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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 4, 2000
TBM HOLDINGS, INC.
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(Exact Name of Registrant as Specified in its Charter)
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Florida 0-18707 59-282441
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
136 Main Street, Westport, Connecticut 06880
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (203) 227-6140
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On February 4, 2000, the Agreement and Plan of Merger (the "Merger
Agreement") dated January 12, 2000, by and among TBM Holdings, Inc. (the
"Company"), TBM Acquisition I, Inc., a wholly owned subsidiary of the Company
(the "Merger Sub"), Long Reach Holdings, Inc. ("LRH") and certain shareholders
of LRH, was amended and restated in its entirety (the "Amended Merger
Agreement"). The Merger Agreement provides that the Merger Sub will acquire LRH
by means of a merger of LRH with and into the Merger Sub, with the Merger Sub
being the surviving corporation.
The Merger Agreement was amended and restated to amend the
consideration that will be paid to certain shareholders, warrant holders, option
holders and subordinated noteholders of LRH (the "Stakeholders"), to consist of
(i) LRH's transfer of certain real property located in Little Rock, Arkansas to
an affiliate of the shareholders at closing, (ii) the payment of $1,500,000 to
the Stakeholders, (iii) the assumption of existing Subordinated Notes with a
face amount of $3,000,000 and (iv) the issuance of 500,000 unregistered shares
of Common Stock of the Company, $.001 par value ("Common Stock") at $6.00 per
share. The option granted to the Stakeholders to purchase up to 500,000 shares
of Common Stock at $5.00 per share has been eliminated. In addition, the Amended
Merger Agreement provides that the Company will issue new Contingent
Subordinated Notes to the Stakeholders in an aggregate amount not to exceed
$2,000,000 in the event certain net sales targets are achieved in calendar year
2000. The Subordinated Notes and, if issued, the Contingent Notes, will be
guaranteed by the Company.
The Company has completed its due diligence investigation of LRH. The
Merger remains subject to the approval of LRH shareholders, the assumption or
refinancing of senior debt by dates specified in the Amended Merger Agreement,
as well as other customary closing conditions.
The above description of the Amended Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the Amended Merger Agreement, which is attached hereto as Exhibit
99.1 and is incorporated by reference.
This Current Report on Form 8-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, as amended. The forward-looking
statements contained herein involve risks and uncertainties, including those
relating to the possible inability to complete the merger transaction involving
the Merger Sub and LRH as scheduled, if at all, and those associated with the
ability of the combined company to achieve the anticipated benefits of the
Merger. Actual results and developments may differ materially from those
described or incorporated by reference in this Report. For more information
about the Company and risks arising when investing in the Company, investors are
directed to the Company's most recent reports on Form 10-KSB and most recent
reports on Form 10-QSB as filed with the Securities and Exchange Commission.
This Current Report on Form 8-K is qualified in its entirety by the
Amended Merger Agreement filed as Exhibit 99.1 and incorporated by reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) None.
(b) None.
(c) Exhibits.
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Exhibit No. Description
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99.1 Amended and Restated Agreement and Plan of Merger, dated
February 4, 2000, among TBM Holdings, Inc., TBM
Acquisition I, Inc., Long Reach Holdings, Inc. and certain
shareholders of Long Reach Holdings, Inc. Pursuant to Item
601(b)(2) of Regulation S-K, the Company agrees to furnish
supplementary copies of any omitted schedule to the
Securities and Exchange Commission upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TBM HOLDINGS, INC.
By: /s/ William A. Schwartz
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William A. Schwartz
President
Dated: February 14, 2000
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EXECUTION COPY
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
among
TBM HOLDINGS, INC.
a Florida corporation,
TBM ACQUISITION I, INC.
a Delaware corporation,
LONG REACH HOLDINGS, INC.
a Delaware corporation,
and
THE SHAREHOLDERS OF LONG REACH HOLDINGS, INC.
February 4, 2000
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1 THE MERGER............................................................................................1
1.1 The Merger..........................................................................................1
1.2 Effective Time......................................................................................1
1.3 Effect of Merger....................................................................................2
1.4 Certificate of Incorporation; Bylaws................................................................2
1.5 Directors and Officers..............................................................................2
1.6 Definitions.........................................................................................2
ARTICLE 2 MERGER CONSIDERATION; CONVERSION OF SHARES IN THE MERGER..............................................8
2.1 Terms of Merger.....................................................................................8
2.2 Payment of Merger Consideration....................................................................10
2.3 Closing............................................................................................11
2.4 Closing of Seller Transfer Books...................................................................12
2.5 Transfer Taxes.....................................................................................12
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER, THE MAJORITY STAKEHOLDERS AND THE SUBSIDIARY...........12
3.1 Organization; Powers; Approvals....................................................................12
3.2 Authorization of Transaction; Noncontravention.....................................................13
3.3 Capitalization; Shares.............................................................................13
3.4 Financial Statements...............................................................................14
3.5 Litigation.........................................................................................14
3.6 Tax Returns........................................................................................15
3.7 No Defaults........................................................................................16
3.8 Properties.........................................................................................16
3.9 Real Property......................................................................................16
3.10 Leases............................................................................................17
3.11 Governmental Approvals............................................................................17
3.12 Intellectual Property.............................................................................17
3.13 ERISA.............................................................................................19
3.14 Insurance.........................................................................................20
3.15 Labor Matters.....................................................................................20
3.16 Employment Arrangements...........................................................................21
3.17 Accounts Receivable...............................................................................21
3.18 Brokers' Compensation.............................................................................21
3.19 Contracts.........................................................................................21
3.20 Bank Accounts.....................................................................................23
3.21 No Material Misstatements.........................................................................23
3.22 Product Liability; Warranties.....................................................................23
3.23 Absence of Undisclosed Changes....................................................................23
3.24 Affiliate Transactions............................................................................24
3.25 Absence of Claims by Shareholders.................................................................24
3.26 Bankruptcy........................................................................................25
3.27 Other Agreements..................................................................................25
3.28 Information Technology; Year 2000 Compliance......................................................25
3.29 Environmental.....................................................................................25
3.30 Guaranties........................................................................................26
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.......................................................26
4.1 Ownership of Shares................................................................................26
4.2 Power and Authority................................................................................27
4.3 No Violation.......................................................................................27
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4.4 Litigation.........................................................................................27
4.5 Brokers' Compensation..............................................................................27
4.6 Affiliate Transactions.............................................................................27
