SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
PRECISION STANDARD, INC.
(Name of Issuer)
Common Stock, $.0001 par value
(Title of Class of Securities)
740327 20 0
(CUSIP Number)
Emanuel S. Cherney, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
(212) 836-8000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
SEPTEMBER 7, 1999
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
<PAGE>
- -------------------------------------------------------------------------------
SCHEDULE 13D
- -------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 2 of 23 Pages
-- ---
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 TCO/PSI, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 1,026,908
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 2,026,908
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
1,026,908
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,026,908
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,026,908
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 3 of 23 Pages
-- ---
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Tennenbaum & Co., LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 0
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 2,026,908
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
335,000
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,361,908
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,026,908
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 4 of 23 Pages
-- ---
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Special Value Bond Fund, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 0
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 250,000
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
250,000
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
250,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IV
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 5 of 23 Pages
-- ---
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 SVIM/MSM, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 0
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 250,000
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
250,000
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
250,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IV
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 6 of 23 Pages
-- ---
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Special Value Investment Management, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 0
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 250,000
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
250,000
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
250,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.3%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IV
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 7 of 23 Pages
-- ---
- -------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 TMCT Ventures, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 0
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 300,000
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
300,000
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
300,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 8 of 23 Pages
-- ---
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Massachusetts Mutual Life Insurance Company
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Commonwealth of Massachusetts, U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 0
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 300,000
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
150,000
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
300,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IC
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 9 of 23 Pages
-- ---
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 MassMutual High Yield Partners II, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
PF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware, U.S.A.
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 0
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 300,000
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
150,000
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
300,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 740327 20 0 Page 10 of 23 Pages
--- ---
- --------------------------------------------------------------------------------
NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
1 Michael E. Tennenbaum
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- --------------------------------------------------------------------------------
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY 0
OWNED BY EACH
REPORTING PERSON 8 SHARED VOTING POWER
WITH 2,026,908
------------------------------------------------------
9 SOLE DISPOSITIVE POWER
335,000
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
1,361,908
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,026,908
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
- --------------------------------------------------------------------------------
<PAGE>
Item 1. Security and Issuer.
The securities to which this Statement on Schedule 13D relates
are the Common Stock, $.0001 par value per share (ACommon Stock@) of Precision
Standard, Inc. (the ACompany@). The principal executive office of the Company is
located at 12000 East 47th Avenue, Suite 400, Denver, Colorado 80237.
Item 2. Identity and Background.
(a), (b), (c) and (f). This Statement on Schedule 13D is being
filed by TCO/PSI, LLC, a Delaware limited liability company ("ATCO/PSI"),
Tennenbaum & Co., LLC, a Delaware limited liability company ("Tennenbaum LLC"),
Special Value Bond Fund, LLC, a Delaware limited liability company ("Special
Value"), SVIM/MSM, LLC, a Delaware limited liability company ("SVIM/MSM"),
Special Value Investment Management, LLC, a Delaware limited liability company
("SVIM"), TMCT Ventures, L.P., a Delaware limited partnership ("TMCT"),
Massachusetts Mutual Life Insurance Company, a Commonwealth of Massachusetts
insurance company ("Massachusetts Mutual Life"), MassMutual High Yield Partners
II, LLC, a Delaware limited liability company ("MassMutual High Yield") and Mr.
Michael E. Tennenbaum ("Mr. Tennenbaum"), the managing member of Tennenbaum LLC.
TCO/PSI, Tennenbaum LLC, Special Value, SVIM/MSM, SVIM, TMCT, Massachusetts
Mutual Life, MassMutual High Yield and Mr. Tennenbaum (together, the "Reporting
Persons") are filing this statement jointly, pursuant to the provisions of Rule
13d-1(k)(1) under the Securities Exchange Act of 1934, as amended, and not as
separate persons.
TCO/PSI is a limited liability company of which Tennenbaum LLC and Mr.
Matthew Gold ("Mr. Gold") are managing members. The principal business of
TCO/PSI is owning, holding, voting and seeking to maximize the value of the
Common Stock. Its principal office is located at 12000 East 47th Avenue, Suite
400, Denver, Colorado 80237.
Tennenbaum LLC is a private investment firm of which Mr. Tennenbaum is
the managing member. The principal business of Tennenbaum LLC is making
investments and managing assets. Its principal office is located at 11100 Santa
Monica Boulevard, Suite 210, Los Angeles, California 90036.
Special Value is a fund which Tennenbaum LLC manages. The principal
business of Special Value is making investments and managing assets. Its
principal office is located at 11100 Santa Monica Boulevard, Suite 210, Los
Angeles, California 90036. The managing member of Special Value is SVIM/MSM. The
investment advisor to Special Value is SVIM. The managing member of each of
SVIM/MSM and SVIM is Tennenbaum LLC.
TMCT is a private equity investment fund. Its offices are located at
220 West 1st Street, 6th Floor, Los Angeles, California 90012.
Massachusetts Mutual Life provides investment advice to MassMutual High
Yield. Its offices are located at 1295 State Street, Springfield, Massachusetts
01111-0001.
Page 11 of 23 Pages
<PAGE>
MassMutual High Yield is a private investment fund which invests in
high yield securities, syndicated bank loans and other investments. Its offices
are located at 1295 State Street, Springfield, Massachusetts 01111-0001.
Mr. Tennenbaum is the managing member of Tennenbaum LLC. His business
address is 11100 Santa Monica Boulevard, Suite 210, Los Angeles, California
90036. Mr. Tennenbaum=s principal occupation is serving as managing member of
Tennenbaum LLC. Mr. Tennenbaum is a citizen of the United States of America.
(d) and (e). No Reporting Person, nor to the best knowledge of each
Reporting Person, any of the persons identified in this Item 2 has, during the
last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction as a result of which
any such person was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
On September 7, 1999, Mr. Gold and TMG Fund LLP, a Colorado
limited liability partnership that is wholly owned by Mr. Gold, sold 800,000
shares and 200,000 shares, respectively, of Common Stock to Tennenbaum LLC,
Massachusetts Mutual Life, MassMutual High Yield, TMCT, Special Value, and
certain other investors. This sale was pursuant to a Stock Purchase Agreement
dated the same date (the "Stock Purchase Agreement"). The purchase price for
these shares was $10,000,000 (or $10 per share). The purchases were consummated
using personal funds and working capital of the respective Reporting Persons.
Item 4. Purposes of Transaction
The Reporting Persons acquired the Common Stock for investment
purposes. They intend to monitor and evaluate the investment on a continuing
basis. Except as set forth herein, the Reporting Persons have no plans or
proposals that relate to or would result in any of the matters referred to in
paragraphs (a) through (j), inclusive, of Item 4 of Schedule 13D. The Reporting
Persons, however, may at any time and from time to time, review or reconsider
their position with respect to any of such matters.
Also on September 7, 1999, in related transactions, (1) Mr.
Gold, Tennenbaum LLC and certain other persons formed TCO/PSI of which Mr. Gold
and Tennenbaum LLC are managing members and (2) Mr. Gold contributed 1,026,908
shares of Common Stock to TCO/PSI pursuant to the Limited Liability Company
Agreement of TCO/PSI dated the same date (the "TCO/PSI Agreement"). The TCO/PSI
Agreement provides that (i) TCO/PSI shall vote the contributed shares for the
election of a slate of directors of the Company consisting of two Tennenbaum LLC
nominees, two Gold nominees, and such other nominees as Mr. Gold and Tennenbaum
LLC select, and (ii) TCO/PSI shall vote the contributed shares in favor of any
matter recommended by a majority of the Company=s board of directors, on
condition that all of the Tennenbaum LLC and Gold nominees were then serving and
voted or abstained from voting. In the event that a matter is submitted for
Page 12 of 24 Pages
<PAGE>
stockholder approval without a recommendation from the Company=s board of
directors, TCO/PSI shall vote the contributed shares as directed by Mr. Gold and
Tennenbaum LLC, or, if Mr. Gold and Tennenbaum LLC do not agree as to how the
contributed shares should be voted on that matter, TCO/PSI shall vote 50% of the
contributed shares as directed by Mr. Gold and the other 50% as directed by
Tennenbaum LLC.
In connection with these transactions, Mr. Tennenbaum and Mr.
Mark K. Holdsworth, a principal of Tennenbaum LLC, were appointed to the
Company's board of directors, with Mr. Tennenbaum being named Chairman of the
Board, and two members of the Company=s board of directors resigned.
The buyers under the Stock Purchase Agreement granted TCO/PSI
proxies to vote the shares purchased pursuant thereto in the same manner as the
shares of Common Stock owned by TCO/PSI are voted pursuant to the TCO/PSI
Agreement. The respective proxies terminate, with respect to each purchased
share, on the earliest to occur of (1) the sale or other transfer of that share,
(2) termination of the TCO/PSI Agreement, or (3) the annual meeting of
stockholders of the Company held in calendar year 2000.
Item 5. Interest in Securities of the Issuer
(a) - (b) The following table sets forth the aggregate number
and percentage of Common Stock of the Company beneficially owned by each
Reporting Person. The percentages of Common Stock were calculated based on the
3,978,137 shares reported to be outstanding on August 16, 1999 in the Company=s
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999. Except
as noted below, each Reporting Person has sole voting and dispositive power with
respect to the shares indicated.
- --------------------------------------------------------------------------------
Number of Shares
Stockholder Beneficially Owned Percentage
----------- ------------------ ----------
- --------------------------------------------------------------------------------
TCO/PSI, LLC 2,026,908(1) 51%
- --------------------------------------------------------------------------------
Tennenbaum & Co., LLC 2,206,908(2) 51%
- --------------------------------------------------------------------------------
Special Value Bond Fund, LLC 250,000 6.3%
- --------------------------------------------------------------------------------
SVIM/MSM, LLC 250,000 6.3%
- --------------------------------------------------------------------------------
Special Value Investment Management, LLC 250,000 6.3%
- --------------------------------------------------------------------------------
TMCT Ventures, L.P. 300,000 7.5%
- --------------------------------------------------------------------------------
Massachusetts Mutual Life Insurance 300,000(3) 7.5%
Company
- --------------------------------------------------------------------------------
MassMutual High Yield Partners II, LLC 300,000(3) 7.5%
- --------------------------------------------------------------------------------
Page 13 of 23 Pages
<PAGE>
- --------------------------------------------------------------------------------
Michael E. Tennenbaum 2,026,908(4) 51%
- --------------------------------------------------------------------------------
(1) Includes 1,000,000 shares of Common Stock reported separately herein as
owned by certain of the Reporting Persons who granted TCO/PSI proxies to vote
such shares. Accordingly, TCO/PSI shares voting power and disclaims beneficial
ownership of such shares. See Items 3 and 4 for a full description of the
purchasers and the proxy rights relating thereto.
(2) Includes shares of Common Stock reported separately herein as owned by
TCO/PSI (1,026,908), Special Value (250,000) and certain of the other Reporting
Persons who granted TCO/PSI proxies to vote their shares. Tennenbaum LLC shares
voting and dispositive power over the shares of Common Stock held by TCO/PSI and
Special Value. With respect to the shares of Common Stock held by certain other
persons who granted TCO/PSI proxies to vote their shares, Tennenbaum LLC
disclaims beneficial ownership of such shares. See Items 3 and 4 for a full
description of the purchasers and the proxy rights relating thereto.
(3) Includes shares reported separately herein as owned by MassMutual High Yield
as to which Massachusetts Mutual Life shares voting and dispositive power and
disclaims beneficial ownership. Massachusetts Mutual Life provides investment
advice to MassMutual High Yield.
(4) Includes shares owned by Tennenbaum LLC, Special Value, TCO/PSI and the
proxies granted to TCO/PSI. Special Value is managed by Tennenbaum LLC and
Tennenbaum LLC is a managing member of TCO/PSI. By reason of Mr. Tennenbaum=s
position as the managing member of Tennenbaum LLC, he may be deemed to share
voting and dispositive power over the shares held thereby.
(c) Except as described herein, during the last 60 days none of the
Reporting Persons has effected any transaction in the Common Stock.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relations with Respect to
Securities of the Issuer.
See Items 3 and 4 for a description of the Stock Purchase
Agreement and the TCO/PSI Agreement. These agreements are attached as exhibits
to this Schedule 13D and the descriptions in Items 3 and 4 are qualified in
their entirety by reference to those exhibits.
Page 14 of 23 Pages
<PAGE>
Item 7. Material to be Filed as Exhibits
Exhibit A Joint Filing Agreement
Exhibit B Stock Purchase Agreement by and among
Tennenbaum & Co., LLC and the Other Parties
listed under the heading "Buyer" on the
signature pages thereto and Matthew L. Gold
and the Other Parties listed under the
heading "Seller" on the signature pages
thereto dated September 7, 1999.
Exhibit C Limited Liability Company Agreement of TCO/PSI,
LLC dated September 7, 1999.
Page 15 of 23 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I hereby certify that the information set forth in this statement is
true, complete and correct.
