidation or winding up, the
8
<PAGE> 10
right to exercise this Warrant shall terminate on a date fixed by the Company.
Such date so fixed shall be no earlier than 3 P.M. New York City Time, on the
forty-fifth (45th) day next succeeding the date on which notice of such
termination of the right to exercise this Warrant has been given by mail to the
registered Holder of this Warrant at its address as it appears on the books of
the Company.
(e) No Fractional Shares. Upon any exercise of this Warrant by the
Warrant Holder, the Company shall not be required to deliver fractions of one
share, but adjustment in the purchase price payable by the Warrant Holder shall
be made in respect of any such fraction of one share on the basis of the
purchase price per share then applicable upon exercise of this Warrant.
(f) Notices. In the event that, prior to the expiration of this Warrant
by exercise or by its terms, the Company shall determine to take a record of its
stockholders for the purpose of determining stockholders entitled to receive any
dividend, stock dividend, distribution or other right whether or not it may
cause any change or adjustment in the number, amount, price or nature of the
securities or assets deliverable upon the exercise of this Warrant pursuant to
the foregoing provisions, the Company shall give at least ten (10) days' prior
written notice to the effect that it intends to take such record to the
registered Holder of this Warrant at its address as it appears on the books of
the Company, said notice to specify the date as of which such record is to be
taken, the purpose for which such record is to be taken, and the effect which
the action which may be taken will have upon this Warrant.
(g) Registered Owner. The Company may deem and treat the registered
Holder of the Warrant at any time as the absolute owner hereof for all purposes,
and shall not be affected by any notice to the contrary.
(h) Status. This Warrant shall not entitle any Holder thereof to any of
the rights of a stockholder, and shall not entitle any Holder thereof to any
dividend declared upon the Common Stock unless the Holder shall have exercised
the within Warrant and purchased the shares of Common Stock prior to the record
date fixed by the Board of Directors for the determination of Holders of Common
Stock entitled to exercise any such rights or receive said dividend.
(i) No Adjustment for Small Amounts. Anything in the Statement of
Rights to Warrants to the contrary notwithstanding, the Company shall not be
required to give effect to any adjustment in the Purchase Price unless and until
the net effect of one or more adjustments, determined as above provided, shall
have required a change of the Purchase Price by at least ten cents, but when the
cumulative net effect of more than one adjustment so determined shall be to
change the actual Purchase Price by at least ten cents, such change in the
Purchase Price shall thereupon be given effect.
9
<PAGE> 11
ASSIGNMENT
(To Be Executed By the Registered Holder
to Effect a Transfer of the Within Warrant)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto __________________________
- -------------------------------------------------------------------------------
(Name)
- -------------------------------------------------------------------------------
(Address)
- -------------------------------------------------------------------------------
the right to purchase Common Stock evidenced by the within Warrant, to the
extent _____________________ of shares of Common Stock, and does hereby
irrevocably constitute and appoint ________________________
- -------------------------------------------------------------------------------
to transfer the said right on the books of the Company, with full power of
substitution.
Dated: ____________________________, 19___.
--------------------------------
(Signature)
NOTICE: The signature to this assignment must correspond with the name as
written upon the case of the within Warrant in every particular,
without alteration or enlargement, or any change whatsoever and must
be guaranteed by a bank, other than a savings bank or trust company,
having an office or correspondent in New York, or by a firm having
membership on a registered national securities exchange and an office
in New York, New York.
10
<PAGE> 12
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To River Oaks Furniture, Inc.
The undersigned, the Holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, ________(1) shares of Common Stock of River
Oaks Furniture, Inc. and herewith makes payment of $______ therefor, and
requests that the certificate or certificates for such shares be issued in
the name of and delivered to the undersigned.
Dated
------------------------------------------
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrants)
------------------------------------------
(Address)
- --------
(1) Insert here the maximum number of shares or, in the case of a partial
exercise, the portion thereof as to which the Warrant is being exercised.
11
<PAGE> 13
ANNEX B
REGISTRATION RIGHTS
(a) If, at any time prior to September 14, 2002 the Company proposes to
register any of its securities under the Securities Act of 1933 (the "Securities
Act") (other than securities to be issued pursuant to a stock option or other
employee benefit or similar plan or in connection with a transaction
contemplated by Rule 145 under the Securities Act, the Company shall, promptly
give written notice (the "Registration Notice"), to Holder of the Company's
intention to effect such registration. The Company also agrees that on two
occasions it will deliver such a Registration Notice to Holder within 30 days of
its receipt of a written demand from Holder for a Registration Notice. If,
within 15 days after receipt of such Registration Notice, Holder submits a
written request to the Company specifying the number of shares of Common Stock
which it will receive upon exercise of the Warrant and which it proposes to sell
or otherwise dispose of, (the "Subject Stock") the Company shall include the
Subject Stock in such registration statement, provided that any registration of
Subject Stock pursuant to such two-time demand and right shall be for not less
than 50 % of the shares covered by the Warrant. Holder when requesting inclusion
of the Subject Stock in any such registration statement, may in its discretion
delay exercise of the Warrant and notify the Company that it will exercise its
Warrant as to the Subject Stock immediately upon the registration statement
becoming effective or for delivery upon closing of a related offering. The
Company shall keep each registration statement covering any Subject Stock in
effect until the earlier of (i) 90 days following the effectiveness of such
registration statement and (ii) the sale of the Subject Shares. Notwithstanding
the foregoing, if the offering of the Company's securities pursuant to such
registration statement is to be made by or through underwriters, the Company
shall not be required to include Subject Stock therein if and to the extent that
the underwater managing the offering advises the Company in writing that such
inclusion would materially adversely affect such offering and, in such event,
the Company may delay the effectiveness of the registration of or cause Holder
to delay the sale of the Subject Stock for a period of not more than 30 days
after completion of the distribution of securities being underwritten on behalf
of the Company (but in no event for more than 180 days after the registration
statement first becomes effective) and the Company shall thereupon promptly file
such supplements and post-effective amendments and take such other steps as may
be necessary to permit Holder to make its proposed offering following the end of
such period of delay.