4.7 Adequacy of Merger Consideration...................................................................27
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE COMPANY.........................................28
5.1 Organization, Standing and Power...................................................................28
5.2 Authority of the Company and the Parent; No Violation..............................................28
5.3 Brokers or Finders.................................................................................29
5.4 Capitalization of Company and Parent; Issuance of Parent Common Stock..............................29
5.5 Financial Statements...............................................................................29
5.7 No Material Misstatements..........................................................................30
5.8 Condition of the Business..........................................................................30
5.9 Ownership and Sufficiency of Purchased Assets......................................................30
5.10 Company...........................................................................................30
5.11 SEC Filings.......................................................................................30
5.12 No Employment Agreements or Material Contracts....................................................30
5.13 Officer, Director and Employee Claims.............................................................30
5.14 Options and Warrants..............................................................................31
5.15 Trading...........................................................................................31
5.16 Loan Obligations..................................................................................31
5.17 Compliance with Laws..............................................................................31
5.18 Material Information..............................................................................31
ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS..................................................................31
6.1 Access to Information..............................................................................31
6.2 Conduct of Business by the Seller..................................................................32
6.3 Regulatory Matters.................................................................................34
6.4 Further Assurances.................................................................................34
6.5 Transaction Proposals..............................................................................34
6.6 Notice of Certain Events...........................................................................35
6.7 Tax Covenants......................................................................................35
6.8 Financial Statements...............................................................................36
6.9 Parent Common Stock................................................................................36
6.10 Post-Closing Obligations of the Parent and the Company............................................36
ARTICLE 7 CONDITIONS...........................................................................................37
7.1 Conditions Precedent to Obligations of the Company and the Parent..................................37
7.2 Conditions Precedent to Obligations of the Seller and the Stakeholders.............................40
ARTICLE 8 TERMINATION..........................................................................................42
8.1 Termination........................................................................................42
8.2 Effect of Termination or Failure to Consummate Merger..............................................43
8.3 Expenses...........................................................................................43
8.4 Specific Performance...............................................................................43
ARTICLE 9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; OFFSETS.................................44
9.1 Survival of Representations, Warranties and Covenants..............................................44
9.2 Indemnification....................................................................................44
9.3 Procedure for Payment for Third-Party Claims.......................................................46
9.4 Non-Third Party Claims.............................................................................46
ARTICLE 10 GENERAL.............................................................................................47
10.1 Notices...........................................................................................47
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10.2 Extension; Waiver.................................................................................48
10.3 Choice of Law; Consent to Jurisdiction............................................................48
10.4 Amendment; Entire Agreement.......................................................................48
10.5 Counterparts; Headings............................................................................48
10.6 Publicity.........................................................................................49
10.7 Severability......................................................................................49
10.8 No Third Party Beneficiaries; Assignment..........................................................49
10.9 Confidentiality...................................................................................49
10.10 Tax Implications.................................................................................50
10.11 Interpretation...................................................................................51
10.12 Dispute Resolution...............................................................................51
10.13 Legal Fees.......................................................................................51
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Exhibits
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A Form of Subordinated Note
B Form of Guaranty
C Form of Employment Agreement of Michael Buchanan
D Form of Lease Agreement
E Terms of Escrow Agreement
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Schedules
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Seller Schedules
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1.5 Officers of Surviving Corporation
1.6 October 1999 Balance Sheet
2.2 Shareholders; Pro Rata Percentages; Merger Consideration Payable to each Shareholder
3.1 Directors and Officers of the Seller
3.2 Consents
3.3 Capitalization; Shares
3.4 Financial Statements
3.5 Litigation
3.6 Taxes
3.8 Properties
3.9 Real Property
3.10 Leases
3.11 Governmental Approvals
3.12 Intellectual Property
3.13 ERISA
3.14 Insurance
3.15 Labor Matters
3.16 Employment Arrangements
3.17 Accounts Receivable
3.19 Material Contracts
3.20 Bank Accounts
3.22 Product Liabilities; Warranties
3.23 Absence of Undisclosed Changes
3.24 Affiliate Transactions
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3.27 Other Agreements
3.28 Information Technology; Year 2000 Compliance
3.29 Environmental
6.2 Conduct of Business by the Seller
Shareholder Schedules
4.1 Voting Agreements
4.3 No Violation
4.6 Shareholder Affiliate Transactions
Company and Parent Schedules
5.6 Litigation
5.9 Parent's Assets
5.14 Options and Warrants
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement"), dated as of February 4, 2000, among TBM HOLDINGS, INC., a Florida
corporation (the "Parent"), TBM ACQUISITION I, INC., a Delaware corporation (the
"Company"), LONG REACH HOLDINGS, INC., a Delaware corporation (the "Seller"),
the Majority Stakeholders (as defined below) and the other shareholders of
Seller signatory hereto (collectively, the "Shareholders").
WHEREAS, the parties hereto entered into the Agreement and Plan of
Merger dated as of January 12, 2000 ("Original Merger Agreement");
WHEREAS, the Company has completed its due diligence review of
Seller and parties desire to amend and restate in its entirety the Original
Merger Agreement pursuant to the provisions of this Agreement;
WHEREAS, the Boards of Directors of the Parent, the Company and the
Seller deem it advisable and in the best interests of their respective
shareholders that Seller shall merge with and into the Company (the "Merger") in
accordance with the Delaware General Corporation Law ("DGCL"), as the result of
which the Company will be the surviving corporate entity, with the Merger to be
upon the terms and subject to the conditions set forth herein; and
WHEREAS, capitalized terms used herein shall have the meanings given
to them or referred to in Section 1.6 hereof.
NOW THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements contained herein, the
Parent, the Company, the Seller and the Shareholders agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. At the Effective Time and in accordance with
the terms and conditions of this Agreement, (i) the Seller shall be merged with
and into the Company and the separate corporate existence of the Seller shall
thereupon cease, (ii) the Company shall be the surviving corporation in the
Merger, and (iii) the Company shall continue its corporate existence under the
laws of the State of Delaware with all its rights, privileges, powers,
franchises, assets, liabilities and obligations unaffected by the Merger. The
Company after the Merger is sometimes referred to herein as the "Surviving
Corporation", and references to the Company after the Effective Time shall also
be deemed to be references to the Surviving Corporation.
1.2 EFFECTIVE TIME. As soon as practicable after
satisfaction or waiver of the conditions set forth in Article 7, the Company and
the Seller (collectively, the "Constituent Corporations") shall cause the Merger
to be consummated by the filing with the Secretary of State of Delaware of a
certificate of merger ("Certificate of Merger") in accordance with the DGCL. The
Merger shall become effective in accordance with the DGCL upon the filing of the
Certificate of Merger with the Secretary of State of Delaware (the "Effective
Time").
