<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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): October 20, 1998
-----------------------
THE ENSTAR GROUP, INC.
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(Exact name of registrant as specified in its charter)
Georgia 0-7477 63-0590560
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State of other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation Identification No.)
172 COMMERCE ST. 3RD FLOOR MONTGOMERY, AL 36104
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(Address of principal executive offices) (Zip Code)
(334) 834-5483
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(Telephone number, including area code, of registrant)
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
On October 20, 1998, The Enstar Group, Inc. ("Enstar") issued a press
release announcing the proposed appointment of J. Christopher Flowers, an Enstar
director, to the executive officer position of Vice Chairman of the Board of
Directors effective December 1, 1998. In addition, Enstar announced that it has
entered into an Investment Agreement with Mr. Flowers dated October 20, 1998
pursuant to which Enstar proposes to sell to Mr. Flowers 1,158,860 newly issued
shares of Enstar common stock for a purchase price of approximately $15 million,
or approximately $12.94 per share. Mr. Flowers will purchase the shares with a
promissory note. The transaction is conditioned upon the approval of Enstar's
shareholders at a special meeting of shareholders to be called by the Board of
Directors for that purpose.
The terms of the proposed transaction are more fully described in the press
release attached hereto as exhibit 99 and hereby incorporated by reference
herein and in the Investment Agreement and certain exhibits thereto attached
hereto as exhibit 10.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
Reference
Number Description of Exhibits
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10.1 Investment Agreement dated October 20, 1998 between the
Registrant and J. Christopher Flowers, together with
certain exhibits thereto
10.2 Amendment Agreement dated as of October 20, 1998 to the
Rights Agreement dated as of January 20, 1997 between the
Registrant and American Stock Transfer & Trust Company
99 Press Release dated October 20, 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.
THE ENSTAR GROUP, INC.
(Registrant)
Date: October 21, 1998 By: Nimrod T. Frazer
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Nimrod T. Frazer
Chairman, President and
Chief Executive Officer
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EXHIBIT 10.1
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INVESTMENT AGREEMENT
BY AND BETWEEN
THE ENSTAR GROUP, INC.
AND
J. CHRISTOPHER FLOWERS
AS OF OCTOBER 20, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
PURCHASE AND SALE OF SHARES............................................................................-2-
Section 1.1 Purchase and Sale....................................................................-2-
Section 1.2 Consideration........................................................................-3-
Section 1.3 Closing..............................................................................-3-
Section 1.4 Deliveries by Seller.................................................................-3-
Section 1.5 Deliveries by Buyer..................................................................-3-
Section 1.6 Transfer Restrictions................................................................-4-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER...............................................................-5-
Section 2.1 Organization.........................................................................-5-
Section 2.2 Authorization........................................................................-5-
Section 2.3 Capitalization.......................................................................-6-
Section 2.4 Consents and Approvals; No Violations................................................-6-
Section 2.5 Financial Statements.................................................................-7-
Section 2.6 Absence of Material Adverse Change...................................................-8-
Section 2.7 SEC Filings..........................................................................-8-
Section 2.8 Brokers, Finders and Investment Bankers Fees.........................................-8-
Section 2.9 Hart Scott Rodino Act................................................................-9-
Section 2.10 State Takeover Laws..................................................................-9-
Section 2.11 Investment Company...................................................................-9-
Section 2.12 Litigation...........................................................................-9-
Section 2.13 NOLs................................................................................-10-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................-10-
Section 3.1 Authority of Buyer..................................................................-10-
Section 3.2 Consents and Approvals; No Violations...............................................-11-
Section 3.3 Net Worth...........................................................................-11-
Section 3.4 Brokers, Finders and Investment Bankers Fees........................................-12-
Section 3.5 Investment Representations..........................................................-12-
Section 3.6 Hart Scott Rodino Act...............................................................-13-
Section 3.7 Litigation..........................................................................-13-
ARTICLE IV
COVENANTS AND AGREEMENTS..............................................................................-14-
Section 4.1 Reasonable Best Efforts.............................................................-14-
Section 4.2 Covenant to Satisfy Conditions......................................................-14-
Section 4.3 Public Announcements................................................................-14-
Section 4.4 Proxy Statement and Special Meeting.................................................-15-
Section 4.5 Board of Directors Position.........................................................-16-
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<TABLE>
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Section 4.6 Share Transfer Restrictions.........................................................-16-
Section 4.7 Indemnification.....................................................................-17-
Section 4.8 Adjustments.........................................................................-19-
Section 4.9 Rights Agreement....................................................................-20-
Section 4.10 Vice-Chairman.......................................................................-20-
ARTICLE V
STANDSTILL OBLIGATIONS................................................................................-21-
Section 5.1 Definitions.........................................................................-21-
Section 5.2 Standstill Obligations..............................................................-21-
Section 5.3 Termination of Standstill Obligations...............................................-23-
Section 5.4 Fiduciary Duties....................................................................-23-
ARTICLE VI
CONFLICTING TRANSACTIONS..............................................................................-23-
Section 6.1 Conflicting Business Opportunities..................................................-23-
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES..............................................................-24-
Section 7.1 Conditions to Each Party's Obligation...............................................-24-
Section 7.2 Conditions to Obligations of Seller.................................................-25-
Section 7.3 Conditions to Obligations of Buyer..................................................-26-
ARTICLE VIII
TERMINATION...........................................................................................-26-
Section 8.1 Termination.........................................................................-26-
Section 8.2 Procedure and Effect of Termination; Termination Fee................................-27-
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS................................................-28-
Section 9.1 No Survival of Representations and Warranties.......................................-28-
Section 9.2 Survival of Covenants and Agreements................................................-28-
ARTICLE X
MISCELLANEOUS.........................................................................................-29-
Section 10.1 Fees and Expenses...................................................................-29-
Section 10.2 Further Assurances..................................................................-29-
Section 10.3 Notices.............................................................................-29-
Section 10.4 Severability........................................................................-31-
Section 10.5 Binding Effect; Assignment..........................................................-31-
Section 10.6 No Third Party Beneficiaries........................................................-31-
Section 10.7 Interpretation......................................................................-31-
Section 10.8 Arbitration.........................................................................-32-
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<TABLE>
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Section 10.9 Entire Agreement....................................................................-34-
Section 10.10 Governing Law.......................................................................-34-
Section 10.11 Counterparts........................................................................-34-
Section 10.12 Amendment, Modification and Waiver..................................................-34-
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DEFINED TERMS
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<CAPTION>
Term Section
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<S> <C>
Affiliate........................................................................................ 10.7(c)
Agreement........................................................................................ Preamble
Acquisition Proposal............................................................................. 4.4(b)
Acquisition Transaction.......................................................................... 4.4(b)
Amendment to the Rights Agreement................................................................ 2.10
Articles of Incorporation........................................................................ 2.7
Board of Directors............................................................................... Preamble
Buyer............................................................................................ Preamble
Buyer Disclosure Letter.......................................................................... Article III
Buyer Material Adverse Effect.................................................................... 3.2
Buyer Parties.................................................................................... 6.1
Bylaws........................................................................................... 2.7
Claim............................................................................................ 4.7(b)
Closing.......................................................................................... 1.1
Closing Date..................................................................................... 1.3
Common Stock..................................................................................... Preamble
Continuing Directors............................................................................. 5.1
Director......................................................................................... Preamble
Enstar........................................................................................... Preamble
Exchange Act..................................................................................... 2.7
Financial Statements............................................................................. 2.5
GAAP............................................................................................. 2.5
GBCC............................................................................................. Preamble
Hart Scott Rodino Act............................................................................ 2.9
Indemnified Party................................................................................ 4.7(c)
NOLs............................................................................................. 2.12
Material Conflict................................................................................ 6.1(c)
Permitted Transferee............................................................................. 4.6(b)
Person........................................................................................... 10.7(b)
Promissory Note.................................................................................. Preamble
Qualified Directors.............................................................................. Preamble
Recommendation................................................................................... 4.4(a)
Registration Rights Agreement.................................................................... 7.2(d)
Rights Agreement................................................................................. 2.7
Rules for Arbitration............................................................................ 10.8
SEC.............................................................................................. 2.7
Seller Material Adverse Effect................................................................... 2.4
Share Price...................................................................................... Preamble
Shares........................................................................................... Preamble
Securities Act................................................................................... 1.6
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<TABLE>
<CAPTION>
Term Section
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Seller........................................................................................... Preamble
Seller Disclosure Letter......................................................................... Article II
Share Price...................................................................................... Preamble
Significant Proposal............................................................................. 5.1
Special Meeting.................................................................................. Preamble
Superior Proposal................................................................................ 4.4(b)
Termination Fee.................................................................................. 8.2(b)
Transaction...................................................................................... Preamble
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SCHEDULES
<TABLE>
<CAPTION>
Schedule Number
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<S> <C>
Seller Disclosure Letter 1
Buyer Disclosure Letter 2
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EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
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<S> <C>
Form of Promissory Note 1
Form of Shareholder Letter 2
Form of Registration Rights Agreement 7.2
</TABLE>
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<PAGE> 9
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT, dated as of October 20, 1998 (the
"Agreement"), by and between THE ENSTAR GROUP, INC., a Georgia corporation
("Seller" or "Enstar") and J. CHRISTOPHER FLOWERS, an individual resident of the
State of New York ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer has been an outside director of Seller (a "Director")
since October of 1996;
WHEREAS, Seller desires to secure the services of Buyer in an enhanced
capacity as Vice Chairman of the Board of Directors of Seller (the "Board of
Directors") and to utilize the services of Buyer to assist in the search for and
acquisition of an operating company;
WHEREAS, Buyer desires to assume an enhanced role with Seller as the
Vice Chairman of the Board of Directors and in connection therewith desires to
make a significant investment in Seller on the terms described in this
Agreement;
WHEREAS, Seller desires to sell to Buyer 1,158,860 newly issued shares
(the "Shares") of common stock, par value $.01 per share (the "Common Stock") of
Seller at a price per share of $12.94375 (the "Share Price"), which represents
the average of the closing prices for shares of Common Stock for the 10 trading
days immediately preceding October 20, 1998, the date the Board of Directors
approved the proposed sale of the Shares to Buyer;
WHEREAS, Seller desires to sell the Shares to Buyer in exchange for a
full recourse promissory note of Buyer in the form attached hereto as Exhibit 1
(the "Promissory Note" and the purchase and sale of the Shares in exchange for
the Promissory Note is hereinafter referred to as the "Transaction");
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WHEREAS, the Seller has received an opinion from Stephens Inc. to the
effect that the consideration to be received by Seller in the Transaction is
fair to the disinterested shareholders of Seller from a financial point of view;
WHEREAS, the qualified directors (the "Qualified Directors"), within
the meaning of Section 14-2-862(d) of the Georgia Business Corporations Code
(the "GBCC"), have approved the Transaction and recommend that the Transaction
be approved by the holders of a majority of the qualified shares, within the
meaning of Section 14-2-863(b) of the GBCC, in accordance with the requirements
of Section 14-2-863 of the GBCC at a special meeting of the shareholders of
Seller (the "Special Meeting"); and
WHEREAS, each of the Qualified Directors, in their capacity as
shareholders of Seller, have agreed to vote the shares of Common Stock owned by
them at the Special Meeting in favor of the Transaction, and has heretofore
delivered to Buyer for his benefit a letter in the form attached hereto as
Exhibit 2 confirming such agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 Purchase and Sale. Subject to the terms and
conditions set forth in this Agreement, at the closing provided for in Section
1.3 hereof (the "Closing"), Seller agrees to sell, transfer and deliver to
Buyer, and Buyer agrees to purchase, acquire and accept from Seller, the Shares.
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Section 1.2 Consideration. Subject to the terms and conditions
of this Agreement, in consideration of the aforesaid sale, transfer and delivery
of the Shares, Buyer will execute and deliver to Seller at the Closing the
Promissory Note.
Section 1.3 Closing. The Closing of the Transaction shall take
place as promptly as practicable, but in any event no earlier than December 1,
1998 and no later than the fifth business day following the satisfaction or
waiver of all of the conditions to Closing set forth in Article VII hereof, at
10:00 a.m., local time, at the offices of King & Spalding, 191 Peachtree Street,
Atlanta, Georgia, or on such other date and at such other time or place as the
parties may agree. The date of the Closing is sometimes referred to herein as
the "Closing Date."
Section 1.4 Deliveries by Seller. At the Closing,
Seller will deliver or cause to be delivered to Buyer (unless delivered
previously) the following:
(a) The stock certificate or certificates
representing the Shares registered in such names and denominations as Buyer
shall instruct Seller in writing prior to the Closing; and
(b) All other documents, instruments and
writings required or reasonably requested by Buyer to be delivered by Seller at
or prior to the Closing pursuant to this Agreement or otherwise reasonably
required in connection herewith.
Section 1.5 Deliveries by Buyer. At the Closing, Buyer
will deliver or cause to be delivered to Seller (unless previously delivered)
the following:
(a) The Promissory Note in accordance with
Section 1.2 hereof; and
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(b) All other documents, instruments and
writings required or reasonably requested by Seller to be delivered by Buyer at
or prior to the Closing pursuant to this Agreement or otherwise reasonably
required in connection herewith.