(b) In connection with any offering of shares of Subject Stock registered
pursuant to this Annex B the Company (i) shall furnish to Holder such number of
copies of each registration statement, each prospectus and each preliminary
prospectus, and of each amendment and supplement to any thereof as Holder may
reasonably request in order to effect the offering and sale of the Subject
12
<PAGE> 14
Stock to be offered and sold, but only while the Company shall be required under
the provisions hereof to cause the registration statement to remain current and
(ii) take such action as shall be necessary to qualify the shares covered by
such registration statement under such blue sky or other state securities laws
for offer and sale as Holder shall request; provided, however, that the Company
shall not be obligated to qualify as a foreign corporation to do business under
the laws of any jurisdiction in which it shall not then be qualified or to file
any general consent to service of process in any jurisdiction in which such a
consent has not been previously filed. To the extent the Company shall enter
into an underwriting agreement (the "Agreement") with a managing underwater or
underwriters selected by it containing representations, warranties, indemnities
and agreements then customarily included by an issuer in underwriting agreements
with respect to secondary distributions, Holder agrees as a condition to
participation in such offering to make such representations and warranties with
respect to information as to it as selling stockholder, and as to its holdings,
which is furnished in writing to the underwriter for use in the registration
statement as are customary and appropriate. In connection with any offering of
Subject Stock registered pursuant to this Annex B, the Company shall furnish to
the underwater, at the Company's expense, unlegended certificates representing
ownership of the Subject Stock being sold in such denominations as requested and
instruct any transfer agent and registrar of the Subject Stock to release any
stop transfer orders with respect to such Subject Stock.
(c) In connection with any registration pursuant to this Annex B all
expenses of registration shall be borne by the Company (unless contrary to the
federal securities laws or the laws of any state where the Subject Stock is to
be offered), provided, however, in connection with any such registration, Holder
shall be obligated to pay any and all underwriter's and/or brokers commissions,
to the extent that such commissions would not have been so incurred in the
absence of the registration of such Subject Stock. Under no circumstances shall
the Company have any liability for any fees and expenses of underwriters,
counsel, accountants or other agents of Holder relating to the subject stock
with respect to any registration statement filed pursuant hereto, including but
not limited to any out-of-pocket expenses, securities liability insurance
policies, the costs of any investigations by or on behalf of Holder of the
accuracy and completeness of such registration statement or related to the
furnishing of information by Holder in connection with such registration
statement.
(d) For a period until the earlier of (i) ninety (90) days from and after
the effective date of any registration statement filed pursuant hereto in which
any of the Subject Stock is included and (ii) the sale of the Subject Shares,
the Company shall from time to time amend or supplement the registration
statement and the prospectus used in connection therewith as may be necessary to
permit such sale and disposition and to the extent necessary in order to keep
such registration statement effective and such prospectus current under the Act
so that
13
<PAGE> 15
neither the registration statement nor the prospectus contains any untrue
statement as to any material fact, omits any statements necessary to make the
statements contained therein not misleading.
(e) In the case of any offering registered pursuant to this Annex B, the
Company agrees to indemnify and hold harmless Holder and each controlling person
of Holder within the meaning of Section 15 of the Securities Act, and the
directors and officers of Holder, against any and all losses, claims, damages or
liabilities to which they or any of them may become subject under the Securities
Act or any other statute or common law or otherwise, and to reimburse them, from
time to time upon request, for any legal or other expenses reasonably incurred
by them in connection with investigating any claims and defending any actions,
insofar as any such losses, claims, damages, liabilities or actions shall arise
out of or shall be based upon any untrue statement or alleged untrue statement
contained in the registration statement relating to the sale of such Subject
Stock in any preliminary prospectus or in any prospectus or in any supplement or
amendment to any of the foregoing of a material fact, or the omission or alleged
omission to state therein a material fact required to be stated or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, provided, however, that the indemnification agreement
contained in this paragraph (e) shall not apply to such losses, claims, damages,
liabilities or actions which shall arise from (i) the sale of Subject Stock if
such losses, claims, damages, liabilities or actions shall arise out of or shall
be based upon any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission shall have been made
in reliance upon and in conformity with information furnished in writing to the
Company by Holder specifically for use in connection with the preparation of the
registration statement or any preliminary prospectus or prospectus contained in
the registration statement or any amendment thereof or supplement thereto; or
(ii) any actual or alleged untrue statement of a material fact or any actual or
alleged omission of a material fact required to be stated in any preliminary
prospectus if Holder sells Securities to a Person to whom there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the final
prospectus or of the final prospectus as then amended or supplemented, whichever
is most recent, if the Company had previously furnished copies thereof to Holder
or its representatives and such final prospectus, as then amended or
supplemented, corrected any such misstatement or omission; or (iii) the use of
any preliminary, final or summary prospectus by or on behalf of Holder after the
Company has notified Holder that such prospectus contains an untrue statement of
a material fact or omits to state a material fact required to be stated therein,
in the light of the circumstances under which they were made, not misleading; or
(iv) the use of any final prospectus, as amended or supplemented, by or on
behalf of Holder after such time as the obligation of the Company under this
Annex B to keep the related registration statement effective has expired; or (v)
any violation of any federal or state securities laws, rules or regulations
committed by Holder (other than any violation that arises out of or is based
upon the
14
<PAGE> 16
circumstances described above and as to which Holder would otherwise be
entitled to indemnification hereunder).