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1.3 EFFECT OF MERGER.
(a) At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the DGCL. Without limiting
the generality of the foregoing, at the Effective Time, all the property,
rights, privileges, powers and franchises of each of the Constituent
Corporations so merged shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Constituent Corporations shall become the debts,
liabilities and duties of the Surviving Corporation.
(b) As of the Effective Time, each share of the
Seller's capital stock that is issued and outstanding immediately prior to the
Effective Time (other than any dissenting shares under applicable state law)
shall, by virtue of the Merger and without any action on the part of the
Company, the Seller or the Shareholders, be canceled and extinguished and the
Senior Preferred Stakeholders (as hereinafter defined) may have the right to
receive the Contingent Subordinated Notes referred to in Section 2.1(a)(iv), as
provided in such Section 2.1(a)(iv) to the extent the conditions set forth
therein have been met.
(c) As of the Effective Time, all options, warrants,
rights convertible into capital stock, or similar rights to acquire capital
stock of the Seller shall be canceled and of no further force and effect.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS. At the Effective
Time, (a) the Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, and (b) the Bylaws of the Company
as in effect immediately prior to the Effective Time shall become the Bylaws of
the Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
1.5 DIRECTORS AND OFFICERS. The directors of the Parent
immediately prior to the Effective Time and the individuals identified on
Schedule 1.5 hereto to be officers of the Surviving Corporation, from and after
the Effective Time, shall be the directors and officers, respectively, of the
Surviving Corporation until their successors have been duly elected or appointed
in accordance with the Bylaws of the Surviving Corporation.
1.6 DEFINITIONS. In addition to capitalized terms otherwise
defined herein, as used in this Agreement, the following capitalized terms shall
have the meanings provided in this Section 1.6:
"Affiliate" shall mean, with respect to any Person, at the time in
question, any shareholder, officer or director of such Person, any Affiliate of
any shareholder, officer or director of such Person, or any other Person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with such Person. For purposes of the
preceding definition, "control" (including the terms "controlling", "controlled
by" and "under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of voting securities, by contract or
otherwise.
"Applicable Law" shall mean a statute, law, treaty, rule, code,
ordinance, regulation, permit, license, certificate, Governmental Approval,
order, judgment, decree, injunction, writ, or other binding
2
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determination or like action of any Governmental Authority, including all
Environmental, Health or Safety Requirements of Law, as in effect from time to
time.
"Applicable Target Closing Date" shall mean (i) February 15, 2000 if
Bank One, Texas, N.A. remains the senior lender immediately after the Closing or
(ii) March 1, 2000 otherwise, in each case as the same is extended pursuant to
Section 8.1(d).
"Assumed Amount", in relation to the Existing Subordinated Notes,
shall mean $3,000,000.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., any amendments
thereto, any successor statutes, and any regulations or guidance promulgated
thereunder.
"Certificate" means a stock certificate evidencing ownership of
shares of Common Stock and Preferred Stock of the Seller, immediately prior to
the Effective Time.
"Certificate of Merger" shall have the meaning set forth in
Section 1.2.
"Claim" shall mean any claim, pledge, contract, title, retention
agreement, right, option, lien, encumbrance, agreement, charge, tax, loss or
liability of every kind and nature.
"Claim Notice" shall have the meaning set forth in Section 9.3(a).
"Closing" or "Closing Date" means the date of satisfaction of all of
the conditions set forth in Article 7.
"Common Stock" means Common Stock, $0.0001 par value, of the Seller.
"Company" means TBM Acquisition I, Inc., a Delaware corporation.
"Constituent Corporations" shall have the meaning set forth in
Section 1.2.
"Contaminant" shall mean any waste, pollutant, hazardous or toxic
substance, hazardous or toxic waste, petroleum or petroleum derived substance or
waste, any radioactive material, including but not limited to, any source,
special nuclear or byproduct material as defined at 42 U.S.C. Section 2011 et
seq., as amended or hereafter amended, asbestos in friable condition,
polychlorinated biphenyls, or any constituent of any such substance or waste,
and includes but is not limited to these terms as defined in federal, state,
local or foreign laws or regulations (including, without limitation, under any
Environmental, Health or Safety Requirements of Law).
"Contingent Payment Date" shall mean a date that is no later than
twenty (20) business days after the first to occur of (i) the date the Senior
Preferred Stakeholders accept in writing the Company's calculation of Net Sales
as set forth in Section 2.1(a)(iv), (ii) the date that is thirty days after the
Company notifies the Senior Preferred Stakeholders of its calculation of Net
Sales in accordance with Section 2.1(a)(iv) if the Senior Preferred Stakeholders
fail to accept or reject in writing such calculation
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within such time period, or (iii) the final resolution of any dispute concerning
the calculation of Net Sales in accordance with Section 2.1(a)(iv).
"Contingent Subordinated Notes" shall mean the subordinated notes,
if any, issued pursuant to Section 2.1(a)(iv).
"Contracts" shall mean all contracts, agreements, guaranties,
indentures, bonds, options, leases, security agreements, easements, collective
bargaining agreements, licenses, contractual commitments or binding agreements
of any nature whatsoever, express or implied, written or unwritten, and all
amendments thereto, entered into or binding upon the Seller or to which the
property or assets of the Seller may be subject.
"Cut-Off Date" shall mean the earlier of the Closing Date and
Applicable Target Closing Date.
"DGCL" shall have the meaning set forth in Section 1.2.
"Due Diligence Investigations" shall mean reports, inspections,
audits, due diligence or other investigations conducted by the Parent, the
Company or the Seller or on each of their behalf in connection with the Merger
contemplated hereby.
"Effective Time" shall have the meaning set forth in Section 1.2.
"Environmental, Health or Safety Requirements of Law" shall mean any
Federal, state, local or foreign law, ordinance, rule, regulation, permit,
license, order, decree or other binding determination of any Governmental
Authority relating to, imposing liability or standards concerning, or otherwise
addressing the environment, human health and/or safety, including but not
limited to the Clean Air Act, the Clean Water Act, Resource Conservation
Recovery Act, CERCLA, any so-called "Superfund" or "Superlien" law, the River
and Harbor Act, Walter Pollution Control Act, Safe Drinking Water Act, Solid
Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide Act, the
Toxic Substances Control Act and the Occupational Safety and Health Act.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any (i) corporation which is a member
of the same controlled group of corporations (within the meaning of IRC Section
414(b)) as the Seller, (ii) partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of IRC Section
414(c)) with the Seller, or (iii) member of the same affiliated service group
(within the meaning of IRC Section 414(m)) as the Seller, any corporation
described in clause (i) above or any partnership or trade or business described
in clause (ii) above.
