SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
July 31, 1998
Room Plus, Inc.
(Exact Name of Registrant as Specified in Charter)
New York 1-14478 11-2622051
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
91 Michigan Avenue, Paterson, New Jersey 07503
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 523-4600
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 1. Changes in Control of Registrant.
On July 31, 1998, Room Plus, Inc. (the "Company") entered into
certain agreements with David A. Belford ("Belford") pursuant to which Belford
loaned the Company the sum of $1,500,000.00 for a two (2) year term at an annual
interest rate of 12% (the "Loan") and received a Warrant to purchase 2,000,000
shares of the Company's Common Stock at an exercise price of $2.00 per share.
Copies of the Loan Agreement and the Warrant, each dated July 31, 1998, are
filed herewith as Exhibits 10.25 and 4.13, respectively, and are incorporated
herein by reference. Based upon the number of shares of the Company's Common
Stock currently outstanding, upon full exercise of the Warrant, Belford would
own approximately 31.3% of the Company's Common Stock. The Loan is secured by a
pledge of substantially all of the Company's assets pursuant to a Security
Agreement dated July 31, 1998, a copy of which is filed herewith as Exhibit
10.26 and incorporated herein by reference. Pursuant to the Loan Agreement,
Belford was also elected as a Director and Chairman of the Board of the Company,
and all expenditures by the Company in excess of $5,000.00 require the prior
approval of Belford, which is not to be unreasonably withheld.
Simultaneously with the execution of the foregoing agreements
between the Company and Belford, the Company also entered into a Conditional
Agreement and Plan of Merger with Nationwide Warehouse & Storage, Inc.
("Nationwide") dated July 31, 1998 (the "Merger Agreement"), a copy of which is
filed herewith as Exhibit 2.1 and incorporated herein by reference. Pursuant to
the Merger Agreement, Nationwide is granted the right to merge with the Company
(the "Merger") if Nationwide's Board of Directors and Shareholders so elect
within five (5) business days following the issuance of the Company's financial
statements for the fiscal year ending December 31, 1998. The Merger Agreement
provides for the Company to issue an aggregate of 61,965,000 shares of its
Common Stock to Nationwide's shareholders in the Merger, which amount would be
increased to 84,915,000 shares if Nationwide were to acquire a related company
in exchange for its stock prior to the Merger. Marc Zucker, Allan Socher,
Theodore Shapiro and Frank Terzo, directors of Room Plus, who currently own in
the aggregate 1,471,267 shares of Room Plus Common Stock, exclusive of warrants
and options, have agreed to vote their shares in favor of the merger, which has
been approved by the Room Plus Board of Directors. Copies of those Stockholder
Agreements, each dated July 31, 1998, are filed herewith as Exhibits 10.27,
10.28, 10.29 and 10.30, respectively, and are incorporated herein by reference.
The Merger is subject to approval by the Company's shareholders and other
conditions. Nationwide is an affiliate of Belford.
As a result of the foregoing transactions, Belford may be deemed to
control the Company. A copy of the Company's press release dated August 3, 1998
announcing the foregoing transactions is filed herewith as Exhibit 99 and
incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits. The following exhibits are filed herewith:
No. Document
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2.1 Conditional Agreement and Plan of Merger dated
as of July 31, 1998, among the Company, Room
Plus Sub, Inc. and Nationwide Warehouse &
Storage, Inc.
4.13 Stock Subscription Warrant issued by the Company
to David A. Belford
10.25 Loan Agreement dated July 31, 1998, by and
between the Company and David A. Belford
10.26 Security Agreement dated as of July 31, 1998, by
and between the Company and David A. Belford
10.27 Stockholder Agreement dated as of July 31, 1998,
by and between Nationwide Warehouse & Storage,
Inc., the Company, Room Plus Sub, Inc. and Marc
Zucker
10.28 Stockholder Agreement dated as of July 31, 1998,
by and between Nationwide Warehouse & Storage,
Inc., the Company, Room Plus Sub, Inc. and Allan
Socher
10.29 Stockholder Agreement dated as of July 31, 1998,
by and between Nationwide Warehouse & Storage,
Inc., the Company, Room Plus Sub, Inc. and
Theodore Shapiro
10.30 Stockholder Agreement dated as of July 31, 1998,
by and between Nationwide Warehouse & Storage,
Inc., the Company, Room Plus Sub, Inc. and Frank
Terzo
99 Press release dated August 3, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROOM PLUS, INC.
Date: August 7, 1998 By: /s/ Jay H. Goldberg
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Name: Jay H. Goldberg
Title: Chief Financial Officer
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Exhibit No. 2.1
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CONDITIONAL
AGREEMENT AND PLAN OF MERGER
dated as of July 31, 1998,
among
ROOM PLUS, INC.,
ROOM PLUS SUB, INC.,
and
NATIONWIDE WAREHOUSE & STORAGE, INC.
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CONDITIONAL AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 31, 1998 (the "Agreement"),
by and among ROOM PLUS, INC., a New York corporation ("Parent"), ROOM PLUS SUB,
INC., an Ohio corporation ("Acquisition Sub") and wholly-owned subsidiary of
Parent, and NATIONWIDE WAREHOUSE & STORAGE, INC., an Ohio corporation (the
"Company").
W I T N E S S E T H:
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WHEREAS, the Boards of Directors of Parent and Acquisition Sub have
approved the merger of the Company with and into Acquisition Sub (the "Merger")
pursuant to the terms and conditions set forth in this Agreement and the sole
stockholder of Acquisition Sub has approved the Merger;
WHEREAS, the Board of Directors and stockholders of the Company have not
approved the Merger and if they fail to do so within five business days after
receipt by the Company of the audited financial statements of the Parent for the
year ending December 31, 1998, this Agreement may be terminated;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, Parent, Acquisition Sub
and the Company, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
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Section 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the Ohio General Corporation Law (the "GCL"), the Company shall be merged
with and into Acquisition Sub in accordance with this Agreement and with an
appropriate certificate of merger (the "Certificate of Merger") and the separate
existence of the Company shall thereupon cease (the "Forward Merger"). The
Acquisition Sub shall be the surviving corporation in the Merger (hereinafter
sometimes referred to as the "Surviving Corporation"). Notwithstanding the
foregoing, after consultation with its advisors and counsel, if Parent and the
Company determine that the Forward Merger is not practicable, could be
detrimental to Parent or the Company, or would not qualify as a reorganization
under Section 368(a) of the Internal Revenue Code of 1986, as amended, Parent
may cause Acquisition Sub to merge with and into the Company, with the Company
to be the Surviving Corporation or to cause the Company to be merged directly
with the Parent (the "Reverse Merger").
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Section 1.2 Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective Time") after the Closing as a copy of the
duly completed Certificate of Merger (the "Merger Filing") is delivered to the
Secretary of State of the State of Ohio for filing and is filed by the Secretary
of State of the State of Ohio or at such later time as the parties may agree to
specify in the Certificate of Merger.
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Section 1701.82 of the GCL.
Section 1.4 Closing. The closing (the "Closing ") of the transactions
contemplated by this Agreement shall take place at the offices of Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York, New York at 10:00 A.M. New York
time on the second business day immediately following the date on which the last
of the conditions set forth in Article VIII hereof is fulfilled or waived, or at
such other time and place as Parent and the Company shall agree (the "Closing
Date").
Section 1.5 Shareholders' Agreements. Concurrently herewith, each of
Messrs. Theodore Shapiro, Allan Socher, Frank Terzo and Marc Zucker are entering
into agreements with the Company providing for, among other matters, their
agreement to vote in favor of the Merger.
ARTICLE II
THE SURVIVING CORPORATION
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Section 2.1 Certificate of Incorporation; By-laws.
(a) At the Effective Time of the Forward Merger, the Certificate
of Incorporation and the By-Laws of Acquisition Sub, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and the
By-Laws of the Surviving Corporation.
(b) Alternatively, at the Effective Time of the Reverse Merger,
the Certificate of Incorporation and By-Laws, respectively, of the Surviving
Corporation shall be amended and restated in their entirety to read as the
Certificate of Incorporation and By-Laws of Acquisition Sub.
Section 2.2 Directors and Officers.
(a) The directors of Acquisition Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly elected or appointed in
accordance with applicable law.
(b) The officers of Acquisition Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time and until their successors are duly elected or appointed in
accordance with applicable law.
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ARTICLE III
CONVERSION OF SHARES
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Section 3.1 Conversion of Company Shares in the Merger.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of any capital stock of the Company except as
set forth in this Section 3.1, subject to the other provisions of this Section
3.1, the shares of common stock, without par value, of the Company ("Company
Common Stock") issued and outstanding immediately prior to the Effective Time
(excluding any treasury shares) owned by the stockholders of the Company shall
be converted in the aggregate into the right to receive an aggregate of
84,915,000 validly issued, fully paid and nonassessable shares of common stock,
par value $0.00133 per share (the "Merger Consideration"), of Parent ("Parent
Common Stock"), subject to adjustment. Each holder of Company Common Stock shall
receive its pro rata share of the Merger Consideration.
At the Effective Time, all shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive the Merger Consideration. The holders
of certificates previously evidencing shares of Company Common Stock outstanding
immediately prior to the Effective Time (the "Certificates") shall cease to have
any rights with respect to shares of Company Common Stock except as otherwise
provided herein or by law. The Certificates shall be exchanged for certificates
evidencing whole shares of Parent Common Stock issued in consideration therefor
in accordance with the allocation procedures of this Section 3.1 and upon the
surrender of such Certificates in accordance with the provisions of Section 3.2.
No fractional shares of Parent Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 3.2(c).
(b) Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of Parent Common Stock
shall have been changed into a different number of shares or a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Merger
Consideration shall be correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
(c) The Merger Consideration to be received by the stockholders of
the Company assumes that prior to the Merger the Company shall have acquired, in
exchange for equity securities, Nationwide Warehouse & Storage, Inc. of Georgia
and affiliated entities ("Nationwide South"). If Nationwide South shall not have
been acquired, then the Merger Consideration shall be reduced to an aggregate of
61,965,000 shares of Parent Common Stock.
(d) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any direct or
indirect wholly owned subsidiary of Parent or of Company immediately prior to
the Effective Time shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
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(e) In the Reverse Merger, each share of common stock of
Acquisition Sub issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
3.2 Exchange of Certificates.
(a) At or prior to the Effective Time, each holder of Company
Common Stock shall surrender the certificates representing such stock to the
Parent and the Parent shall issue or cause to be issued to such holder at the
Closing the certificates representing the Parent Common Stock to which the
holder is entitled.
(b) All shares of Parent Common Stock issued and cash paid upon
conversion of the shares of Company Common Stock in accordance with the terms
hereof shall be deemed to have been issued or paid in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
(c) No certificates or scrip evidencing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. In lieu of any such
fractional shares, each holder of Company Common Stock upon surrender of a
Certificate for exchange pursuant to this Section 3.2 shall be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(a) the Average Stock Price by (b) the fractional interest to which such holder
would otherwise be entitled (after taking into account all shares of Company
Common Stock then held of record by such holder). The "Average Stock Price"
shall mean the average of the per share closing prices of Parent Common Stock on
the Nasdaq SmallCap Market during the 10 consecutive trading days ending the
tenth trading day prior to the Parent Stockholders' Meeting (as defined in
Section 7.3).
At the Closing, concurrently with the issuance of the certificates representing
the Parent Common Stock as set forth in Section 3.1(a), Parent shall pay the
amount of cash, if any, to be paid to holders of Company Common Stock with
respect to any fractional share interests, to such holders of Company Common
Stock subject to and in accordance with this Agreement.
Section 3.3 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants to Parent and Acquisition Sub as
follows:
Section 4.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation and
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has the requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
The Company is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not, when
taken together with all other such failures, have a Company Material Adverse
Effect. For purposes of this Agreement, a Company Material Adverse Effect shall
be a material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise) or results of operations of the Company and
its subsidiaries taken as a whole. True and complete copies of the Company's
Certificate of Incorporation and By-Laws, as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Parent.
Section 4.2 Company Common Stock. The authorized capital stock of the
Company consists of 1,000 shares of Company Common Stock, of which 350 shares
are outstanding as of the date hereof, all of which are or shall be validly
issued and are fully paid, nonassessable and free of preemptive rights. Except
as set forth in Section 4.2 of the separate disclosure schedule delivered by the
Company simultaneous with the execution and delivery of this Agreement (the
"Company's Disclosure Schedule"), as of the date hereof, there are no
outstanding subscriptions, options, warrants, rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions, or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or other agreement obligating the Company to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or obligating the Company or any
subsidiary of the Company to grant, extend or enter into any such agreement or
commitment except pursuant to this Agreement.
Section 4.3 Subsidiaries. Each direct and indirect subsidiary of the
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. Each of such subsidiaries is
qualified to do business, and is in good standing, in each jurisdiction in which
the properties owned, leased or operated by it, or the nature of the business
conducted by it, makes such qualification necessary, except where the failure to
be so qualified and in good standing will not, when taken together with all such
other failures, have a Company Material Adverse Effect. All of the outstanding
shares of capital stock of each subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned directly or
indirectly by the Company or another subsidiary free and clear of any liens,
claims, encumbrances, security interests, equities, charges and options of any
nature whatsoever. There are no outstanding subscriptions, options, warrants,
rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights affecting any shares of capital
stock of any subsidiary of the Company, including any right of conversion or
exchange under any outstanding security, instrument or agreement.
Section 4.4 Authority; Non-Contravention; Approvals. (a) Subject to
approval by its board of directors and stockholders, the Company has full
corporate power and authority to enter
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into this Agreement and, subject to the Company Required Approvals (as defined
in Section 4.4(c)), to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation by
the Company of the transactions contemplated hereby have not been authorized by
the Company's Board of Directors, and this Agreement and the transactions
contemplated hereby have not been approved by the stockholders of the Company,
and approval by the board of directors and stockholders on the part of the
Company are necessary to authorize the execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby.
Subject to board of directors and stockholders approval, this Agreement will
have been duly and validly executed and delivered by the Company and will
constitute a valid and legally binding agreement of the Company enforceable
against it in accordance with its terms.
(b) Except as set forth in Section 4.4(a), the execution and
delivery of this Agreement by the Company do not, and the consummation by the
Company of the transactions contemplated hereby will not, violate, conflict with
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its subsidiaries under any of the
terms, conditions or provisions of (i) the respective charters or by-laws of the
Company or any of its subsidiaries, (ii) subject to obtaining the Company
Required Approvals, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its subsidiaries or any of their
respective properties or assets, or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or any of
its subsidiaries is now a party or by which the Company or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected, excluding from the foregoing clauses (ii) and (iii) such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a Company Material Adverse Effect.
(c) Except for (i) the filings, if any, by the Company required by
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (ii) approval by the board of directors and stockholders of the
Company and (iii) the making of the Merger Filing with the Secretary of State of
the State of Ohio in connection with the Merger (the filings and approvals
referred to in clauses (i), (ii) and (iii) are collectively referred to as the
"Company Required Approvals"), no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, other than such filings, registrations, authorizations,
consents or approvals, the failure of which to make or obtain, as the case may
be, will not have a Company Adverse Effect.
Section 4.5 Financial Statements. The Company has previously delivered
to Parent true and complete copies of its audited consolidated financial
statements as at and for the two
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years ended December 31, 1996, its unaudited consolidated financial statements
as at and for the year ended December 31, 1997 and its unaudited consolidated
financial statements for the six months ended June 30, 1998 (collectively the
"Company Financial Statements"). The Company Financial Statements fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis, the consolidated financial position of the Company and its
subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (except as otherwise
indicated therein or in the notes thereto, or, in the case of audited financial
statements, the related report of the Company's independent accountants, as the
case may be). subject, in the case of the unaudited interim financial
statements, to normal year-end and audit adjustments and any other adjustments
described therein. The Company has also previously delivered to Parent true and
complete copies of certain unaudited consolidated financial information of
Nationwide South for the two years ended December 31, 1997 (collectively the
"South Financial Statements"). To the best knowledge of the Company, the South
Financial Statements fairly present the consolidated results of operations of
Nationwide South for the periods then ended, subject to normal year end and
audit adjustments.
Section 4.6 Absence of Undisclosed Liabilities. Neither the Company nor
any of its subsidiaries had at December 31, 1997, or has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except liabilities, obligations or contingencies (a)
which are accrued or reserved against in the Company Financial Statements or
reflected in the notes thereto or (b) which were incurred after December 31,
1997, and were incurred in the ordinary course of business and consistent with
past practices and, in either case, except for any such liabilities, obligations
or contingencies which (i) would not, in the aggregate, have a Company Material
Adverse Effect or (ii) have been discharged or paid in full prior to the date
hereof.
Section 4.7 Absence of Certain Changes or Events. Since June 30, 1998
there has not been any material adverse change in the business (including,
without limitation, any actual or threatened loss of significant customers or
suppliers), operations, properties, assets, liabilities, condition (financial or
other) or results of operations of the Company and its subsidiaries, taken as a
whole, or, to the knowledge of the Company, in Nationwide South and the Company
and its subsidiaries and, to the knowledge of the Company, Nationwide South have
in all material respects conducted their respective businesses in the ordinary
course consistent with past practice.
Section 4.8 Litigation. (a) There are no claims, suits, actions or
proceedings pending or, to the knowledge of the Company, threatened, nor to the
knowledge of the Company are there any investigations or reviews pending or
threatened, against, relating to or affecting the Company or any of its
subsidiaries, which, if adversely determined, could have a Company Material
Adverse Effect; (b) there have not been any developments since June 30, 1998
with respect to such claims, suits, actions, proceedings, investigations or
reviews which, individually or in the aggregate, may have a Company Material
Adverse Effect; and (c) except as contemplated by the Company Required
Approvals, neither the Company nor any of its subsidiaries is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission,
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agency, instrumentality, authority or arbitrator which prohibits or restricts
the consummation of the transactions contemplated hereby or may have a Company
Material Adverse Effect.
Section 4.9 No Violation of Law. Neither the Company nor any of its
subsidiaries is in violation of, or, to the knowledge of the Company, is under
investigation with respect to, or has been given notice of or been charged with,
any violation of any law, statute, order, rule, regulation, ordinance, or
judgment of any governmental or regulatory body or authority, except for
violations which in the aggregate do not have a Company Material Adverse Effect.
The Company and its subsidiaries have all material permits, licenses, franchises
and other governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
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Parent and Acquisition Sub jointly and severally represent and warrant to
the Company as follows:
Section 5.1 Organization and Qualification. Parent and Acquisition Sub
are each corporations duly organized, validly existing and in good standing
under the laws of their respective states of incorporation and have the
requisite corporate power and authority to own, lease and operate their
respective assets and properties and to carry on their respective businesses as
they are now being conducted. Each of Parent and Acquisition Sub is qualified to
do business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a Parent Material Adverse Effect. For purposes of this Agreement, a Parent
Material Adverse Effect shall be a material adverse effect on the business,
operations, properties, assets, condition (financial or otherwise) or results of
operations of the Parent and its subsidiaries taken as a whole. True and
complete copies of Parent's and Acquisition Sub's Certificates of Incorporation
and By-Laws, as in effect on the date hereof, including all amendments thereto,
have heretofore been delivered to the Company.
Section 5.2 Parent Common Stock. The authorized capital stock of Parent
consists of 10,000,000 shares of Parent Common Stock, of which 4,385,000 shares
are outstanding as of the date hereon, all of which are validly issued and are
fully paid, nonassessable and free of preemptive rights. Except for 2,530,000
redeemable common stock purchase warrants and except as set forth in Section 5.2
of the separate disclosure schedule delivered by Parent and Acquisition Sub
simultaneous with the execution and delivery of this Agreement ("Parent's
Disclosure Schedule"), as of the date hereof, there are no other outstanding
subscriptions, options, warrants, rights, calls, contracts, voting trusts,
proxies or other commitments, understandings, restrictions, or arrangements,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating Parent to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of the capital stock of
Parent or
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obligating Parent or any subsidiary of Parent to grant, extend or enter into any
such agreement or commitment except pursuant to this Agreement.