Dated: September 16, 1999
TCO/PSI, LLC
By: /s/ Michael E. Tennenbaum
-------------------------
Michael E. Tennenbaum,
its Managing Member
TENNENBAUM & CO., LLC
By: /s/ Michael E. Tennenbaum
--------------------------
Michael E. Tennenbaum,
its Managing Member
SPECIAL VALUE BOND FUND, LLC
By: SVIM/MSM, LLC, its Managing Member
By: Tennenbaum & Co., LLC,
its Managing Member
By: /s/ Michael E. Tennenbaum
--------------------------
Michael E. Tennenbaum,
its Managing Member
SVIM/MSM LLC
By: Tennenbaum & Co., LLC,
its Managing Member
By: /s/ Michael E. Tennenbaum
---------------------------
Michael E. Tennenbaum,
its Managing Member
SPECIAL VALUE INVESTMENT MANAGEMENT, LLC
By: Tennenbaum & Co., LLC,
its Managing Member
By: /s/ Michael E. Tennenbaum
--------------------------
Michael E. Tennenbaum,
its Managing Member
/s/ Michael E. Tennenbaum
--------------------------
MICHAEL E. TENNENBAUM
Page 16 of 23 Pages
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Kathleen Lynch
--------------------------
Name: Kathleen Lynch
Title: a Managing Director
MASSMUTUAL HIGH YIELD PARTNERS II, LLC
By: HYP MANAGEMENT INC., as Managing Member
By: /s/ Kathleen Lynch
---------------------
Kathleen Lynch
Vice President
Page 17 of 23 Pages
<PAGE>
TMCT VENTURES, L.P.
By: Rustic Canyon Partners, LLC,
as General Partner
By: /s/ Thomas Unterman
---------------------
Thomas Unterman
Managing Member
Page 18 of 23 Pages
<PAGE>
Index to Exhibits
Exhibit
-------
A. Joint Filing Agreement
B. Stock Purchase Agreement by and among Tennenbaum &
Co., LLC and the Other Parties listed under the
heading "Buyer" on the signature pages thereto and
Matthew L. Gold and the Other Parties listed under
the heading "Seller" on the signature pages thereto
dated September 7, 1999.
C. Limited Liability Company Agreement of
TCO/PSI, LLC dated September 7, 1999.
Page 19 of 23 Pages
<PAGE>
Exhibit A
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k)(1)(iii) of the Securities
Exchange Act of 1934, as amended, the undersigned agree to the joint filing on
behalf of each of them of a Statement on Schedule 13D (including any and all
amendments thereto) with respect to the Common Stock, par value $.0001 per
share, of Precision Standard, Inc., and further agree that this Agreement shall
be included as an Exhibit to such joint filing.
The undersigned further agree that each party hereto is
responsible for timely filing of such statement on Schedule 13D and any
amendments thereto, and for the completeness and accuracy of the information
concerning such party contained therein; provided that no party is responsible
for the completeness or accuracy of the information concerning the other
parties, unless such party knows or has reason to believe that such information
is inaccurate.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original instrument, but all of such
counterparts together shall constitute but one agreement.
In evidence thereof the undersigned, being duly authorized,
hereby execute this Agreement this 16th day of September, 1999.
TCO/PSI, LLC
By: /s/ Michael E. Tennenbaum
--------------------------
Michael E. Tennenbaum,
its Managing Member
SPECIAL VALUE BOND FUND, LLC
By: SVIM/MSM, LLC, its Managing Member
By: Tennenbaum & Co., LLC,
its Managing Member
By: /s/ Michael E. Tennenbaum
--------------------------
Michael E. Tennenbaum,
its Managing Member
SVIM/MSM LLC
By: Tennenbaum & Co., LLC,
its Managing Member
By: /s/ Michael E. Tennenbaum
--------------------------
Michael E. Tennenbaum,
its Managing Member
Page 20 of 23 Pages
<PAGE>
SPECIAL VALUE INVESTMENT MANAGEMENT, LLC
By: Tennenbaum & Co., LLC,
its Managing Member
By: /s/ Michael E. Tennenbaum
--------------------------
Michael E. Tennenbaum,
its Managing Member
TENNENBAUM & CO., LLC
By: /s/ Michael E. Tennenbaum
---------------------------
Michael E. Tennenbaum,
Its Managing Member
/s/ Michael E. Tennenbaum
--------------------------
MICHAEL E. TENNENBAUM
Page 21 of 23 Pages
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Kathleen Lynch
-------------------------
Kathleen Lynch
a Managing Director
MASSMUTUAL HIGH YIELD PARTNERS II, LLC
By: HYP MANAGEMENT INC., as Managing Member
By: /s/ Kathleen Lynch
--------------------
Kathleen Lynch
Vice President
Page 22 of 23 Pages
<PAGE>
TMCT VENTURES, L.P.
By: Rustic Canyon Partners, LLC, as
General Partner
By: /s/ Thomas Unterman
---------------------
Thomas Unterman
Managing Member
Page 23 of 23 Pages
<PAGE>
STOCK PURCHASE AGREEMENT
by and among
TENNENBAUM & CO., LLC
and
THE OTHER PARTIES LISTED UNDER THE
HEADING "BUYER" ON THE SIGNATURE PAGES HERETO
collectively, as "Buyer"
and
MATTHEW L. GOLD
and
THE OTHER PARTIES LISTED UNDER THE
HEADING "SELLER" ON THE SIGNATURE PAGES HERETO
as "Seller"
Dated September 7, 1999
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS......................................................1
1.1. DEFINED TERMS...........................................................1
1.2. OTHER DEFINED TERMS.....................................................3
ARTICLE II. PURCHASE AND SALE OF SHARES.....................................3
2.1. SALE OF SHARES..........................................................3
2.2. PURCHASE PRICE..........................................................3
ARTICLE III. CLOSING........................................................4
3.1. CLOSING.................................................................4
3.2. CONVEYANCES AT CLOSING..................................................4
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF SELLER........................5
4.1. MAKING OF REPRESENTATIONS AND WARRANTIES................................5
4.2. OWNERSHIP OF SHARES.....................................................5
4.3. ENFORCEABILITY; NO CONFLICT.............................................5
4.4. REPORTS AND FINANCIAL STATEMENTS........................................5
4.5. ABSENCE OF CERTAIN CHANGES..............................................6
4.6. FINDER'S FEE............................................................6
4.7. NO OTHER AGREEMENTS TO SELL THE SHARES..................................6
4.8. DISCLOSURE..............................................................6
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF BUYER..........................6
5.1. MAKING OF REPRESENTATIONS AND WARRANTIES................................6
5.2. ORGANIZATION OF BUYER...................................................7
5.3. AUTHORITY...............................................................7
5.4. FINDER'S FEE............................................................8
5.5. INVESTMENT..............................................................8
5.6. ACCREDITED INVESTOR STATUS..............................................8
5.7. RESTRICTED SECURITIES...................................................8
ARTICLE VI. COVENANTS.......................................................8
6.1. FURTHER ASSURANCES......................................................8
6.2. YEAR 2000...............................................................9
6.3. RECORDS; TAX MATTERS....................................................9
6.4. SURVIVAL OF REPRESENTATIONS, ETC........................................9
ARTICLE VII. INDEMNIFICATION................................................9
7.1. INDEMNIFICATION BY SELLER...............................................9
7.2. LIMITATIONS ON INDEMNIFICATION BY SELLER...............................10
7.3. INDEMNIFICATION BY BUYER...............................................10
7.4. LIMITATION ON INDEMNIFICATION BY BUYER.................................10
i
<PAGE>
7.5. NOTICE; DEFENSE OF CLAIMS..............................................11
ARTICLE VIII. MISCELLANEOUS................................................11
8.1. FEES AND EXPENSES......................................................11
8.2. GOVERNING LAW..........................................................11
8.3. NOTICES................................................................12
8.4. ENTIRE AGREEMENT.......................................................12
8.5. ASSIGNMENT.............................................................12
8.6. CAPTIONS AND GENDER....................................................13
8.7. EXECUTION IN COUNTERPARTS..............................................13
8.8. AMENDMENTS.............................................................13
8.9. PUBLICITY..............................................................13
8.10.ARBITRATION; ATTORNEYS' FEES...........................................13
8.11. SPECIFIC PERFORMANCE..................................................13
ii
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of September 7, 1999 (the
"Agreement"), is by and among Tennenbaum & Co., LLC, a Delaware limited
liability company ("TCO"), and the other parties listed under the heading
"Buyer" on the signature pages hereto (together with TCO, "Buyer"), and Matthew
L. Gold, an individual ("Gold"), and the other parties listed under the heading
"Seller" on the signature pages hereto (together with Gold, "Seller").
W I T N E S S E T H
WHEREAS, Seller owns 2,026,908 shares of common stock, par value
$.0001 per share ("Common Stock"), of Precision Standard, Inc., a Colorado
corporation (the "Company"), constituting approximately 51% of the outstanding
capital stock of the Company;
WHEREAS, Buyer desires to purchase from Seller 1,000,000 shares of
Common Stock of the Company (the "Shares"), and Seller desires to sell to Buyer,
the Shares, upon the terms and subject to the conditions of this Agreement; and
WHEREAS, concurrently with the purchase and sale of the Shares,
Seller will transfer the remaining 1,026,908 shares of Company Common Stock
owned by Seller to a limited liability company of which TCO and Gold are
members, to be voted and distributed in accordance with the terms of the LLC
Agreement governing such limited liability company.
NOW, THEREFORE, in consideration of the respective covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I.
DEFINITIONS
1.1. Defined Terms.
As used herein, the terms below shall have the following meanings.
Any of such terms, unless the context otherwise requires, may be used in the
singular or plural, depending upon the reference.
"affiliate" shall have the meaning set forth in the Exchange Act and
the rules and regulations thereunder.
"Closing Date" shall mean September 7, 1999, or such other date as
Buyer and Seller shall mutually agree upon.
"Contract" shall mean any agreement, contract, personal or real
property lease, note, loan, evidence of indebtedness, purchase order, letter of
credit, indenture, security or pledge
<PAGE>
agreement, franchise agreement, undertaking, covenant not to compete, employment
agreement, license, instrument, obligation or commitment to which a particular
person or entity is a party or is bound, whether oral or written.
"Damages" shall mean damages, Liabilities, losses (including,
without limitation, diminution in value), obligations, deficiencies, claims,
demands, Taxes, fines, penalties, costs and expenses of any kind or nature
whatsoever (whether or not arising out of third-party claims), including,
without limitation, reasonable attorneys' fees and all amounts paid in
investigation, defense or settlement of any of the foregoing.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Liabilities" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, guaranty or endorsement of
or by any person of any type, whether accrued, absolute, contingent, matured,
unmatured or other.
"Material Adverse Effect" shall mean (a) with respect to Seller or
the Company, any material adverse effect or change in the condition (financial
or other), business, results of operations, prospects, assets, Liabilities or
operations of the Company or on the ability of Seller to consummate the
transactions contemplated hereby, or any event or condition which would, with
the passage of time, constitute a material adverse effect or material adverse
change, and (b) with respect to Buyer, any material adverse effect or change in
the condition (financial or other), business, results of operations, prospects,
assets, liabilities or operations of Buyer or on the ability of Buyer to
consummate the transactions contemplated hereby, or any event or condition which
would, with the passage of time, constitute a material adverse effect or
material adverse change.
"Representative" shall mean any officer, director, principal,
attorney, agent, employee, member or other representative.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiary" shall mean (a) any corporation in an unbroken chain of
corporations beginning with a particular entity, if each of the corporations
other than the last corporation in the unbroken chain then owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain, (b) any partnership in which
2
<PAGE>
such entity is a general partner, (c) any limited liability company in which
such entity is a managing member, or (d) any partnership or limited liability
company in which such entity possesses a 50% or greater interest in the total
capital or total income of such partnership.
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, VAT, service, service use, ad valorem, transfer,
franchise, profits, license, lease, withholding, social security, payroll,
employment, excise, estimated, severance, stamp, recording, occupation, real and
personal property, gift, windfall profits or other taxes, customs duties, fees,
assessments or charges of any kind whatsoever, whether computed on a separate,
consolidated, unitary, combined or other basis, together with any interest,
fines, penalties, additions to tax or other additional amounts imposed thereon
or with respect thereto imposed by any taxing authority (domestic or foreign).
"TCO/PSI" shall mean TCO/PSI, LLC, a Delaware limited liability
company of which TCO and Gold are members.
1.2. Other Defined Terms.
The following terms shall have the meanings defined for such terms
in the Sections set forth below:
Term Section
---- -------
Buyer Indemnified Parties 7.1
Buyer Organizational Documents 5.2
Closing 3.1
Company SEC Reports 4.4
Fraud Claims 7.1(a)
General Claims 7.1(c)
Indemnification Percentage 7.4
LLC Agreement 3.2(a)
Ownership Claims 7.1(b)
Purchase Price 2.2
SEC 4.4
Seller Indemnified Parties 7.3
3
<PAGE>
ARTICLE II.
PURCHASE AND SALE OF SHARES
2.1. Sale of Shares.
Upon the terms and subject to the conditions contained herein, at
the Closing, Seller shall sell, convey, transfer, assign and deliver to Buyer,
and Buyer shall purchase and acquire from Seller, the Shares, free and clear of
all Encumbrances.
2.2. Purchase Price.
Upon the terms and subject to the conditions contained herein, as
consideration for the purchase of the Shares, Buyer shall pay to Seller at the
Closing an aggregate cash amount equal to Ten Million Dollars ($10,000,000) (the
"Purchase Price" ). Each Buyer shall pay to Seller that portion of the Purchase
Price set forth opposite such Buyer's name on Exhibit A hereto. The Purchase
Price shall be paid by delivery to Seller of a cashier's check or wire transfer
of immediately available funds.
ARTICLE III.