"Escrow Agent" means Hudson United Bank.
"Excluded Share" means any share of Common Stock or Preferred Stock
of Seller that immediately prior to the Closing Date is held by the Seller in
its treasury.
"Existing Subordinated Noteholders" means the holders of the
Existing Subordinated Notes.
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"Existing Subordinated Notes" means the Seller's existing
subordinated notes identified on Schedule 2.2 hereto, which, after the Closing,
shall have the terms described in Section 2.1(b) and be in the form set forth in
Exhibit A.
"Existing Subordinated Note Prepayment Amount" shall mean the
portion of the $1,500,000 cash payment referred to in Section 2.1(a)(i) which is
applied toward the prepayment in part of the Existing Subordinated Notes, as
contemplated by Section 2.1(a)(i).
"Expiration Date" shall have the meaning set forth in Section 9.1.
"Financial Statements" shall have the meaning set forth in
Section 3.4.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Governmental Approval" shall mean any material authorization,
certificate, consent, approval, waiver, exception, variance, franchise,
permission, permit, exception, filing, publication, declaration, notice,
license, right or other form of required permission from, of or with any
Governmental Authority.
"Governmental Authority" means any nation or government, any
federal, state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty" means the unconditional guaranty of the Existing
Subordinated Notes and, if issued, the Contingent Subordinated Notes by Parent
in favor of Golub Associates Incorporated, as agent (or any successor as such
agent) for the Subordinated Noteholders for the benefit of the Subordinated
Noteholders substantially in the form of Exhibit B attached hereto.
"Intellectual Property" shall mean any patent, copyright, trademark,
trade name, service mark, logo, Internet domain name or industrial design, any
registrations thereof and pending applications therefor (to the extent
applicable), any other intellectual property right (including, without
limitation, any invention, know-how, trade secret, formula, algorithm, process,
confidential or proprietary report or information, customer list or membership
list, any computer program, software, source code, object code, database or data
right, and any system, user, programmer, maintenance, installation or other form
of documentation or other material related thereto), any license or other
contract relating to any of the foregoing, and any goodwill associated with any
business owning, holding or using any of the foregoing.
"IRC" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder, and any
successor statutes or rules and regulations.
"IRS" means the Internal Revenue Service or any successor agency.
"Lien" shall mean any mortgage, pledge, deed of trust, assignment,
lien, charge, encumbrance, security interest of any kind, lease, conditional
sales contract, reversionary interest, right of first refusal, easement or other
adverse claim or right, or any agreement to grant or furnish any of the
foregoing.
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"Losses" means all actual claims, demands, liabilities, obligations,
losses, fines, costs, proceedings, suits, actions, causes of action, judgments,
awards, deficiencies, assessments, damages (whether or not resulting from third
party claims, governmental actions or otherwise), including, without limitation,
out-of-pocket expenses and reasonable attorneys' fees and expenses; provided,
however, that the amount of any Loss shall be limited to the excess of the
amount thereof over any recoveries from the insurance maintained or required to
be maintained in accordance with Section 6.10.
"Majority Stakeholders" means LEG Partners, L.P., LEG Partners II,
L.P. and LEG Partners SBIC, L.P., in their capacities as holders of a majority
in interest of the pre-Closing subordinated debt and common equity of the Seller
on a fully-diluted basis.
"Material Adverse Effect" means any condition, event, change, or
occurrence which is or would reasonably be expected to be materially adverse to
either (i) the business, operations, results of operations, condition (financial
or otherwise) or prospects of the Seller, the Company or the Parent, as
applicable, or (ii) the ability of the parties hereto to perform their
respective obligations hereunder or consummate the transactions contemplated
hereby.
"Material Contract" shall have the meaning given to such term in
Section 3.20.
"Merger" shall have the meaning set forth in the first "Whereas"
clause.
"Merger Consideration" shall have the meaning set forth in
Section 2.1(a).
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by the Company or an ERISA Affiliate.
"Net Sales" means the Company's net sales for the calendar year 2000
determined in accordance with GAAP.
"Net Worth" shall mean total assets minus total liabilities,
including all debt (and excluding from total liabilities all preferred stock)
determined in a manner consistent with the October 31, 1999 balance sheet
prepared by Seller and delivered to the Parent in which the Seller's net worth
was $4,342,000, which balance sheet is attached as Schedule 1.6.
"Parent" means TBM Holdings, Inc., a Florida corporation.
"Parent Common Stock" means shares of Common Stock, par value $.001,
of TBM Holdings, Inc. evidenced by stock certificate(s) bearing a restrictive
legend.
"Person" means any individual, corporation, association, limited
liability company, partnership, joint venture, trust, unincorporated
organization, Governmental Authority or other entity.
"Plan" shall have the meaning given in ERISA Section 3(3) (other
than a Multiemployer Plan) in respect of which the Seller or any ERISA Affiliate
is, or within the immediately preceding six (6) years was, an "employer" as
defined in Section 3(5) of ERISA.
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"Preferred Stock" means all series of Preferred Stock, $0.0001 par
value, of the Seller.
"Property" or "Properties" shall mean any real or personal property,
plant, building, facility, structure, underground storage tank, equipment or
unit, or other asset owned, leased or operated by the Seller.
"Real Property Agreements" shall have the meaning set forth in
Section 3.9.
"Reduction Matters" shall mean the following items which resulted in
an downward adjustment to the Merger Consideration from the Original Agreement
to this Agreement: (a) inadequate reserves for obsolete inventory, (b)
inadequate reserves for allowance for doubtful accounts to cover current bad
debt experience, (c) inadequate reserves for product warranty claims for current
warranty experience, (d) inadequate reserves for the O'Neal Steel purchase, (e)
lack of salary and vacation accrual, (f) inadequate reserves for medical claims
incurred but not received, (g) misstatement of inventory in an amount equal to
$91,000, and (h) inadequate accruals for real estate taxes.
"Release" shall have the same meaning as set forth in 42 U.S.C.
Section 9601(22).
"Response Action" shall have the same meaning as set forth in 42
U.S.C. Section 9601(25).
"Seller" means Long Reach Holdings, Inc., a Delaware corporation.
"Senior Debt" means the debt of the Seller owed to Bank One, Texas,
N.A. that is secured by all of the Seller's assets and any other debt of the
Seller that ranks pari passu with such Bank One debt.