(f) In connection with any registration statement in which Holder is
participating, Holder will indemnify, to the extent permitted by law, the
Company, controlling persons of the Company under Section 15 of the Securities
Act and its directors and officers against any and all losses, claims, damages,
liabilities and expenses resulting, and to reimburse them, from time to time
upon request, for any legal or other expenses reasonably incurred by them in
connection with investigating any claims and defending any actions, solely by
reason of (i) any untrue statement of a material fact or any omission of a
material fact necessary to make the statements therein not misleading, in the
registration statement or any prospectus or preliminary prospectus or any
amendment or supplement thereto, but only to the extent that such untrue
statement is contained in, or such omission is omitted from, information so
furnished to the Company by Holder in writing; (ii) the use of any prospectus by
or on behalf of Holder (x) after the Company has notified Holder that such
prospectus contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein, in light of the circumstances under
which they were made, not misleading or (y) after such time as the obligation of
the Company to keep the related registration statement effective and current has
expired; (iii) the failure to send or deliver to a party to whom Holder sells
the Securities, at or prior to the written confirmation of sale, a copy of the
final prospectus or of the final prospectus as then amended or supplemented,
whichever is most recent, if the Company had previously furnished copies thereof
to Holder or its representatives; or (iv) any violation by Holder of any federal
or state securities law or rule or regulation thereunder (other than any
violation that arises out of or is based upon the circumstances described above
and as to which Holder is entitled to indemnification hereunder); provided,
however, that Holder shall not be liable in the aggregate for any amounts
exceeding the product of the sale price minus the exercise price per share of
Subject Stock of Holder sold in such registered offering and the number of
shares of Subject Stock sold pursuant to such registration statement or
prospectus by Holder.
(g) Each party indemnified under paragraph (e) or (f) of this Annex B
shall, promptly after receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
hereunder, notify the indemnifying party in writing of the commencement thereof.
The omission of any indemnified party to so notify an indemnifying party of any
such action shall not relieve the indemnifying party from any liability in
respect of such action which it may have to such indemnifies party on account of
the indemnity agreement contained in paragraph (e) or (f) of this Annex B,
unless the indemnifying party was prejudiced by such omission, and in no event
shall relieve the indemnifying party from any other liability which it may have
to such indemnified party. In case any such action shall be brought against any
indemnified party and it shall notify an indemnifying party of the commencement
thereof, the
15
<PAGE> 17
indemnifying party shall be entitled to participate therein and, to the extent
that it may desire to assume the defense thereof through counsel satisfactory to
the indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under paragraph
(e) or (f) of this Annex B for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof, other than
reasonable costs of investigation (unless such indemnified party reasonably
objects to such assumption on the grounds that there may be defenses available
to it which are different from or in addition to such indemnifying party in
which event the indemnified party shall be reimbursed by the indemnifying party
for the expenses incurred in connection with retaining one separate legal
counsel).
(h) Nothing in paragraph (e) or (f) of this Annex B shall prevent the
indemnified party from retaining counsel of its own choosing, at its own
expense, to defend or cooperate in the defense or investigation of any claim in
respect of which indemnification is available hereunder. No indemnifying party
will consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
(i) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as specified therein, the parties entitled
to indemnification by the terms thereof shall be entitled to contribution for
any and all losses, claims, damages, or liabilities, joint or several, and
expenses to which they may become subject, in such proportion as is appropriate
to reflect the relative fault of the parties entitled to indemnification, on the
one he and, and the indemnifying parties, on the other, in connection with the
matter out of which such losses, claims, damages, liabilities or expenses arise
or result from. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the parties' relative
knowledge and access to information concerning the matter with respect to which
the action was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate under the
circumstances. The Company and each Holder agrees that it would not be equitable
if the amount of such contribution were determined by pro rata or per capita
allocations. Notwithstanding the provisions of this Section (i) the Holder shall
not be required to contribute any amount in excess of the amount by which the
net proceeds received by such Holder from the sale of its Warrants or underlying
shares of Common Stock exceeds the amount of the exercise price of the Warrants
plus any damages that such Holder has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission.
(j) Notwithstanding the foregoing, Holder shall furnish to the Company such
information regarding Holder, its intended method of distribution of the
Securities and such other information as the Company may from time to time
16
<PAGE> 18
reasonably request for purposes of preparation of any registration statement
pursuant to this Annex B and to maintain the effectiveness of such registration
statement.
