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Krauses Furniture Inc · 10-K/A · For 12/24/00

Filed On 5/1/01 5:25pm ET · SEC File 1-13981 · Accession Number 1095811-1-501708

  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 5/01/01  Krauses Furniture Inc             10-K/A     12/24/00    1:13                                     Bowne of Los Ang..Inc/FA

Amendment to Annual Report · Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K/A      Amendment No. 2 to Form 10-K                          13     60K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Certain Relationships and Related Transactions Compensation of Executive Officers Directors and Executive Officers of the Registrant Gecc Security Ownership of Certain Beneficial Owners and Management
1	1st Page
3	Item 10. Directors and Executive Officers of the Registrant
8	Item 11. Compensation of Executive Officers
11	Item 12. Security Ownership of Certain Beneficial Owners and Management
13	Item 13. Certain Relationships and Related Transactions
"	Gecc

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A

AMENDMENT NO. 2
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934]

For the fiscal year ended December 24, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _________________ to ___________________.

Commission file number 0-17868

KRAUSE'S FURNITURE, INC.
(Exact name of Registrant as specified in its charter.)

DELAWARE 77-0310773
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

200 NORTH BERRY STREET, BREA, CALIFORNIA 92821-3903
(Address of principal executive offices) (Zip Code)

(714) 990-3100

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $.001 PAR VALUE AMERICAN STOCK EXCHANGE
(Title of Class) (Name of each exchange where registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [ ]

As of April 27, 2001 the aggregate market value of Registrant's $.001
par value Common Stock held by non-affiliates was approximately $2,371,830 based
on the closing price for the stock. As of April 27, 2001 there were 23,604,865
shares of $.001 par value common stock outstanding.

Documents Incorporated by Reference: None.

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Krause's Furniture INC. (the "Company"), by this Form 10-K/A, Amendment
No. 2 to Form 10-K (the "Amendment") hereby amends and restates in its entirety
Part 3 Items 10, 11, 12 and 13 of its Annual Report on Form 10-K filed with the
Securities Exchange Commission on April 10, 2001 for the fiscal year ended
December 24, 2000 (the "Annual Report"), as set forth in the pages attached
hereto.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934,
this Amendment is set forth in its entirety on the following pages numbered 1
to 14, inclusive.

This Amendment includes the information required by Items 10 through 13 of
Part 3 to the Company's Annual Report.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-K/A, Amendment No. 2 to Annual Report
on Form 10-K for the year ended December 24, 2000, to be signed on its behalf
by the undersigned thereunto duly authorized.

KRAUSE' FURNITURE, INC.
(REGISTRANT)

Dated: May 1, 2001 By /s/ Robert A. Burton
----------------------
Robert A. Burton
Executive Vice President and Chief Financial officer
(Principal Financial Officer and Principal
Accounting Officer)

Page 2

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PART III

The information required by Part III (Items 10, 11, 12, and 13) of the
Company's Annual Report on Form 10-K for the fiscal year ended December 24, 2000
(the "Annual Report"), filed with the Securities and Exchange Commission on
April 10, 2001, was to be incorporated by reference to the definitive Proxy
Statement for the 2001 Annual Meeting of Stockholders of the Company, which
Proxy Statement was to be filed pursuant to Regulation 14A under the Exchange
Act within 120 days following the end of the Company's fiscal year as permitted
under General Instruction G of Form 10-K. The definitive Proxy Statement has not
yet been filed within such period. Accordingly, the Company hereby amends Items
10, 11, 12, and 13 of the Annual Report as follows:

Item 10. Directors and Executive Officers of the Registrant

Listed below are the names of each of our directors and executive
officers, his or her age, offices held with us or our predecessors and a brief
description of his or her business experience.

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KAMAL G. ABDELNOUR ("Abdelnour"), age 64, has been a director since
September 1996 and had previously served as a director from February 1993 to
August 1996 when he resigned in connection with the Company's recapitalization.
Since 1980 Mr. Abdelnour has been President, Chief Executive Officer and a
director of ATCO Development, Inc. ("ATCO"). ATCO is engaged in the business of
investments, real estate ownership and management, and export sales. Mr.
Abdelnour currently also serves as a director of Permal Management Corporation,
an indirect, wholly owned subsidiary of Worms & Co., Inc.