Section 1.6 Transfer Restrictions. Buyer acknowledges and
agrees that the Shares will be sold to Buyer in a sale not involving any public
offering, and that the subsequent resale or transfer of the Shares will be
restricted under federal and state securities laws. Each certificate
representing the Shares will be stamped or otherwise imprinted with a legend
substantially in the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. THE SHARES MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS, AND IN
THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS
ENSTAR HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER
APPLICABLE LAWS.
Each certificate issued upon exchange or transfer of any such Shares
will bear the legend set forth above, except that such certificate will not bear
such legend (and Seller will cause any such legend to be removed) if (i) such
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), or (ii) Seller is
provided with an opinion of counsel reasonably satisfactory to Seller to the
effect
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that such transfer of the Shares may be effected without registration under the
Securities Act or applicable state securities laws and other jurisdictions and
that the transferee (other than an affiliate of Seller) would be entitled to
transfer such securities in a public sale without registration under the
Securities Act.
Buyer acknowledges that there are additional restrictions on the
transfer of the Shares contained in Section 4.6 of this Agreement, and that the
certificate(s) evidencing the Shares will bear an appropriate legend relating to
such additional transfer restrictions. The foregoing provisions of this Section
1.6 shall not be deemed to affect the obligations of Seller under the
Registration Rights Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
With such exceptions as are set forth in a letter (the "Seller
Disclosure Letter") delivered by Seller to Buyer prior to the execution of this
Agreement, Seller hereby represents and warrants to Buyer as follows:
Section 2.1 Organization. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Section 2.2 Authorization. Seller has the corporate
power and authority to execute and deliver this Agreement and perform its
obligations hereunder. The execution and delivery of this Agreement and the
performance by Seller of its covenants and agreements hereunder have been duly
and validly authorized by the Board of Directors. This Agreement
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<PAGE> 14
has been duly executed and delivered by Seller and constitutes a valid and
binding agreement of Seller, enforceable against Seller in accordance with its
terms, except that (a) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now
or hereafter in effect, relating to or limiting creditors' rights generally and
(b) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
Section 2.3 Capitalization. The authorized capital stock of
Seller consists of 55,000,000 shares of Common Stock. As of the date hereof,
there are 4,106,709 shares of Common Stock issued and outstanding. Each share of
Common Stock which is outstanding as of the date hereof is duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights.
There are no outstanding securities convertible into, exchangeable for, or
carrying the right to acquire, Common Stock of Seller, nor are there any
subscriptions, warrants, options, rights or other arrangements or commitments
(other than this Agreement) which could obligate Seller to issue any shares of
its Common Stock. The Shares have been duly authorized, and on the Closing Date
the Shares will be duly issued and delivered, and upon payment therefor in
accordance with the terms and conditions hereof, the Shares will constitute
validly issued, fully paid and nonassessable shares of Common Stock, free of
preemptive rights.
Section 2.4 Consents and Approvals; No Violations. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the articles of incorporation or bylaws of Seller; (b)
require any filing with, or the obtaining of any permit, authorization,
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consent or approval of, any governmental or regulatory authority; (c) violate,
conflict with or result in a default (or any event which, with notice or lapse
of time or both, would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration under, any of the terms, conditions or
provisions of any material agreement or obligation to which Seller is a party or
by which Seller or any of its assets may be bound; or (d) violate any order,
injunction, decree, statute, rule or regulation applicable to Seller, excluding
from the foregoing clauses (b), (c) and (d) such requirements, violations,
conflicts, defaults or rights which would not have a material adverse effect
upon the assets, liabilities, results of operations, financial condition,
business or prospects of Seller and its subsidiary, taken as a whole (a "Seller
Material Adverse Effect").
Section 2.5 Financial Statements. Seller has made available to
Buyer: (a) the audited balance sheets of Seller and its subsidiary as of
December 31, 1996 and 1997 and the audited statements of income and cash flows
thereof for the respective fiscal years then ended, including the notes thereto;
and (b) the unaudited balance sheet of Seller and its subsidiary as of June 30,
1998 and the unaudited statements of income and cash flows thereof for the six
month period then ended. All of the foregoing financial statements are
hereinafter collectively referred to as the "Financial Statements". Except as
disclosed in the Financial Statements, the Financial Statements have been
prepared from, and are in accordance with, the books and records of Seller and
present fairly, in all material respects, the consolidated financial position
and consolidated results of operations of Seller and its subsidiary as of the
dates and for the applicable periods indicated, in each case in conformity with
generally accepted accounting principles ("GAAP"), consistently applied.
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Section 2.6 Absence of Material Adverse Change. Except as
otherwise contemplated by this Agreement, since June 30, 1998, (i) the business
of Seller and its subsidiary has been carried on only in the ordinary and usual
course and (ii) there has not been any Seller Material Adverse Effect.
Section 2.7 SEC Filings. Since March 27, 1997, Seller has
filed all forms, reports and documents, including any amendments thereof, with
the Securities and Exchange Commission (the "SEC") required to be filed by it
pursuant to the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and the rules and regulations promulgated
thereunder, each of which complied as to form, at the time such form, report or
document was filed, including any amendments thereto, in all material respects
with the applicable requirements of the Securities Act and Exchange Act and the
applicable rules and regulations promulgated thereunder. As of their respective
dates, the forms, reports and documents, including any amendments thereto, filed
by Seller with the SEC did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The filings with the SEC made by Seller prior to the date
hereof contain a true, complete and correct copy of each of the articles of
incorporation of Seller (the "Articles of Incorporation"), the Bylaws of Seller
(the "Bylaws") and the rights agreement dated as of January 20, 1997 between
Seller and American Stock Transfer & Trust Company, as rights agent (the "Rights
Agreement).
Section 2.8 Brokers, Finders and Investment Bankers Fees.
Except for the engagement of Stephens Inc. to deliver an opinion as to the
fairness of the consideration to be
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<PAGE> 17
received by Seller in the Transaction, Seller has not employed any financial
advisor or finder or incurred any liability for any broker, investment banker or
other financial advisor in connection with this Agreement or the transactions
contemplated hereby.
Section 2.9 Hart Scott Rodino Act. For purposes of the
Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the "Hart Scott Rodino
Act"), neither Seller nor any Person that includes Seller has total assets or
annual net sales of $100,000,000 or more.
Section 2.10 State Takeover Laws. The Board of Directors of
the Seller has taken all actions necessary so that the Buyer is not an
"interested stockholder" for purposes of Sections 14-2-1131 through 14-2-1133 of
the GBCC. Seller is not subject to any other takeover statute applicable under
the GBCC. On the date hereof and on the Closing Date, the Rights Agreement has
been amended (the "Amendment to the Rights Agreement") to exclude from the
definition of "Acquiring Person" (as such term is defined in the Rights
Agreement) Buyer and his Permitted Transferees and to otherwise exempt the
Transaction and certain related matters and any transfer of the Shares or the
pledge thereof in accordance with the provisions of Section 4.6(b)(i), (ii) or
(iii) from the applicable provisions of the Rights Agreement.
Section 2.11 Investment Company. Seller is not, and as a
result of and after giving effect to the consummation of the Transaction will
not be, an "investment company" as defined in the Investment Company Act of
1940, as amended. To the knowledge of Seller, Seller is not a company controlled
by such an investment company.
Section 2.12 Litigation. As of the date hereof, there is no
action, suit, proceeding or investigation pending or, to the knowledge of
Seller, currently threatened against
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<PAGE> 18
Seller that questions the validity of this Agreement, the Registration Rights
Agreement or the Promissory Note or the right of Seller to enter into, or to
consummate, the transactions contemplated hereby or thereby, or that is
reasonably likely, either individually or in the aggregate, to have a Seller
Material Adverse Effect, nor does Seller have knowledge that there is any basis
for any of the foregoing. Seller is not a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality that specifically names Seller or its subsidiary and
as to which either compliance or noncompliance is reasonably likely to have a
Seller Material Adverse Effect. There is no action, suit, proceeding or
investigation by Seller currently pending or which Seller intends to initiate
that is material to the operations of Seller.
Section 2.13 NOLs. None of the net operating loss
carryforwards or tax credits of the Seller or its subsidiary ("NOLs") are
subject to any current limitation resulting from an ownership change under
Section 382 or 383 of the Internal Revenue Code of 1986 and neither the entering
into of this Agreement nor the consummation of the Transaction will result in
the occurrence of an ownership change upon the date hereof or the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
With such exceptions as are set forth in a letter (the "Buyer
Disclosure Letter") delivered by Buyer to Seller prior to the execution of this
Agreement, Buyer hereby represents and warrants to Seller as follows:
Section 3.1 Authority of Buyer. Buyer is an individual
resident of the State of New York and Buyer has the capacity to execute and
deliver this Agreement and perform his
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<PAGE> 19
obligations hereunder. No other actions on the part of Buyer are necessary to
permit the execution, delivery and performance of this Agreement by Buyer or the
consummation of the transactions so contemplated by Buyer. This Agreement has
been duly executed and delivered by Buyer and constitutes a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
except that (a) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or hereafter
in effect, relating to or limiting creditors' rights generally, and (b) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 3.2 Consents and Approvals; No Violations. Neither the
execution and delivery of this Agreement by Buyer nor the consummation of the
transactions contemplated hereby by Buyer will (a) require any filing with, or
the obtaining of any permit, authorization, consent or approval of, any
governmental or regulatory authority; (b) violate, conflict with or result in a
default (or any event which, with notice or lapse of time or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under, any of the terms, conditions or provisions
of any material agreement or obligation to which Buyer is a party or by which
Buyer or any of his assets may be bound; or (c) violate any order, injunction,
decree, statute, rule or regulation applicable to Buyer, excluding from the
foregoing clauses (a), (b) and (c) such requirements, violations, conflicts,
defaults or rights which would not have a material adverse effect upon the
assets, liabilities, financial condition or prospects of Buyer (a "Buyer
Material Adverse Effect").
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Section 3.3 Net Worth. As of the date hereof and as of the
Closing Date, Buyer has and will have the minimum net worth, calculated in
accordance with GAAP, as set forth in the Buyer Disclosure Letter.
Section 3.4 Brokers, Finders and Investment Bankers Fees.
Buyer has not employed any financial advisor or finder or incurred any liability
for any broker, investment banker or other financial advisor in connection with
this Agreement or the transactions contemplated hereby.
Section 3.5 Investment Representations.
(a) Buyer is acquiring the Shares for his own
account, for investment, and not with a view toward the resale or distribution
thereof in violation of the Securities Act or any applicable state securities
laws.
(b) Buyer understands that he must bear the
economic risk of his investment in the Shares for an indefinite period of time
because the Shares are not and will not be registered under the Securities Act
or any applicable state securities laws, and except as provided in the
Registration Rights Agreement (defined herein) may not be resold unless
subsequently registered under the Securities Act and such other laws or unless
an exemption from such registration is available.
(c) Buyer represents that he has the ability to
bear the economic risks of his investment in the Shares for an indefinite period
of time. Buyer further acknowledges that he has retained counsel to represent
him in connection with the matters contemplated hereby and that Buyer has had
the opportunity to ask questions of, and receive answers from, Seller with
respect to the business and financial condition of Seller and the terms and
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conditions of the Shares and to obtain any additional information which Seller
possesses or can acquire without unreasonable effort or expense that is
necessary to verify such information.
(d) Buyer represents that he has such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of his investment in the Shares. Buyer further
represents that he is an "accredited investor" as such term is defined in Rule
501 of Regulation D under the Securities Act with respect to his purchase of the
Shares.
Section 3.6 Hart Scott Rodino Act. For purposes of the Hart
Scott Rodino Act, Buyer and all entities directly or indirectly controlled by
Buyer do not have total assets or annual sales of $100,000,000 or more.
Section 3.7 Litigation. As of the date hereof, there is no
action, suit, proceeding or investigation pending or, to the knowledge of Buyer,
currently threatened against Buyer that questions the validity of this
Agreement, the Registration Rights Agreement or the Promissory Note or the right
of Buyer to enter into, or to consummate, the transactions contemplated hereby
or thereby, or that is reasonably likely, either individually or in the
aggregate, to have a Buyer Material Adverse Effect, nor does Buyer have
knowledge that there is any basis for any of the foregoing. Buyer is not a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality that specifically names
Buyer as to which either compliance or noncompliance is reasonably likely to
have a Buyer Material Adverse Effect. There is no action, suit, proceeding or
investigation by Buyer currently pending or which Buyer intends to initiate that
is material to the assets, liabilities or financial condition of Buyer.
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ARTICLE IV
COVENANTS AND AGREEMENTS
Section 4.1 Reasonable Best Efforts. Each of Seller and Buyer
shall cooperate and use reasonable best efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the Transaction by
December 31, 1998.