CLOSING
3.1. Closing.
The closing of the transactions contemplated herein (the "Closing")
shall be held at the offices of Latham & Watkins, 633 West Fifth Street, Suite
4000, Los Angeles, California 90071, on the Closing Date, or at such other date
and location as may be mutually agreed upon by the parties.
3.2. Conveyances at Closing.
(a) To effect the sale and transfer referred to in Section 2.1,
Seller shall, at the Closing, deliver or cause to be delivered to Buyer the
following:
(i) Certificate(s) evidencing the Shares, free and
clear of all Encumbrances, duly endorsed in blank for transfer or
accompanied by stock powers duly executed in blank;
(ii) The Limited Liability Company Agreement of
TCO/PSI in the form attached hereto as Exhibit B (the "LLC Agreement"),
duly executed by Gold, and Seller shall transfer 1,026,908 shares of
Company Common Stock to TCO/PSI as contemplated thereby; and
(iii) Reasonable evidence to the effect that Michael
Tennenbaum and Mark Holdsworth have been elected to serve as directors
of the Company, with Michael
4
<PAGE>
Tennenbaum designated as Chairman of the Company's Board of Directors
and Gold designated as Chairman of the Company's Executive Committee.
(b) To effect the sale and transfer referred to in Section
2.1, Buyer shall, at the Closing, deliver or cause to be delivered to Seller the
following:
(i) The Purchase Price in immediately available
funds;
(ii) The LLC Agreement, duly executed by TCO, Mark
Holdsworth and Howard Levkowitz; and
(iii) Proxy(ies) in favor of TCO/PSI in the form
attached hereto as Exhibit C, duly executed by Buyer.
(c) Seller and Buyer shall each deliver such other instruments
as shall be reasonably necessary to vest in Buyer title in and to the Shares in
accordance with the provisions hereof.
(d) To the extent that a form of any document to be delivered
hereunder is not attached as an exhibit hereto, such documents shall be in form
and substance, and shall be executed and delivered in a manner, reasonably
satisfactory to Buyer and Seller.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1. Making of Representations and Warranties.
As a material inducement to Buyer to enter into this
Agreement and consummate the transactions contemplated hereby, each Seller,
jointly and severally, hereby makes the representations and warranties to Buyer
contained in this Article IV.
4.2. Ownership of Shares.
Seller owns of record and beneficially, and will transfer to
Buyer, all of the Shares free and clear of all Encumbrances.
4.3. Enforceability; No Conflict.
This Agreement and each agreement, document and instrument
executed and delivered by Seller pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of Seller
enforceable against Seller in accordance with their terms, subject to the effect
of any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at
5
<PAGE>
law. The execution, delivery and performance by Seller of this Agreement and
each such agreement, document and instrument:
(a) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to Seller, or require
Seller to obtain any approval, consent or waiver of, or make any filing with,
any person or entity (governmental or otherwise) that has not been obtained or
made (other than filings pursuant to Sections 13(d) and 16(a) of the Exchange
Act); and
(b) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other Contract,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which Seller is a party or by which the property of
Seller is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of Seller's assets or the Shares, except where such breach, default,
acceleration or exercise of right of termination would not have a Material
Adverse Effect.
4.4. Reports and Financial Statements.
To Seller's best actual knowledge, the Company has timely
filed all required reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission (the
"SEC") prior to the date of this Agreement (collectively, including all exhibits
thereto, the "Company SEC Reports"). To Seller's best actual knowledge, none of
the Company SEC Reports, as of their respective dates (and, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. To Seller's best actual knowledge, each of the financial
statements (including the related notes) included in the Company SEC Reports
presents fairly, in all material respects, the consolidated financial position
and consolidated results of operations and cash flows of the Company as of the
respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the periods involved except as
otherwise noted therein, and subject, in the case of the unaudited interim
financial statements, to normal and recurring year-end adjustments that have not
been and are not expected to be material in amount. To Seller's best actual
knowledge, all of such Company SEC Reports, as of their respective dates (and as
of the date of any amendment to the respective Company SEC Report filed prior to
the date of this Agreement), complied as to form in all material respects with
the applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder.
4.5. Absence of Certain Changes.
To Seller's best actual knowledge, except as set forth in
the Company SEC Reports or as otherwise disclosed publicly, since June 30, 1999,
there has not been any change in the business, properties, assets, results of
operations, financial condition, liabilities, or prospects
6
<PAGE>
of the Company, which change by itself or in conjunction with all other such
changes, whether or not arising in the ordinary course of business, has been
materially adverse with respect to the Company.
4.6. Finder's Fee.
Neither Seller nor the Company has incurred or become liable
for any broker's commission or finder's fee relating to or in connection with
the transactions contemplated by this Agreement.
4.7. No Other Agreements to Sell the Shares.
Seller does not have any commitment or legal obligation,
absolute or contingent, to any other person or firm other than Buyer to sell,
assign, transfer or effect a sale of any of the Shares, to sell or effect a sale
of the equity of the Company or any Subsidiary of the Company, to effect any
merger, consolidation, liquidation, dissolution or other reorganization of the
Company or any Subsidiary of the Company, or to enter into any agreement or
cause the entering into of an agreement with respect to any of the foregoing.
4.8. Disclosure.
The representations, warranties and statements contained in
this Agreement and in the exhibits and schedules hereto do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. To Seller's best actual knowledge,
there are no facts which are reasonably likely in the future to have a Material
Adverse Effect which have not been specifically disclosed herein or in a
Schedule furnished herewith, other than general economic conditions affecting
the industries in which the Company operates.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1. Making of Representations and Warranties.
As a material inducement to Seller to enter into this
Agreement and consummate the transactions contemplated hereby, each Buyer,
severally but not jointly, hereby makes the representations and warranties to
Seller contained in this Article V.
5.2. Organization of Buyer.
Such Buyer is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization with power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is currently conducted or proposed to be conducted. Such Buyer is not
in
7
<PAGE>
violation of any term of its organizational documents, as amended to date (the
"Buyer Organizational Documents"). Such Buyer is duly qualified to do business
and in good standing to do business in each jurisdiction in which the nature or
leasing of its properties makes such qualification necessary, other than where
the failure to be duly qualified or have such good standing, as the case may be,
would not have a Material Adverse Effect.
5.3. Authority.
Such Buyer has full right, authority and power to enter into
this Agreement and each agreement, document and instrument to be executed and
delivered by such Buyer pursuant to this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
such Buyer of this Agreement and each such other agreement, document and
instrument have been duly authorized by all necessary action of such Buyer and
no other action on the part of such Buyer is required in connection therewith.
This Agreement and each other agreement, document and instrument executed and
delivered by such Buyer pursuant to this Agreement constitutes, or when executed
and delivered will constitute, valid and binding obligations of such Buyer, as
applicable, enforceable in accordance with their terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject to the effect of general
principles of equity, including, without limitation, the possible unavailability
of specific performance or injunctive relief, regardless of whether considered
in a proceeding in equity or at law. The execution, delivery and performance by
such Buyer of this Agreement and each such agreement, document and instrument:
(a) does not and will not violate any provision of its Buyer
Organizational Documents;
(b) does not and will not violate any laws of the United
States or of any state or any other jurisdiction applicable to such Buyer or
require such Buyer to obtain any approval, consent or waiver of, or make any
filing with, any person or entity (governmental or otherwise) which has not been
obtained or made (other than filings pursuant to Sections 13(d) and 16(a) of the
Exchange Act); and
(c) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture, loan or credit agreement, or other material
Contract, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Buyer is a party, except where
such breach, default, acceleration or exercise of right of termination would not
have a Material Adverse Effect.
5.4. Finder's Fee.
Such Buyer has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
8
<PAGE>
5.5. Investment. Such Buyer is acquiring the Shares for investment for
its own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof. Such Buyer understands that
the Shares have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of such Buyer's representations and warranties contained
herein.
5.6. Accredited Investor Status. Such Buyer is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act.
5.7. Restricted Securities. Such Buyer understands that the Shares to
be purchased hereunder are characterized as "restricted securities" under the
Securities Act inasmuch as they are being acquired from Seller in a transaction
not involving a public offering, and that under the Securities Act and
applicable regulations thereunder such securities may be resold without
registration under the Securities Act only in certain limited circumstances.
Such Buyer is familiar with Rule 144 of the Securities Act, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
5.8. Investigation. Such Buyer has conducted its own investigation of
the Company through materials and other information provided by the Company and
hereby acknowledges that the only representations and warranties of Seller in
connection with such Buyer's purchase of the Shares are those expressly made by
Seller in Article IV of this Agreement.
ARTICLE VI.
COVENANTS
6.1. Further Assurances.
Upon the terms and subject to the conditions contained
herein, Seller and Buyer agree, both before and after the Closing, (a) to use
all reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement, (b) to execute
any documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the transactions contemplated
hereunder, and (c) to cooperate with each other in connection with the
foregoing. Without limiting the foregoing, Seller and Buyer agree to use their
respective commercially reasonable efforts (i) to obtain all necessary
approvals, authorizations and consents as are required to be obtained under any
applicable laws, rules or regulations, and (ii) to give all notices to, obtain
all waivers, consents and approvals from, and make all registrations and filings
with third parties, including without limitation submissions of information
requested by any governmental authorities.
6.2. Year 2000.
9
<PAGE>
Gold agrees, after the Closing, to personally loan up to
$1,500,000 to the Company to the extent such funds are reasonably required, as
determined by TCO/PSI, to enable the Company to resolve all Year 2000 issues
relating to its software programs, systems and applications by the end of
calendar year 1999. Any loan by Gold to the Company hereunder shall contain the
following terms: term -- 24 months; interest rate -- 12.5% per annum; payments
- -- interest only payable quarterly, with entire principal amount due at
maturity; prepayable out of proceeds of any refinancing of the Company's
existing debt; secured by a third lien on the Company's assets to the extent
permitted by the Company's existing loan documents. Gold further agrees to cause
the Company to engage an appropriate expert on a temporary basis, the terms of
which engagement shall be reasonably acceptable to Gold, to increase the speed
at which the Company becomes Year 2000 compliant.
6.3. Records. Each party agrees that it will cooperate with and make
available to the other party, during normal business hours, all records and
other information of such party retained and remaining in existence after the
Closing which is necessary or useful in connection with any Tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such records or other information for any reasonable business
purpose. The party requesting any such records or other information shall bear
all of the out-of-pocket costs and expenses (including without limitation
attorneys' fees) reasonably incurred in connection with providing such records
or other information.
6.4. Survival of Representations, Etc.
Each of the representations, warranties, agreements,
covenants and obligations herein are material, shall be deemed to have been
relied upon by the other party and shall survive the Closing regardless of any
investigation and shall not merge in the performance of any obligation by any
party hereto; provided, however, that such representations and warranties shall
expire on the same dates as and to the extent that the rights to indemnification
with respect thereto under Article VII shall expire.
ARTICLE VII.
INDEMNIFICATION
7.1. Indemnification by Seller.
Each Seller, jointly and severally, agrees subsequent to the
Closing to indemnify and hold Buyer and its Subsidiaries, affiliates, successors
and assigns and persons serving as officers, directors, partners, managers,
shareholders, members, employees and agents thereof (individually a "Buyer
Indemnified Party" and collectively the "Buyer Indemnified Parties") harmless
from and against any Damages which may be sustained or suffered by any of them
arising out of or based upon any of the following matters:
(a) fraud, intentional misrepresentation or willful breach of
any representations, warranties or covenants of Seller under this Agreement
(collectively, "Fraud Claims");
10
<PAGE>
(b) any failure to convey title to the Shares free and clear
of all Encumbrances (collectively, "Ownership Claims"); and
(c) other than Fraud Claims or Ownership Claims, any other
breach of any representation, warranty or covenant of Seller under this
Agreement or in any schedule or exhibit delivered pursuant hereto, or by reason
of any claim, action or proceeding asserted or instituted growing out of any
matter or thing constituting a breach of such representations, warranties or
covenants (collectively, "General Claims").
7.2. Limitations on Indemnification by Seller.
Anything contained in this Agreement to the contrary
notwithstanding, the liability of Seller to provide any indemnification to any
Buyer Indemnified Party and the right of the Buyer Indemnified Parties to
indemnification under Section 7.1 (or otherwise) shall be subject to the
following provisions:
(a) No claims for indemnification shall be made under this
Agreement against Seller, and no indemnification shall be payable to any Buyer
Indemnified Party, with respect to General Claims after the date which is one
(1) year following the Closing.
(b) The aggregate amount to be payable by Seller to all Buyer
Indemnified Parties for claims for indemnification with respect to General
Claims hereunder and with respect to General Claims under Paragraph 4.5 of the
LLC Agreement shall in no event together exceed $1,000,000.
(c) Claims for indemnification with respect to Fraud Claims
and Ownership Claims made under this Agreement by any Buyer Indemnified Party
shall not be subject to any of the limitations set forth in this Section 7.2.
Any amounts payable by Seller to the Buyer Indemnified Parties under this
Agreement shall be allocated among the Buyer Indemnified Parties according to
their respective Indemnification Percentages (as defined below).
7.3. Indemnification by Buyer.
Each Buyer, severally but not jointly, agrees to indemnify
and hold Seller and its affiliates and persons serving as officers, directors,
partners, managers, shareholders, members, employees and agents thereof
(individually a "Seller Indemnified Party" and collectively the "Seller
Indemnified Parties") harmless from and against any Damages which may be
sustained or suffered by any of them arising out of or based upon any breach of
any representation, warranty or covenant made by such Buyer in this Agreement or
in any certificate delivered by such Buyer hereunder, or by reason of any claim,
action or proceeding asserted or instituted growing out of any matter or thing
constituting such a breach.
