SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 11 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report February 10, 1999
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CHANCELLOR CORPORATION
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(Exact name of Registrant as specified in its charter)
Massachusetts 0-11663 04-2626079
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
210 South Street, Boston, Massachusetts 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 368-2700
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<PAGE>
Item 2. Acquisition or Disposition of Assets.
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On January 29, 1999, Chancellor Asset Management Inc. ("CAM" or the "Company"),
a wholly owned subsidiary of Chancellor Corporation ("Chancellor"), acquired all
of the issued and outstanding capital stock of M.R.B. Inc., a Georgia
corporation d/b/a Tomahawk Truck Sales; Tomahawk Truck & Trailer Sales, Inc., a
Florida corporation; Tomahawk Truck & Trailer Sales of Virginia, Inc., a
Virginia corporation; and Tomahawk Truck & Trailer Sales of Missouri, Inc., a
Missouri corporation (collectively "Tomahawk"), pursuant to a Stock Purchase
Agreement (the "Agreement") dated January 29, 1999. The Company acquired the
capital stock of Tomahawk from Ms. M. Rea Brookings and Mr. David F. Herring
(the "Selling Shareholders").
Tomahawk is engaged in a similar line of business as the Company. Tomahawk
retails and wholesales used transportation equipment, primarily tractors and
trailers. Tomahawk operates five (5) retail centers in Conley, Georgia;
Richmond, Virginia; Pompano, Florida; Orlando, Florida; and Kansas City,
Missouri. Additionally, Tomahawk operates its wholesale division from the
Conley, Georgia facility. Tomahawk will be operated as a wholly owned
subsidiary of the Company, with many operations coordinated with the Company, to
achieve operating efficiencies and synergies.
The purchase price paid by the Company consisted of 4,500,000 shares of the
Common Stock of Chancellor (valued at $1.34 per share) and future cash
consideration pursuant to an Earn-Out provision as provided in Section 3 of the
Agreement (the "Earn-Out"). The Earn-Out provides for the payment of seven and
one-half percent (7.5%) of the Adjusted Pre-Tax Earnings of Tomahawk to each of
the Selling Shareholders. The Earn-Out begins in the fiscal year ended December
31, 1999, and ends in the fiscal year ended December 31, 2004. At the time of
the acquisition, Tomahawk had liabilities of approximately $6,617,000. In
addition, the Company incurred acquisition costs of approximately $530,000. In
conection with the Agreement, the Company loaned the Selling Shareholders a
total of $500,000 pursuant to certain promissory notes payable in full on
January 29, 2004. This transaction has been recorded in accordance with the
purchase method of accounting. As a result of a preexisting agreement between
CAM and the Selling Shareholders that gave CAM effective control of Tomahawk's
operations, the designated date of this transaction for accounting purposes will
be August 1, 1998.
The Agreement also: (1) nominates one of the Selling Shareholders as a director
of Chancellor's Board of Directors; (2) elects both of the Selling Shareholders
as directors of the Company's Board of Directors; (3) provides for Employment
Agreements for the Selling Shareholders over a period of five years with minimum
base salaries of $200,000 per annum; (4) prohibits the Selling Shareholders from
competing against the Company or Tomahawk, or soliciting former employees and
customers of Tomahawk; (5) provides for Tomahawk to lease from the Selling
Shareholders the Conely, Georgia facility at fair market value rents of
approximately $8,500 per month; and (6) provides for an option to purchase from
the Selling Shareholders the Conley, Georgia facility for an amount not to
exceed $950,000.
Item 7. Financial Statements and Exhibits.
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a) Financial statements of business acquired.
Financial information relating to the acquisition required by this item will be
filed as soon as practicable but in no event later than sixty (60) days after
the filing of this report.
<PAGE>
b) Pro forma financial information.
Financial information relating to the acquisition required by this item will be
filed as soon as practicable but in no event later than sixty (60) days after
the filing of this report.
<TABLE>
<CAPTION>
C) Exhibits.
<S> <C>
Exhibit 2 Stock Purchase Agreement, dated January 29, 1999, by
and among Chancellor Asset Management, Inc., M. Rea
Brookings, and David F. Herring.
Exhibit 10.1 Lease Agreement, dated January 29, 1999, by and among
M. Rea Brooking, David F. Herring, and Chancellor Asset
Management, Inc.
Exhibit 10.2 Memorandum of lease, dated January 29, 1999, by and
among M. Rea Brookings, David F. Herring, and
Chancellor Asset Management, Inc.
Exhibit 10.3 Employment Agreement, dated January 29, 1999, by and
among M. R. B., Inc. and M. Rea Brookings.
Exhibit 10.4 Promissory Note, dated January 29, 1999, by and among
M. Rea Brookings and Chancellor Asset Management,
Inc.
Exhibit 10.5 Stock Pledge Agreement, dated January 29, 1999, by and
among Chancellor Asset Management, Inc. and M. Rea
Brookings.
Exhibit 10.6 Employment Agreement, dated January 29, 1999, by and
among M.R. B., Inc. and David F. Herring.
Exhibit 10.7 Promissory Note, dated January 29, 1999, by and among
David F. Herring and Chancellor Asset Management, Inc.
Exhibit 10.8 Stock Pledge Agreement, dated January 29, 1999, by and
among Chancellor Asset Management, Inc. and David F.
Herring.
Exhibit 99 Press Release.
</TABLE>
<PAGE>
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, thereunto duly authorized.
Chancellor Corporation
By /s/ Franklyn E. Churchill
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Franklyn E. Churchill, President
Dated: February 10, 1999
<PAGE>
Exhibit 2
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of the 29th
day of January, 1999, by and among CHANCELLOR ASSET MANAGEMENT, INC., a Delaware
corporation (the "Buyer"), M. REA BROOKINGS of the State of Georgia
("Brookings"), and DAVID F. HERRING of the State of Georgia ("Herring," and
collectively with Brookings, the "Sellers").
W I T N E S S E T H:
WHEREAS, the Sellers are the owners of all of the issued and outstanding
shares of the capital stock (collectively, the "Shares") of M.R.B., Inc., a
Georgia corporation d/b/a "Tomahawk Truck Sales" ("MRB"), Tomahawk Truck &
Trailer Sales, Inc., a Florida corporation ("Tomahawk Florida"), Tomahawk Truck
& Trailer Sales of Virginia, Inc., a Virginia corporation ("Tomahawk Virginia"),
and Tomahawk Truck & Trailer Sales of Missouri, Inc., a Missouri corporation
("Tomahawk Missouri") (each, a "Company" and collectively, the "Companies"); and
WHEREAS, the Sellers desire to sell the Shares to the Buyer, and the Buyer
desires to purchase the Shares from the Sellers, upon the terms and subject to
the conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SHARES.
1.1. Purchase and Sale. Subject to the terms and conditions set forth in
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this Agreement, the Sellers agree to sell to the Buyer, and the Buyer agrees to
purchase from the Sellers, at the Closing (as defined in Section 2 hereof), all
of the Shares, in exchange for the payment of the Purchase Price (as defined in
Section 1.2 hereof).
1.2. Purchase Price. The Buyer shall pay and cause to be delivered to the
Sellers, as the aggregate purchase price for the Shares (the "Purchase Price"),
the following: (a) 4,500,000 shares (the "Closing Shares") of the common stock,
$.01 par value per share (the "Common Stock"), of Chancellor Corporation, a
Massachusetts corporation and corporate parent of the Buyer ("Chancellor"); (b)
the Earn Out Payments, if any, payable pursuant to Section 3 hereof; (c) the
payments to be made to the Sellers pursuant to Section 4.4 hereof; and (d) the
Contingent Shares, as defined in, and deliverable to the Seller pursuant to the
terms of, Section 4.5 hereof. Each Seller shall receive one-half (1/2) of the
Closing Shares and, if applicable, the Contingent Shares. The Closing Shares
and the Contingent Shares are sometimes hereinafter collectively referred to as
the "Chancellor Shares."
<PAGE>
2. CLOSING.
2.1. Time and Place. The closing of the sale and purchase of the Shares
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(the "Closing") shall be held at the offices of Bingham Dana LLP, 150 Federal
Street, Boston, Massachusetts, at 10:00 a.m. on January 29, 1999. The date on
which the Closing is actually held hereunder is sometimes referred to herein as
the "Closing Date".
2.2. Transactions at Closing. At the Closing, in addition to any other
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instruments or documents referred to herein:
(a) The Sellers shall deliver to the Buyer, free and clear of any lien,
claim or encumbrance, certificates representing the Shares, duly endorsed in
blank or with duly executed stock powers attached.
(b) Each Seller shall execute and deliver to the Buyer a Seller Closing
Note (as defined in Section 4.2 hereof).
(c) Each Seller shall execute and deliver to the Buyer a Pledge
Agreement (as defined in Section 4.2 hereof), together with the certificate
Representing the Pledged Shares (as defined in Section 4.2 hereof), with duly
Executed stock powers attached thereto.
(d) The Buyer shall deliver to each Seller, free and clear of any lien,
claim or encumbrance, certificates representing such Seller's Closing Shares, a
portion of which shall be delivered by each Seller to the Buyer as "Pledged
Shares" pursuant to Section 2.2(c) hereof.
(e) The Buyer shall cause to be repaid to each Seller in immediately
available funds $25,000 of such Seller's Existing Loan (as defined in Section
4.1 hereof).
(f) Brookings and MRB shall execute and deliver an employment agreement
in the form of Exhibit A-1 hereto (the "Brookings Employment Agreement").
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(g) Herring and MRB shall execute and deliver an employment agreement
in the form of Exhibit A-2 hereto (the "Herring Employment Agreement"; and
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together with the Brookings Employment Agreement, the "Employment Agreements").
(h) The Sellers and the Buyer shall execute and deliver the Lease ( as
defined in Section 4.6 hereof).
(i) The Sellers and the Buyer shall execute and deliver such other
instruments, agreements and documents as any of the parties or their respective
legal counsel may reasonably request in order to effectuate the terms and
conditions contained in this Agreement.
3. EARN OUT.
(a) The Sellers shall be entitled to receive, as additional purchase
price for the Shares (and irrespective of whether a Seller remains employed with
any of the Companies), a payment (each, an "Earn-Out Payment") with respect to
each of the four (4) quarters (each, an "Earn-Out Quarter") in the six (6) full
consecutive fiscal years of
<PAGE>
the Companies, beginning with the fiscal year ended on December 31, 1999 and
ending with the fiscal year ended on December 31, 2004, determined as
hereinafter provided (each such fiscal year being referred to herein as an
"Earn-Out Year"). With respect to each Earn-Out Quarter, an Earn-Out Payment
shall be payable to each Seller in an amount equal to seven and one-half percent
(7.5%) of the Adjusted Pre-Tax Earnings (as defined in Section 11 hereof) during
each such Earn-Out Quarter. Each Earn-Out Payment, if any, due to the Sellers
shall be paid by the Buyer within ninety (90) days after the end of the
applicable Earn-Out Quarter in respect of which it has been achieved.
(b) All determinations of the Adjusted Pre-Tax Earnings during each
Earn-Out Quarter, and the amount of the Earn-Out Payout, if any, due to each
Seller in respect thereof (each, a "Determination"), shall initially be made by
the Buyer in good faith from the combined unaudited, internally prepared
financial statements for the Companies for each such Earn-Out Quarter, and shall
be made within twenty (20) days after the end of such Earn-Out Quarter. Upon
each Determination, the Buyer shall immediately thereafter (but in any event
within five (5) days) furnish to the Sellers written notice of such
Determination, together with a copy of the applicable financial statements for
such Earn-Out Quarter.
(c) Following the end of each Earn-Out Year, the Buyer shall instruct
its then certified public accounting firm (the "Buyer's Accountants") to
prepare, as part of the Buyer's Accountant's audit of the Companies for such
Earn-Out Year, a determination of the Adjusted Pre-Tax Earnings during each
Earn-Out Quarter in such Earn-Out Year, and a determination of the Earn-Out
Payments, if any, due and owing to the Sellers in respect thereof. In
connection with such process, the Buyer's Accountants shall determine whether
the amount of the Earn-Out Payments, if any, paid by the Buyer to the Sellers in
respect of each such Earn-Out Quarter, was correct, and if not, shall calculate
the net amount that the Buyer or the Sellers, as the case may be, owe the
other(s) on account thereof (any such net amount being referred to herein as an
"Earn-Out Adjustment). As soon as practicable after the Buyer's Accountants
have determined the Earn-Out Adjustment, if any, as aforesaid, they shall
furnish a copy of their calculation, together with such reasonably supporting
information and worksheets, to the Buyer and the Sellers (herein, an "Earn-Out
Adjustment Determination"). Within twenty (20) days after the Sellers' receipt
of an Earn-Out Adjustment Determination (a "Determination Review Period"), each
Seller shall notify the Buyer in writing as to whether such Seller accepts the
Earn-Out Adjustment Determination. If any Seller does not object to the
Earn-Out Adjustment Determination within the Determination Review Period, then
the Earn-Out Adjustment Determination shall be final and binding upon the Buyer
and such Seller. If, however, a Seller objects to the Earn-Out Adjustment
Determination within the Determination Review Period, then the Buyer and such
Seller shall promptly meet and use their best efforts in good faith to resolve
the dispute. If, after ten (10) days, the parties are unable to resolve the
dispute, then the matter shall be submitted to Tofias, Fleischman Shapiro & Co.,
P.C. of Boston, Massachusetts (who shall have no prior or existing relationship
with Chancellor or any of its Affiliates (as defined in Section 11 hereof),
including the Buyer, or the Sellers) for resolution, whose determination shall
be made within forty-five (45) days and shall be final and binding upon the
parties, and whose fees shall be borne by the party against whom the matter is
resolved.
(d) All Earn-Out Payments, if any, shall be payable in cash; provided,
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however, that after consummation of the Buyer IPO (as defined in Section 11
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hereof), at the election of the Buyer, the Buyer may offer both of the Sellers
the option of receiving
<PAGE>
Earn-Out Payments in cash or shares of the Buyer's common stock, $.01 par value
per share (the "Buyer Common Stock"), or MRB common stock, $1.00 par value per
share (the "MRB Common Stock"), as the case may be; provided, further, that if
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the Buyer offers the Sellers such an option, the Sellers shall be entitled
separately to elect to receive their Earn-Out Payments in cash or shares of
Buyer Common Stock or MRB Common Stock, as the case may be. If a Seller so
elects to receive an Earn-Out Payment in shares of Buyer Common Stock or MRB
Common Stock, as the case may be, such Seller shall be entitled to receive a
number of shares of Buyer Common Stock or MRB Common Stock, as the case may, be
equal to the Earn-Out Payment divided by the average share price of the Buyer
Common Stock or MRB Common Stock, as the case may be, for the twenty (20)
trading days immediately prior to the end of the particular Earn-Out Quarter in
respect of which the Earn-Out Payment is due.
4. ANCILLARY MATTERS.
4.1. Repayment of Loans from Sellers. At and after the Closing, the
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Buyer shall cause the Companies to remit to each Seller $150,000 in the
aggregate in immediately available funds in repayment of existing loans made by
the Sellers to the Companies (as to each Seller, such Seller's "Existing Loan"),
payable to each Seller in accordance with the following schedule:
<TABLE>
<CAPTION>
Date Amount
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<S> <C>
Closing Date $ 25,000
July 1, 1999 $ 25,000
January 2, 2000 $ 25,000
July 1, 2000 $ 25,000
January 2, 2001 $ 25,000
July 1, 2001 $ 25,000
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Total: $150,000
</TABLE>
4.2. Loans to Sellers at Closing. At the Closing, the Buyer shall loan
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to each Seller the sum of $150,000 (collectively, the "Seller Closing Loans"),
which Seller Closing Loans shall be made by the Buyer from the proceeds of the
Capital Contribution (as defined in Section 8.12 hereof), and shall be repaid by
each Seller to the Buyer pursuant to the terms of a five (5) year promissory
note from each Seller in the original principal amount of $150,000 in the form
of Exhibit B hereto (as to each Seller, such Seller's "Seller Closing Note").
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The obligations of each Seller to pay such Seller's Seller Closing Note shall be
secured by a pledge by each Seller to the Buyer of such number of the Closing
Shares determined by dividing (a) 150,000, by (b) the closing price of the
Common Stock on the day immediately preceding the Closing Date (as to each
Seller, such Seller's "Pledged Shares," which term will also include the Closing
Shares pledged to the Buyer pursuant to Section 4.6 hereof), pursuant to the
terms of a pledge agreement between such Seller and the Buyer in the form of
Exhibit C hereto (as to each Seller, such Seller's "Pledge Agreement").
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<PAGE>
4.3. Chancellor Employee Options. At the Closing, Chancellor shall
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reserve in the aggregate 500,000 shares of Common Stock for issuance upon the
exercise of options granted to key management and personnel of the Companies (as
recommended by the Sellers in their reasonable judgment as hereinbelow provided)
pursuant to the Chancellor Corporation 1997 Stock Option Plan (the "Chancellor
Employee Options"). The Chancellor Employee Options shall be granted by the
Compensation Committee of the Chancellor Board of Directors (the "Compensation
Committee"), on or prior to the fifth anniversary of the Closing, pursuant to
the terms of the Chancellor Corporation 1997 Stock Option Plan; provided, that
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in no event shall the Compensation Committee grant less than 100,000 shares of
Common Stock to key management and personnel of the Companies (as recommended by
the Sellers in their reasonable judgment as hereinbelow provided) during each
fiscal year, commencing with the 1999 fiscal year ending on December 31, 1999.
The Sellers shall be entitled to provide recommendations to the Compensation
Committee with respect to the grantee, number of shares issuable upon exercise
and vesting schedule of the Chancellor Employee Options, which recommendations
are set forth on Schedule 4.3 hereto, which the Compensation Committee shall be
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required in good faith to consider adopting; provided, however, that all final
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decisions with respect to the Chancellor Employee Options, and the terms and
conditions thereof, shall be determined by the Compensation Committee.
4.4. Reimbursement for 1998 S Corp. Tax Liability. On April 15, 1999,
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the Buyer shall reimburse the Sellers the amount by which the aggregate 1998
federal and state income tax liability incurred by the Sellers on account of the
Companies having elected S corp. status under Section 1362 of the Internal
Revenue Code of 1986, as amended (the "1998 Tax Liability") exceeds the
aggregate amount of $200,000, up to a maximum aggregate reimbursement amount of
$100,000. In the event that the 1998 Tax Liability is less than $200,000 (such
shortfall being referred to herein as the "1998 Tax Liability Shortfall"), the
amount of the 1998 Tax Liability Shortfall shall be reimbursed by the Sellers to
the Buyer within five (5) days after such 1998 Tax Liability Shortfall has been
determined.
4.5. Loans to Sellers Post-Closing. On April 15, 1999, the Buyer shall
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loan to each Seller the sum of $100,000 (collectively, the "Seller Post-Closing
Loans"), which Seller Post-Closing Loans shall be repaid by each Seller to the
Buyer pursuant to the terms of a five (5) year promissory note from each Seller
in the original principal amount of $100,000 in the form of Exhibit D hereto (as
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to each Seller, such Seller's "Seller Post-Closing Note"). The obligations of
each Seller to pay such Seller's Seller Post-Closing Note shall be secured by a
pledge by each Seller to the Buyer of such number of Closing Shares determined
by dividing (a) 100,000, by (b) the closing price of the Common Stock on the day
immediately preceding the Closing Date (as to each Seller, such Closing Shares
so pledged shall be included in such Seller's "Pledged Shares"), pursuant to
such Seller's Pledge Agreement.
4.6. Real Estate. The Sellers own the approximately six (6) acre
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parcel of land and improvements thereon located at 4382 S. Moreland Avenue
(Highway 42), Conley, Georgia, on which MRB's business and operations are
conducted, as more particularly described on Exhibit E hereto (the "Conley Real
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Estate"). At the Closing, the Sellers and the Buyer shall enter into a lease
for the Conley Real Estate in the form of Exhibit F hereto (the "Lease"), but
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specifically providing for the following: a five (5) year term with a five (5)
year option term; (b) rent at the rate of $8,500 per month for the initial five
(5) year term, and rent at the rate of $10,000 for the five (5) year option
term; and an option (the "Option") in favor of the Buyer to purchase the Conley
Real Estate, exercisable by the Buyer for a period of six (6) months after the
Closing (the "Option Period"), for a purchase price equal to the sum of (i)
$300,000, plus (ii) the total of the three (3) existing mortgage loans secured
by the Conley Real Estate, but which mortgage loans shall not exceed $650,000 in
the aggregate. In the event that the Buyer exercises the Option, the Buyer and
the Sellers shall enter into a real estate purchase and sale agreement
containing mutually agreeable terms and conditions (subject to the purchase
price being as hereinabove provided, the closing date being within sixty (60)
days following the date on which the Option was exercised by the Buyer, and
title being satisfactory to the Buyer in its sole discretion), with usual and
customary closing conditions. In the event, however, that the Buyer does not
exercise the Option, and/or does not consummate the purchase of the Conley Real
Estate after exercising the Option for reasons other than any breach or failure
to satisfy one or more closing conditions
<PAGE>
by the Sellers, then the Buyer shall cause to be delivered to each Seller
250,000 additional shares of Common Stock (collectively, the "Contingent
Shares"), which Contingent Shares shall be delivered to the Sellers, if due,
within thirty (30) days after the expiration of the Option Period, or within
thirty (30) days after the failure of the Buyer to consummate the purchase of
the Conley Real Estate within the required time period after the Buyer has
exercised the Option, as the case may be.
4.7. Release of Personal Guaranties of Sellers. Prior to the Closing, and
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if not satisfied prior to the Closing, then thereafter, the Buyer shall use its
best efforts to cause the Sellers to be released from any personal guaranties
(the "Seller Guaranties") which the Sellers (or either of them) have executed
with respect to Indebtedness (as defined in Section 11 hereof) of the Companies.
In connection therewith, the Buyer shall indemnify and hold harmless the Sellers
from and against any Losses (as defined in Section 12.1 hereof) suffered by any
Seller under or in respect of any one or more of the Seller Guaranties
(including, without limitation, the Seller Guaranties of Indebtedness to
Associates Commercial Corporation or any Affiliates thereof) in the event that
the Buyer is unable to cause the Sellers to be released therefrom as aforesaid.
4.8. Conversion of Chancellor Shares. At any time upon not less than
---------- -- ---------- ------
thirty (30) days prior notice to the Buyer, each Seller shall have the right to
convert all, but not less than all, of such Seller's Chancellor Shares, into
such number of shares of Buyer Common Stock representing ten percent (10%) of
the issued and outstanding shares of capital stock of the Buyer determined at
the time of conversion on a fully-diluted basis.
4.9. Board of Directors. At the Closing, each Seller shall be elected
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to the Board of Directors of the Buyer. Until the conclusion of the final
Earn-Out Year, the Sellers shall be entitled at all times to have one of the
Sellers remain as a member of the Board of Directors of the Buyer, unless the
employment of both Sellers shall have been terminated for "Cause" under the
Employment Agreements, in which case no Seller shall be entitled to so serve.
In addition, the Buyer shall cause Brookings, for so long as she shall remain
employed by the MRB, to be recommended to the Board of Directors of Chancellor
(or Herring, for so long as he shall remain employed by MRB, in the event that
Brookings is unable or unwilling to so serve), subject to election by
Chancellor's stockholders (the outcome of which Brookings and Herring
acknowledge the Buyer cannot control).
5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers, jointly
and severally, represent and warrant to the Buyer as follows:
5.1. Organization of the Company; Authority. Each Company is a corporation
------------ -- --- ------- ---------
duly organized, validly existing and in corporate good standing under the laws
of its respective state of incorporation as set forth on Schedule 5.1(a) hereto.
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Each Company is duly qualified and in good standing as a foreign corporation in
all jurisdictions in which the character of the properties owned or leased or
the nature of the activities conducted by it makes such qualification necessary,
including those jurisdictions listed on Schedule 5.1(b) hereto. The Sellers
---------------
have delivered to the Buyer complete and correct copies of each Company's
charter documents and By-laws and all amendments thereto. Each Company has all
requisite power and authority to own or lease and operate its properties and to
carry on its business as such business is now conducted.
5.2. Rights to Sell Shares; Approvals; Binding Effect. Each of the
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Sellers has all requisite power and full legal right and authority to enter into
this Agreement and the other Transaction Documents (as defined in Section 11
hereof) to which each is a party, and to perform all of such Seller's respective
agreements and obligations thereunder, each in accordance with its respective
<PAGE>
terms. Each of the Sellers has all requisite power and full legal right and
authority to sell to the Buyer all of the Shares held by such Seller. Each of
the Transaction Documents to which the Sellers are parties has been duly
executed and delivered by the Sellers, as applicable, and constitutes the legal,
valid and binding obligation of the Sellers, enforceable against the Sellers, as
applicable, in accordance with its terms, except as the enforceability thereof
may be limited by any applicable bankruptcy, reorganization, insolvency or other
laws affecting creditors' rights generally or by general principles of equity.
5.3. Subsidiaries. No Company has any Subsidiaries (as defined in Section
------------
11 hereof), and no Company owns or holds, of record and/or beneficially, any
shares of any class in the capital of any corporations. In addition, no Company
owns or holds any legal and/or beneficial interests in any partnerships,
business trusts or joint ventures or in any other unincorporated trade or
business enterprises.
5.4. Capitalization. The authorized capital stock of each Company, and
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the issued and outstanding shares of which, are as set forth on Schedule 5.4
-------- ---
hereto. All of the Shares are owned of record and beneficially by the Sellers,
and are validly issued and outstanding, fully paid and non-assessable. There
are no commitments for the purchase or sale of, and no options, warrants or
other rights to subscribe for or purchase, any securities of any Company.
5.5. Title to Shares. The Sellers have, and as of the consummation of the
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Closing the Buyer will have, sole record and beneficial ownership to all of the
Shares, free and clear of any mortgage, lien, pledge, charge, security interest,
encumbrance, title retention agreement, option, equity or other adverse claim
thereto.
5.6. Non-Contravention. The execution and delivery of this Agreement and
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the other Transaction Documents by the Sellers, and the consummation by the
Sellers of the transactions contemplated hereby and thereby, will not (a)
violate or conflict with any provision of the charter documents or By-laws of
any Company, each as amended to date; or (b) constitute a violation of, or be in
conflict with, or constitute or create a default under, or result in the
creation or imposition of any encumbrance upon any property of any Company
pursuant to (i) any agreement or instrument to which the Seller or any Company
is a party or by which any of their respective properties is bound, or (ii) any
statute, judgment, decree, order, regulation or rule of any court or
governmental or regulatory authority applicable to the Sellers or any Company,
or to which the Sellers or any Company are subject.
5.7. Consents; Transferability of Licenses, Etc. Except as set forth on
-------- --------------- -- -------- ---
Schedule 5.7 hereto, no consent, approval or authorization of, or registration,
- -------- ---
qualification or filing with, any governmental agency or authority or other
Person (as defined in Section 11 hereof) is required for the execution and
delivery by the Sellers of this Agreement or the other Transaction Documents to
which they are party, or for the consummation by the Sellers of the transactions
contemplated hereby or thereby. Each Company has and maintains, and the permits
listed on Schedule 5.7 hereto include, all licenses, permits and other
-------- ---
authorizations from all governmental authorities (collectively, the "Permits")
as are necessary or desirable for the conduct of each Company's business.
Except as expressly designated on Schedule 5.7 hereto, all of the Permits will
-------- ---
remain in full force and effect after the sale of the Shares by the Sellers to
the Buyer, and true and complete copies of such Permits have previously been
delivered to the Buyer.
5.8. Financial Statements. The Sellers have delivered the following
--------- ----------
financial statements (the "Financial Statements") to the Buyer, and there are
attached as Schedule 5.8(i) hereto: (a) the audited balance sheets of each of
-------- ------
MRB and Tomahawk Virginia as of December 31, 1997; (b)
<PAGE>
the compiled combined balance sheets of MRB, Tomahawk Virginia and Tomahawk
Florida as of December 31, 1997; (c) the unaudited consolidated statements of
income of MRB, Tomahawk Virginia and Tomahawk Florida for the fiscal year ended
December 31, 1997; (d) the unaudited consolidated balance sheets of MRB,
Tomahawk Virginia and Tomahawk Florida as of July 31, 1998, and the related
statements of income of MRB, Tomahawk Virginia and Tomahawk Florida for the
seven-month period then ended; (e) the unaudited consolidated balance sheets of
MRB, Tomahawk Virginia and Tomahawk Florida as of November 30, 1998 (such
balance sheets being referred to herein as the "November 1998 Balance Sheets"),
and the related statements of income of MRB, Tomahawk Virginia and Tomahawk
Florida for the 11-month period then ended; and (f) the unaudited balance sheet
of Tomahawk Missouri as of November 30, 1998 (the financial statements in the
foregoing clauses (d), (e) and (f) being referred to herein as the "Interim
Financials"). Except as set forth on Schedule 5.8(ii) hereto, each of the
-------- -------
Financial Statements are true and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles
consistently applied (subject, in the case of the Interim Financials, to the
absence of footnotes and to year-end audit adjustments); each of such balance
sheets contained therein fairly and accurately presents the financial condition
of the Company as of its respective date in all material respects; and each such
statements of income, retained earnings and cash flows contained therein fairly
and accurately present the results of operations for the periods covered
thereby.