Section 4.2 Covenant to Satisfy Conditions. Seller will use
its reasonable best efforts to ensure that the conditions set forth in Article
VII hereof are satisfied, insofar as such matters are within the control of
Seller, and Buyer will use his reasonable best efforts to ensure that the
conditions set forth in Article VII hereof are satisfied, insofar as such
matters are within the control of Buyer.
Section 4.3 Public Announcements. Upon the execution of this
Agreement, Seller and Buyer will consult with each other with respect to the
issuance of a joint press release with respect to this Agreement and the
transactions contemplated hereby. Prior to the Closing, except as otherwise
agreed to by the parties, the parties shall not issue any report, statement or
press release or otherwise make any public statements with respect to this
Agreement and the transactions contemplated hereby, except as in the reasonable
judgment of the party may be required by law or in connection with the
obligations of a publicly-held company. Upon the Closing, Seller and Buyer will
consult with each other with respect to the issuance of a joint press release
with respect to the consummation of the transactions contemplated hereby.
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Section 4.4 Proxy Statement and Special Meeting.
(a) Seller shall prepare and file with the SEC
as soon as is reasonably practicable a proxy statement relating to the
Transaction. Seller shall call the Special Meeting to be held as soon as
practicable after the date hereof for the purpose of voting upon the
Transaction. Seller will use its reasonable best efforts to hold the Special
Meeting as promptly as practicable and will, through its Qualified Directors,
recommend that its shareholders approve the Transaction in accordance with the
requirements of Section 14-2-863 of the GBCC (the "Recommendation") except as
set forth in, and subject to the terms and conditions contained in, Section
4.4(b) hereof.
(b) Prior to the Special Meeting, the Qualified
Directors may withdraw the Recommendation if there is an unsolicited bona fide
written proposal or offer with respect to the purchase of all or a significant
portion of the assets, or fifteen percent (15%) or more of the capital stock of,
Seller (any of the foregoing being hereinafter referred as an "Acquisition
Transaction"), if and only to the extent that: (i) the Qualified Directors
conclude in good faith (after consultation with their financial advisor) that
such Acquisition Transaction is reasonably capable of being completed, taking
into account all legal, financial and other aspects of the proposal and the
Person making the proposal, and would, if consummated, result in a transaction
more favorable to Seller's shareholders from a financial point of view than the
Transaction (any such proposal or offer, an "Acquisition Proposal" and any such
more favorable transaction, a "Superior Proposal"), (ii) the Qualified Directors
conclude in good faith (after consultation with their financial advisor and
legal counsel) that the Superior Proposal is not capable of being completed
without termination of this Agreement; and (iii) the Qualified
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Directors determine in good faith, after consultation with their legal counsel,
that the fiduciary duties of the Qualified Directors to the shareholders of
Seller under applicable law requires that the Qualified Directors withdraw such
recommendation. Until the Closing Date, the Seller agrees that neither it nor
its subsidiary nor any of its executive officers or directors shall, directly or
indirectly, initiate, solicit, knowingly encourage or otherwise facilitate any
inquiries with respect to or the making of any Acquisition Proposal.
Section 4.5 Board of Directors Position. Seller agrees,
through its Board of Directors, to nominate Buyer for election to the Board of
Directors as a Class I Director by the shareholders of Seller for so long as
Buyer owns five percent (5%) or more of the outstanding capital stock of Seller;
provided, however, that Seller's obligations under this Section 4.5 shall
terminate and expire on the sixth anniversary of the Closing Date.
Section 4.6 Share Transfer Restrictions.
(a) Buyer and Seller agree that, without the
prior written consent of Seller, Buyer will not sell, transfer or otherwise,
directly or indirectly, dispose of any of the Shares prior to the second
anniversary of the Closing Date; provided, however, that the restrictions on
transfer set forth in this Section 4.6 shall terminate and expire upon the
earlier of: (i) the repayment in full of the Promissory Note; (ii) Buyer no
longer being a Director (other than as a result of Buyer resigning from his
directorship or being removed from his directorship by an affirmative vote of
the shareholders of Seller for cause); or (iii) the Continuing Directors (as
defined herein) shall no longer constitute a majority of the Board of Directors
of Seller.
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(b) Notwithstanding anything to the contrary
contained herein or in any other document executed in connection with the
matters contemplated hereby, the restriction contained in Section 4.6(a) hereof
shall not: (i) prohibit Buyer from, and Buyer shall be entitled to participate
in, (1) any offer made by Seller to its shareholders generally (including,
without limitation, any tender or exchange offer or share repurchase program)
and (2) any merger, tender offer, reorganization, share exchange, consolidation
or similar transaction approved by the Board of Directors; (ii) apply to any
bona fide pledge of the Shares by Buyer (it being understood that the pledgee
thereunder shall remain subject to the restrictions set forth in Section 4.6(a)
hereof); and (iii) apply to any transfer of the Shares to Buyer's immediate
family members (including grandchildren), to any entity in which Buyer or
members of his immediate family own all of the capital stock or equity interests
or to or among Buyer's estate (including, without limitation, any transfer by
Buyer to or among any trust, custodial or other similar accounts or funds for
the benefit of Buyer or any other member of his immediate family), in each
instance with such transferee (each, a "Permitted Transferee"), remaining
subject to the restrictions set forth in Section 4.6(a) hereof.
(c) Buyer and Seller further acknowledge and
agree that the certificate or certificates evidencing the Shares shall bear a
legend reflecting the transfer restrictions set forth in this Section 4.6 for so
long as such transfer restrictions shall remain in effect in accordance with the
terms of this Section 4.6.
Section 4.7 Indemnification.
(a) Buyer and Seller acknowledge and agree that
if any action or omission of Buyer in connection with the matters contemplated
by this Agreement is not
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subject to indemnification pursuant to the provisions set forth in Article VI of
Seller's Bylaws (which indemnification provisions insofar as they relate to
Buyer and the transactions contemplated hereby or any other document executed in
connection herewith shall not be amended, altered or otherwise modified without
the prior written consent of Buyer for a period of six years after the Closing
Date), then such action or omission shall be indemnifiable pursuant to the terms
and conditions set forth in Section 4.7(b) and (c) hereof.
(b) Seller agrees to indemnify and hold harmless
Buyer and any of his Affiliates (direct or indirect) from and against all
actions, suits, proceedings (including any investigations or inquiries), claims,
losses, damages, liabilities or expenses of any kind or nature whatsoever
("Claims") which may be incurred by or asserted against or involve Buyer, or any
of his Affiliates (direct or indirect) as a result of any third-party claim
arising out of the transactions contemplated hereby and, upon demand by Buyer or
any such Affiliate, pay or reimburse any of Buyer or his Affiliates for any
reasonable out-of-pocket legal or other expenses, and other costs incurred by
Buyer or its Affiliates (direct or indirect) in connection with the
investigation, defending or preparing to defend any such Claim, provided that
the foregoing indemnity shall not apply to the extent any Claim arises from the
gross negligence or willful misconduct of an Indemnified Party (as defined
herein).
(c) Each person entitled to indemnification
under Section 4.7(b) hereof (each an "Indemnified Party") shall give notice to
Seller promptly after such Indemnified Party has actual knowledge of any Claim
as to which indemnity may be sought, and shall permit Seller to assume the
defense of any such Claim; provided, that counsel for Seller, who shall conduct
the defense of such Claim, shall be approved by the Indemnified Party (which
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approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at such party's expense (unless the Indemnified
Party shall have reasonably concluded that there is a conflict of interest
between the Indemnified Party and Seller in such action, in which case the
reasonable fees and expenses for one such counsel for all Indemnified Parties
(and one local counsel) shall be at the expense of Seller), and provided,
further, that the failure of any Indemnified Party to give notice as provided
herein shall not relieve Seller of its obligations under Section 4.7(b) or this
Section 4.7(c) except, and only to the extent that, such failure to give notice
as provided herein results in the forfeiture of material rights or material
defenses otherwise available to Seller or the Indemnified Party with respect to
such Claim. Seller may not, in the defense of any such Claim, except with the
consent of each Indemnified Party (which consent shall not be unreasonably
withheld or delayed), consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such Claim. Each Indemnified Party shall furnish such
information regarding itself or the Claim in question as Seller may reasonably
request in writing and as shall be reasonably required in connection with the
defense of such Claim.
Section 4.8 Adjustments.
(a) If the number of shares of Common Stock
outstanding at any time after the date hereof and prior to the Closing is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, following the record
date fixed for the determination of holders of Common Stock entitled to receive
such stock dividend, subdivision or split up, the Share Price shall be
appropriately
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decreased so that the number of Shares to be acquired by Buyer shall be
increased in proportion to such increase in outstanding shares.
(b) If the number of shares of Common Stock
outstanding at any time after the date hereof and prior to the Closing is
decreased by a combination of the outstanding shares of Common Stock, then,
following the record date fixed for such combination, the Share Price shall be
appropriately increased so that the number of Shares to be acquired by Buyer
shall be decreased in proportion to such decrease in outstanding shares.
Section 4.9 Rights Agreement. The Amendment to the Rights
Agreement shall remain in full force and effect at all times.
Section 4.10 Vice-Chairman. On or prior to the Closing Date,
Seller shall appoint Buyer Vice Chairman of the Board of Directors to serve in
such capacity at the discretion of the Board of Directors, which position shall
be an executive position, and in such capacity Buyer shall assist Seller in the
search for and acquisition of an operating company. In his capacity as Vice
Chairman of the Board of Directors, Buyer shall be entitled to reimbursement of
his out-of-pocket expenses incurred in connection with providing services to
Seller and such other compensation and remuneration as the Board of Directors of
Seller shall determine in its discretion. Seller acknowledges and agrees that
Buyer is and will be engaged in other business activities and that there shall
be no specific time commitment applicable to Buyer with respect to the
performance of his services as Vice Chairman of the Board.
Section 4.11 Registration Rights. Seller covenants that it
will not hereinafter enter into any agreement with respect to its securities
which is inconsistent with the rights granted to Buyer in the Registration
Rights Agreement.
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ARTICLE V
STANDSTILL OBLIGATIONS
Section 5.1 Definitions. For purposes of this Article V
"Significant Proposal" means any proposal for: (a) a tender
or exchange offer, a merger, consolidation, share exchange or other business
combination involving Seller; (b) a recapitalization, liquidation, dissolution
or similar transaction involving Seller; (c) a sale of all or substantially all
of the assets of Seller; (d) the removal of a Continuing Director or the
increase in the number of directors constituting the Board of Directors; or (e)
the acquisition of twenty percent (20%) or more of the outstanding capital stock
of Seller, other than in connection with the Transaction.
"Continuing Directors" means T. Whit Armstrong, T. Wayne
Davis, Nimrod T. Frazer and Jeffrey S. Halis and any new member hereinafter
added to the Board of Directors by a majority vote of such Continuing Directors.
Section 5.2 Standstill Obligations. Subject to the provisions
of Sections 5.3 and 5.4 of this Agreement, Buyer will not and will not authorize
any of its agents or representatives to, without prior written approval of a
majority of the Continuing Directors, directly or indirectly, acting alone or in
concert with others:
(a) acquire, offer to acquire, or agree to
acquire, by purchase or otherwise, any capital stock or direct or indirect
rights to acquire any capital stock of Seller, other than (i) any capital stock
or rights offered generally to the other shareholders of Seller (including,
without limitation, in connection with a tender or exchange offer, a merger,
consolidation, share exchange or other business combination involving Seller);
(ii) any rights
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issued under the Rights Agreement and any shares of capital stock acquired upon
the exercise thereof; (iii) capital stock or rights acquired pursuant to the
terms and conditions of any agreement or arrangement approved by a majority of
the Continuing Directors in office at the time such agreement or arrangement is
or was approved by the Board of Directors (including, without limitation, all
stock options issued to Buyer); or (iv) capital stock or rights acquired
pursuant to a transaction approved by a majority of the Continuing Directors in
office at the time such transaction is or was approved by the Board of
Directors;
(b) submit a proposal for, or offer to effect
any Significant Proposal;
(c) make, or in any way participate, directly
or indirectly, in any solicitation of proxies to vote, or seek to advise or
influence any person or entity with respect to the voting of capital stock of
Seller in connection with a Significant Proposal; or
(d) form, join or in any way participate in a
"group" as defined in Rule 13d-5(b) under the Exchange Act in connection with
any of the foregoing.
Buyer will promptly advise Seller of any inquiry or proposal
made to Buyer with respect to any of the foregoing and describe, in reasonable
detail, the terms and conditions thereof.
Section 5.3 Termination of Standstill Obligations. The
standstill obligations of Buyer described in Section 5.2 of this Article shall
commence upon execution hereof and shall terminate upon the earlier to occur of
the following events:
(a) termination of this Agreement pursuant to
Article VIII hereof;
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(b) Buyer shall beneficially own five percent
(5%) or fewer of the outstanding shares of capital stock of Seller for a period
of at least ninety (90) consecutive days;
(c) the Continuing Directors no longer
constitute a majority of the Board of Directors;
(d) Buyer no longer being a Director (other than
as a result of Buyer resigning from his directorship or Buyer being removed from
his directorship by an affirmative vote of the shareholders of Seller for
cause); or
(e) the sixth anniversary of the Closing Date.