(i) At least five business days prior to any disposition of Securities
(other than pursuant to an underwritten offering) by Holder, Holder will orally
advise the Company (and promptly confirm such advise in writing) of the dates on
which such disposition is expected to commence and terminate, the number of
Securities expected to be sold, the method of disposition and such other
information as the Company may reasonably request in order to supplement the
prospectus contained in the registration statement in accordance with the rules
and regulations of the Commission. Promptly after receiving such advise, the
Company will, if necessary, (x) prepare a supplement to the prospectus based
upon such advice and file the same with the Commission pursuant to Rule 424(b)
under the Securities Act and (y), if necessary, qualify the Securities to be
sold under the securities or blue sky laws of such jurisdiction in the United
States as Holder shall reasonably request (subject to the proviso of Section (b)
of this Annex B).
(ii) Holder agrees that, upon receipt of any notice from the Company
of any event of the kind described in Section (d) of this Annex B, Holder will
forthwith discontinue disposition of the Securities pursuant to such
registration statement until receipt of copies of the supplemented or amended
prospectus contemplated by Section (d), and, if so directed by the Company, will
deliver to the Company all copies of the prospectus covering the Securities in
its possession at the time of receipt of such notice.
(iii) Holder shall, at any time it is engaged in a distribution of
Securities, comply with all applicable requirements of Rule M (or any successor
provisions then in force) promulgated under the Exchange Act and (x) will not
engage in any stabilization activity in connection with the securities of the
Company in contravention of such rules, (y) will distribute the Securities
solely in the manner described in the registration statement and (z) will not
bid for or purchase any securities of the Company or attempt to induce any
person to purchase any securities of the Company other than as permitted under
the Exchange Act.
(iv) Holder shall provide such information and materials, execute all
such documents and take all such other actions as the Company shall reasonably
request in order to permit the Company to comply with all applicable
requirements of law and to effect the registration of Holder's Securities.
(v) If Securities are registered for sale pursuant to Rule 415 under
the Securities Act, Holder shall cease any distribution of such shares under the
registration statement twice a year, for up to 90 days each, upon the request of
the Company if: (x) such distribution would require the public disclosure of
material
17
<PAGE> 19
non-public information concerning any transaction or negotiations involving the
Company or any of its affiliates that, in the good faith judgment of the
Company's Board of Directors (or the executive committee thereof), would
materially interfere with such transaction or negotiations, (y) such
distribution would otherwise require premature disclosure of information that,
in the good faith judgment of the Company's E3oard of Directors, would adversely
affect or otherwise be detrimental to the Company or (z) the Company proposes to
file a registration statement under the Securities Act for the offering and sale
of securities for its own account in an underwritten offering and the managing
underwriter therefor shall advise the Company in writing that in its opinion the
continued distribution of the Securities would adversely affect the success of
the offering of the securities proposed to be registered for the account of the
Company. The Company shall promptly notify Holder at such time as (i) such
transactions or negotiations have been otherwise publicly disclosed or
terminated, (ii) such non-public information has been publicly disclosed or
counsel to the Company has determined that such disclosure is not required due
to subsequent events or (iii) the completion of such underwritten offering.
(vi) The Company shall be entitled to postpone once a year, for a
reasonable period of time not to exceed 90 days, the filing of a registration
statement otherwise require to be prepared and filed by it pursuant to Section
(a) of this Annex B if, at the time it receives the written demand, (y) such
registration would require the public disclosure of material non-public
information concerning any transaction or negotiations involving the Company or
any affiliate that, in the opinion of counsel to the Company, is not yet
required to be publicly disclosed and the Company's Board of Directors, in good
faith, determines that such disclosure would materially interfere with such
transaction or negotiations on (z) such registration would, in good faith
judgment of the Company, otherwise require premature disclosure of information
which would adversely affect or otherwise be detrimental to the Company.
18
<PAGE> 1
Exhibit 10.6
NEITHER THIS SUBORDINATED CONVERTIBLE NOTE NOR THE SHARES OF
COMMON STOCK INTO WHICH IT IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
NEITHER MAY BE SOLD OR OTHERWISE TRANSFERRED, EXCEPT AS OTHERWISE PROVIDED
HEREIN, IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO RIVER OAKS FURNITURE, INC. THAT
SUCH REGISTRATION IS NOT REQUIRED.
[FORM OF 12% SUBORDINATED CONVERTIBLE NOTE]
DUE November 12, 1998
$_____________________ Belden, Mississippi
November 12, 1997
RIVER OAKS FURNITURE, INC., a Mississippi corporation (the
"Company"), for value received, hereby promises to pay ________________________
hereinafter referred to as "holder" of this 12% subordinated convertible note
(the "Note"), the principal amount of Two Hundred Eighty Thousand ($280,000.00)
Dollars (or so much thereof as shall not have been previously paid) on or before
November 12, 1998. The unpaid principal of this Note remaining outstanding from
time to time shall bear interest at the rate of 12% per annum (computed on the
basis of a 365-day year) from the date hereof. Interest shall be payable
semi-annually on each first day of May and first day of November after the date
hereof. Principal and all accrued and unpaid interest shall be due and payable
on or before November 12, 1998. Payments of principal and interest on this Note
shall be made in lawful money of the United States of America at the principal
office of the Company. The Company shall have the right to prepay this Note in
while or in part.