5.9. Absence of Certain Changes. Except as set forth on Schedule 5.9
------- -- ------- ------- -------- ---
hereto, since November 30, 1998: (a) each Company has carried on its business
generally in the ordinary course consistent with past practice, and (b) there
has not been (i) any change in the assets, liabilities, sales, income or
business of any Company, or in its relationships with suppliers, customers or
lessors, other than changes which were both in the ordinary course of business
and have not been, either in any case or in the aggregate, materially adverse;
(ii) any acquisition or disposition by any Company of any asset or property
other than in the ordinary course of business; (iii) any damage, destruction or
loss, whether or not covered by insurance, materially and adversely affecting,
either in any case or in the aggregate, the property or business of any Company;
(iv) any declaration, setting aside or payment of any dividend or any other
distributions in respect of the Shares; (v) any issuance of any shares of the
capital stock of any Company or any direct or indirect redemption, purchase or
other acquisition of any of the Shares; (vi) any increase in the compensation,
pension or other benefits payable or to become payable by any Company to any of
its officers or employees, or any bonus payments or arrangements made to or with
any of them (other than pursuant to the terms of any existing written agreement
or plan of which the Buyer has been supplied complete and correct copies of);
(vii) any forgiveness or cancellation of any debt or claim by any Company or any
waiver of any right of material value other than compromises of accounts
receivable, debts or claims of any Company in the ordinary course of business;
(viii) any entry by any Company into any transaction other than in the ordinary
course of business; (ix) any incurrence by any Company of any obligations or
liabilities, whether absolute, accrued, contingent or otherwise (including,
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others), other than obligations and liabilities incurred in the
ordinary course of business; (x) any mortgage, pledge, lien, lease, security
interest or other charge or encumbrance on any of the assets, tangible or
intangible, of any Company; or (xi) any discharge or satisfaction by any Company
of any lien or encumbrance or payment by any Company of any obligation or
liability (fixed or contingent) other than (A) current liabilities included in
such Company's November 1998 Balance Sheet, and (B) current liabilities incurred
since the date of such Company's November 1998 Balance Sheet in the ordinary
course of business.
<PAGE>
5.10. Litigation, Etc. Except as set forth on Schedule 5.10 hereto, no
---------- --- -------- ----
action, suit, proceeding or investigation is pending or threatened against any
Company or the Sellers (nor is there any basis therefor actually known to the
Sellers).
5.11. Conformity to Law. Each Company has complied with, and is in
---------- -- ---
compliance with (a) all laws, statutes, governmental regulations and all
judicial or administrative tribunal orders, judgments, writs, injunctions,
decrees or similar commands applicable to any Company or any of its properties
(including, without limitation, any labor, environmental, occupational health,
zoning or other law, regulation or ordinance), and (b) all unwaived terms and
provisions of all contracts, agreements and indentures to which such Company is
a party, or by which such Company or any of its properties is subject. Except
as set forth on Schedule 5.11 hereto, no Company has committed, been charged
-------- ----
with, or been under investigation with respect to, nor does there exist, any
violation of any provision of any federal, state or local law or administrative
regulation in respect of such Company or any of its properties.
5.12. Title to Property; Real PropertyLeases, etc. Except as set forth on
----- -- -------- ------------------- ---
Schedule 5.12(a) hereto, each Company has good and marketable title to all of
- -------- -------
its properties and assets, including, without limitation, all those reflected in
its November 1998 Balance Sheet (except for properties or assets sold or
otherwise disposed of in the ordinary course of business since November 30,
1998), all free and clear of all liens, pledges, charges, security interests,
encumbrances or title retention agreements of any kind or nature. Except as
hereinafter provided with respect to vehicles, all such properties and assets
are in good condition and repair and are adequate and sufficient to carry on the
business of each such Company as presently conducted; provided, however, that,
--------
except with respect to not more than twenty percent (20%) of all vehicles owned
by the Companies, with respect to all remaining vehicles owned by the Companies,
each such vehicle: is in "trade package" condition, without any glass damage;
has no body damage in excess of $500; has tires with an average tread depth of
at least 40%, which tires shall have matched treads; is in a condition to pass
all applicable Federal and state safety inspections; and is mechanically and
structurally sound and legal for operation on public roads. Schedule 5.12(b)
-------- -------
hereto sets forth a complete and correct list of all capital assets of each
Company having a book or fair market value in excess of $1,000, and all real
property owned or leased by each Company (the "Real Property"). There are no
material defects in any such capital assets or Real Property, as to title or
condition, not described on Schedule 5.12(b) hereto. None of the Sellers or any
-------- -------
Company has received any notice that either the whole or any portion of any Real
Property is to be condemned, requisitioned or otherwise taken by any public
authority. None of the Sellers or any Company has any actual knowledge of any
public improvements that may result in special assessments against or otherwise
affect any Real Property. Schedule 5.12(c) hereto sets forth a complete and
-------- -------
correct description of all leases of Real Property to which any Company is a
party, and a complete legal description of all Real Property owned by each
Company. Complete and correct copies of all such leases have been delivered to
the Buyer. Each such lease is valid and subsisting and no event or condition
exists which constitutes, or after notice or lapse of time or both would
constitute, a default thereunder. The leasehold interests, if any, of each
Company are subject to no lien or other encumbrance, and each Company is in
quiet possession of the properties covered by such leases.
5.13. Environmental Matters.
------------- -------
(a) Except as set forth on Schedule 5.13(a) hereto:
-------- -------
<PAGE>
(i) no Company nor any operator of any real property
presently or formerly owned, leased or operated by any Company is in violation
or alleged violation of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without limitation,
those arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Water Pollution Control Act, the Solid Waste Disposal Act,
as amended, the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any federal, state or local statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter "Environmental Laws");
(ii) none of the Sellers or any Company has received notice
from any third party, including, without limitation, any federal, state or local
governmental authority, (A) that any Company or any predecessor in interest has
been identified by the United States Environmental Protection Agency (the "EPA")
as a potentially responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (B) that any
hazardous waste, as defined by 42 U.S.C. 6903(5), any hazardous substance, as
defined by 42 U.S.C. 9601(14), any pollutant or contaminant, as defined by 42
U.S.C. 9601(33), or any toxic substance, oil or hazardous material or other
chemical or substance regulated by any Environmental Laws (hereinafter
"Hazardous Substances") which any Company or any predecessor in interest has
generated, transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or has ordered
that such Company or any predecessor in interest conduct a remedial
investigation, removal or other response action pursuant to any Environmental
Law; or (C) that any Company or any predecessor in interest is or shall be a
named party to any claim, action, cause of action, complaint (contingent or
otherwise), or legal or administrative proceeding arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind whatsoever
in connection with the release of Hazardous Substances;
(iii) (A) no portion of any real property presently or
formerly owned, leased or operated by any Company has been used for the
handling, manufacturing, processing, storage or disposal of Hazardous Substances
except in accordance with applicable Environmental Laws; and no underground tank
or other underground storage receptacle for Hazardous Substances is located on
such properties; (B) in the course of any activities conducted by each Company
or operators of any real property presently or formerly owned, leased or
operated by such Company, no Hazardous Substances have been generated or are
being used on such property except in accordance with applicable Environmental
Laws; (C) all real property presently or formerly owned, leased or operated by
each Company are free from contamination of every kind, including without
limitation, groundwater, surface water, soil, sediment and air contamination,
and such properties do not contain asbestos in any form, urea formaldehyde foam
insulation, transformers or other equipment containing polychlorinated biphenyls
or any other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any Environmental Law, or which poses a hazard to the
<PAGE>
health and safety of the occupants of such properties or those adjacent thereto;
(D) there have been no releases (i.e., any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
disposing or dumping) or threatened releases of Hazardous Substances on, upon,
into or from any real property presently or formerly owned, leased or operated
by any Company except in accordance with applicable Environmental Laws; (E)
there have been no releases on, upon, from or into any real property in the
vicinity of any real property presently or formerly owned, leased or operated by
any Company which, through soil or groundwater contamination, may have come to
be located on such real property; and (F) in addition, any Hazardous Substances
that have been generated on any real property presently or formerly owned,
leased or operated by each Company have been transported offsite only by
carriers having identification numbers issued by the EPA and have been treated
or disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which transporters and
facilities have been and are, to the best of the Sellers' knowledge, operating
in compliance with such permits and applicable Environmental Laws; and
(iv) no real property presently or formerly owned, leased or
operated by any Company is or shall be subject to any applicable environmental
cleanup responsibility law or environmental restrictive transfer law or
regulation, by virtue of the transactions set forth herein and contemplated
hereby.
(b) Attached as Schedule 5.13(b) hereto is a list of all documents,
-----------------
reports, site assessments, data, communications or other materials, in each
Company's and the Sellers' possession, custody or control, which contain any
material information with respect to potential environmental liabilities
associated with any real property presently or formerly owned, leased or
operated by any Company or relating to compliance with Environmental Laws or the
environmental condition of such properties and adjacent properties. The Sellers
have furnished to the Buyer complete and accurate copies of all of the
documents, reports, site assessments, data, communications and other materials
listed on Schedule 5.13(b) hereto.
-----------------
5.14. Insurance. Schedule 5.14 hereto lists all policies of fire,
--------- -------- ----
liability, workmen's compensation, life, property and casualty and other
insurance owned or held by each Company. All such policies of insurance are
maintained with financially sound and reputable insurance companies, funds or
underwriters and are of the kinds and cover such risks and are in such amounts
and with such deductibles and exclusions as are consistent with prudent business
practice. All such policies (a) are in full force and effect, (b) are
sufficient for compliance by each Company with all requirements of law and all
agreements to which such Company is a party, (c) provide that they will remain
in full force and effect through the respective dates set forth in such Schedule
and (d) will not in any way be affected by, or terminate or lapse by reason of,
the transactions contemplated by this Agreement. No Company is in default with
respect to its obligations under any of such insurance policies, and no company
has received any written notification of cancellation of any such insurance
policies.
5.15. Contracts. Schedule 5.15 hereto sets forth a complete and accurate
--------- -------- ----
list of all contracts to which each Company is a party (excluding oral at will
employment contracts with employees), or by or to which it or any of its assets
or properties is bound or subject, except (a) contracts entered into in the
ordinary course of business after the date hereof and prior to the Closing,
which will be identified by the Sellers to the Buyer in writing prior to the
Closing, (b) contracts terminable by any Company upon thirty (30) days' notice
<PAGE>
or less without the payment of any termination fee or penalty, and (c) contracts
listed in other Schedules hereto. As used in this Section 5.15, the term
"contract" means and includes every agreement or understanding of any kind,
written or oral, which is legally enforceable by or against each Company, and
specifically includes: (i) contracts and other agreements with any current or
former officer, director, employee, consultant or shareholder or any
partnership, corporation, joint venture or any other entity in which any such
person has an interest; (ii) agreements with any labor union or association
representing any employee; (iii) contracts and other agreements for the
provision of services or products by such Company; (iv) bonds or other security
agreements provided by any party in connection with the business of such
Company; (v) contracts and other agreements for the sale of any of such
Company's assets or properties other than in the ordinary course of business or
for the grant to any person of any preferential rights to purchase any of such
Company's assets or properties; (vi) joint venture agreements relating to the
assets, properties or business of such Company or by or to which it or any of
its assets or properties are bound or subject; (vii) contracts or other
agreements under which such Company agrees to indemnify any party, to share tax
liability of any party, or to refrain from competing with any party; (viii) any
contracts or other agreements with regard to outstanding Indebtedness; or (ix)
any other contract or other agreement whether or not made in the ordinary course
of business. The Sellers have delivered to the Buyer true, correct and complete
copies of all such contracts, together with all modifications and supplements
thereto. Each of the contracts listed on Schedule 5.15 hereto or any of the
-------- ----
other Schedules hereto is in full force and effect, the particular Company party
hereto is not in breach of any of the provisions of any such contract, nor, to
the best knowledge of the Sellers, is any other party to any such contract in
default thereunder, nor does any event or condition exist which with notice or
the passage of time or both would constitute a default thereunder. Each Company
has in all material respects performed all obligations required to be performed
by it to date under each such contract. No approval or consent of any Person is
needed in order that the contracts listed on Schedule 5.15 hereto and other
-------- ----
Schedules hereto continue in full force and effect following the consummation of
the transactions contemplated by this Agreement, and no such contract includes
any provision the effect of which may be to enlarge or accelerate any
obligations of the particular Company thereunder or give additional rights to
any other party thereto or will in any other way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement.
5.16. Employees. Schedule 5.16 hereto sets forth the name and current
--------- -------- ----
annual salary or hourly wage and other compensation payable by each Company
(including, but not limited to, wages, salary, commissions, normal bonus, profit
sharing, deferred compensation and other extra compensation) to each employee of
such Company.
5.17. Employee Benefit Plans.
-------- ------- -----
(a) Except for the arrangements set forth on Schedule 5.17(a) hereto,
-------- -------
no Company now maintains or contributes to, and no Company has in the current or
preceding six (6) calendar years maintained or contributed to, any pension,
profit-sharing, deferred compensation, bonus, stock option, share appreciation
right, severance, group or individual health, dental, medical, life insurance,
survivor benefit, or similar plan, policy or arrangement, whether formal or
informal, for the benefit of any director, officer, consultant or employee,
whether active or terminated, of such Company. Each of the arrangements set
forth on Schedule 5.17(a) hereto is hereinafter referred to as an "Employee
-------- -------
Benefit Plan," except that any such arrangement which is a multi-employer plan
shall be treated as an Employee Benefit Plan only for purposes of Sections
5.17(d)(iv), (vi) and (viii) and 5.17(g) below.
<PAGE>
(b) The Sellers have heretofore delivered to the Buyer true, correct
and complete copies of each Employee Benefit Plan of each Company, and with
respect to each such Employee Benefit Plan (i) any associated trust, custodial,
insurance or service agreements, (ii) any annual report, actuarial report, or
disclosure materials (including specifically any summary plan descriptions)
submitted to any governmental agency or distributed to participants or
beneficiaries thereunder in the current or any of the six (6) preceding calendar
years and (iii) the most recently received IRS determination letters and any
governmental advisory opinions or rulings.
(c) Each Employee Benefit Plan is and has heretofore been maintained
and operated in compliance with the terms thereof and with the requirements
prescribed (whether as a matter of substantive law or as necessary to secure
favorable tax treatment) by any and all statutes, governmental or court orders,
or governmental rules or regulations in effect from time to time, including but
not limited to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Internal Revenue Code of 1986, as amended (the "Code"), and
applicable to such Employee Benefit Plan. Each Employee Benefit Plan which is
intended to qualify under Section 401(a) of the Code has been determined to be
so qualified by the IRS and nothing has occurred since the date of the last such
determination which has resulted or is likely to result in the revocation of
such determination.
(d) Except as set forth on Schedule 5.17(d) hereto:
-------- -------
(i) there is no pending or threatened legal action, proceeding or
investigation, other than routine claims for benefits, concerning any Employee
Benefit Plan or, to the best knowledge of the Sellers, any fiduciary or service
provider thereof and, to the best knowledge of the Sellers, there is no basis
for any such legal action or proceeding;
(ii) no liability (contingent or otherwise) to the Pension Benefit
Guaranty Corporation ("PBGC") or any multi-employer plan has been incurred by
any Company or any Affiliate (as defined in Section 11 hereof) thereof (other
than insurance premiums satisfied in due course);
(iii) no reportable event, or event or condition which presents a
material risk of termination by the PBGC, has occurred with respect to any
Employee Benefit Plan, or any retirement plan of an affiliate of any Company,
which is subject to Title IV of ERISA;
(iv) no Employee Benefit Plan nor any party in interest with respect
thereof, has engaged in a prohibited transaction which could subject any Company
directly or indirectly to liability under Section 409 or 502(i) of ERISA or
Section 4975 of the Code;
(v) no communication, report or disclosure has been made which, at the
time made, did not accurately reflect the terms and operations of any Employee
Benefit Plan;
<PAGE>
(vi) no Employee Benefit Plan provides welfare benefits subsequent to
termination of employment to employees or their beneficiaries (except to the
extent required by applicable state insurance laws and Title I, Part 6 of
ERISA);
(vii) no benefits due under any Employee Benefit Plan have been
forfeited subject to the possibility of reinstatement (which possibility would
still exist at or after Closing); and
(viii) no Company has undertaken to maintain any Employee Benefit Plan
for any period of time and each such Employee Benefit Plan is terminable at the
sole discretion of the sponsor thereof, subject only to such constraints as may
be imposed by applicable law.
(e) With respect to each Employee Benefit Plan for which a separate
fund of assets is or is required to be maintained, full payment has been made of
all amounts that each Company is required, under the terms of each such Employee
Benefit Plan, to have paid as contributions to that Employee Benefit Plan as of
the end of the most recently ended plan year of that Employee Benefit Plan, and
no accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any such
Plan. The current value of the assets of each such Employee Benefit Plan, as of
the end of the most recently ended plan year of that Employee Benefit Plan,
exceeded the current value of all accrued benefits under that Employee Benefit
Plan.
(f) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment (whether of
severance pay or otherwise) becoming due from any Employee Benefit Plan to any
current or former director, officer, consultant or employee of any Company, or
result in the vesting, acceleration of payment or increases in the amount of any
benefit payable to or in respect of any such current or former director,
officer, consultant or employee.
(g) No Employee Benefit Plan is a multi-employer plan.
(h) For purposes of this Section 5.17, "multi-employer plan," "party in
interest," "current value," "accrued benefit," "reportable event" and "benefit
liability" have the same meaning assigned such terms under Sections 3, 4043(b)
or 4001(a) of ERISA, and "affiliate" means, as to any Company, any entity which
under Section 414 of the Code is treated as a single employer with such Company.
5.18. Labor Relations. Except as set forth on Schedule 5.18 hereto, each
----- --------- -------- ----
Company is in full compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours and nondiscrimination in employment, and is not engaged in any unfair
labor practice. Except as set forth on Schedule 5.18 hereto, there is no charge
-------- ----
pending or threatened against any Company alleging unlawful discrimination in
employment practices before any court or agency, and there is no charge of or
proceeding with regard to any unfair labor practice against any Company pending
before the National Labor Relations Board. There is no labor strike, dispute,
slow-down or work stoppage actually pending or threatened against or involving
any Company. No one has petitioned within the last five (5) years, and no one
is now petitioning, for union representation of any of any Company's employees.
No grievance or arbitration proceeding arising out of or under any collective
<PAGE>
bargaining agreement is pending against any Company and no claim therefor has
been asserted. None of the employees of any Company is covered by any
collective bargaining agreement, and no collective bargaining agreement is
currently being negotiated by such Company. Except as set forth on Schedule
--------
5.18 hereto, no Company has experienced any work stoppage during the last five
- ----
(5) years.
5.19. Potential Conflicts of Interest. Except as set forth on Schedule
--------- --------- -- -------- --------
5.19 hereto, no officer, director or stockholder of any Company (a) owns,
- ----
directly or indirectly, any interest in (excepting not more than 1% stock
holdings for investment purposes in securities of publicly held and traded
companies) or is an officer, director, employee or consultant of any Person
which is a competitor, lessor, lessee, customer or supplier of such Company; (b)
owns, directly or indirectly, in whole or in part, any tangible or intangible
property which such Company is using or the use of which is necessary for the
business of such Company; or (c) has any cause of action or other claim
whatsoever against, or owes any amount to, such Company, except for claims in
the ordinary course of business, such as for accrued vacation pay, accrued
benefits under Employee Benefit Plans and similar matters and agreements.
5.20. Trademarks; Patents, Etc. Schedule 5.20 hereto sets forth a
---------- ------- --- -------- ----
complete and accurate list of (a) all patents, trademarks, trade names and
copyrights registered in the name of each Company or used or proposed to be used
by each Company, all applications therefor, and all licenses (as licensee or
licensor) and other agreements relating thereto, and (b) all written agreements
relating to other technology, know-how and processes which each Company is
licensed or authorized by others to use or which each Company has licensed or
authorized for use by others (other than retail shrink-wrap licenses for
ordinary course computer software such as Microsoft Windows 95, Microsoft Office
and the like). Except to the extent set forth in Schedule 5.20 hereto, each
-------- ----
Company owns or has the sole and exclusive right to use all patents, trademarks,
trade names and copyrights, and has the right without restrictions to use all
technology, know-how and processes, used or necessary for the ordinary course of
business as presently conducted or proposed to be conducted, and the
consummation of the transactions contemplated hereby will not alter or impair
any such right. No claims have been asserted, and no claims are pending, by any
Person regarding the use of any such patents, trademarks, trade names,
copyrights, technology, know-how or processes, or challenging or questioning the
validity or effectiveness of any license or agreement, and there is no basis for
such claim. To the best knowledge of the Sellers, the use by each Company of
such patents, trademarks, trade names, copyrights, technology, know-how or
processes in the ordinary course of business does not infringe on the rights of
any Person.
5.21. Suppliers and Customers. Schedule 5.21(a) hereto sets forth the ten
--------- --- --------- -------- -------
(10) largest suppliers and ten (10) largest customers of each Company as of the
date hereof, in each case based on sales volume for the 1997 and 1998 fiscal
years. The relationships of each Company with such suppliers and customers are
good commercial working relationships and, except as set forth on Schedule
--------
5.21(a) hereto, no supplier or customer of material importance to such Company
- -------
has cancelled or otherwise terminated, or threatened to cancel or otherwise to
terminate, its relationship with such Company, or has during the last twelve
(12) months decreased materially, or threatened to decrease or limit materially,
its services, supplies or materials for use by such Company or its usage or
purchase of the services or products of such Company except for normal cyclical
changes related to customers' businesses. To the best knowledge of the Sellers,
no such supplier or customer intends to cancel or otherwise substantially modify
its relationship with any Company, or to decrease materially or limit its
services, supplies or materials to such Company, or its usage or purchase of
such Company's services or products, and to the best knowledge of the Sellers,
the communication of the
<PAGE>
transactions contemplated hereby will not adversely affect the relationship of
the Company with any such supplier or customer. Schedule 5.21(b) hereto sets
-------- -------
forth all agreements, written or oral, pursuant to which the Company is an
exclusive supplier of services or products.
5.22. Accounts Receivable. Except to the extent reflected or reserved
-------- -----------
against in the November 1998 Balance Sheets or described on any Schedule hereto,
all accounts and notes receivable reflected on the November 1998 Balance Sheets,
and all accounts and notes receivable of the Companies arising subsequent to
November 30, 1998, have arisen in the ordinary course of business, represent
valid obligations owing to the applicable Company, and have been collected or
will be collected in the aggregate recorded amounts thereof in accordance with
their terms.
5.23. No Undisclosed Liabilities. Except to the extent (a) reflected or
-- ----------- -----------
reserved against in the November 1998 Balance Sheets, (b) incurred in the
ordinary course of business after November 30, 1998 or (c) described on any
Schedule hereto, no Company has any liabilities or obligations of any nature,
whether accrued, absolute, contingent or otherwise (including, without
limitation, as guarantor or otherwise with respect to obligations of others),
other than performance obligations with respect to each Company's contracts that
would not be required to be reflected or reserved against on a balance sheet
prepared in accordance with generally accepted accounting principles or in the
footnotes thereto.
5.24. Taxes. Each Company has duly filed with the appropriate government
-----
agencies all of the income, sales, use, employment and other tax returns and
reports required to be filed by it. No waiver of any statute of limitations
relating to taxes has been executed or given by any Company. All taxes,
assessments, fees and other governmental charges upon each Company or upon any
of its properties, assets, revenues, income and franchises which are owed by
such Company with respect to any period ending on or before the Closing Date
have been paid, other than those currently payable without penalty or interest.
Each Company has withheld and paid all taxes required to be withheld or paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor or third party. No federal tax return of any Company is currently
under audit by the IRS (as defined in Section 11 hereof), and no other tax
return of any Company is currently under audit by any other taxing authority.
The Sellers have not received any written notice that either the IRS or any
other taxing authority is now asserting or threatening to assert against any
Company any deficiency or claim for additional taxes or interest thereon or
penalties in connection therewith or any adjustment that would have a material
adverse effect on such Company.
5.25. Indebtedness. Except for Indebtedness described on Schedule
------------ --------
5.25hereto, no Company has any Indebtedness outstanding as of the date hereof.
Except as disclosed on Schedule 5.25 hereto, no Company is in default with
-------- ----
respect to any outstanding Indebtedness or any instrument relating thereto and
no such Indebtedness, or any instrument or agreement relating thereto purports
to limit the issuance of any securities by any Company or the operation of the
business of any Company. Complete and correct copies of all instruments and
agreements (including all amendments, supplements, waivers and consents)
relating to any Indebtedness of each Company described on Schedule 5.25 hereto
-------- ----
have been furnished to the Buyer.
5.26. Illegal Payments. None of the Sellers or any officer, director,
------- --------
employee or consultant of any Company has at any time during the past five (5)
years (a) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (b) made any
payment to any federal or state governmental officer or official, or other
persons charged with public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof.
<PAGE>
5.27. Bank Accounts; Signing Authority; Powers of Attorney. Except as set
---- -------- ------- --------- ------ -- --------
forth on Schedule 5.27 hereto, no Company has any account or safe deposit box in
-------- ----
any bank and no Person has any power, whether singly or jointly, to sign any
checks on behalf of any Company to withdraw any money or other property from any
bank, brokerage or other account of any Company, or to act under any power of
attorney granted by the Company at any time for any purpose. Schedule 5.27
-------- ----
hereto also sets forth the names of all Persons authorized to borrow money or
sign notes on behalf of each Company.
5.28. Minute Books. The minute books of each Company made available to
------ -----
the Buyer for inspection accurately record therein all actions taken by each
such Company's Board of Directors and shareholders.
5.29. Brokers. None of the Sellers or any Company has retained, utilized
-------
or been represented by any broker, agent, finder or other intermediary in
connection with the negotiation or consummation of the transactions contemplated
by this Agreement.
5.30. Securities Matters. Each Seller is an "accredited investor" under
------------------
Rule 501(a) of the Securities Act of 1933, as amended. Each Seller has received
and reviewed copies of the following: (a) Chancellor's Annual Report on Form
10KSB for the fiscal year ended December 31, 1997; (b) Chancellor's Interim
Report on Form 10QSB for the fiscal quarter ended March 31, 1998; (c)
Chancellor's Interim Report on Form 10QSB for the fiscal quarter ended June 30,
1998; (d) Chancellor's Interim Report on Form 10QSB for the fiscal quarter ended
September 30, 1998; and (e) Chancellor's Proxy Statement dated April 9, 1998
furnished to its stockholders in connection with Chancellor's Annual Meeting of
Stockholders held on May 15, 1998; all of the foregoing which Chancellor has
filed with the United States Securities and Exchange Commission under the United
States Securities Exchange Act of 1934. Each Seller and his or her
representatives has had an adequate opportunity to ask questions and receive
answers (and have asked such questions and received such answers to their
satisfaction) from Chancellor and its officers concerning the business,
operations and financial condition of Chancellor. Each Seller has received all
materials and information regarding Chancellor which they have requested from
Chancellor and its representatives. Each Seller is acquiring such Seller's
Chancellor Shares for his or her own account for investment and not with a view
to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same, and each Seller does not
have any contract, undertaking, agreement or understanding, whether oral or
written, with any third party to sell, transfer or grant participation in any
Chancellor Shares to be acquired by such Seller in connection with the
consummation of the transactions contemplated under this Agreement. Each Seller
will not sell, assign, transfer, pledge or otherwise encumber (except pursuant
to the terms of the Pledge Agreements) any of such Seller's Chancellor Shares
for a period of one (1) year after the Closing Date.
5.31. Disclosure. No representation or warranty by the Sellers in this
----------
Agreement or in any exhibit, schedule, written statement, certificate or other
document delivered or to be delivered to the Buyer pursuant hereto or in
connection with the consummation of the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading or necessary in order to
provide the Buyer with proper and complete information as to the business,
condition, operations and prospects of any Company. There is no fact which the
Sellers have not disclosed to the Buyer in writing which materially adversely
affects, or so far as any Seller can now foresee will materially adversely
affect, the
<PAGE>
business or condition (financial or other) of each Company, or the ability of
the Sellers to perform this Agreement or any of the transactions contemplated
hereby.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Sellers as follows:
6.1. Organization of Buyer; Authority. The Buyer is a corporation duly
------------ -- ----- ---------
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer has all requisite power and authority to execute and
deliver the Transaction Documents to which it is a party and to carry out all of
the actions required of it pursuant to the terms thereof.
6.2. Corporate Approval; Binding Effect. The Buyer has obtained all
--------- -------- ------- ------
necessary authorizations and approvals from its Board of Directors required for
the execution and delivery of this Agreement and the other Transaction Documents
to which it is a party and the consummation of the transactions contemplated
hereby and thereby. Each of the Transaction Documents to which the Buyer is a
party has been duly executed and delivered by the Buyer and constitutes the
legal, valid and binding obligation of the Buyer, enforceable against the Buyer
in accordance with its terms, except as the enforceability thereof may be
limited by any applicable bankruptcy, reorganization, insolvency or other laws
affecting creditors' rights generally or by general principles of equity.