Section 5.3 Subsidiaries. Each subsidiary of Parent is listed in Section
5.3 of Parent's Disclosure Schedule. Each direct and indirect subsidiary of
Parent is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. Each such subsidiary is qualified
to do business, and is in good standing, in each jurisdiction in which the
properties owned, leased or operated by it, or the nature of the business
conducted by it, makes such qualification necessary, except where the failure to
be so qualified and in good standing will not, when taken together with all such
other failures, have a Parent Material Adverse Effect. The authorized capital
stock of Acquisition Sub consists of 100 shares of common stock, of which 100
shares are issued and outstanding, all of which are beneficially owned by
Parent. All of the outstanding shares of capital stock of each subsidiary are
validly issued, fully paid, nonassessable and free of preemptive rights, and are
owned directly or indirectly by Parent free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever. There are no outstanding subscriptions, options, warrants, rights,
calls, contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting, transfer,
ownership or other rights affecting any shares of capital stock of any
subsidiary of Parent, including any right of conversion or exchange under any
outstanding security, instrument or agreement. Section 5.3 of Parent's
Disclosure Schedule sets forth a list of all material corporations,
partnerships, joint ventures and other business entities in which Parent or any
of its subsidiaries directly or indirectly owns an interest and Parent's or such
subsidiary's direct and indirect share, partnership or other ownership interest
of each such entity.
Section 5.4 Authority; Non-Contravention; Approvals. (a) Each of Parent
and Acquisition Sub has full corporate power and authority to enter into this
Agreement and, subject to the Parent Stockholders' Approval (as defined in
Section 7.3) and the Parent Required Approvals (as defined in Section 5.4(c)),
to consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation by Parent and Acquisition Sub
of the transactions contemplated hereby have been duly authorized by Parent's
and Acquisition Sub's Boards of Directors, and no other corporate proceedings on
the part of Parent or Acquisition Sub are necessary to authorize the execution
and delivery of this Agreement and the consummation by Parent and Acquisition
Sub of the transactions contemplated hereby, except for the Parent Stockholders'
Approval and the obtaining of the Parent Required Approvals. This Agreement has
been duly and validly executed and delivered by Parent and Acquisition Sub and
constitutes a valid and legally binding agreement of each of Parent and
Acquisition Sub, enforceable against it in accordance with its terms.
(b) Except as set forth in Section 5.4(b) of Parent's Disclosure
Schedule, the execution and delivery of this Agreement by Parent and Acquisition
Sub do not, and the consummation by Parent and Acquisition Sub of the
transactions contemplated hereby will not, violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event
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which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
respective properties or assets of Parent or any of its subsidiaries under any
of the terms, conditions or provisions of (i) the respective charters or by-laws
of Parent or any of its subsidiaries, (ii) subject to obtaining the Parent
Required Approvals and the receipt of the Parent Stockholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
Parent or any of its subsidiaries or any of their respective properties or
assets, or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which Parent or any of its subsidiaries is now a
party or by which Parent or any of its subsidiaries or any of their respective
properties or assets may be bound or affected, excluding from the foregoing
clauses (ii) and (iii) such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests, charges
or encumbrances that would not, in the aggregate, have a Parent Material Adverse
Effect.
(c) Except for (i) the filings, if any, by Parent required by
Title II of the HSR Act, (ii) the filing of the Proxy Statement (as defined in
Section 5.9) with the Securities and Exchange Commission (the "SEC") pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act of 1933, as amended (the "Securities Act"), and the declaration
of the effectiveness thereof by the SEC and filings with various blue sky
authorities, (iii) the filing of the Registration Statement (as defined in
Section 5.9) with the SEC pursuant to the Securities Act, and the declaration of
the effectiveness thereof by the SEC and filings with various blue sky
authorities, (iv) the making of the Merger Filing with the Secretary of State of
the State of Ohio in connection with the Merger and (v) the listing with the
Nasdaq SmallCap Market of the additional shares of Parent Common Stock to be
issued in the Merger (the filings and approvals referred to in clauses (i)
through (v) are collectively referred to as the "Parent Required Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Parent and
Acquisition Sub or the consummation by Parent and Acquisition Sub of the
transactions contemplated hereby, other than such filings, registrations,
authorizations, consents or approvals, the failure of which to make or obtain,
as the case may be, will not, in the aggregate, have a Parent Material Adverse
Effect.
Section 5.5 Reports and Financial Statements. Since December 31, 1995,
Parent and each of its subsidiaries required to make filings under the
Securities Act, the Exchange Act and applicable state laws and regulations, as
the case may be, have filed all forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed by them under the Securities Act, the Exchange Act and applicable laws and
regulations of Parent's and its subsidiaries' jurisdictions of incorporation and
the respective rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the appropriate acts, laws
and regulations and the rules and regulations thereunder. Parent has previously
delivered to the Company true and complete copies of its (a) Annual Reports on
Form 10-KSB, Quarterly Reports on Form 10-QSB, and Current Reports on Form 8-K
filed by Parent or any of its subsidiaries with the SEC under the Exchange Act
since December 31, 1995, (b) proxy and information statements relating to all
meetings of its
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stockholders (whether annual or special) and actions by written consent in lieu
of a stockholders' meeting held or taken since December 31, 1995 and (c) all
other reports or registration statements filed by Parent or any of its
subsidiaries with the SEC under the Exchange Act or the Securities Act since
December 31, 1995 (collectively, the "Parent SEC Reports"). As of their
respective dates, the Parent SEC Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of Parent included in the
Parent SEC Reports fairly present, in conformity with generally accepted
accounting principles applied on a consistent basis, the consolidated financial
position of Parent and its subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(except as otherwise indicated therein or in the notes thereto or, in the case
of audited financial statements, the related report of Parent's independent
accountants, as the case may be), subject, in the case of the unaudited interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein.
Section 5.6 Absence of Undisclosed Liabilities. Except as set forth in
Section 5.6 of Parent's Disclosure Schedule or in the Parent SEC Reports,
neither Parent nor any of its subsidiaries had at December 31, 1997, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except liabilities, obligations
or contingencies (a) which are accrued or reserved against in the financial
statements of Parent included in Parent's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997 or (b) which were incurred after December
31, 1997, and were incurred in the ordinary course of business and consistent
with past practices and, in either case, except for any such liabilities,
obligations or contingencies which (i) would not, in the aggregate, have a
Parent Material Adverse Effect or (ii) have been discharged or paid in full
prior to the date hereof.
Section 5.7 Absence of Certain Changes or Events. Except as set forth in
Section 5.7 of Parent's Disclosure Schedule, since March 31, 1998 there has not
been any material adverse change in the business (including, without limitation,
any actual or threatened loss of significant customers or suppliers),
operations, properties, assets, liabilities, condition (financial or other) or
results of operations of Parent and its subsidiaries, taken as a whole, and
Parent and its subsidiaries have in all material respects conducted their
respective businesses in the ordinary course consistent with past practice.
Section 5.8 Litigation. Except as disclosed in Section 5.8 of Parent's
Disclosure Schedule or in the Parent SEC Reports, (a) there are no claims,
suits, actions or proceedings pending or, to the knowledge of Parent,
threatened, nor to the knowledge of Parent are there any investigations or
reviews pending or threatened, against, relating to or affecting Parent or any
of its subsidiaries, which, if adversely determined, could have a Parent
Material Adverse Effect; (b) there have not been any developments since March
31, 1998 with respect to such claims, suits, actions, proceedings,
investigations or reviews which, individually or in the aggregate, may have a
Parent Material Adverse Effect; and (c) except as contemplated by the Parent
Required Approvals, neither Parent nor any of its subsidiaries is subject to any
judgment, decree,
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injunction, rule or order of any court, governmental department, commission,
agency, instrumentality, authority or arbitrator which prohibits or restricts
the consummation of the transactions contemplated hereby or may have a Parent
Material Adverse Effect.
Section 5.9 Proxy Statement. The proxy statement to be distributed in
connection with the Parent Stockholders' Meeting (the "Proxy Statement") and
which shall be included in the Registration Statement on Form S-4 to be filed by
Parent with the SEC in connection with the issuance of Parent Common Stock in
the Merger (the "Registration Statement") will not at the time of the mailing of
the Proxy Statement and any amendment or supplement thereto, and at the time of
the Parent Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading or necessary to correct any statement
in any earlier filing with the SEC of such Proxy Statement or any amendment or
supplement thereto or any earlier communication to stockholders of Parent with
respect to the transactions contemplated by this Agreement. The Proxy Statement
will comply as to form in all material respects with all applicable laws,
including the provisions of the Exchange Act and the rules and regulations
promulgated thereunder. Notwithstanding the foregoing, no representation is made
by Parent with respect to information supplied by the Company or its
representatives specifically for inclusion in the Proxy Statement.
Section 5.10 No Violation of Law. Except as set forth in Section 5.10 of
Parent's Disclosure Schedule, neither Parent nor any of its subsidiaries is in
violation of, or, to the knowledge of Parent, is under investigation with
respect to, or has been given notice of or been charged with, any violation of
any law, statute, order, rule, regulation, ordinance, or judgment of any
governmental or regulatory body or authority, except for violations which in the
aggregate do not have a Parent Material Adverse Effect. Parent and its
subsidiaries have all material permits, licenses, franchises and other
governmental authorizations, consents and approvals (the "Parent Government
Approvals") necessary to conduct their businesses as presently conducted and all
such Parent Government Approvals shall continue in full force and effect after
the Merger.
Section 5.11 Compliance with Agreements. Except as already set forth in
the Parent SEC Documents, Section 5.11 of Parent's Disclosure Schedule sets
forth as of the date hereof a list of all leases for real property, all material
leases for personal property and all material contracts to which Parent or any
of its subsidiaries is a party or by which Parent or any of its subsidiaries or
any of its assets is bound or subject. Except as set forth in Section 5.11 of
Parent's Disclosure Schedule, Parent and each of its subsidiaries are not in
breach or violation of or in default in the performance or observance of any
term or provision of, and no event has occurred which, with lapse of time or
action by a third party, could result in a default under, (i) the respective
charters or by-laws of Parent or any of its subsidiaries or (ii) any contract,
commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which Parent or any of its subsidiaries
is a party or by which any of them is bound or to which any of their property is
subject, which breaches, violations and defaults, in the case of this clause
(ii) would have, in the aggregate, a Parent Material Adverse Effect.
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Section 5.12 Taxes. Parent and its subsidiaries have duly filed with
the appropriate federal, state, local, and foreign taxing authorities all tax
returns required to be filed by them on or prior to the Effective Time and such
tax returns are true and complete in all material respects. Parent and its
subsidiaries have duly paid in full or made adequate provision for the payment
of all taxes for all periods ending at or prior to the Effective Time. The
liabilities and reserves for taxes reflected in Parent's consolidated financial
statements described in Section 5.5 are adequate to cover all taxes which are or
may become payable with respect to all periods covered by such financial
statements. Except as set forth in Section 5.12 of Parent's Disclosure Schedule,
(i) there are no material liens for taxes upon any property or asset of Parent
or any subsidiary thereof, except for (x) liens for taxes not yet due and (y)
any such liens for taxes shown on such Section 5.12 of Parent's Disclosure
Schedule, which are being contested in good faith through appropriate
proceedings; (ii) Parent has not made any change in accounting method, received
a ruling from any taxing authority or signed an agreement with any taxing
authority which will materially and adversely affect Parent in future periods;
(iii) during the past three years neither Parent nor any of its subsidiaries has
received any notice of deficiency, proposed deficiency or assessment from any
governmental taxing authority with respect to taxes of Parent or any of its
subsidiaries, except any such notice of deficiency, proposed deficiency or
assessment which will not in the aggregate cause a Parent Material Adverse
Effect, and, any such deficiency or assessment shown on such Section 5.12 of
Parent's Disclosure Schedule has been paid or is being contested in good faith
through appropriate proceedings; (iv) the income tax returns for Parent and its
subsidiaries are not currently the subject of any audit by the IRS or any other
national taxing authority, and such federal income tax returns have been
examined by the IRS (or the applicable statutes of limitation for the assessment
of federal taxes for such periods have expired) for all periods through and
including December 31, 1993 and no material deficiencies were asserted as a
result of such examinations which have not been resolved and fully paid; (v)
there are no outstanding requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of any taxes or
deficiencies against Parent or any of its subsidiaries, and no power of attorney
granted by either Parent or any of its subsidiaries with respect to any taxes is
currently in force; and (vi) neither Parent nor any of its subsidiaries is a
party to any agreement providing for the allocation or sharing of taxes. Neither
Parent nor any of its subsidiaries has, with regard to any assets or property
held, acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code").
Section 5.13 Employee Benefit Plans; ERISA. (a) Section 5.13 of Parent's
Disclosure Schedule lists all material employee benefit plans, employment
contracts or other arrangements for the provision of benefits for employees or
former employees of Parent and its subsidiaries and neither Parent nor its
subsidiaries have any commitment to create any additional plan, contract or
arrangement or to amend any such plan, contract or arrangement so as to increase
benefits thereunder, except as required under existing collective bargaining
agreements. Section 5.13(a) of Parent's Disclosure Schedule identifies all
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), other than
"multiemployer plans" within the meaning of Section 3(37) of ERISA, covering
current or former employees of Parent and its subsidiaries (the "Parent Plans"),
other than the Parent Plans which are described in the Parent SEC Reports. A
true and correct copy of
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each of the employee benefit plans, employment contracts and other arrangements
for the provision of benefits for employees and former employees of Parent and
its subsidiaries described in the Parent Plans listed on Section 5.13(a) of
Parent's Disclosure Schedule, except for any multiemployer plans, and all
contracts relating thereto, or to the funding thereof (including, without
limitation, all trust agreements, insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements), each as will be in effect at the Effective Time, has been provided
to the Company. A true and correct copy of the most recent annual report,
actuarial report, summary plan description, and IRS determination letter with
respect to each such Parent Plan, to the extent applicable, and a current
schedule of assets (and the fair market value thereof assuming liquidation of
any asset which is not readily tradeable) held with respect to any funded plan,
Parent Plan, or benefit arrangement has been provided to the Company by Parent,
and there have been no material changes in the financial condition in the
respective plans, Parent Plans or benefit arrangements from that stated in such
annual report and actuarial reports.
(b) Except as set forth in Section 5.13(b) of Parent's Disclosure
Schedule, (i) there have been no prohibited transactions within the meaning of
Section 406 of ERISA or Section 4975 of the Code with respect to any of the
Parent Plans which, assuming that the taxable period of such transaction expired
as of the date hereof, could subject Parent or its subsidiaries to a material
tax or penalty under Section 502(i) of ERISA or Section 4975 of the Code; (ii)
no liability (except for premiums due) has been or is expected to be incurred by
Parent or any of its subsidiaries under Title IV of ERISA with respect to any of
the Parent Plans or with respect to any ongoing, frozen or terminated "single
employer plan" within the meaning of Section 4001(a)(15) of ERISA currently or
formerly maintained by any of them, or by any entity which is considered a
single employer with Parent under Section 4001 of ERISA or Section 414 of the
Code (a "Parent ERISA Affiliate"); (iii) all amounts which Parent or its
subsidiaries are required to pay as contributions to the Parent Plans have been
timely made or have been reflected in the financial statements described in
Section 5.5; (iv) none of the Parent Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived; (v) the current value of all "benefit liabilities" within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions used in the Plan's most recent actuarial valuation) under
each of the Parent Plans which is subject to Title IV of ERISA did not exceed
the then current value of the assets of such plan allocable to such benefit
liabilities by more than the amount disclosed in Section 5.13(b) of Parent's
Disclosure Schedule; (vi) each of the Parent Plans has been operated and
administered in all material respects in accordance with applicable laws,
including, but not limited to, the reporting and disclosure requirements of Part
1 of Subtitle I of ERISA and the group health plan continuation requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA; (vii)
each of the Parent Plans which is intended to be "qualified" within the meaning
of Section 401(a) of the Code has been determined by the IRS to be so qualified
and Parent is not aware of any circumstances likely to result in revocation of
any such determination; (viii) there are no material pending, threatened or
anticipated claims involving any of the Parent Plans other than claims for
benefits in the ordinary course; (ix) no notice of a "reportable event" within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived has been required to be filed for any of the Parent Plans;
(x) neither Parent nor any of its
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subsidiaries is a party to, nor participates in or has any liability or
contingent liability with respect to, any multiemployer plan (regardless of
whether based on contributions of a Parent ERISA affiliate); and (xi) neither
Parent nor its subsidiaries has any liability or contingent liability for
retiree life and health benefits under any of the Parent Plans other than
statutory liability for providing group health plan continuation coverage under
Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code, except
as set forth in Section 5.13(b) of Parent's Disclosure Schedule.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will accelerate benefits or
any payments under any Parent employee agreement, plan or arrangement.
Section 5.14 Material Defaults. Except as set forth in Section 5.14 of
Parent's Disclosure Schedule, neither Parent nor any of its subsidiaries is, or
has received any notice or has any knowledge that Parent or any subsidiary is,
in default in any respect under any contract, agreement, commitment,
arrangement, lease, insurance policy, or other instrument to which Parent or any
of its subsidiaries is a party or by which Parent or any of its subsidiaries or
their respective assets, business, or operations receives benefits, except for
those defaults which would not have, individually or in the aggregate, a Parent
Material Adverse Effect; and there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
Section 5.15 Labor Matters. Except as set forth in Section 5.15 of
Parent's Disclosure Schedule, there are no material controversies pending or, to
the knowledge of Parent, threatened between Parent or any of its subsidiaries
and any representatives of its employees, and, to the knowledge of Parent, there
are no material organizational efforts presently being made involving any of the
presently unorganized employees of Parent or its subsidiaries. Parent and its
subsidiaries have complied in all material respects with all laws relating to
the employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and no person has, to the knowledge of Parent,
asserted that Parent or any of its subsidiaries is liable in any material amount
for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing.
Section 5.16 Environmental Matters.
(a) Except as set forth in the Section 5.16(a) of Parent's
Disclosure Schedule, Parent and its subsidiaries have complied in all respects
with all Environmental Laws (as defined in Section 5.16(g)). Parent and its
subsidiaries have obtained and will maintain through the Closing Date all
permits, licenses, certificates and other authorizations which are required with
respect to its operation under any Environmental Laws and all such permits,
licenses, certificates and other authorizations are listed on Section 5.16(a) of
Parent's Disclosure Schedule.
(b) Except as set forth in Section 5.16(b) of Parent's Disclosure
Schedule, Parent and its subsidiaries are in compliance in all respects with all
permits, licenses and authorizations required by any Environmental Laws, and are
also in full compliance with all
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other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
Environmental Laws or contained in any regulation or code promulgated or
approved under the Environmental Laws, or any plan, order, decree, judgment,
injunction, notice or demand letter issued to or entered against Parent
thereunder. All products sold and services provided by Parent and its
subsidiaries prior to the date hereof are in compliance with all Environmental
Laws applicable thereto and all such products and services so sold or provided
prior to the Closing Date will as of such date be in compliance with all
Environmental Laws applicable thereto. Parent has hereto delivered to the
Company true and complete copies of all environmental studies made in the last
ten years relating to the business or assets of Parent and its subsidiaries.
(c) Except as set forth in Section 5.16(c) of Parent's Disclosure
Schedule, there is no pending or, to Parent's knowledge, threatened, civil,
criminal or administrative action, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter that affects or applies to
Parent or its subsidiaries, their respective businesses or assets, the products
they have sold or the services they have provided relating in any way to any
Environmental Laws or any regulation or code promulgated or approved under the
Environmental Laws, or any plan, order, decree, judgment, injunction, notice or
demand letter issued to or entered against Parent or its subsidiaries
thereunder.
(d) Except as set forth in Section 5.16(d) of Parent's Disclosure
Schedule, there are no past or present (or, to the knowledge of Parent,
anticipated) events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent compliance or
continued compliance by Parent or its subsidiaries with any Environmental Laws
or with any regulation or code promulgated or approved under the Environmental
Laws, or any plan, order, decree, judgment, injunction, notice or demand letter
issued to or entered against Parent or its subsidiaries thereunder, or which may
give rise to any common law or legal liability, or otherwise form the basis of
any claim, action, demand, suit, proceeding, hearing, notice of violation, study
or investigation, based on or related to the sale, processing, distribution,
use, treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, by Parent or its
subsidiaries of any pollutant, contaminant, chemical, or industrial, toxic or
hazardous substance or waste.
(e) Except as set forth in Section 5.16(e) of Parent's Disclosure
Schedule and except in accordance with a valid governmental permit, license,
certificate or approval listed in Section 5.16(e) of Parent's Disclosure
Schedule there has not been by Parent or its subsidiaries, from any of their
assets, from any site at which any of such assets were or are located, any
emission, spill, release or discharge into or upon (i) the air, (ii) soils or
improvements, (iii) surface or ground water, or (iv) the sewer, septic system or
waste treatment, storage or disposal system servicing such asset of any toxic or
hazardous substances or wastes used, stored, generated, treated or disposed at
or from any of such assets (any of which events in hereinafter referred to as
"Hazardous Discharge").