Section 5.4 Fiduciary Duties. Notwithstanding anything to the
contrary contained in this Article V (including, without limitation, Section
5.2(b)), this Agreement or any other agreement contemplated hereby, Buyer shall
have the right to take action or omit to take action in his capacity as a
Director of Seller for so long as he serves in such capacity.
ARTICLE VI
CONFLICTING TRANSACTIONS
Section 6.1 Conflicting Business Opportunities.
(a) Seller acknowledges and agrees that Buyer
and any entities in which Buyer may invest or which Buyer may control
(collectively, the "Buyer Parties") are or may be engaged in the future in
business activities that compete with Seller or are in the same lines of
business as Seller. The Buyer Parties shall have the right to, and shall have no
duty not to, (i) engage in the same or similar business activities or lines of
business as Seller, or (ii) do
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business with any client or customer of Seller. Accordingly, Buyer will not be
liable to Seller or to its shareholders for breach of any fiduciary duty by
reason of any such activities.
(b) In the event that Buyer acquires knowledge
of a potential transaction or matter which may be a corporate opportunity for
both Buyer and Seller, Buyer is not under any duty to present such corporate
opportunity to Seller, and Buyer (i) will not be liable to Seller or its
shareholders for breach of any fiduciary duty as a shareholder of Seller by
reason of the fact that Buyer or any other Buyer Party pursues or acquires such
corporate opportunity for itself, directs such corporate opportunity to another
Person or does not present the corporate opportunity to Seller and (ii) shall be
deemed not to have breached Buyer's duty of loyalty to Seller or its
shareholders and not to have derived an improper personal benefit therefrom.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section 7.1 Conditions to Each Party's Obligation. The
respective obligation of each party to consummate the transactions contemplated
hereby is subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) No statute, rule or regulation shall have
been enacted, promulgated or enforced by any court or governmental authority
which prohibits or restricts the consummation of the transactions contemplated
hereby;
(b) There shall not be in effect any judgment,
order, injunction or decree of any court of competent jurisdiction enjoining the
consummation of the transactions contemplated hereby;
(c) There shall not be any suit, action,
investigation, inquiry or other proceeding commenced by any governmental or
other regulatory or administrative agency or commission which seeks to enjoin or
otherwise prevent consummation of the transactions contemplated hereby; and
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(d) The Transaction shall have been approved
at the Special Meeting by a majority of the total votes entitled to be cast by
the holders of all qualified shares of Common Stock at such Special Meeting in
accordance with Section 14-2-863 of the GBCC.
Section 7.2 Conditions to Obligations of Seller. The
obligations of Seller to consummate the transactions contemplated hereby are
further subject to the satisfaction (or waiver) at or prior to the Closing of
the following conditions:
(a) The representations and warranties of Buyer
contained in Article IV of this Agreement shall be true and correct in all
material respects at the date hereof and as of the Closing as if made at and as
of such time, except for changes permitted or contemplated hereby and except for
representations and warranties which are as of a specific date;
(b) Buyer shall have performed in all material
respects his obligations under this Agreement required to be performed by him at
or prior to the Closing pursuant to the terms hereof;
(c) Buyer shall have delivered to Seller those
items set forth in Section 1.5 hereof; and
(d) Buyer shall have duly executed and delivered
the Registration Rights Agreement in the form attached as Exhibit 7.2 to this
Agreement (the "Registration Rights Agreement").
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Section 7.3 Conditions to Obligations of Buyer. The
obligations of Buyer to consummate the transactions contemplated hereby are
further subject to the satisfaction (or waiver) at or prior to the Closing of
the following conditions:
(a) The representations and warranties of Seller
contained in Article II of this Agreement shall be true and correct in all
material respects at the date hereof and as of the Closing as if made at and as
of such time, except for changes permitted or contemplated hereby and except for
representations and warranties which are as of a specific date;
(b) Seller shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Closing pursuant to the terms hereof;
(c) Seller shall have delivered to Buyer those
items set forth in Section 1.4 hereof and the Amendment to the Rights Agreement
shall be in full force and effect; and
(d) Seller shall have duly executed and
delivered the Registration Rights Agreement.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned:
(a) at any time, by mutual written consent of
Seller and Buyer;
(b) at any time on or after March 1, 1999 by
either party, if the Closing shall not have occurred on or prior to such date;
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(c) by either party if, at the Special Meeting,
the shareholders fail to approve the Transaction in accordance with the
requirements of Section 14-2-863 of the GBCC, and such meeting is ended without
any adjournment to another time; and
(d) by either party, if the Qualified Directors
shall have withdrawn their recommendation of the Transaction in accordance with
Section 4.4(b) hereof.
Section 8.2 Procedure and Effect of Termination;
Termination Fee.
(a) In the event of the termination of this
Agreement and the abandonment of the transactions contemplated hereby pursuant
to Section 8.1 hereof, written notice thereof shall forthwith be given by
Seller, on the one hand, or Buyer, on the other hand, so terminating to the
other party and this Agreement shall terminate and the transactions contemplated
hereby shall be abandoned, without further action by Seller, on the one hand, or
Buyer, on the other hand. If this Agreement is terminated pursuant to Section
8.1 hereof and other than as set forth in Section 8.2(b) herein, there shall be
no liability or obligation hereunder on the part of Seller or Buyer or any of
their respective directors, officers, employees, Affiliates, controlling
persons, agents or representatives, except that Seller or Buyer, as the case may
be, shall have liability to the other party if the basis of termination is a
willful, material breach by Seller or Buyer, as the case may be, of one or more
of the provisions of this Agreement, and except that the obligations provided
for in this Section 8.2 and Sections 4.7 and 10.1 hereof shall survive any such
termination.
(b) If this Agreement is terminated (i) pursuant
to Section 8.1(d) or (ii) pursuant to Section 8.1(c), and, in the case of clause
(ii), if prior to the Special Meeting (or an adjournment thereof) an Acquisition
Transaction was pending or consummated or an
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Acquisition Proposal was made and within one year after the termination of this
Agreement Seller consummates or enters into an Acquisition Transaction with any
Person (other than Buyer), Seller shall (A) at the time of such termination in
the case of a termination under clause (i) above or (B) upon consummation of
such Acquisition Transaction in the case of a termination under clause (ii)
above, pay Buyer a fee of $1,000,000 (the "Termination Fee"). Any termination by
Seller under Section 8.1(d) shall not be effective unless the Termination Fee is
paid.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Section 9.1 No Survival of Representations and Warranties. The
representations and warranties of Seller and Buyer made in Articles II and III
hereof, respectively, shall not survive the Closing and, except as provided in
Section 8.2 hereof, shall not survive any termination of this Agreement.
Section 9.2 Survival of Covenants and Agreements. The various
covenants and agreements of the parties contained herein shall survive until
fully performed and satisfied (or waived) in accordance with the terms hereof.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. Each of Seller and Buyer shall
bear its own fees, costs and expenses incurred in connection with the matters
contemplated hereby; provided, however, that Seller shall reimburse Buyer for
his reasonable out-of-pocket expenses incurred in connection with the
Transaction in an amount not to exceed $50,000. This
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limitation on Buyer's out-of-pocket reimbursement shall not affect Buyer's
rights under Section 4.7 hereof and Section 4.10 hereof or under the
Registration Rights Agreement.
Section 10.2 Further Assurances. From time to time after the
Closing Date, at the reasonable request of the other party hereto and at the
expense of the party so requesting, each of the parties hereto shall execute and
deliver to such requesting party such documents and take such other action as
such requesting party may reasonably request in order to consummate more
effectively the matters contemplated hereby.
Section 10.3 Notices. All notices, requests, demands, waivers
and other communications required or permitted to be given under this Agreement
shall be in writing and may be given by any of the following methods: (a)
personal delivery; (b) facsimile transmission; (c) registered or certified mail,
postage prepaid, return receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder):
If to Buyer, to:
J. Christopher Flowers
4 East 70th Street
New York, New York 10021
Facsimile: (212) 517-3933
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Facsimile: (212) 728-8111
Attention: Thomas M. Cerabino, Esq.
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If to Seller, to:
The Enstar Group, Inc.
172 Commerce Street, 3rd Floor
Montgomery, AL 36104
Facsimile: (334) 834-2530
Attention: Mr. Nimrod T. Frazer
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Facsimile: (404) 572-5145
Attention: William R. Spalding, Esq.
All such notices, requests, demands, waivers and communications shall be deemed
received upon (i) actual receipt thereof by the addressee, (ii) actual delivery
thereof to the appropriate address or (iii) in the case of a facsimile
transmissions upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
Section 10.4 Severability. Should any provision of this
Agreement for any reason be declared invalid or unenforceable, such decision
shall not affect the validity or enforceability of any of the other provisions
of this Agreement, which remaining provisions shall remain in full force and
effect and the application of such invalid or unenforceable provision to Persons
or circumstances other than those as to which it is held invalid or
unenforceable shall be valid and enforced to the fullest extent permitted by
law.
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Section 10.5 Binding Effect; Assignment. This Agreement and
all of the provisions hereof shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned, directly or indirectly, including, without
limitation, by operation of law, by any party hereto without the prior written
consent of the other party hereto.
Section 10.6 No Third Party Beneficiaries. This Agreement is
solely for the benefit of Seller, and its successors and permitted assigns, with
respect to the obligations of Buyer under this Agreement, and for the benefit of
Buyer, and his permitted assigns, with respect to the obligations of Seller,
under this Agreement, and this Agreement shall not be deemed to confer upon or
give to any other third party any remedy, claim, liability, reimbursement, cause
of action or other right.
Section 10.7 Interpretation.
(a) The Article and Section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) As used in this Agreement, the term "Person"
shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
(c) As used in this Agreement, the term "Affiliate"
shall have the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
Section 10.8 Arbitration. Each of Seller and Buyer agrees as
follows:
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<PAGE> 40
(a) Seller and Buyer shall attempt in good faith to
resolve promptly any dispute, controversy or claim under or in connection with
this Agreement by negotiations. If any such dispute, controversy or claim should
arise, the parties or representatives of each such party shall meet at least
once to attempt to resolve the matter. Any such representative may request the
other representatives to meet within 14 days after delivery of written notice to
the others of any such dispute, controversy, or claim, at a mutually agreed time
and place.
(b) If the matter has not been resolved pursuant
to negotiations within 60 days after the first meeting of the representatives
(which period may be extended by mutual agreement), the matter shall be settled
exclusively by arbitration (except as provided in Section 10.8(f)) conducted by
three arbitrators in accordance with the provisions of the Federal Arbitration
Act (9 U.S.C. Sections 1-16), and in accordance with the Center for Public
Resources, Inc.'s Rules (the "Rules for Arbitration") for Non-Administered
Arbitration of Business Disputes. The three arbitrators shall be selected as
follows: one arbitrator shall be selected by Seller, one arbitrator shall be
selected by Buyer and one arbitrator shall be selected by the other two
arbitrators. All arbitrators shall be individuals: (i) who meet the
qualifications set forth in Rule 7 of the Rules of Arbitration, (ii) who are
attorneys or retired judges and (iii) who have past experience in settling
complex litigation involving claims relating to securities and mergers and
acquisitions. The arbitration of such matters in controversy, including the
determination of any amount of damages, shall be final and binding upon Seller
and Buyer to the maximum extent permitted by law. No such Person shall seek, and
no arbitrator shall be authorized to award, any punitive damages relating to any
matter arbitrated. This Agreement to arbitrate is irrevocable.
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<PAGE> 41
(c) Any arbitration proceedings shall be conducted in
Atlanta, Georgia or at such other location as Seller and Buyer may agree.
(d) Any arbitration award under this Section 10.8
shall be final and binding, and judgment may be entered on such award by any
court having jurisdictions upon application of Seller or Buyer.
(e) Any party to an arbitration proceeding under this
Section 10.8 shall be entitled to be reimbursed by the other party for its costs
and expenses incurred in connection with the arbitration proceeding, including
reasonable attorneys' fees, to the extent determined by the arbitrators. The
arbitrators shall assess the costs of the arbitration proceeding, including
their fees, to the parties to the proceeding in such proportions as the
arbitrators consider reasonable under the circumstances.
(f) Notwithstanding anything else in this Section
10.8 to the contrary, Seller and Buyer shall be entitled to seek any equitable
remedies available under the governing law from any court of competent
jurisdiction, and the order or judgment of any such court shall be binding in
any arbitration proceeding pursuant to this Section 10.8.
Section 10.9 Entire Agreement. This Agreement and other
documents referred to herein or delivered pursuant hereto which form a part
hereof constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties or any of them with
respect to the subject matter hereof.
Section 10.10 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Georgia (regardless
of the laws that might
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otherwise govern under applicable principles of conflicts of laws thereof) as to
all matters, including but not limited to matters of validity, construction,
effect, performance and remedies.
