As Filed with the Securities and Exchange Commission on July 18, 1996
Registration No. 33-79554
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 2 TO
FORM SB-2 ON FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
THE GREAT TRAIN STORE COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Delaware 75-2539189
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
14180 Dallas Parkway, Suite 618
Dallas, Texas 75240
(214) 392-1599
(Address, Including Zip Code, and Telephone
Number, Including Area Code, of Registrant's
Principal Executive Offices)
James H. Levi
President and Chief Executive Officer
14180 Dallas Parkway, Suite 618
Dallas, Texas 75240
(214) 392-1599
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies of all correspondence to:
DOUGLAS J. BATES, ESQ.
Gallop, Johnson & Neuman, L.C.
101 South Hanley
St. Louis, Missouri 63105
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Post-Effective Amendment to Registration Statement
becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the shares offered hereby, all of which will be
paid by the Company:
Transfer and Warrant Agent fees and charges ............. 1,200
Printing and engraving expenses ......................... 3,000
Legal fees and expenses ................................. 10,000
Accounting fees and expenses ............................ 5,000
Miscellaneous ........................................... 5,000
------
Total .............................................. $24,200
======
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware permits
indemnification by a corporation of certain officers, directors, employees and
agents. Consistent therewith, Article VIII of the Company's Bylaws requires that
the Company indemnify all persons whom it may indemnify pursuant thereto to the
fullest extent permitted by Section 145. Article VIII also provides that
expenses incurred by an officer or director of the Company or any of its direct
or indirect wholly-owned subsidiaries, in defending a civil or criminal action,
suit or proceeding, will be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such officer, director, employee or agent to repay such amount
if it shall ultimately be determined that he is not entitled to be indemnified
by the Company as authorized. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
In addition, Article VII of the Company's Certificate of Incorporation
provides that directors of the Company shall not be personally liable for
monetary damages to the Company or its stockholders for a breach of fiduciary
duty as a director, except for liability as a result of (i) a breach of the
director's duty of loyalty to the Company or its stockholders; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) an act related to the unlawful stock repurchase or
payment of a dividend under Section 174 of Delaware General Corporation Law; and
(iv) transactions from which the director derived an improper personal benefit.
The Company has procured and intends to maintain a policy of insurance
under which the directors and officers of the Company will be insured, subject
to the limits of the policy, against certain losses arising from claims made
against such directors and officers by reason of any acts or omissions covered
under such policy in their respective capacities as directors or officers.
Item 27. Exhibits
1.1 Underwriting Agreement
3.1 Certificate of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1 Form of Stock Certificate
4.2 Form of Warrant Agreement and Certificates
4.3 Form of Bridge Warrants
4.4 Form of Underwriter's Option
4.5 Form of Management Notes
4.6 Form of Security Agreement
4.7 Form of Subordination and Pledge Agreement
5.1 Opinion of Gallop, Johnson & Neuman, L.C.
10.1 The Great Train Store Company 1994 Incentive Compensation Plan
II-2
<PAGE>
10.2 The Great Train Store Company 1994 Director Stock Option Plan
10.3 Form of Restricted Stock Agreement with Stanley R. Herndon and Michael
D. Glazer
10.4 Form of Employment Agreement with James H. Levi
10.5 The Great Train Store Partners, L.P. Agreement of Limited Partnership
dated as of September 1, 1990 as amended
10.6 Consulting Agreement with Barington Capital Group, L.P.
10.7 First Amendment to The Great Train Store Company 1994 Incentive
Compensation Plan
10.8 Second Amendment to The Great Train Store Company 1994 Incentive
Compensation Plan
10.9 First Amendment to The Great Train Store Company 1994 Direct Stock
Option Plan
10.10 Letter agreement with Barington Capital Group, L.P. dated July 15, 1996
21.1 Subsidiaries of the Registrant
23.2 Consent of Gallop, Johnson & Neuman, L.C.
23.3 Consent of KPMG Peat Marwick LLP, independent public accountants
24.1 Power of Attorney
99.2 Cautionary Statement Identifying Important Factors that Could Cause
the Company's Actual Results to Differ from those Projected in Forward
Looking Statements
Item 28. Undertakings
(a) The undersigned registrant hereby further undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to reflect
in the prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the undersigned registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on July 17, 1996.
THE GREAT TRAIN STORE COMPANY
By /s/ James H. Levi
James H. Levi, President,
Chief Executive Officer and
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statements has been signed by the following persons in the
capacities and one the dates indicated.