6.3. Non-Contravention. The execution and delivery by the Buyer of this
-----------------
Agreement and the other Transaction Documents to which it is a party, and the
consummation by the Buyer of the transactions contemplated hereby and thereby,
will not (a) violate or conflict with any provisions of the Certificate of
Incorporation or By-laws of the Buyer, each as amended to date; or (b)
constitute a violation of, or be in conflict with, constitute or create a
default under, or result in the creation or imposition of any lien upon any
property of the Buyer pursuant to (i) any agreement or instrument to which the
Buyer is a party or by which the Buyer or any of its properties is bound or to
which the Buyer or any of its properties is subject, or (ii) any statute,
judgment, decree, order, regulation or rule of any court or governmental or
regulatory authority applicable to the Buyer, or to which the Buyer is subject.
6.4. Consents. No consent, approval or authorization of, or
--------
registration, qualification or filing with, any governmental agency or authority
or other Person is required for the execution and delivery by the Buyer of this
Agreement and the other Transaction Documents to which it is a party, or for the
consummation by the Buyer of the transactions contemplated hereby or thereby.
6.5. Brokers. The Buyer has not retained, utilized or been represented by
-------
any broker, agent, finder or other intermediary in connection with the
negotiation or consummation of the transactions contemplated by this Agreement.
7. CONDUCT OF BUSINESS BY THE COMPANIES PENDING CLOSING. INTENTIONALLY
DELETED.
8. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. The obligation of the
Buyer to consummate the Closing shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions (to the extent noncompliance
is not waived in writing by the Buyer, or waived by Buyer's consummating the
Closing notwithstanding the failure of the Sellers to satisfy at or prior to
Closing all such conditions precedent):
<PAGE>
8.1. Representations and Warranties True at Closing. The representations
--------------- --- ---------- ---- -- -------
and warranties made by the Sellers in or pursuant to this Agreement shall be
true and correct at and as of the Closing Date with the same effect as though
such representations and warranties had been made or given at and as of the
Closing Date.
8.2. Compliance with Agreement. The Sellers shall have performed and
---------- ---- ---------
complied with all of their obligations under this Agreement to be performed or
complied with by them on or prior to the Closing Date.
8.3. Closing Certificate. The Sellers shall have delivered to the Buyer
------- -----------
in writing, at and as of the Closing, a certificate duly executed by each of the
Sellers, in form and substance reasonably satisfactory to the Buyer and the
Buyer's counsel, certifying that the conditions in each of Sections 8.1 and 8.2
hereof have been satisfied.
8.4. No Material Change. Between November 30, 1998 and the Closing, there
-- -------- ------
shall not have been or threatened to be, any material damage to or loss or
destruction of any properties or assets owned or leased by any Company (whether
or not covered by insurance) or any material adverse change in the condition
(financial or otherwise), operations, business, prospects or assets of any
Company, or the imposition of any laws, rules or regulations which would
materially adversely affect the condition (financial or otherwise), operations,
business, prospects or assets of any Company.
8.5. Opinion of Counsel. Wilson, Brock & Irby, LLC, counsel to the
------- -- -------
Sellers and the Companies, shall have delivered to the Buyer a written opinion,
addressed to the Buyer and dated the Closing Date, substantially in the form of
Exhibit G hereto.
- ------- -
8.6. Board Approvals. The respective Boards of Directors of the Buyer and
----- ---------
Chancellor shall have approved the transactions contemplated by this Agreement
and the other Transaction Documents.
8.7. No Litigation. No restraining order or injunction shall prevent the
-- ----------
transactions contemplated by this Agreement, and no action, suit or proceeding
shall be pending or threatened before any court or administrative body in which
it will be or is sought to restrain or prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
8.8. Due Diligence. The Buyer shall have completed a due diligence
--- ---------
investigation, satisfactory to the Buyer in its sole discretion, of each
Company's business, assets and liabilities.
8.9. Environmental Report. The Buyer shall have obtained, at the Buyer's
------------- ------
cost and expense, reports, in form and substance satisfactory to it in its sole
discretion, of an environmental engineering firm satisfactory to the Buyer, as
to compliance of the Real Property, including without limitation, the Conley
Real Estate, with all applicable environmental statutes, rules and regulations,
including without limitation, the absence of any Hazardous Materials on such
Real Property.
8.10. Regulatory and Other Consents. The Sellers shall have obtained all
---------- --- ----- --------
necessary governmental consents and approvals required with respect to the
consummation of the transactions contemplated under this Agreement and the other
Transaction Documents, in order to so consummate said transactions, and all
consents and approvals to the consummation of the
<PAGE>
transactions contemplated under this Agreement and the other Transaction
Documents by each Person to any contract, commitment or other obligation of any
Company under which said transactions would constitute a default, would
accelerate obligations of any Company or would permit cancellation of any such
contract or commitment.
8.11. Resignations of Directors and Officers. The officers and directors
------------ -- --------- --- --------
of each Company set forth on Schedule 8.11 hereto shall have resigned their
-------- ----
positions with each such Company, on the Closing Date, and on such date shall
have executed such appropriate documents with respect to the transfer or
establishment of bank accounts, signing authority, etc., as the Buyer shall
reasonably request.
8.12. Capital Contribution and Letter of Credit. Chancellor shall have
------- ------------ --- ------ -- ------
simultaneously with the Closing (a) contributed $1,500,000 to the capital of the
Buyer (the "Capital Contribution"), and (b) caused a letter of credit in the
face amount of $2,000,000 to be issued in favor of the Buyer (the "Letter of
Credit").
9. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATIONS. The obligation of
the Sellers to consummate the Closing shall be subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (to the extent
noncompliance is not waived in writing by the Sellers, or waived by the Sellers'
consummating the Closing notwithstanding the failure of the Buyer to satisfy at
or prior to Closing all such conditions precedent):
9.1. Representations and Warranties True at Closing. The representations
--------------- --- ---------- ---- -- -------
and warranties made by the Buyer in this Agreement shall be true and correct at
and as of the Closing Date with the same effect as though such representations
and warranties had been made or given at and as of the Closing Date.
9.2. Compliance with Agreement. The Buyer shall have performed and
---------- ---- ---------
complied with all of its obligations under this Agreement that are to be
performed or complied with by it at or prior to the Closing.
9.3. Closing Certificate. The Buyer shall have delivered to the Sellers
------- -----------
in writing, at and as of the Closing, a certificate duly executed by the
President of the Buyer, in form and substance satisfactory to the Sellers and
their counsel, to the effect that the conditions in each of Sections 9.1 and 9.2
hereof have been satisfied.
9.4. Opinion of Counsel. Bingham Dana LLP, counsel to the Buyer, shall
------- -- -------
have delivered to the Sellers a written opinion, dated the Closing Date and
addressed to the Sellers, substantially in the form of Exhibit H hereto.
------- -
9.5. No Litigation. No restraining order or injunction shall prevent the
--- ----------
transactions contemplated by this Agreement, and no action, suit or proceeding
shall be pending or threatened before any court or administrative body in which
it will be or is sought to restrain or prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the transactions
contemplated hereby.
9.6. Regulatory and Other Consents. The Buyer shall have obtained all
---------- --- ----- --------
necessary governmental consents and approvals required with respect to the
consummation of the transactions contemplated under this Agreement and the other
Transaction Documents, in order to so consummate said transactions, and all
consents and approvals to the consummation of the transactions contemplated
under this Agreement and the other Transaction Documents by each
<PAGE>
Person to any contract, commitment or other obligation of the Buyer under which
said transactions would constitute a default, would accelerate obligations of
the Buyer or would permit cancellation of any such contract or commitment.
9.7. Capital Contribution and Letter of Credit. Chancellor shall have
------- ------------ --- ------ -- ------
simultaneously with the Closing (a) consummated the Capital Contribution, and
(b) caused the Letter of Credit to be issued.
10. CERTAIN COVENANTS.
10.1. Confidential Information. The Sellers and the Buyer agree that any
------------ -----------
and all information disclosed by the Buyer to the Sellers or by the Sellers to
the Buyer as a result of the negotiations leading to the execution of this
Agreement, or in furtherance thereof, or disclosed by either the Sellers or the
Buyer in connection with any of the transactions contemplated hereby, which
information is of a proprietary nature, or was not already publicly available or
known to the Sellers or to the Buyer, as the case may be, shall remain
confidential to the Sellers and the Buyer and their respective directors,
officers, employees, agents, representatives and lenders (collectively, "Related
Parties"), until the Closing Date. If the Closing does not take place for any
reason, each of the Sellers and the Buyer agrees that such Person will not, and
will use best efforts to cause such Person's Related Parties to not, further
divulge or disclose or use for such Person's benefit or purposes any such
information at any time in the future unless it has otherwise become public.
The information intended to be protected hereby shall include, but not be
limited to, financial information, customers, sales representatives, and any
other nonpublicly available information having an economic or pecuniary benefit
to the Buyer or the Sellers, respectively. Notwithstanding anything to the
contrary set forth in this Section 10.1, nothing herein shall prohibit any
disclosure under Section 14.12 hereof in strict accordance with the terms
thereof.
10.2. Non-Competition and Non-Solicitation. Each of the Sellers agrees
--------------- --- ----------------
that for a period from the Closing Date until the fifth anniversary of the
Closing Date, such Seller and such Seller's Affiliates shall not, without the
prior written consent of the Buyer, (a) engage anywhere in the United States,
directly or indirectly, alone or as a shareholder (other than as a holder of
less than 3% of the capital stock of any publicly traded corporation), member,
partner, manager, officer, director, employee or consultant, in any business
that is engaged or becomes engaged in the business of the Companies as existing
on the Closing Date, (b) divert or attempt to divert to any competitor of the
Companies or any Affiliate of any such competitor, any customer or client, or
any prospective customer or client, of the Companies, or (c) solicit or
encourage, or attempt to solicit or encourage, any employee of the Companies to
leave its employ for employment by or with either Seller or such Seller's
Affiliates, or any competitor of the Companies or any of any such competitor's
Affiliates. If at any time the provisions of this Section 10.2 shall be
determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10.2 shall
be considered divisible and shall become and be immediately amended to only such
area, duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
the Sellers agree that this Section 10.2 as so amended shall be valid and
binding as though any invalid or unenforceable provisions had not been included
therein. Notwithstanding anything to the contrary set forth in this Section
10.2, in the event that any Earn-Out Payment due and owing to either Seller is
not paid when due in accordance with Section 3 hereof, and continues unpaid
after written notice thereof has been furnished from such Seller to the Buyer
and a fifteen (15) day period to remedy same has expired, then the
non-competition covenants set forth in this Section 10.2 shall terminate as to
such Seller as of the end of such fifteen (15) day period.
<PAGE>
10.3. Equitable Remedies. It is recognized by the parties hereto that
--------- --------
damages for breaches of covenants of the nature contained in Sections 10.1 and
10.2 are difficult, if not impossible, to ascertain. Accordingly, it is agreed
that the covenants set forth in Sections 10.1 and 10.2 may be enforceable by any
party hereto by injunction, specific performance and/or equitable relief, in
addition to any other remedies available to such party at law or in equity.
10.4. Line of Credit. The Buyer shall use its reasonable commercial
---- -- ------
efforts to obtain from one or more lenders, within six (6) months after the
Closing Date, and shall provide for MRB's use, a warehouse inventory line of
credit in an amount not less than $20,000,000 on terms and conditions
satisfactory to the Buyer and Chancellor.
11. DEFINITIONS. As used herein the following terms not otherwise
defined have the following respective meanings:
"Adjusted Pre-Tax Earnings": As of any measuring period, the combined
-------- ------- --------
pre-tax earnings of the Companies during such period, determined in accordance
with generally accepted accounting principles consistently applied; provided,
--------
that in determining such after-tax earnings, (a) an allocable portion determined
in good faith by the Chancellor Board of Directors based upon a fair and
reasonable standard which reflects the Companies' share of Chancellor's
overhead, including, without limitation, costs associated with benefits
administration, management information systems maintenance and upgrade, and
costs and expenses reasonably incurred by Chancellor's SEC, investor relations
and M&A departments, and other costs and expenses which are reasonably incurred
by Chancellor to benefit all of Chancellor's subsidiaries and affiliates, shall
be allocated as expenses of the Companies, and (b) any of such costs and
expenses attributable solely and directly to any Company shall be charged as
expenses of such Company. Notwithstanding anything to the contrary set forth
herein, in no event shall the Companies' allocable portion of Chancellor's
overhead under clause (a) above exceed $50,000 in the aggregate per month.
"Affiliate". As applied to any specified Person, any other Person
---------
controlling, controlled by or under common control with, such specified Person.
"Buyer IPO": The initial public offering of the Buyer Common Stock or the
----- ---
MRB Common Stock, as the case may be.
"Indebtedness": As applied to any Person, (a) all indebtedness of such
------------
Person for borrowed money, whether current or funded, or secured or unsecured,
(b) all indebtedness of such Person for the deferred purchase price of property
or services represented by a note or other security, (c) all indebtedness of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (d)
all indebtedness of such Person secured by a purchase money mortgage or other
lien to secure all or part of the purchase price of property subject to such
mortgage or lien, (e) all obligations under leases which shall have been or must
be, in accordance with generally accepted accounting principles, recorded as
capital leases in respect of which such Person is liable as lessee, (f) any
liability of such Person in respect of banker's acceptances or letters of
credit, and (g) all indebtedness referred to in clause (a), (b), (c), (d), (e)
or (f) above which is directly or indirectly guaranteed by such Person or which
such Person has agreed (contingently or otherwise) to purchase or otherwise
acquire or in respect of which it has otherwise assured a creditor against loss.
<PAGE>
"IRS": The United States Internal Revenue Service.
---
"Person": A corporation, an association, a limited liability company, a
------
partnership, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
"Subsidiary": With respect to any Person, any corporation a majority (by
----------
number of votes) of the outstanding shares of any class or classes of which
shall at the time be owned by such Person or by a Subsidiary of such Person, if
the holders of the shares of such class or classes (a) are ordinarily, in the
absence of contingencies, entitled to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof, even
though the right so to vote has been suspended by the happening of such a
contingency, or (b) are at the time entitled, as such holders, to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, whether or not the right so to vote exists by
reason of the happening of a contingency.
"Transaction Documents": This Agreement, the Seller Closing Notes, the
----------- ---------
Seller Post-Closing Notes, the Pledge Agreements, the Employment Agreements, and
the Lease.
12. INDEMNIFICATION.
12.1. Indemnity by the Sellers. Subject to the time limitations set
---------------------------
forth in Section 12.5 hereof, the Sellers, jointly and severally, agree to
indemnify and hold the Buyer and each Company (and their respective directors,
officers, employees and Affiliates) harmless from and with respect to any and
all claims, liabilities, losses, damages, costs and expenses, including without
limitation, the fees and disbursements of counsel reasonably and actually
incurred (collectively, the "Losses") suffered or incurred by the Buyer and/or
any Company, related to or arising, directly or indirectly, out of or with
respect to (a) any failure or any breach by the Sellers of any representation or
warranty, covenant, obligation or undertaking made by the Sellers in or pursuant
to this Agreement or any other Transaction Document, any Schedule or Exhibit
hereto, or any other statement, certificate or other instrument delivered
pursuant hereto or in connection herewith, and (b) any of the litigation
disclosed on Schedule 5.10 hereto, subject to the provisions of Section 13
-------- ----
hereof; provided, that no Person entitled to indemnification by the Sellers
--------
under this Section 12.1 shall be entitled to seek such indemnification until the
Losses suffered by all such Persons, in the aggregate, equal at least $50,000,
after which the Sellers shall be obligated to indemnify all such Persons in full
for all Losses suffered thereby, excluding however such initial $50,000 of
Losses; provided, further, that this limitation shall not apply to any Losses
--------
suffered by such Persons on account of the matters set forth in clause (b)
above.
12.2. Indemnity by the Buyer. Subject to the time limitations set forth
------------------------
in Section 12.5 hereof, the Buyer agrees to indemnify and hold the Sellers
harmless from and with respect to any and all Losses suffered or incurred by any
Seller related to or arising from, directly or indirectly, any failure or any
breach by the Buyer of any representation or warranty, covenant, obligation or
undertaking made by the Buyer in or pursuant to this Agreement or any other
Transaction Document, any Schedule or Exhibit hereto, or any other statement,
certificate or other instrument delivered pursuant hereto or in connection
herewith; provided, that no Person entitled to indemnification by the Buyer
--------
under this Section 12.2 shall be entitled to seek such indemnification until the
Losses suffered by all such Persons, in the aggregate, equal at least $50,000,
after which the Buyer shall be obligated to indemnify all such Persons in full
for all Losses suffered thereby, excluding however such initial $50,000 of
Losses.
<PAGE>
12.3. Claims.
------
(a) Notice. Any party seeking indemnification hereunder (the
------
"Indemnified Party") shall promptly notify the other party hereto (the
"Indemnifying Party") of any action, suit, proceeding, demand or breach (a
"Claim") with respect to which the Indemnified Party claims indemnification
hereunder; provided, that the failure of the Indemnified Party to give such
--------
notice shall not relieve the Indemnifying Party of its obligations under this
Section 12 except to the extent, if at all, that such Indemnifying Party shall
have been materially and adversely prejudiced thereby.
(b) Third Party Claims. If such Claim relates to any action, suit,
----- ----- ------
proceeding or demand instituted against the Indemnified Party by a third party
(a "Third Party Claim"), the Indemnified Party shall promptly notify the
Indemnifying Party of such Third Party Claim and the Indemnified Party's claim
of indemnification with respect thereto. Within thirty (30) days after receipt
of such notice from the Indemnified Party, the Indemnifying Party may assume the
defense of such Third Party Claim by delivering a notice to the Indemnified
Party, in which case the Indemnifying Party shall have the authority to
negotiate, compromise and settle such Third Party Claim, if and only if the
following conditions are satisfied:
(i) the Indemnifying Party shall have confirmed in writing that it is
obligated hereunder to indemnify the Indemnified Party with respect to such
Third Party Claim; and
(ii) such Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief and any settlement thereof releases
the Indemnified Party from any further liability with respect thereto.
The Indemnified Party shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation. If the Indemnifying Party fails to
notify the Indemnified Party of its election to assume the defense within thirty
(30) days after its receipt of notice of a particular matter from the
Indemnified Party, the Indemnified Party shall be entitled to assume the defense
of such Third Party Claim at the expense of the Indemnifying Party.
12.4. Method and Manner of Paying Claims. In the event of any Claims
------------------------------------
under this Section 12, the claimant shall advise the party or parties who are
required to provide indemnification therefor in writing of the amount and
circumstances surrounding such Claim. Any amount owed by an Indemnifying Party
hereunder with respect to any Claim (the "Claim Amount") may be set-off by the
Indemnified Party against any amounts owed by the Indemnified Party to any
Indemnifying Party, including; provided, however, that with respect to any such
--------
Claim Amount owed by the Sellers to the Buyer, such Claim Amount shall be
satisfied in the following manner and order of priority: first, by deducting the
Claim Amount against any Earn-Out Payments then owing by the Buyer to the
Sellers at the time any such Claim Amount is owed to the Buyer; second, to the
extent any such available Earn-Out Payments are insufficient to pay such Claim
Amount, by the Sellers forfeiting to Chancellor such number of Chancellor Shares
determined by dividing (a) the amount of the unsatisfied Claim Amount, by (b)
the closing price of the Common Stock on the day immediately preceding the day
the Claim giving rise to such
<PAGE>
Claim Amount becomes final and agreed upon; and third, to the extent any such
Chancellor Shares are insufficient to pay the amount of the unsatisfied Claim
Amount, by the Sellers paying
the Buyer the amount of such remaining unsatisfied Claim Amount in cash or
immediately available funds.
12.5. Limitations on Indemnification. No Indemnifying Party shall be
----------- -- ---------------
liable for any Losses pursuant to this Section 12 unless a written claim for
indemnification in accordance with this Section 12 is given by the Indemnified
Party to the Indemnifying Party with respect thereto within eighteen months (18)
after the Closing Date, except that this time limitation shall not apply to any
Losses related to or arising directly or indirectly out of any (i) breaches by
the Sellers of the representations and warranties set forth in Sections 5.2,
5.4, 5.5, 5.13, 5.24 and 5.29 hereof, (ii) breaches by the Sellers of the
provisions of Section 10 hereof, (iii) breaches by the Buyer of the
representation and warranty set forth in Section 6.5 hereof, and (iv) claim by
the Buyer under Section 12.1(b) hereof, as to which in each case the applicable
statute of limitations shall apply.
12.6. Survival of Representations and Warranties. The representations and
-------- -- --------------- --- ----------
warranties of the parties hereto contained in this Agreement or otherwise made
in writing in connection with the transactions contemplated hereby (in each case
except as affected by the transactions contemplated by this Agreement) shall be
deemed material and, notwithstanding any investigation by the Buyer or the
Sellers, shall be deemed to have been relied on by the Buyer and the Sellers, as
the case may be, and shall survive the Closing, and the consummation of the
transactions contemplated hereby. Each representation and warranty made by the
Sellers or the Buyer in this Agreement shall expire on the last day, if any,
that Claims for breaches of such representation or warranty may be made pursuant
to Section 12.5 hereof, except that any such representation or warranty that has
been made the subject of a Claim prior to such expiration date shall survive
with respect to such Claim until the final resolution of such Claim pursuant to
Section 12.
13. AGREEMENT REGARDING LITIGATION. In the event that MRB recovers any
amounts in respect of the litigation disclosed on Schedule 5.10 hereto, the
-------- ----
Buyer shall cause MRB to promptly remit to the Sellers the full amount of any
such recovery, after deducting the amount of any costs and expenses, including
attorney's fees and expenses, incurred by MRB in respect thereof.
14. GENERAL.
14.1. Expenses. The Sellers shall pay all transfer and sales taxes
--------
payable in connection with the sale of the Shares. All expenses of the
preparation, execution and consummation of this Agreement and of the
transactions contemplated hereby, including without limitation, attorneys',
accountants' and outside advisers' fees and disbursements, shall be borne by the
party incurring such expenses; provided, however, that MRB shall be permitted to
-------- -------
pay up to $37,500 of such fees and expenses incurred by the Sellers.
14.2. Notices. All notices, requests, demands or other communications
-------
required or permitted to be given hereunder shall be in writing and shall be
addressed and delivered by hand delivery, or by certified mail, return receipt
requested, or by overnight or local commercial courier, to each party at the
address set forth below:
Any such notice shall be effective upon receipt or actual delivery.
Rejection or other refusal to accept or inability to deliver because of a change
of address as to which proper notice
<PAGE>
was not furnished shall be deemed to be receipt of the notice, request, demand
or other communication.
If to the Sellers, to:
M. Rea Brookings
1285 Iris Lake Road
McDonough, Georgia 30252
David F. Herring
707 Lexington Avenue
Jonesboro, Georgia 30236
with a copy sent contemporaneously to:
Frank L. Wilson, III, Esq.
Wilson, Brock & Irby, LLC
Overlook I, Suite 700
2849 Paces Ferry Road
Atlanta, Georgia 30339
If to the Buyer, to:
Chancellor Asset Management, Inc.
c/o Chancellor Corporation
210 South Street, 10th Floor
Boston, Massachusetts 02111
Attention: Peter J. Mullen, Clerk
with a copy sent contemporaneously to:
Victor J. Paci, Esq.
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
or such other address as such party shall designate by written notice to the
other parties hereto in accordance with the terms hereof. Legal counsel for the
Sellers and the Companies on the one hand, and the Buyer on the other hand,
shall be permitted to send to the other parties any notices, requests, demands
or other communications required or permitted to be given hereunder by such
party.
14.3. Entire Agreement. This Agreement contains the entire understanding
------ ---------
of the parties, supersedes all prior agreements and understandings relating to
the subject matter hereof, including, without limitation, any management
agreements or arrangements between the parties, and shall not be amended except
by a written instrument hereafter signed by all of the parties hereto.
14.4. Governing Law. The validity and construction of this Agreement
--------- ---
shall be governed and construed and enforced in accordance with the internal
laws (and not the choice-of-law rules) of the State of Delaware.
<PAGE>
14.5. Sections and Section Headings. The headings of sections and
-------- --- ------- --------
subsections are for reference only and shall not limit or control the meaning
thereof.
14.6. Assigns. This Agreement shall be binding upon and inure to the
-------
benefit of the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns. Neither this Agreement nor the obligations of
any party hereunder shall be assignable or transferable by such party without
the prior written consent of the other party hereto, which may be withheld in
the sole discretion of such party; provided, however, that nothing contained in
-------- -------
this Section 14.6 shall prevent the Buyer, without the consent of the Sellers
(a) from transferring or assigning this Agreement or its rights or obligations
hereunder to another entity controlling, under the control of, or under common
control with, Chancellor, or (b) from assigning all or part of its rights or
obligations hereunder by way of collateral assignment to any bank or financing
institution providing financing for the acquisition contemplated hereby, but no
such transfer or assignment made pursuant to clauses (a) or (b) shall relieve
the Buyer of its obligation under this Agreement.
14.7. Severability. In the event that any covenant, condition, or other
------------
provision herein contained is held to be invalid, void, or illegal by any court
of competent jurisdiction, the same shall be deemed to be severable from the
remainder of this Agreement and shall in no way affect, impair, or invalidate
any other covenant, condition, or other provision contained herein.
14.8. Further Assurances. The parties agree to take such reasonable steps
------- ----------
and execute such other and further instruments, agreements and documents as may
be necessary or appropriate and which are reasonably requested to cause the
terms and conditions contained herein to be carried into effect.
14.9. No Implied Rights or Remedies. Except as otherwise expressly
-- ------- ------ -- --------
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any Person, other than the Sellers and the
Buyer and their respective shareholders, if any, any rights or remedies under or
by reason of this Agreement.
14.10. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.11. Satisfaction of Conditions Precedent. The Sellers and the Buyer
------------ -- ---------- ---------
will use their best efforts to cause the satisfaction of the conditions
precedent contained in this Agreement; provided, however, that nothing contained
-------- -------
in this Section 14.11 shall obligate either party hereto to waive any right or
condition under this Agreement.
14.12. Public Statements or Releases. Except as otherwise required by law
------ ---------- -- --------
and in the case of the Buyer's prior issuance of a press release disclosing the
parties entering into of a letter of intent for the purchase and sale of Shares,
each of the parties hereto agrees that prior to the consummation of the Closing,
no party to this Agreement will make, issue or release any public announcement,
statement or acknowledgment of the existence of, or reveal the status of, this
Agreement or the transactions contemplated hereby or any negotiations or
discussions related thereto or hereto, without first obtaining the consent of
the other parties hereto. Nothing contained in this Section 14.12 shall prevent
any party from making such disclosures as such party may consider necessary to
satisfy such party's legal or contractual obligations; provided,
--------
<PAGE>
that the party seeking to make such disclosures shall provide written notice to
the other parties to this Agreement immediately upon the knowledge thereof.
15. NON-BINDING MEDIATION. If a dispute (a "Dispute") arises
between the Buyer and either or both of the Sellers under this Agreement which
is not resolved within ten (10) days, the Dispute shall, within thirty (30) days
after notice from either the Buyer or a Seller, be submitted to mediation before
any such party proceeds with any other rights or remedies to which any such
party may be entitled. The mediation shall be conducted through any mutually
agreeable commercial mediation and arbitration service, which shall appoint a
mediator (a "Mediator") to mediate the Dispute. If no commercial mediation and
arbitration service is mutually agreeable to the parties, the Mediator shall be
appointed by the American Arbitration Association in Boston, Massachusetts in
accordance with its Commercial Arbitration Rules. The parties shall meet with
the Mediator and present their evidence and arguments at such time and at such
place in Boston, Massachusetts as shall be directed by the Mediator which, in
any event, shall be as soon as reasonably practicable following submission of
the Dispute to mediation. The Mediator shall be requested to provide a written
decision to the parties within ten (10) days following the conclusion of
presentation of evidence and arguments. The fees and expenses of the Mediator
shall be borne equally by the Buyer on the one hand, and either or both of
Sellers on the other hand. The decision of the Mediator will be considered in
good faith by the parties before proceeding with any further dispute resolution,
but such decision will not be binding and will not be admissible as evidence in
any judicial or other proceeding.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed and delivered as a sealed
instrument as of the date first above written.
BUYER:
------
CHANCELLOR ASSET MANAGEMENT, INC.
By: /s/ Franklyn E. Churchill
----------------------------
Franklyn E. Churchill
President
SELLERS:
--------
/s/ M. Rea Brookings
----------------------------
M. Rea Brookings
/s/ David F. Herring
----------------------------
David F. Herring
<PAGE>
Exhibit 10.1
LEASE AGREEMENT
---------------
THIS LEASE AGREEMENT ("Lease"), made and entered into as of the 29th day of
January, 1999 ("Date of this Lease"), by and between M. REA BROOKINGS and DAVID
F. HERRING, individual residents of the State of Georgia (collectively
"Lessor"), and CHANCELLOR ASSET MANAGEMENT, INC., a Delaware corporation
("Lessee");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Lessor owns certain improved real property containing
approximately six (6) acres of land and improvements located at 4382 South
Moreland Avenue (Highway 42), Conley, Clayton County, Georgia which is more
particularly described on Exhibit A attached hereto and made a part hereof by
this reference ("Premises"), on which the business operations of M.R.B., Inc., a
Georgia corporation, are presently conducted;
WHEREAS, Lessor desires to lease to Lessee, and Lessee desires to lease
from Lessor, the Premises on the terms and conditions set forth in this Lease;
NOW, THEREFORE, for and in consideration of the rentals to be paid
hereunder, the mutual covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby covenant and agree as follows:
ARTICLE I
PREMISES
--------
SECTION 1.1. PREMISES. Lessor hereby rents and leases to Lessee, and Lessee
--------
hereby rents and leases from Lessor, the Premises on and subject to the terms
and conditions contained in this Lease. No easement for light, air or view is
included in this Lease of the Premises, and no diminution or shutting off of
light or air or view by any structure which may be now or hereafter erected
shall affect this Lease. This Lease shall create the relationship of landlord
and tenant and shall be a usufruct, and not an estate for years.