"Senior Debt Rate" means the prevailing rate of interest on the
senior debt of the Company.
"Senior Preferred Stakeholders" shall mean (i) the holders of the
Seller's Series D Preferred Stock, and (ii) the holders of the Seller's B
Warrants, for such purpose treating such B Warrants as exchanged for Preferred
Warrants and treating such Preferred Warrants as exercised (on a cashless
exercise basis) for the Seller's Series E Preferred Stock, all as contemplated
by Section 9(b) of Omnibus Amendment No. 2 to Financing Documents dated as of
April 20, 1999 among the Seller and the holders of the Notes and Warrants
referred to therein.
"Shareholders" means the holders of record of capital stock of the
Seller either as of the date hereof or prior to or as of the Closing Date as set
forth on Schedule 2.2.
"Stakeholder" means (i) any Shareholder, warrant holder, option
holder, or any other equity holder of the Seller, and (ii) the Existing
Subordinated Noteholders.
"Stakeholder 2.2 Claims" shall have the meaning set forth in
Section 9.2(c).
"Stock Purchase and Reorganization Agreement" means that certain
Stock Purchase and Reorganization Agreement, dated June 15, 1999, by and among
the Parent (f/k/a Specialty Retail Group, Inc.), Seymour Zises, TBM Consulting
Group, Inc. and Colt Services, Inc.
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"Subordinated Notes" shall mean the Existing Subordinated Notes and
the Contingent Subordinated Notes.
"Subordinated Noteholders" means the holders from time to time of
the Subordinated Notes.
"Subsidiary" means Long Reach Brudi Pacific Pty Ltd., an Australian
corporation.
"Surviving Corporation" shall have the meaning set forth in
Section 1.1.
"Tax Return" shall mean any return, declaration, claim for refund,
information return, report or statement in relation to Taxes, including any
schedule or attachment thereto or amendment thereof.
"Taxes" shall mean any and all Federal, state, local or foreign
taxes, charges, fees, levies, other assessments in the nature of taxes, interest
or penalties, including, without limitation, those measured by or referred to as
income, gross receipts, excise, real or personal property, sales, withholding,
social security, occupation, use, service, service use, license, net worth,
payroll, franchise, ad valorem, profits, employment, severance, stamp, premium,
value added, windfall profits, customs duties or similar fees, transfer and
recordings taxes, fees and charges.
"Transaction Proposals" means any discussions or proposals however
obtained or delivered regarding any acquisition or purchase of a significant
portion of the assets of the Seller or assets of the Seller which reflect a line
of business, except for discrete assets, not reflecting a line of business, that
have a value in the aggregate of less than $100,000, or any equity or security
interest in, the Seller, or any tender or exchange offer, merger, consolidation,
reorganization, recapitalization, joint venture, liquidation, spin-off,
dissolution or similar transaction involving, directly or indirectly, the
Seller. Notwithstanding the foregoing, discussions the Seller or the Majority
Stakeholders may have with the Majority Stakeholders or any of their Affiliates
or other potential investors in Seller regarding any additional, extended or new
financing, shall not constitute a Transaction Proposal.
ARTICLE 2
MERGER CONSIDERATION;
CONVERSION OF SHARES IN THE MERGER
2.1 TERMS OF MERGER. Subject to the terms hereof:
(a) Ipso facto and without any action on the part of the
holder of any capital stock of the Seller, the Stakeholders in the aggregate
will receive the property set forth in clauses (i) through (iv) below
(hereinafter clauses (i) through (iv) referred to as the "Merger
Consideration"):
(i) At the Effective Time, One Million Five Hundred
Thousand Dollars ($1,500,000.00), which shall be delivered at the
Closing to the Existing Subordinated Noteholders or others as
provided in Schedule 2.2(a) by wire transfer of immediately
available funds to the domestic bank accounts designated by them in
writing at least three (3) business
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days prior to the Closing Date. To the extent paid to the Existing
Subordinated Noteholders, such payment shall be applied towards
prepayment in part of the Existing Subordinated Notes;
(ii) At the Effective Time, the Company shall assume
the Assumed Amount of the Existing Subordinated Notes, which notes
shall be modified as provided in Section 2.1(b);
(iii) At the Effective Time, the Existing Subordinated
Noteholders shall receive 500,000 shares of Parent Common Stock,
valued at $6.00 per share, in exchange for pre-Closing Existing
Subordinated Notes in the amount of Three Million Dollars
($3,000,000) and the Existing Subordinated Noteholders shall provide
to Parent such investment representations, subscription and related
documents as are reasonably required by Parent. Any such stock shall
enjoy the same rights accorded Parent Common Stock issued in the
June 15, 1999 private placement, including registration rights;
(iv) If the Net Sales of the Company are at least
$40,000,000, the Company shall deliver, on the Contingent Payment
Date, to the Senior Preferred Stakeholders and D.M. Buchanan, in
accordance with Schedule 2.2(b), Contingent Subordinated Notes in an
aggregate amount equal to $2,000,000. If the Net Sales of the
Company are more than $36,000,000 but less than $40,000,000, the
Company shall deliver, on the Contingent Payment Date, to the Senior
Preferred Stakeholders and D.M. Buchanan, in accordance with
Schedule 2.2(b), Contingent Subordinated Notes in an aggregate
amount determined by multiplying $2,000,000 by a fraction, the
numerator of which is the Net Sales of the Company minus 36,000,000
and the denominator of which is $4,000,000. If the Net Sales of the
Company are $36,000,000 or less, no Contingent Subordinated Notes
will be issued. Any Contingent Subordinated Notes issued hereunder
shall have the terms set forth in Section 2.1(b). The calculation of
Net Sales shall be made by the Company or the Company's auditors in
accordance with GAAP on a reasonably prompt basis. The Company shall
provide the Senior Preferred Stakeholders with a certificate showing
how these calculations were made, and shall provide Senior Preferred
Stakeholders with all supporting documentation. If the Senior
Preferred Stakeholders have any objection to the calculation, they
will deliver to the Company a detailed statement describing those
objections within thirty (30) days after receiving it. The Company
and the Senior Preferred Stakeholders will use reasonable efforts to
resolve any such objections themselves. If they do not resolve the
objections within thirty (30) days after receipt of the objections,
they will select an accounting firm mutually acceptable to them to
resolve any remaining objections. The decision of such accounting
firm will be set forth in writing and will be conclusive and binding
upon the parties. The Company will revise the calculations as
appropriate to reflect the resolution of any objections thereto
pursuant to this section. The cost of such accounting firm will be
borne by the Senior Preferred Stakeholders.
