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EXHIBIT 10.2
WARRANT EXCHANGE AGREEMENT
This WARRANT EXCHANGE AGREEMENT (this "Agreement") is made this 3rd day
of August, 1999, by and between State Street Bank and Trust Company, as Trustee
for The Textron Master Trust (hereinafter referred to as "Trustee"), and Decora
Industries, Inc., a Delaware corporation (hereinafter referred to as "DII") and
Decora Incorporated, a Delaware corporation (hereinafter referred to as "DI"
and, together with DII, "Decora").
WHEREAS, Trustee is the record owner of warrants to purchase shares of
Decora's common stock, par value $.01 per share, and warrants to purchase shares
of Decora's Series A Convertible Preferred Stock, par value $.01 per share;
WHEREAS, Decora desires to exchange with Trustee, and Trustee desires
to exchange with Decora, all of such warrants for aggregate consideration
consisting of (i) Seven Hundred Fifty Thousand Dollars ($750,000) payable by
DII, and (ii) the issuance by DII to Trustee of Four Hundred Thousand (400,000)
shares of its common stock, par value $.01 per share; and
WHEREAS, the parties desire to enter into this Agreement to set forth
the terms and conditions upon which Trustee may exchange such warrants for such
consideration from Decora;
NOW, THEREFORE, in consideration of the representations, warranties and
covenants and the mutual agreements herein contained, it is understood and
agreed as follows:
1. Exchange of Warrants. In exchange for the consideration to be
tendered by Decora pursuant to the terms hereof, and on the other terms and
conditions set forth herein, Trustee hereby sells, transfers, assigns, and
delivers to Decora all of its right, title and interest in and to (i) the
warrants, evidenced by Common Stock Purchase Warrant Certificate(s) dated
September 30, 1997, to purchase up to an aggregate of 2,136,534 shares of
Decora's common stock, par value $.01 per share; (ii) the warrants, evidenced by
Series A Convertible Preferred Stock Purchase Warrant Certificate(s) dated
September 30, 1997, to purchase up to an aggregate of 69,557 shares of Decora's
Series A Convertible Preferred Stock, par value $.01 per share; and (iii) the
warrants, evidenced by Contingent Common Stock Purchase Warrant Certificate(s)
dated September 30, 1997, to purchase a number of shares of Decora's common
stock, par value $.01 per share, as shall equal 21.2% of the sum of (A) the
shares of such common stock, if any, issued after the closing date with respect
to such Certificate(s) pursuant to the terms of the Cigna Exchange Agreement (as
defined in said Certificate(s)), and (B) the Conny Minority Acquisition Shares
(as defined in said Certificate(s)), owned of record by Trustee (hereinafter
referred to as the "Warrants").
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2. Consideration for Warrants. As full payment in exchange for
the sale and transfer of the Warrants to Decora by Trustee, Decora shall deliver
to Trustee concurrently with the execution hereof and on the date hereof (the
"Closing Date"): (i) the sum of $750,000, and (ii) in reliance upon the
representations and warranties of Trustee to Decora set forth in Section 4
hereof, 400,000 newly issued shares of DII's common stock, par value $.01 per
share (the "Securities").
3. Transfer of Warrants; Issuance of Shares.
(a) In order to effectuate the transfer of the Warrants to
Decora and the issuance of the Securities to Trustee on the Closing Date,
Trustee shall deliver to Decora all warrant agreements, warrants and other
instruments comprising the Warrants duly endorsed for transfer or accompanied by
duly executed instruments of assignment and any other documents reasonably
requested by Decora to effectuate the purposes of this Agreement, and Decora
shall deliver by wire transfer to the Trustee, in accordance with Trustee's
wiring instructions, the amount set forth in Section 2 above and duly executed
share certificates representing all of the Securities registered in the name of
Trustee.
(b) Promptly upon receipt of the Warrants, Decora shall
cancel, or cause to be canceled, all of the Warrants.
4. Amendment of 1997 Agreement. Upon the Closing Date, that certain
Note and Warrant Purchase Agreement dated as of September 26, 1997 (the "1997
Agreement") to which the parties hereto were parties, shall be deemed amended in
the following respects:
(a) The term "Registrable Securities", as defined in Section
17.1(c) of the 1997 Agreement, shall be deemed to include the Securities (but
only to the extent that any such Securities cannot then otherwise be sold,
transferred or distributed without registration in compliance with Rule 144 (or
any similar provision then in force, but not including Rule 144A) under the
Securities Act of 1933, as amended).
(b) Section 7.23 of the 1997 Agreement ("Board Seat") shall be
deleted, and shall be of no further force and effect.