(f) Prior to the Closing Date, there shall not occur, by Parent or
its subsidiaries, any Hazardous Discharge (except in accordance with a valid
governmental permit, license, certificate or approval listed in Section 5.16(f)
of Parent's Disclosure Schedule).
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(g) As used in this Agreement, the term "Environmental Laws" means
all federal, state, local and foreign environmental, health and safety laws,
codes and ordinances and all rules and regulations promulgated under the
Environmental Laws, including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, air, surface water, ground water,
land surface or subsurface strata) or otherwise relating to the sale,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial,
solid, toxic or hazardous substances or wastes. As used in this Agreement, the
term "hazardous substances or wastes" includes, without limitation, (i) all
substances which are designated pursuant to Section 311(b)(2)(A) of the Federal
Water Pollution Control Act ("FWPCA"), 33 U.S.C ss. 1251 et seq.; (ii) any
element, compound, mixture, solution, or substance which is designated pursuant
to Section 102 of the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.; (iii) any hazardous waste
having the characteristics which are identified under or listed pursuant to
Section 3001 of the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq.; (iv) any toxic pollutant listed under Section 307(a) of the
FWPCA; (v) any hazardous air pollutant which is listed under Section 112 of the
Clean Air Act, 42 U.S.C. ss. 7401 et seq.; (vi) any imminently hazardous
chemical substance or mixture with respect to which action has been taken
pursuant to Section 7 of the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq.; and (vii) waste oil.
Section 5.17 Certain Business Practices. As of the date of this
Agreement, except for such action which would not have a Parent Material Adverse
Effect, neither Parent nor any of its subsidiaries nor any directors, officers,
agents, or employees of Parent or any of its subsidiaries has (i) used any funds
for unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or (iii) made any other unlawful payment.
Section 5.18 No Excess Parachute Payments. Sections 5.13(a), 5.13(b), and
5.13(c) of Parent's Disclosure Schedule set forth all written contracts,
arrangements, or undertakings pursuant to which any person may receive any
amount or entitlement from Parent or the Surviving Corporation or any of their
respective subsidiaries (including cash or property or the vesting of property)
that may be characterized as an "excess parachute payment" as such term is
defined in Section 280G(B)(1) of the Code as a result of any of the transactions
being contemplated by this Agreement. No person is entitled to receive any
additional payment from Parent, any of its subsidiaries, or any other person (a
"Parachute Gross-Up Payment") in the event that the 20 percent parachute excise
tax of Section 4999(a) of the Code is imposed on such person. Parent's Board of
Directors has not, during the six months prior to the date of this Agreement,
granted to any officer, director, or employee of Parent any right to receive any
Parachute Gross-Up Payment.
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Section 5.19 Trademarks, etc. Section 5.19 of Parent's Disclosure
Schedule sets forth a true and complete list of all patents, trademarks
(registered or unregistered), trade names, service marks, and registered
copyrights and applications therefor ("Intellectual Property Rights") owned,
used or filed by or licensed to Parent and its subsidiaries and, with respect to
registered trademarks, contains a list of all jurisdictions in which such
trademarks are registered or applied for and all registration and application
numbers. Except as disclosed in Section 5.19 of Parent's Disclosure Schedule,
the Intellectual Property Rights which are trademark or copyright registrations
and issued patents are valid and in good standing, and are owned by Parent or
its subsidiaries, free and clear of all liens, encumbrances, equities, or claims
and, along with applications therefor, are not involved in any interferences,
litigations, oppositions, or cancellation proceedings. Parent or its
subsidiaries owns or has the right to use, without payment to any other party,
the patents, trademarks, trade names, service marks, copyrights, and
applications therefor referred to in Parent's Disclosure Schedule or otherwise
used by Parent or its subsidiaries, and the consummation of the transactions
contemplated hereby will not alter or impair such rights in any material
respect. Except as set forth in Section 5.19 of Parent's Disclosure Schedule,
neither Parent nor any of its subsidiaries is a licensor or licensee in respect
of any Intellectual Property Rights, nor has it granted any rights thereto or
interest therein to any person or entity. Except as set forth in Section 5.19 of
Parent's Disclosure Schedule, no claims are pending or threatened by any person
with respect to the ownership, validity, enforceability, or use of any such
Intellectual Property Rights challenging or questioning the validity or
effectiveness of any of the foregoing, which claims reasonably could be expected
to have a Parent Material Adverse Effect. Parent and its subsidiaries shall make
all required filings to ensure the continued validity and enforceability of its
Intellectual Property Rights up to the Effective Time.
Section 5.20 State Takeover Statutes. Parent's Board of Directors has
approved the Merger and the Merger is exempt from the provisions of Section 912
of the New York Business Corporation Law and Chapter 1704 of the GCL.
Section 5.21 Vote Required. The affirmative vote of the holders of at
least two-thirds of the outstanding Parent Common Stock is the only vote of the
holders of any class or series of Parent capital stock necessary to approve the
Merger.
Section 5.22 Registration Statement. The prospectus forming part of the
Registration Statement will not, at the time it becomes effective and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time, any event with
respect to Parent or any of its subsidiaries or their respective officers and
directors should occur which is required to be described in an amendment or
supplement to such prospectus, such event shall be so described and such
description in such amendment or supplement of such information will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or in the prospectus or necessary in order to make
the statements therein or in the prospectus, in light of the circumstances under
which they are made, not misleading. Notwithstanding the foregoing, no
representation is made by Parent with respect to information
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other than information supplied by Parent or Acquisition Sub or their
representatives specifically for inclusion therein.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
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Section 6.1 Conduct of Business by Parent Pending the Merger. Except as
set forth in Section 6.1 of Parent's Disclosure Schedule or as otherwise
contemplated by this Agreement, after the date hereof and prior to the Effective
Time or earlier termination of this Agreement, unless otherwise agreed in
writing by the Company, Parent shall and shall cause each of its subsidiaries
to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective charters or
by-laws; (ii) split, combine or reclassify their outstanding capital stock or
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise; or (iii) knowingly take any action which would result in
a failure to maintain the trading of Parent Common Stock on the Nasdaq SmallCap
Market;
(c) not (i) except for the issuance of shares of common stock upon
the exercise of currently outstanding stock options or warrants, authorize the
issuance of, issue, sell, pledge or dispose of, or agree to issue, sell, pledge
or dispose of, any additional shares of, or any options, warrants or rights of
any kind to acquire any shares of, their capital stock of any class or any debt
or equity securities convertible into or exchangeable for such capital stock,
(ii) sell (including, without limitation, by sale/leaseback), pledge, dispose
of, license or encumber any material assets (including, without limitation,
intellectual property), or any interests therein, other than in the ordinary
course of business and consistent with past practice; (iii) redeem, purchase,
acquire or offer to purchase or acquire any (x) shares of their capital stock,
other than in accordance with the governing terms of such securities or (y)
long-term debt, other than as required by the governing instruments relating
thereto; or (iv) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(d) use their best efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill and
business relationships with suppliers, distributors, customers, and others
having business relationships with them;
(e) confer on a regular and frequent basis with one or more
representatives of the Company to discuss operational matters of materiality and
the general status of ongoing operations;
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(f) promptly notify the Company of any significant changes in the
business, properties, assets, financial condition, or results of operations of
Parent and its subsidiaries taken as a whole;
(g) not acquire, or publicly propose to acquire, all or any
substantial part of the business and properties or capital stock of any person
not a party to this Agreement, whether by merger, purchase of assets, tender
offer or otherwise;
(h) not, directly or indirectly, through any officer, director,
employee, representative, agent, or otherwise, solicit, initiate or encourage,
including by way of furnishing information, or take any other action to
facilitate, the submission of any proposal or offer from any person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act) or entity relating to any acquisition or purchase of all or (other than in
the ordinary course of business) any portion of the assets of, or any equity
interest in, or any merger or other business combination with, Parent or any of
its subsidiaries (collectively, an "Acquisition Transaction") or participate in
any discussion or negotiations regarding any Acquisition Transaction; provided,
however, that if Parent's Board of Directors determines in good faith, after
consultation with and based on the written advice of outside counsel that it is
required to do so in order to comply with its fiduciary obligations to its
stockholders under New York law, (a) following receipt of a bona fide
unsolicited written offer to consummate an Acquisition Transaction, Parent may
take and disclose to its stockholders the position of Parent's Board of
Directors contemplated by Rule 14e-2 under the Exchange Act or otherwise make
appropriate disclosures to its stockholders, (b) Parent may furnish or cause to
be furnished information concerning its business, properties or assets to a bona
fide third party on terms substantially similar to those set forth in the letter
agreement entered into in July 1998 between Parent and the Company (the
"Confidentiality Agreement"), and (c) Parent may engage in discussions or
negotiations with a third party concerning an Acquisition Transaction with
respect to Parent, provided that Parent shall notify the Company promptly
(orally and in writing) of any such offer, the material terms of such offer and
the identity of the person making the offer, and shall keep the Company informed
as to the status and details of the offer;
(i) not enter into or amend any employment, severance, or special
pay arrangement with respect to termination of employment, or other similar
arrangement or agreement with any directors, officers or key employees;
(j) not adopt, enter into or amend any bonus, profit sharing,
compensation (except ordinary course salary adjustments consistent with historic
practice), stock option, pension, retirement, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law occurring after the date
hereof;
(k) maintain with financially responsible insurance companies,
insurance on Parent's and its subsidiaries' tangible assets and businesses in
such amounts and against such risks and losses as are consistent with past
practice and customary for companies engaged in the businesses engaged in by
Parent and its subsidiaries;
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(l) not introduce any new product or plan which would
substantially increase the risk exposure of Parent and its subsidiaries taken as
a whole;
(m) not enter into any material arrangement, agreement, or
contract with any third party (other than customers in the ordinary course of
business) which provides for an exclusive arrangement with that third party or
is substantially more restrictive on Parent or substantially less advantageous
to Parent than arrangements, agreements, or contracts existing on the date
hereof;
(n) not establish any new lines of credit or other credit
facilities or incur any indebtedness other than pursuant to existing credit
facilities, except for trade liabilities incurred in the ordinary course of
business;
(o) not make or agree to make any new capital expenditure or
expenditures that, individually, exceeds $5,000 or, in the aggregate, exceed
$10,000;
(p) not pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereof) of Parent, or incurred
since the date of such financial statements in the ordinary course of business
consistent with past practice;
(q) not adopt any material change in Parent's accounting policies,
practices or procedures, other than in the ordinary course of business
consistent with past practice or as required by the SEC or by law; and
(r) not agree in writing, or otherwise, to take any of the
foregoing actions or any other action which would make any representation or
warranty contained in Article V untrue or incorrect in any material respect as
of the time of the Closing.
ARTICLE VII
ADDITIONAL AGREEMENTS
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Section 7.1 Access to Information. (a) The Company and its subsidiaries
shall afford to Parent and Acquisition Sub and their accountants, counsel, and
other representatives full access during normal business hours throughout the
period prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records (including, but not limited to, tax returns)
and during such period, shall furnish promptly to Parent and Acquisition Sub (i)
a copy of each report, schedule and other document filed or received by any of
them pursuant to the requirements of federal or state securities laws or the HSR
Act or filed or received by any of them with or from the SEC, Federal Trade
Commission ("FTC") or Department of Justice ("DOJ") and (ii) all other
information concerning their respective businesses, properties and personnel as
Parent and Acquisition Sub may reasonably request; provided, however, that no
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investigation pursuant to this Section 7.1(a) shall affect any representations
or warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. The Company and its subsidiaries shall
promptly advise Parent in writing of any change or occurrence of any event after
the date of this Agreement having, or which, insofar as can reasonably be
foreseen, in the future may have, a Company Material Adverse Effect.
(b) Parent and its subsidiaries shall afford to the Company and
its accountants, counsel and other representatives full access during normal
business hours throughout the period prior to the Effective Time to all of their
respective properties, books, contracts, commitments and records (including, but
not limited to, tax returns) and, during such period, shall furnish promptly to
the Company (i) a copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of federal or state
securities laws or the HSR Act or filed or received by any of them with or from
the SEC, FTC or DOJ and (ii) all other information concerning their respective
businesses, properties and personnel as the Company may reasonably request;
provided, however, that no investigation pursuant to this Section 7.1(b) shall
affect any representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the Merger. Parent and its
subsidiaries shall promptly advise the Company in writing of any change or
occurrence of any event after the date of this Agreement having, or which,
insofar as can reasonably be foreseen, in the future may have, a Parent Material
Adverse Effect. Parent shall furnish to the Company promptly after available the
audited financial statements of the Parent for the year ending December 31,
1998.
(c) Any information received pursuant to Sections 7.1(a) and
7.1(b) above shall be considered Evaluation Material (as defined in the
Confidentiality Agreement), and such information shall be held in confidence by
Parent, Acquisition Sub and the Company in accordance with the terms of the
Confidentiality Agreement.
Section 7.2 Registration Statement and Proxy Statement. Parent shall
prepare and file with the SEC as soon as reasonably practicable after this
Agreement has been approved by the board of directors and stockholders of the
Company, the Proxy Statement and the Registration Statement (in which the Proxy
Statement shall be included) and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable
thereafter. Parent shall also take any action required to be taken under
applicable state blue sky or securities laws in connection with the issuance of
Parent Common Stock in the Merger; provided, however, that with respect to such
blue sky qualifications neither Parent nor the Company shall be required to
register or qualify as a foreign corporation or to take any action which would
subject it to service of process in any jurisdiction where any such entity is
not now so subject, except as to matters and transactions relating to or arising
solely from the offer and sale of Parent Common Stock. Parent and the Company
shall promptly furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with any action by any of
them in connection with the preceding sentence. The information provided and to
be provided by each of the Company and Parent (and by their auditors, attorneys,
financial advisors or other consultants or advisors) to the other for use in the
Registration Statement and Proxy Statement shall be true and complete in all
material respects without omission of any material fact which is required to
make such information not false or misleading as of the date
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the Registration Statement becomes effective, the date of the Proxy Statement
and the Effective Time. The Proxy Statement shall include the recommendation of
Parent's Board of Directors in favor of the Merger, unless otherwise necessary
due to the applicable fiduciary duties of the directors of Parent, as determined
pursuant to Section 6.1(h).
Section 7.3 Stockholders' Approval. After approval of this Agreement by
the board of directors and stockholders of the Company, Parent shall promptly
submit this Agreement and the transactions contemplated hereby for the approval
of its stockholders at a special meeting of its stockholders (the "Parent
Stockholders' Meeting") to be held as soon as practicable after the Registration
Statement is declared effective by the SEC and, subject to the fiduciary duties
of Parent's Board of Directors pursuant to Section 6.1(h), shall use its best
efforts to obtain stockholder approval (the "Parent Stockholders' Approval") of
this Agreement and the transactions contemplated hereby in accordance with
Section 5.21. Parent shall, through its Board of Directors, recommend to its
stockholders approval of this Agreement and the transactions contemplated by
this Agreement. The transactions contemplated hereby shall include (a) the
amendment to the Certificate of Incorporation of the Parent to increase its
authorized shares of Common Stock to a number sufficient to issue the Merger
Consideration and (b) approval of the issuance of warrants by the Parent to
David A. Belford.
Section 7.4 Compliance with the Securities Act. The Company shall use
its best efforts to cause each principal executive officer, each director and
each other person who is an "affiliate," as that term is used in paragraphs (c)
and (d) of Rule 145 under the Securities Act (an "Affiliate"), of the Company to
deliver to Parent and the Company on or prior to the Effective Time a written
agreement (an "Affiliate Agreement") to the effect that such person will not
offer to sell, sell or otherwise dispose of any shares of Parent Common Stock
issued in the Merger, except, in each case, pursuant to an effective
registration statement or in compliance with Rule 145, as amended from time to
time, or in a transaction which, in the opinion of legal counsel reasonably
satisfactory to Parent, is exempt from the registration requirements of the
Securities Act and, in any case, until after the results covering 30 days of
post-merger combined operations of Parent and the Company have been filed with
the SEC, sent to shareholders of Parent or otherwise publicly issued.
Section 7.5 Nasdaq SmallCap Market. Parent shall use its best efforts to
obtain the listing on Nasdaq SmallCap Market, at or before the Effective Time,
of the additional shares of Parent Common Stock to be issued pursuant to the
Merger.
Section 7.6 Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses; provided, however that all costs and expenses
relating to the HSR Act and to printing, filing and mailing the Registration
Statement, the Proxy Statement and any other filings with the SEC and all SEC
and other regulatory filing fees incurred in connection with such filings shall
be borne 50% by Parent and 50% by the Company.
Section 7.7 Agreement to Cooperate. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use all reasonable
efforts to take, or cause to be
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taken, all action to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using its reasonable
efforts to obtain all necessary or appropriate waivers, consents and approvals
and SEC "no-action" letters (including, but not limited to, required approvals
under applicable New York and Ohio state laws and regulations), to effect all
necessary registrations and filings (including, but not limited to, filings
under the HSR Act) and to lift any injunction or other legal bar to the Merger
(and, in such case, to proceed with the Merger as expeditiously as possible).
Each party hereto agrees to allow the other to review each regulatory filing
made by such party prior to the filing thereof during the term of this
Agreement.
Section 7.8 Public Statements. The parties shall release a mutually
agreed upon press release immediately upon the signing of this Agreement. None
of the parties hereto shall issue any press release or make any other public
statements, in each case relating to or connected with or arising out of this
Agreement or the matters contained therein, without obtaining the prior written
approval of the other parties to the contents and the manner of presentation and
publication thereof, provided, however, that nothing herein shall prevent any
party from making any disclosures required by applicable law or regulation
(including regulation of the SEC and the Nasdaq SmallCap Market).
Section 7.9 Accountants' Letters. Each of Parent and the Company shall
use its best efforts to cause to be delivered to the other letters of Arthur
Andersen LLP and Ehrenkrantz Sterling & Co., LLC, independent auditors for the
Company and the Parent, respectively, dated the date of the Proxy Statement, the
effective date of the Registration Statement and the Effective Time (or such
other dates reasonably acceptable to the parties) with respect to certain
financial statements and other financial information included in the
Registration Statement, which letters shall be in customary form and substance
reasonably satisfactory to the addressee.
Section 7.10 Indemnification of Certain Officers and Directors. To the
extent permitted by applicable law, Parent and Acquisition Sub agree that all
rights to indemnification from the Company or any subsidiary of the Company now
existing in favor of the directors, officers, employees or agents of the Company
and any subsidiary of the Company as provided in their respective charters or
by-laws, as in effect on the date of this Agreement, shall survive the Merger
and shall continue in full force and effect and be honored by Parent,
Acquisition Sub and the Surviving Corporation for a period of not less than six
years from the Effective Time; provided, however, that in the event any claim or
claims are asserted or made within such six-year period, all such rights shall
continue until final disposition of any such claim or claims.
Section 7.11 Tax Treatment. Each of Parent, Acquisition Sub and the
Company will use its reasonable best efforts to cause the Forward Merger to
qualify as a reorganization under the provisions of Section 368(a) of the Code.
Section 7.12 Reverse Merger. In the event a decision is made to structure
the Merger as a Reverse Merger pursuant to Section 1.1, Parent agrees to cause a
merger agreement conforming to Section 1701.78 of the GCL and effecting the
terms hereof to be adopted by Acquisition Sub. The Company agrees in such case
to enter into such merger agreement.
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Section 7.13 Indemnification. (a) The Certificate of Incorporation and
By-Laws of the Parent and Surviving Corporation shall contain the provisions
with respect to indemnification set forth in their respective Certificates of
Incorporation and By-Laws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of six years after
the Effective Time in any manner that would adversely affect the rights
thereunder of persons who at any time prior to the Effective Time were
identified as prospective indemnitees under such Certificates of Incorporation
or By-Laws in respect of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement), unless such modification is required by law.
(b) From and after the Effective Time, the Parent and the
Surviving Corporation shall indemnify, defend and hold harmless the present and
former officers, directors, agents and employees of the Parent, the Surviving
Corporation and the Company and their subsidiaries (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of
Parent and the Surviving Corporation (which approval shall not be unreasonably
withheld), or otherwise in connection with, any claim, action, suit, proceeding
or investigation (a "Claim"), based in whole or in part on the fact that such
person is or was such a director, officer, agent or employee of the Parent, the
Surviving Corporation, the Company or any subsidiary and arising out of actions
or omissions occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), in each case to the fullest extent
permitted under law (and, from and after the Effective Time, shall pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted under law, upon receipt from
the Indemnified Party to whom expenses are advanced of the undertaking to repay
such advances contemplated by law).