(v) Notwithstanding anything contained herein to the
contrary, in no event shall the Company issue consideration to the
Stakeholders that exceeds (A) One Million Five Hundred Thousand
Dollars ($1,500,000), plus (B) Existing Subordinated Notes with a
face amount of Three Million Dollars ($3,000,000), plus (C) 500,000
shares of Parent Common Stock valued at $6.00 a share, plus (D) to
the extent earned, the aggregate amount of the Contingent
Subordinated Notes.
(b) At the Closing, the Company shall assume the
Assumed Amount of the Existing Subordinated Notes, which notes shall be modified
as provided in the form attached hereto as Exhibit A. Any Contingent
Subordinated Notes issued shall also be in the form of Exhibit A. The Existing
Subordinated Notes, and if issued, the Contingent Subordinated Notes, shall
mature sixty (60) months
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following the Closing Date and be unconditionally guaranteed by Parent pursuant
to the Guaranty in the form attached hereto as Exhibit B. No interest shall
accrue on the Subordinated Notes through December 31, 2000. The interest rate on
the principal balance of the Subordinated Notes and, if issued, the Contingent
Subordinated Notes beginning on January 1, 2001 shall be 6% per annum for a
period continuing for 48 months after the Closing. Interest shall accrue and
will be added to principal on the Subordinated Notes and, if issued, the
Contingent Subordinate Notes for the period from January 1, 2001 through a
period ending 24 months after Closing. Beginning month 25, interest shall be
paid monthly on the Existing Subordinated Notes and, if issued, the Contingent
Subordinated Notes. In months 49 through maturity, the interest rate on the
Existing Subordinated Notes and the Contingent Subordinated Notes shall be
adjusted to a rate per annum equal to the Senior Debt Rate plus two percent.
Principal and all accrued and unpaid interest on the Subordinated Notes shall be
due in full sixty (60) months from Closing. In the event that at any time during
months 37 - 48 from Closing, the Company or Parent has the ability to refinance
all or a portion of the Subordinated Notes, without compromising its business
plan or objectives, the Company or Parent will, in its sole discretion exercised
in good faith, use reasonable efforts to do so. The provisions of Section 6.10
below shall be incorporated into the Existing Subordinated Notes and the
Contingent Subordinated Notes.
(c) Immediately prior to Closing, Company shall
amend or refinance Seller's existing Senior Bank Debt with Bank One.
(d) The Certificates shall, after the Effective
Time, represent only the right to receive from the Company the portion of the
Merger Consideration, if any, applicable to such shares as set forth on Schedule
2.2(b), subject to the terms hereof. Until presented and surrendered to the
Parent in accordance with the terms hereof, each Certificate shall be deemed for
all purposes to evidence ownership of the applicable portion of the Merger
Consideration for such shares. Except as otherwise provided for herein, no
interest shall accrue or be payable with respect to the Merger Consideration.
The Existing Subordinated Notes will be assumed and modified as provided herein,
and evidenced by replacement note certificates in the form set forth on Exhibit
A. The existing note certificates with respect to the pre-Closing Existing
Subordinated Notes must be surrendered to the Company.
(e) Each Excluded Share shall be canceled and
retired, and no securities shall be issuable and no cash paid with respect
thereto.
(f) Immediately following the Merger, Parent will be
the sole shareholder of the Surviving Corporation.
2.2 PAYMENT OF MERGER CONSIDERATION.
(a) The Company shall deliver, against the
delivery of the Certificate or Certificates and of the existing note certificate
representing the pre-Closing Existing Subordinated Notes:
(i) at the Closing, to the Existing
Subordinated Noteholders or others as provided in
Schedule 2.2(a), the cash portion of the Merger
Consideration to be paid pursuant to Section 2.1(a)(i);
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(ii) at the Closing, to each Existing
Subordinated Noteholder a replacement note certificate
for the Existing Subordinated Notes in an amount set
forth on Schedule 2.2(b);
(iii) at the Closing, to the Existing
Subordinated Noteholders, an aggregate of 500,000 shares
of Parent Common Stock in accordance with Section
2.1(iii); and
(iv) on the Contingent Payment Date, to each
Senior Preferred Stakeholder and D.M. Buchanan, a note
certificate for the Contingent Subordinated Notes, if
the conditions set forth in Section 2.1(iv) have been
met, in an amount set forth on Schedule 2.2(b).
The Company and the Parent may rely on Schedules 2.2(a) and (b) hereto with
respect to the number of shares held by each Shareholder, the amount of the cash
Merger Consideration to be paid to each Existing Subordinated Noteholder, and
the amount of each Subordinated Note and each Contingent Subordinated Note (if
issued) to be issued to each Existing Subordinated Noteholder, Senior Preferred
Stakeholder and D.M. Buchanan.
(b) If payment is to be made with respect to shares
of Common Stock or Preferred Stock of the Seller or with respect to a note held
by an Existing Subordinated Noteholder to a Person other than the registered
holder of the Certificate or note surrendered, it shall be a condition of such
payment that (i) the Certificate or note so surrendered shall be properly
endorsed or otherwise in proper form for transfer, and (ii) the Person
requesting such payment shall pay any transfer or other Taxes required by reason
of the payment to a Person other than the registered holder of the Certificate
or the note surrendered or establish to the reasonable satisfaction of the
Company that such Tax has been paid or is not applicable.
(c) In the event any Certificate representing Common
Stock or Preferred Stock of the Seller or any Subordinated Note shall have been
lost, stolen, or destroyed, the Company shall deliver in exchange for such lost,
stolen, or destroyed Certificate or note, upon the making of an affidavit of
that fact by the holder thereof, such payment as may be required pursuant
hereto; provided, however, that the Company may, in its discretion and as a
condition precedent to any such payment, require the owner of such lost, stolen,
or destroyed Certificate or note to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against the
Company, or any other party with respect to the Certificate or note alleged to
have been lost, stolen, or destroyed.
2.3 CLOSING. The closing of the Merger (the "Closing") shall
take place at the offices of Levett Rockwood P.C., 33 Riverside Avenue,
Westport, CT 06881 at 10:00 a.m. on the third business day following the date on
which the last to be fulfilled or waived of the conditions set forth in Article
7 hereof shall be fulfilled or waived in accordance with this Agreement or at
such other place and/or time and/or on such other date as the Seller and the
Company may agree.