/s/ James H. Levi President, Chief Executive Officer July 17, 1996
James H. Levi and Chairman of the Board
(Principal Executive Officer)
/s/ Cheryl A. Taylor Vice President - Finance and July 17, 1996
Cheryl A. Taylor Administration (Principal
Financial and Accounting Officer)
* Director July 17, 1996
Joel S. Pollack
* Director July 17, 1996
John S. Schultz
* Director July 17, 1996
Charles M. Tureen
* Director July 17, 1996
Robert M. Warner
*By: /s/ James H. Levi
James H. Levi, Attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------ ----------- ----
<S> <C> <C>
1.1* Underwriting Agreement ..............................................
3.1* Certificate of Incorporation of the Registrant ......................
3.2* Bylaws of the Registrant ............................................
4.1* Form of Stock Certificate ...........................................
4.2* Form of Warrant Agreement and Certificates...........................
4.3* Form of Bridge Warrants..............................................
4.4* Form of Underwriter's Option ........................................
4.5* Form of Management Notes ............................................
4.6* Form of Security Agreement ..........................................
4.7* Form of Subordination and Pledge Agreement ..........................
5.1* Opinion of Gallop, Johnson & Neuman, L.C. ...........................
10.1* The Great Train Store Company 1994 Incentive Compensation Plan.......
10.2* The Great Train Store Company 1994 Director Stock Option Plan........
10.3* Form of Restricted Stock Agreement with Stanley R. Herndon and
Michael D. Glazer .................................................
10.4* Form of Employment Agreement with James H. Levi .....................
10.5* The Great Train Store Partners, L.P. Agreement of Limited
Partnership dated as of September 1, 1990 as amended ..............
10.6* Consulting Agreement with Barington Capital Group, L.P...............
10.7**** First Amendment to The Great Train Store Company 1994 Incentive
Compensation Plan .................................................
10.8**** Second Amendment to The Great Train Store Company 1994 Incentive
Compensation Plan .................................................
10.9**** First Amendment to The Great Train Store Company 1994 Directors
Stock Option Plan ...............................................
10.10 Letter agreement with Barington Capital Group, L.P. dated
July 15, 1996 .....................................................
21.1**** Subsidiaries of the Registrant ......................................
23.2* Consent of Gallop, Johnson & Neuman, L.C.
(included in Exhibit 5.1) .........................................
23.3**** Consent of KPMG Peat Marwick LLP, independent public
accountants........................................................
24.1* Power of Attorney (set forth on signature page) .....................
99.1***** Cautionary Statement Identifying Important Factors that Could
Cause the Company's Actual Results to Differ from those
Projected in Forward Looking Statements............................
</TABLE>
* previously filed
** Incorporated by Reference to Quarterly Report on Form 10-QSB for the
Twenty-Six Week Period Ended July 1, 1995.
*** Incorporated by Reference to Current Report on Form 8-K filed December
22, 1994.
**** Incorporated by Reference to Annual Report on Form 10-KSB for the fiscal
year ended December 30, 1995
***** Incorporated by Reference to Annual Report on Form 10-QSB for the thirteen
weeks ended March 30, 1996
II-5
THE GREAT TRAIN STORE COMPANY
14180 Dallas Parkway
Suite 618
Dallas, Texas 75240
July 15, 1996
Barington Capital Group, L.P.
888 Seventh Avenue
New York, New York 10019
Dear Sirs:
1. THE TRANSACTION. The Great Train Store Company, a Delaware corporation
(the "Company"), has filed an amendment to its registration statement on Form
SB-2 on Form S-3 with the Securities and Exchange Commission (the "Commission")
in order to register the common stock, par value $.01 per share ("Common
Stock"), issuable upon exercise of its outstanding warrants (the "Warrants").
Such registration statement, as amended (including the prospectus, financial
statements, exhibits and all other documents filed as a part thereof or
incorporated by reference directly or indirectly therein (such incorporated
documents being hereinafter referred to as the "Incorporated Documents")), is
hereinafter referred to as the "Registration Statement".
The Company intends to solicit the holders of the Warrants (the
"Warrantholders") to exercise the Warrants prior to their expiration (such
solicitation being hereinafter referred to as (the "Transaction"). In connection
therewith, the Company will deliver to each Warrantholder a copy of the
prospectus forming a part of the Registration Statement at the time it was
declared effective (such prospectus, as it may be amended or supplemented being
hereinafter referred to as the "Warrant Prospectus") and any other document or
instrument required by any applicable federal, state securities or blue sky law.