SECTION 1.2. CONDITION OF PREMISES. Lessee acknowledges that Lessee has
-----------------------
examined and inspected the Premises and is fully familiar with the physical
condition, state of repair, expenses for operating the Premises, use or
operation of the Premises and any other facts or matters relating to Lessee's
decision to enter into this Lease. Neither Lessor nor any of Lessor's agents or
other representatives have made any representations or warranties as to any
facts or matters relating to the Premises except as expressly provided in this
Section. Lessee hereby expressly acknowledges and represents that no such
representations or warranties have been made, and Lessee further acknowledges
and represents that based upon its examination and inspection of the Premises,
Lessee agrees to accept the Premises "as-is" in the present condition, subject
to ordinary wear and tear and natural deterioration from and after the Date of
this Lease.
<PAGE>
SECTION 1.3. USE OF PREMISES. Lessee acknowledges and agrees that Lessee is
-----------------
entering into this Lease for the purpose of Lessee or one or more of its
subsidiaries conducting the below-described business on the Premises and for no
other purposes without the prior written consent of Lessor which shall not be
unreasonably withheld or delayed. Lessor shall have no liability or
responsibility if for any reason the Lessee is prevented from using the
Premises, in whole or in part, for the purposes set forth below, which purposes
Lessor represents and warrants are in compliance with all applicable zoning
laws. Subject to the foregoing, the business to be operated by Lessee on the
Premises is as follows: storage, maintenance, repair, lease, sale or other
disposition of motor vehicle tractors and trailers together with all other
activities and operations arising out of or related thereto.
ARTICLE II
TERM
----
SECTION 2.1. TERM. Lessee takes and accepts the Premises from Lessor to have
----
and to hold the same for the term described below ("Lease Term"). The Lease
Term and the payment of rent hereunder shall commence at 12:00 midnight, E.T. on
February 1, 1999 ("Commencement Date"). The Lease Term shall terminate at 12:00
midnight E.T. on January 31, 2004 ("Expiration Date"), unless sooner terminated
as herein provided. Lessee shall have the right to enter the Premises as of the
Date of this Lease and shall be entitled to use and possession of the Premises
without any obligation to pay rent for occupancy of the Premises from the Date
of this Lease until the Commencement Date. This Lease shall be effective as of
the Date of this Lease, and Lessor and Lessee shall be governed by, and perform
in accordance with, the terms and conditions contained in this Lease, including,
without limitation, with respect to insurance, utility charges and repair and
maintenance of the Premises.
SECTION 2.2. OPTIONAL TERM. Lessor hereby grants to Lessee the right, at
--------------
Lessee's sole option, to extend the term of this Lease for an additional five
(5) year period from and after the Expiration Date ("Optional Term") on the same
terms and conditions as set forth in this Lease, except as herein expressly
provided to the contrary. During the Optional Term, the annual rent shall be
One Hundred Twenty Thousand and No/100 Dollars ($120,000.00) ("Optional Term
Base Rental"). The Optional Term Base Rental during each twelve (12) month
period of the Optional Term shall be paid in equal monthly installments of Ten
Thousand and No/100 Dollars ($10,000.00) with the first installment being due on
the first day of the first month of the Optional Term and on the first day of
each successive month thereafter during the Optional Term. Lessee shall, if
Lessee desires to exercise such option rights, exercise Lessee's option rights
granted hereunder on or before ninety (90) days prior to the Expiration Date of
this Lease. If Lessee fails to exercise the option within ninety (90) days
prior to the Expiration Date, Lessor, at Lessor's option, may terminate Lessee's
option rights under this Lease.
<PAGE>
SECTION 2.3. REMOVAL OF LESSEE'S PERSONAL PROPERTY. Before the termination or
-------------------------------------
expiration of this Lease, Lessee shall remove from the Premises all Lessee's
personal property which this Lease allows Lessee to remove and shall peaceably
surrender the Premises and the keys thereto to Lessor in the same condition as
at the beginning of the Lease Term, subject to alterations and additions
subsequently made by Lessee pursuant to the terms of this Lease and subject to
ordinary wear and tear and natural deterioration. Personal property which
Lessee fails to remove from the Premises before the termination of this Lease
shall be considered as abandoned by Lessee and may be disposed of by Lessor in
any manner whatsoever without accounting to Lessee for such property or being
liable in any way to Lessee for such disposition.
SECTION 2.4. HOLDING OVER. In no event shall there be any renewal of this
-------------
Lease by operation of law, and if Lessee remains in possession of the Premises
after the termination of this Lease and without a new Lease executed by Lessor
and Lessee, Lessee shall be deemed to be occupying the Premises as a tenant at
sufferance and agrees to pay Lessor an amount equal to one hundred fifty percent
(150%) of the Base Rental and additional rent provided for in this Lease and
shall otherwise be subject to all the terms and conditions of this Lease insofar
as the same are applicable to a month-to-month tenancy.
SECTION 2.5. PURCHASE OPTION. Lessor hereby grants to Lessee an option to
----------------
purchase the Premises ("Purchase Option") at any time during the six (6) month
period from and after the Date of this Lease through and including July 31, 1999
("Purchase Option Period") for a purchase price equal to the sum of (i) Three
Hundred Thousand Dollars ($300,000), plus (ii) the total of the three (3)
existing mortgage loans secured by the Premises, but which mortgage loans shall
not exceed Six Hundred Fifty Thousand Dollars ($650,000) in the aggregate. In
the event that the Lessee exercises the Purchase Option prior to the expiration
of the Purchase Option Period, Lessor and Lessee shall enter into a real estate
purchase and sale agreement ("Sale Agreement") containing mutually agreeable
terms and conditions (subject to the purchase price being in an amount as
hereinabove provided), and the closing date shall be within sixty (60) days
following the date on which the Purchase Option was exercised by Lessee. The
Sale Agreement shall provide that the title shall be satisfactory to Lessee in
Lessee's sole discretion. The Sale Agreement shall also provide closing
conditions which are usual and customary in the State of Georgia. In the event
that Lessee does not exercise the Purchase Option, and/or does not consummate
the purchase of the Premises after exercising the Purchase Option for reasons
other than any breach or failure to satisfy one or more closing conditions by
Lessor, then Lessee shall cause to be delivered to each Lessor one-half (1/2) of
the Contingent Shares (as defined in Section 4.6 of the Stock Purchase Agreement
dated as of December 31, 1998 between Lessor and Lessee). The Contingent Shares
shall be delivered to each Lessor, if due, within thirty (30) days after the
expiration of the Purchase Option Period, or more than thirty (30) days after
the failure of Lessee to consummate the purchase of the Premises within the
required time period after Lessee has exercised the Purchase Option, as the case
may be.
<PAGE>
ARTICLE III
RENT
----
SECTION 3.1. BASE RENTAL. Lessee shall pay to Lessor annual rental ("Base
------------
Rental") for the Premises in the amount of One Hundred Two Thousand Dollars
($102,000.00) which is due and payable in equal monthly installments of Eight
Thousand Five Hundred Dollars ($8,500.00) on the first day of each and every
calendar month during the Lease Term commencing on February 1, 1999 and
continuing on the first calendar day of each month thereafter until January 1,
2004 on which the final monthly installment of Base Rental for the Lease Term
shall be due and payable.
SECTION 3.2. RENT AND OTHER PAYMENTS. Lessee shall pay to Lessor all Base
--------------------------
Rental and all other charges due and owing by Lessee under this Lease without
deduction or set off, in legal tender, and at Lessor's address stated in the
Lease or as otherwise directed from time to time by written notice from Lessor.
All installments of rent and all other charges due and owing by Lessee under
this Lease not paid when due shall bear interest at twelve percent (12%) per
annum. Lessee shall pay all sales or other taxes (but not including income
taxes or taxes of a similar nature hereinafter charged to Lessor) levied or
assessed against any rent payment due under this Lease simultaneously with each
required rent payment.
ARTICLE IV
REPAIR AND MAINTENANCE OF PREMISES; UTILITIES; SIGNAGE
------------------------------------------------------
SECTION 4.1. MAINTENANCE AND REPAIRS BY LESSEE. Lessee accepts the Premises in
---------------------------------
"as is, where is" condition without representation or warranty of any kind
whatsoever, including, without limitation, any warranty of habitability or of
fitness for an intended purpose, except with respect to electrical, plumbing,
HVAC and other systems and equipment located in or on the Premises which systems
and equipment shall be in working order as of the Date of this Lease and for a
thirty (30) day period thereafter. Lessor shall not have any responsibility for
maintenance or repairs of such systems and equipment following the expiration of
such thirty (30) day period. From and after the expiration of thirty (30) days
following the Date of this Lease, Lessee shall at its own expense keep the
Premises, including, without limitation, all electrical, plumbing, HVAC and
other systems and equipment located in or on the Premises, in good repair and
tenantable condition and indemnify Lessor against any loss, damage, or expense
arising by reason of any failure of Lessee so to keep the Premises in good
repair, maintenance and tenantable condition or due to any act or neglect of
Lessee, its agents, employees, contractors, invitees, licensees or permitted
assignees or sublessees. Lessee further agrees to maintain and care for the
grounds of the Premises, including mowing of grass, care of shrubs and general
landscaping. Lessee agrees to return the Premises to Lessor at the expiration
or termination of this Lease in as good of condition and repair as when first
received, normal wear and tear excepted. Notwithstanding anything to the
contrary set forth herein, upon reasonable notice from Lessee, Lessor shall be
responsible for maintaining and repairing the roof, the exterior walls and the
foundation of the Premises at Lessor's cost and expense, and shall indemnify
Lessee against any loss, damage or expense arising from Lessor's failure to so
maintain such portions of the Premises. If Lessee fails to perform, or cause to
be performed, such maintenance and repairs, then at the option of Lessor, in
its sole discretion and without any obligation to do so, any such maintenance or
repair may be performed or caused to be performed by Lessor and the cost and
expense thereof charged to Lessee, and Lessee shall pay the amount thereof to
Lessor on demand as additional rent.
<PAGE>
SECTION 4.2. ALTERATIONS AND IMPROVEMENTS BY LESSEE. Lessee shall have the
-----------------------------------------
right to make cosmetic and non-structural tenant improvements to the Premises.
Otherwise, Lessee shall make no alterations or additions of any kind in or to
the Premises without first obtaining Lessor's written consent, which shall not
be unreasonably withheld or delayed. All such work, including additions,
fixtures, and tenant improvements (but excluding moveable office furniture and
equipment and other personal property of Lessee) made or placed in or upon the
Premises by Lessee shall be at Lessee's sole cost and expense and shall be and
become Lessor's property at the termination of this Lease, by lapse of time or
otherwise, all without compensation or payment to Lessee, and shall remain upon
and in the Premises; but said property shall be and remain the Lessee's property
during the Lease Term. Any tenant improvement or alteration shall be
performed in a good and workmanlike manner and shall comply with any and all
governmental building, zoning, sign and other applicable ordinances and
regulations. Lessee shall indemnify and hold harmless Lessor for any violation
of any governmental regulation related to such tenant improvement or alteration.
SECTION 4.3. DISCHARGE OF LIENS. Lessee shall discharge of record by bond or
-------------------
otherwise within ten (10) days following the date whereupon Lessee learns of the
filing of any mechanic's or similar lien filed against the Premises for work or
materials claimed to have been furnished at Lessee's instance to or for the
benefit of Lessee and/or the Premises. If Lessee shall fail to cause such lien
or claim of lien to be so discharged or bonded within such period, in addition
to any other right or remedy it may have, Lessor may, but shall not be obligated
to, discharge the same by paying the amount claimed to be due or by procuring
the discharge of such lien or claim by deposit in court or bonding, and, in any
such event, Lessor shall be entitled, if Lessor so elects, to compel the
prosecution of any action for the foreclosure of such lien or claim by the lien
or claimant and to pay the amount of the judgment, if any, in favor of the lien
or, with interest, costs and allowances. Lessee shall pay as additional rent,
on demand from time to time, any sum or sums so paid by Lessor and all costs and
expenses incurred by Lessor, including, but not limited to, attorneys' fees and
expenses in prosecuting such discharge or in defending any such action.
Notwithstanding the foregoing, Lessee shall be entitled to dispute any such
liens against the Premises so long as Lessee secures it obligations by posting a
security bond or other security reasonably acceptable to Lessor.
SECTION 4.4. REPORTS OF DEFECTS. Lessee shall report to Lessor in writing any
------------------
damage to or defective condition in or about the Premises known to Lessee as
soon as reasonably possible after Lessee obtains actual knowledge thereof.
SECTION 4.5. SERVICES AND UTILITIES. Lessee shall pay for all water, gas,
------------------------
electricity, fuel and other utilities consumed or used by Lessee on or in
connection with the Premises and shall be responsible for making all security
deposits required in order to obtain such utilities. Lessee shall also be
responsible for providing all cleaning and janitorial service and all other
services necessary or helpful to use or occupy the Premises. Lessee agrees that
Lessor shall have no obligation to provide or pay for any such utilities or any
such services.
SECTION 4.6. SIGNAGE. From and after the Date of this Lease, Lessee shall be
-------
entitled to use all signage located on the Premises for the advertisement of
Lessee's business operated on the Premises. Lessee shall be obligated to pay
all costs and expenses in connection with use of the signage, including, without
limitation, all costs and expenses for maintenance and repairs to such signage.
<PAGE>
ARTICLE V
DAMAGE
------
SECTION 5.1. DAMAGE AND DESTRUCTION.
------------------------
(a) If the Premises are rendered partially or wholly unfit for occupancy
by fire, the elements, acts of God or other casualty, and if such damage cannot,
in Lessor's reasonable judgment, be materially restored within one hundred
twenty (120) days after the date of such damage, then either Lessor or Lessee
may terminate this Lease as of the date of such fire or other casualty, and the
Lease Term shall end on such date as if that date had been originally fixed in
this Lease for the expiration of the Lease Term. Lessor shall indicate whether
the Premises may be materially restored by written notice to Lessee within
thirty (30) days of such fire or other casualty. If Lessor determines the
Premises may be materially restored, neither party shall have the right to
terminate this Lease. If Lessor fails to give such notice with respect to
whether the Premises may be materially restored or if Lessor's notice indicates
that the Premises may not be so materially restored, either party shall have the
right to terminate this Lease as provided in this Section; provided, however,
this right to terminate shall cease if not exercised within sixty (60) days of
the date of such damage. For purposes hereof, the Premises shall be deemed
"materially restored" if they are in such condition as would not prevent or
materially interfere with Lessee's use of the Premises for the purpose for which
it was being used at the time of such fire or other casualty.
(b) If this Lease is not terminated pursuant to subparagraph (a) above,
Lessor shall proceed with all due diligence to repair and restore the Premises
(except that Lessor may elect not to rebuild, and thus terminate this Lease, if
such damage occurs during the last year of the Lease Term exclusive of any
option which is unexercised at the date of such damage). In the event that
Lessor shall fail to complete such repairs and material restoration within one
hundred twenty (120) days after the date of such damage, Lessee may, at its
option and as its sole remedy, terminate this Lease by delivering written notice
to Lessor, whereupon the Lease shall end on the date of such notice as if the
date of such notice were the Expiration Date hereunder; provided, however, that
if construction is delayed because of changes, deletions, or additions in
construction requested by Lessee, or because of strikes, lockouts, casualties,
acts of God, war, material or labor shortages, governmental regulation or
control, or other causes beyond the reasonable control of Lessor, the period for
restoration, repair, or rebuilding shall be extended for the amount of time
Lessor is so delayed; provided further, however, that such construction shall be
completed in any event within one hundred eighty (180) days after the date of
such damage. In no event shall Lessor be required to rebuild, repair, or
replace any part of the partitions, fixtures, additions, or other property and
improvements which may have been placed in or about the Premises by Lessee.
(c) In the event of any damage or destruction to the Premises and if the
Premises is unfit for occupancy in whole or in part following such damage, the
rent otherwise payable during the period in which the Premises is unfit for
occupancy shall abate in proportion to the number of square feet of Rentable
Area of the heated improvements located on the Premises rendered unusable by
such damage; provided, however, that no such abatement shall be made hereunder
if such damage or destruction was caused by or through the act or neglect of
Lessee, its officers, directors, partners, agents, employees, independent
contractors, invitees, licensees or permitted assignees.
<PAGE>
(d) In the event of any damage or destruction to the Premises, Lessee
shall, upon notice from Lessor, remove forthwith, at its sole cost and expense,
such all or part of the property belonging to Lessee (other than partitions,
fixtures, additions, and similar improvements) from such portion or all of the
Premises as Lessor shall request, and Lessee hereby indemnifies and holds Lessor
harmless from any loss, liability, costs, and expenses, including attorneys'
fees and expenses, arising out of any claim of damage or injury as a result of
any alleged failure properly to secure the Premises prior to such removal.
(e) Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage, deed to secure debt or other
security instrument covering the Premises requires that any insurance proceeds
be paid to it, then Lessor shall have the right to terminate this Lease by
giving written notice to Lessee after written notice of such requirement is
received by Lessor, whereupon the Lease shall end on the date of such damage as
if the date of such damage was the Expiration Date hereunder.
(f) If any such casualty stated in this Section occurs, Lessor shall not
be liable to Lessee for inconvenience, annoyance, loss of profits, expenses, or
for any repair, modification, arranging, or rearranging of any portion of the
Premises or any part or all of the Premises or for termination of this Lease as
provided hereunder. In addition, if any such casualty stated in this Section
occurs, Lessor shall not be liable to Lessee for any personal or other property
of Lessee located, or anyone claiming through Lessee, on the Premises at the
time of such casualty.
(g) Notwithstanding anything contained in this Lease to the contrary, if
the insurance proceeds paid in connection with such damage or destruction to the
Premises are insufficient, in Lessor's sole discretion, to pay for the repair
and restoration of the Premises, Lessor shall be entitled to terminate this
Lease as of the date of such fire or other casualty, and the Lease Term shall
end on such date as if that date had been originally fixed in this Lease for the
expiration of the Lease Term.
<PAGE>
ARTICLE VI
CONDEMNATION
------------
SECTION 6.1. CONDEMNATION. If all or any substantial part of the Premises
------------
should be taken for any public or quasi-public use under governmental law,
ordinance, or regulation, or by right of eminent domain, or by private purchase
in lieu thereof, and the taking would prevent or materially and adversely
interfere with the use of the Premises for the purpose for which it is leased to
Lessee, this Lease shall terminate effective when the physical taking shall
occur in the same manner as if the date of such taking were the Expiration Date
hereunder. If part of the Premises is taken for any public or quasi-public use
under any governmental law, ordinance, or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, and this Lease is not terminated
as provided hereinabove, this Lease shall not terminate but the rent payable
hereunder during the unexpired portion of this Lease shall be reduced to such
extent, if any, as may be fair and reasonable under all of the circumstances,
and Lessor shall undertake to restore the Premises to a condition suitable for
Lessee's use, as near to the condition thereof immediately prior to such taking
as is reasonably feasible under all the circumstances. Notwithstanding the
foregoing, if the cost to restore the Premises to a condition suitable for
Lessee's use as aforesaid will, in Lessor's sole discretion, exceed the
condemnation award or payment, Lessor shall be entitled to terminate this Lease
as of the date of such condemnation, and the Lease Term shall end on such date
as if that date had been originally fixed in this Lease for the expiration of
the Lease Term.
SECTION 6.2. CONDEMNATION AWARD. Lessee shall not share in any condemnation
-------------------
award or payment in lieu thereof or in any award for damages resulting from any
grade change of adjacent streets, the same being hereby assigned to Lessor by
Lessee; provided, however, that Lessee may separately claim and receive from the
condemning authority, if legally payable, compensation for Lessee's removal and
relocation costs, any fixtures or property of Lessee taken and for Lessee's loss
of business and/or business interruption.
ARTICLE VII
LESSOR'S RIGHT TO ENTER PREMISES
--------------------------------
SECTION 7.1. ACCESS. Lessor and its officers, agents, employees and
------
contractors shall have the right to enter the Premises at such times as Lessor
deems reasonably necessary to inspect the Premises to make repairs, additions,
alterations, and improvements to the Premises for which Lessor is responsible
under this Lease. Lessor shall also be allowed to take into and through the
Premises any and all needed materials that may be required to make such repairs,
additions, alterations, and improvements. During such time as work is being
carried on in or about the Premises, provided such work is carried out in a
manner so as not to interfere unreasonably with the conduct of Lessee's business
therein, the rent provided herein shall not abate, and Lessee waives any claim
and cause of action against Lessor for damages by reason of loss or interruption
to Lessee's business and profits therefrom because of the prosecution of any
such work or any part thereof. In addition, Lessor and its officers, agents,
employees, and contractors shall have the right to enter the Premises during
normal business hours, upon reasonable advance notice, without undue
interference with the conduct of Lessee's business therein, to inspect and
examine the Premises and to exhibit the Premises to prospective purchasers or
tenants. In the event of emergency, or if otherwise necessary to prevent injury
to persons or damage to property, such
<PAGE>
entry to the Premises may be made by force without any liability whatsoever on
the part of Lessor for damage resulting from such forcible entry.
ARTICLE VIII
INSURANCE; LIABILITY; INDEMNIFICATION; TAXES
--------------------------------------------
SECTION 8.1. INSURANCE. During the Lease Term, Lessee shall purchase and
---------
maintain, at Lessee's cost and expense, fire and extended coverage insurance
insuring the interest of Lessor and any lenders or mortgagees of the Premises
together with any and all furniture, fixtures, equipment, supplies and other
property owned, leased, held or possessed by Lessor and contained therein, such
insurance coverage to be in an amount equal to the full replacement cost of the
interests of Lessor and any such lenders and mortgagees. From and after the
Date of this Lease and during the Lease Term, Lessee shall purchase and
maintain, at Lessee's cost and expense, fire and extended coverage insurance
insuring Lessee's interest in its improvements to the Premises and any and all
furniture, fixtures, equipment, supplies and other property owned, leased, held
or possessed by it and contained therein, such insurance coverage to be in an
amount equal to the full replacement cost of Lessee's said interest. Lessee
shall provide to Lessor the policy or a certified copy thereof which insures
such interest. All insurance coverages required to be obtained by Lessee shall
be obtained from insurers approved by Lessor, such approval not to be
unreasonably withheld or delayed.
SECTION 8.2. WAIVER OF SUBROGATION. Lessee shall cause each liability
-----------------------
insurance policy together with each insurance policy carried by Lessee insuring
the Premises as well as the contents thereof against loss by fire or any other
casualty, to be written in such a manner as to provide that the insurer waives
all right of recovery by way of subrogation against Lessor in connection with
any loss or damage covered by the policy.
SECTION 8.3. INDEMNITY OF LESSOR. Lessee indemnifies and shall hold Lessor
---------------------
harmless from and defend Lessor against any and all claims, demands, loss,
liability, damages, costs and expenses, including, without limitation,
attorneys' fees and expenses, for any personal injury or deal to any person and
for damage to any property whatsoever, arising out of or relating to this Lease
or the use or occupancy of the Premises, except for any of the foregoing arising
from Lessor's willful misconduct or negligence.
SECTION 8.4. LIABILITY OF LESSOR. Lessor shall not be liable to Lessee or to
--------------------
any person, firm, corporation or other business association claiming by, through
or under Lessee for failure to furnish or for delay in furnishing any service
provided for in this Lease, and no such failure or delay by Lessor shall be an
actual or constructive eviction of Lessee; nor, except as expressly provided
herein, shall any such failure or delay operate to relieve Lessee from the
prompt and punctual performance of each and all of the covenants to be performed
herein by Lessee; nor for any latent defects in the Premises; nor for defects in
the cooling, heating, electric, water, elevator or other apparatus or systems or
for water discharged from sprinkler systems, if any, on the Premises; nor for
the theft, mysterious disappearance or loss of any property of Lessee from the
Premises.
SECTION 8.5. LIMITATION OF LIABILITY. Lessor's obligations and liability with
-----------------------
respect to this Lease shall be limited solely to Lessor's interest in the
Premises, as such interest is constituted from time to time, and neither Lessor
nor any officer, director or shareholder shall have any personal liability
whatsoever with respect to this Lease.
<PAGE>
SECTION 8.6. TAXES. Lessee shall pay to Lessor all real estate ad valorem
-----
property and other taxes levied or assessed against the Premises which become
due during the Lease Term, and any extension thereof. In addition, Lessee shall
pay all taxes becoming due with respect to the conduct by Lessee of its business
on the Premises, to any personal property owned by Lessee or otherwise owed by
Lessee.
ARTICLE IX
LAWS, ORDINANCES AND REQUIREMENTS
---------------------------------
SECTION 9.1. COMPLIANCE WITH LAWS. Lessee shall comply, at its own expense,
----------------------
with all statutes, regulations, rules, ordinances, and orders of any
governmental body, department, or agency thereof which apply to or result from
Lessee's use or occupancy of the Premises.
SECTION 9.2. BUILDING ALTERATIONS. If any governmental authority requires all
--------------------
or any part of the Premises to be repaired, altered, removed, constructed,
reconstructed or improved and Lessor, rather than Lessee, has the obligation
under this Lease to perform such required work, Lessee's obligations under this
Lease will not be affected, and Lessee waives all claims for injury, damage or
abatement of rent because of such repair, alteration, removal, construction,
reconstruction, or improvement, or lack thereof; provided, however, that if such
action by Lessor shall render the Premises partially or wholly unfit for
occupancy and if, in Lessor's reasonable estimation, it cannot complete such
acts within one hundred twenty (120) days, then at the option of Lessor to be
exercised by giving written notice to Lessee within sixty (60) days following
the date of notice to Lessor by such governmental authority, this Lease shall
terminate on the date of such election, and Lessee shall promptly surrender the
Premises to Lessor. If Lessor shall elect not to terminate this Lease as
provided above, Lessor and Lessee shall have the same respective rights and
obligations as provided above in Section 5.1, and the provisions of Section
5.1(g) shall apply regardless of whether or not Lessor elects to terminate this
Lease.
ARTICLE X
ASSIGNMENT AND SUBLETTING
-------------------------
SECTION 10.1. ASSIGNMENT AND SUBLETTING.
---------------------------
(a) Lessee shall not (i) assign, convey, mortgage, pledge, encumber, or
otherwise transfer (whether voluntarily, by operation of law or otherwise) this
Lease or any interest under it; (ii) allow any lien to attach to the Premises,
to the Lease or any interest therein; or (iii) sublet the Premises or any part
thereof; or (iv) permit the use or occupancy of the Premises or any part thereof
by anyone other than Lessee or any subsidiaries of Lessee, without Lessor's
prior written consent which shall not be unreasonably withheld or delayed. Any
attempt to consummate any of the foregoing without Lessor's prior written
consent shall be void.
(b) Lessee agrees to pay to Lessor, on demand, reasonable legal costs and
credit reference costs actually paid to third parties by Lessor in connection
with any request by Lessee for Lessor to consent to any assignment or subletting
by Lessee.
<PAGE>
(c) Any transfer after the date hereof, whether to one or more persons or
entities and whether at one or more different times, of a controlling interest
in Lessee (regardless whether Lessee is a corporation, partnership or other
entity), whether voluntarily, by operation of law or otherwise, shall be deemed
an assignment of this Lease within the meaning of this Section.
SECTION 10.2. RENT COLLECTION. If with the prior written consent of Lessor
----------------
this Lease is assigned or the Premises or any part thereof is sublet or occupied
by anybody other than Lessee, Lessor may, after default by Lessee, collect rent
directly from the assignee, subtenant or occupant and apply the net amount
collected to the Base Rental and additional rent herein reserved, but no such
assignment, subletting, occupancy or collection shall be deemed: (i) a waiver of
any of Lessee's covenants contained in this Lease; (ii) the acceptance by Lessor
of the assignee, subtenant or occupant as Lessee; or (iii) a release of Lessee
from performance by Lessee of its covenants under this Lease.
SECTION 10.3. LEASE OBLIGATIONS OF ASSIGNEE OR SUB-LESSEE. Each assignee,
-----------------------------------------------
sub-lessee or other transferee approved by Lessor shall assume and shall be
deemed to have assumed this Lease and shall remain jointly and severally liable
with Lessee for the payment of all rent provided under any assignment or
sublease and for the due performance during the term of this Lease of all terms
and conditions contained in this Lease applicable to Lessee (except relating to
the amount of rent under the assignment or sublease which shall be governed by
this said assignment or sublease). Lessee agrees that Lessee shall not assign
or sublease any part of the Premises unless pursuant to a written assignment or
sublease in a form mutually agreeable to Lessor and Lessee.
ARTICLE XI
DEFAULT
-------
SECTION 11.1. DEFAULT AND REMEDIES.