Section 10.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 10.12 Amendment, Modification and Waiver. This
Agreement may be amended, modified or supplemented at any time by written
agreement of Seller and Buyer. Any failure of Seller or Buyer to comply with any
term or provision of this Agreement may be waived, with respect to Buyer, by
Seller and, with respect to Seller, by Buyer, by an instrument in writing signed
by or on behalf of the appropriate party, but such waiver or failure to insist
upon strict compliance with such term or provision shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure to comply.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
THE ENSTAR GROUP, INC.
By:
-----------------------------------
Name:
Title:
J. CHRISTOPHER FLOWERS
--------------------------------------
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<PAGE> 44
EXHIBIT 1
Form of Promissory Note
$15,000,000.00 Atlanta, Georgia
____________, 19981
FOR VALUE RECEIVED, without grace, J. CHRISTOPHER FLOWERS, an
individual resident of the State of New York (the "Borrower"), promises to pay
to the order of THE ENSTAR GROUP, INC., a Georgia corporation (herein called
the "Lender", and together with any subsequent holder of this Note, called the
"Holder"), in the manner set forth below, the principal sum of FIFTEEN MILLION
AND NO/100 DOLLARS ($15,000,000.00) or, if less, the unpaid principal amount.
This Promissory Note is repayable in full on ___________, 2000(2) (the
"Maturity Date") when the entire principal balance of this Note, together with
all accrued and unpaid interest, shall mature and be then due and payable,
unless sooner accelerated in accordance with the terms hereof.
In addition to principal, the Borrower agrees to pay interest, and this
Note shall bear interest on the unpaid principal balance hereof, on an
Actual/360 Day Basis, from the date hereof until payment in full at an annual
fixed rate of interest equal to 4.06% (the "Note Rate").
In addition to principal and interest, the Borrower also agrees to pay
all costs of collection, including, without limitation, actual attorneys' fees
and disbursements incurred if the indebtedness evidenced hereby is collected by
or through an attorney-at-law.
The Borrower further agrees with the Holder as follows:
SECTION 1. DEFINITIONS.
As used in this Note, the following capitalized terms are defined as
follows:
(a) "ACTUAL/360 DAY BASIS" means a method of computing interest on the
basis of an assumed year of 360 days for the actual number of days elapsed,
meaning that the interest accrued for each day will be computed by multiplying
the interest rate applicable on that day by the unpaid principal balance on
that day and dividing the result by 360.
(b) "BOARD OF DIRECTORS" means the Board of Directors of Lender.
- --------------
(1) Insert Closing Date.
(2) Insert second anniversary of Closing Date.
<PAGE> 45
(c) "BORROWER" has the meaning set forth in the first paragraph of this
Note.
(d) "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which the Lender is closed for business.
(e) "CONTINUING DIRECTORS" means T. Whit Armstrong, T. Wayne Davis,
Nimrod T. Frazer and Jeffrey S. Halis and any new member hereinafter added to
the Board of Directors by a majority of the Continuing Directors.
(f) "DEFAULT RATE" means a rate of interest four percentage (4.00%)
points per annum higher than the rate of interest otherwise in effect.
(g) "EVENT OF DEFAULT" is defined in Section 4. An Event of Default
"exists" if an Event of Default has occurred, is continuing and has not been
cured.
(h) "HOLDER" has the meaning set forth in the first paragraph hereof.
(i) "LENDER" has the meaning set forth in the first paragraph hereof.
(j) "LOAN DOCUMENTS" means this Promissory Note and all other documents
executed in connection with this transaction, in each case as amended, modified
or supplemented from time to time.
(k) "MATURITY DATE" has the meaning set forth in the second paragraph
hereof.
(l) "NOTE" means this Promissory Note, either as originally executed or
as the same may be amended, supplemented or otherwise modified from time to
time.
(m) "NOTE RATE" has the meaning set forth in the third paragraph hereof.
(n) "QUARTERLY INTEREST PAYMENT" has the meaning set forth in Section 2
of this Note.
(o) "QUARTERLY INTEREST PAYMENT DATE" has the meaning set forth in
Section 2 of this Note.
(p) "RULES OF ARBITRATION" has the meaning set forth in Section 14 of
this Note.
SECTION 2. PLACE AND TIME OF PAYMENTS.
(a) Interest on the outstanding principal balance hereof shall be due and
payable quarterly, in arrears (each such payment, a "Quarterly Interest
Payment"), with the first
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<PAGE> 46
installment being payable on the ___ day of ________ 19993, and subsequent
installments being payable on the ___ day of each succeeding [June],
[September], [December] and [March] thereafter (each such payment date, a
"Quarterly Interest Payment Date") until the Maturity Date, at which time the
entire outstanding principal balance, together with all accrued and unpaid
interest, shall be immediately due and payable in full.
(b) The Borrower may at any time prepay all or any part of the
outstanding principal indebtedness evidenced by this Note, without premium or
penalty. Any prepayment shall be accompanied by the payment of accrued interest
to the date of prepayment on the principal amount prepaid.
(c) All payments by the Borrower to the Holder under this Note shall be
made in lawful currency of the United States and in immediately available funds
to the Lender at such address as shall be specified by the Holder by notice to
the Borrower. Any payment received by the Holder after 2:00 p.m. (Atlanta,
Georgia time) on a Business Day (or at any time on a day that is not a Business
Day) shall be deemed made by the Borrower and received by the Holder on the
following Business Day.
(d) All amounts payable by the Borrower to the Holder under this Note for
which a payment date is expressly set forth herein or therein shall be payable
on the specified due date without notice or demand by the Holder. All amounts
payable by the Borrower to the Holder under this Note for which no payment date
is expressly set forth herein or therein shall be payable ten (10) days after
written demand by the Holder to the Borrower. The Holder may, at its option,
send written notice or demand to the Borrower of amounts payable on a specified
due date pursuant to this Note, but the failure to send such notice shall not
affect or excuse the Borrower's obligation to make payment of the amounts due
on the specified due date.
(e) To the extent that a Quarterly Interest Payment Date falls on a day
that is not a Business Day, the corresponding Quarterly Interest Payment shall
be payable on the next succeeding Business Day, and no interest shall be
payable thereon for the number of elapsed days from the date that such payment
was due to the date that such payment was made on the next succeeding Business
Day. Any other payments that are due on a day that is not a Business Day,
including but not limited to payment of the entire principal balance
outstanding on the Maturity Date to the extent that the Maturity Date falls on
a day that is not a Business Day, shall be payable on the next succeeding
Business Day, and no interest shall be payable thereon for the number of
elapsed days from the date that such payment was due to the date that such
payment was made on the next succeeding Business Day.
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(3) Insert date which is 3 months after the Closing Date.
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<PAGE> 47
SECTION 3. DEFAULT RATE.
If an Event of Default exists, this Note shall bear interest at the
Default Rate, until the earlier of (a) such time as all amounts due hereunder
are paid in full or (b) no such Event of Default exists.
SECTION 4. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an event
of default (each an "Event of Default") under this Note (whatever the reason
for such event and whether or not it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree, order, rule
or regulation of any governmental authority): (a) any default shall be made in
the payment when due of any of the obligations evidenced by this Note or any
part thereof and such default shall continue unremedied for five (5) days; or
(b) the filing of any petition or the commencement of any proceeding against
the Borrower for relief under bankruptcy or insolvency laws, or any law
relating to the relief of debtors, readjustment of indebtedness, debtor
reorganization, or composition or extension of debt; or (c) the Borrower is no
longer serving on the Board of Directors of the Lender as a result of the
Borrower resigning from his directorship or being removed from his directorship
by an affirmative vote of the shareholders of Lender for cause.
SECTION 5. REMEDIES.
(a) Upon the occurrence and during the continuation of an Event of
Default (other than an Event of Default described in Section 4(b)), the Lender
may, in its sole discretion, (i) terminate all obligations of the Lender to the
Borrower, (ii) declare this Note, including, without limitation, principal,
accrued interest and costs of collection (including, without limitation, actual
attorneys' fees and disbursements if collected by or through an attorney at law
or in bankruptcy, receivership or other judicial proceedings) immediately due
and payable, without presentment, demand, protest or any other notice of any
kind, all of which are expressly waived.
(b) Upon the occurrence of an Event of Default under Section 4(b) all
obligations of the Lender to the Borrower, shall (i) terminate automatically
and (ii) this Note, including, without limitation, principal, accrued interest
and costs of collection (including, without limitation, reasonable attorneys'
fees if collected by or through an attorney at law or in bankruptcy,
receivership or other judicial proceedings) shall become immediately due and
payable, without presentment, demand, protest, or any other notice of any kind,
all of which are expressly waived.
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<PAGE> 48
(c) Upon the occurrence of an Event of Default and acceleration of this
Note as provided in (a) or (b) above, the Lender may pursue any remedy
available under this Note or available at law or in equity, all of which shall
be cumulative. The order and manner in which the rights and remedies of the
Lender under the Note and otherwise may be exercised shall be determined by the
Lender in its sole discretion.
(d) All payments with respect to this Note received by the Lender after
the occurrence of an Event of Default and acceleration of this Note (regardless
of how the Lender may treat the payments for the purpose of its own accounting)
shall be applied first, to the costs and expenses (including actual attorneys'
fees and disbursements) incurred by the Lender as a result of the Event of
Default, as set forth above, second, to the payment of accrued and unpaid fees
of the Lender, if any, third, to the payment of accrued and unpaid interest on
this Note, to and including the date of such application, fourth, to the
payment of the unpaid principal of this Note, and fifth, to the payment of all
other amounts then owing to the Lender under the Note. No application of the
payments will cure any Event of Default or prevent acceleration, or continued
acceleration, of amounts payable under the Note or prevent the exercise, or
continued exercise, of rights or remedies of the Lender hereunder or under
applicable law.
SECTION 6. CERTAIN WAIVERS AND OTHER AGREEMENTS BY THE BORROWER.
(a) AS TO THE OBLIGATIONS EVIDENCED BY THIS NOTE, THE BORROWER (i) WAIVES
DEMAND, PRESENTMENT FOR PAYMENT, PROTEST, NOTICE OF PROTEST, SUIT AND ALL OTHER
REQUIREMENTS NECESSARY TO HOLD THE BORROWER LIABLE; AND (ii) AGREES TO PAY ALL
COSTS OF COLLECTION, INCLUDING REASONABLE ATTORNEYS' FEES AND DISBURSEMENTS, IN
THE EVENT DEFAULT SHOULD BE MADE IN THE PAYMENT OF ANY OF THE OBLIGATIONS
EVIDENCED BY THIS NOTE.
(b) The Borrower (i) agrees that any obligations of the Borrower may,
from time to time, in whole or in part, be renewed, extended, modified,
accelerated, compromised, discharged or released by the Holder, and any
collateral, lien, right of set-off or other security for the obligations
evidenced by this Note or any other obligations of the Borrower to the Holder
may, from time to time, in whole or in part, be exchanged, sold, released,
satisfied, or terminated, all without notice to, or in any way affecting or
releasing any of the obligations of the Borrower; and (ii) agrees that the
Holder will not be required first to resort to any guaranty or any other
security pledged or granted to the Holder, but upon a default under this Note,
the Holder may forthwith look to the Borrower for payment hereunder or may look
to and realize upon any other security held by the Holder, in any order the
Holder chooses, until the entire debt evidenced by this Note is paid.
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<PAGE> 49
SECTION 7. SUCCESSORS AND ASSIGNS.
Whenever in this Note any party hereto is referred to, such reference
shall be deemed to include the successors and assigns of such party, including,
without limitation, the estate of the Borrower, except that the Borrower may
not assign or transfer its obligations under this Note without the prior
written consent of the Holder; and all obligations of the Borrower under this
Note shall bind the Borrower's successors and assigns and shall inure to the
benefit of the successors and assigns of the Holder. For the avoidance of
doubt, if the Lender transfers this Note, the Lender shall remain obligated to
perform its covenants and agreements set forth in the Investment Agreement.
SECTION 8. GOVERNING LAW.
This Note shall be construed in accordance with and governed by the
internal laws of the State of Georgia (without regard to conflict of law
principles) except as otherwise required by mandatory provisions of law.
SECTION 9. SEPARABILITY CLAUSE.
If any provision of this Note shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 10. NO ORAL AGREEMENTS AND SECTION HEADINGS.
This Note is the final expression of the agreement between the parties
hereto, and this Note may not be contradicted by evidence of any prior oral
agreement between such parties. All previous oral agreements between the
parties hereto have been incorporated into this Note and there is no unwritten
oral agreement between the parties hereto in existence. The section headings of
this Note are inserted for convenience only and do not constitute a part of
this Note.
SECTION 11. WAIVER AND ELECTION.
The exercise by the Holder of any option given under this Note shall not
constitute a waiver of the right to exercise any other option. No failure or
delay on the part of the Holder in exercising any right, power or remedy under
this Note shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any further exercise
thereof or the exercise of any other right, power or remedy. No modification,
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<PAGE> 50
termination or waiver of any provisions of this Note, nor consent to any
departure by the Borrower therefrom, shall be effective unless in writing and
signed by an authorized officer of the Holder, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.