5 Representations, Warranties and Covenants of Trustee. Trustee
hereby represents, warrants and covenants, as applicable, to Decora as follows:
(a) Authority; No Liens. Trustee is a defined Rhode Island
benefit plan, duly organized, validly existing and in good standing, under the
laws of the jurisdiction in which it is incorporated. Trustee has all requisite
power and authority to convey, assign, and transfer the Warrants pursuant to
this Agreement. The Warrants are free and clear of restrictions on, or
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conditions to, such transfer or assignment, and free and clear of any security
interests, liens, pledges, charges, encumbrances, equities, claims, covenants,
conditions, or restrictions of any kind. This Agreement constitutes the valid
and binding obligation of Trustee enforceable against Trustee in accordance with
its terms.
(b) Agreement Will Not Cause Breach or Violation. The
consummation of the transactions contemplated herein will not result in or
constitute (i) a default or an event that, with notice or lapse of time or both,
would be a default, breach, or violation of any agreement or arrangement to
which Trustee is a party or by which it is bound, or (ii) a conflict with or a
violation of any provision of the certificate of incorporation or bylaws of
Trustee, or (iii) a violation of any law, rule, regulation, rider or decree
(including U.S. federal and state securities laws and regulations of any
securities self-regulatory organizations to which Trustee is subject) applicable
to Trustee or by which any asset of Trustee is bound or affected.
(c) Litigation. There is no suit, action, or arbitration, or
legal, administrative, or other proceeding, or governmental investigation
pending or, to the best of Trustee's knowledge, threatened, that would affect
the transfer of the Warrants as provided for herein either directly or
indirectly.
(d) Warrant Ownership. Trustee represents and warrants that
the Warrants transferred by it to Decora pursuant to the terms hereof constitute
all of the warrants, capital stock or other securities of Decora owned by
Trustee (except for the Securities to be issued and sold to Trustee pursuant
hereto).
(e) Access to Independent Counsel. Trustee represents and
warrants that it has had ample opportunity to consult and has consulted
independent legal counsel with respect to its entering into this Agreement and
the terms hereof and has not relied upon Decora, or any counsel to Decora, for
legal or other advice.
(f) Trustee Evaluation. By reason of Trustee's knowledge and
experience in financial and business matters in general, and investments in
particular, Trustee is able to evaluate the merits and risks of the Securities.
(g) No Disposition. The Trust has income and net worth in an
amount such that the Trust is not now, and does not contemplate in the future
being, required to dispose of any portion of any investment in the Securities to
satisfy any existing or contemplated undertaking.
(h) Bear Economic Risks. The Trust is able to bear the
economic risks of an investment in the Securities, including, without limiting
the generality of the foregoing, the risk of losing part or all of the Trust's
investment in the Securities, and the probable inability to sell or transfer the
Securities for an indefinite period of time.
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(i) Accredited Investor. The Trust is an "accredited investor"
as that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Act"). The Trust is such an "accredited
investor" because it is a trust, with total assets in excess of $5 million, not
formed for the specific purpose of acquiring the Securities, whose acquisition
of the Securities is directed by a sophisticated person as described in Section
506(b)(2)(ii) of said Regulation D.
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(j) Acquisition for Investment. The Trust intends to acquire
the Securities solely for the Trust's own account, for investment, and not with
a present view to, or to offer or sell for an issuer in connection with, a
distribution of the Securities, or to participate or have a direct or indirect
participation in any such undertaking, or to participate or have a participation
in the direct or indirect underwriting of any such undertaking; provided,
however, by making the representations and warranties herein, the Trustee does
not agree to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an applicable exemption under
the Act.
(k) Disclosure. Trustee further acknowledges that it has
received and reviewed Decora's Form 10-K for the fiscal year ended March 31,
1999, and has received satisfactory and complete information concerning the
business and financial condition of Decora in response to all inquiries made by
Trustee in respect thereof.
(l) Direct Communication of Offer. The offer by DII to issue
the Securities to Trustee was directly communicated to Trustee by DII in such a
manner that Trustee was able to ask questions of and receive answers from DII or
a person acting on its behalf concerning the terms of this transaction and that
at no time was Trustee presented with or solicited by any leaflet, public or
promotional meeting, newspaper or magazine article, radio or television
advertisement or any other form of general advertising or general solicitation.
(m) Reliance Upon Information. In determining whether to
acquire the Securities, Trustee has relied solely upon the information
concerning Decora obtained by Trustee (i) from independent investigations made
by Trustee with respect to Decora and (ii) from the sources described in
paragraph 4(l) above, and no oral or written representations concerning Decora
or the value of the Securities have been made to Trustee other than in
connection with the information obtained as described in this sentence, this
Agreement and the agreements and documents referred to herein.