1. Events of Default. If any of the following conditions or events
(each an "Event of Default" and collectively, the "Events of Default") shall
occur and be continuing:
(a) if the Company shall default in the payment of any
principal on this Note when the same becomes due and payable, whether at
maturity or otherwise, and such payment shall not have been made within thirty
(30) days after written notice of default shall have been received by the
Company from the holder of this Note; or
(b) if the Company shall default in the payment of any
interest on the Note when the same becomes due and payable and such default
shall continue
<PAGE> 2
more than thirty (30) days after written notice of default shall have been
received by the Company from the holder of this Note; or
(c) if the Company shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
bankruptcy or similar statute, law or regulation, or shall file any answer
admitting or not contesting the material allegations of a petition filed against
the Company in any such proceeding, or shall seek or consent to or acquiesce in
the appointment of any custodian, trustee, receiver or liquidator of the Company
or of all or substantially all of the properties of the Company or such
subsidiary, or if the Company or its directors or majority shareholders shall
take any action looking to the dissolution or liquidation of the Company; or
(d) if, within ninety (90) days after the commencement of an
involuntary bankruptcy proceeding or other action against the Company seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been dismissed or all orders or
proceedings thereunder affective the operations or the business of the Company
stayed, or if the stay of any such order or proceeding shall thereafter be set
aside, or if, within ninety (90) days after the appointment without the consent
or acquiescence of the Company or any custodian, trustee, receiver or liquidator
of the Company or of all or substantially all of the properties or the Company,
such appointments shall not have been vacated; or
(e) the Company shall be in default under any Senior Debt and
such Senior Debt has been accelerated and is immediately due and payable by the
Company;
then, and in such event, the holder hereof may at any time (unless all defaults
shall theretofore have been remedied) at its option, by written notice to the
Company, declare this Note to be due and payable, whereupon this Note shall
forthwith mature and become due and payable, together with interest accrued and
unpaid hereon, without presentment, demand, protest or notice, all of which are
hereby waived; provided, however, no holder shall take any action to enforce its
rights hereunder unless and until the holder of any Senior Debt shall have
accelerated such Senior Debt or has otherwise taken legal action to collect such
Senior Debt following the default of the same.
2
<PAGE> 3
2. Conversion.
2.1. Conversion Privilege. This Note may, at the election of
the holder hereof, on or prior to the maturity date (or, if this Note is not
paid on the maturity date, the date payment is made) be converted into the
number of fully paid and nonassessable shares of the Company's Common Stock,
$.10 par value per share (the "Common Stock"), determined by dividing (x) the
conversion price of $2.50 (such conversion price, as so adjusted and readjusted
and in effect at any time, being herein called the "Conversion Price") into (y)
the outstanding principal amount of this Note being converted.
2.2 Manner of Conversion, Partial Conversion, Etc.
2.2.1. Surrender of Note. This Note may be converted
by the holder hereof by surrender of this Note, accompanied by written notice
stating that such holder elects to convert all or a portion of the outstanding
principal amount hereof. The certificate or certificates for shares of Common
Stock which are to be issued will be issued in the name of the holder. A minimum
of at least Ten Thousand Dollars ($10,000) of the principal amount must be
tendered. Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which this Note shall have been so
surrendered to the Company; and at such time the rights of the holder as to that
portion of this Note so converted shall cease, and the certificate or
certificates for shares of Common Stock (or other securities) shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record thereof. In no event may the holder hereof surrender this Note for
partial conversion more often than two (2) times per calendar year.
2.2.2. Accrued Interest, Etc. The Company will have
no obligation to pay to the holder converting this Note any accrued but unpaid
interest on the principal amount so converted up to and including the date of
conversion.
2.3. Delivery of Stock Certificates; Fractional Shares. As promptly as
practicable after the conversion of this Note in whole or in part, and in any
event within ten (10) days thereafter, the Company will issue and deliver to the
holder of this Note, a certificate or certificates for the number of full shares
of Common Stock (or other securities) issuable upon such conversion, plus, in
lieu of any fractional share to which such holder would otherwise be entitled,
cash equal to such fraction multiplied by the market value of one full share as
of the close of business on the date of such conversion, as determined by the
Board of Directors. Upon issuance, such certificates shall bear a legend
restricting transfers similar to the legend on this Subordinated Convertible
Note.
2.4. Adjustment of Conversion Price. The Conversion Price
shall be adjusted from time to time as follows:
3
<PAGE> 4
2.4.1. If (i) the Company shall fix a record date for the issuance of
any stock dividend payable in shares of Common Stock or (ii) the number of
shares of Common Stock shall have been increased by a subdivision or split-up of
shares of Common Stock, then, on the record date fixed for the determination of
holders of Common Stock entitled to receive such dividend or immediately after
the effective date of such subdivision or split-up, as the case may be, the
number of shares to be delivered upon conversion of this Note will be
appropriately increased so that the holder will be entitled to receive the
number of shares of Common Stock the holder would have owned immediately
following such action had this Note been converted immediately prior thereto,
and the Conversion Price will be appropriately adjusted.