7.4. Limitation on Indemnification by Buyer.
Notwithstanding the foregoing, (a) no indemnification shall
be payable to the Seller Indemnified Parties with respect to claims asserted
pursuant to Section 7.3 above after the
11
<PAGE>
date which is one (1) year after the Closing, and (b) the aggregate amount to be
payable to all Seller Indemnified Parties pursuant to Section 7.3 shall not
exceed $1,000,000; provided that the aggregate amount payable by any Buyer for
such indemnification claims shall not exceed such Buyer's Indemnification
Percentage of $1,000,000. The "Indemnification Percentage" of each Buyer for
this purpose shall be the percentage set forth opposite such Buyer's name on
Exhibit A hereto. Claims for indemnification with respect to fraud, intentional
misrepresentation or willful breach of any representations, warranties or
covenants of Buyer under this Agreement shall not be subject to any of the
limitations set forth in this Section 7.4.
7.5. Notice; Defense of Claims.
An indemnified party shall make claims for indemnification
hereunder by giving written notice thereof to the indemnifying party promptly on
discovery and in any event within the period in which indemnification claims can
be made hereunder. If indemnification is sought for a claim or liability
asserted by a third party, the indemnified party shall also give written notice
thereof to the indemnifying party promptly after it receives notice of the claim
or liability being asserted, but the failure to do so shall not relieve the
indemnifying party from any liability except to the extent that it is prejudiced
by the failure or delay in giving such notice. Such notice shall summarize the
basis for the claim for indemnification and any claim or liability being
asserted by a third party. Within 20 days after receiving such notice the
indemnifying party shall give written notice to the indemnified party stating
whether it disputes the claim for indemnification and whether it will defend
against any third party claim or liability at its own cost and expense. If the
indemnifying party fails to give notice that it disputes an indemnification
claim within 20 days after receipt of notice thereof, it shall be deemed to have
accepted and agreed to the claim, which shall become immediately due and
payable. The indemnifying party shall be entitled to direct the defense against
a third party claim or liability with counsel selected by it (subject to the
consent of the indemnified party, which consent shall not be unreasonably
withheld) as long as the indemnifying party is conducting a good faith and
diligent defense. The indemnified party shall at all times have the right to
fully participate at its own expense in the defense of a third party claim or
liability, directly or through counsel; provided, however, that if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and the indemnified party is advised that representation of
both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the indemnified party may engage separate
counsel at the expense of the indemnifying party. If no such notice of intent to
dispute and defend a third party claim or liability is given by the indemnifying
party, or if such good faith and diligent defense is not being or ceases to be
conducted by the indemnifying party, the indemnified party shall have the right,
at the expense of the indemnifying party, to undertake the defense of such claim
or liability (with counsel selected by the indemnified party), and to compromise
or settle it, with consent of the indemnifying party, which consent shall not be
unreasonably withheld. If the third party claim or liability is one that by its
nature cannot be defended solely by the indemnifying party, then the indemnified
party shall make available such information and assistance as the indemnifying
party may reasonably request and shall cooperate with the indemnifying party in
such defense, at the expense of the indemnifying party.
12
<PAGE>
ARTICLE VIII.
MISCELLANEOUS
8.1. Fees and Expenses.
Except as otherwise specified in this Agreement, each party
hereto shall pay its own legal, accounting, out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
8.2. Governing Law.
This Agreement shall be construed under and governed by the
internal laws of the State of California without regard to its conflict of laws
provisions.
8.3. Notices.
Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission, upon receipt, or if sent
by registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the addresses set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
TO BUYER: Tennenbaum & Co., LLC
11100 Santa Monica Boulevard, Suite 210
Los Angeles, CA 90025
Attention: Michael Tennenbaum
Fax: (310) 566-1010
With a copy to: Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: Hugh Steven Wilson, Esq.
Fax: (619) 696-7419
TO SELLER: Matthew L. Gold
P.O. Box 142
Granby, CO 80446
Fax: (970) 887-3495 Fax:
With a copy to: Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attention: Paul S. Pearlman, Esq.
Fax: (212) 715-8000
Any notice given hereunder may be given on behalf of any party by its counsel or
other authorized representatives.
13
<PAGE>
8.4. Entire Agreement.
This Agreement and the LLC Agreement, including the exhibits
and schedules hereto and thereto, reflect the entire agreement of the parties
with respect to the subject matter hereof, and supersede all previous written or
oral negotiations, commitments and writings. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as referred to herein or therein or in such schedules and
exhibits; and all inducements to the making of this Agreement relied upon by any
party hereto have been expressed herein or therein or in such schedules or
exhibits.
8.5. Assignment.
Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by any party without the prior written consent of the
other parties; provided, however, that Buyer may, without such consent, assign
all such rights to any corporation, partnership, limited liability company or
other entity that controls, is controlled by or under common control with Buyer
or to any entity which acquires substantially all of the assets of Buyer or
survives any merger with Buyer; provided that no such assignment shall relieve
Buyer of any obligations hereunder. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and subject to Paragraph 4.5 of the
LLC Agreement, no other person shall have any right, benefit or obligation under
this Agreement as a third party beneficiary or otherwise.
8.6. Captions and Gender.
The captions in this Agreement are for convenience only and
shall not affect the construction or interpretation of any term or provision
hereof. The use in this Agreement of the masculine pronoun in reference to a
party hereto shall be deemed to include the feminine or neuter, as the context
may require.
8.7. Execution in Counterparts.
For the convenience of the parties and to facilitate
execution, this Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same document.
8.8. Amendments.
This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
8.9. Publicity.
Except as required by applicable law or court order, no
party shall issue any press release or make any public statement regarding the
transactions contemplated hereby,
14
<PAGE>
without the prior approval of the other party, and the parties hereto shall
issue a mutually acceptable press release as soon as practicable following the
Closing.
8.10. Arbitration; Attorneys' Fees.
Any dispute, controversy or claim arising out of this
Agreement or the performance, breach or termination hereof shall be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The place of arbitration shall be Los Angeles,
California. The arbitration shall be conducted by a neutral arbitrator appointed
by the American Arbitration Association from its Large, Complex Case Panel.
Judgment upon the award rendered may be entered in any court having
jurisdiction. The prevailing party shall be entitled to all costs of arbitration
including, but not limited to, reasonable attorneys' fees. All information
resulting from or otherwise pertaining to any dispute shall be nonpublic and
handled by Buyer, Seller and their respective Representatives in such a way as
to prevent the public disclosure of such information.
8.11. Specific Performance.
The parties agree that it would be difficult to measure damages which
might result from a breach of this Agreement by either party and that money
damages would be an inadequate remedy for such a breach. Accordingly, if there
is a breach or proposed breach of any provision of this Agreement by either
party, the other party shall be entitled, in addition to any other remedies
which it may have, to an injunction or other appropriate equitable relief to
restrain such breach without having to show or prove actual damage.
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized representatives, as of the date first
written above.
BUYER:
TENNENBAUM & CO., LLC
By: /s/ Michael Tennenbaum
-----------------------------------
Name: Michael Tennenbaum
-----------------------------
Title: Managing Member
-----------------------------
SELLER:
/s/ Matthew L. Gold
------------------------------
Matthew L. Gold
TMG FUND, LLP
By: /s/ Matthew L. Gold
-----------------------------------
Name: Matthew L. Gold
-----------------------------
Title: Managing Partner
-----------------------------
16
<PAGE>
COUNTERPART SIGNATURE PAGE
TO
STOCK PURCHASE AGREEMENT
(For signature by additional Buyers)
BUYER:
TMCT VENTURES, L.P.
By: Rustic Canyon Partners, LLC
General Partner
By: /s/ Thomas Unterman
-------------------------------
Name: Thomas Unterman
Title: Managing Partner
SPECIAL VALUE BOND FUND, LLC
By: /s/ Michael E. Tennenbaum
-----------------------------------
Name: Michael E. Tennenbaum
Title: Managing Member
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Walter T. Dwyer
-----------------------------------
Name: Walter T. Dwyer
Title: Managing Director
MASS MUTUAL HIGH YIELD
PARTNERS II, LLC
By: HYP Management, Inc. as Managing Member
By: /s/ Walter T. Dwyer
-------------------------------
Name: Walter T. Dwyer
Title: Vice President
TENNENBAUM & CO. LLC
By: /s/ Michael E. Tennenbaum
-----------------------------------
Name: Michael E. Tennenbaum
Title: Managing Member
CENTRAL VALLEY ADMINISTRATORS, INC.
By: /s/ Richard Merkin
-----------------------------------
Name: Richard Merkin
Title: President
/s/ David DeLeeuw
---------------------------------------
David DeLeeuw
<PAGE>
Exhibit A
---------
LIST OF BUYERS
No. of Portion of Indemnification
Buyer Shares Purchase Price Percentage
----- ------ -------------- ----------
TMCT Ventures, L.P. ................. 300,000 $ 3,000,000 30.0%
Special Value Bond Fund, LLC ........ 250,000 2,500,000 25.0
Massachusetts Mutual Life
Insurance Company ................... 150,000 1,500,000 15.0
MassMutual High Yield
Partners II, LLC .................... 150,000 1,500,000 15.0
Tennenbaum & Co., LLC ............... 85,000 850,000 8.5
Central Valley Administrators, Inc. . 50,000 500,000 5.0
Devid DeLeeuw ....................... 15,000 150,000 1.5
------ ------- ---
Total ......................1,000,000 $10,000,000 100.0%
18
<PAGE>
Exhibit B
---------
LLC AGREEMENT
[Separately filed]
19
<PAGE>
Exhibit C
---------
PROXY
The undersigned shareholder of Precision Standard, Inc., a
Colorado corporation ("PSI"), hereby appoints and constitutes TCO/PSI, LLC, a
Delaware limited liability company (the "Company"), the attorney-in-fact and
proxy of the undersigned, with full power of substitution and resubstitution, as
set forth below with respect to __________ [1,000,000 in the aggregate] shares
of common stock, par value $.0001 per share, of PSI beneficially owned by the
undersigned (including any securities issued pursuant to any stock dividend,
stock split, combination or reclassification of any kind in respect of such
shares) (collectively, the "Shares").
Upon the execution hereof, all prior proxies given by the
undersigned with respect to the Shares are hereby revoked and no subsequent
proxies will be given. This proxy is coupled with an interest and is
irrevocable.
The attorney and proxy named above will be empowered to
exercise all voting rights with respect to the Shares in accordance with that
certain Limited Liability Company Agreement of TCO/PSI, LLC dated as of
__________, 1999 (the "LLC Agreement") between the undersigned and the other
parties thereto, for a period commencing on the date hereof and ending, with
respect to each Share, on the earliest to occur of: (a) the sale or transfer of
such Share by the undersigned; (b) the termination of the LLC Agreement; or (c)
the annual meeting of PSI shareholders held in calendar year 2000.
The Company shall be empowered to exercise this proxy to vote
the Shares at any annual, special or other meeting of the shareholders of PSI
and any adjournments thereof (including, without limitation, the power to
execute and deliver written consents with respect to the Shares).
The undersigned agrees, upon request, to execute and deliver
any additional documents deemed by the above named attorney and proxy to be
reasonably necessary to effect the proxy created hereby.
IN WITNESS WHEREOF, the undersigned has executed this proxy as
of the ___ day of ________, 1999.
-------------------------
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
TCO/PSI, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement") is
made and entered into as of the 7th day of September, 1999, by the Persons
executing this Agreement as Members. This Agreement provides terms and
conditions for the governance and operation of TCO/PSI, LLC (the "Company"), a
limited liability company organized under the Delaware Limited Liability Company
Act (the "Act").
ARTICLE 1.
ORGANIZATIONAL MATTERS
1.1. Formation. The Members formed the Company under the Act
by filing a certificate of formation as of September 7, 1999. The rights and
liabilities of the Members of the Company are as provided in the Act, except as
otherwise expressly provided herein. In the event of any inconsistency between
any terms and conditions contained in this Agreement and any non-mandatory
provisions of the Act, the terms and conditions contained in this Agreement
shall govern.
1.2. Name. The name of the Company is TCO/PSI, LLC. The
Company may also conduct business at the same time under one or more fictitious
names if the Managing Members determine that such is in the best interests of
the Company. The Managing Members may change the name of the Company, from time
to time, in accordance with applicable law.
1.3. Principal Place of Business; Other Places of Business.
The principal place of business of the Company is located at the principal
offices of PSI, or such other place within or outside the State of Delaware as
the Managing Members may from time to time designate. The Company may maintain
offices and places of business at such other place or places within or outside
the State of Delaware as the Managing Members deem advisable.
1.4. Business Purpose. The business purpose of the Company
shall be to own, hold, vote, and seek to maximize the value of the Shares during
the term of this Agreement. The Company shall have the power to do and perform
all things determined by the Managing Members to be necessary for, incident to
and connected with or arising out of such activities and shall not engage in any
other business without the agreement of the Managing Members.
1.5. Certificate of Formation; Filings. The Members have
caused to be executed and filed a Certificate of Formation (the "Certificate")
in the Office of the Delaware Secretary of State as required by the Act. The
Managing Members may execute and file any duly authorized amendments to the
Certificate from time to time in a form prescribed by the Act. The Managing
Members shall also cause to be made, on behalf of the Company, such additional
filings and recordings as they shall deem necessary or advisable.