JEFFREY H. COATS ("Coats"), age 43, has been a director since August 1996.
He is the founder of TH Lee Global Internet Managers, L.P., where he served as
Managing Director from July 1999 to the present. From April 1996 to July 1999,
he served as a Managing Director of GE Equity, a wholly owned subsidiary of GE
Capital, during which time he managed GE Equity's Consumer Group and was
responsible for strategic and financial investments involving the Internet,
eCommerce, media and entertainment, and retail and consumer products and
services. From February 1994 to April 1996, Mr. Coats served as President of
Maverick Capital Equity Partners, LLC, an investment firm. From May 1993 to
January 1994, Mr. Coats served as a Managing Director of Veritas Capital, Inc.,
also an investment firm. From September 1991 to April 1993, Mr. Coats served as
a Managing Director of GE Capital Corporate Finance Group, Inc., a wholly owned
subsidiary of GE Capital. Currently Mr. Coats is a director of Wink
Communications, autobytel.com Inc., and MyTurn.

HON. PETER H. DAILEY ("Dailey"), age 70, has been a director since
September 1996. From April 1994 to January 1997, Mr. Dailey, served as the
Director, Chairman and Chief Executive Officer of Memorex Telex, NV, a worldwide
technology company headquartered in Amsterdam, the Netherlands. Prior to
returning to government service, he served as a director of the Walt Disney Co.
and the Interpublic Group of Companies. From 1985 to 1992, Mr. Dailey was a
member of President's General Advisory Committee on Arms Control and
Disarmament. From 1985 to 1988, Mr. Dailey served as counselor to the Director
of the Central Intelligence Agency. In 1985, he was special Presidential envoy
to NATO countries. He served as Ambassador to Ireland from 1982 to 1984. In
1968, Mr. Dailey founded Enniskerry Financial, Ltd., a private investment
company, and is currently its Chairman of the Board. Mr. Dailey is also a member
of the Board of Directors of Jacobs Engineering Group, Inc. and Wirthlin
Worldwide.

Page 4

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THOMAS M. DELITTO ("DeLitto"), age 48, has been a director since June 1991
and Vice Chairman since December 1994. Mr. DeLitto was previously the Company's
Chief Executive (from April 1995 to August 1996), President and Chief Executive
Officer (from July 1992 to December 1994), and Executive Vice President and
Chief Operating Officer (from June 1991 to July 1992). Mr. DeLitto has been a
director of Permal Capital Management, Inc. ("Permal"), a wholly owned
subsidiary of Worms & Co., Inc. ("Worms"), since March 1991. He was Permal's
President from March 1991 to August 2000 and has been Chief Executive Officer
since August 2000. Mr. Delitto was Worms' Executive Vice President from February
1996 to June 1998, Chief Administrative Officer from June 1998 to May 2000 and
has been Chief Operating Officer since May 2000.

HON. JOHN A. GAVIN ("Gavin"), age 70, has been a director since September
1996. He has been a Managing Director and Partner of Hicks, Muse, Tate and Furst
(Latin America), a private equity investment firm, since 1995. He is also the
founder and Chairman of the Board of Directors of Gamma Holdings, an
international capital and consulting firm. He is a member of the Board of
Directors of Apex Mortgage Capital and International Wire Group. He also acts as
a trustee and director of certain Merrill Lynch funds.

PHILIP M. HAWLEY ("Hawley"), age 75, has been Chairman and Chief Executive
Officer since August 1996. He served as Chairman and Chief Executive Officer of
The Broadway Stores, Inc. (formerly Carter Hawley Hale Stores, Inc.) from 1977
to 1993. Mr. Hawley has been the President and Chief Executive Officer of P. M.
Hawley, Inc., since 1993. Mr. Hawley is a director of Aeromovel, U.S.A.

BRIAN P. KEIL ("Keil"), age 36, has served as a director since July 2000.
He is currently a Vice President of GE Capital Equity Capital Group, Inc. Mr.
Keil has served in various positions within GE Capital Equity Capital Group,
Inc. since November 1999. Prior to joining GE Capital, Mr. Keil was employed by
the Capital Trust Group, a private investment firm located in New York, from
January 1, 1997 to October 1999. From June 1994 to December 1996, Mr. Keil was
employed by Bain & Company, a management consulting firm.