(c) Without limiting the foregoing, in the event any Claim is
brought against any Indemnified Party (whether arising before or after the
Effective Time) after the Effective Time (i) the Surviving Corporation shall pay
all reasonable fees and expenses of counsel for the Indemnified Parties relating
to such claim (which counsel shall be reasonably acceptable to Parent) and (ii)
the Surviving Corporation shall not be liable for any settlement of any Claim
effected without its written consent, which consent shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification under this
Section 7.13, upon learning of any such Claim, shall promptly notify the
Surviving Corporation (although the failure so to notify the Surviving
Corporation shall not relieve the Surviving Corporation from any liability which
the Surviving Corporation may have under this Section 7.13, except to the extent
such failure prejudices the Surviving Corporation), and shall deliver to the
Surviving Corporation the undertaking contemplated by law. Notwithstanding
anything contained herein to the contrary, the Surviving Corporation shall not
be obligated pursuant to this Section 7.13 to pay the fees and expenses of more
than one law firm (in addition to any appropriate local counsel) for all
Indemnified Parties as a group with respect to each such matter unless there is,
under applicable standards of professional conduct (as reasonably determined by
counsel to such Indemnified Parties), a conflict on any significant issue
between the positions of any two or more of such
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Indemnified Parties, in which event, any additional counsel as may be reasonably
required and shall be reasonably satisfactory to Parent may be retained by such
Indemnified Parties.
(d) For a period of three years after the Effective Time, the
Parent shall cause to be maintained in effect the current policies of directors'
and officers' liability insurance maintained by Parent (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend pursuant to this Section 7.13(d)
more than an amount equal to 150% of current annual premiums paid by Parent for
such insurance.
(e) This Section 7.13 shall survive the consummation of the Merger
and is intended for the benefit of, and shall be enforceable by, the Indemnified
Parties referred to herein, their heirs and personal representatives and shall
be binding on Parent and Acquisition Sub and the Surviving Corporation and their
respective successors and assigns.
ARTICLE VIII
CONDITIONS
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Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved and adopted by the requisite vote of the stockholders of
Parent pursuant to Section 5.21;
(b) The additional shares of Parent Common Stock issuable in the
Merger shall have been authorized for listing on the Nasdaq SmallCap Market;
(c) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated and no additional
requirements relating thereto shall be applicable;
(d) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect;
(e) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect (each party agreeing to use
all reasonable efforts to have any such injunction, order or decree lifted);
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(f) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state, federal or foreign government
or governmental agency which would prevent the consummation of the Merger or
that would have a material adverse effect on the prospects of the Surviving
Corporation; and
(g) All governmental consents and approvals legally required for
the consummation of the Merger and the transactions contemplated hereby,
including, without limitation, approval (if required) by the DOJ, FTC and the
SEC, shall have been obtained and be in effect at the Effective Time on terms
and conditions that would not have a material adverse effect on the prospects of
the Surviving Corporation.
Section 8.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Parent and Acquisition Sub shall have performed in all
material respects their agreements contained in this Agreement required to be
performed on or prior to the Effective Time and the representations and
warranties made by Parent and Acquisition Sub herein that are qualified as to
materiality shall be true and correct in all respects in accordance with their
terms, and the representations and warranties made by such parties herein that
are not so qualified shall be true and correct in all material respects, in each
case on and as of the date of this Agreement and on and as of the Effective Time
as if made on and as of such date, except as contemplated or permitted by this
Agreement, and except to the extent such representations and warranties relate
solely to an earlier date, in which case such representations and warranties
were true and correct on and as of such earlier date, and the Company shall have
received a certificate of the President or the Chief Financial Officer of each
of Parent and Acquisition Sub to that effect;
(b) The Company shall have received an opinion addressed to the
Company from existing counsel to Parent and Acquisition Sub, or other counsel
reasonably acceptable to the Company, dated the Closing Date;
(c) The Company shall have received the letter of Ehrenkrantz
Sterling & Co., LLC contemplated by Section 7.9;
(d) The Affiliate Agreements required to be delivered to the
Company pursuant to Section 7.4 shall have been furnished as required by Section
7.4;
(e) Parent shall have delivered to the Company at or prior to the
Effective Time such other documents (including certificates of officers of
Parent) as the Company may reasonably request in order to enable the Company to
determine whether the conditions to its obligations under this Agreement have
been met and otherwise to carry out the provisions of this Agreement;
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(f) Between the date of this Agreement and the Closing Date, there
shall have been no event with respect to Parent or any subsidiary of Parent
having or reasonably likely to have, individually or in the aggregate, a Parent
Material Adverse Effect;
(g) The employment agreement of Theodore Shapiro shall have been
terminated, Mr. Shapiro shall be entitled to receive an aggregate of $186,000
payable in equal monthly installments commencing January 1, 1999, the Parent
shall continue to pay for his health insurance benefits until January 31, 2000
and the Parent shall continue to pay $500 per month for an automobile allowance
until March 1, 2001; and
(h) The Board of Directors and stockholders of the Company shall
have approved this Agreement within five business days after the Company's
receipt of the audited financial statements of the Parent for the year ending
December 31, 1998.
Section 8.3 Conditions to Obligation of Parent and Acquisition Sub to
Effect the Merger. The obligation of Parent and Acquisition Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the additional following conditions:
(a) The Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time and the representations and warranties made by the Company
herein that are qualified as to materiality shall be true and correct in all
respects in accordance with their terms, and the representations and warranties
made by such parties herein that are not so qualified shall be true and correct
in all material respects, in each case on and as of the date of this Agreement
and on and as of the Effective Time as if made on and as of such date, except as
contemplated or permitted by this Agreement, and except to the extent such
representations and warranties relate solely to an earlier date, in which case
such representations and warranties were true and correct on and as of such
earlier date, and Parent and Acquisition Sub shall have received a Certificate
of the President of the Company to that effect;
(b) Parent and Acquisition Sub shall have received an opinion from
Stroock & Stroock & Lavan LLP, counsel to the Company, or other counsel
reasonably acceptable to Parent and Acquisition Sub, dated the Closing Date;
(c) Parent and Acquisition Sub shall have received the letters of
Arthur Andersen LLP contemplated by Section 7.9;
(d) The employment agreement of Theodore Shapiro shall have been
terminated as set forth in Section 8.2(g);
(e) The Affiliate Agreements required to be delivered to Parent
pursuant to Section 7.4 shall have been furnished as required by Section 7.4.
(f) The Company shall have delivered to Parent at or prior to the
Effective Time such other documents (including certificates of officers of the
Company) as Parent may reasonably request in order to enable Parent to determine
whether the conditions to its
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obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement; and
(g) Between the date of this Agreement and the Closing Date, there
shall have been no event with respect to the Company or any subsidiary of the
Company having or reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
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Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders or Parent:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if (i) the Merger shall not
have been consummated on or before June 30, 1999 (the "Termination Date"), (ii)
the requisite vote of the stockholders of Parent to approve this Agreement
pursuant to Section 8.1(a) and the transactions contemplated hereby shall not be
obtained at the Parent Stockholders' Meeting, or any adjournments thereof, (iii)
any governmental or regulatory body, the consent of which is a condition to the
obligations of Parent, Acquisition Sub and the Company to consummate the
transactions contemplated hereby, shall have determined not to grant its consent
and any appeals of such determination shall have been taken and have been
unsuccessful or such body shall have imposed conditions or limitations on its
consent that would have a material adverse effect on the prospects of the
Surviving Corporation and any appeals from such imposition shall have been taken
and have been unsuccessful, or (iv) any court of competent jurisdiction in the
United States, or any state or any country in which there is a subsidiary of
Parent or the Company, shall have issued an order, judgment or decree (other
than a temporary restraining order) restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment or decree shall have become
final and nonappealable; or
(c) by the Company (i) if Parent's Board of Directors shall have
withdrawn or modified in a manner adverse to the Company its approval or
recommendation of the Merger, this Agreement or the transactions contemplated
hereby or shall have failed to reaffirm such approval or recommendation upon the
Company's request, or shall have resolved to do any of the foregoing, (ii) if
Parent or any of the other persons or entities described in Section 6.1(c) or
6.1(h) shall take any of the actions that would be proscribed by Section 6.1(c)
or 6.1(h) but for the proviso in Section 6.1(h) allowing certain actions to be
taken if required by fiduciary duty upon advice of counsel, (iii) if there has
been (x) a material breach of any covenant or agreement herein on the part of
Parent or Acquisition Sub which has not been cured or adequate assurance of cure
given, in either case within 15 business days following receipt of notice of
such breach, or (y) a representation or warranty of Parent or Acquisition Sub
herein is or becomes untrue or incorrect in a material respect which
representation or warranty by its nature cannot be made true and correct in all
material respects prior to the Termination Date or is not made true and correct
prior to the Termination Date, (iv) if (x) Parent enters into an agreement with
any corporation,
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partnership, person, other entity or group (as defined in Section 13(d)(3) of
the Exchange Act) other than the Company whereby such entity or group would
directly or indirectly acquire all or any substantial part of the assets or
capital stock of Parent, whether by merger, share exchange, purchase of assets,
consolidation, tender offer or otherwise or (y) any third party commences a
tender or exchange offer for 20% or more of the Parent Common Stock and Parent's
Board of Directors does not recommend, or ceases to recommend, to the
stockholders of Parent that they reject such offer; or (v) the Board of
Directors and stockholders of the Company shall not have approved this Agreement
within five business days after the receipt by the Company of the audited
financial statements of the Parent for the year ending December 31, 1998 or
shall have voted against approval of this Agreement prior thereto.
(d) by Parent if there has been (x) a material breach of any
covenant or agreement herein on the part of the Company which has not been cured
or adequate assurance of cure given, in either case within 15 business days
following receipt of notice of such breach or (y) a representation or warranty
of the Company herein is or becomes untrue or incorrect in a material respect
which representation or warranty by its nature cannot be made true and correct
in all material respects prior to the Termination Date or is not made true and
correct prior to the Termination Date.
Notwithstanding the foregoing, if prior to the Closing Date, (i) any preliminary
or permanent injunction or other order or decree by any federal or state court
which prevents the consummation of the Merger shall have been issued, and
remains in effect (each party agreeing to use all reasonable efforts to have any
such injunction, order or decree lifted); (ii) any action shall have been taken,
or any statute, rule or regulation shall have been enacted, by any state,
federal or foreign government or governmental agency which would prevent the
consummation of the Merger or that would have a material adverse effect on the
prospects of the Surviving Corporation; or (iii) any governmental consents and
approvals legally required for the consummation of the Merger and the
transactions contemplated hereby, including, without limitation, approval (if
required) by the DOJ, FTC and the SEC, shall not have been obtained or not be in
effect at the Effective Time on terms and conditions that would not have a
material adverse effect on the prospects of the Surviving Corporation, the
Termination Date shall be extended at the option of any party hereto for a
period of up to 120 days. If, at the end of such 120-day period, the matters
referred to in (i), (ii) or (iii) shall not have been satisfied to each party's
reasonable satisfaction, either party may terminate this Agreement pursuant to
the applicable provisions of this Section 9.1.
Section 9.2 Effect of Termination.
(a) In the event of termination of this Agreement by either
Parent, Acquisition Sub or the Company as provided in Section 9.1 or any breach
of any party or any failure of condition giving rise to a right to terminate
this Agreement, there shall be no liability on the part of either the Company,
Parent or Acquisition Sub or their respective officers or directors except as
set forth in this Section 9.2.
(b) If this Agreement is terminated pursuant to or as the result
of the provisions of Sections 6.1(h) or 9.1(c)(i), (ii) or (iv), then
concurrently with such termination
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Parent shall pay to the Company in cash a fee (the "Termination Fee") equal to
the greater of (i) $1,000,000 or (ii) 25% of the consideration in such
Acquisition Transaction over $10 million. In addition, Parent shall pay to the
Company in cash all reasonable out-of-pocket expenses incurred by it or on its
behalf in connection with the transactions contemplated by this Agreement (the
"Expense Reimbursement"), including but not limited to, reasonable attorneys',
accountants' and advisors' fees and expenses and financing commitment fees. In
addition, if the Agreement is terminated for any reason other than pursuant to
Section 9.1(d) hereof, then Parent shall pay to the Company (x) concurrently
with such termination the Expense Reimbursement and (y) if an Acquisition
Transaction is consummated within twelve months after such termination,
concurrently with such consummation the Termination Fee.
(c) The agreements contained in this Section 9.2 are an integral
part of the transactions contemplated by this Agreement and constitute
liquidated damages or other appropriate payments and not a penalty. If a party
fails promptly pay to perform in accordance with Article IX, such party shall
pay the costs and expenses (including legal fees and expenses) of the other
party in connection with any action, including the filing of any lawsuit or
other legal action, taken to enforce the terms of this Agreement. Payments under
this Section shall be made within five business days after termination of this
Agreement.
Section 9.3 Amendment. This Agreement may be amended by the parties
hereto, at any time before or after approval hereof by the stockholders of
Parent, but, after any such approval, no amendment shall be made which (a)
changes the Merger Consideration or (b) changes any of the other principal terms
of this Agreement, in each case, without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein; provided, however, that waiver of compliance with
any agreements or conditions herein shall not limit the parties' obligations to
comply with all other agreements or conditions herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of each of the parties.
ARTICLE X
GENERAL PROVISIONS
- ------------------
Section 10.1 Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties and agreements in this Agreement shall
survive the Merger, except for the agreements contained in this Section 10.1,
Article III, and in Sections 2.2, 7.1(c), 7.6, 7.8, 7.10, 7.13 and Article IX.
This Section 10.1 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time of the Merger.
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Section 10.2 Brokers. The Company represents and warrants that no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Parent and Acquisition Sub represent and warrant that no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or
Acquisition Sub.
Section 10.3 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to the Company, to:
Nationwide Warehouse & Storage, Inc.
2097 South Hamilton Road, 2nd Floor
Columbus, Ohio 43232
Attn.: David A. Belford
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attn.: Martin H. Neidell
(b) If to Acquisition Sub or the Parent, to:
Room Plus, Inc.
91 Michigan Avenue
Paterson, New Jersey 07503
Attn.: Marc Zucker
Section 10.4 General Terms. The following definitions shall apply to the
extent not otherwise defined, or used in capitalized form, in this Agreement:
(a) The terms "agreements" and "contracts" shall include any
contract, purchase or sales order, franchise, insurance policy, license,
undertaking, arrangement, understanding, commitment, document, lease, sublease,
deed, mortgage, plan, indenture, bill of sale, assignment, proxy, voting trust
or other agreement or instrument.
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(b) The term "approval" shall include any consent, waiver,
license, permit, certificate or authorization.
(c) The term "breach" shall include any default, event of default
or event, occurrence, condition or act which, with notice or lapse of time or
both, would constitute a breach, default, or event of default or give the other
party or parties a right to accelerate any obligation under the applicable
agreement.
(d) The term "governmental authority" means any agency,
instrumentality, department, commission, court, tribunal or board of any
government, whether foreign or domestic and whether national, federal, state,
provincial or local.
(e) The term "law" shall mean, unless specifically stated
otherwise herein, laws, rules, regulations, codes, orders, ordinances,
judgments, injunctions, decrees and government policies.
(f) The terms "liability" and "liabilities" shall include any
direct or indirect indebtedness, claim, loss, damage, penalty, deficiency
(including deferred income tax and other net tax deficiencies), cost, expense,
obligation, duties or guarantee, whether accrued, absolute, or contingent, known
or unknown, fixed or unfixed, liquidated or unliquidated, matured or unmatured
or secured or unsecured.
(g) The term "person" shall include an individual, a partnership,
a joint venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a government or other legal body thereof.
(h) The term "subsidiary" shall include each entity controlled by
the Company or Parent, as the case may be.
(i) The term "transfer" shall include any sale, pledge, gift,
assignment, conveyance, lease or disposition and the term "transferred" shall
include sold, pledged, gave, assigned, conveyed, leased or disposed of.
Section 10.5 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 10.6 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (a) together with the Confidentiality Agreement,
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; (b) is not intended to confer upon any
other person any rights or remedies hereunder; (c) shall not be assigned by
operation of law or otherwise; and (d) shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of New
York (without giving effect to the provisions thereof relating to conflicts of
law) and service of process may be made upon any
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party by using the notification procedure set forth in Section 10.3. References
to Exhibits and Schedules shall be references to the exhibits of, and schedules,
to this Agreement. Such Exhibits and Schedules form an integral part of this
Agreement and are hereby incorporated in this Agreement. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
Section 10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 10.8 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under this Agreement.
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IN WITNESS WHEREOF, Parent, Acquisition Sub and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
ROOM PLUS, INC.
By: /s/ Marc Zucker
---------------
ROOM PLUS SUB, INC.
By: /s/ Marc Zucker
---------------
NATIONWIDE WAREHOUSE & STORAGE, INC.
By: /s/ David A. Belford
--------------------
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Exhibit No. 4.13
THE WARRANT AND ANY SHARES OF COMMON STOCK ISSUED UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OR
SOLD UNLESS (i) A REGISTRATION STATEMENT UNDER SUCH ACT IS THEN IN EFFECT WITH
RESPECT THERETO, (ii) A WRITTEN OPINION FROM COUNSEL FOR THE ISSUER OR MESSRS.
STROOCK & STROOCK & LAVAN LLP OR OTHER COUNSEL FOR THE HOLDER REASONABLY
ACCEPTABLE TO THE ISSUER HAS BEEN OBTAINED TO THE EFFECT THAT NO SUCH
REGISTRATION IS REQUIRED OR (iii) A "NO ACTION" LETTER OR ITS THEN EQUIVALENT
HAS BEEN ISSUED BY THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION WITH
RESPECT TO SUCH TRANSFER OR SALE.
No. W - 1 Warrant to Subscribe for
2,000,000 Shares
STOCK SUBSCRIPTION WARRANT
To Subscribe for and Purchase Common Stock of
ROOM PLUS, INC.
THIS CERTIFIES that, for value received,
David A. Belford
----------------
or registered assigns is entitled to subscribe for and purchase from Room Plus,
Inc. (herein called the "Company"), a corporation organized and existing under
the laws of the State of New York, at the price of $2.00 per share (subject to
adjustment as noted below) (the "Exercise Price") at any time and from time to
time after the date hereof and before 5:00 P.M., New York City time, five years
from the date hereof (the "Exercise Period"),
Two Million
----------------
fully paid and nonassessable shares of the Company's Common Stock (subject to
adjustment as noted below).
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise of This Warrant. The rights represented by this Warrant may
be exercised by the holder hereof, in whole or in part (but not as to a
fractional share of Common Stock), by the surrender of this Warrant (properly
endorsed if required) at the office of the Company, 91 Michigan Avenue,
Paterson, New Jersey 07053, or such other office or agency of the Company as the
Company may designate by notice in writing to the holder hereof at the address
of such holder appearing on the books of the Company, at any time during the
Exercise Period upon payment to it of the Exercise Price for such shares. The
Exercise Price for shares of Common
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<PAGE>
Stock issuable upon exercise of this Warrant shall be payable as follows: (a) by
payment to the Company of the Exercise Price in cash, by check or by wire
transfer of funds; (b) by surrender to the Company for cancellation of
securities of the Company having a Market Price (as defined in Section 3C(8)
hereof) on the date of exercise equal to the Exercise Price for such shares; (c)
by surrender to the Company for cancellation of notes or debt securities of the
Company having a principal balance plus accrued interest on the date of exercise
equal to the Exercise Price for such shares or (d) by a combination of the
methods described in clauses (a), (b) and (c) above. In lieu of exercising the
Warrant, the holder may elect to receive a payment equal to the difference
between (i) the Market Price of the number of shares of Common Stock for which
the payment is elected and (ii) the Exercise Price with respect to such shares,
payable only in shares of Common Stock valued at Market Price on the date of
exercise. The Company agrees that the shares so purchased shall be deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Certificates for the shares of stock
so purchased shall be delivered to the holder hereof within a reasonable time,
not exceeding five (5) days, after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time.
2. Reservation, Issuance and Listing of Stock.
2A. The Company will at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, solely for
the purpose of issue upon exercise of the Warrant, such number of shares of
Common Stock as shall then be issuable upon exercise of the Warrant. The Company
will, at its expense, use its best efforts to cause such shares to be listed
(subject to issuance or notice of issuance) on all stock exchanges, if any, on
which the Company's Common Stock may become listed during the Exercise Period.
2B. The Company covenants that all shares which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized and issued, fully paid and nonassessable and free from all taxes,
liens, charges and security interests with respect to the issue thereof.
2C. Before or concurrently with the taking of any action which could
cause an adjustment pursuant to Section 3 reducing the Exercise Price below the
then par value (if any) of the Company's Common Stock, the Company will take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock at such
Exercise Price as so adjusted.