<PAGE>
2. RETENTION. The Company hereby retains you, and you hereby agree, to use
your best efforts to solicit the exercise of Warrants prior to their expiration.
Your obligation to do so, however, shall be subject to (i) the Registration
Statement being declared effective by the Commission and no order of any court
or regulatory or governmental agency, authority or instrumentality (a "Stop
Order") suspending the effectiveness of the Registration Statement, preventing
or suspending the use of the Warrant Prospectus, the Registration Statement or
any amendment or supplement thereto, refusing to permit the effectiveness of the
Registration Statement, or enjoining, preventing or suspending the Transaction,
having been issued; (ii) no litigation or proceeding before any court or
regulatory or governmental agency, authority, or instrumentality having been
commenced or threatened with respect to the Transaction, any of the Transaction
Material (as hereinafter defined) or the execution, delivery or performance of
this letter agreement; (iii) compliance by the Company with all applicable laws,
rules, regulations, orders, consents, judgments and decrees of any court or
regulatory or governmental agency, authority or instrumentality (including,
without limitation, any applicable federal and state securities or blue sky
laws); (iv) all necessary consents, exemptions, orders, approvals and other
actions of any court or regulatory or governmental agency, authority or
instrumentality (including, without limitation, the Commission and any state
securities or blue sky commissions or authorities) having been obtained and
remaining in full force and effect; and (v) compliance by the Company with all
of the terms and conditions contained in this letter agreement and in the
Transaction Material; and (vi) the accuracy of all representations, warranties
and statements made by the Company contained in this letter agreement or in the
Transaction Material.
3. NO LIABILITY FOR ACTS OF DEALERS, BANKS AND TRUST COMPANIES. You shall
not be liable to the Company for any act or omission to act on the part of any
broker or dealer in securities (a "Dealer") (other than yourself), bank or trust
company, or any other person, if any, who participates in any manner in the
Transaction. In connection with the Transaction, no Dealer, bank or trust
company is to be deemed to be acting as your agent or as the agent of the
Company, and you shall act as an independent contractor and are not to be deemed
the agent of any dealer, bank or trust company or the agent of the Company.
<PAGE>
4. THE TRANSACTION MATERIAL. The Company hereby agrees to furnish you with
one copy of the original Warrant Prospectus and the first supplement thereto,
and as many copies as you may reasonably request of all other documents filed or
to be filed with any federal, state or local governmental or regulatory agency,
authority or instrumentality, and any amendments or supplements to any of such
documents, to be used by the Company in connection with the Transaction (the
Registration Statement (including, without limitation, the Incorporated
Documents), the Warrant Prospectus, such other documents, and any further
material authorized by the Company for use in connection with the Transaction or
published or distributed to Warrantholders, being hereinafter collectively
referred to as the "Transaction Material"), and you are hereby authorized to use
copies of the Transaction Material in connection with the Transaction. No
additional Transaction Material will be used in connection with the Transaction
or be filed with the Commission (or any other federal or any state or local
governmental or regulatory agency, authority or instrumentality) with respect to
the Transaction unless the Company shall have first submitted it to you a
reasonable time prior to such use and shall have given reasonable consideration
to you and your counsel's comments, if any, thereon.
5. COMPENSATION. The Company agrees to pay to you as compensation for your
services hereunder a percentage of the gross proceeds received by the Company
from the exercise of all Warrants solicited by you (as confirmed in writing by
the Warrantholders you have solicited) determined as follows: (i) if up to
350,000 of such Warrants are exercised, 2% of such gross proceeds; (ii) if
between 350,001 and 500,000 of such Warrants are exercised, 5% of such gross
proceeds; (iii) if between 500,001 and 750,000 of such Warrants are exercised,
8% of such gross proceeds; and (iv) if 750,001 or more of such Warrants are
exercised, 10% of such gross proceeds. The percentage so determined shall apply
to the entire gross proceeds from all Warrants solicited by you (and not just to
the Warrants in excess of the previous category). The compensation provided for
herewith is in lieu of the compensation called for by Section 5(bb) of the
Underwriting Agreement, dated August 4, 1994, between us.