2.4.2. If the number of shares of Common Stock shall be decreased by a
combination of the outstanding shares of Common Stock, then, immediately after
the effective date of such combination, the number of shares of Common Stock to
be delivered upon conversion of this Note will be appropriately decreased so
that the holder thereafter will be entitled to receive the number of shares of
Common Stock that the holder would have owned immediately following such action
had this Note been converted immediately prior thereto, and the Conversion Price
will be appropriately adjusted.
2.4.3. No adjustment in the Conversion Price need be made if such
adjustment would amount to a change in such Conversion Price of less than $.10;
provided, however, that the amount by which any adjustment is not made by reason
of the provisions of this Section 2.4.3 shall be carried forward and taken into
account at the time of any subsequent adjustment in the Conversion Price.
2.5. Adjustments for Consolidation Merger, Sale of Assets,
Reorganization, Etc. If any capital reorganization of the Company, or any
reclassification of the Common Stock, or any consolidation or share exchange of
the Company with or merger of the Company with or into any other corporation or
any sale, lease or other transfer of all or substantially all of the assets of
the Company to any other person (including any individual, partnership, joint
venture, corporation, trust or group thereof), shall be effected in such a way
that the holders of the Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, upon
conversion of this Note in accordance with the terms hereof, the holder of this
Note shall have the right to receive the kind and amount of stock, securities or
assets receivable upon such reorganization, reclassification, consolidation,
share exchange, merger or sale, lease or other transfer by a holder of the
number of shares of Common Stock that such holder would have been entitled to
receive upon conversion of this Note had this Note been exercised immediately
before such reorganization, reclassification, consolidation, share exchange,
merger or sale, lease or other transfer, subject to adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for herein.
4
<PAGE> 5
2.6. Notices of Record Date, Etc. In the event of
(a) any action by the Company which would require an
adjustment to the Conversion Price pursuant to Section 2.4, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the Common Stock, any consolidation or
merger involving the Company and any other person, any transfer of all or
substantially all the assets of the Company to any other person or any other
transaction described in Section 2.5 hereof, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to the holder of this Note, at least ten (10) days prior
to the date of any action referred to in the notice referred to herein, a notice
specifying (i) the date on which any such record is to be taken for the purpose
of determining the holders of record of Common Stock entitled to receive such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation, winding-up or other transaction referred to in
Section 2.4 or 2.5 hereof is to take place, and the time, if any such time is to
be fixed, as of which the holders of record of Common Stock shall be entitled or
obligated to exchange their shares of Common Stock for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation,
winding-up or other transaction referred to in Section 2.4 or 2.5 hereof. In
addition, promptly after the occurrence of any event which results in an
adjustment of the Conversion Price, the Company shall mail to the holder of this
Note a notice of such adjustment together with a statement setting forth the
computations relating thereto. Failing to give such notice or any default
therein shall not affect the legality or validity of the proceedings described
in Subsection (a), (b) or (c) of this Section 2.6.
2.7. Reservation of Stock, Etc., Issuable on Conversion. The
Company will at all times reserve and keep available, solely for issuance and
delivery upon the conversion of this Note, the number of shares of Common Stock
(or other securities), whether authorized but unissued shares reserved by it
which are free from preemptive rights or issued shares which have been
reacquired by it, from time to time issuable upon the conversion of this Note at
the time outstanding. The Company hereby covenants that all such securities
shall be duly authorized and, when issued upon such conversion, shall be validly
issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
2.8. Conversion Agent. The Company may, upon 10 days prior
written notice to the holder of this Note, appoint a bank or trust company as
agent
5
<PAGE> 6
for the purpose of accepting this Note surrendered for conversion and issuing
Common Stock upon the conversion of this Note pursuant to Section 2.2, and
thereafter (as long as the authority of such agent shall continue in effect) any
such surrender and conversion and issuance shall be made at such office to and
by such agent.
3. Subordination.
3.1. Definition. For purposes of this Section 3.1 the term "Senior
Debt" shall mean any indebtedness for borrowed money, the payment of which the
Company is at the time of determination responsible or liable as obligor,
guarantor or otherwise, other than (a) indebtedness as to which, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is expressly provided that such indebtedness is junior and
subordinate to other indebtedness and obligations of the Company, (b)
indebtedness which by its terms refers explicitly to this Note and states that
such indebtedness shall not be senior thereto and shall be equally subordinated
and equally junior, and (c) indebtedness of the Company in respect of this Note.
Senior Debt shall continue to be Senior Debt and entitled to the benefits of the
subordination provisions set forth herein without regard to any amendment,
modification, or waiver of any term of the Senior Debt or extension or renewal
of the Senior Debt, and any of which may be made or created at any time by the
Company in its sole discretion.
3.2. Note Subordinate to Senior Debt. The Company, for itself,
its successors and assigns, covenants and agrees, and each holder, by its
acceptance of this Note or any portion hereof, likewise covenants and agrees,
that this Note shall be subordinated and subject, to the extent and in the
manner herein set forth, in right of payment to the prior payment in full of all
Senior Debt. The provision of this Section 3 are made for-the benefit of all
holders of Senior Debt, and any such holder may proceed to enforce such
provisions.