<PAGE>
1.6. Fictitious Business Name Statements. Fictitious business
name statements shall be filed and published when and if the Managing Members
determine it necessary or advisable. Any such statement shall be renewed as
required by applicable law.
1.7. Designated Agent for Service of Process. The Company
shall continuously maintain a registered office and a designated and duly
qualified agent for service of process on the Company in the State of Delaware.
The address of the current registered office in Delaware and of the current
registered agent for service of process is Corporation Service Company, 1013
Centre Road, Wilmington, Delaware 19805-1297.
1.8. Term. The Company commenced existence on the date that
the Certificate was filed with the Office of the Delaware Secretary of State,
and shall continue until terminated pursuant to this Agreement.
ARTICLE 2.
DEFINITIONS
Capitalized words and phrases used and not otherwise defined
elsewhere in this Agreement shall have the following meanings:
2.1. "Act" is defined in the Preamble.
2.2. "Additional Members" means those Persons admitted to the
Company pursuant to Paragraph 3.4.
2.3. "Affiliate" means, with reference to a specified Person:
(a) a Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the specified
Person, (b) any Person that is an officer, partner, or trustee of, or serves in
a similar capacity with respect to, the specified Person, or for which the
specified Person is an officer, partner, or trustee, or serves in a similar
capacity, or (c) any member of the Immediate Family of the specified Person.
2.4. "Agreement" is defined in the Preamble.
2.5. "Assignee" means any Person owning an Economic Interest
but not a Voting Interest.
2.6. "Business Plan" means the business plan of the Company in
the form of Exhibit "B" or any other business plan of the Company agreed upon by
the Managing Members.
2.7. "Capital Account" means the Capital Account maintained
for a Member on the Company's books and records in accordance with the
accounting practices reflected in Regulations Sections 1.704-1(b) and 1.704-2,
and for purposes of determining the amount of any liabilities, Code Section 752.
- 2 -
<PAGE>
2.8. "Capital Contributions" means, with respect to any
Member, the total amount of money and the fair market value of property (other
than money), less the amount of liabilities to which any contributed property is
subject, contributed to the capital of the Company by such Member, whether as an
initial Capital Contribution or as an additional Capital Contribution.
2.9. "Code" means the Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of succeeding law).
2.10. "Company" is defined in the Preamble.
2.11. "Company Assets" means all direct and indirect interests
in real and personal property owned by the Company from time to time, and shall
include both tangible and intangible property (including cash).
2.12. "Economic Interest" means a Person's right to share in
the Net Profits, Net Losses, or similar items of, and to receive distributions
from, the Company, but does not include any other rights of a Member including,
without limitation, the right to vote or to participate in the management of the
Company, or, except as specifically provided in this Agreement or required under
the Act, any right to information concerning the business and affairs of the
Company. The Economic Interest of each Member is set forth opposite such
Member's name on Exhibit "A" attached hereto, as it may be modified, changed, or
supplemented from time to time.
2.13. "Excess Distribution Amount" means, as of any given
time, the excess, if any, of $10.00 over the Gold Distribution Amount.
2.14. "Gold" means Matthew L. Gold.
2.15. "Gold Distribution Amount" means, as of any given time,
the aggregate amount of all distributions theretofore made to Gold pursuant to
Paragraph 5.1, divided by the number of Shares.
2.16. "Immediate Family" means, and is limited to, an
individual Member's current spouse and the children and grandchildren of the
Member or of the Member's current spouse, or a trust or estate, all of the
beneficiaries of which consist of such Member or members of such Member's
Immediate Family.
2.17. "Incapacity" means the entry of an order of incompetence
or of insanity, or the death, dissolution, bankruptcy (as defined in the Act),
or termination (other than by merger or consolidation) of any Person.
2.18. "Indemnitee" is defined in Paragraph 7.7.1.
2.19. "Managing Members" means, subject to Section 7.2, Gold
and TCO.
- 3 -
<PAGE>
2.20. "Members" means the Persons set forth on Exhibit "A" and
any Additional Member.
2.21. "Membership Interest" or "Interest" means the entire
ownership interest of a Member in the Company, including without limitation such
Member's Voting Interest and Economic Interest.
2.22. "Net Profits" or "Net Losses" means, for each fiscal
year or other period, an amount equal to the Company's taxable income or loss
for such year or period determined in accordance with Code Section 703(a) and
the Regulations thereunder.
2.23. "Non Managing Members" means the Members other than the
Managing Members.
2.24. "Operating Cash Expenses" means cash reasonably
disbursed in the ordinary and necessary course of business with the approval of
the Managing Members, including, without limitation, all cash expenses, such as
taxes, legal, accounting, bookkeeping, computing, equipment use, telephone
expenses, and direct expenses of Company employees (if any) and agents while
engaged in Company business. Operating Cash Expenses shall include the actual
cost of goods, materials and administrative services used for or by the Company,
whether incurred by any Member, any delegate or Affiliate thereof, or any
non-Affiliate in performing functions set forth in this Agreement reasonably
requiring the use of such goods, materials or administrative services. Operating
Cash Expenses shall not include expenditures paid from Reserves.
2.25. "Person" means and includes an individual, a
corporation, a partnership, a limited liability company, a trust, an
unincorporated organization, a government or any department or agency thereof,
or any entity similar to any of the foregoing.
2.26. "PSI" means Precision Standard, Inc., a Colorado
corporation having its principal place of business at 12000 East 47th Avenue,
Suite 400, Denver, Colorado 80237 or such other place as it may from time to
time determine.
2.27. "Regulations" means proposed, temporary, and final
Treasury Regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
Treasury Regulations).
2.28. "Reserves" means funds set aside or amounts allocated to
reserves that shall be maintained in amounts deemed sufficient by the Managing
Members for working capital, to pay taxes, insurance, debt service, and other
costs or expenses incident to the conduct of business by the Company as
contemplated hereunder.
2.29. "Responsible Party" is defined in Paragraph 7.7.6.
2.30. "Shares" means 1,026,908 shares of PSI common stock, par
value $.0001 per share, contributed by Gold to the Company pursuant to this
Agreement, together with any
- 4 -
<PAGE>
cash, securities or other property issued in respect of such shares (including,
without limitation, any securities issued pursuant to any stock dividend, stock
split, combination or reclassification of any kind).
2.31. "Substitute Member" means any Person to whom a Member
Transfers all or any part of its Voting Interest in the Company.
2.32. "TCO" means Tennenbaum & Co., LLC, a Delaware limited
liability company.
2.33. "Terminating Capital Transaction" means any sale or
other disposition of all or substantially all of the assets of the Company or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Company.
2.34. "Transfer" means, with respect to any Interest in the
Company, a sale, conveyance, exchange, assignment, pledge, encumbrance, gift,
bequest, hypothecation, or other transfer or disposition by any other means,
whether for value or no value and whether voluntary or involuntary (including,
without limitation, by operation of law), or an agreement to do any of the
foregoing. When used as a verb, Transfer means effecting a Transfer.
2.35. "Voting Interest" means the entire ownership interest of
a Member in the Company, excluding that Member's Economic Interest but including
the right to give or withhold approval or consent, in accordance with the
provisions of this Agreement and the Act. The Voting Interest of each Member is
set forth opposite such Member's name on Exhibit "A" attached hereto, as it may
be modified, changed or supplemented from time to time.
ARTICLE 3.
MEMBER CAPITAL, LOANS AND LIABILITY
3.1. Initial Capital Contributions of Members. The names,
addresses, initial Capital Contributions, and Voting Interests and Economic
Interests of the Members are set forth on Exhibit "A" attached hereto and
incorporated herein. All Members acknowledge and agree that the initial Capital
Contributions set forth in Exhibit "A" represent the amount of money and the
fair market value of all property (other than money) initially contributed by
the Members.
3.2. Additional Capital Contributions by Members.
3.2.1. Except as provided in Paragraphs 3.2.2 and
3.2.3, no Member shall be permitted or required to make any additional
Capital Contributions to the Company.
3.2.2. The Managing Members may at any time call upon
all Members to make a Capital Contribution to the Company to pay
Operating Cash Expenses or to fund Reserves in proportion to their
respective Voting Interests. If any Member elects
- 5 -
<PAGE>
to not make a Capital Contribution, one or more of the other Members
may, with the approval of the Managing Members, elect to make available
to the Company the amount of that Capital Contribution in the form of a
loan (each such loan, a "Capital Contribution Loan"). If more than one
of the other Members elects to make any given Capital Contribution
Loan, each of those Members may make a proportion of that Capital
Contribution Loan equal to the proportion of the aggregate Voting
Interests of all Members that elect to make that Capital Contribution
Loan that is represented by that Member's Voting Interest. Interest on
Capital Contribution Loans shall accrue at the highest lawful rate
permissible under applicable usury laws up to a maximum rate of 20% per
annum and be payable quarterly or as the Managing Members may otherwise
agree. The principal of Capital Contribution Loans shall be payable on
liquidation of the Company or as the Managing Members may otherwise
agree.
3.3. Capital Accounts. A Capital Account shall be established
and maintained for each Member in accordance with the terms of this Agreement.
3.4. Additional Members. Following formation of the Company,
the Company may issue Interests to additional Persons, and admit one or more
recipients of such Interests as additional Non-Managing Members from time to
time, on such terms and conditions and for such Capital Contributions, if any,
as the Managing Members may unanimously determine. No action or consent by other
than the Managing Members shall be required in connection with the admission of
an Additional Member. As a condition to being admitted to the Company, each
Additional Member shall execute an agreement to be bound by the terms and
conditions of this Agreement.
3.5. Member Capital. Except as otherwise provided in this
Agreement or with the prior written consent of the Managing Members: (a) no
Member shall demand or be entitled to receive a return of or interest on its
Capital Contributions or Capital Account, (b) no Member shall withdraw any
portion of its Capital Contributions or receive any distributions from the
Company as a return of capital on account of such Capital Contributions, and (c)
the Company shall not redeem or repurchase the Interest of any Member.
3.6. Member Loans. Except as provided in Paragraph 3.2.2, no
Member shall be required or permitted to make any loans or otherwise lend any
funds to the Company, except with the consent of the Managing Members.
3.7. Liability of Members. Except as otherwise required by any
non-waivable provision of the Act or other applicable law: (a) no Member shall
be personally liable in any manner whatsoever for any debt, liability, or other
obligation of the Company, whether such debt, liability, or other obligation
arises in contract, tort or otherwise; and (b) no Member shall in any event have
any liability whatsoever in excess of (i) the amount of its Capital
Contributions, (ii) its share of any assets and undistributed profits of the
Company, (iii) the amount of any unconditional obligation of such Member to make
additional Capital Contributions to the Company pursuant to this Agreement, and
(iv) the amount of any wrongful distribution to such Member, if, and only to the
extent, such Member has actual knowledge (at the time of the distribution) that
such distribution is made in violation of Section 18-607(a) of the Act.
- 6 -
<PAGE>
ARTICLE 4.
DELIVERY AND VOTING OF SHARES
4.1. Delivery of Shares. Concurrently with the execution of
this Agreement, Gold shall transfer to the Company his entire right, title and
interest in the Shares, and shall deliver to the Company certificate(s)
evidencing the Shares, free and clear and all liens, claims and encumbrances,
duly endorsed in blank for transfer or accompanied by stock powers duly executed
in blank.
4.2. Voting -- Election of Directors. The Company shall vote
the Shares for the election of a slate of PSI directors which shall consist of
(a) two qualified persons designated by TCO (the TCO Nominees"), (b) two
qualified persons designated by Gold (the "Gold Nominees") and (c) such other
persons as the Managing Members select (the "Joint Nominees"; together with the
TCO Nominees and the Gold Nominees, the "Nominees"). The Purchase Agreement
dated the date hereof (the "Purchase Agreement") among Gold, TMG Fund LLP
(collectively, with Gold, "Seller") and the other Persons party thereto (the
"Original Purchasers"), pursuant to which the Original Purchasers are purchasing
from Seller 1,000,000 shares of PSI common stock in the aggregate, provides that
the Original Purchasers shall grant the Company a proxy to vote those shares of
PSI common stock for election of the Nominees until, with respect to each Share
(as defined in the Purchase Agreement), the earliest to occur of (a) the sale or
transfer of such Share by any Original Purchaser, (b) the termination of this
Agreement, and (c) the annual meeting of stockholders held in calendar year
2000.
4.2.1. In the event action is to be taken by PSI's
Board of Directors to fill a vacancy on the Board created by the
resignation, removal or death of a Nominee, then (a) in the event such
vacant position was previously filled by a TCO Nominee, Gold agrees to
exercise his best efforts to cause any remaining Gold Nominees on the
Board to vote in favor of a TCO Nominee to fill such vacancy, (b) in
the event such vacant position was previously filled by a Gold Nominee,
TCO agrees to exercise its best efforts to cause any remaining TCO
Nominees on the Board to vote in favor of a Gold Nominee to fill such
vacancy, and (c) in the event such vacant position was previously
filled by a Joint Nominee, Gold and TCO shall exercise their best
efforts to cause the Gold Nominees and the TCO Nominees, respectively,
to vote in favor of a Joint Nominee to fill such vacancy.
4.2.2. The Company shall vote the Shares for the
removal from PSI's Board of Directors, upon notice from TCO, Gold or
the Managing Members, of any TCO Nominee, Gold Nominee or Joint
Nominee, respectively, and for the election to the unexpired term of
each director so removed another person designated by TCO, Gold or the
Managing Members, respectively.