-3-
<PAGE>
6. EXPENSES. In addition to your compensation for your services, the
Company hereby agrees that it will, without regard to whether the Transaction is
commenced, or withdrawn, terminated or cancelled prior to the exercise by any
Warrantholder of any Warrants pursuant thereto, and without regard to the number
of Warrants (if any) exercised by any Warrantholder pursuant thereto, (i) bear
all expenses of preparing, printing and filing the Transaction Material (other
than printing the original Warrant Prospectus and the first supplement thereto
which will be borne by you), all advertisement expenses relating to the
Transaction incurred or authorized by the Company, all expenses of mailing,
publishing or otherwise transmitting Transaction Material to Warrantholders,
(ii) bear all expenses of Continental Stock Transfer & Trust Company (the
"Warrant Agent"), (iii) bear all expenses of the Shareholders Communication
Corporation, hired in connection with the Transaction, and (iv) bear all other
expenses involved in making the Transaction incurred or authorized by the
Company or on its behalf. All payments to be made by the Company pursuant to
this Paragraph 6 shall be made promptly after receipt by it of invoices
therefor.
7. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE COMPANY.
The Company represents, warrants covenants and agrees, in addition to each of
the other representations, warranties, covenants and agreements contained
herein, that:
(i) all necessary corporate action on the part of the Company has been
duly taken to authorize commencement and consummation of the Transaction
(including, without limitation, the issuance of Common Stock upon exercise
of the Warrants) and the execution, delivery and performance of this letter
agreement, and, when executed by you, this letter agreement will be a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms;
-4-
<PAGE>
(ii) the Transaction Material, as filed, used, published or
distributed, or as amended or supplemented from time to time, will comply
in all material respects with the applicable provisions of the Securities
Act of 1933, as amended (the "1933 Act"), or the Securities Exchange Act of
1934, as amended, (the "1934 Act"), as the case may be, and the rules and
regulations thereunder. None of the Transaction Material, as filed, used,
published or distributed, or as amended or supplemented from time to time,
will at any time contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
are made, not misleading, and no event will have occurred which should have
been set forth in an amendment or supplement to the Transaction Material
which has not then been set forth in such an amendment or supplement. Each
of the Incorporated Documents will comply in all material respects with the
requirements of the 1934 Act;
(iii) the commencement and consummation of the Transaction (including,
without limitation, the issuance of Common Stock upon the exercise of the
Warrants) and the execution, delivery and performance of this letter
agreement will comply with all applicable requirements of law (including
any applicable regulations of the Commission, any applicable state
securities and blue sky laws and any applicable laws, rules and regulations
of any regulatory or governmental agency, authority or instrumentality),
and no consent, exemption, order, approval or other action of, or filing
with, any regulatory or governmental agency, authority or instrumentality,
federal, state or local, is required in connection with the commencement or
consummation of the Transaction except for such consents, exemptions,
orders, approvals or other actions which have been obtained and are in full
force and effect and any such filings which have been made or will be made
in compliance with applicable law.
8. NOTICE OF CERTAIN EVENTS. The Company will advise you promptly of (i)
any proposal or requirement to amend or supplement the Transaction Material,
(ii) the effectiveness of the Registration Statement and any post-effective
amendment thereto, (iii) the receipt of any notification with respect to a Stop
Order or the initiation or threatening of any proceeding with respect to a Stop
Order, (iv) the issuance of any comments or the taking of any action by the
Commission or any other regulatory or governmental agency, authority or
instrumentality concerning the Transaction, or (v) any other information
relating to the Transaction which you may from time to time reasonably request.