----------------------
(a) The occurrence of any of the following shall constitute events of
default:
(i) The rent (including any additional rent) and any other sum of
money payable under this Lease is not paid when due and such failure continues
for a period of twenty (20) days after the date such sum is due;
(ii) The Premises are deserted or vacated even though the Lessee
continues to pay the stipulated monthly rent;
(iii) Lessee's interest in the Lease or the Premises shall be
subjected to any attachment, levy or sale pursuant to any order or decree
entered against Lessee in any legal proceeding and such order or decree shall
not be vacated within fifteen (15) days of entry thereof, provided that Lessee
shall be entitled to dispute any such attachment, levy or sale so long as Lessee
provides Lessor with a security bond or other security reasonably acceptable to
Lessor; or
(iv) Lessee breaches or fails to comply with any term, provisions,
condition or covenant of this Lease (other than the payment of rent).
(b) Upon the occurrence of an event of default and if the event of default
described above in subparagraph (a) is not cured after written notice from
Lessor of such default (i) within ten (10) days after written notice is given if
the action required by Lessee involves the payment of money
<PAGE>
or (ii) within thirty (30) days after written notice is given if the action
required by Lessee is other than the payment of money, Lessor shall have the
option to do and perform any one or more of the following in addition to, and
not in limitation of, any other remedy or right permitted it by law or in equity
or by this Lease:
(i) Lessor, with or without terminating this Lease, may immediately
or at any time thereafter reenter the Premises and correct or repair any
condition which shall constitute a failure on Lessee's part to keep, observe,
perform, satisfy or abide by any term, condition, covenant, agreement or
obligation of this Lease or of any notice given Lessee by Lessor pursuant to the
terms of this Lease, and Lessee shall fully reimburse and compensate Lessor for
reasonable expenses on demand.
(ii) Lessor, with or without terminating this Lease, may immediately
demand in writing that Lessee vacate the Premises and thereupon Lessee shall
vacate the Premises and remove therefrom all property thereon belonging to or
placed on the Premises by, at the direction of or with consent of Lessee within
ten (10) days of receipt by Lessee of such notice from Lessor, whereupon Lessor
shall have the right to reenter and take possession of the Premises. Any such
demand, reentry and taking possession of the Premises by Lessor shall not of
itself constitute an acceptance by Lessor of a surrender of this Lease or of the
Premises by Lessee and shall not of itself constitute a termination of this
Lease by Lessor.
(iii) Lessor, with or without terminating this Lease, may immediately
or at any time thereafter reenter the Premises and remove therefrom Lessee and
all property belonging to or
placed on the Premises by, at the direction of or with consent of Lessee. Any
such reentry and removal by Lessor shall not of itself constitute an acceptance
by Lessor of a surrender of this Lease or of the Premises by Lessee and shall
not of itself constitute a termination of this Lease by Lessor.
(iv) Lessor, with or without terminating this Lease, may immediately
or at any time thereafter relet the Premises or any part thereof for such time
or times, at such rental or rentals and upon such other terms, provisions and
conditions as Lessor in its sole discretion may deem advisable. Lessor may make
any alterations or repairs to the Premises which it may deem necessary or proper
to facilitate such reletting, and Lessee shall pay all reasonable costs of such
reletting, not to exceed the total aggregate rent due for the remainder of the
Lease Term, including, but not limited to, the cost of any such alterations and
repairs to the Premises, attorney's fees and brokerage commissions. If this
Lease shall not have been terminated, Lessee shall continue to pay all rent and
all other charges due under this Lease up to and including the date of beginning
of payment of rent by any subsequent tenant of part or all of the Premises, and
thereafter Lessee shall pay monthly during the remainder of the term of this
Lease the difference, if any, between the rent and other charges collected from
any such subsequent tenant or tenants and the rent and other charges reserved in
this Lease, but Lessee shall not be entitled to receive any excess of any such
rents collected from such subsequent tenant or tenants over the rents reserved
herein.
(v) Lessor may immediately, or at any time thereafter, terminate this
Lease, and this Lease shall be deemed to have been terminated upon receipt by
Lessee of written notice of such termination. Upon such termination, Lessor
shall recover from Lessee all reasonable damages Lessor may suffer by reason of
such termination including, without limitation: unamortized sums expended by
Lessor for construction of Finish Work; all arrearages in rentals, costs,
charges, additional rentals and reimbursements; the cost (including court costs
and attorney's fees) of recovering possession of the Premises; and the cost of
any alteration of or repair to the Premises
<PAGE>
which is necessary or proper to prepare the same for reletting. In addition
thereto, Lessor shall have and recover from Lessee an amount equal to the
excess, if any, of the total amount of all rents and other charges to be paid by
Lessee for the remainder of the term of this Lease over the then reasonable
rental value of the Premises for the remainder of the term of this Lease which
amount shall be discounted to present value.
(c) If Lessor reenters the Premises or terminates this Lease pursuant to
any of the provisions of this Lease, Lessee hereby waives all claims for damages
which may be caused by such reentry or termination by Lessor. Lessee shall and
does hereby indemnify and hold Lessor harmless from any loss, costs (including
court costs and attorney's fees) or damages suffered by Lessor by reason of such
reentry or termination. No such reentry or termination shall be considered or
construed to be a forcible entry.
(d) No course of dealing between Lessor and Lessee or any failure or delay
on the part of Lessor in exercising any rights of Lessor under this Section or
under any other provisions of this Lease shall operate as a waiver of any rights
of Lessor hereunder or under any other provisions of this Lease, nor shall any
waiver of a default on one occasion operate as a waiver of any subsequent
default or of any other default. No express waiver shall affect any condition,
covenant, rule or regulation other than the one specified in such waiver and
that one only for the time and in the manner specifically stated.
(e) The exercise by Lessor of any one or more of the rights and remedies
provided in this Lease shall not prevent the subsequent exercise by Lessor of
any one or more of the other rights
and remedies herein provided. All remedies provided for in this Lease are
cumulative and may, at the election of Lessor, be exercised alternatively,
successively or in any other manner and are in addition to any other rights
provided for or allowed by law or in equity.
SECTION 11.2. LATE PAYMENTS. Lessee shall pay, as a late charge in the event
--------------
any installment of rent, additional rent or other charge to be paid by Lessee
hereunder is not paid within ten (10) days of the date when due, the greater of
$100.00 or an amount equal to five percent (5%) of the amount due. Should
Lessee make a partial payment of past due amounts, the amount of such partial
payment shall be applied first to reduce all accrued and unpaid late charges,
beginning with the late charge which is most past due, and then to reduce all
other past due amounts, beginning with the amount which is most past due.
SECTION 11.3. ATTORNEY'S FEES. If any rent or other debt owing by Lessee to
----------------
Lessor hereunder is collected by or through an attorney-at-law, Lessee agrees to
pay an additional amount equal to the attorneys' fees and expenses reasonably
and actually incurred by Lessor in collecting such rent or other debt owing by
Lessee to Lessor.
SECTION 11.4. WAIVER OF HOMESTEAD. Lessee hereby waives and renounces all
---------------------
homestead or exemption rights which Lessee may have under or by virtue of the
Constitution and laws of the United States, the State of Georgia and any other
State as against any debt or sum Lessee may owe Lessor under this Lease and
hereby transfers, conveys and assigns to Lessor all homestead or exemption
rights which may be allowed or set apart to Lessee, including such as may be
set apart in any bankruptcy proceeding, to pay any debt or sum owing by Lessee
to Lessor hereunder.
<PAGE>
ARTICLE XII
INSOLVENCY OR BANKRUPTCY
------------------------
SECTION 12.1. The appointment of a receiver to take possession of all or
substantially all of the assets of Lessee or an assignment of Lessee for the
benefit of creditors, or any action taken or suffered by Lessee under any
insolvency, bankruptcy or reorganization act shall, at Lessor's option,
constitute a material breach of this Lease by Lessee. Upon the happening of any
such event or at any time thereafter, this Lease shall terminate five (5) days
after written notice of termination from Lessor to Lessee. In no event shall
this Lease be assigned or assignable by operation of law or by voluntary or
involuntary bankruptcy proceedings or otherwise and in no event shall this Lease
or any rights or privileges hereunder be an asset of Lessee under any
bankruptcy, insolvency or reorganization proceedings.
ARTICLE XIII
NO WAIVER OF RIGHTS
-------------------
SECTION 13.1. No failure or delay of Lessor or Lessee to exercise any right or
power given it herein or to insist upon strict compliance by the other party
with any obligation imposed on it herein and no custom or practice of either
party hereto at variance with any term hereof shall constitute a waiver or a
modification of the terms hereof by Lessor or Lessee or any right it has herein
to demand strict compliance with the terms hereof by the other party. No person
has or shall have any authority to waive any provision of this Lease unless such
waiver is expressly
made in writing and signed by the waiving party or by an authorized officer or
agent of the waiving party.
ARTICLE XIV
BROKER AND COMMISSION
---------------------
SECTION 14.1. All negotiations relating to the procurement of this Lease and of
the Premises have been carried on by and between Lessor and Lessee without the
intervention of any broker, agent or other intermediary. Lessor and Lessee each
represent and warrant to the other that there are and there will be no broker's,
agent's or other intermediary's fees or commissions payable as a result of this
transaction, and that they have not dealt with any broker, agent or other
intermediary who might, because of such dealings, have a claim for a fee,
commission or other compensation. Lessor hereby agrees to indemnify, hold
harmless, defend and protect Lessee from and against any and all claims,
demands, damages, lawsuits and costs incurred because of claims for commissions,
compensation, expense or charge of whatever nature by any broker, agent or other
intermediary, based upon any dealing with Lessor. Lessee hereby agrees to
indemnify, hold harmless, defend and protect Lessor from and against any and
all claims, demands, damages, lawsuits and costs incurred because of claims for
commissions, compensation, expense or charge of whatever nature by any broker,
agent or other intermediary based upon any dealing with Lessee.
<PAGE>
ARTICLE XV
ADDRESSES AND NOTICES
---------------------
SECTION 15.1. NOTICES. All notices, requests, demands or other communications
-------
required or permitted to be given hereunder shall be in writing and shall be
addressed and delivered by hand or by certified mail, return receipt requested,
or by commercial overnight courier, by hand delivery by reputable courier, to
each party at the addresses set forth below. Any such notice, request, demand
or other communication shall be considered given or delivered, as the case may
be, on the date of receipt. Rejection or other refusal to accept or inability
to deliver because of changed address of which proper notice was not given shall
be deemed to be receipt of the notice, request, demand or other communication.
By giving prior written notice thereof, any party may from time to time and at
any time change its address for notices hereunder. Legal counsel for the
respective parties may send to the other party any notices, requests, demands or
other communications required or permitted to be given hereunder by such party.
Lessor's Addresses for Notices:
---------------------------------
M. Rea Brookings
1285 Iris Lake Road
McDonough, Georgia 30252
David F. Herring
707 Lexington Avenue
Jonesboro, Georgia 30236
With copy to:
--------------
Frank L. Wilson, III
Wilson Brock & Irby, LLC
Suite 700, Overlook I
2849 Paces Ferry Road
Atlanta, GA 30339
Lessee's Address for Notices:
-------------------------------
Chancellor Asset Management, Inc.
c/o Chancellor Corporation
210 South Street, 10th Floor
Boston, MA 02111
Attention: Peter J. Mullen, Clerk
With copy to:
--------------
Victor J. Paci, Esq.
Bingham Dana, LLP
150 Federal Street
Boston, MA 02110
<PAGE>
ARTICLE XVI
SUBORDINATION
-------------
SECTION 16.1. SUBORDINATION.
-------------
(a) Except as provided in subsection (c) below with respect to mortgage
subordination, this Lease and all rights of Lessee hereunder are and shall be
subject and subordinate to the lien of each mortgage, deed to secure debt, deed
of trust or other instrument in the nature thereof which may now affect Lessor's
fee title to the Premises and to any other instrument encumbering the fee title
of the Premises and to any modifications, renewals, consolidations, extensions
or replacements thereof that this Lease shall not be terminated by any such
holder of a security instrument or by operation of law.
(b) In confirmation of the subordination pursuant to subsection (a),
Lessee shall, upon demand and at any time or times, execute, acknowledge and
deliver to Lessor or the holder of any such mortgage, deed to secure debt, deed
of trust or other instrument, without expense, any and all instruments that may
be requested by Lessor or such holder to evidence the subordination of this
Lease and all rights hereunder to the lien of any such mortgage, deed to secure
debt, deed of trust or other instrument, and each such renewal, modification,
consolidation, replacement and extension thereof. If Lessee shall fail at any
time, within ten (10) days following the giving of a written request therefor,
to execute, acknowledge and deliver any such instrument, Lessor or such holder,
in addition to any other remedies available to it in consequence thereof, may
execute, acknowledge and deliver the same as the attorney-in-fact of Lessee and
in Lessee's name, place and stead, and Lessee hereby irrevocably makes,
constitutes and appoints Lessor or such holder, and their respective successors
and assigns, such attorney-in-fact for that purpose.
(c) Lessee shall, upon demand and at any time or times, execute,
acknowledge and deliver to Lessor or to the holder of any mortgage, deed to
secure debt, deed of trust or other instrument affecting or encumbering the fee
title of the Premises, without expense, any and all instruments that may be
necessary to make this Lease superior to the lien of any such mortgage, deed to
secure debt, deed of trust or other instrument, and each renewal, modification,
consolidation, replacement and extension thereof. If Lessee shall fail at any
time, within ten (10) days following the giving of a written request therefor,
to execute, acknowledge and deliver any such instrument, Lessor or such holder,
in addition to any other remedies available to it in consequence thereof, may
execute, acknowledge and deliver the same as the attorney-in-fact of Lessee and
in Lessee's name, place and stead, and Lessee hereby irrevocably makes,
constitutes and appoints Lessor or such holder, and their respective successors
and assigns, such attorney-in-fact for that purpose.
<PAGE>
SECTION 16.2. ATTORNMENT. If the holder of any mortgage, deed to secure debt,
----------
deed of trust or other instrument affecting or encumbering the fee title of the
Premises shall hereafter succeed to the rights of Lessor under this Lease or
the lessor under the Lease, whether through possession or foreclosure action or
otherwise, Lessee shall, at the option of such holder, attorn to and recognize
such successor as Lessee's landlord under this Lease and shall promptly execute
and deliver any instrument that may be necessary to evidence such attornment.
Lessee hereby irrevocably appoints Lessor or such holder the attorney-in-fact of
Lessee to execute and deliver such instrument on behalf of Lessee should Lessee
refuse and fail to do so within ten (10) days after Lessor or such holder shall
have given notice to Lessee requesting the execution and delivery of such
instrument. Upon such attornment, this Lease shall continue in full force and
effect as a direct Lease between such successor landlord and Lessee, subject to
all of the terms conditions of this Lease.
ARTICLE XVII
ESTOPPEL CERTIFICATE
--------------------
SECTION 17.1. At any time and from time to time, Lessee, within fifteen (15)
days after written request, shall execute, acknowledge and deliver to Lessor a
certificate evidencing whether or not (i) this Lease is in full force and
effect; (ii) this Lease has been modified or amended in any way; (iii) there are
any existing defaults on the part of Lessor hereunder to the knowledge of Lessee
and specifying the nature of such defaults, if any; (iv) the date to which rent,
and other amounts due hereunder, if any, have been paid; and (v) any other
information reasonably requested by Lessor for inclusion therein. Each
certificate delivered pursuant to this Section may be relied upon by any
prospective purchaser or transferee of Lessor's interest hereunder or of any
part of Lessor's property or by any mortgagee of Lessor's interest hereunder or
of any part of Lessor's property or by an assignee of any such mortgagee.
ARTICLE XVIII
MISCELLANEOUS PROVISIONS
------------------------
SECTION 18.1. SEVERABILITY. If during the term of this Lease or any extension
------------
hereof any clause or provision of this Lease is or becomes illegal, invalid or
unenforceable because of present or future laws or any rule or regulation of any
governmental body or entity, the intention of the parties hereto is that the
remaining parts of this Lease shall not be affected thereby, unless such
invalidity is, in the sole determination of Lessor, essential to the rights of
both parties, in which event Lessor has the right to terminate this Lease on
written notice to Lessee.
SECTION 18.2. CAPTIONS. All captions, headings, articles, sections,
--------
subsections and other reference captions are solely for the purpose of
facilitating reference to this Agreement and shall not supplement, limit or
otherwise vary the text of this Lease in any respect. All references to
particular sections, paragraphs and subparagraphs by number refer to the text of
the section, paragraph and subparagraph so numbered in this Agreement.
SECTION 18.3. SUCCESSORS AND ASSIGNS. The words "Lessor" and "Lessee" as used
----------------------
herein shall include the respective contracting party, whether singular or
plural, and whether an individual, masculine or feminine, or a partnership,
joint venture, business association or corporation. The provisions of this
Lease shall inure to the benefit of and be binding upon Lessor and Lessee and
their respective successors, heirs, legal representatives and permitted assigns.
<PAGE>
SECTION 18.4. GEORGIA LAW. The laws of the State of Georgia shall govern the
------------
interpretation, validity, performance and enforcement of this Lease.
SECTION 18.5. TIME OF THE ESSENCE. Time is of the essence of this Lease;
----------------------
provided, however, that failure of Lessor to provide Lessee with any
notification regarding charges provided for hereunder, within the time periods
prescribed in this Lease, shall not relieve Lessee of its obligation to make
such contributions. Unless specifically provided otherwise, all references to
terms of days, months or years shall be construed as references to calendar
days, calendar months or calendar years respectively.
SECTION 18.6. COUNTERPARTS. This Lease may be executed in any number of
------------
counterparts, each of which shall be deemed an original and any of which shall
be deemed to be complete in itself and may be introduced into evidence or used
for any purpose without the production of the other counterparts.
SECTION 18.7. FORCE MAJEURE. Except as otherwise expressly provided in this
--------------
Lease Agreement, Lessor shall be excused for the period of any delay and shall
not be deemed to be in default with respect to the performance of any of the
terms conditions of this Lease when prevented from so doing by a cause or causes
beyond Lessor's control, which shall include, without limitation, all labor
disputes, governmental regulations or controls, fire or other casualty,
inability to obtain any material or services, acts of God or any other cause not
within the reasonable control of the Lessor.
SECTION 18.8. AUTHORIZED SIGNATORY. If Lessee signs as a corporation, each of
--------------------
the persons (of which there must be at least two) executing this Lease on behalf
of Lessee does hereby warrant and covenant that Lessee is a duly authorized and
existing corporation, that Lessee has and is qualified to do business in
Georgia, that the corporation has full right and authority to enter into this
Lease, that each and both of the persons executing this Lease on behalf of the
corporation are authorized to do so, and that such execution is fully binding on
the corporation.
SECTION 18.9. NO RECORDATION OF LEASE. This Lease is not in recordable form,
------------------------
and Lessee agrees not to record or permit the recording of this Lease; provided,
however, that Lessee shall be entitled to record a Memorandum of Lease in a form
approved by Lessor, such approval not to be unreasonably withheld or delayed.
SECTION 18.10. ENTIRE AGREEMENT. This Lease supersedes all prior discussions
-----------------
and agreements between Lessor and Lessee with respect to the Lease of the
Premises. This Lease contains the sole and entire understanding and agreement
between Lessor and Lessee with respect to the Lease of the Premises, and all
promises, inducements, offers, solicitations, agreements, representations and
warranties heretofore made between the parties, if any, whether written or oral,
are merged into this Lease and shall have no binding legal effect. This Lease
shall not be modified or amended in any respect except by written instrument
executed by or on behalf of Lessor and Lessee in the same manner as this Lease
is executed.
SECTION 18.11. EXHIBITS. The content of each and every exhibit which is
--------
referenced in this Lease as being attached hereto is incorporated into this
Lease as fully as if set forth in the body hereof.
<PAGE>
[Remainder of Page Intentionally Blank/Signatures on Following Page]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed and sealed this Lease
Agreement as of the Date of this Lease.
LESSOR:
/s/ M. Rea Brookings (SEAL)
------------------------------
M. REA BROOKINGS
/s/ David F. Herring (SEAL)
------------------------------
DAVID F. HERRING
LESSEE:CHANCELLOR ASSET
MANAGEMENT, INC., a
Delaware corporation
By: /s/ Franklyn E. Churchill
------------------------------
Title: President
------------------------------
[CORPORATE SEAL]
<PAGE>
EXHIBIT A
---------
(Legal Description for Premises)
<PAGE>
Exhibit 10.2
Cross reference to:
Deed Recorded at
Deed Book 2192,
Page 184, Clayton
County, Georgia Records
MEMORANDUM OF LEASE
-------------------
M. REA BROOKINGS and DAVID F. HERRING, individual residents of the State of
Georgia (collectively "Lessor"), and CHANCELLOR ASSET MANAGEMENT, INC., a
Delaware corporation ("Lessee"), hereby place on the deed records of Clayton
County, Georgia, the following Memorandum of Lease for the purpose of
memorializing that certain lease agreement dated as January ___, 1999 ("Lease")
between Lessor and Lessee and by this Memorandum of Lease do hereby ratify and
reaffirm that the Lease is in full force and effect as of the date of this
Memorandum of Lease. The terms of the Lease include the following:
Lessor: M. Rea Brookings and David F. Herring
Lessee: Chancellor Asset Management, Inc., a Delaware corporation
Date of Lease: January ___, 1999
Leased Premises: All that tract or parcel of land lying and being in Land
Lot 237 of the 12th District, Clayton County, Georgia, and
Being more particularly described on Exhibit A attached
---------
hereto and made a part hereof by this reference.
Term: Five (5) years commencing on February 1, 1999 and expiring
on July 31, 2004, with an option in favor of Lessee to
extend the term of the Lease for a five (5) year period
commencing on February 1, 2004 and expiring on January 31,
2009.
Purchase Option: Lessee has the option to purchase the Leased Premises
during the period from January ___, 1999, through and
including July 31, 1999. In the event Lessee does not
exercise its option to purchase the Leased Premises on or
before July 31, 1999, and, if Lessee timely exercises such
Option to Purchase but does not close Lessee's purchase
within sixty (60) days thereafter, the Purchase Option
expressly expires, and Lessee shall have no further right
pursuant to the Purchase Option to purchase the Leased
Premises from Lessor.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the ____ day of January, 1999.
<PAGE>
LESSOR:
Signed, sealed and delivered
in the presence of:
/s/ M. Rea Brookings (SEAL)
- -------------------------- ------------------------------
Unofficial Witness M. REA BROOKINGS
- --------------------------
Notary Public
My Commission Expires
- --------------------------
[Affix Notarial Seal]
Signed, sealed and delivered
in the presence of:
/s/ David F. Herring (SEAL)
- -------------------------- ------------------------------
Unofficial Witness DAVID F. HERRING
- --------------------------
Notary Public
My Commission Expires
- --------------------------
[Affix Notarial Seal]
LESSEE:
Signed, sealed and delivered
in the presence of: CHANCELLOR ASSET MANAGEMENT,
INC., a Delaware corporation
- --------------------------
Unofficial Witness
By: /s/ Franklyn E. Churchill
- -------------------------- ------------------------------
Title: President
Notary Public ------------------------------
My Commission Expires [CORPORATE SEAL]
- --------------------------
[Affix Notarial Seal]
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
---------- ---------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the
29th day of January, 1999, by and between M.R.B., INC., a Georgia corporation
(the "Company"), and M. REA BROOKINGS (the "Employee").
R E C I T A L S
The Company desires to obtain the services of the Employee in the employment of
the Company on the terms and subject to the conditions set forth in this
Agreement, and the Employee desires to make her services available to the
Company on the terms and subject to the conditions set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, agreements and mutual
covenants set forth herein, the parties hereto, intending to be bound legally,
hereby agree as follows:
1. DEFINITIONS. The following terms when used herein, unless the context
otherwise requires, shall be defined as follows:
1.1. "Cause" shall have the meaning set forth in Section 5.1 hereof.
1.2. "CAM" shall mean Chancellor Asset Management, Inc., a Delaware
corporation and parent company of the Company.
1.3. "Chancellor" shall mean Chancellor Corporation, a Massachusetts
corporation and parent company of CAM.
1.4. "Companies" shall mean the Company, together with Tomahawk Truck and
Trailer Sales, Inc., a Florida corporation, Tomahawk Truck and Trailer Sales of
Virginia, Inc., a Virginia corporation, and Tomahawk Truck and Trailer Sales of
Missouri, Inc, a Missouri corporation.
1.5. "Company" shall mean M.R.B. Inc., a Georgia corporation.
1.6. "Confidential Information" shall have the meaning set forth in Section
7.1 hereof.
1.7. "Term" shall have the meaning set forth in Section 3 hereof.
1.8. "Stock Purchase Agreement" shall mean the Stock Purchase Agreement
entered into among CAM, David F. Herring, and the Employee dated as of the 29th
day of January, 1999.
2. EMPLOYMENT.
2.1. General. The Company hereby agrees to employ the Employee as President
of the Company during the Term on the terms and subject to the conditions
contained in
<PAGE>
this Agreement, and the Employee hereby agrees to accept such employment on the
terms and subject to the conditions contained in this Agreement.
2.2. Duties of Employee. During the Term, the Employee shall diligently
perform all duties and responsibilities as may be assigned to her by the
Company's Board of Directors, and shall exercise such power and authority as may
from time to time be delegated to her thereby. The Employee shall devote her
full business time and attention to the business and affairs of the Companies as
necessary to perform her duties and responsibilities hereunder, render such
services to the best of her ability, and use her best efforts to promote at all
times the interests of the Companies.
3. TERM. Subject to the provisions of Section 5 of this Agreement, the
Company shall employ the Employee for a term of five (5) years (the "Term")
commencing as of the date first written above (the "Effective Date).
4. COMPENSATION.
4.1. Salary. The Employee shall receive an annual salary of Two Hundred
Thousand Dollars ($200,000.00) during the Term, and such salary shall be payable
in equal installments consistent with the Company's normal payroll schedule
commencing on either the first or fifteenth day of the month, as the case may
be, following the Effective Date. The Employee's annual salary shall be subject
to such increases as shall be approved by the Company's Board of Directors in
its sole discretion.
4.2. Benefits. During the Term, the Employee shall be entitled to
participate in all plans adopted for the general benefit of the Company's
employees, such as stock option plans, 401(k) plans, pension plans, profit
sharing plans, medical plans, group or other insurance plans and benefits, to
the extent that the Employee is and remains eligible to participate therein and
subject to the eligibility provisions of such plans in effect from time to time.
For each calendar year during the Term, the Employee shall be entitled to four
(4) weeks of paid vacation at such times as shall be mutually acceptable to the
Employee and the Company, and to sick and holiday time as prescribed by the
established Chancellor policies in effect from time to time.
4.3. Withholding. Notwithstanding any provision in this Agreement to the
contrary, all payments required to be made by the Company hereunder to the
Employee in connection with the Employee's employment hereunder shall be subject
to withholding of such amounts relating to taxes as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, in whole or in part, the Company may, in its
sole discretion, accept other provisions for the payment of taxes, provided that
the Company is satisfied that all requirements of law affecting its
responsibilities to withhold have been satisfied.
4.4. Reimbursement of Expenses. The Company agrees to reimburse the
Employee for all reasonable business expenses (including, without limitation,
reasonable travel and entertainment expenses) incurred by the Employee in the
discharge of her duties hereunder, subject to the Company's reimbursement
policies in effect from time to time. The Employee agrees to maintain reasonable
records of her business expenses in such form and detail as the Company may
request and to make such records available to the Company as and when requested.
<PAGE>
5. TERMINATION.
5.1. Termination by the Company for Cause. Notwithstanding any provision in
this Agreement to the contrary, this Agreement may be terminated by the Company
for "Cause" at any time during the Term hereof, and such termination shall be
effective immediately upon written notice to the Employee. For purposes of this
Agreement, "Cause" for the termination of the Employee's employment hereunder
shall be deemed to exist only if, in the reasonable judgment of the Company's
Board of Directors: (a) the Employee commits fraud, theft or embezzlement
against any of the Companies; (b) the Employee commits a felony or a crime
involving moral turpitude; (c) the Employee discloses trade secrets or other
proprietary information of Chancellor or any of the Companies or any subsidiary
or affiliate thereof to any unauthorized person or entity; (d) the Employee
breaches any non-competition or non-solicitation agreement with Chancellor or
any of the Companies or any subsidiary or affiliate thereof; (e) the Employee
breaches any of the terms of this Agreement (other than those referenced in
clauses (c) and (d) of this Section 5.1) and fails to cure such breach within
twenty (20) days after the receipt of written notice of such breach from the
Company; or (f) the Employee engages in gross negligence or willful misconduct
that causes harm (or could reasonably be expected to cause harm) to the business
and operations of Chancellor or any of the Companies or a subsidiary or
affiliate thereof. Upon any termination pursuant to this Section 5.1, the
Employee shall be entitled to be paid solely the Employee's salary then in
effect through the effective date of termination, and the Company shall have no
further liability or other obligation of any kind whatsoever to the Employee
hereunder.