4.2.3. For purposes of this Paragraph 4.2, persons
qualified to be Nominees include, among others, members of TCO and any
current directors of PSI.
4.3. Voting -- Other Matters.
- 7 -
<PAGE>
4.3.1. The Company shall vote the Shares in favor of
any matter recommended by a majority of PSI's Board of Directors;
provided that, at the time of such recommendation, all of the TCO
Nominees and Gold Nominees were serving on the Board and voted (or
abstained from voting) with respect to that matter.
4.3.2. In the event that a matter is submitted for
stockholder approval without a recommendation from the Board and the
Managing Members agree as to how the Shares should be voted on that
matter, the Company shall vote the Shares as directed by the Managing
Members. If the Managing Members do not agree as to how the Shares
should be voted on that matter, the Company shall vote 50% of the
Shares as directed by Gold and the other 50% as directed by TCO.
4.4. Agreement on Certain Matters. The Company and each of the
Members shall exercise their respective best efforts to cause the Nominees,
subject to the Nominees' fiduciary obligations, to agree among themselves on all
matters, including without limitation the following matters:
4.4.1. The selection of PSI's Chief Executive Officer
and/or his replacement (if necessary);
4.4.2. The sale of PSI (if any);
4.4.3. Any financings by PSI utilizing either common
stock or common stock linked securities;
4.4.4. Any acquisitions or dispositions in excess of
$10,000,000; and
4.4.5. Nominations to PSI's Board of Directors.
4.5. Indemnification; Purchase Agreement. Gold agrees that (a)
the Company and each of its Members (other than Gold) shall be entitled to rely
on the representations and warranties of Seller under Article IV of the Purchase
Agreement to the same extent as if such Persons were Original Purchasers under
the Purchase Agreement, and (b) the Company and each of its Members (other than
Gold) shall be entitled to be indemnified by Seller upon the breach of any such
representations and warranties to the same extent as if such Persons were
Original Purchasers under the Purchase Agreement; provided, however, that the
aggregate amount payable by Seller for claims for indemnification with respect
to General Claims (as defined in the Purchase Agreement) under the Purchase
Agreement and with respect to General Claims hereunder shall in no event
together exceed $1,000,000.
ARTICLE 5.
DISTRIBUTIONS
5.1. Distributions. All distributions of cash, securities or
other property (excluding shares of PSI common stock) received by the Company
from PSI in respect of the
- 8 -
<PAGE>
Shares, and the proceeds from any sale of the Shares, shall be distributed to
the Members as follows unless the Managing Members agree otherwise:
5.1.1. If at the time of the distribution the value
of the property to be distributed with respect to each of the Shares is
equal to or less than the Excess Distribution Amount, then all of such
value shall be distributed to Gold.
5.1.2. If at the time of the distribution the value
of the property to be distributed with respect to each of the Shares is
more than the Excess Distribution Amount, then:
(a) Gold shall first receive that portion of
the property to be distributed with respect to each of the
Shares equal to the Excess Distribution Amount; and
(b) The Members and Assignees shall next
receive in the aggregate, and shall divide amongst them in
proportion to their Economic Interests, the balance.
5.1.3. If the Managing Members are at any time unable
to agree upon the value of any property that is to be distributed by
the Company, they shall submit the dispute to an independent
nationally-recognized appraisal company selected jointly by them whose
conclusion regarding the value of that property will be conclusive and
binding on the Managing Members. In the event the Managing Members
cannot agree on an appraisal company, they shall each appoint one
independent nationally-recognized appraisal company and the two
appointees must select a third independent nationally-recognized
appraisal company, whose conclusion regarding the value of that
property will be conclusive and binding on the Managing Members. Each
Managing Member shall pay the fees and expenses of any appraisal
company appointed by them, and shall share equally the fees and
expenses of any appraisal company selected jointly by them or by
appraisal companies appointed by them, as the case may be.
5.2. Limitations on Distributions. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not
make a distribution to any Member or the holder of any Economic Interest on
account of its Membership Interest or Economic Interest in the Company (as
applicable) in violation of the Act.
ARTICLE 6.
ALLOCATIONS OF NET PROFITS AND NET LOSSES
6.1. General Allocation of Net Profits and Losses. The Members
intend that the Company be treated as a partnership, or equivalent pass-through
entity, for federal, state and local income tax purposes. Net Profits and Net
Losses shall be determined and allocated with respect to each fiscal year of the
Company as of the end of such fiscal year.
- 9 -
<PAGE>
6.1.1. Net Losses shall be allocated among the
Members as follows:
(a) First, to the Members with positive
Adjusted Capital Account Balances (as defined below) in
proportion to and to the extent thereof;
(b) Second, to the Members who are allocated
a share of the Company's indebtedness pursuant to Code Section
752, in proportion to, and to the extent of, each Member's
share of the indebtedness that funded the Net Loss being
allocated pursuant to this priority (determined by assuming,
once no Member's Adjusted Capital Account Balance is positive,
the Net Losses of the Company are funded in inverse order of,
and to the extent of, the Company's creditors' claims to the
assets of the Company); and
(c) Thereafter, sixty-three percent (63%) to
TCO and thirty-seven percent (37%) to Gold.
For purposes of this Paragraph 6.1.1, a Member's Adjusted Capital
Account Balance shall be equal to his or its Capital Account after
making the following adjustments: (i) add the amount that the Member is
obligated to restore or is deemed obligated to restore pursuant to
Regulations Sections 1.704-2(g)(1) and 1.702-2(i)(5); and (ii) subtract
such Member's share of the items described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
6.1.2. Net Profits shall be allocated as follows:
(a) First, to the Members in proportion to,
and to the extent of, any Net Losses allocated to them
pursuant to Paragraph 6.1.1(c);
(b) Second, to the Members in proportion to,
and to the extent of, any Net Losses allocated to them
pursuant to Paragraph 6.1.1(b);
(c) Third, to the Members in proportion to,
and to the extent of, any Net Losses allocated to them
pursuant to Paragraph 6.1.1(a); and
(d) Thereafter, any gain realized by the
Company in connection with a distribution, tender or other
disposition of the Shares shall be allocated as follows: (i)
if the value of the Shares at the time of the disposition is
$10.00 per Share or less, one hundred percent (100%) of the
gain realized shall be allocated to Gold; and (ii) if the
value of the Shares at the time of the disposition exceeds
$10.00 per Share, then one hundred percent (100%) of the gain
realized as if the Shares were disposed
- 10 -
<PAGE>
of for $10.00 per Share shall be allocated to Gold, and all
remaining gain realized shall be allocated to the Members and
Assignees in proportion to their Economic Interests.
6.2. Tax-Related Provisions.
6.2.1. For any fiscal year during which any part of a
Membership Interest or Economic Interest is transferred between the
Members or to another Person, the portion of the Net Profits, Net
Losses, and other items of income, gain, loss, deduction, and credit
that are allocable with respect to such part of a Membership Interest
or Economic Interest shall be apportioned between the transferor and
the transferee under any method allowed pursuant to Section 706 of the
Code and the applicable Regulations as determined by the Members.
6.2.2. In the event that the Code or any Regulations
require allocations of items of income, gain, loss, deduction, or
credit different from those set forth in this Article 6, the Managing
Members are hereby authorized to make new allocations in reliance on
the Code and such Regulations. Specifically, the Managing Members are
authorized to take such steps as they, in their sole and absolute
discretion, deem necessary or advisable in order to comply with the
rules under Regulations ss.ss.1.704-1 and -2 dealing with "substantial
economic effect" as it effects the allocation of income and loss and
Regulations ss.1.704-1 dealing with differences between book and tax
basis. No such new allocation shall give rise to any claim or cause of
action by any Member. The Members shall be bound by the provisions of
this Article 6 in reporting their shares of Net Profits, Net Losses,
and other items of income, gain, loss, deduction, and credit for
federal, state, and local income tax purposes.
6.2.3. Notwithstanding any other provisions of this
Agreement, if a Member unexpectedly receives an adjustment, allocation,
or distribution described in Regulations ss.1.704-1 (b)(2)(ii)(d)(4),
(5), or (6), that Member will be allocated items of income and gain
(consisting of a pro rata portion of each item of Company income,
including gross income, and gain for such year) in an amount and manner
sufficient to eliminate any resulting deficit balance in that Member's
capital account. This provision is intended to be a "qualified income
offset" provision within the meaning of Regulations
ss.1.704-1(b)(2)(ii)(d), and shall be construed and applied as such by
the Members.
ARTICLE 7.
GOVERNANCE AND OPERATIONS
7.1. Management. The Managing Members shall have management
responsibility over all the affairs and business of the Company, in all respects
and in all matters, and shall have complete discretion to make all decisions
affecting the business and affairs of the Company, and to take all such actions
they deem necessary or appropriate to accomplish the purposes and direct the
affairs of the Company. Each such decision or action (including, without
limitation, those permitted or required to be taken by the Managing Members
under the terms
- 11 -
<PAGE>
of this Agreement) shall require the unanimous approval of the Managing Members,
except as otherwise expressly provided. The Managing Members acting together
shall have the power and authority to bind the Company, except and to the extent
that such power is expressly delegated in writing to any other Person by
agreement of the Managing Members. Any such delegation shall not cause either of
the Managing Members to cease to be a Managing Member. No Member other than the
Managing Members (a) have any right to vote on or consent to any other matter,
act, decision, or document involving the Company or its business, or (b) take
part in the day-to-day management, or the operation or control, of the business
and affairs of the Company.
7.2. Transfer by Managing Members. If a Managing Member
Transfers any part of its Voting Interest (other than a Transfer of less than
all of its Voting Interest pursuant to Paragraph 8.1.1), it will automatically
cease being a Managing Member, and the other Managing Member will become the
sole Managing Member and will have sole management responsibility over all the
affairs and business of the Company. If both Managing Members or any sole
Managing Member Transfer all of their Voting Interests, management of the
Company will be by all the Members, with decisions being made by Members holding
two-thirds or more of the aggregate Voting Interests.
7.3. Limitations on Authority of Managing Members.
Notwithstanding any contrary provision of this Agreement, without the written
consent of all Members, the Managing Members shall not have the authority to:
7.3.1. Do any act in contravention of the Agreement;
or
7.3.2. Knowingly perform any act that would subject
any Member to liability for the debts, liabilities or obligations of
the Company.
7.4. Reliance By Third Parties. Any Person dealing with the
Company or the Managing Members may rely upon a certificate signed by the
Managing Members as to:
7.4.1. the identity of the Managing Members or any
Members of the Company;
7.4.2. the existence or non-existence of any fact or
facts which constitute a condition precedent to acts by the Managing
Members or in any other manner germane to the affairs of the Company;
7.4.3. the Persons who are authorized to execute and
deliver any instrument or document for or on behalf of the Company; or
7.4.4. any act or failure to act by the Company or as
to any other matter whatsoever involving the Company or any Member.
7.5. Compensation of Managing Members.
- 12 -
<PAGE>
7.5.1. The Company shall pay the Managing Members
compensation for services rendered in administering the Company. That
compensation will be determined by the Managing Members and will be
subject to approval of the Members holding two-thirds or more of the
aggregate Voting Interests.
7.5.2. The Managing Members shall be entitled to
reimbursement from the Company on an annual basis for all cash expenses
approved by the Managing Members and incurred by the Managing Members
on behalf of the Company.
7.6. Records and Reports.
7.6.1. The Managing Members shall cause to
be kept, at the principal place of business of the Company, or at such
other location as the Managing Members shall reasonably deem
appropriate, full and proper ledgers, other books of account, and
records of all receipts and disbursements, other financial activities,
and the internal affairs of the Company for at least the current and
past four fiscal years.
7.6.2. The Managing Members shall also cause
to be sent to each Member of the Company, the following:
(a) within ninety (90) days following
the end of each fiscal year of the Company, a report that
shall include all necessary information required by each
Member for preparation of its federal, state, and local income
or franchise tax or information returns, including each
Member's pro rata share of Net Profits, Net Losses, and any
other items of income, gain, loss, and deduction for such
fiscal year; and
(b) a copy of the Company's federal,
state, and local income tax or information returns for each
fiscal year, concurrent with the filing of such returns.
7.6.3. Members (personally or through an
authorized representative) may, for purposes reasonably related to
their Interests, examine and copy (at their own cost and expense) the
books and records of the Company at all reasonable business hours.
7.6.4. Members shall be entitled to all
rights to which they are entitled with regard to Information and
Inspection Rights under the Act.
7.7. Indemnification and Liability of the Members
and Others.
7.7.1. The Company shall indemnify and hold
harmless each Member, and all officers, directors, managing directors,
principals, employees, and agents of the Company (individually, an
"Indemnitee") to the full extent permitted by law from and against any
and all losses, claims, demands, costs, damages, liabilities, joint and
several, expenses of any nature (including attorneys' fees and
disbursements),
- 13 -
<PAGE>
judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits, or proceedings, civil, criminal,
administrative, or investigative, in which the Indemnitee may be
involved, or threatened to be involved as a party or otherwise,
relating to the performance or nonperformance of any act concerning the
activities of the Company, characterized as active or passive
negligence or otherwise, if (a) the act or failure to act of that
Indemnitee was in good faith and in a manner it believed to be in, or
not contrary to, the best interests of the Company, and (b) the conduct
of that Indemnitee did not constitute gross negligence or willful
misconduct. Such acts concerning the Company include acts related to
positions assumed by an Indemnitee, with the approval of the Company,
as a director, officer, or other fiduciary of an entity in which the
Company has an interest, to the extent not otherwise paid for under
indemnification or insurance. The termination of an action, suit, or
proceeding by judgment, order, settlement, or upon a plea of nolo
contendere or its equivalent, shall not, in and of itself, create a
presumption or otherwise constitute evidence that the Indemnitee acted
in a manner contrary to that specified above.