2.4 CLOSING OF SELLER TRANSFER BOOKS. At the Effective Time,
the stock transfer books of the Seller shall be closed and no transfer of shares
of capital stock of the Seller shall thereafter be made. If, after the Effective
Time, certificates formerly representing shares of Common Stock or Preferred
Stock of the Seller are presented to the Company or the Parent, they shall be
canceled and, if subject to
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exchange, exchanged for the portion of the Merger Consideration, if any, into
which such shares are convertible, as set forth in Schedule 2.2.
2.5 TRANSFER TAXES. The Stakeholders shall bear and pay any
applicable sales, transfer, stamp, documentary and other similar Taxes that are
due or payable as a result of the transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER, THE MAJORITY
STAKEHOLDERS AND THE SUBSIDIARY
A Each of the Seller, the Majority Stakeholders and the
Subsidiary, jointly and severally, represents and warrants to and covenants and
agrees with the Company and the Parent that as of the date hereof and at all
times through the Closing Date:
3.1 ORGANIZATION; POWERS; APPROVALS.
(a) The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified as a foreign corporation and in good standing under the
laws of each other jurisdiction in which such qualification is required, except
where the failure to so qualify would not have a Material Adverse Effect.
(b) The Seller has the requisite corporate power and
authority to own, lease and operate its Property and to carry on its business as
it is presently being conducted. The Seller has heretofore made available to the
Company (i) a complete and correct copy of its Certificate of Incorporation and
ByLaws, each as amended to date, and (ii) the minute books of the Seller. The
Seller is not in violation of any provision of its Certificate of Incorporation
or ByLaws. All resolutions of the Seller were duly passed and all meetings of
the Seller were duly held and the stock certificate book and register are, and
will at the Closing Date be, complete and accurate.
(c) The Board of Directors of the Seller have, by
resolutions duly adopted by a vote at a meeting of the Board unanimously: (i)
approved the Merger and recommended that the Shareholders approve the Merger,
(ii) approved this Merger Agreement and the transactions contemplated hereby,
and (iii) determined that the Merger is in the best interests of the
Shareholders.
(d) Schedule 3.1 lists each director and officer
(including the title/position held) of the Seller.
3.2 AUTHORIZATION OF TRANSACTION; NONCONTRAVENTION.
(a) The Seller has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby to be
consummated by it. Except as set forth on Schedule 3.2, the execution and
delivery by the Seller of this Agreement, the performance by the Seller of its
obligations hereunder and the consummation by it of the transactions
contemplated hereby to be consummated by it have been or, prior
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to Closing, will be duly and validly authorized by all necessary corporate and
shareholder action on the part of the Seller. This Agreement has been duly
executed and delivered by the Seller and constitutes the legal, valid and
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms.
(b) Neither the execution and the delivery by the
Seller of this Agreement, the performance by it of its obligations hereunder,
nor the consummation by it of the transactions contemplated hereby will (i)
violate or conflict with any provision of the Certificate of Incorporation or
Bylaws of the Seller, (ii) violate or conflict with any law, rule, regulation or
any court or administrative order, judgment, decree, injunction or other binding
action or requirement of any Governmental Authority to or by which the Seller
(or any of its Property) is a party or is bound, (iii) require the approval of
or a filing or registration with any Governmental Authority (other than the
filing of the Certificate of Merger), (iv) except as set forth on Schedule 3.2,
whether after notice or lapse of time or both, violate, breach or conflict with
any provision of, result in the loss of a material benefit under, give the other
parties thereto any rights or benefits not otherwise applicable under, or permit
the termination or acceleration of any Material Contract, (v) except as set
forth on Schedule 3.2, require any authorization, consent or approval of,
exemption or other action by, or notice to, any party to any Material Contract,
or (vi) result in the creation or imposition of any Lien upon any Property of
the Seller.
3.3 CAPITALIZATION; SHARES.
(a) The authorized, issued and outstanding capital
stock of the Seller consists of the shares set forth on Schedule 3.3, which
shares are duly authorized, validly issued, fully paid and nonassessable and
free and clear of all Claims.
(b) Except as set forth in Section 3.3(a) above or
on Schedule 3.3, there are no shares of capital stock or other equity or voting
securities of the Seller issued, reserved for issuance or outstanding. Other
than as set forth on Schedule 3.3, there are no outstanding bonds, debentures,
notes or other indebtedness or other securities of the Seller having the right
to vote (or convertible into, or exchangeable or exercisable for, securities
having the right to vote) on any matters on which Shareholders may vote. Except
as set forth in Section 3.3(a) above or on Schedule 3.3, there are no
outstanding options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Seller is a party or by
which it is bound obligating the Seller to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock or other
securities of the Seller or obligating the Seller to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Except as set forth on Schedule 3.3,
there are no outstanding contractual obligations, commitments, understandings or
arrangements of the Seller to repurchase, redeem or otherwise acquire or make
payment in respect of any shares of capital stock of the Seller or to provide
funds to or make any investment (in the form of a loan, capital contribution or
otherwise) in any other entity. Except as set forth on Schedule 3.3, there are
no proxies with respect to the shares of capital stock of the Seller (other than
to vote in favor of the transactions contemplated by this Agreement) and there
are no agreements or understandings between or among any Persons which affect or
relate to the voting or giving of written consents with respect to any security
of the Seller. Except as set forth on Schedule 3.3, there are no agreements or
arrangements to which the Seller is a party pursuant to which the Seller is or
could be required to register shares of Common Stock or Preferred Stock of the
Seller or other securities under the Securities Act of 1933. Except as set forth
on
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Schedule 3.3, no outstanding shares of capital stock of the Seller are
subject to preemptive or similar rights.
(c) Schedule 2.2 contains a true, accurate, and
complete list of the names of the Stakeholders of record and, as applicable, (i)
the number and class of shares held of record by each Stakeholder as of the date
hereof and as of the Closing of Seller's capital stock as of the Closing, or
(ii) the principal amount of Existing Subordinated Notes and any accrued and
unpaid interest thereon and the pro rata percentage of Subordinated Notes held
by each Stakeholder. Each Stakeholder has good, marketable and indefeasible
title to all shares or notes as listed on Schedule 2.2. At the Effective Time,
the shares of Common Stock and Preferred Stock set forth on Schedule 2.2 and the
Existing Subordinated Notes shall be owned by the Stakeholders free and clear of
any Liens, encumbrances, security agreements, claims, equities, charges,
restrictions, voting agreements, proxies, options, rights of first refusal,
calls, contractual rights or other interests.
