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EXHIBIT 10.1
AGREEMENT
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THIS AGREEMENT is entered into this 29th day of August 2000 among
GENESIS WORLDWIDE INC. (formerly The Monarch Machine Tool Company), an Ohio
corporation ("Genesis"), each of the SELLING STOCKHOLDERS (as defined in Section
1 of this Agreement), and THREE CITIES RESEARCH, INC., a Delaware corporation,
solely as Stockholders Representative under the Stock Purchase Agreement (as
defined in Section 1 of this Agreement) ("TCR"), under the following
circumstances:
A. Genesis and the Selling Stockholders are parties to the
Stock Purchase Agreement, pursuant to which Genesis purchased, and the
Selling Stockholders sold to Genesis, all of the capital stock of
Precision Industrial Corporation, a Delaware corporation (the
"Company") on June 30, 1999;
B. In Article IX of the Stock Purchase Agreement, each of the
Selling Stockholders appointed TCR as its representative and attorney
in fact with respect to all matters concerning the Selling Stockholders
set forth in the Stock Purchase Agreement or in any other agreements
entered into by the Selling Stockholders in accordance with the Stock
Purchase Agreement; and
C. Upon the terms and conditions set forth herein, Genesis and
the Selling Stockholders desire to resolve certain differences that
have arisen among them relating to the purchase of the capital stock of
the Company pursuant to the Stock Purchase Agreement;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF
WHICH IS HEREBY ACKNOWLEDGED, GENESIS, EACH OF THE SELLING STOCKHOLDERS AND TCR
AGREE AS FOLLOWS:
SECTION 1. DEFINED TERMS. For purposes of this Agreement, the following
terms shall have the following meanings:
"Agreement Regarding Shares" means the Agreement Regarding Shares,
dated June 30, 1999, between Genesis and TCR, as Stockholders Representative,
relating to the release of the Stock Consideration to the Selling Stockholders.
"Interest Payment Agreement" means the Interest Payment Agreement,
dated June 27, 2000, between Genesis and TCR, as Stockholders Representative.
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"Note/Warrant Agreement" means the Agreement among Genesis and the
Selling Stockholders, dated June 30, 1999, pursuant to which the Selling
Stockholders purchased the Subordinated Note and Genesis agreed, among other
things, to issue Warrants.
"Selling Stockholders" means the persons and entities listed on Exhibit
A to the Stock Purchase Agreement, a copy of which is attached hereto as
APPENDIX A and incorporated herein by this reference.
"Special Note" means the 8% Special Junior Subordinated Note in the
original principal amount of $840,000 issued by Genesis on June 30, 1999 to TCR,
as Stockholders Representative, in part payment of the purchase price provided
for in the Stock Purchase Agreement.
"Stock Consideration" means the 500,000 common shares of Genesis
evidenced by Certificate No. C 15350, issued to TCR, as Stockholders
Representative, dated June 30, 1999, which were delivered in part payment of the
purchase price provided for in the Stock Purchase Agreement.
"Stock Purchase Agreement" means the Stock Purchase Agreement between
Genesis and each of the Selling Stockholders dated May 13, 1999.
"Subordinated Note" means the 12% Junior Subordinated Note of Genesis
in the original principal amount of $15,000,000 issued on June 30, 1999 to TCR,
as Stockholders Representative, pursuant to the Note/Warrant Agreement, as
amended by the Interest Payment Agreement.
"Three Cities Research, Inc." means Three Cities Research, Inc., a
Delaware corporation, in its individual capacity and not in any representative
capacity.
SECTION 2. SOLD COMPANIES LITIGATION AND CERTAIN OTHER MATTERS
INVOLVING SOLD COMPANIES.
(A) At the time this Agreement is executed, TCR shall, in payment of
the obligations identified in Section 2(B) of this Agreement, wire transfer
$325,000 to Genesis in immediately available funds to an account designated by
Genesis in writing to TCR.