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EXECUTIVE OFFICERS OF THE COMPANY WHO ARE NOT DIRECTORS

HERBERT J. FRIEDMAN ("Friedman"), age 50, was named President on July 1,
2000. Prior to being named President, Mr. Freidman worked in the following
positions for the Company: Executive Vice President of Merchandising, Product
Development, Marketing and Stores from February 1999 to July 2000; Senior Vice
President of Merchandising, Product Development, Marketing and Stores from April
1997 to February 1, 1999; Senior Vice President of Strategic Planning from April
1995 to April 1997; and Vice President of Merchandising from June 1989 to April
1995.

ROBERT A. BURTON ("Burton"), age 60, was named Executive Vice President and
Chief Financial Officer on February 1, 1999; he had been Senior Vice President
and Chief Financial Officer of the Company

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from December 1996 to February 1999. Mr. Burton was an independent financial
consultant from January 1995 to November 1996.

ELIZABETH A. GALLIHER ("Galliher"), age 39, was named Executive Vice
President and Chief Information Officer on August 22, 2000; she had previously
been Vice President, Information Systems since February 1997. Ms. Galliher was
Director, Information Technology at VitalCom.Inc., from September 1996 to
February 1997 and Manager, Planning & Integration at Gannett Outdoor from
February 1995 to August 1996.

K. JAMES MCTAGGART ("McTaggart"), age 39, was named Executive Vice
President of Manufacturing and Distribution on February 1, 1999. Mr. McTaggart
worked in the following positions for the Company: Senior Vice President of
Manufacturing and Distribution from April 1996 to February 1999; and Vice
President of Distribution and Logistics from February 1996 to March 1996. Mr.
McTaggart was the Vice President of Distribution/Logistics at Stanley Works-Door
Systems from March 1995 to February 1996; and served in other manufacturing and
distribution positions at Stanley Works-Door Systems from November 1985 to March
1995.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the directors and officers of the Company and persons holding more than ten
percent of a registered class of the Company's equity securities ("Reporting
Persons") to file with the Securities and Exchange Commission and the American
Stock Exchange initial reports of ownership and reports of changes in ownership
of Common Stock. In addition, under Section 16(a), trusts for which a Reporting
Person is a trustee and a beneficiary (or a member of his immediate family is a
beneficiary), may have a separate reporting obligation with regard to holdings
and transactions in Common Stock. Specific due dates for these reports have been
established and the Company is required to disclose in this proxy statement any
failure to file by these dates during fiscal 2000 or in prior years if not
previously reported. During fiscal year 2000, Messrs. Friedman, Fisher, Gallaway
and Nelson and Ms. Galliher, all of whom were considered Reporting Persons under
Section 16(a), each filed a late Form 3 or Form 5 which reported either (i) a
promotion to a position within the Company that required reporting of their
Common Stock ownership under Section 16(a) or (ii) the grant of Company stock
options pursuant to the Company's 1997 Stock Incentive Plan.

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ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth all compensation paid by the Company during
fiscal 2000, 1999, and 1998 to (i) the Company's Chief Executive Officer during
fiscal 2000, (ii) each of the four other most highly compensated executive
officers of the Company during fiscal 2000, and (iii) one additional individual
for whom disclosure would have been provided except that he was not serving as
an executive officer at the end of fiscal year 2000 See Footnote 2, below
(collectively referred to as the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

[Enlarge/Download Table]

LONG-TERM
COMPENSATION
---------------
ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) ($)
--------------------------- ---- ------------ -------- --------------- ------------

Philip M. Hawley...................... 2000 284,000 --
Chairman of the Board and 1999 260,333 300,000
Chief Executive Officer 1998 233,649 --
Herbert J. Friedman................... 2000 216,575 100,000
President 1999 167,017 50,000 35,335(1)
1998 157,215 15,000
Robert A. Burton...................... 2000 170,400 --
Executive Vice President and 1999 156,200 50,000
Chief Financial Officer 1998 155,415 15,000
Klaus Tabar........................... 2000 155,415 --
Senior Vice President of 1999 142,464 --
Real Estate and Construction 1998 155,415 15,000 36,061(1)
K. James McTaggart.................... 2000 150,400 50,000
Executive Vice President of 1999 137,867 50,000
Manufacturing and Distribution 1998 135,405 15,000
Thomas J. Beale(2).................... 2000 162,783 25,000
Senior Vice President, Stores 1999 144,100 --
1998 148,420 10,000

---------------
(1) Represents payment for prior years' accrued but unused vacation.