7.7.2. Expenses incurred by an Indemnitee in
defending any claim, demand, action, suit, or proceeding subject to
this Paragraph 7.7 shall be advanced by the Company prior to the final
disposition of such claim, demand, action, suit, or proceeding and at
times and in a manner to pay the expenses as they are reasonably
billed.
7.7.3. Any indemnification provided
hereunder shall be satisfied solely out of the assets of the Company,
as an expense of the Company. No Member shall be subject to personal
liability by reason of these indemnification provisions. Any rights to
indemnification hereunder shall survive the termination or
reorganization of the Company, and upon any such event, sufficient
assets shall be set aside in an amount and manner so as reasonably to
provide for claims and potential claims under this Paragraph 7.7.
7.7.4. The provisions of this Paragraph 7.7
are for the benefit of the Indemnitees and shall not be deemed to
create any rights for the benefit of any other Person. The rights of
Indemnitees under this Paragraph 7.7 shall survive and continue after
the termination of the relationship with the Company giving rise to the
rights, as to acts performed or not performed before the termination.
7.7.5. Neither any Member nor its Affiliates
nor the officers, directors, managing directors, principals, employees,
or agents of the Company shall be liable to the Company or to a Member
for any losses sustained or liabilities incurred as a result of any act
or omission of any such Person if, whether characterized as active or
passive negligence or otherwise, (a) the act or failure to act of such
Person was in good faith and in a manner it believed to be in, or not
contrary to, the best interests of the Company, and (b) the conduct of
such Person did not constitute gross negligence or willful misconduct.
- 14 -
<PAGE>
7.7.6. To the extent that any Member, or any
officer, director, managing director, principal, employee, or agent of
any Member (each, a "Responsible Party") has, at law or in equity,
duties (including, without limitation, fiduciary duties) to the
Company, any Member or other Person bound by the terms of this
Agreement, such Responsible Parties acting in accordance with this
Agreement shall not be liable to the Company, any Member, or any such
other Person for its good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they
restrict the duties of a Responsible Party otherwise existing at law or
in equity, are agreed by all parties hereto to replace such other
duties to the greatest extent permitted under applicable law.
7.7.7. Whenever a Responsible Party is
required or permitted to make a decision, take or approve an action, or
omit to do any of the foregoing: (a) in its discretion, under a similar
grant of authority or latitude, or without an express standard of
behavior (including, without limitation, standards such as "reasonable"
or "good faith"), then such Responsible Party shall be entitled to
consider only such interests and factors, including its own, as it
desires, and shall have no duty or obligation to consider any other
interests or factors whatsoever, or (b) with an express standard of
behavior (including, without limitation, standards such as "reasonable"
or "good faith"), then such Responsible Party shall comply with such
express standard but shall not be subject to any other, different, or
additional standard imposed by this Agreement or otherwise applicable
law.
7.8 Other Activities. The Members may engage or invest in,
and devote their time to, any other business venture or activity of any nature
and description (independently or with others), whether or not such other
activity may be deemed or construed to be in competition with the Company.
Neither the Company nor any other Member shall have any right by virtue of this
Agreement or the relationship created hereby in or to such other venture or
activity of any Member (or to the income or proceeds derived therefrom), and the
pursuit thereof, even if competitive with the business of the Company, shall not
be deemed wrongful or improper.
ARTICLE 8.
INTERESTS AND TRANSFERS OF INTERESTS
8.1. Transfers.
8.1.1. Without the consent of the Managing Members or
any other Member, a Member may Transfer all or any portion of its
Membership or Economic Interest, and an Assignee may transfer all or
any portion of its Economic Interest, to a member of the Member's
Immediate Family for estate planning purposes, to a bona fide charity
(only with respect to all or any portion of the Economic Interest of a
Member or Assignee), to an Affiliate, to its partners (general or
limited), members or stockholders, or to any other Member.
- 15 -
<PAGE>
8.1.2. Subject to Paragraph 8.1.1, any Member seeking
to Transfer all or any portion of its Economic Interest to any Person
must obtain the prior written consent of the Managing Members, which
the Managing Members may not unreasonably withhold. Any Member that
Transfers all of its Economic Interest but retains all or part of its
Voting Interest will remain a Member, and any Person who is a
transferee of all or part of one or more Members' Economic Interest but
is not a transferee of any part of any Member's Voting Interest will be
considered an Assignee. Assignees shall only receive, to the extent
Transferred, the distributions and allocations of income, gain, loss,
deduction, credit, or similar item to which the Member which
Transferred its Interest would be entitled, and (b) such Assignee shall
not be entitled or enabled to exercise any other rights or powers of a
Member, such other rights remaining with the transferring Member. In
such a case, the transferring Member shall remain a Member even if he
has Transferred his entire Economic Interest in the Company to one or
more Assignees. In the event any Assignee desires to make a further
assignment of any Economic Interest in the Company, such Assignee shall
be subject to all of the provisions of this Agreement to the same
extent and in the same manner as any Member desiring to make such an
assignment.
8.1.3. Subject to Paragraph 8.1.1, Transfer by any
Member of all or any part of its Voting Interest requires the prior
written consent of the Managing Members, which the Managing Members may
withhold or grant in their sole discretion. Any Member seeking to
Transfer all or any portion of its Voting Interest to any Person must
send written notice to the Managing Members setting forth the name and
address of the proposed transferee, the Voting Interest proposed to be
transferred, the effective date of the proposed Transfer, information
concerning the proposed transferee's financial capacities and
investment experience, and a copy of any instrument of Transfer and the
proposed transferee's written consent to be bound by this Agreement,
each in a form reasonably satisfactory to the Managing Members.
8.1.4. Upon due Transfer by any Member of all or any
part of its Voting Interest, the transferee will be considered a
Substitute Member, and bound by this Agreement. Upon due Transfer by
any Member of all of its Voting Interest, that Member will cease to be
a Member.
8.1.5. Upon Transfer by a Member of all or any part
of its Voting Interest or Economic Interest, or both, Exhibit "A" will
be amended to reflect the name, address, and Voting and Economic
Interests of the Substitute Member or Assignee that is the transferee,
and to alter the Voting Interest or Economic Interest of the
transferring Member or to eliminate the transferring Member, as
applicable.
8.2. Further Restrictions. Any Transfer shall be null and
void if:
(a) such Transfer would cause a termination
of the Company for federal, state or local, if applicable,
income tax purposes;
- 16 -
<PAGE>
(b) such Transfer would, in the opinion of
counsel to the Company, cause the Company to cease to be
classified as a partnership for federal or state income tax
purposes;
(c) such Transfer requires the registration
of such Transferred Interest pursuant to any applicable
federal or state securities laws;
(d) such Transfer causes the Company to
become a "Publicly Traded Partnership," as such term is
defined in Section 7704 of the Code;
(e) such Transfer subjects the Company to
regulation under the Investment Company Act of 1940, the
Investment Advisers Act of 1940 or the Employee Retirement
Income Security Act of 1974, each as amended;
(f) such Transfer results in a violation of
applicable laws;
(g) such Transfer is made to any Person who
lacks the legal right, power, or capacity to own such
Interest; or
(h) it is in any manner not in accordance
with this Agreement.
8.3. Conversion of Membership Interest. Upon the Incapacity of
a Member, such Incapacitated Member's Membership Interest shall automatically be
converted to an Economic Interest only, and such Incapacitated Member (or its
executor, administrator, trustee, or receiver, as applicable) shall thereafter
be deemed an Assignee for all purposes hereunder, with the same Economic
Interest as was held by such Incapacitated Member prior to its Incapacity, but
without any other rights of a Member.
ARTICLE 9.
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
9.1. Limitations. The Company may be dissolved, liquidated and
terminated only pursuant to the provisions of this Article 9, and the parties
hereto do hereby irrevocably waive any and all other rights they may have to
cause a dissolution of the Company or a sale or partition of any or all of the
Company Assets.
9.2. Exclusive Causes. Notwithstanding the Act, the following
and only the following events shall cause the Company to be dissolved,
liquidated and terminated:
- 17 -
<PAGE>
(a) The occurrence of a Terminating Capital
Transaction;
(b) A court of competent jurisdiction
decrees a dissolution of the Company pursuant to an action
duly filed by a Member under the Act because, inter alia, it
is reasonably necessary to dissolve the Company in order to
protect the rights or interests of the complaining members;
(c) The unanimous written consent of the
Managing Members (or, if there remain no Managing Members, the
written consent of Members holding two-thirds or more of the
aggregate Voting Interests);
(d) Distribution of the Shares pursuant to
Paragraph 9.3; or
(e) Judicial dissolution.
Any dissolution of the Company other than as provided in this Paragraph 9.2
shall be a dissolution in contravention of this Agreement.
9.3. Distribution of Shares. Subject to Paragraph 9.6, the
Company shall promptly distribute the Shares (by delivery of proper share
certificates therefor) as provided in Paragraph 9.4 within 15 days of the
occurrence of any of the following:
9.3.1. the average closing price of PSI common stock,
as reported by the principal stock exchange (including Nasdaq) on which
PSI common stock is then listed, is less than $25.00 per share
(adjusted for any stock dividends, stock splits, distributions,
combinations or reclassifications of any kind) during the 60-day period
commencing on the third anniversary of the date of this Agreement, and
within 15 days after the end of that 60-day period either Managing
Member requests that the Shares be distributed;
9.3.2. unless the Managing Members unanimously agree
otherwise, the fifth anniversary of the date of this Agreement;
9.3.3. prior to the earlier of (i) January 1, 2001
and (ii) preparation and delivery of the items listed under the heading
"Reports" in the Business Plan, Michael E. Tennenbaum is Incapacitated
or otherwise ceases to be a Managing Member of TCO and Gold promptly
requests in writing that the Shares be distributed; or
9.3.4. prior to September 1, 2002, the Original
Purchasers owning in the aggregate fewer than 250,000 shares of
outstanding PSI common stock (adjusted for any stock dividends, stock
splits, distributions, combinations or reclassifications of any kind)
and Gold promptly requests in writing that the Shares be distributed.
- 18 -
<PAGE>
9.4. Allocation of Shares Upon Distribution. Subject to
Paragraph 9.6, any distribution of Shares pursuant to Paragraph 9.3 shall be in
accordance with the relative Economic Interests of the Members and Assignees at
the time of the distribution as follows:
9.4.1. If at the time of the distribution the value
of each of the Shares (as determined in accordance with Paragraph
9.4.3) is less than or equal to the Excess Distribution Amount, then
all of the Shares shall be distributed to Gold.
9.4.2. If at the time of the distribution the value
of each of the Shares exceeds the Excess Distribution Amount, then:
(a) Gold shall receive that number of Shares
(rounded to the nearest whole number) equal to (i) the
aggregate number of Shares multiplied by the sum of the Excess
Distribution Amount plus 37% of the amount by which the value
per Share exceeds the Excess Distribution Amount divided by
(ii) the price per Share; and
(b) The other Members and Assignees shall
receive in the aggregate, and shall divide amongst them in
proportion to their Economic Interests, the remaining number
of Shares.
9.4.3. For purposes of determining the value of the
Shares at the time of any distribution, tender or other disposition of
the Shares, the value per Share shall be deemed to equal the average
closing price of the PSI common stock, as reported by the principal
stock exchange (including Nasdaq) on which the common stock is then
listed, during the 30-day period ending on the last trading day
immediately preceding the date of the distribution, tender or other
disposition.
9.5. Examples. Set forth in Exhibit "C" attached hereto are
examples of the manner in which Paragraphs 5.1, 5.2, 9.4.1 and 9.4.2 operate.
9.6. Monetization. Upon the request of Gold at any time or
from time to time (but in no event more often than three times in any
twelve-month period), the other Members shall use their reasonable good faith
efforts to monetize Gold's Economic Interest at the highest value then available
by any method that is not inconsistent with the interests of the other Members;
provided that Gold shall be under no obligation to accept such monetization
unless such value is deemed satisfactory to Gold in his sole discretion.
9.7. Effect of Dissolution. The dissolution of the Company
shall be effective on the day on which the event occurs giving rise to the
dissolution, but the Company shall not terminate until it has been wound up and
its assets have been distributed as provided in Paragraph 9.9 of this Agreement.
Notwithstanding the dissolution of the Company, prior to the termination of the
Company, the business of the Company and the affairs of the Members, as such,
shall continue to be governed by this Agreement.
- 19 -
<PAGE>
9.8. No Capital Contribution Upon Dissolution. Each Member
shall look solely to the assets of the Company for all distributions with
respect to the Company, its Capital Contribution thereto, its Capital Account,
and its share of Net Profits or Net Losses, and shall have no recourse therefor
(upon dissolution or otherwise) against any other Member. Accordingly, if any
Member has a deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which the liquidation occurs), then such Member shall have no
obligation to make any Capital Contribution with respect to such deficit, and
such deficit shall not be considered a debt owed to the Company or to any other
Person for any purpose whatsoever.