(B) Upon receipt of the $325,000 payment, the following obligations
shall be deemed paid: (i) all costs known to, and incurred by, Genesis or a
subsidiary of Genesis at May 31, 2000 relating to litigation claims asserted
against companies previously sold by the Company and previously identified by
the parties as the Foster, Dunklin, Belcher, Sigmon, Grim, Viars, Dave,
Besavage, Kirkpatrick, and Callahan litigation claims; (ii) all costs known to,
and incurred by, Genesis or a subsidiary of Genesis at May 31, 2000 relating to
worker's compensation claims of employees of companies previously sold by the
Company, which claims are presently being administered by Genesis or a
subsidiary of Genesis in connection with certain insurance policies which have a
self-insured retention amount per claim; (iii) all costs known to, and incurred
by, Genesis or a subsidiary
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of Genesis at June 30, 2000 relating to unemployment taxes due to the State of
Illinois by Herr Voss Corporation for periods prior to June 30, 1999 which costs
were not recorded or paid at June 30, 1999 by Herr Voss Corporation; (iv) all
costs known to, and incurred by, Genesis or a subsidiary of Genesis at June 30,
2000 relating to a sales and use tax assessment by the State of Pennsylvania
against Herr Voss Corporation for periods prior to June 30, 1999 which costs
were not recorded or paid at June 30, 1999 by Herr Voss Corporation; and (v)
$8,500 in costs incurred or to be incurred by Genesis in connection with
obtaining a determination letter for the Roll Centers, Inc. 401(k) plan
established in 1993.
(C) Except as specifically set forth in Section 2(B) of this Agreement,
nothing contained in this Agreement, including the provisions of Section 7 of
this Agreement, shall be construed or interpreted in any manner to reduce,
lessen, or limit the indemnification obligations of the Selling Stockholders
under "Paragraph 7.3 - Indemnification Against Liabilities with Regard to
Previously Sold Companies" and "Paragraph 7.4 - Tax Indemnification" of the
Stock Purchase Agreement. TCR hereby specifically acknowledges the obligation of
the Selling Stockholders to continue to pay promptly upon submission of proper
documentation claims covered by such paragraphs of the Stock Purchase Agreement.
(D) Genesis or a subsidiary of Genesis has caused National City to
issue Letter of Credit No. SPA008072 (dated May 12, 1999) in the amount of
$350,000 for the benefit of Techint Technologies Inc. to cover claims arising
against Herr-Voss Industries, Inc. under the Settlement Agreement and Mutual
Release dated May 11, 1999 between Techint Technologies Inc. and Herr-Voss
Industries, Inc. (the "Techint LOC"). TCR hereby agrees that any payments
properly made under the Techint LOC to Techint are the responsibility of the
Selling Stockholders under Paragraph 7.3 of the Stock Purchase Agreement. As
soon as practical after the execution of this Agreement (but not more than 30
days thereafter), TCR shall deliver to Genesis a "back-up" letter of credit of a
commercial bank in favor of National City in the amount of $262,500 which shall
be designed to re-imburse the amount of any loss National City suffers as a
result of payment by National City to Techint under the Techint LOC. To the
extent that any such loss suffered by National City under the Techint LOC shall
exceed the face amount of the back-up letter of credit, the Selling Stockholders
shall directly reimburse National City the amount of such loss.
(E) Genesis or a subsidiary of Genesis has caused ING (U.S.) Capital
LLC ("ING") to issue Letter of Credit No.G74626 (dated December 10,1999), as
amended by amendment no. 1 thereto (dated July 5, 2000) (the "ING LOC"), in the
amount of $720,000 for the benefit of the Zurich-American Insurance Group
("Zurich"), of which $507,000 is to cover the self-insured retention portion of
certain insurance claims as to which Salem Corporation retained responsibility
in connection with the sale of certain companies (the "Salem Obligations") and
for which Genesis is indemnified under Paragraph 7.3 of the Stock Purchase
Agreement. TCR hereby agrees that any payments properly made under the ING LOC
to Zurich to reimburse it for a Salem Obligation are the responsibility of the
Selling Stockholders under Paragraph 7.3 of the Stock Purchase Agreement. As
soon as practical after the execution of this Agreement (but not more than 30
days thereafter),
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TCR shall deliver to Genesis a "back-up" letter of credit of a commercial bank
in favor of ING in the amount of $380,250 which shall be designed to re-imburse
the amount of any loss ING suffers as a result of payment by ING to Zurich for a
Salem Obligation under the ING LOC. To the extent that any such loss suffered by
ING under the ING LOC shall exceed the face amount of the back-up letter of
credit, the Selling Stockholders shall directly reimburse ING the amount of such
loss.