(2) Mr. Beale ceased being an officer of the Company on October 30, 2000.

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OPTION/SAR GRANTS IN FISCAL YEAR 2000

The following table sets forth information regarding stock options and
deferred stock units granted during fiscal 2000 to the Executive Officers named
in the Summary Compensation Table who received stock option grants in fiscal
year 2000.

[Enlarge/Download Table]

REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES
NUMBER OF OPTIONS/SARS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE OR FOR OPTION TERM
OPTIONS/SARS FISCAL BASE PRICE EXPIRATION -----------------
NAME GRANTED(#) YEAR(1) ($/SH) DATE 5%($) 10%($)
---- ------------ ------------ ----------- ---------- ------- -------

Philip M. Hawley.... -- -- -- -- -- --
Herbert J.
Friedman.......... 100,000 24.1% 1.00 07/16/10 163,000 259,000
Robert A. Burton.... -- -- -- -- -- --
Klaus Tabar......... -- -- -- -- -- --
K. James
McTaggart......... 50,000 12.1% 0.75 10/18/10 61,125 97,125
Thomas J.
Beale(2).......... 25,000 6.0% 1.00 07/16/10 40,750 64,750

---------------
(1) The Company granted options for 325,000 shares of Common Stock to employees
of the Company and a total of 89,286 deferred stock units to directors
during 2000. All of the options and deferred stock units were granted under
the 1997 Stock Incentive Plan.

(2) Mr. Beale ceased being an officer of the Company on October 30, 2000.

AGGREGATED OPTION/SAR EXERCISED IN FISCAL 2000
AND YEAR-END OPTION/SAR VALUES(1)

The following table sets forth information concerning the value of
unexercised options and deferred stock units held by the Executive Officers
named in the Summary Compensation Table as of December 24, 2000, the end of the
Company's 2000 fiscal year. None of the Executive Officers named in the Summary
Compensation Table exercised any options during fiscal year 2000.

[Enlarge/Download Table]

NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
NUMBER OF AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------

Philip M. Hawley... -- -- 1,309,000 225,000 -- --
Robert A. Burton... -- -- 102,500 62,500 -- --
Herbert J.
Friedman......... -- -- 103,500 162,500 -- --
K. James
McTaggart........ -- -- 92,500 107,500 -- --
Klaus Tabar........ -- -- 91,000 25,000 -- --
Thomas J.
Beale(2)......... -- -- 70,000 45,000 -- --

---------------
(1) Based on the closing price of the Common Stock of $0.31 as quoted on the
American Stock Exchange on December 24, 2000. None of the Executive Officers
named in this table hold any in the money options.

(2) Mr. Beale ceased being an officer of the Company on October 30, 2000.

EMPLOYMENT AGREEMENTS

In August 1996, the Company entered into an Employment Agreement with
Philip M. Hawley pursuant to which the Company agreed to employ Mr. Hawley for a
term ending on August 25, 1999, and to pay Mr. Hawley a base salary at the rate
of $225,000 per year and provide benefits.

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Mr. Hawley's salary was increased by the Compensation Committee effective
February 1, 1999, to $275,000 and he was also granted 300,000 options. In
February 1998, the Company and Mr. Hawley agreed to extend the term of the
Employment Agreement to January 28, 2001. Effective January 28, 2001, the
Company and Mr. Hawley agreed to a further extension of the term of the
Employment Agreement until December 31, 2001, subject to termination at any time
by either party with ninety (90) days prior written notice. If Mr. Hawley's
employment is terminated by the Company without cause (as defined in the
Employment Agreement) he is entitled to receive his full base salary and
benefits for the remaining term of the Employment Agreement. If Mr. Hawley
resigns from the Company upon a change in control (as defined in the Employment
Agreement) he is entitled to a lump sum payment equal to the greater of (i) the
remaining amounts that would be payable to him under the Employment Agreement
and (ii) $275,000. Furthermore, the Company granted Mr. Hawley an option to
purchase 1,234,000 shares of Common Stock at an exercise price of $1.00 per
share with vesting over three years. In the event of a change in control, the
right to exercise the options would accelerate. Mr. Hawley is also entitled to
all other benefits of employment available to executive officers of the Company
generally, including bonuses, retirement, vacation, deferred compensation,
employee discount, and various health related benefits.

