CONVERSION AGREEMENT
Conversion Agreement (this "Agreement") dated as of October 12, 2000, by
and among Interiors, Inc., a Delaware corporation (the "Company"),
▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation and wholly owned subsidiary of the
Company (the "Sub"), and Seaside Partners, L.P., a Delaware limited partnership
(the "Seaside").
WHEREAS, Seaside is the record owner of 200,000 shares of Series B
Preferred Stock, par value $.001 per share, of the Company (the "Series B
Preferred Shares"), which accrues dividends at 8% per annum and is convertible
into shares of Class A Common Stock, par value $.001 per share, of the Company
("Class A Shares") at $2.35 per share;
WHEREAS, Seaside is the record owner of the Class A Common Stock Purchase
Warrant dated January 22, 1999 to purchase 2,000,000 shares of Class A Common
Stock, par value $.001 per share ("Class A Shares") of the Company at $0.75 per
share (the "Interiors Warrant");
WHEREAS, Seaside is the holder of a Convertible Promissory Note dated May
16, 2000 in the original principal amount of $1,000,000 (the "▇▇▇▇▇▇▇▇▇.▇▇▇
Note"), which accrues interest at 8% per annum and is convertible into common
stock, par value $.01 per share, of Sub ("Sub Common Stock") at $1.00 per share;
WHEREAS, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is the record owner of the Common Stock
Purchase Warrant dated May 16, 2000 to purchase 2,500,000 shares Sub Common
Stock at $1.00 per share (the "▇▇▇▇▇▇▇▇▇.▇▇▇ Warrant");
WHEREAS, the Company desires to simplify its capital structure, remove the
accrual of dividends on the Series B Preferred Shares, remove the accrual of
interest on the ▇▇▇▇▇▇▇▇▇.▇▇▇ Note and remove the overhang of the Interiors
Warrant and the ▇▇▇▇▇▇▇▇▇.▇▇▇ Warrant.
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Conversion of Securities. The transactions listed below are to be made
notwithstanding the terms of the individual securities and the agreements
governing them:
a) Seaside hereby exercises the Interiors Warrant for $1,500,000
resulting in the issuance to Seaside of 2,000,000 Class A Shares;
b) Seaside hereby delivers 150,000 Series B Preferred Shares having
a value of $1,500,000 to the Company as the purchase price for the
Interiors Warrant;
c) Seaside hereby converts its remaining 50,000 Series B Preferred
Shares and $213,485.20 in accrued dividends on the Series B Preferred
Shares through October 11, 2000 into Class A Shares at a conversion price
of $2.35 per Class A Share, resulting in the issuance of 303,610 Class A
Shares;
d) The ▇▇▇▇▇▇▇▇▇.▇▇▇ Note and $9,863.01 in accrued interest through
June 30, 2000, are converted into Class A Shares at $0.25 per Class A
Share, resulting in the issuance of 4,039,452 Class A Shares;
e) The interest on the ▇▇▇▇▇▇▇▇▇.▇▇▇ Note of subsequent to June 30,
2000 is forgiven by Seaside; and
f) The ▇▇▇▇▇▇▇▇▇.▇▇▇ Warrant is hereby terminated.
2. Delivery of Shares. By October 18, 2000, the Company shall deliver to
Seaside a stock certificate representing the 2,303,610 Class A Shares received
from conversion of the securities pursuant to paragraphs 1. a) and 1 c) above,
and a second stock certificate representing the 4,039,452 Class A Shares
received from conversion of the securities pursuant to paragraph 1. d) above.
3. Restriction on Transfer. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇ shall not sell,
transfer, pledge, hypothecate or otherwise convey, directly or indirectly, any
interest in the Class A Shares being delivered pursuant to this Agreement.
4. Standstill Agreement. (a) For so long as the Class A Shares are held by
Seaside or its affiliates, Seaside will not, alone or in concert with others,
directly or indirectly: (i) by purchase or otherwise, acquire, or agree to
acquire, ownership (including, but not limited to, beneficial ownership) of any
Class A Shares or direct or indirect rights (including convertible securities)
or options to acquire such ownership; (ii) make any public announcement with
respect to, or submit any proposal for, the acquisition of beneficial ownership
of Class A Shares (or direct or indirect rights, including convertible
securities, or options to acquire such beneficial ownership) for or with respect
to any extraordinary transaction or merger, consolidation, sale of substantial
assets or business combination involving the Company or any of its affiliates,
whether or not any parties other than Seaside or its affiliates and associates
are involved and whether or not such proposal might require the making of a
public announcement; (iii) make, or in any way participate in, any
"solicitation" of "proxies" (as such terms are defined or used in Regulation 14A
under the Exchange Act) or become a "participant" in any "election contest" (as
such terms are defined or used in Rule 14a-11 under the Exchange Act) to vote,
or seek to advise or influence any person or entity with respect to the voting
of, any voting securities of the Company or any of its affiliates; provided,
however, that the foregoing shall not restrict any actions with respect to
matters (other than matters relating to the election of directors or the
composition of the Company's Board of Directors) submitted to a shareholder vote
which matters are not proposed or initiated by Seaside or its affiliates or
associates or by any person acting in concert with or at the direction of
Seaside or its affiliates or associates; (iv) form, join or in any way
participate in a "group" (as such term is used in Section 13d(3) of the Exchange
Act) with respect to any securities of the Company in connection with any action
or matter otherwise prohibited by the terms of this agreement; (v) initiate or
propose any shareholder proposals for submission to a vote of shareholders with
respect to the Company or any of its affiliates or propose any person for
election to the Board of Directors of the Company or any of its affiliates; or
(vi) otherwise seek to control the management or policies of the Company or any
of its affiliates, including, without limitation, taking any action to seek to
obtain representation on the Board of Directors of the Company or any of its
affiliates.
(b) So long as the Class A Shares are held by Seaside or its affiliates,
Seaside and its affiliates will vote the Class A Shares delivered pursuant to
this Agreement in support of the election of the nominees to the Company's Board
of Directors proposed by either the current Board of Directors or the members of
the Board of Directors who have been nominated to the Board by the current Board
of Directors (or such of their successors who have been nominated by the Board
members so nominated).
5. Registration of the Class A Shares held by Seaside. The Company shall
make a reasonable best effort to have registered by March 31, 2001, all of the
Class A Shares issued pursuant to paragraph 1. a) and 1. c) of this Agreement
held by Seaside that are not then salable by Seaside under Rule 144.
6. Miscellaneous.
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(a) This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
(b) The headings and paragraphs of this Agreement have been added for
convenience only and shall not be deemed part of this Agreement.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision.
(d) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
(e) This Agreement sets forth the entire understanding and agreement of
the parties, and supersedes any and all oral or written agreements or
understandings between the parties, as to the subject matter hereof. If may be
changed only by a writing signed by all the parties hereto.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
the day and year first above written.
INTERIORS, INC.
By: /s/
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Name: ▇▇▇ ▇▇▇▇
Title: Chairman, President and Chief
Executive Officer
▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/
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Name: ▇▇▇ ▇▇▇▇
Title: Chairman
SEASIDE PARTNERS, L.P.
By: SEASIDE ADVISORS, L.L.C.,
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its general partner
By: /s/
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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