-5-
<PAGE>
9. INDEMNIFICATION AND CONTRIBUTION. The Company hereby agrees to indemnify
and hold harmless you LNA Capital Corp., your general partner, and each of your
respective, officers, directors, employees, partners, stockholders, agents,
representatives and counsel, and any person controlling (within the meaning of
Section 15 of the 1933 Act or Section 20(a) of the 1934 Act) you or any such
person (collectively, the "Indemnified Persons") from and against any and all
losses, claims, damages, liabilities and expenses whatsoever (a) arising out of
or based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any Transaction Material (including, without limitation, the
Incorporated Documents) or any omission or alleged omission to state in any such
material or document a material fact required to be stated therein or necessary
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading, unless such statement or omission was made
in reliance upon and in conformity with written information furnished to the
Company by you expressly for inclusion in the Transaction Material, or (ii) any
breach or alleged breach by the Company of any of its representations,
warranties, covenants or agreements contained in this letter agreement; or (b)
otherwise arising out of, relating to or in connection with, or alleged to arise
out of, relate to or be in connection with, the Transaction (including, without
limitation, the issuance of Common Stock upon exercise of the Warrants);
provided, however, that no Indemnified Person shall be entitled to
indemnification in the case of clause (b) for any loss, claim, damage, liability
or expense (including, but not limited to, any and all expenses incurred by such
Indemnified Person and its attorneys (under circumstances where such Indemnified
Person shall be entitled to employ separate counsel as provided below in this
Paragraph 9) incurred in investigating, preparing for or defending against any
litigation or proceeding, commenced or threatened, or any claim whatsoever or
any other loss, claim, damage, liability or expense referred to in this
-6-
<PAGE>
Paragraph 9) (x) in the case of clause (a)(i) above, which results primarily
from your failure to provide the Warrant Prospectus to Warrantholders, and (y)
in the case of clause (b) above, which is primarily attributable to his gross
negligence or willful misconduct. The foregoing indemnity shall be in addition
to any other rights which the Indemnified Persons may have against the Company
otherwise than under this Paragraph 9. The Company acknowledges and agrees that
the three clauses (a)(i), a(ii) and (b) above are independent of each other in
that indemnification may be available under one or more of such clauses but not
under others. If any litigation or proceeding is brought against any Indemnified
Person or circumstances otherwise exist in respect of which indemnity may be
sought against the Company pursuant to this Paragraph 9, such Indemnified Person
shall promptly notify the Company in writing of the commencement of such
litigation, proceeding or circumstance, but the omission so to notify the
Company shall not relieve the Company from any obligation or liability which it
may have to any Indemnified Person under this Paragraph 9 or otherwise except to
the extent that the Company is materially prejudiced thereby. In case any such
litigation or proceeding shall be brought against any Indemnified Person, the
Company shall be entitled to participate in such litigation or proceeding, and,
after written notice from the Company to such Indemnified Person, to assume the
defense of such litigation with counsel of its choice at its expense; provided,
however, that such counsel shall be satisfactory to the Indemnified Person in
the exercise of its reasonable judgment. Notwithstanding the election of the
Company to assume the defense of such litigation, such Indemnified Person shall
have the right to employ separate counsel and to participate in the defense of
such litigation, and the Company shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) in the reasonable judgment of such
Indemnified Person the use of counsel chosen by the Company to represent such
Indemnified Person would present such counsel with a conflict of interest, (ii)
-7-
<PAGE>
such Indemnified Person shall have reasonably concluded that there may be one or
more defenses available to it or to one or more other Indemnified Persons which
are different from or in addition to those available to the Company (in which
case the Company shall not have the right to direct the defense of such action
on behalf of the Indemnified Person), (iii) the Company shall not have employed
counsel satisfactory to such Indemnified Person in the exercise of the
Indemnified Person's reasonable judgment to represent such Indemnified Person
within a reasonable time after notice of the institution of any such litigation
or proceeding, or (iv) the Company shall authorize such Indemnified Person to
employ separate counsel at the expense of the Company; it being understood,
however, that the Company shall not be liable for the expense of more than one
separate counsel at any one time in the same jurisdiction for all Indemnified
Persons. The Company and you agree to notify the other promptly of the assertion
of any claim against it, any of its officers, directors, employees, partners,
stockholders, agents, representatives or counsel or any person who controls it
or any such person within the meaning of Section 15 of the 1933 Act or Section
20(a) of the 1934 Act in connection with the Transaction. If the Company becomes
obligated under this Paragraph 10 to pay or reimburse expenses (including fees
of counsel) of an Indemnified Person, such payment or reimbursement will be made
promptly against the delivery of invoices therefor. The Company shall not be
liable for settlements effected without its written consent.
You hereby agree to indemnify and hold harmless the Company, each director
of the Company, each officer of the Company who shall have signed the
Registration Statement, and each other person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to the
Indemnified Persons in this Paragraph 9, but only with respect to statements or
omissions, if any, made in the Transaction Material in reliance upon and in
conformity with written information furnished to the Company by you expressly
for inclusion in the Transaction Material. If any action shall be brought
against the Company or any other person so indemnified in respect of which
indemnity may be sought against you hereunder, you shall have the rights and
duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the Indemnified Persons,
in the preceding paragraph.