3.3. Payment Over of Proceeds Upon Dissolution, Etc. No
payment on account of principal of (or premium, if any) or interest on this Note
shall be made, if any default or event of default with respect to any Senior
Debt, which permits or with the giving of notice or passage of time or both
would permit the holders thereof (or a trustee on their behalf) to accelerate
the maturity thereof, shall have occurred and be continuing and the Company
shall have received written notice thereof from the holders of at least 10% in
principal amount of any kind or category of any Senior Debt (or the
representative or representatives of such holders).
In the event this Note is declared due and payable before the
maturity date hereof, or upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or total or partial liquidation or
reorganization of the
6
<PAGE> 7
Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, or upon any assignment by the Company for the
benefit of creditors or any other marshalling of the assets of the Company, all
principal of (and premium, if any) and interest due or to become due upon all
Senior Debt (including any interest thereon occurring after the commencement of
any such proceeding) shall first be paid in full before the holder of this Note
shall be entitled to retain any assets (other than shares of stock of the
Company as reorganized or readjusted or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated, at least to the same extent as this Note, to
the payment of all Senior Debt which may at the time be outstanding, provided
that the rights of the holders of the Senior Debt are not altered by such
reorganization or readjustment) so paid or distributed in respect of this Note
(for principal, premium, if any, or interest); and upon such dissolution or
winding-up or liquidation or reorganization or assignment or marshaling of
assets, any payment or distribution or assets of the Company of any kind or
character, whether in cash, property or securities (other than shares of stock
of the Company as reorganized or readjusted or securities of the Company or any
other corporation provided for by a plan or reorganization or readjustment, the
payment of which is subordinated, at least to the same extent as this Note, to
the payment of all Senior Debt which may at the time be outstanding, provided
that the rights of the holders of the Senior Debt are not altered by such
reorganization or readjustment), to which the holders of this Note would be
entitled, except for the provisions of this Section, shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, or by the holders of this Note
if received by them or it, directly to the holders of Senior Debt (pro rata to
each such holder as their interests may appear on the basis of the respective
amounts of Senior Debt held by such holder, including any interest thereon
accruing after the commencement of any such proceedings) or their
representatives, to the extent necessary to pay all Senior Debt in full, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt, before any payment or distribution is made to the holders of this
Note.
No holder of Senior Debt shall be prejudiced in his right to
enforce subordination of this Note by any act or failure to act on the part of
the Company.
Subject to the payment in full of all Senior Debt, the holder
of this Note shall be subrogated (equally and ratably with the holders of all
indebtedness of the Company which, by its express terms, ranks on a parity with
this Note and is entitled to like rights of subrogation) to the rights of the
holders of Senior Debt to receive payments or distributions of assets of the
Company applicable to the Senior Debt until this Note shall be paid in full. For
purposes of such subrogation, no payments or distributions on the Senior Debt
pursuant to this Section shall, as between the Company, its creditors other than
the holders of Senior Debt, and the holder of this Note, be deemed to be a
payment by the Company to or on account of the Senior Debt, and no payments or
distributions to the holders of this Note of
7
<PAGE> 8
assets by virtue of the subrogation herein provided for shall, as between the
Company, its creditors other than the holder of Senior Debt, and the holders of
this Note, be deemed to be a payment to or on account of this Note. The
provisions of this Section are and are intended solely for the purpose of
defining the relative rights of the holder of this Note, on the one hand, and
the holders of Senior Debt, on the other hand, and nothing contained in this
Section or in this Note is intended to or shall impair the obligation of the
Company, which is unconditional and absolute, to pay the principal of (and
premium, if any) and interest on this Note as and when the same shall become due
and payable in accordance with its terms, or to affect the relative rights of
the holders of this Note and creditors of the Company other than the holders of
Senior Debt, nor shall anything herein prevent the holders of this Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Note, subject to the rights, under this Note, of the holders of Senior Debt
in respect of cash, property or securities of the Company otherwise payable or
delivered to the holders of this Note upon the exercise of any such remedy.
Nothing contained in this Section 3.3 shall prevent conversion
of this Note.
4. Miscellaneous.
4.1. Governing Law. This Note shall be governed by the laws of
the State of Mississippi.
4.2. Notices. All notices delivered pursuant to the terms hereof
shall be deemed effective upon receipt thereof.
RIVER OAKS FURNITURE, INC.
BY:
------------------------------------
STEPHEN L. SIMONS
ITS: CHAIRMAN AND CEO
8
<PAGE> 1
Exhibit 10.7
[FORM OF WARRANT]
THIS SECURITY AND THE SECURITIES ISSUABLE, UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE
AND IS CURRENT WITH RESPECT TO THE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY UPON THE HOLDER HEREOF FIRST
HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY, OR OTHER COUNSEL
ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR
SECURITIES LAW.
November 10, 1997
RIVER OAKS FURNITURE, INC.
For good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by River Oaks Furniture, Inc., a Mississippi
corporation, with its principal office at 3350 McCulloush Blvd., Belden,
Mississippi 38826 (the "Company"), _________________________ (the "Holder"),
subject to the terms and conditions of this Warrant, is hereby granted the right
to purchase, at the initial exercise price per share equal to the lesser of (i)
$2.50; or (ii) the closing bid price of the Common Stock of the Company on the
first day it is relisted for trading on NASDAQ or any national exchange at any
one or more times from the date hereof until 5:00 p.m. on November 9, 2002, in
the aggregate, twenty-eight thousand (28,000) shares of Common Stock of the
Company, $.10 par value (the "Shares") subject to adjustment as provided in
Section 5 hereof.