The Company has entered into agreements with Messrs. Burton, Friedman,
McTaggart, Beale and Tabar, as well as several other officers and employees of
the Company, providing for the payment of severance benefits equal to such
officers' or employees' monthly salary plus benefits for up to 12 months if
terminated without cause.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock, including Common Stock of
the Company issuable upon conversion of the Company's Series A Convertible
Preferred Stock, as of March 20, 2001 by (i) each person (or group of affiliated
persons) who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, including Common Stock of the Company issuable upon
conversion of the Company's Series A Convertible Preferred Stock, (ii) each of
the Company's directors and executive officers, and (iii) all directors and
executive officers as a group.

[Enlarge/Download Table]

SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) SHARES OWNED
------------------------------------ --------------------- ------------

TH Lee Global Internet Partners, L.P. ............ 11,818,170(2) 29.2%
200 Madison Avenue
Suite 1900
New York, NY 10016
General Electric Capital Corporation (GECC)....... 10,060,820(3) 23.1
260 Long Ridge Road
Stamford, CT 06927
Worms & Cie....................................... 2,763,202(4) 6.7
55 rue la Boetie
75008 Paris, France
Japan Omnibus Ltd. (JOL).......................... 671,087(5) 1.6
Tropic Isle Building
Road Town, Tortola
British Virgin Islands
John F. Hawley and Barbara H. Hawley, as
Trustees........................................ 1,944,653(6) 4.8
515 South Figueroa Street
Los Angeles, CA 90071
ATCO Holdings Limited............................. 1,343,195(7) 3.3
c/o ATCO Development, Inc.
11777 Katy Freeway
Suite 300S
Houston, TX 77079
Philip M. Hawley.................................. 1,437,500(8) 3.4
Thomas M. DeLitto................................. 121,852(9) *
Robert A. Burton.................................. 137,500(10) *
Herbert J. Friedman............................... 129,500(11) *
K. James McTaggart................................ 116,000(12) *
Klaus Tabar....................................... 105,340(13) *
Kamal G. Abdelnour................................ 74,766(14) *
Jeffrey H. Coats.................................. 27,246(15) *
Peter H. Dailey................................... 41,816(16) *
John A. Gavin..................................... 41,816(16) *
All directors and executive officers as a group
(11 persons).................................... 2,318,336 5.4

---------------
* Less than one percent.

(1) Warrants and options held by each of the principal stockholders, directors
and executive officers which are exercisable currently or within 60 days of
the date of this table are deemed to be outstanding shares of Common Stock
for their respective calculations.

(2) Includes 11,818,170 shares of Common Stock issuable upon conversion of
260,000 shares of Series A Convertible Preferred Stock.

(3) Includes 1,891,589 shares of Common Stock issuable upon conversion of
41,615 shares of Series A Convertible Preferred Stock and warrants to
purchase 3,169,231 shares of Common Stock.

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(4) Worms & Cie, through JOL, Permal Capital Management, Inc. and certain other
affiliates, may be deemed to be the beneficial owner of 1,852,797 shares of
Common Stock, 367,591 shares of Common Stock issuable upon conversion of
8,087 shares of Series A Convertible Preferred Stock, and warrants to
purchase 542,814 shares of Common Stock, which amounts include 556,194
shares held by a former director of the Company and exclude 121,852 shares,
options and warrants held by Mr. DeLitto and shown separately below. The
former director of the Company and Mr. DeLitto are directors and officers
of affiliates of Worms & Cie. Worms & Cie disclaims ownership of the shares
held by these individuals.

(5) Includes warrants to purchase 530,769 shares of Common Stock and 3,087
shares of Series A Convertible Preferred Stock convertible into 140,318
shares of Common Stock.

(6) As trustees for various Hawley Trusts, John F. Hawley and Barbara H. Hawley
are deemed to be beneficial owners of such shares. Includes 12,500 shares
of Series A Convertible Preferred Stock convertible into 568,181 shares of
Common Stock.

(7) Includes 227,273 shares of Common Stock issuable upon conversion of 5,000
shares of Series A Convertible Preferred Stock.

(8) Includes options to purchase 1,384,000 shares of Common Stock.

(9) Includes options to purchase 9,998 shares of Common Stock and 36,816
deferred stock units.

(10) Includes options to purchase 127,500 shares of Common Stock.

(11) Includes options to purchase 128,500 shares of Common Stock.

(12) Includes options to purchase 115,000 shares of Common Stock.