(F) In the event that Genesis notifies TCR in writing that ING has
advised Genesis that Genesis will be required to treat the full face amount the
Techint LOC and the ING LOC as indebtedness of Genesis, even though such
obligations are supported by the "back-up" letter of credit, then TCR agrees to
provide original letters of credit in lieu of "back-up" letters of credit, with
the same terms as the "back-up" letters of credit would have had, except they
will be direct obligations to Techint and Zurich, respectively.
SECTION 3. SUBORDINATED NOTE.
(A) The Subordinated Note shall be amended as of July 1, 2000 to
reflect the following changes:
(1) The name "Genesis Worldwide Inc." shall be substituted for
"The Monarch Machine Tool Company" to reflect the name change of the
payor of the Subordinated Note;
(2) The principal amount of the Subordinated Note at July 1,
2000 shall be changed to "$11,947,541," which amount was arrived at (i)
by reducing the original principal amount of $15,000,000 by $3,500,000
and (ii) by increasing the principal amount by $447,541 as required
pursuant to Section 2 of the Interest Payment Agreement;
(3) For the period from July 1, 2000 through December 31,
2001, the Subordinated Note shall bear interest at a rate of 9% per
annum, with the applicable interest rate changing to 12.50% per annum
effective January 1, 2002 until March 31, 2002 and increasing by 50
basis points on April 1, 2002 and on each July 1, October 1, January 1,
and April 1 after that until April 1, 2004, on and after which the rate
of interest payable under the Subordinated Note will be 17% per annum;
and
(4) The interest payment due and payable under the
Subordinated Note on each of September 30, 2000, December 31,2000 and
March 31, 2001 shall not be paid in cash, but in lieu thereof, an
amount equal to such cash payment shall be paid by increasing the
principal amount of the Subordinated Note by such amount effective on
the respective dates that such interest payments are due and payable;
and the principal amount of the Subordinated Note as so increased shall
bear interest and be payable at the maturity date, all as provided in
the Subordinated Note.
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(B) The Subordinated Note, as amended, to give effect to the provisions
of Section 3(A) of this Agreement shall be restated in the form set forth in the
"12% Junior Subordinated Note, As Restated," attached hereto as APPENDIX B (the
"Restated Subordinated Note"). At the time this Agreement is executed, Genesis
shall execute and deliver to TCR the Restated Subordinated Note, and TCR shall
deliver the Subordinated Note to Genesis for cancellation.
(C) Upon the execution of this Agreement, the Interest Payment
Agreement shall be null and void and of no further force and effect.
SECTION 4. SPECIAL NOTE. Notwithstanding anything contained in the
Special Note to the contrary, in the event that Genesis closes on the sale of
its 50% interest in the Nippon Herr Joint Venture and within five business days
after such closing, Genesis transfers and assigns to TCR a 50% interest in any
payments or other consideration it received or will receive for such interest
(the "Nippon Herr Consideration"), then the Special Note shall be deemed paid in
full. Genesis further agrees it will immediately upon the receipt of any Nippon
Herr Consideration assigned to TCR (and in no event, more than five business
days after the receipt of any such payment), deliver such payment to TCR.
SECTION 5. STOCK CONSIDERATION.
(A) At the time this Agreement is executed, TCR shall transfer and
assign the Stock Consideration to Genesis by surrendering Genesis Certificate
No. 15350 to Genesis, endorsed in blank. Upon the transfer and assignment of the
Stock Consideration to Genesis, the Selling Stockholders shall have no further
interest in the Stock Consideration.
(B) Upon the execution of this Agreement, the Agreement Regarding
Shares shall be null and void and of no further force and effect.
SECTION 6. NOTE/WARRANT AGREEMENT.