5.2. Termination by the Company Without Cause. The Company may, in its sole
and absolute discretion, terminate the employment of the Employee hereunder at
any time without "Cause" (as such term is defined in Section 5.1 above), or
otherwise without any cause, reason or justification, provided that the Company
provides to the Employee at least ninety (90) days' prior written notice (the
"Termination Notice") of such termination. In the event of any such termination
by the Company, (a) the Employee's employment with the Company shall cease and
terminate on the date specified in the Termination Notice (or, if no date is so
specified, on the date which is ninety (90) days following the date of such
notice), and (b) the Employee shall be entitled to receive and be paid (i) in
the case of a termination under this Section 5.2 at any time prior to or on the
third anniversary of the Effective Date, the Employee's entire salary, at the
rate in effect as of the effective date of such termination and in equal monthly
installments, through such third anniversary, and thereafter fifty percent (50%)
of the Employee's salary, at the rate in effect as of the effective date of such
termination and in equal monthly installments, during the then remaining Term,
and (ii) in the case of termination under this Section 5.2 at any time after the
third anniversary of the Effective Date, fifty percent (50%) of the Employee's
salary, at the rate in effect as of the effective date of such termination and
in equal monthly installments, during the then remaining Term, payable in either
of the cases set forth in clauses (i) and (ii) over the applicable period at the
Company's regular and customary intervals for the payment of salaries as then in
effect and in equal monthly installments, and the Company shall have no further
liability or other obligation of any kind whatsoever to the Employee hereunder.
<PAGE>
5.3. Death of the Employee. In the event that the Employee shall die during
the Term, the Employee's employment with the Company shall immediately cease and
terminate and the Employee's estate, heirs (at law), devisees, legatees or other
proper and legally entitled descendants, or the personal representative,
executor, administrator or other proper legal representative on behalf of such
descendants, shall be entitled to receive and be paid solely the Employee's
salary through the date of death, and the Company shall have no further
liability or other obligation of any kind whatsoever to the Employee hereunder.
5.4. Disability of the Employee. In the event that the Employee becomes
incapacitated during the Term by reason of sickness, accident or other mental or
physical disability such that she is substantially unable to perform her duties
and responsibilities hereunder for a period of ninety (90) consecutive days, or
for shorter or intermittent periods aggregating one hundred twenty (120) days
during any 12-month period (a "Disability"), the Company thereafter shall have
the right, in its sole and absolute discretion, to terminate the Employee's
employment under this Agreement by sending written notice of such termination to
the Employee or her legal guardian or other proper legal representative and
thereupon her employment hereunder shall immediately cease and terminate;
provided, however, that notwithstanding the foregoing, the Employee's employment
shall not be terminated as aforesaid if the Company's Board of Directors
determines, in its reasonable judgment, that after the termination of such
Disability, the Employee is able to resume her duties and responsibilities to
the Company in accordance with the terms hereof in the manner theretofore
provided. In the event of any such termination, the Employee shall be entitled
to receive and be paid solely the Employee's salary then in effect through the
effective date of termination, and the Company shall have no further liability
or other obligation of any kind whatsoever to the Employee hereunder.
5.5. Termination by the Employee. Provided that the Company does not have
"Cause" to terminate the Employee pursuant to Section 5.1 above, the Employee
may terminate the Employee's employment with the Company hereunder at any time
and for any reason. Employee must provide to the Company written notice of such
termination not less than ninety (90) days prior to the date such termination is
to be effective. Upon any termination pursuant to this Section 5.5, the Employee
shall be entitled to be paid solely the Employee's salary then in effect through
the effective date of termination, and the Company shall have no further
liability or other obligation of any kind whatsoever to the Employee hereunder.
6. AGREEMENT NOT TO COMPETE. In addition to the separate non-competition
covenants made by the Employee as a "Seller" in Section 10.2 of the Stock
Purchase Agreement, which non-competition covenants the Employee agrees and
acknowledges are being given in consideration of the acquisition by CAM of the
outstanding capital stock of the Companies, and are fully and independently
enforceable in accordance with their terms, the Employee agrees that in the
event that the Employee's employment with the Company is terminated either (a)
at the expiration of the full five (5) year Term, or (b) at any time during the
fifth year of the Term (the actual effective date of such employment termination
being referred to herein as the "Termination Date"), the Employee shall not, for
an additional one (1) year period commencing as of the Termination Date, without
the prior written consent of the Company, (a) engage anywhere in the United
States, directly or indirectly, alone or as a shareholder (other than as a
holder of less than 3% of the capital stock of any publicly traded
<PAGE>
7. corporation), member, partner, manager, officer, director, employee or
consultant, in any business that is engaged or becomes engaged in the business
of any of the Companies as existing on the Effective Date, (b) divert or attempt
to divert to any competitor of any of the Companies or any Affiliate of any such
competitor, any customer or client, or prospective customer or client, of any of
the Companies, or (c) solicit or encourage, or attempt to solicit or encourage,
any employee of any of the Companies to leave its employ for employment by or
with either Employee or Employee's Affiliates, or any competitor of any of the
Companies or any of any such competitor's Affiliates. If at any time the
provisions of this Section 6 shall be determined to be invalid or unenforceable,
by reason of being vague or unreasonable as to area, duration or scope of
activity, this Section 6 shall be considered divisible and shall become and be
immediately amended to only such area, duration and scope of activity as shall
be determined to be reasonable and enforceable by the court or other body having
jurisdiction over the matter; and the Employee agrees that this Section 6 as so
amended shall be valid and binding as though any invalid or unenforceable
provisions had not been included therein. Notwithstanding anything to the
contrary set forth in this Section 6, in the event that the non-competition
covenants of the Employee set forth in Section 10.2 of the Stock Purchase
Agreement terminate in accordance with the last sentence thereof, then the
non-competition covenants set forth in this Section 6 shall also terminate as to
the Employee as of the date such non-competition covenants set forth in the
Stock Purchase Agreement so terminate.
8. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
8.1. As used in this Agreement, "Confidential Information" shall mean all
customer sales and marketing information, customer account records, proprietary
receipts and/or processing techniques, information regarding vendors and
products, training and operations memoranda and similar information, personnel
records, pricing information, financial information and trade secrets concerning
or relating to the business, accounts, customers, employees and affairs of the
Companies, or any subsidiary or affiliate thereof, obtained by or furnished,
disclosed or disseminated to the Employee, or obtained, assembled or compiled by
the Employee or under her supervision during the course of her employment by the
Company, and all physical embodiments of the foregoing, all of which are hereby
agreed to be the property of and confidential to the Companies, but Confidential
Information shall not include any of the foregoing to the extent the same is or
becomes publicly known through no fault or breach of this Agreement by the
Employee.
8.2. The Employee acknowledges and agrees that all Confidential Information,
and all physical embodiments thereof, are confidential to and shall be and
remain the sole and exclusive property of the Companies. Upon request by any of
the Companies, and in any event upon termination of the Employee's employment
with the Company for any reason whatsoever, as a prior condition to the
Employee's receipt of any final salary or benefit payments hereunder, the
Employee shall deliver to the Companies all property belonging to the Companies
or any of its subsidiaries or affiliates, including, without limitation, all
Confidential Information (and all embodiments thereof), then in her custody,
control or possession, but any forfeiture of such salary or benefit shall not be
considered a satisfaction or a release of or liquidated damages for any claim(s)
for damages against the Employee which may accrue to the Companies, as a result
of any breach of this Section 7 by the Employee.
<PAGE>
8.3. The Employee agrees that she will not, either during the Term or at any
time thereafter, without the prior written consent of the Company, use, disclose
or make available any Confidential Information to any person or entity, nor
shall she use, disclose, make available or cause to be used, disclosed or made
available, or permit or allow, either on her own behalf or on behalf of others,
any use or disclosure of such Confidential Information other than in the proper
performance of the Employee's duties hereunder. Notwithstanding anything to the
contrary set forth herein, after the expiration of the longer of (a) the
non-competition period applicable to the Employee set forth in the Stock
Purchase Agreement, and (b) the non-competition period set forth herein, the
Employee shall be permitted to utilize the customer lists of the Companies for
any purpose whatsoever.
8.4. Notwithstanding anything to the contrary set forth in this Section 7,
in the event the non-competition covenants of the Employee set forth in Section
10.2 of the Stock Purchase Agreement terminate in accordance with the last
sentence thereof, then the provision of this Section 7 shall also terminate as
to the Employee as of the date such non-competition covenants set forth in the
Stock Purchase Agreement so terminate.
9. INVENTIONS. The Employee shall disclose promptly to the Companies any
and all conceptions and ideas for inventions, improvements, business methods and
systems, and valuable discoveries, whether patentable or not, that are conceived
or made by the Employee, solely or jointly with another, during the Term and
that are directly related to the business or activities of the Companies and
that the Employee conceives as a result of her employment by the Company,
regardless of whether or not such ideas, inventions, or improvements qualify as
"works for hire." The Employee hereby assigns and agrees to assign all her
interests therein to the Companies or their nominees. Whenever requested to do
so by any of the Companies, the Employee shall execute any and all applications,
assignments or other instruments that such Company shall deem necessary to apply
for and obtain Letters Patent of the United States or any foreign country or to
otherwise protect any of the Companies' interest therein.
10. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 6, 7 or 8 shall be declared by a court of competent jurisdiction to
exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
11. ENFORCEABILITY. Any provision of Sections 6, 7 or 8 which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
12. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach or threat of breach by the Employee of any of the covenants
contained in Sections 6, 7 or 8 of this Agreement will cause irreparable harm
and damage to the Companies, the monetary amount of which may be virtually
impossible to ascertain. As a result, the Employee recognizes and hereby
acknowledges that the Companies shall be entitled to an injunction
<PAGE>
from any court of competent jurisdiction enjoining and restraining any violation
or threatened violation of any or all of the covenants contained in Sections 6,
7 or 8 of this Agreement by the Employee or any of her affiliates, associates,
partners or agents, either directly or indirectly, and that such right to
injunction shall be cumulative and in addition to whatever other remedies the
Companies may possess.
13. ASSIGNMENT; BINDING EFFECT. The Employee shall not assign any of her
rights or obligations pursuant to this Agreement to any other person without the
prior written consent of the Company, which consent may be unreasonably withheld
or delayed. Subject to the foregoing, this Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns.
14. EMPLOYER'S AUTHORITY. The relationship between the parties hereto is
that of employer and employee. The Employee agrees to observe and comply with
the rules and regulations of the Companies, as adopted by the Companies from
time to time with respect to the performance of the duties of the Employee. The
Employee acknowledges that she has no authority to enter into any contracts or
other obligations that are binding upon any of the Companies unless such
contracts or obligations are authorized by the Board of Directors of such
Companies. The Company shall have the power to direct, control and supervise the
duties to be performed by the Employee, the manner of performing said duties,
and the time of performing said duties.
15. GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Delaware, excluding
the choice of law rules thereof.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. This
Agreement may not be modified or amended in any way, unless by a written
instrument signed by both the Company and the Employee.
17. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given upon
receipt or actual delivery by hand or after sent by certified United States
mail, return receipt requested, postage prepaid, or by a reputable overnight
courier service, addressed as follows:
i) If to the Employee:
M. Rea Brookings
4382 S. Moreland Ave.
Conley, GA 30288
Fax: 404-362-9460
<PAGE>
with a copy given in the manner prescribed above to:
Frank L. Wilson, III, Esq.
Wilson Brock & Irby, L.L.C.
Overlook I, Suite 700
2849 Paces Ferry Rd., N.W.
Atlanta, GA 30339
Fax: 404-853-1812
ii) If to the Company:
c/o Peter J. Mullen, Clerk
Chancellor Corporation
210 South Street
10th Floor
Boston, MA 02111
Fax: 617-422-5851
with a copy given in the manner prescribed above to:
Victor J. Paci, Esq.
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Fax: 617-951-8736
or to such other addresses as either party hereto may from time to time
give notice of to the other party hereto in the aforesaid manner.
17. DAMAGES. Nothing contained herein shall be construed to prevent any of
the Companies or the Employee from seeking and recovering from the other damages
sustained by either or both of them as a result of its or her breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the non-prevailing party shall pay all reasonable court costs
and attorneys' fees of the other party.
18. SECTION HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
or entity other than the parties hereto and their respective heirs, personal
representative, legal representative, successors and assigns, and except for the
other Companies (other than the Company), any rights or remedies under or by
reason of this Agreement.
<PAGE>
20. WAIVER. No delay or failure at any time on the part of any of the
Companies in exercising any right, power or privilege under this Agreement, or
in enforcing any provision of this Agreement, shall impair any such right, power
or privilege, or be construed as a waiver of any default or as any acquiescence
therein, or shall affect the right of any of the Companies thereafter to enforce
each and every provision of this Agreement in accordance with its terms. The
waiver by either party hereto of a breach or violation of any term or provision
of this Agreement shall neither operate nor be construed as a waiver of any
subsequent breach or violation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement under seal as
of the date first above written.
M.R.B., INC.
By: /s/ Franklyn E. Churchill
---------------------------------------------
Name: Franklyn E. Churchill
Title: CEO and President, Chancellor Asset Management, Inc.
EMPLOYEE
By: /s/ M. Rea Brookings
---------------------------------------------
Name: M. Rea Brookings
<PAGE>
Exhibit 10.4
PROMISSORY NOTE
---------- ----
$150,000 January 29, 1999
I. Indebtedness.
------------
FOR VALUE RECEIVED, the undersigned, M. REA BROOKINGS of McDonough, Georgia
("Maker"), promises to pay to the order of CHANCELLOR ASSET MANAGEMENT, INC., a
-----
Delaware corporation (the "Payee"), the principal amount of ONE HUNDRED FIFTY
-----
THOUSAND DOLLARS ($150,000), without interest, payable in one installment on
January 29, 2004 (the "Maturity Date"), at the Payee's principal address at 210
-------- ----
South Street, 10th Floor, Boston, Massachusetts 02110 or at such other place as
the Payee shall have designated to the Maker in writing, (i) in lawful money of
the United States of America and in immediately available funds, or (ii) in the
form of common stock, $.01 par value per share (the "Common Stock"), of
------ -----
Chancellor Corporation, a Massachusetts corporation and the corporate parent of
the Payee ("Chancellor"), in accordance with the terms set forth in Section V of
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this Note.
II. Loan Obligations.
---- -----------
This is a "Seller Closing Note" delivered by the Maker to the Payee
------ ------- ----
pursuant to Section 4.2 of the Stock Purchase Agreement, dated as of December
31, 1998 (the "Stock Purchase Agreement"), by and among the Payee, the Maker and
-------------- ---------
David F. Herring, as evidence of the obligation of the Maker to repay to the
Payee a Seller Closing Loan (as defined in Section 4.2 of the Stock Purchase
Agreement).
III. Default.
-------
If an Event of Default (as hereinafter defined) shall occur and be
continuing under the provisions of this Note, the Payee may accelerate the
entire unpaid principal balance outstanding under this Note, by written notice
to the Maker, and the entire unpaid principal balance outstanding under this
Note shall become immediately due and payable within five (5) days after receipt
by the Maker of said notice. At such time the Payee shall be entitled to
exercise any remedies that it may have at law, or in equity, in order to collect
its debt hereunder including, without limitation, the commencement of legal
proceedings against the Maker.
As used herein, an "Event of Default" means the occurrence of any of the
----- -- -------
following:
(i) the failure of the Maker to make any payment of principal or other
sums due under this Note within twenty (20) days after the due date thereof;
(ii) if the Maker shall make an assignment for the benefit of
creditors, or if a receiver of the property of the Maker shall be appointed, or
if a petition in any bankruptcy or other similar proceeding under any law for
relief of debtors shall be filed by or against the Maker, and, if against the
Maker, is not dismissed or discharged within sixty (60) days;
<PAGE>
(iii) any breach or default by the Maker of the terms and conditions of
that certain Stock Pledge Agreement, of even date herewith, between the Maker
and the Payee, securing the obligation of the Maker under this Note, which
continues unremedied after notice and a cure period as specifically provided
therein; or
(iv) the death of the Maker.
IV. Prepayment
----------
All or any portion of this Note may be prepaid (herein, a "Prepayment") at
----------
any time without premium or penalty by the Maker furnishing a written notice to
the Payee of the Maker's election to effect such a prepayment (a "Prepayment
----------
Notice"), which Prepayment Notice shall include the date on which the Maker
- ------
desires to make the Prepayment (the "Prepayment Date"); provided, however, that
---------- ---- -------- -------
if the Maker desires to pay all (or any portion) of the Prepayment in the manner
described in Section V hereof, then the Prepayment Date shall be the fifteenth
(15th) day following the Prepayment Notice (or the first (1st) business day
thereafter if such fifteenth (15th) day is not a business day).
V. Payment in the Form of Common Stock
-------- -- --- ---- -- -------------
A. Exchange. On the Maturity Date or earlier upon the a Prepayment
--------
Date, as the case may be, the Maker may, but shall not be obligated to, pay all
(or any portion) of the outstanding principal balance owed under this Note by
delivery to the Payee of such whole number of shares of Common Stock held by the
Maker determined by dividing (a) the outstanding principal amount of this Note
to be so paid, by (b) the Exchange Price (as hereinafter defined). In order to
pay all (or any portion) of the outstanding principal balance owed under this
Note by delivering shares of Common Stock as hereinabove provided, the Maker
shall be required to:
(i) in the case of any such payment on the Maturity Date, furnish an
Exchange Notice (as hereinafter defined) to the Payee not less than fifteen (15)
days prior to the Maturity Date, notifying Payee of the Maker's desire to
exercise the Maker's rights to pay in such manner; and
(ii) in the case of any such payment constituting a Prepayment, furnish
an Exchange Notice to the Payee contemporaneously with the applicable Prepayment
Notice (which Exchange Notice may be incorporated into the applicable Prepayment
Notice), notifying the Payee of the Maker's desire to exercise the Maker's
rights to pay in such manner.
B. Exchange Mechanism. Payment of all (or any portion) of the
-------------------
outstanding principal balance owed under this Note in the manner hereinabove
described shall be made by the Maker's surrender of the stock certificate(s)
representing the number of shares of Common Stock to be exchanged by the Maker
determined as hereinabove provided, duly endorsed or accompanied by a written
instrument of transfer duly executed by the Maker, to the Payee at its principal
place of business (or at such other office as the Payee shall designate by
notice in writing to the Maker from time to time), accompanied by a copy of the
applicable Exchange Notice previously furnished.
<PAGE>
C. Certain Definitions. For all purposes of this Section V, the
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following terms shall have the respective meanings set forth below:
(a) "Exchange Notice" shall mean written notice by the Maker to the
-------- ------
Payee of the Maker's election to effect a payment with shares of Common Stock
held by the Maker of all (or any portion) of the outstanding principal balance
owed under the Note on the Maturity Date or on a Prepayment Date, as the case
may be; and
(b) "Exchange Price" shall mean (i) the last reported sales price per
-------- -----
share of the Common Stock on any national securities exchange or the NASDAQ
National Market System or the over-the-counter market which is then the
principal market for the Common Stock on the trading day immediately before the
Maturity Date or a Prepayment Date, as the case may be, or (ii) if the Common
Stock is not quoted or listed in any national securities exchange or the NASDAQ
National Market System or the over-the-counter market, the fair market value of
a share of Common Stock, as promptly determined in good faith by the Board of
Directors of Chancellor.
VI. Miscellaneous.
-------------
A. Waiver. The Payee hereby waives, to the extent not prohibited by
------
provisions of applicable law, presentment, demand, protest and notice thereof or
dishonor, and waives any right to be released by reason of any extension of time
or change in the terms of payment or any change, alteration or release of any
security given for the payment hereof. No course of dealing between Payee on
the one hand, and the Payee hereof on the other hand, shall operate as a waiver
of any of its rights under this Note. No delay or omission in exercising any
right under this Note shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a waiver of or
bar to any right or remedy on any other occasion.
B. Expenses. The Maker hereby agrees to pay on demand all costs of
--------
collection, including reasonable attorneys fees and disbursements, paid or
incurred by the Payee in connection with enforcing the Maker's obligations
hereunder.
C. Notices. All notices hereunder shall be given in the manner
-------
provided in the Stock Purchase Agreement.
D. Severability. In the event that any one more of the provisions
------------
contained in this Note shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Note shall not in any way be impaired.
E. Assignment. The Maker may not assign or pledge this Note or
----------
delegate its obligation to make payment hereunder without the prior written
consent of the Payee.
THIS NOTE AND THE OBLIGATIONS OF THE MAKER HEREUNDER SHALL FOR ALL PURPOSES
BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
MAKER
<PAGE>
CONSENTS TO SERVICE OF PROCESS IN ANY SUIT WITH RESPECT TO THE ENFORCEMENT OF
THIS NOTE BEING MADE UPON THE MAKER BY MAIL AT THE ADDRESS OF THE MAKER AT 1285
IRIS LAKE ROAD, MCDONOUGH, GEORGIA 30252, WITH A COPY TO FRANK L. WILSON, III,
ESQ., 2849 PACES FERRY ROAD, SUITE 700, ATLANTA, GEORGIA 30339. THE MAKER
HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF
ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT
COURT.
IN WITNESS WHEREOF, the Maker has caused this Note to be signed as an
instrument under seal as of the day and year first above written.
By: /s/ M. Rea Brookings
--------------------------------
M. Rea Brookings
<PAGE>
<PAGE>
Exhibit 10.5
STOCK PLEDGE AGREEMENT
----------------------
This STOCK PLEDGE AGREEMENT is made as of January 29, 1999, by and between
Chancellor Asset Management, Inc., a Delaware corporation (the "Pledgee"), and
-------
M. Rea Brookings, an individual residing in the State of Georgia (the
"Pledgor").
-------
WHEREAS, the Pledgee, the Pledgor and David F. Herring ("Herring") are
-------
parties to a certain Stock Purchase Agreement, dated as of January 29, 1999 (the
"Stock Purchase Agreement"), pursuant to which, among other things, the Pledgor
------------------------
and Herring have sold to the Pledgee, effective as of the date hereof, all of
the issued and outstanding capital stock of various entities previously owned by
the Pledgor and Herring;
WHEREAS, in connection with the transactions contemplated under the Stock
Purchase Agreement, (a) the Pledgee has loaned the Pledgor on the date hereof
the principal amount of $150,000 (the "Closing Loan"), and (b) the Pledgee will
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loan the Pledgor on April 15, 1999 the additional principal amount of $100,000
(the "Post-Closing Loan"), and the Pledgor has evidenced, or will evidence, the
------------ ----
Pledgor's obligation to repay (i) the Closing Loan by executing and delivering
to the Pledgee on the date hereof a Promissory Note in the principal amount of
$150,000 (the "Closing Note"), and (ii) the Post-Closing Loan by executing and
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delivering to the Pledgee on April 15, 1999 a Promissory Note in the principal
amount of $100,000 (the "Post-Closing Note"; which together with the Closing
------------ ----
Note, the "Notes"); and
-----
WHEREAS, the Pledgor owns 2,250,000 shares of the common stock, $.01 par
value per share (the "Common Stock"), of Chancellor Corporation, a Massachusetts
------ -----
corporation and the corporate parent of the Pledgee ("Chancellor"), and has
----------
agreed to pledge certain of those shares to the Pledgee to secure the Pledgor's
obligations under the Notes and this Agreement (the "Obligations"), upon the
-----------
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. PLEDGE OF STOCK, ETC.
------------------------
The Pledgor hereby pledges, assigns, grants a security interest in, and delivers
to the Pledgee, to secure the Obligations, all of the Pledgor's right, title and
interest in and to 471,698 shares of Common Stock held by the Pledgor (the
"Pledged Shares"), to be held by the Pledgee subject to the terms and conditions
------- ------
hereinafter set forth. The certificate(s) for the Pledged Shares, accompanied
by a stock power or other appropriate instrument of assignment thereof duly
executed in blank by the Pledgor, are being delivered to the Pledgee
contemporaneously herewith. Notwithstanding anything to the contrary set forth
herein, if for any reason the Pledgee fails or refuses to make the Post-Closing
Loan to the Pledgor on or before April 15, 1999, the Pledgee will immediately
thereafter return to the Pledgor forty percent (40%) of the Pledged Shares (the
"Returned Pledged Shares"), provided, however, that if the Pledgee subsequently
-------- ------- ------ --------
makes the Post-Closing Loan to the Pledgor, the Pledgor will contemporaneously
therewith re-pledge the Returned Pledged Shares to the Pledgee to secure the
Post-Closing Loan.
<PAGE>
2. DEFINITIONS. Event of Default shall mean any of the following (a) an
----------- ----------------
Event of Default under either or both of the Notes, or (b) a breach of any
obligation of the Pledgor under this Agreement which remains unredmedies by the
Pledgor after receipt of written notice thereof from the Pledgee and a ten (10)
day period to cure same.
Stock Collateral shall mean the property at any time pledged to the Pledgee
----------------
hereunder (whether described herein or not) and all income therefrom, increases
therein and proceeds thereof, including without limitation, any additional stock
of Chancellor issued to the Pledgor on account of any stock split,
reorganization, recapitalization, reclassification or similar event affecting
the Pledged Shares, but excluding from the definition of "Stock Collateral" any
income, increases or proceeds received by the Pledgee to the extent expressly
permitted by 6.
3. SECURITY FOR OBLIGATIONS. This Agreement and the security interest in
-------------------------
and pledge of the Stock Collateral hereunder are made with and granted to the
Pledgee as security for the prompt payment and performance in full of all the
Obligations.
4. DISTRIBUTIONS PAID TO PLEDGEE. Any sums or other property paid or
-------------------------------
distributed upon or with respect to any of the Pledged Shares, whether by
dividend or redemption or upon the liquidation or dissolution of Chancellor or
otherwise, shall, except to the limited extent provided in 6, be paid over and
delivered to the Pledgee to be held by the Pledgee pursuant to the terms of this
Agreement, as security for the payment and performance in full of all the
Obligations. In the event that, pursuant to the recapitalization or
reclassification of the capital of Chancellor or pursuant to the reorganization
thereof, any distribution of capital shall be made on or in respect of any of
the Pledged Shares or any property shall be distributed upon or with respect to
any of the Pledged Shares, the property so distributed shall be delivered to the
Pledgee to be held by it as security for the Obligations. Except to the limited
extent provided in 6, all sums of money and property paid or distributed in
respect of the Pledged Shares, whether as a dividend or upon such a liquidation,
dissolution, recapitalization or reclassification or otherwise, that are
received by the Pledgee shall, until paid or delivered to the Pledgee, be held
in trust for the Pledgee as security for the prompt payment and performance in
full of all of the Obligations.
5. WARRANTY OF TITLE; AUTHORITY. The Pledgor hereby represents and warrants
----------------------------
that: (i) the Pledgor has good and marketable title to the Pledged Shares
described in 1, subject to no pledges, liens, security interests, charges,
options, restrictions or other encumbrances claimed by, through or under the
Pledgor, except the pledge and security interest created by this Agreement, and
(ii) the Pledgor has full power, authority and legal right to execute, deliver
and perform the Pledgor's obligations under this Agreement and to pledge and
grant a security interest in all of the Stock Collateral pursuant to this
Agreement. The Pledgor covenants that the Pledgor will defend the Pledgee's
rights and security interest in such Pledged Shares against the claims and
demands of all persons whomsoever. The Pledgor further covenants that the
Pledgor will have the like title to, and right
<PAGE>
to pledge and grant a security interest, in the Stock Collateral hereafter
pledged or in which a security interest is granted to the Pledgee hereunder and
will likewise defend the Pledgee's rights, pledge and security interest thereof
and therein.
6. DIVIDENDS, VOTING, ETC., PRIOR TO MATURITY. So long as no Event of
-----------------------------------------------
Default shall have occurred and be continuing, the Pledgor shall be entitled to
receive all cash and stock dividends paid in respect of the Pledged Shares, to
vote the Pledged Shares and to give consents, waivers and ratifications in
respect of the Pledged Shares; provided, however, that no vote shall be cast or
-------- -------
consent waiver or ratification given by the Pledgor if the effect thereof would
in the reasonable judgment of the Pledgee impair any of the Stock Collateral or
be inconsistent with or result in any violation of any of the provisions of the
Stock Purchase Agreement or any of the Transaction Documents (as defined in the
Stock Purchase Agreement). All such rights of the Pledgor to receive cash and
stock dividends, and all such rights of the Pledgor to vote and give consents,
waivers and ratifications with respect to the Pledged Shares, shall immediately
cease in the event an Event of Default shall have occurred and be continuing.
7. REMEDIES.
--------
7.1. IN GENERAL. If an Event of Default shall have occurred and be
----------
continuing, the Pledgee shall thereafter have the following rights and
remedies (to the extent permitted by applicable law) in addition to the
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in the Commonwealth of Massachusetts, all such rights and remedies
being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently, at such time or times as the Pledgee deems
expedient:
(a) if the Pledgee so elects and gives notice of such election to
the Pledgor, the Pledgee may vote any or all of the Pledged Shares
(whether or not the same shall have been transferred into its name or
the name of its nominee or nominees) for any lawful purpose,
including, without limitation, if the Pledgee so elects, for the
liquidation of the assets of Chancellor, and give all consents,
waivers and ratifications in respect of the Pledged Shares and
otherwise act with respect thereto as though it were the outright
owner thereof (the Pledgor hereby irrevocably constituting and
appointing the Pledgee the proxy and attorney-in-fact of the Pledgor,
with full power of substitution, to do so);
(b) the Pledgee may demand, sue for, collect or make any
compromise or settlement the Pledgee deems suitable in respect of any
Stock Collateral;
(c) the Pledgee may sell, resell, assign and deliver, or
otherwise dispose of any or all of the Stock Collateral, for cash or
credit or both and upon such terms at such place or places, at such
time or times and to such entities or other persons as the Pledgee
thinks expedient, all without demand for performance by the Pledgee or
any notice or advertisement whatsoever except as expressly provided
herein or as may otherwise be required by law; and
<PAGE>
(d) the Pledgee may cause all or any part of the Pledged Shares
held by it to be transferred into its name or the name of its nominee
or nominees.