3. Exercise Price. The above provisions are, however, subject to the
following:
3A. Initial Exercise Price; Adjustment of Number of Shares. The initial
Exercise Price of $2.00 per share shall be subject to adjustment from time to
time as hereinafter provided.
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<PAGE>
Upon each adjustment of the Exercise Price, the holder of this Warrant shall
thereafter be entitled to purchase, at the Exercise Price resulting from such
adjustment, the number of shares obtained by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
3B. Adjustment of Exercise Price. Except as provided in paragraph 3F, if
and whenever subsequent to the issuance of this Warrant the Company shall issue
or sell any shares of its Common Stock (including shares now or hereafter held
in the treasury of the Company but not including shares issued upon the exercise
of this Warrant) for a consideration per share less than the Exercise Price in
effect on the date of such issue or sale, and/or the Company shall issue or sell
any shares of Common Stock for a consideration per share less than the Market
Price on the date of such issue or sale, then, forthwith upon such issue or
sale, the Exercise Price shall be reduced to the lower of the prices (calculated
to the nearest cent) determined as follows:
(i) by dividing (1) an amount equal to the sum of (aa) the number
of shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Exercise Price, and (bb) the consideration, if
any, received by the Company upon such issue or sale, by (2) the total number of
shares of Common Stock outstanding immediately after such issue or sale; and
(ii) by multiplying the Exercise Price in effect immediately prior
to the time of such issue or sale by a fraction, the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the Market Price immediately prior to
such issue or sale plus (2) the consideration received by the Company upon such
issue or sale, and the denominator of which shall be the product of (3) the
total number of shares of Common Stock outstanding immediately after such issue
or sale, multiplied by (4) the Market Price immediately prior to such issue or
sale.
No adjustment of the Exercise Price however shall be made in an amount
less than $.01 per share, but any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment, if any, which together with any adjustments so carried forward shall
amount to $.01 per share or more, provided that upon any adjustment of the
Exercise Price as a result of any dividend or distribution payable in Common
Stock or Convertible Securities or the reclassification, subdivision or
combination of Common Stock into a greater or smaller number of shares, the
foregoing figure of $.01 per share (or such figure as last adjusted) shall be
adjusted (to the nearest one-half cent) in proportion to the adjustment in the
Exercise Price.
3C. Provisions Relating to Adjustment of Exercise Price. For the purpose
of subsection 3B, the following paragraphs 3C(1) to 3C(9), inclusive, shall also
be applicable:
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<PAGE>
3(C)1 Issuance of Rights, Options or Warrants -- In case at any time
the Company shall grant (whether directly or by assumption in a merger or
otherwise) any rights (other than the Warrant) to subscribe for or to
purchase, or any options or warrants for the purchase of Common Stock or
any stock or securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock or securities being herein called
"Convertible Securities") whether or not such rights or options or
warrants or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such rights or options or
warrants or upon conversion or exchange of such Convertible Securities
(determined by dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the granting of such rights
or options or warrants, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of such rights or
options or warrants, plus, in the case of such rights or options or
warrants which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale
of such Convertible Securities and upon the conversion or exchange
thereof, by (b) the total maximum number of shares of Common Stock
issuable upon the exercise of such rights or options or warrants or upon
the conversion or exchange of all such Convertible Securities issuable
upon the exercise of such rights or options or warrants) shall be less
than the Exercise Price in effect immediately prior to the time of the
granting of such rights or options or warrants (or less than the Market
Price determined as of the date of the granting of such rights or options
or warrants, as the case may be), then the total maximum number of shares
of Common Stock issuable upon the exercise of rights or options or
warrants or upon conversion or exchange of the total maximum amount of
such Convertible Securities issuable upon the exercise of such rights or
options or warrants shall (as of the date of granting of such rights or
options or warrants) be deemed to have been issued for such price per
share. Except as otherwise provided in paragraph 3C(3), no adjustments of
the Exercise Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities upon exercise of such rights or
options or warrants or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
3C(2) Issuance of Convertible Securities - In case the Company shall
issue (whether directly or by assumption in a merger or otherwise) or sell
any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (a) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the conversion or exchange thereof, by
(b) the total maximum number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be less
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<PAGE>
than the Exercise Price in effect immediately prior to the time of such
issue or sale (or less than the Market Price, determined as of the date of
such issue or sale of such Convertible Securities, as the case may be),
then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of the
date of the issue or sale of such Convertible Securities) be deemed to be
outstanding and to have been issued for such price per share. If any such
issue or sale of such Convertible Securities is made upon exercise of any
rights to subscribe for or to purchase or any option or warrant to
purchase any such Convertible Securities for which adjustments of the
Exercise Price have been or are to be made pursuant to other provisions of
this paragraph 3C, no further adjustment of the Exercise Price shall be
made by reason of such issue or sale. Except as otherwise provided in
paragraph 3C(3), no adjustments of the Exercise Price shall be made upon
the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
3C(3) Change in Purchase Price or Conversion Rate -- Upon the
happening of any of the following events, namely, if the purchase price
provided for in any right, option or warrant referred to in the first
sentence of paragraph 3C(1), the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Security referred to in
the first sentence of paragraph 3C(1) or 3C(2), or the rate at which any
Convertible Securities referred to in the first sentence of paragraph
3C(1) or 3C(2) are convertible into or exchangeable for Common Stock,
shall change at any time (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in effect at the
time of such event shall forthwith be readjusted to the Exercise Price
which would have been in effect at such time had such rights, options,
warrants or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold; and on the
expiration of any such right, option or warrant or the termination of any
such right to convert or exchange such Convertible Securities, the
Exercise Price then in effect hereunder shall forthwith be increased to
the Exercise Price which would have been in effect at the time of such
expiration or termination had such right, option, warrant or Convertible
Security, to the extent outstanding immediately prior to such expiration
or termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding. If the purchase
price provided for in any such right, option or warrant referred to in the
first sentence of paragraph 3C(1) shall decrease or the rate at which any
Convertible Securities referred to in the first sentence of paragraph
3C(1) or 3C(2) are convertible into or exchangeable for Common Stock shall
increase at any time under or by reason of provisions with respect thereto
designed to protect against dilution, then in case of the delivery of
Common Stock upon the exercise of any such right, option or warrant or
upon conversion or exchange of any such Convertible Security, the Exercise
Price then in effect hereunder shall forthwith be adjusted to such
respective amount as would have obtained had such right, option,
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<PAGE>
warrant or Convertible Security never been issued as to such Common Stock
and had adjustments been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a result of such adjustment
the Exercise Price then in effect hereunder is thereby decreased.
3C(4) Stock Dividends -- In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company
payable in Common Stock or Convertible Securities, any Common Stock or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold
without consideration.
3C(5) Consideration for Stock -- In case any shares of Common Stock
or Convertible Securities or any rights or options or warrants to purchase
any such Common Stock or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions paid
or allowed by the Company in connection therewith. In case any shares of
Common Stock or Convertible Securities or any rights or options or
warrants to purchase any such Common Stock or Convertible Securities shall
be issued or sold in whole or in part for a consideration other than cash,
the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined
by the Board of Directors of the Company, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any shares of
Common Stock or Convertible Securities or any rights or options or
warrants to purchase such Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor shall
be deemed to be the fair value as determined by the Board of Directors of
the Company of such portion of the assets and business of the
non-surviving corporation or corporations as such Board shall determine to
be attributable to such Common Stock, Convertible Securities, rights,
options or warrants, as the case may be. In the event of any consolidation
or merger of the Company in which the Company is not the surviving
corporation or in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any corporation,
the Company shall be deemed to have issued a number of shares of its
Common Stock for stock or securities of the other corporation computed on
the basis of the actual exchange ratio on which the transaction was
predicated and for a consideration equal to the fair market value on the
date of such transaction of such stock or securities of the other
corporation, and if any such calculation results in adjustment of the
Exercise Price, the determination of the number of shares of Common Stock
issuable upon exercise of the Warrant immediately prior to such merger,
conversion or sale, for purposes of subsection 3G shall be made after
giving effect to such adjustment of the Exercise Price.
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3C(6) Record Date -- In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (a) to
receive a dividend or other distribution payable in Common Stock or in
Convertible Securities, or (b) to subscribe for or purchase Common Stock
or Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
3C(7) Treasury Shares -- The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares
shall be considered an issue or sale of Common Stock for the purposes of
this subsection 3C.
3C(8) Definition of Market Price -- The Market Price of a share of
Common Stock or other securities on any day shall mean the average closing
price of a share of Common Stock or other security for the 5 consecutive
trading days preceding such day on the principal national securities
exchange or Nasdaq system on which the shares of Common Stock or
securities are listed or admitted to trading or, if not listed or admitted
to trading on any national securities exchange or Nasdaq system, the
average of the reported bid and asked prices during such 5 trading day
period in the over-the-counter market as furnished by the National
Quotation Bureau, Inc., or, if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then
engaged in such business selected by the Company, or, if there is no such
firm, as furnished by any member of the National Association of Securities
Dealers, Inc. selected by the Company or, if the shares of Common Stock or
securities are not publicly traded, the Market Price for such day shall be
the fair market value thereof determined jointly by the Company and the
holder of this Warrant; provided, however, that if such parties are unable
to reach agreement within a reasonable period of time, the Market Price
shall be determined in good faith by the Board of Directors of the
Company.
3C(9) Determination of Consideration in Connection with Certain
Acquisitions -- Anything in paragraph 3C(5) to the contrary
notwithstanding, in the case of an acquisition where all or part of the
purchase price is payable in Common Stock or Convertible Securities but is
stated as a dollar amount, where the Company upon making the acquisition
pays only part of a maximum dollar purchase price which is payable in
Common Stock or Convertible Securities and where the balance of such
purchase price is deferred or is contingently payable under a formula
related to earnings over a period of time, (i) the consideration received
for any Common Stock or Convertible Securities delivered at the time of
the acquisition shall be deemed to be such part of the total consideration
as the portion of the dollar purchase price then paid in Common Stock or
Convertible
7
<PAGE>
Securities bears to the total maximum dollar purchase price payable in
Common Stock or Convertible Securities, and (ii) in connection with each
issuance of additional Common Stock or Convertible Securities pursuant to
the terms of the agreement relating to such acquisition, the consideration
received shall be deemed to be that portion of the dollar purchase price
then and theretofore paid in Common Stock or Convertible Securities,
multiplied by a fraction, the numerator of which shall be the number of
shares (or in the case of Convertible Securities other than stock, the
aggregate principal amount) then issued and the denominator of which shall
be the total number of shares (or in the case of Convertible Securities
other than stock, the aggregate principal amount) then and theretofore
issued under such acquisition agreement. In the event that only a part of
the purchase price for an acquisition is paid in Common Stock or
Convertible Securities in the manner referred to in this paragraph 3C(9),
the term "total consideration" as used in this paragraph 3C(9) shall mean
that part of the aggregate consideration as is fairly allocable to the
purchase price paid in Common Stock or Convertible Securities in the
manner referred to in this paragraph 3C(9), as determined by the Board of
Directors of the Company.
3D. Adjustment for Certain Special Dividends. In case the Company shall
declare a dividend upon the Common Stock payable otherwise than out of
consolidated earnings or consolidated earned surplus, determined in accordance
with generally accepted accounting principles, including the making of
appropriate deductions for minority interests, if any, in subsidiaries (except
in Common Stock or Convertible Securities or rights or options or warrants to
purchase Common Stock or Convertible Securities, but including other
securities), the Exercise Price in effect immediately prior to the declaration
of such dividend shall be reduced (to the extent payable otherwise than out of
consolidated earnings or consolidated earned surplus) by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per share of the
Common Stock, or in the case of any other dividend, to the fair value thereof
per share of the Common Stock as determined by the Board of Directors of the
Company. For the purposes of the foregoing a dividend other than in cash shall
be considered payable out of earnings or surplus (other than revaluation or
paid-in-surplus) only to the extent that such earnings or surplus are charged an
amount equal to the fair value of such dividend as determined by the Board of
Directors of the Company. Such reductions shall take effect as of the date on
which a record is taken for the purpose of such dividend, or, if a record is not
taken, the date as of which the holders of Common Stock of record entitled to
such dividend are to be determined.
3E. Subdivision or Combination of Stock. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding shares
of Common Stock of the Company shall be combined into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased.
8
<PAGE>
3F. Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustment of the Exercise Price in connection with the issuance of stock
options pursuant to any stock option plan adopted by the Board of Directors of
the Company or the issuance of stock on the exercise or conversion of securities
of the Company outstanding prior to the date hereof.
3G. Reorganization, Reclassification, Consolidation, Merger or Sale. If
the Company shall effect a reorganization, shall merge with or consolidate into
another corporation, or shall sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business and, pursuant to the terms
of such reorganization, merger, consolidation or disposition of assets, property
or assets of the Company, successor or transferee or an affiliate thereof or
cash are to be received by or distributed to the holders of Common Stock, then
the holder of this Warrant shall have the right thereafter to receive, upon the
exercise of this Warrant, the number of shares of stock or other securities,
property or assets of the Company, successor, transferee or affiliate thereof or
cash receivable upon or as a result of such reorganization, merger,
consolidation or disposition of assets by a holder of the number of shares of
Common Stock equal to that to which the holder of this Warrant upon the exercise
thereof immediately prior to such event would be entitled. The provisions of
this subsection 3G shall similarly apply to successive reorganizations, mergers,
consolidations or dispositions of assets. Upon any reorganization,
consolidation, merger or transfer hereinabove referred to, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable to
the shares of stock and other securities, property, assets and cash receivable
upon the exercise of this Warrant after the consummation of such reorganization,
consolidation, merger or transfer, as the case may be. The Company shall not
effect any such reorganization, consolidation, merger or transfer, unless prior
to the consummation thereof the successor corporation (if other than the
Company) resulting therefrom or the corporation purchasing such assets shall, by
written instrument executed and mailed to the registered holder hereof at the
last address of such holder appearing on the books of the Company, (i) assume
the obligation to deliver to such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to purchase, and (ii) agree to be bound by all the terms of this
Warrant.
3H. Notice of Adjustment. Upon any adjustment of the Exercise Price or
in the occurrence of any event which should result in an adjustment to the
Exercise Price, the Company shall promptly obtain the opinion of a firm of
independent certified public accountants (which may be the regular auditors of
the Company) of recognized national standing selected by the Board of Directors
of the Company, which opinion shall state the Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
purchasable at such Price upon the exercise of the Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The Company will promptly deliver, by registered or
certified mail, postage prepaid, a copy of such accountants' opinion to the
registered holder of such Warrant at the address of such holder as shown on the
Company's books.
9
<PAGE>
3I. Other Notices. In case at any time:
(1) the Company shall pay any cash dividend on its Common
Stock;
(2) the Company shall declare any dividend payable in stock
upon its Common Stock or make any special dividend or other
distribution;
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any
class or other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company with, or sale of all or
substantially all of its assets to, another corporation; or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by registered or certified mail, postage prepaid, addressed to the holder of the
Warrant at the address of such holder as shown on the books of the Company, of
(1) the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or (2) the date
(or, if not then known, a reasonable approximation thereof by the Company) on
which such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also specify (or, if not then known, reasonably approximate)
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given at least ten (10) days prior to the action in question and not less than
ten (10) days prior to the record date or the date on which the Company's
transfer books are closed in respect thereto.
3J. Certain Events. If any event occurs as to which in the opinion of
the Board of Directors the other provisions of this Section 3 are not strictly
applicable or if strictly applicable would not fairly protect the purchase
rights of the holder of the Warrant in accordance with the essential intent and
principles of such provisions, then the Board of Directors shall make an
equitable adjustment in the application of such provisions, in accordance with
such essential intent and principles, so as to protect such purchase rights as
aforesaid, but in no event shall any such adjustment have the effect of
increasing the Exercise Price as otherwise determined pursuant to this Section 3
except in the event of a combination of shares of the type contemplated in
subsection 3E and then in no event to an amount larger than the Exercise Price
as adjusted pursuant to subsection 3E.
10
<PAGE>
3K. Loan Agreement Adjustment. In addition to the adjustments set forth
in this Section 3, the Exercise Price shall be adjusted as set forth in the Loan
Agreement dated the date hereof between the Company and the holder of this
Warrant.
4. Definition of Common Stock. As used herein the term "Common Stock"
shall mean and include the Company's authorized Common Stock as constituted on
the date hereof and shall also include any capital stock of any class of the
Company hereafter authorized which shall not be limited to a fixed sum or sums
or percentage or percentages of par value in respect of the rights of the
holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Company; provided that the shares purchasable pursuant to this Warrant shall
include only shares designated as Common Stock of the Company on the date hereof
or, in case of any reclassification of the outstanding shares thereof, the
stock, securities or assets provided for in subsection 3F above.
5. No Voting Rights. This Warrant shall not entitle the holder hereof
to any voting rights or other rights as a stockholder of the Company.
6. Transfer and Registration of Warrants. This Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Company referred to in Section 1 hereof by the holder hereof in person or his
duly authorized attorney, upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed in blank, shall be deemed negotiable,
and that the holder hereof, when this Warrant shall have been so endorsed may be
treated by the Company and all other persons dealing with this Warrant as the
absolute owner thereof for any purpose and as the person entitled to exercise
the rights represented by this Warrant, or to the transfer hereof on the books
of the Company, any notice to the contrary notwithstanding; but until such
transfer on such books, the Company may treat the registered holder hereof as
the owner for all purposes.
7. Exchanges of Warrants. This Warrant is exchangeable, upon the
surrender hereof by the holder hereof at such office or agency of the Company,
for new Warrants of like tenor representing in the aggregate the right to
subscribe for and purchase the number of shares which may be subscribed for and
purchased hereunder, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by said
holder hereof at the time of such surrender.
8. No Fractional Shares. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issued upon the exercise
of the Warrant, but, in lieu thereof, there shall be paid an amount in cash
equal to the same fraction of the Market Price of a whole share of Common Stock
on the business day preceding the day of exercise.
9. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in
11
<PAGE>
form and amount to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
10. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
11. Notices. Except as otherwise provided herein, any notices hereunder
shall be deemed to have been given five (5) days after having been mailed in the
United States by registered or certified mail, addressed if given to the Company
to the principal office of the Company, Attention: President, or if given to a
holder of this Warrant addressed to such holder at his address as the same shall
appear on the books of the Company.
12. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by both
the Company and the holder hereof. This Warrant is being delivered in the State
of New York and shall be construed and enforced in accordance with and governed
by the laws of such State. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
13. Expiration of Warrants. At 5:00 P.M. New York time on the last day
of its Exercise Period, the Warrant, if not exercised prior thereto, shall be
and become wholly void and of no value.
IN WITNESS WHEREOF, Room Plus, Inc. has caused this Warrant to be signed
by one of its duly authorized officers.
Dated: July 31, 1998
ROOM PLUS, INC.
BY: /s/ Marc Zucker
---------------
12
<PAGE>
SUBSCRIPTION AGREEMENT
(To be signed only upon exercise of Warrant)
To ROOM PLUS, INC.:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, shares of Common Stock of ROOM PLUS, INC. and
herewith (a) makes payment of $ therefor, (b) surrender securities
having a Market Price of $ or (c) elects to receive the difference
between Market Price and the Exercise Price, payable in shares. The undersigned
requests that the certificates for such shares be issued in the name of, and
delivered to, , whose address is .
Dated:
------------, ---- ---------------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant)
---------------------------
(Address)
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<PAGE>
ASSIGNMENT
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common Stock of ROOM PLUS, INC.
covered thereby set forth hereinbelow unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated: , 19
---------- -- ---------------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant)
---------------------------
(Address)
Signed in the presence of:
- -------------------------
14
Exhibit No. 10.25
LOAN AGREEMENT
Loan Agreement made this 31st day of July, 1998, by and between Room
Plus, Inc., a New York corporation (the "Company"), and David A. Belford (the
"Investor").
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the Company desires to borrow certain amounts from the Investor
and the Investor desires to make a loan (the "Loan") to the Company;
NOW, THEREFORE, in consideration of the mutual promises, representations
and warranties contained herein, the parties hereby agree as follows:
1. Loan. The Investor hereby lends to the Company the aggregate
principal amount of $1,500,000. The Loan shall be evidenced by a promissory note
(the "Note") in the form attached hereto as Exhibit A, shall bear interest at
the rate of 12% per annum and shall be due and payable two years from the date
hereof, or earlier as provided in the Note. There will not be any commitment fee
or facility fee for the Investor making the Loan.