(A) Notwithstanding anything contained in the Note/Warrant Agreement or
any related document to the contrary, Genesis is hereby released of any
obligation to issue and sell warrants to purchase shares of its common stock to
the Selling Stockholders. The parties hereto acknowledge that Warrant No. W-001
for the purchase of 100,000 shares of common stock of Genesis, issued to TCR on
June 30, 1999, which will remain outstanding, is the only warrant to purchase
shares of common stock issued or issuable in connection with the Note/Warrant
Agreement as modified by this Section 6.
(B) J. William Uhrig shall not be designated to serve as a director of
Genesis by TCR pursuant to Section 3 of the Note/Warrant Agreement.
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SECTION 7. RELEASES.
(A) Genesis hereby releases and discharges Selling Stockholders, TCR,
and Three Cities Research, Inc. from any and all claims, causes of action,
claims for relief, damages and demands of whatsoever kind or nature which
Genesis had, now has, or may hereafter have against any of them ("Claims"),
arising, directly or indirectly, out of or in an way connected with or based
upon "Paragraph 3.2. Selling Stockholders' Joint Representations and Warranties"
of the Stock Purchase Agreement, or out of or in any way connected with or based
upon any related claim under "Paragraph 7.1 Indemnification Against Loss Due to
Inaccuracies in Selling Stockholders' Representations and Warranties," except
that the foregoing release and discharge shall not apply to Claims arising under
the Paragraph 3.2(c) of such Paragraph or out of or in any way connected with or
based upon any claim under "Paragraph 7.1 Indemnification Against Loss Due to
Inaccuracies in Selling Stockholders' Representations and Warranties" related to
Paragraph 3.2(c) or to claims arising under this Agreement.
(B) The Selling Stockholders, TCR, and Three Cities Research, Inc.
hereby release and discharge Genesis from any and all claims, causes of action,
claims for relief, damages and demands of whatsoever kind or nature which the
Selling Stockholders, TCR, or Three Cities Research, Inc. had, now has, or may
hereafter have ("Claims"), arising, directly or indirectly, out of or in an way
connected with or based upon the letter of Richard E. Clemens to TCR, dated
April 27, 2000, or "Article 3.3. Buyer's Representations and Warranties" of the
Stock Purchase Agreement, except that the foregoing release and discharge shall
not apply to Claims arising under Paragraphs 3.3(a), 3.3(b), 3.3(c), 3.3(k) or
3.3(l) of such Paragraph 3.3 or to claims arising under this Agreement.
(C) When used in this Section 7, (i) "Genesis" means Genesis, any
subsidiary of Genesis, any director, officer, or agent of Genesis or any
subsidiary of Genesis and the successors, heirs, administrators, executors and
assigns of any of the foregoing, (ii) "Selling Stockholders" means each of the
Selling Stockholders, TCR, and any director, officer, partner, or agent of
either a Selling Stockholder or TCR and the successors, heirs, administrators,
executors and assigns of any of the foregoing, and (iii) "Three Cities Research,
Inc." means Three Cities Research, Inc., any director, officer, partner, or
agent of Three Cities Research, Inc. and the successors, heirs, administrators,
executors and assigns of any of the foregoing
SECTION 8. REPRESENTATIONS.
(A) Three Cities Research, Inc. represents and warrants that it has the
authority to enter into this Agreement on behalf of each of the Selling
Stockholders and to perform all acts or make all representations described in
this Agreement on behalf of each of the Selling Stockholders. Three Cities
Research, Inc. agrees to hold Genesis harmless from any loss it may suffer as a
result of a breach of the foregoing representation.
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(B) Genesis represents and warrants that it has the authority to enter
into this Agreement and that after a complete investigation, it did not obtain
any information indicating any fraud by the Selling Stockholders (as defined at
Section 7(C), above) or TCR.
SECTION 9. GOVERNING LAW. This Agreement and the obligations of the
parties and the rights of the parties hereunder shall will be governed by the
substantive laws of Delaware.
SECTION 10. FURTHER ACTIONS. Each party hereto agrees to take promptly
all actions reasonably necessary to carry out the terms, conditions and intent
of this Agreement.