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(n) Restricted Securities. Decora has disclosed to Trustee and
Trustee acknowledges that:
(i) the Securities have not been registered
under the Act or qualified under any state securities laws;
(ii) the Securities are "restricted securities"
as defined in Rule 144 promulgated under the Act; and
(iii) each certificate representing the Securities
will bear a legend substantially similar to the following:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED UNDER SAID ACT, WITHOUT
REGISTRATION, EXCEPT UPON RECEIPT BY THE COMPANY OF
AN OPINION OF LEGAL COUNSEL IN FORM, SUBSTANCE AND
SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, OR A COPY OF A LETTER FROM THE STAFF OF
THE SECURITIES AND EXCHANGE COMMISSION, IN EITHER
CASE REASONABLY SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT SUCH SECURITIES MAY LEGALLY BE SOLD OR
TRANSFERRED WITHOUT SUCH REGISTRATION."
(o) Loss of Investment. Trustee understands that Trustee may
lose its entire investment in DII represented by the Securities.
(p) Reliance by Decora. Decora is authorized to rely on all of
the representations and warranties made by Trustee in this Warrant Exchange
Agreement.
(q) Correct and Complete Information. All information which
Trustee has provided to Decora is correct and complete as of the date of
Trustee's execution of this Warrant Exchange Agreement. If there should be any
material change in such information prior to execution and delivery of this
Warrant Exchange Agreement by Decora, Trustee will immediately provide such
information to Decora.
(r) Binding Agreement. Trustee understands that this Warrant
Exchange Agreement shall be binding upon Trustee's successors and assigns.
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(s) Authority of Trustee. Trustee has been and is duly
authorized and empowered to legally represent the Trust and to execute, deliver
and perform this Warrant Exchange Agreement and all other instruments in
connection with the purchase of the Securities on behalf of the Trust and the
signature of Trustee is binding upon the Trust.
6. Representations, Warranties and Covenants of Decora. Decora
hereby, jointly and severally, represents, warrants and covenants, as
applicable, to Trustee as follows:
(a) Authority to Perform. Each of DI and DII is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. Decora has full power and authority to
execute, deliver, and perform this Agreement, including, without limitation, to
issue the Securities to the Trustee and exchange for the consideration described
in Section 2 the Warrants in accordance with the terms hereof, and this
Agreement has been duly authorized and executed by Decora. This Agreement
constitutes the valid and binding obligation of Decora enforceable against
Decora in accordance with its terms.
(b) Agreement Will Not Cause Breach or Violation. The
consummation of the transactions contemplated herein will not result in or
constitute (i) a default or an event that, with notice or lapse of time or both,
would be a default, breach, or violation of any agreement or arrangement to
which Decora is a party or by which it is bound or (ii) a conflict with or a
violation of any provision of the certificate of incorporation or bylaws of
Decora, or (iii) a violation of any law, rule, regulation, rider or decree
(including U.S. federal and state securities laws and regulations of any
securities self-regulatory organizations to which Decora or their respective
securities are subject) applicable to Decora or by which any asset of Decora is
bound or affected.
(c) Litigation. There is no suit, action, or arbitration, or
legal, administrative, or other proceeding, or governmental investigation
pending or, to the best of Decora's knowledge, threatened, that would affect the
transfer of the Warrants as provided for herein either directly or indirectly.
(d) Non-Distributive Intent. Decora is acquiring the
Warrants solely for cancellation.
(e) Issuance of Shares. The Securities are duly authorized,
validly issued, fully paid and non-assessable, and free from all taxes (other
than taxes payable by Decora), liens, claims and encumbrances (other than such
as may arise from obligations or agreements of Trustee) and will not be subject
to preemptive rights or other similar rights of stockholders of Decora and will
not impose personal liability upon the holder thereof as such.
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(f) SEC Documents. DII has delivered to Trustee true and
complete copies of Decora's Form 10-K for the fiscal year ended March 31, 1999
(the "SEC Document"). As of its respective date, the SEC Document complied in
all material respects with all applicable legal requirements at the time it was
filed with the United States Securities and Exchange Commission ("SEC") and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
(g) Absence of Certain Changes. Since the date of the SEC
Document, there has been no material adverse change and no material adverse
development in the assets, liabilities, business, properties, operations,
financial condition, results of operations or prospects of Decora, taken as a
whole, except as disclosed in the SEC Document.
(h) No General Solicitation. Neither Decora nor any
distributor participating on Decora's behalf in the transactions contemplated
hereby (if any) nor any person acting for Decora, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D
("Regulation D") promulgated pursuant to the Act, with respect to any of the
Securities being issued hereby.
(i) No Integrated Offering. Neither Decora, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offerers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Act, or cause the issuance of the
Securities to be integrated with any other offering of securities of Decora
(past, current or future) for purposes of any stockholder approval provisions
applicable to DII or its securities.
(j) Brokers. Decora has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by the Trustee relating to this Agreement or the transactions
contemplated hereby.
(k) Form D; Blue Sky Laws. DII agrees, if required, to file a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to the Trustee promptly after such filing. Decora shall
take such action as Decora shall reasonably determine is necessary to qualify
the Securities for sale to the Trustee pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States or
obtain exemption therefrom, and shall provide evidence of any such action so
taken to the Trustee.