(13) Includes options to purchase 103,500 shares of Common Stock.

(14) Includes options to purchase 5,000 shares of Common Stock and 36,816
deferred stock units.

(15) Includes 27,246 deferred stock units.

(16) Includes options to purchase 5,000 shares of Common Stock and 36,816
deferred stock units.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 2000, the transactions listed below occurred between the
Company and its subsidiaries and certain directors and their affiliates. The
Company believes that each such arrangement was as fair as could have been
obtained from unaffiliated persons.

SALE OF THE SERIES A CONVERTIBLE PREFERRED STOCK OF KRAUSE'S, INC.

TH LEE GLOBAL INTERNET PARTNERS, L.P.

On January 14, 2000, TH Lee.Putnam Internet Partners, L.P., and TH
Lee.Putnam Internet Parallel Partners, L.P., affiliates of TH Lee Global
Internet Partners, L.P. ("TH Lee"), purchased a total of 260,000 shares of
Series A Convertible Preferred Stock of the Company at a purchase price of $13
million. This purchase gave TH Lee a greater than 25% beneficial ownership of
common stock of the Company on a fully converted basis.

Jeffrey H. Coats, was at the time a managing director of TH Lee Global
Internet Partners, L.P., and a member of the Company's Board of Directors. He
did not participate in the Board's vote to approve the sale of the Series A
Convertible Preferred Stock.

GECC

On January 14, 2000, GE Capital Equity Investments, Inc., an affiliate of
General Electric Capital Corporation ("GECC"), purchased 20,000 shares of Series
A Convertible Preferred Stock of the Company at a purchase price of $1 million.
GECC holds beneficial ownership of 10,060,820 shares of common stock, comprising
23.1% of the company's issued and outstanding common stock. (Those numbers are
as of March 20, 2001. They give effect to warrants and other rights to acquire
common stock of the company exercisable within sixty days and fully converted
Series A Convertible Preferred Stock.)

George L. Hashbarger was at the time a vice president of GE Capital Equity
Investments, Inc., and a member of the Company's Board of Directors. He did not
participate in the Board's vote to approve the sale of the Series A Convertible
Preferred Stock.

IMMEDIATE FAMILY MEMBERS OF PHILIP M. HAWLEY

On January 17, 2000, (i) The Hawley Trusts, whose trustees include John F.
Hawley, Philip M. Hawley's son, and Barbara H. Hawley, Philip M. Hawley's
daughter-in-law, purchased a total of 12,500 shares of Series A Convertible
Preferred Stock at a purchase price of $625,000; and (ii) Dr. Philip Hawley, Jr.
purchased a total of 1,250 shares of Series A Convertible Preferred Stock at a
purchase price of $62,500. Philip M. Hawley is the Company's Chief Executive
Officer and Chairman of the Board of Directors. Philip M. Hawley did not
participate in the Board's vote to approve the sale of the Series A Convertible
Preferred Stock.

ISSUANCE OF SERIES A CONVERTIBLE PREFERRED STOCK OF KRAUSE'S INC.,
IN LIEU OF INTEREST

On May 5, 2000, the Company issued 24,702 shares of Series A Convertible
Preferred Stock in lieu of cash interest on its subordinated notes covering the
thirteen-month period from March 1, 2000, through March 31, 2001. These shares
were issued to GECC and JOL pro rata as holders of the subordinated notes. GECC
received 21,615 shares and JOL 3,087.

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 10-K/A Filing	Date	First	Last	Other Filings

	1/1/97	5
	2/1/99	6	10
	8/25/99	9
	1/14/00	13
	1/17/00	13
	3/1/00	13
	5/5/00	13		10-Q
	7/1/00	6
	8/22/00	7
	10/30/00	8	9
For The Period Ended	12/24/00	1	9	10-K, 10-K/A, NT 10-K
	1/28/01	10
	3/20/01	11	13
	3/31/01	13
	4/10/01	2	3	10-K
	4/27/01	1
Filed On / Filed As Of	5/1/01	2
	12/31/01	10

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Krauses Furniture Inc · 10-K/A · For 12/24/00

Filed On 5/1/01 5:25pm ET · SEC File 1-13981 · Accession Number 1095811-1-501708

Amendment to Annual Report · Form 10-KFiling Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated By Reference

Amendment to Annual Report · Form 10-K
Filing Table of Contents