This Warrant initially is exercisable at a price per share equal to the
lesser of (i) $2.50; or (ii) the closing bid price of the Common Stock of the
Company on the first day it is relisted for trading on NASDAQ or any national
exchange payable in cash, by certified or official bank check in New York
Clearing House funds or other form of payment satisfactory to the Company,
subject to adjustment as provided in Section 5 hereof.
<PAGE> 2
1. Exercise of Warrant. The purchase rights represented by this Warrant
are exercisable at the option of the Holder hereof, in whole or in part, at one
or more times during any period in which this Warrant may be exercised as set
forth above. The Holder shall not be deemed to have exercised its purchase
rights hereunder until the Company receives written notice of the Holders
interest to exercise its purchase rights hereunder. The written notice shall be
in the form of the Subscription Form attached hereto and made a part hereof.
Less than all of the Shares may be purchased under this Warrant.
2. Issuance of Certificates. Upon the exercise of this Warrant, the
issuance of certificates for Shares underlying this Warrant shall be made
forthwith (and in any event within ten (10) business days after the Company's
receipt of (i) written notice hereunder as specified in Section 1 above) and
(ii) good funds in respect of the Purchase Price pursuant to Section 4 hereof
for the shares so exercised and such certificates shall be issued in the name of
the Holder hereof.
3. Restriction on Transfer and Registration Rights. Neither this
Warrant nor any Shares issuable upon exercise hereof have been registered under
the Securities Act of 1933, as amended (the "Act"), and neither may be sold or
transferred in whole or in part unless the Holder shall have first given prior
written notice to the Company describing such sale or transfer and furnished to
the Company an opinion, satisfactory to counsel for the Company as determined by
such counsel in its sole discretion, to the effect that the proposed sale or
transfer may be made without registration under the Act; provided, however, that
the foregoing shall not apply if there is in effect a registration statement
with respect to this Warrant or the Shares issuable upon exercise hereof, as the
case may be, at the time of the proposed sale or transfer. Upon exercise, in
part or in whole, of this Warrant, each certificate issued representing the
Shares underlying this Warrant shall bear a legend to the foregoing effect. The
Holder shall have such rights to request the Company to register all or any of
the Shares issuable upon exercise of this Warrant as set forth in Annex B hereto
(the "Registration Rights") subject to the terms of Annex B.
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4. Price.
4.1 Initial and Adjusted Purchase Price. The initial Purchase Price per
share shall be equal to the lesser of (i) $2.50; or (ii) the closing bid price
of the Common Stock of the Company on the first day it is relisted for trading
on NASDAQ or any national exchange. The adjusted Purchase Price shall be the
price which shall result from time to time from any and all adjustments of the
initial purchase price in accordance with the provisions of Section 5 hereof.
4.2 Purchase Price. The term "Purchase Price" herein shall mean the
initial purchase price or the adjusted purchase price, as the case may be.
5. Adjustments of Purchase Price and Number of Shares. The Shares
subject to this Warrant and the Purchase Price thereof shall be appropriately
adjusted by the Company in accordance with the Statement of Rights to Warrants
included in Annex A hereto.
6. Replacement of Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and, in case of such loss, theft, destruction or mutilation, of
indemnity or security reasonably satisfactory to it in its sole discretion, and
reimbursement to the Company of all expenses incidental or relating thereto, and
upon surrender and cancellation of this Warrant (unless lost, stolen or
destroyed), the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
7. Notices to Warrant Holder. Nothing contained in this Warrant shall
be construed as conferring upon the Holder hereof the right to vote or to
consent as a shareholder in respect of any meetings of shareholders for the
election of directors or any other matter, or as having any rights whatsoever as
a shareholder of the Company. The Company shall, however, during the term of
this warrant supply ________________________ with copies of all flags made with
the SEC under the Securities Exchange Act of 1934, as amended and of all
documents delivered to
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stockholders of the Company.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of this Warrant, to the address of such
Holder as shown on the books of the Company.
(b) If to the Company, to the address set forth on the first page of
this Warrant or to such other address as the Company may designate by notice to
the Holder.
9. Successors. All the agreements contained in this Warrant shall bind
the parties hereto and their respective heirs, executors, administrators,
distributees, permitted successors and assigns. The Holder may assign this
Warrant without the Company's prior written consent provided that the Holder
complies with the provisions of this agreement and applicable securities laws.
Any attempted assignment in violation of the preceding sentence shall be void
and of no effect.
10. Headings. The headings in this Warrant are inserted for purposes of
convenience only and shall have no substantive effect.
11. Law Governing. This Warrant is delivered in the State of
Mississippi and shall be construed and enforced in accordance with, and governed
by, the laws of the State of Mississippi, without giving effect to conflicts of
law principles.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its corporate name by, and such signature to be attested to by, a duly
authorized officer as of the date first above written.
RIVER OAKS FURNITURE, INC.
By:
---------------------------------
Stephen L. Simons
Its: Chairman and CEO
Attest:
By:
---------------------------
Thomas D. Keenum, Sr.
Its: Secretary