SECTION 12. USURY LAWS.
If any of the provisions of this Note are susceptible of being construed
as binding or obligating the Borrower, under any circumstances or contingencies
whatsoever, to pay interest in excess of that authorized by law, it is agreed
that such provisions are a mistake in calculation or wording, and
notwithstanding the same it is expressly agreed that the Borrower shall not
ever be required or obligated under the terms hereof to pay interest in excess
of that authorized by law. It is the intention of the parties hereto to conform
strictly to the existing usury laws of the United States and of the State of
Georgia, or of any state which applies its own usury laws to the exclusion of
such usury laws; and any of the aforesaid contracts for interest shall be held
to be subject to reduction to the amount allowed under said usury laws. If any
excess of interest over the maximum lawful rate is contracted for or charged or
collected the excess shall be applied to the outstanding principal due
hereunder.
SECTION 13. TIME OF ESSENCE.
Time is of the essence of this Note.
SECTION 14. ARBITRATION.
Each of Lender and Borrower agrees as follows:
(a) Lender and Borrower shall attempt in good faith to resolve promptly
any dispute, controversy or claim under or in connection with this Note by
negotiations. If any such dispute, controversy or claim should arise, the
parties or representatives of each such party shall meet at least once to
attempt to resolve the matter. Any such representative may request the other
representatives to meet within 14 days after delivery of written notice to the
others of any such dispute, controversy, or claim, at a mutually agreed time
and place.
(b) If the matter has not been resolved pursuant to negotiations within
60 days after the first meeting of the representatives (which period may be
extended by mutual agreement), the matter shall be settled exclusively by
arbitration (except as provided in Section 14(f) conducted by three arbitrators
in accordance with the provisions of the Federal Arbitration Act
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<PAGE> 51
(9 U.S.C. Sections 1-16), and in accordance with the Center for Public
Resources, Inc.'s Rules (the "Rules for Arbitration") for Non-Administered
Arbitration of Business Disputes. The three arbitrators shall be selected as
follows: one arbitrator shall be selected by Lender, one arbitrator shall be
selected by Borrower and one arbitrator shall be selected by the other two
arbitrators. All arbitrators shall be individuals: (i) who meet the
qualifications set forth in Rule 7 of the Rules of Arbitration, (ii) who are
attorneys or retired judges and (iii) who have past experience in settling
complex litigation involving claims relating to securities and mergers and
acquisitions. The arbitration of such matters in controversy, including the
determination of any amount of damages, shall be final and binding upon Lender
and Borrower to the maximum extent permitted by law. No such Person shall seek,
and no arbitrator shall be authorized to award, any punitive damages relating
to any matter arbitrated. This agreement to arbitrate is irrevocable.
(c) Any arbitration proceedings shall be conducted in Atlanta, Georgia or
at such other location as Lender and Borrower may agree.
(d) Any arbitration award under this Section 14 shall be final and
binding, and judgment may be entered on such award by any court having
jurisdictions upon application of Lender or Borrower.
(e) Any party to an arbitration proceeding under this Section 14 shall be
entitled to be reimbursed by the other parties for its costs and expenses
incurred in connection with the arbitration proceeding, including reasonable
attorneys' fees, to the extent determined by the arbitrators. The arbitrators
shall assess the costs of the arbitration proceeding, including their fees, to
the parties to the proceeding in such proportions as the arbitrators consider
reasonable under the circumstances.
(f) Notwithstanding anything else in this Section 14 to the contrary,
Lender and Borrower shall be entitled to seek any equitable remedies available
under the governing law from any court of competent jurisdiction, and the order
or judgment of any such court shall be binding in any arbitration proceeding
pursuant to this Section 14.
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<PAGE> 52
BORROWER:
By: (SEAL)
J. Christopher Flowers
Address of Borrower:
4 East 70th Street
New York, New York 10021
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<PAGE> 53
EXHIBIT 2
Form of Shareholder Letter
October 20, 1998
J. Christopher Flowers
4 East 70th Street
New York, New York 10021
Dear Mr. Flowers:
This letter will confirm that in order to induce you to consummate the
purchase and sale of shares of common stock, par value $.01 per share, of The
Enstar Group, Inc. ("Seller") in exchange for a promissory note made by you
(collectively, the "Transaction") as contemplated under that certain Investment
Agreement dated as of October 20, 1998, by and between Seller and you, and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged and confirmed, the undersigned, in his capacity as a shareholder
of Seller, covenants and unconditionally and irrevocably agrees with you that
at the special shareholders' meeting being called by the Board of Directors of
Seller to approve the Transaction, the undersigned will vote, and/or cause to
be voted, any and all shares owned by the undersigned or any of the
undersigned's controlled affiliates in favor of the Transaction.
Very truly yours,
------------------------------------
[NAME OF DIRECTOR]
AGREED TO AND ACCEPTED
AS OF THE ABOVE DATE.
------------------------------------
J. Christopher Flowers
<PAGE> 54
EXHIBIT 7.2
Form of Registration Rights Agreement
December ___, 1998
J. Christopher Flowers
4 East 70th Street
New York, New York 10021
Dear Sir:
This will confirm that in order to induce J. Christopher Flowers, an
individual resident of the State of New York ("Flowers"), to consummate the
transactions contemplated under that certain Investment Agreement, dated as of
October 20, 1998, by and between The Enstar Group, Inc., a Georgia corporation
("Enstar"), and Flowers (the "Investment Agreement"), and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged
and confirmed, Enstar covenants and agrees with Flowers as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Registration Expenses" means the expenses so described in
Section 8(a) of this Agreement.
"Registration Shares" means the shares of Common Stock issued
to Flowers as contemplated in the Investment Agreement (as adjusted in
accordance with Section 10 of this Agreement) for so long as the
certificates representing such shares bear the legend set forth in
Section 2(a) of this Agreement or any other shares of Common Stock
owned or acquired by Flowers, except for any such shares acquired in
violation of the covenants and agreements contained in Section 5.2 of
the Investment Agreement.
"Selling Expenses" means the expenses so described in
Section 8(a) of this Agreement.
In addition to the foregoing defined terms, any capitalized terms used
herein without definition shall have the meanings ascribed to such terms in the
Investment Agreement.
2. Legend.
(a) Each certificate representing the Registration Shares
will be stamped or otherwise imprinted with a legend substantially in the
following form:
<PAGE> 55
THE SHARES EVIDENCED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.
THE SHARES MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
THE STATES AND OTHER JURISDICTIONS, AND IN THE CASE
OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS
ENSTAR HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT
REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND
SUCH OTHER APPLICABLE LAWS.
Each certificate issued upon exchange or transfer of any such
Registration Shares will bear the legend set forth in this Section 2(a), except
that such certificate will not bear such legend (and Enstar will cause such
legend to be removed) if (i) such transfer is made pursuant to an effective
registration statement under the Securities Act, or (ii) Enstar is provided
with an opinion of counsel reasonably satisfactory to Enstar to the effect that
such transfer of the Registration Shares may be effected without registration
under the Securities Act or applicable state securities laws and other
jurisdictions and that the transferee (other than an affiliate of Enstar) would
be entitled to transfer such securities in a public sale without registration
under the Securities Act.
(b) In addition, each certificate issued upon exchange or transfer of
such Registration Shares will bear the legend set forth in this Section 2(b)
for so long the transfer restrictions in Section 4.6 of the Investment
Agreement shall be in effect with respect to such shares:
IN ADDITION, THE TRANSFER OF THE SHARES
IS RESTRICTED UNDER SECTION 4.6 OF AN INVESTMENT
AGREEMENT, DATED AS OF OCTOBER 20, 1998, BETWEEN
ENSTAR AND BUYER. A COPY OF THIS AGREEMENT IS ON
FILE AT ENSTAR'S PRINCIPAL OFFICE.
3. Demand Registration.
(a) At any time during the period beginning on the expiration of
the transfer restrictions set forth in Section 4.6 of the Investment Agreement,
Flowers may request on not
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<PAGE> 56
more than three (3) occasions that Enstar register the Registration Shares
under the Securities Act for public sale (the "Demand Rights"). Any such Demand
Rights request must be in writing signed by Flowers and must designate the
specific number of Registration Shares proposed to be sold by Flowers in such
public offering and the proposed plan of distribution for the Registration
Shares.
(b) Notwithstanding anything to the contrary set forth in this
Section 3, Enstar shall have no obligation hereunder to: (i) register
Registration Shares if such registration involves 500,000 or fewer Registration
Shares or (ii) maintain the effectiveness of any registration statement filed
pursuant to this Section 3 for a period of time exceeding the Distribution
Period (as defined in Section 5(g) below).
(c) Enstar shall be entitled in its sole discretion to delay the
filing of the registration statement covering such Registration Shares for a
period of up to 90 days from the date of receipt of the request for Demand
Rights if its Board of Directors determines in good faith that such a delay is
in the best interests of Enstar and its shareholders; provided that Enstar
shall not have the right to exercise such discretion to delay such filing more
than once in any 365-day period.
(d) Notwithstanding anything to the contrary set forth in this
Section 3, if Flowers exercises a Demand Right and subsequently informs Enstar
in writing that (i) he desires to withdraw such registration or (ii) he is
unable to sell in excess of 50% of the Registration Shares covered by such
registration statement due to a deterioration in market conditions or other
bona fide reason, and Flowers reimburses Enstar for all Registration Expenses
incurred by Enstar in connection with such terminated registration, then
Flowers shall be deemed not to have exercised the Demand Right under this
Agreement and shall be permitted to exercise such right again in accordance
with the terms of Section 3(a) of this Agreement.
(e) If a registration effected pursuant to this Section 3 involves
a firm commitment underwritten public offering, Flowers shall have the sole
right to select the managing underwriters, subject to the approval of Enstar
(such approval not be unreasonably withheld or delayed).
4. Incidental Registration. If at any time following the Closing Date
Enstar proposes to register any Common Stock under the Securities Act (other
than on Forms S-4, S-8 or any other form which does not permit registration of
securities by Flowers for sale to the public for cash) in connection with the
proposed offer and sale for cash either for its own account or on behalf of any
holder of Common Stock, it will give written notice to Flowers of its intention
to do so. Upon the written request of Flowers, given within five business days
after receipt of any such notice, to register any of the Registration Shares,
Enstar will use its reasonable best efforts to cause the Registration Shares as
to which registration has been so requested to be included in the shares of
Common Stock to be covered by the registration
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statement proposed to be filed by Enstar, all to the extent required to permit
the sale or other disposition by Flowers (in accordance with its written
request) of such Registration Shares so registered. If a registration effected
pursuant to this Section 4 involves a firm commitment underwritten public
offering, Enstar shall have the sole right to select the managing underwriters.
The managing underwriters for such offering shall have the authority to reduce
the number of Registration Shares to be included in such registration if and to
the extent they are of the opinion (a copy of which shall be delivered to
Flowers), that inclusion of such Registration Shares would materially adversely
affect the marketing of the Common Stock to be sold under such offering. Any
such reduction or cutback in the shares included in any such offering shall be
effected in accordance with the following priorities:
(a) First, the managing underwriters shall exclude shares
("Piggyback Shares") of Common Stock included in such registration by
shareholders (including Flowers) by virtue of incidental or piggyback
registration rights (but not demand registration rights) granted to such
shareholders, which exclusion shall be effected on a pro rata basis based upon
the number of shares of Common Stock so requested to be registered in such
offering by all such shareholders proposing to sell Piggyback Shares; and
(b) Second, and only to the extent necessary and after the
exclusion of all Piggyback Shares, the managing underwriters shall exclude
shares of Common Stock included in such registration by Enstar and any
shareholder of Enstar who shall have exercised a demand registration right in
connection with such offering, which exclusion shall be effected on a pro rata
basis based upon the number of shares of Common Stock proposed to be registered
on behalf of Enstar and on behalf of any such holder of demand registration
rights.
Notwithstanding anything to the contrary contained in this Section 4,
if there is a firm commitment underwritten public offering of Common Stock
pursuant to which Flowers has incidental registration rights under this Section
4 and Flowers elects to sell Registration Shares in connection with such
underwritten public offering, Flowers shall enter into an agreement (the
"Lockup Agreement"), pursuant to which Flowers shall refrain from selling any
Registration Shares (other than Registration Shares included in such
Registration) then owned by Flowers during the period of distribution of Common
Stock by such underwriters and for a period of ninety days following the
effective date of such registration; provided, however, that Flowers shall be
required to enter into the Lockup Agreement if, and only if, directors and
executive officers of Enstar enter into an agreement similar to the Lockup
Agreement.