2. Conditions to Loan. The obligation of the Investor to make the Loan
is subject to the conditions that the following shall have occurred prior to or
concurrently with the Loan:
(a) The Company shall have granted to the Investor a security
interest in substantially all its assets pursuant to a security agreement dated
the date hereof.
(b) The Investor shall have been elected as a Director of the
Company and appointed as Chairman of the Board and the Board of Directors of the
Company shall have agreed that the Investor shall be reimbursed for all
reasonable travel expenses incurred in such positions, but will not receive any
salary or consulting fees.
(c) The employment agreements with each of Messrs. Zucker and
Socher shall have been amended as set forth on Schedule 1 attached hereto.
3. Warrants. In consideration of the Investor making the Loan, the
Company hereby issues to the Investor warrants (the "Warrants"), in the form of
Exhibit B attached hereto, to purchase an aggregate of 2,000,000 shares of
Common Stock of the Company at an exercise price of $2.00 per share.
4. Representations of the Company. The Company represents and warrants
to the Investor as follows:
4.1. The issuance of the Note and the Warrants and the shares of
Common Stock issuable upon exercise of the Warrants (the "Warrant Shares")
pursuant to the provisions of this Agreement have been duly and validly
authorized. No approval or authorization of the shareholders or the directors of
the Company or of any governmental authority or agency which has not been
0btained will be required by the Company for the issuance and sale of the Note,
the
15
<PAGE>
Warrants, or the Warrant Shares as contemplated by this Agreement. When issued
and sold to the Investor, the Warrants will be duly and validly issued, fully
paid and non-assessable, and will be free and clear of any liens or encumbrances
created by the Company. The Warrant Shares, when issued and delivered upon
exercise of the Warrants, will be duly and validly issued, fully paid and
non-assessable.
4.2 The Company has the full corporate power and authority to
enter into this Agreement and to perform all of its obligations hereunder. The
execution, delivery and performance of this Agreement and the Note by the
Company have been duly authorized by all necessary corporate action. This
Agreement and the Note constitute legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms.
4.3 Neither the sale of the Note, the Warrants (or the issuance
and delivery of the Warrant Shares), the execution and delivery of this
Agreement, nor the fulfillment of the terms set forth in this Agreement and the
consummation of the transactions contemplated by this Agreement, will (i)
conflict with or constitute a breach of, or constitute a default under or an
event which, with or without notice of lapse of time or each, would be a breach
of or default under or violation of the Certificate of Incorporation or By-Laws
of the Company or would be a breach of or default under or violation of any
agreement, document, lease or other instrument or undertaking by which the
Company is bound or to which any of its properties are subject, would be a
violation of any law, administrative regulation, judgment, order or decree
applicable to the Company, or (ii) subject to the listing approval requirements
of the Nasdaq Stock Market, require the consent which has not been obtained of
any other person or entity under any agreement, lease, document or other
instrument or undertaking by which the Company is bound or to which any of its
properties are subject.
5. Representations of the Investor. The Investor understands that the
Warrants and Warrant Shares have not been registered under the Securities Act of
1933 (the "Securities Act"). The Investor is an accredited investor within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act. The
Investor is acquiring the Warrants and Warrant Shares for his own account and
not with a present view to, or for sale in connection with, any distribution in
violation of the Securities Act. The Investor acknowledges that a restrictive
legend will be placed on the Warrants and Warrant Shares.
6. Covenants of the Company. The Company covenants with the Investor as
follows:
(a) The proceeds of the Loan will be used to repay $850,000 of
outstanding indebtedness of the Company, with the balance to be used for working
capital purposes; provided, however, that all expenditures in excess of $5,000
shall require the prior approval of the Investor, which approval will not be
unreasonably withheld;
(b) If (i) the merger (the "Merger") with Nationwide Warehouse &
Storage, Inc. ("Nationwide") is not consummated by June 30, 1999 for any reason
whatsoever other than by reason of (x) a default or breach by Nationwide of its
obligations under the terms of the merger agreement being entered into
concurrently herewith (the "Merger Agreement") or (y) the failure of the board
of directors or stockholders of Nationwide to approve the Merger and the Merger
Agreement or (ii) at the shareholders meeting of the Company held with respect
to the Merger, the shareholders of the Company fail to approve the Merger, then
500,000 of the Warrants will
2
<PAGE>
automatically be converted into 500,000 shares of Common Stock, the exercise
price of 500,000 of the Warrants will be reduced to $.50 per share and the
remaining 1,000,000 Warrants will remain unchanged.
(c) At all times while the Warrants are outstanding, the Company
will reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the exercise of the Warrants,
the full number of shares of Common Stock deliverable upon exercise of the
Warrants.
7. Survival. All representations, warranties, covenants and agreements
contained in this Agreement or in any document, exhibit, schedule or certificate
delivered in connection herewith shall survive the execution and delivery of
this Agreement and the closing of the Loan and any investigation at any time
made by the Investor or on his behalf.
8. Miscellaneous Provisions.
8.1. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of New York without
giving any effect to principles of conflicts of laws.
8.2. All notices hereunder shall be in writing and shall be deemed
to have been given at the time when mailed by certified mail, addressed to the
address below stated of the party to which notice is given, or to such changed
address as such party may have fixed by notice:
To the Company:
Room Plus, Inc.
91 Michigan Avenue
Paterson, New Jersey 07053
Attn: Marc Zucker
To the Investor:
David A. Belford
Nationwide Warehouse & Storage, Inc.
2097 South Hamilton Road
Columbus, Ohio 43232
provided, however, that any notice of change of address shall be effective only
upon receipt.
8.3. This Agreement shall be binding upon and inure to the benefit
of the Company, the Investor and the successors and assigns of the Investor. The
Company may not assign this Agreement without the prior written consent of the
Investor. The Investor may assign all or any part of his rights and obligations
hereunder to any affiliate of the Investor, without the consent of the Company.
8.4. This Agreement and all exhibits and schedules hereto set forth
the entire understanding of the parties with respect to the transactions
contemplated hereby. This Agreement may be amended, the Company or the Investor
may take any action herein prohibited or omit to take action herein required to
be performed by it or him, and any breach of or
3
<PAGE>
compliance with any covenant, agreement, warranty or representation may be
waived, only if the Company or the Investor has obtained the written consent of
the other party to this Agreement.
8.5. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
8.6. The headings in this Agreement are for reference purposes only
and shall not constitute a part hereof.
8.7 On or prior to December 31, 1998, the Company will reimburse
the Investor for the reasonable attorneys fees and expenses incurred by the
Investor in connection with the preparation, execution and delivery of this
Agreement, the Note, the Warrants and the Security Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
ROOM PLUS, INC.
By: /s/ Marc Zucker
---------------
Marc Zucker
/s/ David A. Belford
--------------------
David A. Belford
4
<PAGE>
Schedule 1
Employment Terms for
Messrs. Socher and Zucker
1. Until new president is appointed, Socher to have existing position.
Thereafter, Socher to be vice president - marketing.
2. Until new president is appointed, Zucker to have existing position.
Thereafter, Zucker to be vice president -real estate and manufacturing.
3. After merger, new people may be brought in from the outside to perform
functions performed by them prior to the date hereof.
4. Agreements to expire December 31, 2000.
5. Annual salary of $162,000 plus cost of living increase effective January
1, 2000.
6. Incentive compensation - each gets 5% of EBITDA if 1998 EBITDA exceeds
$850,000, plus each gets 25,000 options. For each $100,000 of EBITDA above
$850,000 each will get 5,000 options. If merger does not happen, future
bonuses will be based on same formula, with EBITDA to be $1,700,000 per
year. If merger happens, parties to mutually agree on new bonus formula.
Stores open less than one year will not affect the bonus.
7. In the future, each will be granted additional stock options consistent
with other executive officers.
8. No change in control payments.
9. $500 per month car allowance, plus gas, maintenance and insurance.
5
<PAGE>
Nationwide Disclosure Schedule
None
6
Exhibit No. 10.26
SECURITY AGREEMENT
This SECURITY AGREEMENT, dated as of July 31, 1998, is between Room Plus,
Inc., a New York corporation (the "Company"), and David A. Belford (the
"Creditor").
WHEREAS, pursuant to the terms of a Loan Agreement between the Company and
the Creditor dated the date hereof the Company is borrowing money from the
Creditor evidenced by a promissory note dated the date hereof in the principal
amount of $1,500,000 (the "Note");
NOW, THEREFORE, in consideration of the benefits to the Company, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
makes the following representations and warranties to the Creditor and hereby
covenants and agrees with the Creditor as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the meanings herein
specified unless the context otherwise requires. Such definitions shall be
equally applicable to the singular and plural forms of the terms defined.
"Agreement" or "Security Agreement" shall mean this Security
Agreement, as modified, supplemented, or amended from time to time.
"Company" shall have the meaning provided in the first paragraph of
this Agreement.
"Chattel Paper" shall have the meaning assigned that term under the
UCC.
"Collateral" shall have the meaning provided in Section 2.1(a).
"Contracts" shall mean all contracts between the Company and one or
more additional parties.
"Contract Rights" shall mean all rights of the Company (including,
without limitation, all rights to payment) under each Contract.
<PAGE>
"Copyrights" shall mean any U.S. copyright to which the Company now
or hereafter has title, as well as any application for a U.S. copyright
now or hereafter made by the Company.
"Documents" shall have the meaning assigned that term under the UCC.
"Equipment" shall mean any "equipment," as such term is defined in
the UCC, now or hereafter owned by the Company and, in any event, shall
include, but shall not be limited to, all machinery, equipment,
furnishings, fixtures and vehicles now or hereafter owned by the Company
and any and all additions, substitutions, and replacements of any of the
foregoing, wherever located, together with all attachments, components,
parts, equipment, and accessories installed thereon or affixed thereto.
"Event of Default" shall mean an Event of Default as defined in the
Note.
"General Intangibles" shall have the meaning assigned that term
under the UCC.
"Goods" shall have the meaning assigned that term under the UCC.
"Instrument" shall have the meaning assigned that term under the
UCC.
"Inventory" shall mean all raw materials, work-in-process, and
finished inventory of the Company of every type or description and all
documents of title covering such inventory, and shall specifically include
all "inventory" as such term is defined in the UCC, now or hereafter owned
by the Company.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement or any lease in the nature thereof).
"Loan Agreement" shall mean the Loan Agreement dated the date hereof
between the Company and the Creditor, as the same may be modified,
supplemented or amended from time to time.
"Marks" shall mean any trademarks and service marks now held or
hereafter acquired by the Company, which are now or hereafter registered
in the United States Patent and Trademark Office, as well as any
unregistered marks used by the Company in the United States and trade
dress, including logos and/or designs, in connection with which any of
these registered or unregistered marks are used.
"Obligations" shall mean: (a) all indebtedness, obligations, and
liabilities (including, without limitation, guarantees and other
contingent liabilities) of the Company to the Creditor, or the holder of
the Note arising under or in connection with the Loan
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Agreement, this Security Agreement or the Note; (b) any and all sums
advanced by the Creditor in order to preserve the Collateral or preserve
its security interest in the Collateral; and (c) in the event of any
proceeding for the collection or enforcement of any indebtedness,
obligations, or liabilities of the Company referred to in clause (a),
after an Event of Default shall have occurred and be continuing, the
reasonable expenses of re-taking, holding, preparing for sale or lease,
selling, or otherwise disposing or realizing on the Collateral, or of any
exercise by the Creditor of its rights hereunder, together with reasonable
attorneys' fees and court costs.
"Patents" shall mean any U.S. patent to which the Company now or
hereafter has title, as well as any application for a U.S. patent now or
hereafter made by Company.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, limited liability entity, association, trust or other
enterprise.
"Proceeds" shall have the meaning assigned that term under the UCC
or under other relevant law and, in any event, shall include, but not be
limited to, (i) any and all proceeds of any insurance, indemnity,
warranty, or guaranty payable to the Creditor or the Company from time to
time with respect to any of the Collateral, (ii) any and all payments (in
any form whatsoever) made or due and payable to the Company from time to
time in connection with any requisition, confiscation, condemnation,
seizure, or forfeiture of all or any part of the Collateral by any
governmental authority (or any Person acting under color of governmental
authority), and (iii) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral.
"Receivables" shall mean any "account" as such term is defined in
the UCC, now or hereafter owned by the Company and, in any event, shall
include, but shall not be limited to, all of the Company's rights to
payment for goods sold or leased or services performed by the Company,
whether now in existence or arising from time to time hereafter,
including, without limitation, rights evidenced by an account, note,
contract, security agreement, chattel paper, or other evidence of
indebtedness or security, together with (a) all security pledged,
assigned, hypothecated, or granted to or held by the Company to secure the
foregoing, (b) all of the Company's right, title, and interest in and to
any goods, the sale of which gave rise thereto, (c) all guarantees,
endorsements, and indemnifications on, or of, any of the foregoing, (d)
all powers of attorney for the execution of any evidence of indebtedness
or security or other writing in connection therewith, (e) all books,
records, ledger cards, and invoices relating thereto, (f) all evidences of
the filing of financing statements and other statements and the
registration of other instruments in connection therewith and amendments
thereto, notices to other creditors or secured parties, and certificates
from filing or other registration officers, (g) all credit information,
reports, and memoranda relating thereto, and (h) all other writings
related in any way to the foregoing.
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"UCC" means the Uniform Commercial Code as in effect on the date
hereof in all relevant jurisdictions.
ARTICLE II
SECURITY INTERESTS
2.1 Grant of Security Interests.
(a) As security for the prompt and complete payment and
performance when due of all of its Obligations, the Company does hereby sell,
assign, and transfer unto the Creditor, and does hereby grant to the Creditor a
continuing security interest of first priority in, all of the right, title, and
interest of the Company in, to, and under all of the following, whether now
existing or hereafter from time to time acquired: (i) each and every Receivable;
(ii) all Contracts, together with all Contract Rights arising thereunder; (iii)
all Inventory; (iv) all Equipment; (v) all Marks, together with the
registrations and right to all renewals thereof, and the goodwill of the
business of the Company symbolized by the Marks; (vi) all Patents and
Copyrights; (vii) all computer programs of the Company and all intellectual
property rights therein and all other proprietary information of the Company,
including, but not limited to, trade secrets; (viii) all other Goods, General
Intangibles, Chattel Paper, Documents, and Instruments; and (ix) all Proceeds
and products of any and all of the foregoing (all of the above, collectively,
the "Collateral").
(b) The security interest of the Creditor under this Agreement
extends to all Collateral of the kind described in preceding clause (a) which
the Company may acquire at any time during the continuation of this Agreement.
2.2 Power of Attorney. The Company hereby constitutes and appoints the
Creditor its true and lawful attorney, irrevocably, with full power after the
occurrence of an Event of Default (in the name of the Company or otherwise) to
act, require, demand, receive, compound, and give acquittance for any and all
monies and claims for monies due or to become due to the Company under or
arising out of the Collateral, to endorse any checks or other instruments or
orders in connection therewith and to file any claims or take any action or
institute any proceedings which the Creditor may deem to be necessary or
advisable in the premises, which appointment as attorney is coupled with an
interest.
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ARTICLE III
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company represents, warrants, and covenants, which representations,
warranties, and covenants shall survive execution and delivery of this
Agreement, as follows:
3.1 Necessary Filings. All filings, registrations, and recordings
necessary or appropriate to create, preserve, protect, and perfect the security
interest granted by the Company to the Creditor hereby in respect of the
Collateral have been accomplished or will be accomplished as promptly as
practicable after the date hereof and after the giving of value by the Creditor
to the Company the security interest granted to the Creditor pursuant to this
Agreement in and to the Collateral constitutes, or upon the making of all
necessary filings, registrations and recordings will constitute, a valid and
enforceable perfected security interest therein superior and prior to the rights
of all other Persons therein and subject to no other Liens, and is entitled to
all the rights, priorities, and benefits afforded by the UCC or other relevant
law as enacted in any relevant jurisdiction to perfected security interests.
3.2 No Liens. Except as set forth on Schedule 3.2 attached hereto, the
Company is the owner of all Collateral free from any Lien or other right, title,
or interest of any Person, and the Company shall defend the Collateral against
all claims and demands of all Persons at any time claiming the same or any
interest therein adverse to the Creditor. The proceeds of the Loan Agreement
will be used to satisfy the indebtedness underlying the security interests
reflected on Schedule 3.2 and the Company shall promptly cause such liens to be
released. The Company agrees to use its best efforts to remove any Liens created
or asserted by third parties against the Collateral.
3.3 Other Financing Statements. There is no financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any kind in the
Collateral and so long as any of the Obligations remain unpaid, the Company will
not execute or authorize to be filed in any public office any financing
statement (or similar statement or instrument of registration under the law of
any jurisdiction) or statements relating to the Collateral, except financing
statements filed or to be filed in respect of and covering the security
interests granted hereby by the Company.
3.4 Chief Executive Office; Records. The chief executive office of the
Company is located at the address set forth in Section 7.2 of the Loan
Agreement. The Company will not move its chief executive office except to such
new location as the Company may establish in accordance with the last sentence
of this Section 3.4. The originals of all documents evidencing all Receivables
and Contract Rights of the Company and the only original books of account and
records of the Company relating thereto are, and will continue to be, kept at
such chief executive office or at such new locations as the Company may
establish in accordance with the last sentence of this Section 3.4. All
Receivables and Contract Rights of the Company are, and will
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continue to be, maintained at, and controlled and directed (including, without
limitation, for general accounting purposes) from, the office location indicated
above, or such new locations as the Company may establish in accordance with the
last sentence of this Section 3.4. The Company shall not establish a new
location for such offices until (i) it shall have given to the Creditor not less
than 45 days' prior written notice of its intention so to do, clearly describing
such new location and providing such other information in connection therewith
as the Creditor may reasonably request, and (ii) with respect to such new
location, it shall have taken all action, satisfactory to the Creditor, to
maintain the security interest of the Creditor in the Collateral intended to be
granted hereby at all times fully perfected and in full force and effect.
3.5 Location of Inventory and Equipment. All Inventory and Equipment
held on the date hereof by the Company is located at one of the locations shown
on Annex A. The Company agrees that (i) all Inventory and Equipment now held or
subsequently acquired by it shall be kept at (or shall be in transport to) any
one of the locations shown on Annex A, or such new location as the Company may
establish in accordance with the last sentence of this Section 3.5. The Company
may establish a new location for Inventory and Equipment only if (i) it shall
have given to the Creditor prior written notice of its intention so to do,
clearly describing such new location and providing such other information in
connection therewith as the Creditor may reasonably request, and (ii) with
respect to such new location, it shall have taken all action reasonably
satisfactory to the Creditor to maintain the security interest of the Creditor
in the Collateral intended to be granted hereby at all times fully perfected and
in full force and effect.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
4.1 Direction to Account Debtors; Contracting Parties; etc. Upon the
occurrence of an Event of Default and if the Creditor so directs, the Company
agrees to cause all payments on account of the Receivables and Contracts to be
made directly to the Creditor and the Creditor may, at its option, directly
notify the obligors with respect to any Receivables and/or under any Contracts
to make payments with respect thereto to the Creditor. The costs and expenses
(including attorneys' fees) of collection, whether incurred by the Company or
the Creditor, shall be borne by the Company.
4.2 Instruments. If the Company owns or acquires any Instrument, the
Company will within 10 days notify the Creditor thereof, and upon request by the
Creditor promptly deliver such Instrument to the Creditor appropriately endorsed
to the order of the Creditor as further security hereunder.
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ARTICLE V
PROVISIONS CONCERNING ALL COLLATERAL
5.1 Protection of Creditor's Security. The Company will do nothing to
impair the rights of the Creditor in the Collateral. The Company assumes all
liability and responsibility in connection with the Collateral acquired by it
and the liability of the Company to pay its Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to the
Company.
5.2 Further Actions. The Company will, at its expense, make, execute,
endorse, acknowledge, file, and/or deliver to the Creditor from time to time
such lists, descriptions and designations of its Collateral, warehouse receipts,
receipts in the nature of warehouse receipts, bills of lading, documents of
title, vouchers, invoices, schedules, confirmatory assignments, conveyances,
financing statements, transfer endorsements, copyright mortgages, trademark
mortgages, patent mortgages, powers of attorney, certificates, reports, and
other assurances or instruments and take such further steps relating to the
Collateral and other property or rights covered by the security interest hereby
granted, which the Creditor deems reasonably appropriate or advisable to
perfect, preserve or protect its security interest in the Collateral.