-8-
<PAGE>
If a court shall hold for any reason (other than by reason of the exception
to the indemnity provided in this Paragraph 9 as set forth in the proviso to
clause (b) in the first sentence of this Paragraph 9) that the foregoing
indemnification is unavailable to any Indemnified Person as to any matter for
which it would be available if enforceable in accordance with its terms, the
Company on the one hand and you on the other agree to contribute to such loss,
claim, damage, liability or expense (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and by you
on the other from the Transaction, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in the
foregoing clause (i), but also the relative fault of the Company on the one hand
and of you on the other in connection with the statements, actions or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and by you on the other shall be deemed to be in
the same proportion as the total value of the Transaction (as determined in
accordance with the next sentence) bears to the fees paid to you pursuant to
Paragraph 5 hereof. For the purposes of this paragraph, the total value of the
Transaction shall be deemed to be the product of the total number of issued and
outstanding Warrants on the date hereof multiplied by the exercise price of the
Warrants. The relative fault of the Company on the one hand and of you on the
other (i) in the case of an untrue or alleged untrue statement of a material
fact or an omission or alleged omission to state a material fact, shall be
determined by reference to, among other things, whether such statement or
omission relates to information supplied by the Company or by you and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and (ii) in the case of any other
action or omission, shall be determined by reference to, among other things,
whether such action or omission was taken or omitted to be taken by the Company
or by you and the parties relative intent, knowledge, access to information and
opportunity to prevent such action or omission.
-9-
<PAGE>
The Company and you agree that it would not be just and equitable if
contribution pursuant to this Paragraph 9 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Person in connection with investigating or defending any action or claim. In no
event shall you be required to contribute an amount in excess of the fees paid
to you pursuant to Paragraph hereof.
Each other Indemnified Person shall have the same right to contribution as
you have.
10. INDEMNIFICATION TO REMAIN OPERATIVE. The indemnity and contribution
agreements contained in Paragraph 10 hereof and the representations, warranties,
covenants and agreements of the Company set forth in this letter agreement shall
remain operative and in full force and effect regardless of (i) the termination
or consummation of, or the failure to commence, the Transaction, (ii) the
withdrawal by you pursuant to Paragraph 4 hereof, and (iii) any investigation
made by or on behalf of any party hereto or any person controlling any party
hereto within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
1934 Act.
11. NOTICES. Any notices or communications, given pursuant to or in
connection with this letter agreement by either of the parties hereto to the
other shall be in writing and hand-delivered (or sent by telecopy, telex or
similar telecommunications equipment) or mailed by certified mail, return
receipt requested, as follows:
-10-
<PAGE>
(i) If to you, to the address first set forth herein, Attention: Carl
G. Kleidman, Esq., with a copy given in the aforesaid manner to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attn: Stephen J. Gulotta, Jr., Esq.
(ii) If to the Company, at its address first set forth herein,
Attention: Mr. James H. Levi, President, with a copy given in the aforesaid
manner to:
Gallop, Johnson & Neuman, L.C.
101 South Hanley
St. Louis, Missouri 63105
Attention: Douglas J. Bates, Esq.
or in either case to such other address or addresses as hereafter shall be
furnished as provided in this Paragraph 11 by any party hereto to the other
party. Any notice or other communication given by certified mail shall be deemed
given at the time of certification thereof. Any notice given by other means
permitted by this Paragraph 11 shall be deemed given at the time of receipt
thereof.
12. APPLICABLE LAW. This letter agreement shall be governed by, and
construed in accordance with, the domestic laws of the State of New York,
without giving effect to the principles of conflicts of law.
13. SEVERABILITY. If any provision of this letter agreement shall be
determined to be invalid or unenforceable in any respect, such determination
shall not affect any other provisions of this letter agreement, which shall
remain in full force and effect.
14. COUNTERPARTS. This letter agreement may be executed in one or more
separate counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15. HEADINGS. The paragraph headings in this letter agreement are for
reference purposes only and shall not affect the meaning or interpretation
hereof.
-11-
<PAGE>
16. MODIFICATIONS AND WAIVERS. This letter agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
provisions hereof may be waived, only by a written instrument executed by the
parties hereto, or, in the case of a waiver, by the party waiving compliance.
The failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect its right at a later time to require
the same. No waiver by any party of the breach of any term or provision
contained in this letter agreement in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any breach, or a waiver
of the breach of any other term or provision contained herein. Any waiver must
be in writing.
Please indicate your acceptance of the foregoing provisions by signing in
the space provided below for such purpose and returning to us a copy of this
letter agreement so signed, whereupon this letter agreement and your acceptance
shall constitute a binding agreement between us.
Very yours,
THE GREAT TRAIN STORE COMPANY
By: /s/ James H. Levi
James H. Levi, President
Accepted as of the date first above written:
BARINGTON CAPITAL GROUP, L.P.,
By: LNA CAPITAL CORP., General Partner
By: /s/ James A. Mitarotonda
James A. Mitarotonda, Chairman