5. Registration Procedures. If and whenever Enstar is required by the
provisions of Section 3 or 4 of this Agreement to effect the registration of
any of the Registration Shares under the Securities Act, Enstar shall, as
expeditiously as practical:
(a) prepare and file with the SEC a registration statement on the
applicable form with respect to such Registration Shares and use its reasonable
best efforts to cause such registration statement to become and remain
effective for the Distribution Period, but no longer,
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and to promptly notify Flowers of when such registration statement and any
amendment to such registration statement becomes effective, and to provide
Flowers with reasonable access to any written comments received from the SEC in
connection with such registration and any written responses to such
registration statement and any stop order received from the SEC in connection
with such registration statement;
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to keep such registration statement
effective for the Distribution Period, but no longer, and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registration Shares covered by such registration statement;
(c) furnish to Flowers such number of copies of the registration
statement and the prospectus included in such registration statement (including
each preliminary prospectus) as he may reasonably request in order to
facilitate the public sale or other disposition of the Registration Shares
covered by such registration statement;
(d) use its reasonable best efforts to register or qualify the
Registration Shares covered by such registration statement under the securities
or blue sky laws of such jurisdictions as Flowers or, in the case of an
underwritten public offering, the managing underwriters, shall reasonably
request; provided, however, that Enstar shall not for any purpose be required
to qualify to do business as a foreign corporation in any jurisdiction where it
is not so qualified;
(e) immediately notify Flowers (if selling Registration Shares
under such registration statement) and each underwriter, at any time when a
prospectus relating to such registration statement is required to be delivered
under the Securities Act, of the happening of any event as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements in such
registration statement not misleading in the light of the circumstances then
existing and prepare a supplement to or an amendment to such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
Registration Shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated in such
registration statement or necessary to make the statements in such registration
statement not misleading in the light of the circumstances then existing;
(f) use its reasonable best efforts to furnish, at the request of
Flowers, on the date that Registration Shares are delivered to the underwriters
for sale pursuant to such registration: (i) an opinion dated such date of
counsel representing Enstar in connection with such registration, addressed to
the underwriters or broker(s) and to Flowers, stating that such registration
statement has become effective under the Securities Act and that (A) to the
best knowledge of such counsel, no stop order suspending the effectiveness of
such registration
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statement has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus, and each amendment or
supplement of such registration statement or prospectus, comply as to form in
all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the SEC under the Securities Act (except
that such counsel need express no opinion as to the financial statements and
the other financial and statistical data contained or incorporated by reference
in such registration statement or prospectus) and (C) to such other effects as
may reasonably be requested by counsel for the underwriters or broker(s), and
(ii) a letter dated such date from the independent public accountants retained
by Enstar, addressed to the underwriters or broker(s) and to Flowers, stating
that they are independent public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the financial
statements of Enstar included or incorporated by reference in the registration
statement or the prospectus, or any amendment or supplement of such
registration statement or prospectus, comply as to form in all material
respects with the applicable accounting requirements of the Securities Act, and
such letter shall additionally cover such other financial matters (including
information as to the period ending no more than five business days prior to
the date of such letter) with respect to the registration in respect of which
such letter is being given as such underwriters may reasonably request, or if
not an underwritten public offering, such matters as are customarily covered in
such a letter; and
(g) make available for inspection by Flowers, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by Flowers or an underwriter,
all financial and other records, pertinent corporate documents and properties
of Enstar, and cause Enstar's officers, directors and employees to supply all
information reasonably requested by Flowers, an underwriter, attorney,
accountant or agent in connection with such registration statement.
The period of distribution (the "Distribution Period") of Registration
Shares in a firm commitment underwritten public offering shall be deemed to
extend until, but not beyond, such time as each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution
of Registration Shares in any other registration shall extend until, but not
beyond, the earlier of the sale of all Registration Shares covered by such
registration or forty-five (45) days following the effective date of the
registration statement utilized in connection with such registration under the
Securities Act. Enstar shall have the right to deregister with the SEC any
Registration Shares which remain unsold at the conclusion of any Distribution
Period.
6. Flowers' Cooperation. In connection with each registration pursuant
to Sections 3 and 4 of this Agreement, Flowers shall furnish in writing to
Enstar and any underwriter participating in such offering such information with
respect to itself and the proposed distribution by it as is reasonably
necessary in order to assure compliance with federal and applicable state
securities laws.
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7. Underwriting Agreement. In connection with each registration
pursuant to Section 3 or 4 of this Agreement covering an underwritten public
offering, Enstar and Flowers agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between major
underwriters and companies of Enstar's size and investment stature; provided,
however, that such agreement shall not contain any such provision applicable to
Enstar or Flowers which is inconsistent with the provisions of this Agreement.
8. Expenses.
(a) All expenses incurred by Enstar in connection with the
registration contemplated by Sections 3 and 4 of this Agreement, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel and independent public accountants for Enstar,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, reasonable fees and expenses of
Flowers' counsel and expenses applicable to the sale of Registration Shares,
but excluding any Selling Expenses, are called "Registration Expenses" in this
Agreement. All underwriting discounts, selling commissions and brokerage fees
applicable to the sale of the Registration Securities, are in this Agreement
called "Selling Expenses."
(b) Enstar will pay all Registration Expenses in connection with
each registration statement filed pursuant to Section 3 or 4 of this Agreement.
All Selling Expenses in connection with any registration statement filed
pursuant to Section 3 or 4 of this Agreement shall be borne by Flowers in
proportion to the number of Registration Shares sold or proposed to be sold by
Flowers in such registration in relation to the total number of shares sold or
proposed to be sold by all parties under such registration statement.
9. Indemnification.
(a) In the event of a registration of any of the Registration
Shares under the Securities Act pursuant to Section 3 or 4 of this Agreement,
Enstar will indemnify and hold harmless Flowers, each underwriter of
Registration Shares under such registration, if any, each broker, dealer or any
other similar person acting on behalf of Flowers and each other person, if any,
who controls any of the foregoing persons within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which any of the foregoing persons may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect of this Agreement) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registration Shares were registered
under the Securities Act pursuant to Section 3 or 4 of this Agreement, any
preliminary prospectus or final prospectus contained in such registration
statement, or any amendment or supplement of this Agreement, or arise out of or
are based upon the omission or alleged omission to state in such registration
statement a material fact required to be stated in such registration statement
or
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necessary to make the statements in such registration statement not misleading,
and will reimburse Flowers, each such underwriter, broker, dealer or other
person acting on behalf of Flowers and each such controlling person for any
legal or other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that Enstar will not be liable in any such case if and to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by Flowers,
such underwriter, broker, dealer or other person acting on behalf of Flowers or
such controlling person in writing specifically for use in such registration
statement or prospectus.
(b) In the event of a registration of any of the Registration
Shares under the Securities Act pursuant to Section 3 or 4 of this Agreement,
Flowers will indemnify and hold harmless Enstar and each person, if any, who
controls Enstar within the meaning of the Securities Act, each officer of
Enstar who signs the registration statement, each director of Enstar, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint
or several, to which Enstar or such officer or director or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
of such losses, claims, damages or liabilities) arise out of or are based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in conformity with information pertaining to Flowers, furnished in writing
to Enstar by Flowers specifically for use in such registration statement or
prospectus; provided, however, that the liability of Flowers under this
Agreement shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the public offering
price of shares sold by Flowers under such registration statement bears to the
total public offering price of all securities sold under such registration
statement, but not to exceed the net proceeds received by Flowers from the sale
of Registration Shares covered by such registration statement.
(c) Promptly after receipt by an indemnified party under this
Agreement of notice of the commencement of any action, such indemnified party
shall, if a claim in respect of such action is to be made against the
indemnifying party under this Agreement, notify the indemnifying party in
writing of such claim, but the omission so to notify the indemnifying party as
provided in this Agreement shall not relieve the indemnifying party of its
obligations under this Section 9 except to the extent that the omission results
in a failure of actual notice to the indemnifying party and such indemnifying
party is damaged solely as a result of the failure to give notice. In case any
such action shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement of such action, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense of such action with counsel satisfactory to
such indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense of
such action, the indemnifying party shall not be liable to such
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indemnified party under this Section 9 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense of such
action other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded based upon advice of counsel
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the
interests of the indemnifying party, then the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the reasonable
expenses and fees of such separate counsel and other reasonable expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
(d) Notwithstanding the foregoing, in any such action, any
indemnified party shall have the right to retain its own counsel, but the fees
and disbursements of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party shall have failed to retain counsel for
the indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment.
(e) If the indemnification provided for in paragraphs (a) and (b)
of this Section 9 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions referred to in such paragraphs, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party, as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of Enstar, on the one hand, and
Flowers, on the other, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or actions as well as any
other relevant equitable considerations, including the failure to give the
notice required under such paragraphs. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by Enstar, on the
one hand, or Flowers, on the other hand, and to the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Enstar and Flowers agree that it would not be just and
equitable if contributions pursuant to this paragraph were determined by pro
rata allocation (even if Flowers were treated as one entity for such purpose)
or by any other method of allocation which did not take account of the
equitable considerations referred to above in this paragraph. The amount paid
or payable
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by an indemnified party as a result of the losses, claims, damages, liabilities
or actions referred to above in this paragraph, shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this paragraph, Flowers shall not be required
to contribute any amount in excess of the amount, if any, by which the total
price at which the Registration Shares sold by Flowers was offered to the
public exceeds the amount of any damages which they have otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11 (f) of the Securities Act) is entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(f) The indemnification of underwriters provided for in this
Section 9 shall be on such other terms and conditions as are at the time
customary and reasonably required by such underwriters. To the extent Enstar
agrees to provide such underwriters with indemnification rights which differ in
substance from the rights offered Flowers in this Section 9, then the
indemnification of Flowers in such underwriting shall at Flowers' request be
modified to conform to such terms and conditions.
10. Changes in Common Stock. To the extent that there are any changes
in Common Stock by way of stock split, stock dividend, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made
in the provisions of this Agreement, as may be required, so that the rights and
privileges granted to Flowers under this Agreement shall continue with respect
to the Registration Shares as so changed.
11. Rule 144 Matters. For so long as Flowers holds Registration Shares
and this Agreement has not terminated pursuant to Section 12 of this Agreement
and Enstar remains a public company under applicable securities laws, Enstar
agrees to exercise reasonable good faith efforts to:
(a) Make and keep public information generally available, as those
terms are defined in Rule 144 under the Securities Act, at all times subsequent
to the Closing Date;
(b) File with the SEC in a timely manner reports and other
documents required of Enstar under the Securities Act and the Exchange Act to
be so filed; and
(c) Furnish to Flowers, so long as Flowers owns any Registration
Shares, promptly upon a written request for the same:
(i) A written statement by Enstar that it has complied with the
reporting requirements of Rule 144 under the Securities Act; and
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(ii) Such other information as may be reasonably requested by
Flowers to enable Flowers to avail himself of any rule or
regulation of the SEC which permits the sale of securities without
registration under the Securities Act.
12. Effectiveness. Notwithstanding anything to the contrary set forth
in this Agreement, Enstar shall not be required to effect any registration of
the Registration Shares hereunder during such time as all the Registration
Shares acquired by Flowers on the Closing Date pursuant to the Investment
Agreement may be sold to the public pursuant to Rule 144(k) (or any similar
successor provision) under the Securities Act; provided, however, that the
foregoing shall not affect the parties obligations under Sections 8 and 9 of
this Agreement, which Sections shall continue to be effective.
13. Representations and Warranties of Enstar and Flowers.
(a) Enstar represents and warrants to Flowers as follows:
(i) Enstar has the corporate power and authority to
execute and deliver this Agreement and perform its obligations
hereunder. The execution and delivery of this Agreement and the
performance by Enstar of its covenants and agreements hereunder
have been duly and validly authorized by the Board of Directors;
and neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A)
conflict with or result in any breach of any provision of the
articles of incorporation or bylaws of Enstar or (B) violate,
conflict with or result in a default (or any event which, with
notice or lapse of time or both, would constitute a default)
under, or give rise to any right of termination, cancellation or
acceleration under, any of the terms, conditions or provisions of
any material agreement or obligation to which Enstar is a party or
by which Enstar or any of its assets may be bound.
(ii) This Agreement has been duly executed and delivered
by Enstar and constitutes a valid and binding agreement of Enstar,
enforceable against Enstar in accordance with its terms, except
that (A) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(b) Flowers represents and warrants to Enstar as follows:
(i) Flowers is an individual resident of the State of
New York and Flowers has the capacity to execute and deliver this
Agreement and perform his obligations hereunder, and no other
actions on the part of Flowers are necessary
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to permit the execution, delivery and performance of this
Agreement by Flowers or the consummation of the transactions so
contemplated by Flowers; and neither the execution and delivery of
this Agreement nor the consummation of the transactions
contemplated hereby will violate, conflict with or result in a
default (or any event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to any right of
termination, cancellation or acceleration under, any of the terms,
conditions or provisions of any material agreement or obligation
to which Flowers is a party or by which Flowers or any of his
assets may be bound.
(ii) This Agreement has been duly executed and delivered
by Flowers and constitutes a valid and binding agreement of
Flowers, enforceable against Flowers in accordance with its terms,
except that (A) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or
other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally, and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
14. Miscellaneous.
(a) From time to time after the Closing Date, at the reasonable
request of the other party hereto and at the expense of the party so requesting,
each of the parties hereto shall execute and deliver to such requesting party
such documents and take such other action as such requesting party may
reasonably request in order to consummate more effectively the transactions
contemplated hereby.