5.3 Financing Statements. The Company agrees to sign and deliver to the
Creditor such financing statements, in form acceptable to the Creditor, as the
Creditor may from time to time reasonably request or as are necessary or
desirable in the opinion of the Creditor to establish and maintain a valid,
enforceable, first priority security interest in the Collateral as provided
herein and the other rights and security contemplated herein, all in accordance
with the UCC as enacted in any and all relevant jurisdictions or any other
relevant law. The Company will pay any applicable filing fees and related
expenses. The Company authorizes the Creditor to file any such financing
statements without the signature of the Company.
ARTICLE VI
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
6.1 Remedies; Obtaining the Collateral Upon Default. The Company agrees
that, if any Event of Default shall have occurred and be continuing, then and in
every such case, subject to any mandatory requirements of applicable law then in
effect, the Creditor, in addition to any rights now or hereafter existing under
applicable law, shall have all rights as a secured creditor under the UCC in all
relevant jurisdictions and may:
(a) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof, from the Company or any other
Person who then has possession of any part thereof with or without notice or
process of law, and for that purpose may enter upon the
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Company's premises where any of the Collateral is located and remove the same
and use in connection with such removal any and all services, supplies, aids,
and other facilities of the Company; and
(b) instruct the obligor or obligors on any agreement, instrument
or other obligation (including, without limitation, the Receivables)
constituting the Collateral to make any payment required by the terms of such
instrument or agreement directly to the Creditor; and
(c) sell, assign, or otherwise liquidate, or direct the Company to
sell, assign, or otherwise liquidate, any or all of the Collateral or any part
thereof, and take possession of the proceeds of any such sale or liquidation;
and
(d) take possession of the Collateral or any part thereof, by
directing the Company in writing to deliver the same to the Creditor at any
place or places designated by the Creditor, in which event the Company shall at
its own expense:
(i) forthwith cause the same to be moved to the place or
places so designated by the Creditor and there delivered to the Creditor,
and
(ii) store and keep any Collateral so delivered to the
Creditor at such place or places pending further action by the Creditor as
provided in Section 6.2; and
(e) take any or all of the actions set forth elsewhere in this
Agreement;
it being understood that the Company's obligations to deliver the Collateral is
of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Creditor shall be entitled to a decree
requiring specific performance by the Company of said obligation.
6.2 Remedies; Disposition of the Collateral. Any Collateral repossessed
by the Creditor under or pursuant to Section 6.1, and any other Collateral
whether or not so repossessed by the Creditor, may be sold, assigned, leased, or
otherwise disposed of under one or more contracts or as an entirety, and without
the necessity of gathering at the place of sale the property to be sold, and in
general in such manner, at such time or times, at such place or places and on
such terms as the Creditor may, in compliance with any mandatory requirements of
applicable law, determine to be commercially reasonable. Any of the Collateral
may be sold, leased, or otherwise disposed of in the condition in which the same
existed when taken by the Creditor or after any overhaul or repair which the
Creditor shall determine to be commercially reasonable. Any such disposition
which shall be a private sale or other private proceeding permitted by such
requirements shall be made upon not less than 10 days' written notice to the
Company specifying the time at which such disposition is to be made and the
intended sale price or other consideration therefor, and shall be subject, for
the 10 days after the giving of such notice, to the right of the Company or any
nominee of the Company to acquire the Collateral involved at a
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price or for such other consideration at least equal to the intended sale price
or other consideration so specified. Any such disposition which shall be a
public sale permitted by such requirements shall be made upon not less than 10
days' written notice to the Company specifying the time and place of such sale.
To the extent permitted by any such requirement of law, the Creditor may bid for
and become the purchaser of the Collateral or any item thereof, offered for sale
in accordance with this Section 6.2 without accountability to the Company
(except to the extent of surplus money received as provided in Section 6.4). If,
under mandatory requirements of applicable law, the Creditor shall be required
to make disposition of the Collateral within a period of time which does not
permit the giving of notice to the Company as hereinabove specified, the
Creditor need give the Company only such notice of disposition as shall be
reasonably practicable in view of such mandatory requirements of applicable law.
6.3 Waiver of Claims. Except as otherwise provided in this Agreement,
THE COMPANY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND
JUDICIAL HEARING IN CONNECTION WITH THE CREDITOR'S TAKING POSSESSION OR THE
CREDITOR'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION,
ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND
ANY SUCH RIGHT WHICH THE COMPANY WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR
ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and the Company hereby further
waives, to the extent permitted by law:
(a) all damages occasioned by such taking of possession except any
damages which are the direct result of the Creditor's gross negligence or
willful misconduct;
(b) all other requirements as to the time, place and terms of sale
or other requirements with respect to the enforcement of the Creditor's
rights hereunder; and
(c) all rights of redemption, appraisement, valuation, stay,
extension, or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement or the
absolute sale of the Collateral or any portion thereof, and the Company,
for itself and all who may claim under it, insofar as it or they now or
hereafter lawfully may, hereby waives the benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the Company therein and thereto, and
shall be a perpetual bar both at law and in equity against the Company and
against any and all Persons claiming or attempting to claim the Collateral so
sold, optioned or realized upon, or any part thereof, from, through and under
the Company.
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6.4 Application of Proceeds. The proceeds of any Collateral obtained
pursuant to Section 6.1 or disposed of pursuant to Section 6.2 shall be applied
as follows:
(a) to the payment of any and all expenses and fees (including
reasonable attorneys' fees) incurred by the Creditor in obtaining, taking
possession of, removing, insuring, repairing, storing, and disposing of
Collateral and any and all amounts incurred by the Creditor in connection
therewith;
(b) next, any surplus then remaining to the payment of the
Obligations in the following order of priority:
(i) all interest accrued and unpaid on the Note on a pro
rata basis;
(ii) the principal amount owing on the Note on a pro rata
basis;
(iii) all other Obligations then owing;
(c) if no Obligation is outstanding, any surplus then remaining
shall be paid to the Company, subject, however, to the rights of the
holder of any then existing Lien of which the Creditor has actual notice
(without investigation);
it being understood that the Company shall remain liable to the extent of any
deficiency between the amount of the proceeds of the Collateral and the
aggregate amount of the sums referred to in clauses (a) and (b) of this Section
6.4 with respect to the Company.
6.5 Remedies Cumulative. No failure or delay on the part of the Creditor
in exercising any right, power or privilege hereunder and no course of dealing
between the Company and the Creditor shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder. The rights, powers and remedies herein
expressly provided are cumulative and not exclusive of any rights, powers, or
remedies which the Creditor would otherwise have. No notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the rights of
the Creditor to any other or further action in any circumstances without notice
or demand.
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ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices and other communications hereunder shall be
made at the addresses, in the manner and with the effect provided in Section 7.2
of the Loan Agreement.
7.2 Waiver; Amendment. This Agreement may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
7.3 Obligations Absolute. The obligations of the Company under this
Agreement shall be absolute and unconditional and shall remain in full force and
effect without regard to, and shall not be released, suspended, discharged,
terminated, or otherwise affected by, any circumstance or occurrence whatsoever,
including, without limitation: (a) any renewal or extension of the Loan
Agreement or any other instrument or agreement referred to therein, or any
assignment or transfer of any thereof; (b) any waiver, consent, extension,
indulgence, or other action or inaction under or in respect of any such
instrument or agreement or any exercise or non-exercise of any right, remedy,
power or privilege under or in respect of the Loan Agreement; or (c) any
furnishing of any additional security to the Creditor or any acceptance thereof
or any sale, exchange, release, surrender, or realization of or upon any
security by the Creditor.
7.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto; provided, however, that the Company may not
assign or transfer any of its rights or obligations hereunder without the prior
written consent of the Creditor. All agreements, statements, representations and
warranties made by the Company herein or in any certificate or other instrument
delivered by the Company or on its behalf under this Agreement shall be
considered to have been relied upon by the Creditor and shall survive the
execution and delivery of this Agreement regardless of any investigation made by
the Creditor or on its behalf.
7.5 Headings Descriptive, Etc. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
7.6 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be construed in accordance with and be governed by the
internal laws of the State of New York without giving effect to principles of
conflicts of laws.
7.7 Company's Duties. It is expressly agreed, anything herein contained
to the contrary notwithstanding, that the Company shall remain liable to perform
all of the obligations, if any, assumed by it with respect to the Collateral and
the Creditor shall not have any obligations or liabilities with respect to any
Collateral by reason of or arising out of this Agreement, nor shall
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the Creditor be required or obligated in any manner to perform or fulfill any of
the obligations of the Company under or with respect to any Collateral.
7.8 Termination; Release. When all Obligations have been paid in full,
this Agreement shall terminate, and the Creditor, at the request and expense of
the Company, will execute and deliver to the Company the proper instruments
(including UCC termination statements on form UCC-3) acknowledging the
termination of this Agreement, and will duly assign, transfer and deliver to the
Company (without recourse and without any representation or warranty) such of
the Collateral as may be in possession of the Creditor and has not theretofore
been sold or otherwise applied or released pursuant to this Agreement.
7.9 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers or representatives as
of the date first above written.
ROOM PLUS, INC.
By: /s/ Marc Zucker
---------------
Title: Chief Executive Officer
/s/ David A. Belford
--------------------
David A. Belford
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ANNEX A
TO
SECURITY AGREEMENT
------------------
SCHEDULE OF EQUIPMENT AND INVENTORY LOCATIONS
---------------------------------------------
Address County
- ------- ------
Exhibit No. 10.27
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT dated as of July 31, 1998 among Nationwide Warehouse
& Storage, Inc., an Ohio corporation (the "Company"), Room Plus, Inc., a New
York corporation ("Parent"), Room Plus Sub, Inc., an Ohio corporation and a
wholly owned subsidiary of Parent ("Sub"), and Marc Zucker (the "Stockholder").
WHEREAS, Parent, Sub and the Company propose to enter into an Agreement
and Plan of Merger of even date herewith (as the same may be amended or
supplemented, the "Merger Agreement") providing for the merger of the Company
with and into the Sub (the "Merger");
WHEREAS, the Stockholder owns the number of shares of Common Stock, par
value $.00133 per share, of the Parent (the "Parent Common Stock") set forth
opposite the Stockholder's name on the signature page hereof; such shares of
Parent Common Stock, as such shares may be adjusted by any stock dividend, stock
split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the Parent
being referred to herein as the "Subject Shares"; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Company has requested that the Stockholder enter into this
Agreement;
NOW, THEREFORE, to induce the Company to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to the Company as follows:
(a) Authority. The Stockholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Stockholder and constitutes a valid and binding obligation of
the Stockholder enforceable in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time or both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic, foreign or supranational, is required by or with
respect to the
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Stockholder in connection with the execution and delivery of this Agreement or
the ability of the Stockholder to perform his obligations contemplated hereby.
(b) The Subject Shares. The Stockholder is the beneficial owner of
and has good and marketable title to the Subject Shares, free and clear of any
claims, liens, encumbrances and security interests whatsoever; provided,
however, that the Subject Shares are subject to Rule 144 under the Securities
Act of 1933, as amended. The Subject Shares constitute all the capital stock of
the Parent owned beneficially or of record by the Stockholder.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Stockholder that the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company, and the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms.
3. Covenants of the Stockholder.
(a) The Stockholder agrees to attend the meeting of stockholders
of the Parent to be called with respect to the Merger (including any adjournment
thereof) in person or by proxy. At any meeting of stockholders of the Parent
called to vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval with respect to the Merger and the Merger Agreement is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares, and any other
voting securities of the Parent, owned by Stockholder whether issued heretofore
or hereafter, that such person owns or has the right to vote, in favor of the
Merger, the adoption by the Parent of the Merger Agreement and the approval of
the terms thereof and each of the other transactions contemplated by the Merger
Agreement, including, if required, in favor of the issuance of warrants to the
Company and/or David A. Belford.
(b) At any meeting of stockholders of the Parent or at any
adjournment thereof or in any other circumstances upon which the Stockholder's
vote, consent or other approval is sought, the Stockholder shall vote (or cause
to be voted) the Subject Shares, and any other voting securities of the Company,
owned by Stockholder whether issued heretofore or hereafter, that such person
owns or has the rights to vote, against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Parent or any other Acquisition
Transaction, or (ii) any amendment of the Parent's certificate of incorporation
or by-laws or other proposal or transaction involving the Parent or any of its
subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger Agreement or
any of the other transactions
-2-
<PAGE>
contemplated by the Merger Agreement or which could result in any of the
conditions to the Parent's obligations under the Merger Agreement not being
fulfilled.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the sale,
transfer, pledge, assignment or other disposition of, the Subject Shares to any
person or (ii) enter into any voting arrangement, whether by proxy, voting
arrangement, voting agreement or otherwise, in connection, directly or
indirectly, with any Acquisition Transaction.
(d) Until the Merger Agreement is terminated and subject to
Section 8 hereof, the Stockholder shall not, and shall use his best efforts to
cause any investment banker, attorney or other adviser or representative of the
Stockholder not to, (i) directly or indirectly solicit, initiate or knowingly
encourage the submission of, any Acquisition Transaction or (ii) directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or knowingly take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or would reasonably be expected to lead to, any Acquisition
Transaction.
(e) To secure the Stockholder's commitments set forth in this
Section 3, the Stockholder constitutes and appoints the Company or its officers
and each of them, with full power of substitution, to be his true and lawful
proxy and attorney-in-fact from the date hereof until conclusion of the meeting
of stockholders of the Parent as provided in this Section 3 (including any
adjournment or adjournments thereof) to vote all Subject Shares then
beneficially owned by the Stockholder in accordance with this Section 3. This
proxy shall be deemed coupled with an interest, and is irrevocable during the
term of this Agreement and will survive death, incompetency and disability of
the Stockholder. To the extent inconsistent with this Section 3 hereof, the
Stockholder hereby revokes any and all previous proxies or written consents with
respect to the Subject Shares.
4. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, consents and other instruments as the
Company may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that the Company may assign,
in its sole discretion, any or all of its rights, interests and obligations
hereunder to its stockholders or to any direct or indirect wholly owned
subsidiary of the Company. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors, assigns, heirs, legal representatives and
executors.
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<PAGE>
6. Termination. This Agreement shall terminate upon the earliest of (i)
the close of business on the first anniversary of the date hereof, (ii) the
Effective Time (as defined in the Merger Agreement) and (iii) the termination of
the Merger Agreement in accordance with its terms (other than pursuant to
Section 9.1(c) thereof).
7. General Provisions.
(a) Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
(b) Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
(c) Amendments. Subject to Section 6 hereof, this Agreement may
not be amended except by an instrument in writing signed by each of the parties
hereto.
(d) Notice. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent, to:
Nationwide Warehouse & Storage, Inc.
2097 South Hamilton Road
Columbus, Ohio 43232
Attn: David A. Belford
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attn: Martin H. Neidell
and
(ii) if to the Stockholder, at the address set forth beneath
his name.
(e) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the
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<PAGE>
meaning or interpretation of this Agreement. Wherever the words "include",
"includes", or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation". Capitalized terms used herein but
not otherwise defined herein shall have the meanings set forth in the Merger
Agreement.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(g) Entire Agreement: No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
8. Stockholder Capacity. The Stockholder signs solely in its capacity
as the record holder and beneficial owner of the Subject Shares and nothing
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or director of the Parent to the extent specifically
permitted by the Merger Agreement.
9. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State and City of New York or in a New York state court located
in Manhattan, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal court
located in the State and City of New York or any New York state court located in
Manhattan in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that such party will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, (iii) agrees that such party will not bring any
action relating to this Agreement or any of the transactions contemplated hereby
in any court other than a Federal court sitting in the State and City of New
York or a New York state court located in Manhattan and (iv) waives any right to
trial by jury with respect to any claim or proceeding related to or arising out
of this Agreement or any of the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
NATIONWIDE WAREHOUSE & STORAGE, INC.
By: /s/ David A. Belford
---------------------
ROOM PLUS, INC.
By: /s/ Marc Zucker
---------------------
ROOM PLUS SUB, INC.
By: /s/ Marc Zucker
---------------------
Number of Shares of
Common Stock owned: 422,501 /s/ Marc Zucker
----------- ---------------------
Stockholder: Marc Zucker
Address: 91 Michigan Avenue
Paterson, NJ 07503
-6-
Exhibit No. 10.28
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT dated as of July 31, 1998 among Nationwide Warehouse
& Storage, Inc., an Ohio corporation (the "Company"), Room Plus, Inc., a New
York corporation ("Parent"), Room Plus Sub, Inc., an Ohio corporation and a
wholly owned subsidiary of Parent ("Sub"), and Allan Socher (the "Stockholder").
WHEREAS, Parent, Sub and the Company propose to enter into an Agreement
and Plan of Merger of even date herewith (as the same may be amended or
supplemented, the "Merger Agreement") providing for the merger of the Company
with and into the Sub (the "Merger");
WHEREAS, the Stockholder owns the number of shares of Common Stock, par
value $.00133 per share, of the Parent (the "Parent Common Stock") set forth
opposite the Stockholder's name on the signature page hereof; such shares of
Parent Common Stock, as such shares may be adjusted by any stock dividend, stock
split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the Parent
being referred to herein as the "Subject Shares"; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Company has requested that the Stockholder enter into this
Agreement;
NOW, THEREFORE, to induce the Company to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to the Company as follows:
(a) Authority. The Stockholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Stockholder and constitutes a valid and binding obligation of
the Stockholder enforceable in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time or both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic, foreign or supranational, is required by or with
respect to the
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<PAGE>
Stockholder in connection with the execution and delivery of this Agreement or
the ability of the Stockholder to perform his obligations contemplated hereby.
(b) The Subject Shares. The Stockholder is the beneficial owner of
and has good and marketable title to the Subject Shares, free and clear of any
claims, liens, encumbrances and security interests whatsoever; provided,
however, that the Subject Shares are subject to Rule 144 under the Securities
Act of 1933, as amended. The Subject Shares constitute all the capital stock of
the Parent owned beneficially or of record by the Stockholder.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Stockholder that the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company, and the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms.
3. Covenants of the Stockholder.
(a) The Stockholder agrees to attend the meeting of stockholders
of the Parent to be called with respect to the Merger (including any adjournment
thereof) in person or by proxy. At any meeting of stockholders of the Parent
called to vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval with respect to the Merger and the Merger Agreement is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares, and any other
voting securities of the Parent, owned by Stockholder whether issued heretofore
or hereafter, that such person owns or has the right to vote, in favor of the
Merger, the adoption by the Parent of the Merger Agreement and the approval of
0he terms thereof and each of the other transactions contemplated by the Merger
Agreement, including, if required, in favor of the issuance of warrants to the
Company and/or David A. Belford.
(b) At any meeting of stockholders of the Parent or at any
adjournment thereof or in any other circumstances upon which the Stockholder's
vote, consent or other approval is sought, the Stockholder shall vote (or cause
to be voted) the Subject Shares, and any other voting securities of the Company,
owned by Stockholder whether issued heretofore or hereafter, that such person
owns or has the rights to vote, against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Parent or any other Acquisition
Transaction, or (ii) any amendment of the Parent's certificate of incorporation
or by-laws or other proposal or transaction involving the Parent or any of its
subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger Agreement or
any of the other transactions
-2-
<PAGE>
contemplated by the Merger Agreement or which could result in any of the
conditions to the Parent's obligations under the Merger Agreement not being
fulfilled.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the sale,
transfer, pledge, assignment or other disposition of, the Subject Shares to any
person or (ii) enter into any voting arrangement, whether by proxy, voting
arrangement, voting agreement or otherwise, in connection, directly or
indirectly, with any Acquisition Transaction.
(d) Until the Merger Agreement is terminated and subject to
Section 8 hereof, the Stockholder shall not, and shall use his best efforts to
cause any investment banker, attorney or other adviser or representative of the
Stockholder not to, (i) directly or indirectly solicit, initiate or knowingly
encourage the submission of, any Acquisition Transaction or (ii) directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or knowingly take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or would reasonably be expected to lead to, any Acquisition
Transaction.
(e) To secure the Stockholder's commitments set forth in this
Section 3, the Stockholder constitutes and appoints the Company or its officers
and each of them, with full power of substitution, to be his true and lawful
proxy and attorney-in-fact from the date hereof until conclusion of the meeting
of stockholders of the Parent as provided in this Section 3 (including any
adjournment or adjournments thereof) to vote all Subject Shares then
beneficially owned by the Stockholder in accordance with this Section 3. This
proxy shall be deemed coupled with an interest, and is irrevocable during the
term of this Agreement and will survive death, incompetency and disability of
the Stockholder. To the extent inconsistent with this Section 3 hereof, the
Stockholder hereby revokes any and all previous proxies or written consents with
respect to the Subject Shares.
4. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, consents and other instruments as the
Company may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that the Company may assign,
in its sole discretion, any or all of its rights, interests and obligations
hereunder to its stockholders or to any direct or indirect wholly owned
subsidiary of the Company. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors, assigns, heirs, legal representatives and
executors.