7.2. SALE OF STOCK COLLATERAL. In the event of any disposition of the
------------------------
Stock Collateral as provided in clause (c) of 7.1, the Pledgee shall give
to the Pledgor at least five business days prior written notice of the time
and place of any public sale of the Stock Collateral or of the time after
which any private sale or any other intended disposition is to be made. The
Pledgor hereby acknowledges that five business days prior written notice of
such sale or sales shall be reasonable notice. The Pledgee may enforce its
rights hereunder without any other notice and without compliance with any
other condition precedent now or hereunder imposed by statute, rule of law
or otherwise (all of which are hereby expressly waived by the Pledgor, to
the fullest extent permitted by law). The Pledgee may buy any part or all
of the Stock Collateral at any public sale and if any part or all of the
Stock Collateral is of a type customarily sold in a recognized market or is
of the type which is the subject of widely-distributed standard price
quotations, the Pledgee may buy at private sale and may make payments
thereof by any means. The Pledgee may apply the cash proceeds actually
received from any sale or other disposition to the reasonable expenses of
retaking, holding, preparing for sale, selling and the like, to reasonable
attorneys' fees, travel and all other expenses which may be incurred by the
Pledgee in attempting to collect the Obligations or to enforce this
Agreement or in the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement, and then to the
Obligations in the order set forth in such order or preference as the
Pledgee may determine after proper allowance for Obligations not then due.
Only after such applications, and after payment by the Pledgee of any
amount required by 9-504(1)(c) of the Uniform Commercial Code as enacted in
the Commonwealth of Massachusetts, need the Pledgee account to the Pledgor
for any surplus.
7.3. PLEDGOR'S AGREEMENTS, ETC. The Pledgor further agrees to do or
----------------------------
cause to be done all such other acts and things as may be reasonably
necessary to make any sales of any portion or all of the Pledged Shares
pursuant to this 7 valid and binding and in compliance with any and all
applicable laws (including, without limitation, the United States
Securities Act of 1993, as amended, the United States Securities Exchange
Act of 1934, as amended, the rules and regulations of the Securities and
Exchange Commission applicable thereto, and all applicable state securities
or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such
sale or sales, all at the Pledgor's expense. The Pledgor further agrees
that a breach of any of the covenants contained in this 7 will cause
irreparable injury to the Pledgee, that the Pledgee has no adequate remedy
at law in respect of such breach and, as a consequence, agrees that each
and every covenant contained in this 7 shall be specifically enforceable
against the Pledgor and the Pledgor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants.
<PAGE>
8. MARSHALLING. The Pledgee shall not be required to marshal any present or
-----------
future security for (including, but not limited to, this Agreement and the Stock
Collateral), or other assurances of payment of, the Obligations or any of them,
or to resort to such security or other assurances of payment in any particular
order. All of the Pledgee's rights hereunder and in respect of such security and
other assurances of payment shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that it lawfully may, the
Pledgor hereby agrees that it will not invoke any law relating to the
marshalling of collateral that might cause delay in or impede the enforcement of
the Pledgee's rights under this Agreement, or under any other instrument
evidencing any of the Obligations or under which any of the Obligations is
outstanding, or by which any of the Obligations is secured or payment thereof is
otherwise assured, and to the extent that it lawfully may, the Pledgor hereby
irrevocably waives the benefits of all such laws.
9. PLEDGOR'S OBLIGATIONS NOT AFFECTED. The obligations of the Pledgor
------------------------------------
hereunder shall remain full force and effect without regard to, and shall not be
impaired by (i) any exercise or nonexercise, or any waiver, by the Pledgee of
any right, remedy, power or privilege under or in respect of any of the
Obligations or any security thereof (including this Agreement); (ii) any
amendment to or modification of the Stock Purchase Agreement, the Notes or any
of the Transaction Documents (as defined in the Stock Purchase Agreement); (iii)
any amendment or modification of any of the Obligations; or (iv) the taking of
additional security for, or any other assurances of payment of, any of the
Obligations or the release or discharge or termination of any security or other
assurances of payment or performance for any of the Obligations, whether or not
the Pledgor shall have notice or knowledge of any of the foregoing.
10. TRANSFER, ETC., BY THE PLEDGOR. Without the prior written consent of
-------------------------------
the Pledgee, the Pledgor will not sell, assign, transfer or otherwise dispose
of, grant any option with respect to, or pledge or grant any security interest
in or otherwise encumber or restrict any of the Stock Collateral or any interest
therein, except for the pledge thereof and security interest therein provided
for in this Agreement.
11. FURTHER ASSURANCES. The Pledgor will do all such acts, and will furnish
------------------
to the Pledgee all such financing statements, certificates, legal opinions and
other documents, will obtain all such governmental consents and corporate
approvals, and will do or cause to be done all such other things as the Pledgee
may reasonably request from time to time in order to give full effect to this
Agreement and to secure the rights of the Pledgee hereunder, all without any
cost or expense to the Pledgee. If the Pledgee so elects, a photocopy of this
Agreement may at any time and from time to time be filed by the Pledgee as a
financing statement in any recording office in any jurisdiction.
12. PLEDGEE'S EXONERATION. Under no circumstances shall the Pledgee be
----------------------
deemed to assume any responsibility for or obligation or duty with respect to
any part or all of the Stock Collateral of any nature or kind or any matter or
proceedings arising out of or relating thereto, other than (i) to exercise
reasonable
<PAGE>
care in the physical custody of the Stock Collateral, and (ii) after an Event of
Default shall have occurred and be continuing, to act in a commercially
reasonable manner. The Pledgee shall not be required to take any action of any
kind to collect, preserve or protect its or the Pledgor's rights in the Stock
Collateral or against other parties thereto. The Pledgee's prior recourse to
any part or all of the Stock Collateral shall not constitute a condition of any
demand, suit or proceeding for payment or collection of any of the Obligations.
13. NO WAIVER, ETC. No act, failure or delay by the Pledgee or the Pledgor
---------------
shall constitute a waiver of the other's rights and remedies hereunder or
otherwise. No single or partial waiver by the Pledgee or the Pledgor of any
default or right or remedy that it may have against the other shall operate as a
waiver of any other default, right or remedy or of the same default, right or
remedy on a future occasion. The Pledgor hereby waives presentment, notice of
dishonor and protect of all instruments, included in or evidencing any of the
Obligations or the Stock Collateral, and any and all other notices and demands
whatsoever (except as expressly provided herein or in the Notes).
14. NOTICE, ETC. All notices, requests and other communications hereunder
-----------
shall be made in the manner set forth in the Stock Purchase Agreement.
15. TERMINATION. Upon final payment and performance in full of the
-----------
Obligations, this Agreement shall terminate and the Pledgee shall, at the
Pledgee's request and expense, promptly return such Stock Collateral in the
possession or control of the Pledgee as has not theretofore been disposed of
pursuant to the provisions hereof, together with any moneys and other property
at the time held by the Pledgee hereunder.
16. NO WAIVER. Neither this Agreement nor any term hereof may be changed,
---------
waived, discharged or terminated except by a written instrument expressly
referring to this Agreement and to the provisions so modified or limited, and
executed by the party to be charged.
17. ASSIGNMENT; SUCCESSORS AND ASSIGNS. The Pledgor may not assign any of
-----------------------------------
its rights or obligations under this Agreement without the prior written consent
of the Pledgee. Subject to the foregoing, this Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.
18. GOVERNING LAW. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS AN
--------------
INSTRUMENT UNDER SEAL AND THIS AGREEMENT AND THE OBLIGATIONS OF THE PLEDGOR
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS.
<PAGE>
19. HEADINGS. The descriptive section headings have been inserted for
--------
convenience of reference only and do not define or limit the provisions hereof.
20. SEVERABILITY, ETC. If any term of this Agreement shall be held to be
------------------
invalid, illegal or unenforceable, the validity of all other terms hereof shall
be in no way affected thereby, and this Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Pledgor acknowledges receipt of a copy of this Agreement.
IN WITNESS WHEREOF, intending to be legally bound, the Pledgor and the Pledgee
have caused this Agreement to be executed as of the date first above written.
PLEDGEE:
CHANCELLOR ASSET MANAGEMENT, INC.
By: /s/ Franklyn E. Churchill
----------------------------
Franklyn E. Churchill
President
PLEDGOR:
/s/ M. Rea Brookings
----------------------------
M. Rea Brookings
Exhibit 10.6
EMPLOYMENT AGREEMENT
---------- ---------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the
29th day of January, 1999, by and between M.R.B., INC., a Georgia corporation
(the "Company"), and DAVID F. HERRING (the "Employee").
R E C I T A L S
The Company desires to obtain the services of the Employee in the employment of
the Company on the terms and subject to the conditions set forth in this
Agreement, and the Employee desires to make his services available to the
Company on the terms and subject to the conditions set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, agreements and mutual
covenants set forth herein, the parties hereto, intending to be bound legally,
hereby agree as follows:
2. DEFINITIONS. The following terms when used herein, unless the context
otherwise requires, shall be defined as follows:
1.1. "Cause" shall have the meaning set forth in Section 5.1 hereof.
1.2. "CAM" shall mean Chancellor Asset Management, Inc., a Delaware
corporation and parent company of the Company.
1.3. "Chancellor" shall mean Chancellor Corporation, a Massachusetts
corporation and parent company of CAM.
1.4. "Companies" shall mean the Company, together with Tomahawk Truck and
Trailer Sales, Inc., a Florida corporation, Tomahawk Truck and Trailer
Sales of Virginia, Inc., a Virginia corporation, and Tomahawk Truck
and Trailer Sales of Missouri, Inc, a Missouri corporation.
1.5. "Company" shall mean M.R.B. Inc., a Georgia corporation.
1.6. "Confidential Information" shall have the meaning set forth in Section
7.1 hereof.
1.7. "Term" shall have the meaning set forth in Section 3 hereof.
1.8. "Stock Purchase Agreement" shall mean the Stock Purchase Agreement
entered into among CAM, M. Rea Brookings, and the Employee dated as of
the 29th day of January, 1999.
18. EMPLOYMENT.
18.1.General. The Company hereby agrees to employ the Employee as Vice
President of the Company during the Term on the terms and subject to
the conditions contained in
<PAGE>
this Agreement, and the Employee hereby agrees to accept such
employment on the terms and subject to the conditions contained in
this Agreement.
18.2.Duties of Employee. During the Term, the Employee shall diligently
perform all duties and responsibilities as may be assigned to him by
the Company's Board of Directors, and shall exercise such power and
authority as may from time to time be delegated to him thereby. The
Employee shall devote his full business time and attention to the
business and affairs of the Companies as necessary to perform his
duties and responsibilities hereunder, render such services to the
best of his ability, and use his best efforts to promote at all times
the interests of the Companies.
19. TERM. Subject to the provisions of Section 5 of this Agreement, the
Company shall employ the Employee for a term of five (5) years (the
"Term") commencing as of the date first written above (the "Effective
Date).
20. COMPENSATION.
20.1.Salary. The Employee shall receive an annual salary of Two Hundred
Thousand Dollars ($200,000.00) during the Term, and such salary shall
be payable in equal installments consistent with the Company's normal
payroll schedule commencing on either the first or fifteenth day of
the month, as the case may be, following the Effective Date. The
Employee's annual salary shall be subject to such increases as shall
be approved by the Company's Board of Directors in its sole
discretion.
20.2.Benefits. During the Term, the Employee shall be entitled to
participate in all plans adopted for the general benefit of the
Company's employees, such as stock option plans, 401(k) plans, pension
plans, profit sharing plans, medical plans, group or other insurance
plans and benefits, to the extent that the Employee is and remains
eligible to participate therein and subject to the eligibility
provisions of such plans in effect from time to time. For each
calendar year during the Term, the Employee shall be entitled to four
(4) weeks of paid vacation at such times as shall be mutually
acceptable to the Employee and the Company, and to sick and holiday
time as prescribed by the established Chancellor policies in effect
from time to time.
20.3.Withholding. Notwithstanding any provision in this Agreement to the
contrary, all payments required to be made by the Company hereunder to
the Employee in connection with the Employee's employment hereunder
shall be subject to withholding of such amounts relating to taxes as
the Company may reasonably determine it should withhold pursuant to
any applicable law or regulation. In lieu of withholding such amounts,
in whole or in part, the Company may, in its sole discretion, accept
other provisions for the payment of taxes, provided that the Company
is satisfied that all requirements of law affecting its
responsibilities to withhold have been satisfied.
20.4.Reimbursement of Expenses. The Company agrees to reimburse the
Employee for all reasonable business expenses (including, without
limitation, reasonable travel and entertainment expenses) incurred by
the Employee in the discharge of his duties hereunder, subject to the
Company's reimbursement policies in effect from time to time. The
Employee agrees to maintain reasonable records of his business
expenses in such form and detail as the Company may request and to
make such records available to the Company as and when requested.
<PAGE>
21. TERMINATION.
21.1.Termination by the Company for Cause. Notwithstanding any provision
in this Agreement to the contrary, this Agreement may be terminated by
the Company for "Cause" at any time during the Term hereof, and such
termination shall be effective immediately upon written notice to the
Employee. For purposes of this Agreement, "Cause" for the termination
of the Employee's employment hereunder shall be deemed to exist only
if, in the reasonable judgment of the Company's Board of Directors:
(a) the Employee commits fraud, theft or embezzlement against any of
the Companies; (b) the Employee commits a felony or a crime involving
moral turpitude; (c) the Employee discloses trade secrets or other
proprietary information of Chancellor or any of the Companies or any
subsidiary or affiliate thereof to any unauthorized person or entity;
(d) the Employee breaches any non-competition or non-solicitation
agreement with Chancellor or any of the Companies or any subsidiary or
affiliate thereof; (e) the Employee breaches any of the terms of this
Agreement (other than those referenced in clauses (c) and (d) of this
Section 5.1) and fails to cure such breach within twenty (20) days
after the receipt of written notice of such breach from the Company;
or (f) the Employee engages in gross negligence or willful misconduct
that causes harm (or could reasonably be expected to cause harm) to
the business and operations of Chancellor or any of the Companies or a
subsidiary or affiliate thereof. Upon any termination pursuant to this
Section 5.1, the Employee shall be entitled to be paid solely the
Employee's salary then in effect through the effective date of
termination, and the Company shall have no further liability or other
obligation of any kind whatsoever to the Employee hereunder.
21.2.Termination by the Company Without Cause. The Company may, in its
sole and absolute discretion, terminate the employment of the Employee
hereunder at any time without "Cause" (as such term is defined in
Section 5.1 above), or otherwise without any cause, reason or
justification, provided that the Company provides to the Employee at
least ninety (90) days' prior written notice (the "Termination
Notice") of such termination. In the event of any such termination by
the Company, (a) the Employee's employment with the Company shall
cease and terminate on the date specified in the Termination Notice
(or, if no date is so specified, on the date which is ninety (90) days
following the date of such notice), and (b) the Employee shall be
entitled to receive and be paid (i) in the case of a termination under
this Section 5.2 at any time prior to or on the third anniversary of
the Effective Date, the Employee's entire salary, at the rate in
effect as of the effective date of such termination and in equal
monthly installments, through such third anniversary, and thereafter
fifty percent (50%) of the Employee's salary, at the rate in effect as
of the effective date of such termination and in equal monthly
installments, during the then remaining Term, and (ii) in the case of
termination under this Section 5.2 at any time after the third
anniversary of the Effective Date, fifty percent (50%) of the
Employee's salary, at the rate in effect as of the effective date of
such termination and in equal monthly installments, during the then
remaining Term, payable in either of the cases set forth in clauses
(i) and (ii) over the applicable period at the Company's regular and
customary intervals for the payment of salaries as then in effect and
in equal monthly installments, and the Company shall have no further
liability or other obligation of any kind whatsoever to the Employee
hereunder.
<PAGE>
21.3.Death of the Employee. In the event that the Employee shall die
during the Term, the Employee's employment with the Company shall
immediately cease and terminate and the Employee's estate, heirs (at
law), devisees, legatees or other proper and legally entitled
descendants, or the personal representative, executor, administrator
or other proper legal representative on behalf of such descendants,
shall be entitled to receive and be paid solely the Employee's salary
through the date of death, and the Company shall have no further
liability or other obligation of any kind whatsoever to the Employee
hereunder.
21.4.Disability of the Employee. In the event that the Employee becomes
incapacitated during the Term by reason of sickness, accident or other
mental or physical disability such that he is substantially unable to
perform his duties and responsibilities hereunder for a period of
ninety (90) consecutive days, or for shorter or intermittent periods
aggregating one hundred twenty (120) days during any 12-month period
(a "Disability"), the Company thereafter shall have the right, in its
sole and absolute discretion, to terminate the Employee's employment
under this Agreement by sending written notice of such termination to
the Employee or his legal guardian or other proper legal
representative and thereupon his employment hereunder shall
immediately cease and terminate; provided, however, that
--------
notwithstanding the foregoing, the Employee's employment shall not be
terminated as aforesaid if the Company's Board of Directors
determines, in its reasonable judgment, that after the termination of
such Disability, the Employee is able to resume his duties and
responsibilities to the Company in accordance with the terms hereof in
the manner theretofore provided. In the event of any such termination,
the Employee shall be entitled to receive and be paid solely the
Employee's salary then in effect through the effective date of
termination, and the Company shall have no further liability or other
obligation of any kind whatsoever to the Employee hereunder.
21.5.Termination by the Employee. Provided that the Company does not have
"Cause" to terminate the Employee pursuant to Section 5.1 above, the
Employee may terminate the Employee's employment with the Company
hereunder at any time and for any reason. Employee must provide to the
Company written notice of such termination not less than ninety (90)
days prior to the date such termination is to be effective. Upon any
termination pursuant to this Section 5.5, the Employee shall be
entitled to be paid solely the Employee's salary then in effect
through the effective date of termination, and the Company shall have
no further liability or other obligation of any kind whatsoever to the
Employee hereunder.
22. AGREEMENT NOT TO COMPETE. In addition to the separate non-competition
covenants made by the Employee as a "Seller" in Section 10.2 of the
Stock Purchase Agreement, which non-competition covenants the Employee
agrees and acknowledges are being given in consideration of the
acquisition by CAM of the outstanding capital stock of the Companies,
and are fully and independently enforceable in accordance with their
terms, the Employee agrees that in the event that the Employee's
employment with the Company is terminated either (a) at the expiration
of the full five (5) year Term, or (b) at any time during the fifth
year of the Term (the actual effective date of such employment
termination being referred to herein as the "Termination Date"), the
Employee shall not, for an additional one (1) year period commencing
as of the Termination Date, without the prior written consent of the
Company, (a) engage anywhere in the United States, directly or
indirectly, alone or as a shareholder (other than as a holder of less
than 3% of the capital stock of any publicly traded
<PAGE>
corporation), member, partner, manager, officer, director, employee or
consultant, in any business that is engaged or becomes engaged in the
business of any of the Companies as existing on the Effective Date,
(b) divert or attempt to divert to any competitor of any of the
Companies or any Affiliate of any such competitor, any customer or
client, or prospective customer or client, of any of the Companies, or
(c) solicit or encourage, or attempt to solicit or encourage, any
employee of any of the Companies to leave its employ for employment by
or with either Employee or Employee's Affiliates, or any competitor of
any of the Companies or any of any such competitor's Affiliates. If at
any time the provisions of this Section 6 shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as
to area, duration or scope of activity, this Section 6 shall be
considered divisible and shall become and be immediately amended to
only such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having
jurisdiction over the matter; and the Employee agrees that this
Section 6 as so amended shall be valid and binding as though any
invalid or unenforceable provisions had not been included therein.
Notwithstanding anything to the contrary set forth in this Section 6,
in the event that the non-competition covenants of the Employee set
forth in Section 10.2 of the Stock Purchase Agreement terminate in
accordance with the last sentence thereof, then the non-competition
covenants set forth in this Section 6 shall also terminate as to the
Employee as of the date such non-competition covenants set forth in
the Stock Purchase Agreement so terminate.
23. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
23.1.As used in this Agreement, "Confidential Information" shall mean all
customer sales and marketing information, customer account records,
proprietary receipts and/or processing techniques, information
regarding vendors and products, training and operations memoranda and
similar information, personnel records, pricing information, financial
information and trade secrets concerning or relating to the business,
accounts, customers, employees and affairs of the Companies, or any
subsidiary or affiliate thereof, obtained by or furnished, disclosed
or disseminated to the Employee, or obtained, assembled or compiled by
the Employee or under his supervision during the course of his
employment by the Company, and all physical embodiments of the
foregoing, all of which are hereby agreed to be the property of and
confidential to the Companies, but Confidential Information shall not
include any of the foregoing to the extent the same is or becomes
publicly known through no fault or breach of this Agreement by the
Employee.
23.2.The Employee acknowledges and agrees that all Confidential
Information, and all physical embodiments thereof, are confidential to
and shall be and remain the sole and exclusive property of the
Companies. Upon request by any of the Companies, and in any event upon
termination of the Employee's employment with the Company for any
reason whatsoever, as a prior condition to the Employee's receipt of
any final salary or benefit payments hereunder, the Employee shall
deliver to the Companies all property belonging to the Companies or
any of its subsidiaries or affiliates, including, without limitation,
all Confidential Information (and all embodiments thereof), then in
his custody, control or possession, but any forfeiture of such salary
or benefit shall not be considered a satisfaction or a release of or
liquidated damages for any claim(s) for damages against the Employee
which may accrue to the Companies, as a result of any breach of this
Section 7 by the Employee.
<PAGE>
23.3.The Employee agrees that he will not, either during the Term or at
any time thereafter, without the prior written consent of the Company,
use, disclose or make available any Confidential Information to any
person or entity, nor shall he use, disclose, make available or cause
to be used, disclosed or made available, or permit or allow, either on
his own behalf or on behalf of others, any use or disclosure of such
Confidential Information other than in the proper performance of the
Employee's duties hereunder. Notwithstanding anything to the contrary
set forth herein, after the expiration of the longer of (a) the
non-competition period applicable to the Employee set forth in the
Stock Purchase Agreement, and (b) the non-competition period set forth
herein, the Employee shall be permitted to utilize the customer lists
of the Companies for any purpose whatsoever.
23.4.Notwithstanding anything to the contrary set forth in this Section 7,
in the event the non-competition covenants of the Employee set forth
in Section 10.2 of the Stock Purchase Agreement terminate in
accordance with the last sentence thereof, then the provision of this
Section 7 shall also terminate as to the Employee as of the date such
non-competition covenants set forth in the Stock Purchase Agreement so
terminate.
24. INVENTIONS. The Employee shall disclose promptly to the Companies any and
all conceptions and ideas for inventions, improvements, business methods
and systems, and valuable discoveries, whether patentable or not, that are
conceived or made by the Employee, solely or jointly with another, during
the Term and that are directly related to the business or activities of the
Companies and that the Employee conceives as a result of his employment by
the Company, regardless of whether or not such ideas, inventions, or
improvements qualify as "works for hire." The Employee hereby assigns and
agrees to assign all his interests therein to the Companies or their
nominees. Whenever requested to do so by any of the Companies, the Employee
shall execute any and all applications, assignments or other instruments
that such Company shall deem necessary to apply for and obtain Letters
Patent of the United States or any foreign country or to otherwise protect
any of the Companies' interest therein.
25. REASONABLENESS OF RESTRICTIONS. In the event that any provision relating to
time period or geographic area of any restriction set forth in Sections 6,
7 or 8 shall be declared by a court of competent jurisdiction to exceed the
maximum time period or area of restriction that the court deems reasonable
and enforceable, the time period or area of restriction which the court
finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
26. ENFORCEABILITY. Any provision of Sections 6, 7 or 8 which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
27. INJUNCTION. It is recognized and hereby acknowledged by the parties hereto
that a breach or threat of breach by the Employee of any of the covenants
contained in Sections 6, 7 or 8 of this Agreement will cause irreparable
harm and damage to the Companies, the monetary amount of which may be
virtually impossible to ascertain. As a result, the Employee recognizes and
hereby acknowledges that the Companies shall be entitled to an injunction
from any court of competent jurisdiction enjoining and restraining any
violation or threatened
<PAGE>
violation of any or all of the covenants contained in Sections 6, 7 or 8 of
this Agreement by the Employee or any of his affiliates, associates,
partners or agents, either directly or indirectly, and that such right to
injunction shall be cumulative and in addition to whatever other remedies
the Companies may possess.
28. ASSIGNMENT; BINDING EFFECT. The Employee shall not assign any of his rights
or obligations pursuant to this Agreement to any other person without the
prior written consent of the Company, which consent may be unreasonably
withheld or delayed. Subject to the foregoing, this Agreement shall be for
the benefit of and binding upon the parties hereto and their respective
heirs, personal representatives, legal representatives, successors and
assigns.
29. EMPLOYER'S AUTHORITY. The relationship between the parties hereto is that
of employer and employee. The Employee agrees to observe and comply with
the rules and regulations of the Companies, as adopted by the Companies
from time to time with respect to the performance of the duties of the
Employee. The Employee acknowledges that he has no authority to enter into
any contracts or other obligations that are binding upon any of the
Companies unless such contracts or obligations are authorized by the Board
of Directors of such Companies. The Company shall have the power to direct,
control and supervise the duties to be performed by the Employee, the
manner of performing said duties, and the time of performing said duties.
30. GOVERNING LAW. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by
and construed in accordance with the laws of the State of Delaware,
excluding the choice of law rules thereof.
31. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter.
This Agreement may not be modified or amended in any way, unless by a
written instrument signed by both the Company and the Employee.
32. NOTICES. Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given upon receipt or
actual delivery by hand or after sent by certified United States mail,
return receipt requested, postage prepaid, or by a reputable overnight
courier service, addressed as follows:
ii) If to the Employee:
David F. Herring
4382 S. Moreland Ave.
Conley, GA 30288
Fax: 404-362-9460
with a copy given in the manner prescribed above to:
Frank L. Wilson, III, Esq.
Wilson Brock & Irby, L.L.C.
Overlook I, Suite 700
2849 Paces Ferry Rd., N.W.
Atlanta, GA 30339
Fax: 404-853-1812
<PAGE>
iii) If to the Company:
c/o Peter J. Mullen, Clerk
Chancellor Corporation
210 South Street
10th Floor
Boston, MA 02111
Fax: 617-422-5851
with a copy given in the manner prescribed above to:
Victor J. Paci, Esq.
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Fax: 617-951-8736
or to such other addresses as either party hereto may from time to time
give notice of to the other party hereto in the aforesaid manner.
20. DAMAGES. Nothing contained herein shall be construed to prevent any of the
Companies or the Employee from seeking and recovering from the other
damages sustained by either or both of them as a result of its or his
breach of any term or provision of this Agreement. In the event that either
party hereto brings suit for the collection of any damages resulting from,
or the injunction of any action constituting, a breach of any of the terms
or provisions of this Agreement, then the non-prevailing party shall pay
all reasonable court costs and attorneys' fees of the other party.
21. SECTION HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
22. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this Agreement
is intended, or shall be construed, to confer upon or give any person or
entity other than the parties hereto and their respective heirs, personal
representative, legal representative, successors and assigns, and except
for the other Companies (other than the Company), any rights or remedies
under or by reason of this Agreement.
23. WAIVER. No delay or failure at any time on the part of any of the Companies
in exercising any right, power or privilege under this Agreement, or in
enforcing any provision of this Agreement, shall impair any such right,
power or privilege, or be construed as a waiver of any default or as any
acquiescence therein, or shall affect the right of any of the Companies
thereafter to enforce each and every provision of this Agreement in
accordance with its terms. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall neither operate
nor be construed as a waiver of any subsequent breach or violation.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement under seal
as of the date first above written.
M.R.B., INC.
By: /s/ Franklyn E. Churchill
---------------------------------------------
Name: Franklyn E. Churchill
Title: CEO and President, Chancellor Asset Management, Inc.
EMPLOYEE
By: /s/ David F. Herring
---------------------------------------------
Name: David F. Herring
<PAGE>
Exhibit 10.7
PROMISSORY NOTE
---------- ----
$150,000 January 29, 1999
I. Indebtedness.
------------
FOR VALUE RECEIVED, the undersigned, DAVID F. HERRING of Jonesboro, Georgia
("Maker"), promises to pay to the order of CHANCELLOR ASSET MANAGEMENT, INC., a
-----
Delaware corporation (the "Payee"), the principal amount of ONE HUNDRED FIFTY
-----
THOUSAND DOLLARS ($150,000), without interest, payable in one installment on
January 29, 2004 (the "Maturity Date"), at the Payee's principal address at 210
-------- ----
South Street, 10th Floor, Boston, Massachusetts 02110 or at such other place as
the Payee shall have designated to the Maker in writing, (i) in lawful money of
the United States of America and in immediately available funds, or (ii) in the
form of common stock, $.01 par value per share (the "Common Stock"), of
------ -----
Chancellor Corporation, a Massachusetts corporation and the corporate parent of
the Payee ("Chancellor"), in accordance with the terms set forth in Section V of
----------
this Note.