9.9. Liquidation. Upon dissolution of the Company, the
Managing Members shall, subject to Paragraph 9.10, liquidate the assets of the
Company, and after allocating (pursuant to Article 6) all income, gain, loss and
deductions resulting therefrom, shall apply and distribute the proceeds thereof
as follows:
9.9.1. First, to the payment of the obligations of
the Company (including without limitation any outstanding loans from
Members), to the expenses of liquidation, and to the setting up of any
Reserves for contingencies which the Managing Members may consider
necessary.
9.9.2. Thereafter, to the Members and Assignees in
accordance with their respective Economic Interests as provided in
Paragraph 9.4.
9.10. Expenses. The Members shall, in proportion to their
respective Voting Interests, reimburse the Company for obligations of the
Company owed, expenses incurred or Reserves established in connection with
liquidation of the Company. The amount of those obligations, expenses and
Reserves for which any Member is responsible will be deducted from that Member's
share of any distribution upon liquidation. If any Member's share of any
distribution upon liquidation is not sufficient to cover the obligations,
expenses and Reserves for which that Member is responsible, that Member shall
pay the shortfall to the Company.
ARTICLE 10.
MISCELLANEOUS
10.1. Amendments.
10.1.1. Each Additional Member and Substitute Member
shall become a signatory hereto by signing such number of counterpart
signature pages to this Agreement, and such other instruments, in such
manner, as the Managing Members shall determine. By so signing, each
Additional Member and Substitute Member, as the case may be, shall be
deemed to have adopted and to have agreed to be bound by all of the
provisions of this Agreement.
10.1.2. The Managing Members may amend this Agreement
at any time, except that any amendment that would adversely affect the
right of Non-Managing
- 20 -
<PAGE>
Members to receive distributions from the Company must be unanimously
approved by the Non-Managing Members.
10.1.3. In making any amendments, the Managing
Members shall prepare and file such documents and certificates as may
be required under the Act and under the laws of any other jurisdiction
applicable to the Company.
10.2. Accounting and Fiscal Year. Subject to Code Section 448,
the books of the Company shall be kept on such method of accounting for tax and
financial reporting purposes as may be determined by the Managing Members. The
fiscal year of the Company shall end on December 31 of each year, or on such
other date permitted under the Code as the Managing Members shall determine.
10.3. Meetings. At any time, and from time to time, either
Managing Member may, but shall not be required to, call meetings of the Members.
Written notice of any such meeting shall be given to all Members not less than
two (2) nor more than forty-five (45) days prior to the date of such meeting.
Each meeting of the Members shall be conducted by the Managing Members or any
designee thereof. Each Member may authorize any other Person (whether or not
such other Person is a Member) to act for it or on its behalf on all matters in
which the Member is entitled to participate. Each proxy must be signed by the
Member or such Member's attorney-in-fact. All other provisions governing, or
otherwise relating to, the holding of meetings of the Members, shall from time
to time be established in the sole discretion of the Managing Members.
10.4. Entire Agreement. This Agreement and the Purchase
Agreement constitute the entire agreement between the parties hereto pertaining
to the subject matter hereof and fully supersede any and all prior or
contemporaneous agreements or understandings between the parties hereto
pertaining to the subject matter hereof.
10.5. Further Assurances. Each of the parties hereto does
hereby covenant and agree on behalf of itself, its successors, and its assigns,
without further consideration, to prepare, execute, acknowledge, file, record,
publish, and deliver such other instruments, documents and statements, and to
take such other action as may be required by law or reasonably necessary to
effectively carry out the purposes of this Agreement.
10.6. Notices. Any notice, consent, payment, demand, or
communication required or permitted to be given by any provision of this
Agreement shall be in writing and shall be (a) delivered personally to the
Person or to an officer of the Person to whom the same is directed, or (b) sent
by facsimile or registered or certified mail, return receipt requested, postage
prepaid, addressed as follows: if to the Company, to the Company at the address
set forth in Paragraph 1.3 hereof, or to such other address as the Company may
from time to time specify by notice to the Members; if to a Member, to such
Member at the address set forth in Exhibit "A" or to such other address as such
Member may from time to time specify by notice to the Company. Any such notice
shall be deemed to be delivered, given and received for all purposes as of: (i)
the date so delivered, if delivered personally, (ii) upon receipt, if sent by
facsimile, or (iii) on the date of receipt or refusal indicated on the return
receipt, if sent by
- 21 -
<PAGE>
registered or certified mail, return receipt requested, postage and charges
prepaid and properly addressed.
10.7. Tax Matters.
10.7.1. Gold shall operate as "Tax Matters Partner"
(as defined in Code Section 6231), to oversee or handle matters
relating to the taxation of the Company; provided that at such time as
Gold shall no longer serve as a Managing Member, TCO shall replace Gold
as Tax Matters Partner.
10.7.2. The Tax Matters Partner may make all
elections for federal income and all other tax purposes (including,
without limitation, pursuant to Section 754 of the Code).
Notwithstanding the foregoing, the Tax Matters Partner shall promptly
provide notice to the other Members of any action which it intends to
take relating to the taxation of the Company or to any Member's
Interest in the Company (including, without limitation, with respect to
elections for federal income or any other tax purposes), and shall not
take any such action without the prior written consent of the Members
holding two-thirds or more of the aggregate Voting Interests (or, in
the case of any action which only relates to one or more Members'
Interest in the Company, the prior written consent of the Members
holding two-thirds or more of the aggregate Voting Interests held by
such Members). The Members shall cooperate in all reasonable respects
in connection with any audit, litigation or other proceeding with
respect to the taxation of the Company. Such cooperation shall include
promptly providing the other Members a copy of any correspondence or
notice from any tax authority with respect to the taxation of the
Company, signing any tax returns, claims or other documents necessary
to settle any tax controversy or refund claim for any tax period, and
the retention and (upon the Company's request) the provision of records
and information which are reasonably relevant to any such tax return
preparation and filing, audit, litigation or other proceeding. The
Members agree to retain all books and records with respect to tax
matters pertinent to the Company until the expiration of the applicable
statute of limitations of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing
authority.
10.7.3. Income tax returns of the Company shall be
prepared by such certified public accountant(s) as the Managing Members
shall retain at the expense of the Company.
10.8. Arbitration. Any unresolved dispute, controversy or
claim arising out of this Agreement or the performance, breach or termination
thereof shall be settled by final and binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The place
of arbitration shall be Denver, Colorado. The arbitration shall be conducted by
a neutral arbitrator selected by mutual agreement of the parties within fifteen
(15) days after any party delivers a written Demand for Arbitration to another
party. If the parties fail to agree within fifteen (15) days on the selection of
the arbitrator, an arbitrator shall be promptly appointed by the American
Arbitration Association from its Large, Complex Case Panel. Judgment upon the
award rendered may be entered in any court having jurisdiction.
- 22 -
<PAGE>
The arbitrator shall be entitled to award any appropriate remedy including, but
not limited to, monetary damages, specific performance, and all other forms of
legal and equitable relief; provided, however, that the arbitrator shall not be
entitled to award punitive damages and shall not reform, modify or materially
change this Agreement. Each party shall have the right to conduct the following
discovery: one-time service of up to twenty-five (25) document requests upon the
other party with receipt of all responsive documents within thirty (30) days;
exchange of witness lists identifying any witnesses the party intends to call at
the arbitration hearing and any other Persons with material information about
the dispute, including a brief description of each identified Person's
knowledge; the taking of depositions of any fact (non-expert) witnesses
(provided the total time for all of each party's depositions of fact witnesses
shall not exceed seven eight-hour days, including breaks); and the designation
of up to three expert witnesses per party, with the right to depose the opposing
party's experts (provided the total time for all of each party's depositions of
expert witnesses shall not exceed two eight-hour days, including breaks). As
part of the award, the arbitrator shall award to the prevailing party all costs
of arbitration including, but not limited to, reasonable attorneys' fees. All
information resulting from or otherwise pertaining to any dispute shall be
nonpublic and handled by the parties and their respective representatives and
agents in such a way as to prevent the public disclosure of such information.
10.9. Governing Law. This Agreement, including its existence,
validity, construction, and operating effect, and the rights of each of the
parties hereto, shall be governed by and construed in accordance with the laws
of the State of Delaware without regard to otherwise governing principles of
conflicts of law.
10.10. Construction. This Agreement shall be construed as if
all parties prepared this Agreement.
10.11. Captions - Pronouns. Any titles or captions contained
in this Agreement are for convenience only and shall not be deemed part of the
text of this Agreement. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular, or plural as appropriate.
10.12. Binding Effect. Except as otherwise expressly provided
herein, this Agreement shall be binding on and inure to the benefit of the
Members, their heirs, executors, administrators, successors, and all other
Persons hereafter holding, having, or receiving an interest in the Company,
whether as Assignees, Substitute Members, or otherwise.
10.13. Severability. In the event that any provision of this
Agreement as applied to any party or to any circumstance, shall be adjudged by a
court to be void, unenforceable, or inoperative as a matter of law, then the
same shall in no way affect any other provision in this Agreement, the
application of such provision in any other circumstance or with respect to any
other party, or the validity or enforceability of the Agreement as a whole.
Also, if part of any provision or clause shall be duly adjudged by any court or
panel to be void, unenforceable, or inoperative to any extent, the part or parts
not so adjudged shall be effective to the maximum possible extent.
- 23 -
<PAGE>
10.14. Counterparts. This Agreement may be executed in any
number of multiple counterparts, each of which shall be deemed to be an original
copy and all of which shall constitute one agreement, binding on all parties
hereto.
- 24 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
MEMBERS:
/s/ Michael E. Tennenbaum, Managing Member
------------------------------------------
Tennenbaum & Co., LLC
/s/ Mark K. Holdsworth
------------------------------------------
Mark K. Holdsworth
/s/ Howard K. Levkowitz
------------------------------------------
Howard K. Levkowitz
/s/ Matthew L. Gold
------------------------------------------
Matthew L. Gold
- 25 -
<PAGE>
EXHIBIT "A"
MEMBERS, CONTRIBUTIONS, AND
VOTING AND ECONOMIC INTERESTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1 2 3 4
Members Initial Voting Interest Economic Interest
Contribution
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tennenbaum & Co., LLC $0 50% 47.9%
11100 Santa Monica
Boulevard, Suite 210, Los
Angeles, CA 90025
- ----------------------------------------------------------------------------------------------------------
Mark K. Holdsworth $0 0% 9.1%
141 South Citrus Avenue
Los Angeles, CA 90036
- ----------------------------------------------------------------------------------------------------------
Howard M. Levkowitz $0 0% 6.0%
1918 Roxbury Drive
Los Angeles, CA 90035
- ----------------------------------------------------------------------------------------------------------
Matthew L. Gold 1,026,908 shares 50% 37%
P.O. Box 142 of PSI common
Granby, CO 80446 stock ("Shares").
Contribution credit
= $6,161,448.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT "B"
BUSINESS PLAN
[Omitted]
<PAGE>
EXHIBIT "C"
EXAMPLES OF DISTRIBUTION
PROVISIONS OF LLC AGREEMENT
I. Paragraph 5.1.2
A. No distributions previously made
Gold Distribution Amount = 0
Excess Distribution Amount = $10.00
First $10.00 of distributions paid to Gold, excess is split
37%to Gold/63% to TCO
B. Distribution of $2.00 per share made on 1/3/00 and all paid to
Gold as provided in Item A above
- Proposed distribution of $4.00 per share to be made
on 7/1/00
Gold Distribution Amount = $2.00 Excess Distribution
Amount = $8.00 (10 - 2)
All of proposed distribution paid to Gold
C. Distribution of $2.00 per share made on 1/3/00 and all paid to
Gold as provided in Item A above
Distribution of $4.00 per share made on 7/1/00 and all paid to
Gold as provided in Item B above
- Proposed distribution of $6.00 per share to be made
on 12/1/00
Gold Distribution Amount = $6.00 (2 + 4)
Excess Distribution Amount = $4.00 (10 - 6)
First $4.00 of distribution paid to Gold, excess is split
37%to Gold/63% to TCO
II. Paragraph 9.4
A. Distribution proposed 7/1/03
No prior distributions under Paragraph 5.1
Share Value = $20.00 per share Gold Distribution
Amount = 0 Excess Distribution Amount = $10.00 Assume
1,000,000 shares subject to Agreement
<PAGE>
Calculation:
Gold = 1,000,000 x $10.00 (EDA) + $3.70 (37% of 20 - 10)
--------------------
$20.00 = 685,000 or ($13,700,000)
Balance of 315,000 shares ($6,300,000) paid to TCO
B. Distribution proposed 7/1/03
Prior distribution of $5.00 per share under Paragraph 5.1
Share Value = $15.00 per share
Gold Distribution Amount = $5.00
Excess Distribution Amount (10 - 5) = $5.00
Assume 1,000,000 shares subject to Agreement
Calculation:
Gold = 1,000,000 x $5.00 (EDA) + $3.70 (37% of 15 - 5)
-------------------
$15.00 = 580,000 or ($8,700,000)
Gold has received $5,000,000 under Paragraph 5.1 and is
receiving another $8,700,000 in shares
Balance of 420,000 shares (worth $6,300,000) paid to TCO
The distribution provisions set forth in this Agreement (as illustrated above)
shall govern any and all distributions of the Shares and other assets under this
Agreement, irrespective of any tax allocation provisions under Article 6 or
otherwise which may be construed to apply.