(b) All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (i) personal
delivery; (ii) facsimile transmission; (iii) registered or certified mail,
postage prepaid, return receipt requested; or (iv) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile
number given below (or at such other address or facsimile number for such party
as shall be specified by notice given hereunder):
If to Flowers, to:
J. Christopher Flowers
4 East 70th Street
New York, New York 10021
Facsimile: (212) 517-3933
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with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Facsimile: (212) 728-8111
Attention: Thomas M. Cerabino, Esq.
If to Enstar, to:
The Enstar Group, Inc.
172 Commerce Street, 3rd Floor
Montgomery, AL 36104
Facsimile: (334) 834-2530
Attention: Mr. Nimrod T. Frazer
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Fax No. (404) 572-5145
Attention: William R. Spalding, Esq.
All such notices, requests, demands, waivers and communications shall be deemed
received upon (i) actual receipt thereof by the addressee, (ii) actual delivery
thereof to the appropriate address or (iii) in the case of a facsimile
transmissions upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above.
However, such mailing shall in no way alter the time at which the facsimile
notice is deemed received.
(c) Should any provision of this Agreement for any reason be
declared invalid or unenforceable, such decision shall not affect the validity
or enforceability of any of the other provisions of this Agreement, which
remaining provisions shall remain in full force and effect and the application
of such invalid or unenforceable provision to Persons or circumstances other
than those as to which it is held invalid or unenforceable shall be valid and
enforced to the fullest extent permitted by law.
(d) This Agreement and all of the provisions hereof shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall
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be assigned, directly or indirectly, including, without limitation, by
operation of law, by any party hereto without the prior written consent of the
other parties hereto.
(e) This Agreement is solely for the benefit of Enstar, and its
successors and permitted assigns, with respect to the obligations of Flowers
under this Agreement, and for the benefit of Flowers, and his successors and
permitted assigns, with respect to the obligations of Enstar, under this
Agreement. Except as set forth in the next sentence, this Agreement shall not be
deemed to confer upon or give to any other third party any remedy, claim,
liability, reimbursement, cause of action or other right. In addition, and
whether or not any express assignment shall have been made, the provisions of
this Agreement which are for the benefit of Flowers shall also be for the
benefit of and be enforceable by any subsequent holder of any Registration
Shares, subject to all the provisions herein.
(f) Each of Enstar and Flowers agrees as follows:
(i) Enstar and Flowers shall attempt in good faith to
resolve promptly any dispute, controversy or claim under or in
connection with this Agreement by negotiations. If any such
dispute, controversy or claim should arise, the parties or
representatives of each such party shall meet at least once to
attempt to resolve the matter. Any such representative may request
the other representatives to meet within 14 days after delivery of
written notice to the others of any such dispute, controversy, or
claim, at a mutually agreed time and place.
(ii) If the matter has not been resolved pursuant to
negotiations within 60 days after the first meeting of the
representatives (which period may be extended by mutual
agreement), the matter shall be settled exclusively by arbitration
(except as provided in Section 14(f)(v)) conducted by three
arbitrators in accordance with the provisions of the Federal
Arbitration Act (9 U.S.C. Sections 1-16), and in accordance with
the Center for Public Resources, Inc.'s Rules (the "Rules for
Arbitration") for Non-Administered Arbitration of Business
Disputes. The three arbitrators shall be selected as follows: one
arbitrator shall be selected by Enstar, one arbitrator shall be
selected by Flowers and one arbitrator shall be selected by the
other two arbitrators. All arbitrators shall be individuals: (A)
who meet the qualifications set forth in Rule 7 of the Rules of
Arbitration, (B) who are attorneys or retired judges and (C) who
have past experience in settling complex litigation involving
claims relating to securities and mergers and acquisitions. The
arbitration of such matters in controversy, including the
determination of any amount of damages, shall be final and binding
upon Enstar and Flowers to the maximum extent permitted by law. No
such Person shall seek, and no arbitrator shall be authorized to
award, any punitive damages relating to any matter arbitrated.
This Agreement to arbitrate is irrevocable.
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(iii) Any arbitration proceedings shall be conducted in
Atlanta, Georgia or at such other location as Enstar and Flowers
may agree.
(iv) Any arbitration award under this Section 14(f) shall
be final and binding, and judgment may be entered on such award by
any court having jurisdictions upon application of Enstar or
Flowers.
(v) Any party to an arbitration proceeding under this
Section 14(f) shall be entitled to be reimbursed by the other
parties for its costs and expenses incurred in connection with the
arbitration proceeding, including reasonable attorneys' fees, to
the extent determined by the arbitrators. The arbitrators shall
assess the costs of the arbitration proceeding, including their
fees, to the parties to the proceeding in such proportions as the
arbitrators consider reasonable under the circumstances.
(vi) Notwithstanding anything else in this Section 14(f)
to the contrary, Enstar and Flowers shall be entitled to seek any
equitable remedies available under the governing law from any
court of competent jurisdiction, and the order or judgment of any
such court shall be binding in any arbitration proceeding pursuant
to this Section 14(f).
(g) This Agreement and other documents referred to herein or
delivered pursuant hereto which form a part hereof constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties or any of them with respect to the subject matter hereof.
(h) This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia (regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof)
as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.
(i) This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
(j) This Agreement may be amended, modified or supplemented at
any time by written agreement of Enstar and Flowers. Any failure of Enstar or
Flowers to comply with any term or provision of this Agreement may be waived,
with respect to Flowers, by Enstar and, with respect to Enstar, by Flowers, by
an instrument in writing signed by or on behalf of the appropriate party, but
such waiver or failure to insist upon strict compliance with such term or
provision shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure to comply.
-15-
<PAGE> 69
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon this Agreement
shall be binding between Enstar and Flowers.
Very truly yours,
THE ENSTAR GROUP, INC.
By:
------------------------------
Name:
Title:
AGREED TO AND ACCEPTED
AS OF THE DATE FIRST
ABOVE WRITTEN.
J. CHRISTOPHER FLOWERS
---------------------------------
-16-
<PAGE> 1
EXHIBIT 10.2
AMENDMENT AGREEMENT, dated as of October 20, 1998, (this
"Amendment") to the Rights Agreement, dated as of January 20, 1997 (the "Rights
Agreement"), between THE ENSTAR GROUP, INC., a Georgia corporation (the
"Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York corporation
(the "Rights Agent").
WITNESSETH:
WHEREAS, the Company proposes to enter into an Investment
Agreement, dated as of October 20, 1998, (as amended from time-to-time, the
"Investment Agreement"), by and between the Company and J. Christopher Flowers,
an individual resident of the State of New York ("Flowers"), and the Company
desires to enter into this Amendment in order to induce Flowers to enter into
the Investment Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
Section 1. Amendment of the Rights Agreement. The
Rights Agreement is amended pursuant to Section 26 thereof as follows:
(a) The definition of "Exempt Person" set forth in Section 1(o) of
the Rights Agreement is amended by deleting the word "and" at the end of clause
(ii) thereof, changing the period at the end of clause (iii) thereof to a
semi-colon, and adding a new clause (iv) as follows:
"(iv) J. Christopher Flowers ("Flowers") by virtue of the
execution of the Investment Agreement, dated as of October 20,
1998, by and between the Company and Flowers (as amended from
time-to-time, the "Investment Agreement") and/or the
consumation of the purchase and sale of Common Stock
contemplated thereby or capital stock or rights acquired in
accordance therewith and any transferee or pledgee of the
shares of Common Stock (or such capital stock or rights) owned
or acquired by Flowers provided such transfer or pledge is
made in accordance with and to the Persons enumerated in
Section 4.6(b) (i), (ii) or (iii) of the Investment
Agreement."
(b) The definition of "Stock Acquisition Date" set forth in
Section 1(bb) of the Rights Agreement is amended by adding a provision at the
end thereof as follows:
"and, provided further, that a Stock Acquisition Date shall
not be deemed to have occurred upon the execution of the
Investment Agreement or the acquisition of shares of Common
Stock by Flowers in accordance with the express terms and
provisions thereof."
<PAGE> 2
Section 2. The Rights Agreement. The Rights Agreement
is hereby reaffirmed in all respects and shall remain in full force and effect
in accordance with its terms except as amended by this Amendment.
Section 3. Counterparts. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
2
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first written above.
Attest: THE ENSTAR GROUP, INC.
By: By:
--------------------------------- --------------------------------
Name: Name:
------------------------------- -------------------------------
Title: Title:
------------------------------ ------------------------------
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
By: By:
--------------------------------- --------------------------------
Name: Name:
------------------------------- -------------------------------
Title: Title:
------------------------------ ------------------------------
3
<PAGE> 1
Date: October 20, 1998 Contact: Amy M. Dunaway
For Release: Immediately Telephone: (334) 834-5483
ENSTAR GROUP, INC. ANNOUNCES J. CHRISTOPHER FLOWERS TO BECOME
VICE CHAIRMAN OF ENSTAR; PROPOSED PURCHASE BY FLOWERS OF 1,158,860
SHARES OF ENSTAR COMMON STOCK
Montgomery, Alabama -- October 20, 1998... The Enstar Group, Inc.
("Enstar") (ESGR:OTC) today announced the proposed appointment of J.
Christopher Flowers to the position of Vice Chairman of Enstar effective
December 1, 1998 and the proposed purchase by Flowers of 1,158,860 newly issued
shares of common stock of Enstar for a purchase price of approximately $15
million. Mr. Flowers will purchase the common stock with a promissory note. The
transaction is conditioned on the approval of the terms of the proposed sale of
common stock by the shareholders of Enstar at a special meeting to be called by
the Board of Directors for such purpose. If the transaction is consummated, Mr.
Flowers will own approximately 23% of the outstanding common stock of Enstar.
Mr. Flowers, 40, has been an outside director of Enstar since October
1996 and has been involved in working with Enstar's management in locating an
acquisition target. Mr. Flowers graduated magna cum laude from Harvard College
and joined Goldman, Sachs & Co. in 1979. He was made a general partner in 1988
and a managing director in 1996. At Goldman, Sachs & Co., Mr. Flowers founded
and headed the Financial Institutions Group. Mr. Flowers has announced his
decision to resign from Goldman, Sachs & Co. as of November 27, 1998 in order
to pursue his own business interests.
Nimrod T. Frazer, Chairman, President and Chief Executive Officer of
Enstar, noted "We are very pleased with our proposed new relationship with
Chris Flowers. Chris has extensive and unique contacts and experience in the
financial services industry and significant business acumen. I am looking
forward to working closely with him in his new position to locate and acquire
an operating company."
Mr. Flowers stated, "I have enjoyed serving as an outside director of
Enstar and look forward with enthusiasm to assuming this new role as Vice
Chairman and a significant shareholder of Enstar."
Enstar and Flowers have entered into an Investment Agreement, dated
October 20, 1998, whereby Flowers will purchase the 1,158,860 shares at a price
of approximately $12.94 per share. The price per share represents the average
of the reported closing prices for Enstar common stock for the ten trading days
immediately preceding October 20, 1998. In the Investment Agreement, Mr.
Flowers has agreed to certain restrictions on his ability to transfer the
shares and to acquire any additional shares of Enstar or participate in any
capacity in certain other significant transactions involving Enstar without the
approval of the Board of Directors. The Investment Agreement also contains
certain agreements and covenants relating to conflicting business
<PAGE> 2
opportunities and competing transactions involving Mr. Flowers and related
entities, as it is anticipated that Flowers will have business arrangements with
other entities, funds or ventures with which he affiliates or associates.
Mr. Flowers will deliver to Enstar a full recourse promissory note in
the amount of $15 million for the purchase price of the shares. The note will
bear interest at the rate of 4.06%, will have a maturity of two years and will
require quarterly interest payments. Enstar and Flowers also propose to enter
into a registration rights agreement in connection with the closing of the
proposed transaction pursuant to which Flowers will be granted certain rights
to require Enstar to register his shares in the future.
The Board has decided to put the proposed sale of the shares to Mr.
Flowers to the shareholders of Enstar for a vote at a special meeting to be
called for such purpose. The special meeting of shareholders is currently
expected to take place during the first half of December, and Enstar will file
a proxy statement with the Securities and Exchange Commission relating to the
transaction. Subject to certain conditions, the Board of Directors has agreed
to recommend that the Enstar shareholders vote in favor of the transaction and
the members of the Board have agreed with Mr. Flowers to vote their shares of
Enstar common stock in favor of the transaction.
* * *
This press release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements include statements regarding the intent, belief or current
expectations of Enstar and its management team. Prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. Important factors currently known to management that
could cause actual results to differ materially from those in forward-looking
statements contained in this press release are set forth in the Safe Harbor
Compliance Statement for Forward-Looking Statements included as Exhibit 99.1 to
Enstar's Form 10-K/A-1 for the year ended December 31, 1997, and are hereby
incorporated herein by reference.