(l) Reporting Status. DII's Common Stock is registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). So long as the Trustee beneficially owns any of the Securities, DII shall
use its best efforts to timely file all reports required to be filed with the
SEC pursuant to the Exchange Act and DII shall not
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voluntarily terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would permit such termination.
(m) Reliance by Trustee. Trustee is authorized to rely on all
of the representations and warranties made by Decora in this Warrant Exchange
Agreement.
(n) Correct and Complete Information. All information which
Decora has provided to Trustee is correct and complete as of the date of
Decora's execution of this Warrant Exchange Agreement. If there should be any
material change in such information prior to execution and delivery of this
Warrant Exchange Agreement by Trustee, Decora will immediately provide such
information to Trustee.
(o) Binding Agreement. Decora understands that this Warrant
Exchange Agreement shall be binding upon Decora's successors and assigns.
7. Indemnification.
(a) Trustee hereby agrees to indemnify and hold harmless
Decora, and all of the directors, officers, agents and controlling persons of
Decora, from any and all damages, losses, costs and expenses (including actual
attorneys' fees) which they may incur: (i) by reason of Trustee's failure to
fulfill any of the terms and conditions of this Warrant Exchange Agreement; and
(ii) by reason of Trustee's breach of any of Trustee's representations,
warranties or agreements contained herein. Trustee further agrees and
acknowledges that these indemnifications shall survive any sale or transfer, or
attempted sale or transfer, of any portion of the Securities, or Trustee's
default under this Warrant Exchange Agreement.
(b) Decora hereby agrees to indemnify and hold harmless
Trustee, and all of the directors, officers, agents and controlling persons of
Trustee, from any and all damages, losses, costs and expenses (including actual
attorneys' fees) which they may incur: (i) by reason of Decora's failure to
fulfill any of the terms and conditions of this Warrant Exchange Agreement; and
(ii) by reason of Decora's breach of any of Decora's representations, warranties
or agreements contained herein.
8. Cooperation. Each party hereby agrees to execute such other
documents as may be necessary or desirable to consummate the transaction
proposed herein, including, but not limited to, regulatory filings which may be
required to be filed in such party's state of domicile. Each party hereto shall
cooperate with the other party in executing all certificates and documents
deemed necessary or desirable to consummate the transactions contemplated
herein.
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9. Effect of Representations, Warranties and Covenants. Except as
specifically provided otherwise herein, the representations, warranties and
covenants contained in this Agreement or in any instrument delivered hereunder
or pursuant hereto shall survive the execution of this Agreement.
10. Notices. Any notice, request, instruction or other document to
be given hereunder by any party hereto to another shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid to
the last known address of the receiving party unless otherwise requested in
writing by said party. Notice shall be deemed given on the date it was
personally delivered or three days after it was so posted.
11. Entire Agreement. The making, execution and delivery of this
Agreement by the parties hereto have not been induced by any representations,
statements, warranties or agreements other than those herein expressed. This
Agreement, including any exhibits hereto, embodies the entire understanding of
the parties with regard to the sale of the Warrants by the Trustee to Decora and
the other transactions referred to herein, and there are no further or other
agreements or understandings, written or oral, in effect between the parties
relating to the subject matter hereof, unless expressly referred to by reference
herein. The terms of this Agreement are intended by the parties as a final
expression of their agreement with respect to such terms as are included herein
and may not be contradicted by evidence of any prior or contemporaneous written
or oral representations, agreements or understandings, whether express or
implied. The parties further intend that this Agreement constitutes the complete
and exclusive statement of its terms and that no extrinsic evidence whatsoever
may be introduced in any judicial proceeding, if any, involving this Agreement.
12. Amendment. Except as otherwise required by law, this Agreement
may be amended or modified, and any condition specified herein may be waived, by
mutual consent of all of the parties pursuant to a written instrument executed
on behalf of such parties.
13. Attorneys' Fees. In the event of the bringing of any action,
suit or arbitration by any party hereto against another party hereto, by reason
of any breach of any representation, warranty, covenant or condition on the part
of the other party arising out of this Agreement or any document related hereto,
then and in that event, the prevailing party shall be entitled to have and
recover of and from the other party all costs and expenses thereof, including
reasonable attorneys' fees.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to its conflict of law principles.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the day and year first above written.
"DECORA" "TRUSTEE"
DECORA INDUSTRIES, INC., STATE STREET BANK AND TRUST
a Delaware corporation COMPANY, as Trustee for The Textron
Master Trust
By: _______________________ By: __________________________
Its: _______________________ Its: __________________________
DECORA INCORPORATED,
a Delaware corporation
By: _______________________ By: _________________________
Its: _______________________ Its: _________________________
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