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<PAGE>
6. Termination. This Agreement shall terminate upon the earliest of (i)
the close of business on the first anniversary of the date hereof, (ii) the
Effective Time (as defined in the Merger Agreement) and (iii) the termination of
the Merger Agreement in accordance with its terms (other than pursuant to
Section 9.1(c) thereof).
7. General Provisions.
(a) Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
(b) Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
(c) Amendments. Subject to Section 6 hereof, this Agreement may
not be amended except by an instrument in writing signed by each of the parties
hereto.
(d) Notice. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent, to:
Nationwide Warehouse & Storage, Inc.
2097 South Hamilton Road
Columbus, Ohio 43232
Attn: David A. Belford
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attn: Martin H. Neidell
and
(ii) if to the Stockholder, at the address set forth beneath
his name.
(e) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the
-4-
<PAGE>
meaning or interpretation of this Agreement. Wherever the words "include",
"includes", or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation". Capitalized terms used herein but
not otherwise defined herein shall have the meanings set forth in the Merger
Agreement.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(g) Entire Agreement: No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
8. Stockholder Capacity. The Stockholder signs solely in its capacity
as the record holder and beneficial owner of the Subject Shares and nothing
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or director of the Parent to the extent specifically
permitted by the Merger Agreement.
9. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State and City of New York or in a New York state court located
in Manhattan, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal court
located in the State and City of New York or any New York state court located in
Manhattan in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that such party will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, (iii) agrees that such party will not bring any
action relating to this Agreement or any of the transactions contemplated hereby
in any court other than a Federal court sitting in the State and City of New
York or a New York state court located in Manhattan and (iv) waives any right to
trial by jury with respect to any claim or proceeding related to or arising out
of this Agreement or any of the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
NATIONWIDE WAREHOUSE & STORAGE, INC.
By: /s/ David A. Belford
--------------------
ROOM PLUS, INC.
By: /s/ Marc Zucker
--------------------
ROOM PLUS SUB, INC.
By: /s/ Marc Zucker
--------------------
Number of Shares of
Common Stock owned: 422,499 /s/ Allan Socher
----------- --------------------
Stockholder: Allan Socher
Address: 91 Michigan Avenue
Paterson, NJ 07503
-6-
Exhibit No. 10.29
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT dated as of July 31, 1998 among Nationwide Warehouse
& Storage, Inc., an Ohio corporation (the "Company"), Room Plus, Inc., a New
York corporation ("Parent"), Room Plus Sub, Inc., an Ohio corporation and a
wholly owned subsidiary of Parent ("Sub"), and Theodore Shapiro (the
"Stockholder").
WHEREAS, Parent, Sub and the Company propose to enter into an Agreement
and Plan of Merger of even date herewith (as the same may be amended or
supplemented, the "Merger Agreement") providing for the merger of the Company
with and into the Sub (the "Merger");
WHEREAS, the Stockholder owns the number of shares of Common Stock, par
value $.00133 per share, of the Parent (the "Parent Common Stock") set forth
opposite the Stockholder's name on the signature page hereof; such shares of
Parent Common Stock, as such shares may be adjusted by any stock dividend, stock
split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the Parent
being referred to herein as the "Subject Shares"; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Company has requested that the Stockholder enter into this
Agreement;
NOW, THEREFORE, to induce the Company to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to the Company as follows:
(a) Authority. The Stockholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Stockholder and constitutes a valid and binding obligation of
the Stockholder enforceable in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time or both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic, foreign or supranational, is required by or with
respect to the
-7-
<PAGE>
Stockholder in connection with the execution and delivery of this Agreement or
the ability of the Stockholder to perform his obligations contemplated hereby.
(b) The Subject Shares. The Stockholder is the beneficial owner of
and has good and marketable title to the Subject Shares, free and clear of any
claims, liens, encumbrances and security interests whatsoever; provided,
however, that the Subject Shares are subject to Rule 144 under the Securities
Act of 1933, as amended. The Subject Shares constitute all the capital stock of
the Parent owned beneficially or of record by the Stockholder.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Stockholder that the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company, and the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms.
3. Covenants of the Stockholder.
(a) The Stockholder agrees to attend the meeting of stockholders
of the Parent to be called with respect to the Merger (including any adjournment
thereof) in person or by proxy. At any meeting of stockholders of the Parent
called to vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval with respect to the Merger and the Merger Agreement is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares, and any other
voting securities of the Parent, owned by Stockholder whether issued heretofore
or hereafter, that such person owns or has the right to vote, in favor of the
Merger, the adoption by the Parent of the Merger Agreement and the approval of
the terms thereof and each of the other transactions contemplated by the Merger
Agreement, including, if required, in favor of the issuance of warrants to the
Company and/or David A. Belford.
(b) At any meeting of stockholders of the Parent or at any
adjournment thereof or in any other circumstances upon which the Stockholder's
vote, consent or other approval is sought, the Stockholder shall vote (or cause
to be voted) the Subject Shares, and any other voting securities of the Company,
owned by Stockholder whether issued heretofore or hereafter, that such person
owns or has the rights to vote, against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Parent or any other Acquisition
Transaction, or (ii) any amendment of the Parent's certificate of incorporation
or by-laws or other proposal or transaction involving the Parent or any of its
subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger Agreement or
any of the other transactions
-2-
<PAGE>
contemplated by the Merger Agreement or which could result in any of the
conditions to the Parent's obligations under the Merger Agreement not being
fulfilled.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the sale,
transfer, pledge, assignment or other disposition of, the Subject Shares to any
person or (ii) enter into any voting arrangement, whether by proxy, voting
arrangement, voting agreement or otherwise, in connection, directly or
indirectly, with any Acquisition Transaction.
(d) Until the Merger Agreement is terminated and subject to
Section 8 hereof, the Stockholder shall not, and shall use his best efforts to
cause any investment banker, attorney or other adviser or representative of the
Stockholder not to, (i) directly or indirectly solicit, initiate or knowingly
encourage the submission of, any Acquisition Transaction or (ii) directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or knowingly take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or would reasonably be expected to lead to, any Acquisition
Transaction.
(e) To secure the Stockholder's commitments set forth in this
Section 3, the Stockholder constitutes and appoints the Company or its officers
and each of them, with full power of substitution, to be his true and lawful
proxy and attorney-in-fact from the date hereof until conclusion of the meeting
of stockholders of the Parent as provided in this Section 3 (including any
adjournment or adjournments thereof) to vote all Subject Shares then
beneficially owned by the Stockholder in accordance with this Section 3. This
proxy shall be deemed coupled with an interest, and is irrevocable during the
term of this Agreement and will survive death, incompetency and disability of
the Stockholder. To the extent inconsistent with this Section 3 hereof, the
Stockholder hereby revokes any and all previous proxies or written consents with
respect to the Subject Shares.
4. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, consents and other instruments as the
Company may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that the Company may assign,
in its sole discretion, any or all of its rights, interests and obligations
hereunder to its stockholders or to any direct or indirect wholly owned
subsidiary of the Company. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors, assigns, heirs, legal representatives and
executors.
-3-
<PAGE>
6. Termination. This Agreement shall terminate upon the earliest of (i)
the close of business on the first anniversary of the date hereof, (ii) the
Effective Time (as defined in the Merger Agreement) and (iii) the termination of
the Merger Agreement in accordance with its terms (other than pursuant to
Section 9.1(c) thereof).
7. General Provisions.
(a) Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
(b) Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
(c) Amendments. Subject to Section 6 hereof, this Agreement may
not be amended except by an instrument in writing signed by each of the parties
hereto.
(d) Notice. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent, to:
Nationwide Warehouse & Storage, Inc.
2097 South Hamilton Road
Columbus, Ohio 43232
Attn: David A. Belford
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attn: Martin H. Neidell
and
(ii) if to the Stockholder, at the address set forth beneath
his name.
(e) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the
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<PAGE>
meaning or interpretation of this Agreement. Wherever the words "include",
"includes", or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation". Capitalized terms used herein but
not otherwise defined herein shall have the meanings set forth in the Merger
Agreement.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(g) Entire Agreement: No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
8. Stockholder Capacity. The Stockholder signs solely in its capacity
as the record holder and beneficial owner of the Subject Shares and nothing
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or director of the Parent to the extent specifically
permitted by the Merger Agreement.
9. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State and City of New York or in a New York state court located
in Manhattan, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal court
located in the State and City of New York or any New York state court located in
Manhattan in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that such party will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, (iii) agrees that such party will not bring any
action relating to this Agreement or any of the transactions contemplated hereby
in any court other than a Federal court sitting in the State and City of New
York or a New York state court located in Manhattan and (iv) waives any right to
trial by jury with respect to any claim or proceeding related to or arising out
of this Agreement or any of the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first written above.
NATIONWIDE WAREHOUSE & STORAGE, INC.
By: /s/ David A. Belford
--------------------
ROOM PLUS, INC.
By: /s/ Marc Zucker
--------------------
ROOM PLUS SUB, INC.
By: /s/ Marc Zucker
--------------------
Number of Shares of
Common Stock owned: 458,266 /s/ Theodore Shapiro
----------- --------------------
Stockholder: Theodore Shapiro
Address: 91 Michigan Avenue
Paterson, NJ 07503
-6-
Exhibit No. 10.30
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT dated as of July 31, 1998 among Nationwide Warehouse
& Storage, Inc., an Ohio corporation (the "Company"), Room Plus, Inc., a New
York corporation ("Parent"), Room Plus Sub, Inc., an Ohio corporation and a
wholly owned subsidiary of Parent ("Sub"), and Frank Terzo (the "Stockholder").
WHEREAS, Parent, Sub and the Company propose to enter into an Agreement
and Plan of Merger of even date herewith (as the same may be amended or
supplemented, the "Merger Agreement") providing for the merger of the Company
with and into the Sub (the "Merger");
WHEREAS, the Stockholder owns the number of shares of Common Stock, par
value $.00133 per share, of the Parent (the "Parent Common Stock") set forth
opposite the Stockholder's name on the signature page hereof; such shares of
Parent Common Stock, as such shares may be adjusted by any stock dividend, stock
split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the Parent
being referred to herein as the "Subject Shares"; and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Company has requested that the Stockholder enter into this
Agreement;
NOW, THEREFORE, to induce the Company to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to the Company as follows:
(a) Authority. The Stockholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Stockholder and constitutes a valid and binding obligation of
the Stockholder enforceable in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time or both) under any provision of, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic, foreign or supranational, is required by or with
respect to the
<PAGE>
Stockholder in connection with the execution and delivery of this Agreement or
the ability of the Stockholder to perform his obligations contemplated hereby.
(b) The Subject Shares. The Stockholder is the beneficial owner of
and has good and marketable title to the Subject Shares, free and clear of any
claims, liens, encumbrances and security interests whatsoever; provided,
however, that the Subject Shares are subject to Rule 144 under the Securities
Act of 1933, as amended. The Subject Shares constitute all the capital stock of
the Parent owned beneficially or of record by the Stockholder.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Stockholder that the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company, and the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms.
3. Covenants of the Stockholder.
(a) The Stockholder agrees to attend the meeting of stockholders
of the Parent to be called with respect to the Merger (including any adjournment
thereof) in person or by proxy. At any meeting of stockholders of the Parent
called to vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval with respect to the Merger and the Merger Agreement is sought, the
Stockholder shall vote (or cause to be voted) the Subject Shares, and any other
voting securities of the Parent, owned by Stockholder whether issued heretofore
or hereafter, that such person owns or has the right to vote, in favor of the
Merger, the adoption by the Parent of the Merger Agreement and the approval of
the terms thereof and each of the other transactions contemplated by the Merger
Agreement, including, if required, in favor of the issuance of warrants to the
Company and/or David A. Belford.
(b) At any meeting of stockholders of the Parent or at any
adjournment thereof or in any other circumstances upon which the Stockholder's
vote, consent or other approval is sought, the Stockholder shall vote (or cause
to be voted) the Subject Shares, and any other voting securities of the Company,
owned by Stockholder whether issued heretofore or hereafter, that such person
owns or has the rights to vote, against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by the Parent or any other Acquisition
Transaction, or (ii) any amendment of the Parent's certificate of incorporation
or by-laws or other proposal or transaction involving the Parent or any of its
subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify the Merger, the Merger Agreement or
any of the other transactions
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<PAGE>
contemplated by the Merger Agreement or which could result in any of the
conditions to the Parent's obligations under the Merger Agreement not being
fulfilled.
(c) The Stockholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement (including any profit sharing arrangement) with respect to the sale,
transfer, pledge, assignment or other disposition of, the Subject Shares to any
person or (ii) enter into any voting arrangement, whether by proxy, voting
arrangement, voting agreement or otherwise, in connection, directly or
indirectly, with any Acquisition Transaction.
(d) Until the Merger Agreement is terminated and subject to
Section 8 hereof, the Stockholder shall not, and shall use his best efforts to
cause any investment banker, attorney or other adviser or representative of the
Stockholder not to, (i) directly or indirectly solicit, initiate or knowingly
encourage the submission of, any Acquisition Transaction or (ii) directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or knowingly take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or would reasonably be expected to lead to, any Acquisition
Transaction.
(e) To secure the Stockholder's commitments set forth in this
Section 3, the Stockholder constitutes and appoints the Company or its officers
and each of them, with full power of substitution, to be his true and lawful
proxy and attorney-in-fact from the date hereof until conclusion of the meeting
of stockholders of the Parent as provided in this Section 3 (including any
adjournment or adjournments thereof) to vote all Subject Shares then
beneficially owned by the Stockholder in accordance with this Section 3. This
proxy shall be deemed coupled with an interest, and is irrevocable during the
term of this Agreement and will survive death, incompetency and disability of
the Stockholder. To the extent inconsistent with this Section 3 hereof, the
Stockholder hereby revokes any and all previous proxies or written consents with
respect to the Subject Shares.
4. Further Assurances. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, consents and other instruments as the
Company may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement.
5. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that the Company may assign,
in its sole discretion, any or all of its rights, interests and obligations
hereunder to its stockholders or to any direct or indirect wholly owned
subsidiary of the Company. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors, assigns, heirs, legal representatives and
executors.
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<PAGE>
6. Termination. This Agreement shall terminate upon the earliest of (i)
the close of business on the first anniversary of the date hereof, (ii) the
Effective Time (as defined in the Merger Agreement) and (iii) the termination of
the Merger Agreement in accordance with its terms (other than pursuant to
Section 9.1(c) thereof).
7. General Provisions.
(a) Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
(b) Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
(c) Amendments. Subject to Section 6 hereof, this Agreement may
not be amended except by an instrument in writing signed by each of the parties
hereto.
(d) Notice. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent, to:
Nationwide Warehouse & Storage, Inc.
2097 South Hamilton Road
Columbus, Ohio 43232
Attn: David A. Belford
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attn: Martin H. Neidell
and
(ii) if to the Stockholder, at the address set forth beneath
his name.
(e) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the
-4-
<PAGE>
meaning or interpretation of this Agreement. Wherever the words "include",
"includes", or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation". Capitalized terms used herein but
not otherwise defined herein shall have the meanings set forth in the Merger
Agreement.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(g) Entire Agreement: No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
8. Stockholder Capacity. The Stockholder signs solely in its capacity
as the record holder and beneficial owner of the Subject Shares and nothing
herein shall limit or affect any actions taken by the Stockholder in his
capacity as an officer or director of the Parent to the extent specifically
permitted by the Merger Agreement.
9. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State and City of New York or in a New York state court located
in Manhattan, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal court
located in the State and City of New York or any New York state court located in
Manhattan in the event any dispute arises out of this Agreement or any of the
transactions contemplated hereby, (ii) agrees that such party will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, (iii) agrees that such party will not bring any
action relating to this Agreement or any of the transactions contemplated hereby
in any court other than a Federal court sitting in the State and City of New
York or a New York state court located in Manhattan and (iv) waives any right to
trial by jury with respect to any claim or proceeding related to or arising out
of this Agreement or any of the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first written above.
NATIONWIDE WAREHOUSE & STORAGE, INC.
By: /s/ David A. Belford
--------------------
ROOM PLUS, INC.
By: /s/ Marc Zucker
--------------------
ROOM PLUS SUB, INC.
By: /s/ Marc Zucker
--------------------
Number of Shares of
Common Stock owned: 168,000 /s/ Frank Terzo
----------- --------------------
Stockholder: Frank Terzo
Address: 91 Michigan Avenue
Paterson, NJ 07503
-6-
Exhibit No. 99
Mary Martin
(973) 523-4600, Ext. 315
ROOM PLUS, INC. SECURES $1.5 MILLION LOAN
Paterson, NJ - August 3, 1998 - ROOM PLUS, INC. (NASDAQ:PLUS) Room Plus, Inc.
and David Belford, Chairman and Chief Executive Officer and 50% shareholder of
Nationwide Warehouse & Storage, Inc. ("Nationwide"), have entered into
agreements pursuant to which Mr. Belford loaned Room Plus the sum of $1.5
million for a two-year term at an annual interest rate of 12% and received
Warrants to purchase two million shares of Room Plus Common Stock at an exercise
price of $2.00 per share. In addition, the Room Plus Board of Directors has
elected Mr. Belford to its Board and appointed him Chairman as contemplated by
the Loan Agreement. Nationwide is a national chain of retail furniture stores.
In the year ended December 31, 1997, Nationwide had sales of approximately
$131,000,000. At this time, Nationwide operates 84 stores in the U.S. and
Canada. Room Plus had sales of approximately $17,000,000 in 1997 and currently
operates 16 showrooms.
In addition, Room Plus and Nationwide entered into an agreement granting
Nationwide the right to merge with Room Plus if Nationwide's Board of Directors
and shareholders so elect within five business days of the issuance of Room
Plus' financial statements for the year ending December 31, 1998. Such a merger
is also subject to approval by the Room Plus shareholders and other conditions.
Room Plus intends to solicit proxies seeking such approval in accordance with
applicable SEC requirements. Marc Zucker, Allan Socher, Theodore Shapiro and
Frank Terzo, directors of Room Plus, who currently own in the aggregate
1,471,267 shares of Room Plus Common Stock, exclusive of warrants and options,
have agreed to vote their shares in favor of the Merger, which has been approved
by the Room Plus Board of Directors. Under the merger, Nationwide's shareholders
would own 90% of the outstanding shares of the merged company and Room Plus'
shareholders would own 10% of the outstanding shares of the merged company,
based on an assumed 6,885,000 Room Plus shares. Room Plus currently has
4,385,000 common shares outstanding and 7,136,250 warrants and options
outstanding.
Marc Zucker, CEO of Room Plus stated, "This is an excellent opportunity for Room
Plus. Mr. Belford's experience with a national company can provide Room Plus
with expertise in many areas, especially in growth and distribution. Our current
plan is for Room Plus to continue to operate and expand its chain of youth and
children's furniture stores in our existing markets." Mr Zucker further stated,
"Our December 31, 1997 financial statements noted that there was substantial
doubt about our ability to continue as a going concern. The $1.5 million loan
from Mr. Belford coupled with marked improvement in our operations will
eliminate this 'going concern' issue."
Mr. Belford stated, "I am excited about assisting Room Plus as they seek to
expand their market share of the youth and juvenile furniture market, which
represents the fastest growing segment of the furniture industry. Room Plus'
reputation in the metropolitan New York City market and greater
<PAGE>
Philadelphia area, one of the largest markets in the US, will provide them the
opportunity to grow rapidly and expand to other parts of the country. I look
forward to the success of Room Plus and will explore additional potential
mergers and alliances in the future."
ROOM PLUS, INC. has specialized for the past 18 years in the design and
production and retailing of modular, mica-laminated furniture for residential
uses. With its 16 retail showrooms and its 78,000 square foot manufacturing
facility, ROOM PLUS, INC. is the largest and leading vertically integrated
mica-laminated furniture company in New York, New Jersey and Pennsylvania.
Forward looking statements made herein are based on current expectations of the
Company that involves a number of risks and uncertainties and such forward
looking statements should not be considered guarantees of future performance.
These statements are made under the "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995. The factors that could cause actual
results to differ materially from the forward looking statements include the
impact of competitive products and pricing, product demand and market acceptance
risks, the presence of competitors with greater financial resources than the
company and inability to arrange additional debt or equity financing. For
further information concerning risk factors, please see ROOM PLUS, INC. Form
10-KSB filed with the Securities and Exchange Commission April 3, 1998 and ROOM
PLUS, INC. Form 10-QSB filed with the Securities and Exchange Commission May 15,
1998.