II. Loan Obligations.
---- -----------
This is a "Seller Closing Note" delivered by the Maker to the Payee
------ ------- ----
pursuant to Section 4.2 of the Stock Purchase Agreement, dated as of December
31, 1998 (the "Stock Purchase Agreement"), by and among the Payee, the Maker and
-------------- ---------
M. Rea Brookings, as evidence of the obligation of the Maker to repay to the
Payee a Seller Closing Loan (as defined in Section 4.2 of the Stock Purchase
Agreement).
III. Default.
-------
If an Event of Default (as hereinafter defined) shall occur and be
continuing under the provisions of this Note, the Payee may accelerate the
entire unpaid principal balance outstanding under this Note, by written notice
to the Maker, and the entire unpaid principal balance outstanding under this
Note shall become immediately due and payable within five (5) days after receipt
by the Maker of said notice. At such time the Payee shall be entitled to
exercise any remedies that it may have at law, or in equity, in order to collect
its debt hereunder including, without limitation, the commencement of legal
proceedings against the Maker.
As used herein, an "Event of Default" means the occurrence of any of the
----- -- -------
following:
(i) the failure of the Maker to make any payment of principal or other
sums due under this Note within twenty (20) days after the due date thereof;
(ii) if the Maker shall make an assignment for the benefit of
creditors, or if a receiver of the property of the Maker shall be appointed, or
if a petition in any bankruptcy or other similar proceeding under any law for
relief of debtors shall be filed by or against the Maker, and, if against the
Maker, is not dismissed or discharged within sixty (60) days;
<PAGE>
(iii) any breach or default by the Maker of the terms and conditions of
that certain Stock Pledge Agreement, of even date herewith, between the Maker
and the Payee, securing the obligation of the Maker under this Note, which
continues unremedied after notice and a cure period as specifically provided
therein; or
(iv) the death of the Maker.
IV. Prepayment
----------
All or any portion of this Note may be prepaid (herein, a "Prepayment") at
----------
any time without premium or penalty by the Maker furnishing a written notice to
the Payee of the Maker's election to effect such a prepayment (a "Prepayment
----------
Notice"), which Prepayment Notice shall include the date on which the Maker
---
desires to make the Prepayment (the "Prepayment Date"); provided, however, that
- ---------- ---- -------- -------
if the Maker desires to pay all (or any portion) of the Prepayment in the manner
described in Section V hereof, then the Prepayment Date shall be the fifteenth
(15th) day following the Prepayment Notice (or the first (1st) business day
thereafter if such fifteenth (15th) day is not a business day).
V. Payment in the Form of Common Stock
-------- -- --- ---- -- -------------
A. Exchange. On the Maturity Date or earlier upon the a Prepayment
--------
Date, as the case may be, the Maker may, but shall not be obligated to, pay all
(or any portion) of the outstanding principal balance owed under this Note by
delivery to the Payee of such whole number of shares of Common Stock held by the
Maker determined by dividing (a) the outstanding principal amount of this Note
to be so paid, by (b) the Exchange Price (as hereinafter defined). In order to
pay all (or any portion) of the outstanding principal balance owed under this
Note by delivering shares of Common Stock as hereinabove provided, the Maker
shall be required to:
(i) in the case of any such payment on the Maturity Date, furnish an
Exchange Notice (as hereinafter defined) to the Payee not less than fifteen (15)
days prior to the Maturity Date, notifying Payee of the Maker's desire to
exercise the Maker's rights to pay in such manner; and
(ii) in the case of any such payment constituting a Prepayment, furnish
an Exchange Notice to the Payee contemporaneously with the applicable Prepayment
Notice (which Exchange Notice may be incorporated into the applicable Prepayment
Notice), notifying the Payee of the Maker's desire to exercise the Maker's
rights to pay in such manner.
B. Exchange Mechanism. Payment of all (or any portion) of the
-------------------
outstanding principal balance owed under this Note in the manner hereinabove
described shall be made by the Maker's surrender of the stock certificate(s)
representing the number of shares of Common Stock to be exchanged by the Maker
determined as hereinabove provided, duly endorsed or accompanied by a written
instrument of transfer duly executed by the Maker, to the Payee at its principal
place of business (or at such other office as the Payee shall designate by
notice in writing to the Maker from time to time), accompanied by a copy of the
applicable Exchange Notice previously furnished.
<PAGE>
C. Certain Definitions. For all purposes of this Section V, the
------- -----------
following terms shall have the respective meanings set forth below:
(a) "Exchange Notice" shall mean written notice by the Maker to the
-------- ------
Payee of the Maker's election to effect a payment with shares of Common Stock
held by the Maker of all (or any portion) of the outstanding principal balance
owed under the Note on the Maturity Date or on a Prepayment Date, as the case
may be; and
(b) "Exchange Price" shall mean (i) the last reported sales price per
-------- -----
share of the Common Stock on any national securities exchange or the NASDAQ
National Market System or the over-the-counter market which is then the
principal market for the Common Stock on the trading day immediately before the
Maturity Date or a Prepayment Date, as the case may be, or (ii) if the Common
Stock is not quoted or listed in any national securities exchange or the NASDAQ
National Market System or the over-the-counter market, the fair market value of
a share of Common Stock, as promptly determined in good faith by the Board of
Directors of Chancellor.
VI. Miscellaneous.
-------------
A. Waiver. The Payee hereby waives, to the extent not prohibited by
------
provisions of applicable law, presentment, demand, protest and notice thereof or
dishonor, and waives any right to be released by reason of any extension of time
or change in the terms of payment or any change, alteration or release of any
security given for the payment hereof. No course of dealing between Payee on
the one hand, and the Payee hereof on the other hand, shall operate as a waiver
of any of its rights under this Note. No delay or omission in exercising any
right under this Note shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a waiver of or
bar to any right or remedy on any other occasion.
B. Expenses. The Maker hereby agrees to pay on demand all costs of
--------
collection, including reasonable attorneys fees and disbursements, paid or
incurred by the Payee in connection with enforcing the Maker's obligations
hereunder.
C. Notices. All notices hereunder shall be given in the manner
-------
provided in the Stock Purchase Agreement.
D. Severability. In the event that any one more of the provisions
------------
contained in this Note shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Note shall not in any way be impaired.
E. Assignment. The Maker may not assign or pledge this Note or
----------
delegate its obligation to make payment hereunder without the prior written
consent of the Payee.
THIS NOTE AND THE OBLIGATIONS OF THE MAKER HEREUNDER SHALL FOR ALL PURPOSES
BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
MAKER CONSENTS TO SERVICE OF PROCESS IN ANY SUIT WITH RESPECT TO THE
<PAGE>
ENFORCEMENT OF THIS NOTE BEING MADE UPON THE MAKER BY MAIL AT THE ADDRESS OF THE
MAKER AT 707 LEXINGTON AVENUE, JONESBORO, GEORGIA 30236, WITH A COPY TO FRANK L.
WILSON, III, ESQ., 2849 PACES FERRY ROAD, SUITE 700, ATLANTA, GEORGIA 30339.
THE MAKER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
IN WITNESS WHEREOF, the Maker has caused this Note to be signed as an
instrument under seal as of the day and year first above written.
By: /s/ David F. Herring
-----------------------
David F. Herring
<PAGE>
Exhibit 10.8
STOCK PLEDGE AGREEMENT
----------------------
This STOCK PLEDGE AGREEMENT is made as of January 29, 1999, by and between
Chancellor Asset Management, Inc., a Delaware corporation (the "Pledgee"), and
-------
David F. Herring, an individual residing in the State of Georgia (the
"Pledgor").
WHEREAS, the Pledgee, the Pledgor and M. Rea Brookings ("Brookings") are
---------
parties to a certain Stock Purchase Agreement, dated as of January 29, 1999 (the
"Stock Purchase Agreement"), pursuant to which, among other things, the Pledgor
------------------------
and Brookings have sold to the Pledgee, effective as of the date hereof, all of
the issued and outstanding capital stock of various entities previously owned by
the Pledgor and Brookings;
WHEREAS, in connection with the transactions contemplated under the Stock
Purchase Agreement, (a) the Pledgee has loaned the Pledgor on the date hereof
the principal amount of $150,000 (the "Closing Loan"), and (b) the Pledgee will
------- ----
loan the Pledgor on April 15, 1999 the additional principal amount of $100,000
(the "Post-Closing Loan"), and the Pledgor has evidenced, or will evidence, the
------------ ----
Pledgor's obligation to repay (i) the Closing Loan by executing and delivering
to the Pledgee on the date hereof a Promissory Note in the principal amount of
$150,000 (the "Closing Note"), and (ii) the Post-Closing Loan by executing and
------- ----
delivering to the Pledgee on April 15, 1999 a Promissory Note in the principal
amount of $100,000 (the "Post-Closing Note"; which together with the Closing
------------ ----
Note, the "Notes"); and
-----
WHEREAS, the Pledgor owns 2,250,000 shares of the common stock, $.01 par
Value per share (the "Common Stock"), of Chancellor Corporation, a Massachusetts
------ -----
corporation and the corporate parent of the Pledgee ("Chancellor"), and has
----------
agreed to pledge certain of those shares to the Pledgee to secure the Pledgor's
obligations under the Notes and this Agreement (the "Obligations"), upon the
-----------
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises contained herein and for
Other good and valuable consideration, the receipt and sufficiency of which are
Hereby acknowledged, the parties hereto agree as follows:
1. PLEDGE OF STOCK, ETC. The Pledgor hereby pledges, assigns, grants a
---------------------
security interest in, and delivers to the Pledgee, to secure the Obligations,
all of the Pledgor's right, title and interest in and to 471,698 shares of
Common Stock held by the Pledgor (the "Pledged Shares"), to be held by the
------- ------
Pledgee subject to the terms and conditions hereinafter set forth. The
certificate(s) for the Pledged Shares, accompanied by a stock power or other
appropriate instrument of assignment thereof duly executed in blank by the
Pledgor, are being delivered to the Pledgee contemporaneously herewith.
Notwithstanding anything to the contrary set forth herein, if for any reason the
Pledgee fails or refuses to make the Post-Closing Loan to the Pledgor on or
before April 15, 1999, the Pledgee will immediately thereafter return to the
Pledgor forty percent (40%) of the Pledged Shares (the "Returned Pledged
-------- -------
Shares"); provided, however, that if the Pledgee subsequently makes the
- ------ --------
Post-Closing Loan to the Pledgee, then the Pledgor will contemporaneously
therewith re-pledge the Returned Pledged Shares to the Pledgee to secure the
Post-Closing Loan.
<PAGE>
2. DEFINITIONS. Event of Default shall mean any of the following (a) an
----------- ----------------
Event of Default under either or both of the Notes, or (b) a breach of any
obligation of the Pledgor under this Agreement which remains unredmedies by the
Pledgor after receipt of written notice thereof from the Pledgee and a ten (10)
day period to cure same.
Stock Collateral shall mean the property at any time pledged to the Pledgee
----------------
hereunder (whether described herein or not) and all income therefrom, increases
therein and proceeds thereof, including without limitation, any additional stock
of Chancellor issued to the Pledgor on account of any stock split,
reorganization, recapitalization, reclassification or similar event affecting
the Pledged Shares, but excluding from the definition of "Stock Collateral" any
income, increases or proceeds received by the Pledgee to the extent expressly
permitted by 6.
3. SECURITY FOR OBLIGATIONS. This Agreement and the security interest in
-------------------------
and pledge of the Stock Collateral hereunder are made with and granted to the
Pledgee as security for the prompt payment and performance in full of all the
Obligations.
4. DISTRIBUTIONS PAID TO PLEDGEE. Any sums or other property paid or
-------------------------------
distributed upon or with respect to any of the Pledged Shares, whether by
dividend or redemption or upon the liquidation or dissolution of Chancellor or
otherwise, shall, except to the limited extent provided in 6, be paid over and
delivered to the Pledgee to be held by the Pledgee pursuant to the terms of this
Agreement, as security for the payment and performance in full of all the
Obligations. In the event that, pursuant to the recapitalization or
reclassification of the capital of Chancellor or pursuant to the reorganization
thereof, any distribution of capital shall be made on or in respect of any of
the Pledged Shares or any property shall be distributed upon or with respect to
any of the Pledged Shares, the property so distributed shall be delivered to the
Pledgee to be held by it as security for the Obligations. Except to the limited
extent provided in 6, all sums of money and property paid or distributed in
respect of the Pledged Shares, whether as a dividend or upon such a liquidation,
dissolution, recapitalization or reclassification or otherwise, that are
received by the Pledgee shall, until paid or delivered to the Pledgee, be held
in trust for the Pledgee as security for the prompt payment and performance in
full of all of the Obligations.
5. WARRANTY OF TITLE; AUTHORITY. The Pledgor hereby represents and warrants
----------------------------
that: (i) the Pledgor has good and marketable title to the Pledged Shares
described in 1, subject to no pledges, liens, security interests, charges,
options, restrictions or other encumbrances claimed by, through or under the
Pledgor, except the pledge and security interest created by this Agreement, and
(ii) the Pledgor has full power, authority and legal right to execute, deliver
and perform the Pledgor's obligations under this Agreement and to pledge and
grant a security interest in all of the Stock Collateral pursuant to this
Agreement. The Pledgor covenants that the Pledgor will defend the Pledgee's
rights and security interest in such Pledged Shares against the claims and
demands of all persons whomsoever. The Pledgor further covenants that the
Pledgor will have the like title to, and right to pledge and grant a security
interest, in the Stock Collateral hereafter pledged or in which a
<PAGE>
security interest is granted to the Pledgee hereunder and will likewise defend
the Pledgee's rights, pledge and security interest thereof and therein.
6. DIVIDENDS, VOTING, ETC., PRIOR TO MATURITY. So long as no Event of
----------------------------------------------
Default shall have occurred and be continuing, the Pledgor shall be entitled to
receive all cash and stock dividends paid in respect of the Pledged Shares, to
vote the Pledged Shares and to give consents, waivers and ratifications in
respect of the Pledged Shares; provided, however, that no vote shall be cast or
-------- -------
consent waiver or ratification given by the Pledgor if the effect thereof would
in the reasonable judgment of the Pledgee impair any of the Stock Collateral or
be inconsistent with or result in any violation of any of the provisions of the
Stock Purchase Agreement or any of the Transaction Documents (as defined in the
Stock Purchase Agreement). All such rights of the Pledgor to receive cash and
stock dividends, and all such rights of the Pledgor to vote and give consents,
waivers and ratifications with respect to the Pledged Shares, shall immediately
cease in the event an Event of Default shall have occurred and be continuing.
7. REMEDIES.
--------
7.1. IN GENERAL. If an Event of Default shall have occurred and be
----------
continuing, the Pledgee shall thereafter have the following rights and
remedies (to the extent permitted by applicable law) in addition to the
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in the Commonwealth of Massachusetts, all such rights and remedies
being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently, at such time or times as the Pledgee deems
expedient:
(a) if the Pledgee so elects and gives notice of such election to
the Pledgor, the Pledgee may vote any or all of the Pledged Shares
(whether or not the same shall have been transferred into its name or
the name of its nominee or nominees) for any lawful purpose,
including, without limitation, if the Pledgee so elects, for the
liquidation of the assets of Chancellor, and give all consents,
waivers and ratifications in respect of the Pledged Shares and
otherwise act with respect thereto as though it were the outright
owner thereof (the Pledgor hereby irrevocably constituting and
appointing the Pledgee the proxy and attorney-in-fact of the Pledgor,
with full power of substitution, to do so);
(b) the Pledgee may demand, sue for, collect or make any
compromise or settlement the Pledgee deems suitable in respect of any
Stock Collateral;
(c) the Pledgee may sell, resell, assign and deliver, or
otherwise dispose of any or all of the Stock Collateral, for cash or
credit or both and upon such terms at such place or places, at such
time or times and to such entities or other persons as the Pledgee
thinks expedient, all without demand for performance by the Pledgee or
any notice or advertisement whatsoever except as expressly provided
herein or as may otherwise be required by law; and
<PAGE>
(d) the Pledgee may cause all or any part of the Pledged Shares
held by it to be transferred into its name or the name of its nominee
or nominees.
7.2. SALE OF STOCK COLLATERAL. In the event of any disposition of the
------------------------
Stock Collateral as provided in clause (c) of 7.1, the Pledgee shall give
to the Pledgor at least five business days prior written notice of the time
and place of any public sale of the Stock Collateral or of the time after
which any private sale or any other intended disposition is to be made. The
Pledgor hereby acknowledges that five business days prior written notice of
such sale or sales shall be reasonable notice. The Pledgee may enforce its
rights hereunder without any other notice and without compliance with any
other condition precedent now or hereunder imposed by statute, rule of law
or otherwise (all of which are hereby expressly waived by the Pledgor, to
the fullest extent permitted by law). The Pledgee may buy any part or all
of the Stock Collateral at any public sale and if any part or all of the
Stock Collateral is of a type customarily sold in a recognized market or is
of the type which is the subject of widely-distributed standard price
quotations, the Pledgee may buy at private sale and may make payments
thereof by any means. The Pledgee may apply the cash proceeds actually
received from any sale or other disposition to the reasonable expenses of
retaking, holding, preparing for sale, selling and the like, to reasonable
attorneys' fees, travel and all other expenses which may be incurred by the
Pledgee in attempting to collect the Obligations or to enforce this
Agreement or in the prosecution or defense of any action or proceeding
related to the subject matter of this Agreement, and then to the
Obligations in the order set forth in such order or preference as the
Pledgee may determine after proper allowance for Obligations not then due.
Only after such applications, and after payment by the Pledgee of any
amount required by 9-504(1)(c) of the Uniform Commercial Code as enacted in
the Commonwealth of Massachusetts, need the Pledgee account to the Pledgor
for any surplus.
7.3. PLEDGOR'S AGREEMENTS, ETC. The Pledgor further agrees to do or
---------------------------
cause to be done all such other acts and things as may be reasonably
necessary to make any sales of any portion or all of the Pledged Shares
pursuant to this 7 valid and binding and in compliance with any and all
applicable laws (including, without limitation, the United States
Securities Act of 1993, as amended, the United States Securities Exchange
Act of 1934, as amended, the rules and regulations of the Securities and
Exchange Commission applicable thereto, and all applicable state securities
or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or
awards of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over any such
sale or sales, all at the Pledgor's expense. The Pledgor further agrees
that a breach of any of the covenants contained in this 7 will cause
irreparable injury to the Pledgee, that the Pledgee has no adequate remedy
at law in respect of such breach and, as a consequence, agrees that each
and every covenant contained in this 7 shall be specifically enforceable
against the Pledgor and the Pledgor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants.
<PAGE>
8. MARSHALLING. The Pledgee shall not be required to marshal any
-----------
present or future security for (including, but not limited to, this
Agreement and the Stock Collateral), or other assurances of payment of, the
Obligations or any of them, or to resort to such security or other
assurances of payment in any particular order. All of the Pledgee's rights
hereunder and in respect of such security and other assurances of payment
shall be cumulative and in addition to all other rights, however existing
or arising. To the extent that it lawfully may, the Pledgor hereby agrees
that it will not invoke any law relating to the marshalling of collateral
that might cause delay in or impede the enforcement of the Pledgee's rights
under this Agreement, or under any other instrument evidencing any of the
Obligations or under which any of the Obligations is outstanding, or by
which any of the Obligations is secured or payment thereof is otherwise
assured, and to the extent that it lawfully may, the Pledgor hereby
irrevocably waives the benefits of all such laws.
9. PLEDGOR'S OBLIGATIONS NOT AFFECTED. The obligations of the Pledgor
----------------------------------
hereunder shall remain full force and effect without regard to, and shall
not be impaired by (i) any exercise or nonexercise, or any waiver, by the
Pledgee of any right, remedy, power or privilege under or in respect of any
of the Obligations or any security thereof (including this Agreement); (ii)
any amendment to or modification of the Stock Purchase Agreement, the Notes
or any of the Transaction Documents (as defined in the Stock Purchase
Agreement); (iii) any amendment or modification of any of the Obligations;
or (iv) the taking of additional security for, or any other assurances of
payment of, any of the Obligations or the release or discharge or
termination of any security or other assurances of payment or performance
for any of the Obligations, whether or not the Pledgor shall have notice or
knowledge of any of the foregoing.
10. TRANSFER, ETC., BY THE PLEDGOR. Without the prior written consent
-------------------------------
of the Pledgee, the Pledgor will not sell, assign, transfer or otherwise
dispose of, grant any option with respect to, or pledge or grant any
security interest in or otherwise encumber or restrict any of the Stock
Collateral or any interest therein, except for the pledge thereof and
security interest therein provided for in this Agreement.
11. FURTHER ASSURANCES. The Pledgor will do all such acts, and will
-------------------
furnish to the Pledgee all such financing statements, certificates, legal
opinions and other documents, will obtain all such governmental consents
and corporate approvals, and will do or cause to be done all such other
things as the Pledgee may reasonably request from time to time in order to
give full effect to this Agreement and to secure the rights of the Pledgee
hereunder, all without any cost or expense to the Pledgee. If the Pledgee
so elects, a photocopy of this Agreement may at any time and from time to
time be filed by the Pledgee as a financing statement in any recording
office in any jurisdiction.
12. PLEDGEE'S EXONERATION. Under no circumstances shall the Pledgee be
---------------------
deemed to assume any responsibility for or obligation or duty with respect
to any part or all of the Stock Collateral of any nature or kind or any
matter or proceedings arising out of or relating thereto, other than (i) to
exercise reasonable
<PAGE>
care in the physical custody of the Stock Collateral, and (ii) after an
Event of Default shall have occurred and be continuing, to act in a
commercially reasonable manner. The Pledgee shall not be required to take
any action of any kind to collect, preserve or protect its or the Pledgor's
rights in the Stock Collateral or against other parties thereto. The
Pledgee's prior recourse to any part or all of the Stock Collateral shall
not constitute a condition of any demand, suit or proceeding for payment or
collection of any of the Obligations.
13. NO WAIVER, ETC. No act, failure or delay by the Pledgee or the
---------------
Pledgor shall constitute a waiver of the other's rights and remedies
hereunder or otherwise. No single or partial waiver by the Pledgee or the
Pledgor of any default or right or remedy that it may have against the
other shall operate as a waiver of any other default, right or remedy or of
the same default, right or remedy on a future occasion. The Pledgor hereby
waives presentment, notice of dishonor and protect of all instruments,
included in or evidencing any of the Obligations or the Stock Collateral,
and any and all other notices and demands whatsoever (except as expressly
provided herein or in the Notes).
14. NOTICE, ETC. All notices, requests and other communications
------------
hereunder shall be made in the manner set forth in the Stock Purchase
Agreement.
15. TERMINATION. Upon final payment and performance in full of the
-----------
Obligations, this Agreement shall terminate and the Pledgee shall, at the
Pledgee's request and expense, promptly return such Stock Collateral in the
possession or control of the Pledgee as has not theretofore been disposed
of pursuant to the provisions hereof, together with any moneys and other
property at the time held by the Pledgee hereunder.
16. NO WAIVER. Neither this Agreement nor any term hereof may be
----------
changed, waived, discharged or terminated except by a written instrument
expressly referring to this Agreement and to the provisions so modified or
limited, and executed by the party to be charged.
17. ASSIGNMENT; SUCCESSORS AND ASSIGNS. The Pledgor may not assign any
----------------------------------
of its rights or obligations under this Agreement without the prior written
consent of the Pledgee. Subject to the foregoing, this Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
18. GOVERNING LAW. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS AN
--------------
INSTRUMENT UNDER SEAL AND THIS AGREEMENT AND THE OBLIGATIONS OF THE PLEDGOR
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE COMMONWEALTH OF MASSACHUSETTS.
<PAGE>
19. HEADINGS. The descriptive section headings have been inserted for
--------
convenience of reference only and do not define or limit the provisions
hereof.
20. SEVERABILITY, ETC. If any term of this Agreement shall be held to
------------------
be invalid, illegal or unenforceable, the validity of all other terms
hereof shall be in no way affected thereby, and this Agreement shall be
construed and be enforceable as if such invalid, illegal or unenforceable
term had not been included herein. The Pledgor acknowledges receipt of a
copy of this Agreement.
IN WITNESS WHEREOF, intending to be legally bound, the Pledgor and the
Pledgee have caused this Agreement to be executed as of the date first above
written.
PLEDGEE:
CHANCELLOR ASSET MANAGEMENT, INC.
By: /s/ Franklyn E. Churchill
----------------------------
Franklyn E. Churchill
President
PLEDGOR:
/s/ David F. Herring
-----------------------
David F. Herring
<PAGE>
Exhibit 99
Geoffrey Eiten Peter Mullen, Director of InvestorRelations
OTC Financial Network Chancellor Corporation
877-663-0166 / 781-444-6100 ext.13 617-368-2716
[email protected] [email protected]
- ---------------- ---------------------------
For more information, see www.otcfn.com/chlr and www.chancellorcorp.com.
------------------ ----------------------
FOR IMMEDIATE RELEASE:
CHANCELLOR ACQUIRES TOMAHAWK TRUCK & TRAILER SALES
- -- PROJECTS TRANSACTION TO ADD $50 MILLION IN REVENUES IN 1999 --
BOSTON, MA - FEBRUARY 2, 1999: Chancellor Corporation (OTC BB: CHLR) today
announced that its wholly-owned subsidiary, Chancellor Asset Management, Inc.
("CAM"), completed the acquisition of Atlanta-based Tomahawk Truck & Trailer
Sales, Inc. and all of its affiliated entities (collectively, "Tomahawk"). The
transaction provided for the purchase of 100% of Tomahawk's common stock in
exchange for 4,500,000 shares of Chancellor common stock and future cash
consideration based on Tomahawk's operating performance. Tomahawk will continue
to operate under its name as a wholly-owned subsidiary of CAM.
Tomahawk was founded in 1991 and over the past eight years has grown from a
single retail sales center to five centers and a wholesale operation throughout
the southeastern United States. Total gross revenues have grown from
approximately $500,000 in 1991 to over $40 million in 1998, representing a
compound growth rate of approximately 86%. More impressive, however, has been
Tomahawk's ability to generate an average gross margin of 15.9% throughout its
history, versus the industry average of approximately 8.6%. It is anticipated
that the acquisition will increase Chancellor's overall revenues by over $50
million in 1999.
Management believes that the Tomahawk acquisition will enable CAM to emerge as
one of the leaders in the retail and wholesale markets for used transportation
equipment. The acquisition provides CAM immediate growth in its retail sales
center network, a solid foundation for future expansion, and accelerated revenue
appreciation. CAM's current retail sales center in Elizabeth, NJ will be
complemented by the addition of Tomahawk's five retail sales centers in Atlanta,
GA; Kansas City, MO; Orlando, FL; Pompano Beach, FL; and Richmond, VA. CAM
intends to develop a nationwide retail sales center network through internal
growth and by acquisition.
Management also believes that the acquisition of Tomahawk will enable the
Company to provide value-added services to its customers for both new and used
equipment. Local, regional, and national carriers are experiencing increases in
their transit volume on account of the favorable domestic economy and the growth
in Internet commerce, which is estimated to exceed $30 billion in 1999.
Chancellor's Fleet Management Program will give its customers a choice of
quality used transportation equipment or favorable lease programs on new
transportation equipment.
Franklyn E. Churchill, president of Chancellor and CEO of CAM, remarked, "We are
pleased to have completed this transaction and welcome Tomahawk to the
Chancellor family. I am also happy to report that the founders of Tomahawk, M.
Rea Brookings and David F. Herring, will be joining the Board of Directors of
CAM. Their industry experience is a valuable asset to our management team.
<PAGE>
"We are hopeful that the combination of Chancellor's existing fleet remarketing
business coupled with Tomahawk's wholesale and retail presence will enable
Chancellor Asset Management to provide its customers a greater level of service
with the introduction of retail equipment disposal to the fleet market, which
will result in increased shareholder value," Churchill continued. "We are very
pleased to join forces with such a well respected organization and look forward
to the challenge of driving growth."
Rea Brookings, president and co-founder of Tomahawk, remarked, "We are excited
to be joining the Chancellor team and look forward to a long and prosperous
relationship. Tomahawk has made great strides in the development,
implementation, and execution of its business plan over the past eight years. By
combining the resources of Chancellor's fleet remarketing operation with
Tomahawk's growing retail and wholesale operation, management believes the
pattern of growth can be sustained."
Chancellor Corporation is changing the equipment leasing business through
innovative financing and fleet management programs which reduce customers' total
holding costs and significantly improve fleet management through asset
management, equipment maintenance, fuel management, and data management
strategies. Since its founding in 1977, Chancellor has completed a total of
approximately $1.5 billion in equipment lease transactions for its Fortune 500
and middle market customers in the U.S. and international markets, including
South Africa and the CIS. Chancellor is a diversified international financial
services firm headquartered in Boston. The Company's Internet address is
http://www.chancellorcorp.com. The Company is publicly traded under the symbol
"CHLR."
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
-------------------------------------------------------------------------------
1995:
- -----
This release contains statements that are not historical facts and that may be
deemed to contain forward-looking statements with respect to events, the
occurrence of which involves risks and uncertainties, including, without
limitation, demand and competition for the Company's lease financing services
and the products to be leased by the Company, the continued availability to the
Company of adequate financing, the ability of the Company to recover its
investment in equipment through remarketing, and other risks and uncertainties
detailed in the Company's Securities and Exchange Commission filings.
<PAGE>