SECTION 11. NOTICES. Any notice or other communication under or
relating to this Agreement shall be given as provided in Paragraph 10.7 of the
Stock Purchase Agreement.
SECTION 12. CONSTRUCTION. Genesis, TCR, and Three Cities Research, Inc.
have jointly drafted this Agreement and, therefore, no provision of this
Agreement will be construed against any party based upon authorship.
SECTION 13. SIGNATURES. This Agreement may be executed in multiple
copies and signatures may be made by facsimile transmissions.
SECTION 14. NO RELIANCE. Genesis, TCR, and Three Cities Research, Inc.
acknowledge that they have not relied on any statement, representation,
omission, inducement, or promise by the other party (or any other officer,
agent, employee, representative, or attorney for any other party) in executing
this Agreement except as expressly stated in this Agreement.
SECTION 15. NO ADMISSION OF LIABILITY. Genesis and TCR acknowledge that
this Agreement is the result of the compromise of disputed claims; accordingly,
this Agreement is not to be construed as an admission of any liability, fault,
or responsibility on the part of Genesis, any of the Selling Stockholders or
TCR.
SECTION 16. VOLUNTARY AGREEMENT. Genesis and TCR represent and warrant
that they have read this Agreement and know and understand its full content;
Genesis, each of the Selling Stockholders, and TCR voluntarily enter into this
Agreement after full consultation with counsel.
SECTION 17. OTHER AGREEMENTS. Except as amended, modified, or
superceded by specific provisions of this Agreement, the Stock Purchase
Agreement and the Note/Warrant Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.
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GENESIS WORLDWIDE INC. THREE CITIES RESEARCH, INC., AS
STOCKHOLDERS REPRESENTATIVE
By: /s/ Richard E. Clemens By: /s/ William Uhrig
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Richard E. Clemens, President & CEO Its: Partner
EACH OF THE SELLING STOCKHOLDERS
LISTED ON APPENDIX A HERETO
By Three Cities Research, Inc.,As Attorney in Fact for each of the Selling
Stockholders listed on Appendix A hereto
By: /s/ William Uhrig
----------------------
Its: Partner
AGREEMENTS BY THREE CITIES RESEARCH, INC.
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For good and valuable consideration, Three Cities Research, Inc.,
individually for itself and not in any representative capacity, hereby agrees to
the provisions of Sections 7, 8, 12 and 14 of the foregoing Agreement.
IN WITNESS WHEREOF, the undersigned Three Cities Research, Inc. has
executed this addendum to the forgoing Agreement as of the date and year first
written above.
THREE CITIES RESEARCH, INC.
By: /s/ William Uhrig
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Its: Partner
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APPENDIX A
Three Cities Fund II LP
Three Cities Offshore II CV
Wynnefield Partners Small Cap Value LP
Allied Capital Corporation
Allied Investment Corporation
Anthony T. Castor, III
Michael H. Bulkin
J. Murfree Butler
Stephen G. Cerri
A.A. Fornataro
Michael S. Levin
Gerald L. Brenneman Donald J. Mudric
William H. Carver Frank W. Petraglia
Steven B. Chinchi Teresa D. Phillips
Vernon E. Collins James L. Phillis
Joseph L. Cugini William D. Presutti
Webley M. Dias Michael A. Santillo
Martin C. Dillner Karl T. Schoeffel
M. James Ditallo Carl H. Simpson
George A. Douglas Blake C. Steele
Audie K. Dunbar Richard J. Stock
John A. Fischer David D. Struth
Thomas M. Fitzwilliams Mark E. Sutherland
George R. Goldner Mark T. Swain
Richard L. Goldner Henry E. Theis
Francis J. Gordon Glyn R. Vaughan
Gary D. Hart William R. Weber
Thomas F. Hazen Edward R. Woods
Marvin T. Knepp Lloyd P. Zahn
Harry F. Leonard
William A. Lindner
Frank S. Ludwiczak
John A. Marzula
Miros J. Maszczak
Michael W. McGraw
Melinda S. McKee
James N. McKenna
Mark J. Menego
Robert F. Mikesell
Charles L. Miller
Kenneth H. Miller
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