(d) Except as set forth on Schedule 3.3, the Seller
has no subsidiaries and does not own or hold or have the right to acquire any
equity interest in any Person, directly or indirectly.
3.4 FINANCIAL STATEMENTS. Copies of the consolidated
financial statements of the Seller as of June 30, 1997 and June 30, 1998, and
draft consolidated financial statements of June 30, 1999 audited by KPMG LLP,
certified public accountants, and the Seller's unaudited balance sheet and
statement of income for the interim period ending October 31, 1999
(collectively, the "Financial Statements"), duly certified by the President of
the Seller, have been furnished to the Company. Except as set forth on Schedule
3.4 or corresponding to items taken into account in the Reduction Matters, the
Financial Statements (a) have been prepared in good faith and in accordance with
past practices of Seller and generally accepted accounting principles, (b)
fairly present the financial condition of the Seller as of such dates and the
results of the operations of the Seller for the periods ended on such dates, and
(c) contain and reflect all necessary adjustments and accruals for a fair
presentation of the Seller's financial condition and the results of its
operations for the periods covered by the Financial Statements. Notwithstanding
anything to the contrary contained in this Agreement, nothing in this Agreement
shall be deemed to constitute a representation or prediction as to the future
performance of the Seller or its business.
3.5 LITIGATION.
(a) The operations of Seller comply and have
complied in all material respects with all Applicable Laws. There are no
actions, suits, proceedings, orders, decrees or judgments at law or in equity or
by or before any Governmental Authority or other agency now pending or, to the
knowledge of the Seller and the Majority Stakeholders, threatened against or
affecting the Seller or any Property or rights of the Seller which, if adversely
determined, could reasonably be expected to, individually or in the aggregate,
materially impair the right of the Seller to carry on business substantially as
now being conducted or as presently contemplated or would result in a Material
Adverse Effect. Neither the Seller nor any Property or asset of the Seller is
subject to any order, writ, judgment, injunction, decree, determination or award
which has had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Affect.
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<PAGE> 20
(b) Schedule 3.5 sets forth an accurate and complete
description of every pending or, to the knowledge of the Seller and the Majority
Stakeholders, threatened legal action, claim, suit, investigation, arbitration
and legal, administrative or other proceeding of any nature, domestic or
foreign, criminal or civil, at law or in equity, by or against or otherwise
affecting the Seller or its operations, Properties, financial condition or
prospects, which involves an amount in controversy in excess of $25,000 or which
could reasonably be anticipated to have a Material Adverse Effect.
3.6 TAX RETURNS. Except as set forth on Schedule 3.6,
(a) As of the Closing Date, the Seller has duly,
timely and accurately filed or caused to be duly, timely, and accurately filed
with the appropriate taxing jurisdictions, all Federal, state, local and foreign
Tax Returns required to be filed, has timely paid or caused to be timely paid
all Taxes as shown on such returns or on any assessment received by it to the
extent that such Taxes have become due. All Tax Returns were correct and
complete in all respects. The Seller is not the beneficiary of any extension of
time within which to file any Tax Return. The Seller has not waived any statute
of limitation in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or penalty.
(b) No audits or other administrative or court
proceedings are pending or proposed with respect to the Seller that relate to
Taxes. The Seller has never been a party to any audit, administrative or court
proceeding that relate to Taxes.
(c) No claim or assessment has been made by any
taxing authority for unpaid Taxes against the Seller. There are no Tax Liens
upon the assets of Seller, except for any Liens for personal property taxes not
yet due and payable.
(d) All Taxes due and payable by Seller on or before
the Closing Date, for which neither filing of Tax Returns nor notice of
deficiency or assessment is required, have been paid.
(e) The Seller is not a party to or bound by (nor
will it become a party to or bound by) any Tax indemnity, Tax sharing, or Tax
allocation agreement of any kind. There are not outstanding powers of attorney
executed on behalf of the Seller.
(f) The Seller has never been a member of an
affiliated group of corporations within the meaning of IRC Section 1504.
(g) The Seller has not filed a consent pursuant to
the collapsible corporation provisions of IRC Section 341(f) (or any
corresponding provision of state or local law) or agreed to have IRC Section
341(f)(2) (or any corresponding provisions of state or local law) apply to any
disposition of any asset owned by the Seller.
(h) The Seller has not agreed to make nor is it
required to make any adjustment under IRC Section 481(a) by reason of a change
in accounting method or otherwise.
(i) The Seller is not nor has ever been a United
States real property holding company within the meaning of IRC Section 897.
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(j) There is no contract, agreement, plan, or
arrangement covering any employee or former employee of the Seller that,
individually or collectively, would give rise to a payment that would not be
deductible by reason of IRC Section 280G.
(k) Adequate accruals for Taxes have been made on
the books of the Seller that will be reflected in the Seller's Financial
Statements.
(l) All Taxes required to be withheld by or on
behalf of the Seller or with respect to the business or assets thereof have been
withheld, and such withheld taxes have either been duly and timely paid to the
proper Governmental Authorities or set aside in accounts for such purpose or
accrued, reserved against and entered upon the books of the Seller.
Notwithstanding anything to the contrary contained
above, adjustments in claimed Net Operating Loss amounts that do not result in
an adverse cash impact on the Seller shall not constitute a breach of any
representation made in this Section 3.6.
3.7 NO DEFAULTS. The Seller is not in conflict with, or in
default or violation of, any law, rule, regulation, order, judgment, decree,
injunction or requirement of any Governmental Authority applicable to the Seller
or by which any Property or asset of the Seller is bound or affected.
3.8 PROPERTIES. Except as set forth on Schedule 3.8 or
Schedule 3.9, the Seller has good and marketable title to all of its Properties
(other than leased property) free and clear of all Liens. Except as set forth on
Schedule 3.8, the Seller has the right to use all material leased Property with
valid and enforceable lease agreements expiring not earlier than December 31,
2000.
3.9 REAL PROPERTY. Schedule 3.9 contains a description of
all real property which is used by the Seller, and a list of all material
contracts, agreements, concessions, leases, utilities, outside service
arrangements and commitments relating to or affecting such real property or any
interests therein used by the Seller, or to which the Seller contemplates
becoming a party or by which any real property used by the Seller is bound or
affected in any material respect, together with all amendments and supplements
thereto and modifications thereof (the "Real Property Agreements"). Seller has
delivered to Company true and complete copies of the Real Property Agreements.
All of the Real Property Agreements are legally valid and binding and in full
force and effect, and there are no defaults thereunder. The Seller does not
purport to have any fee interest, leasehold or other interest in real property
except as reflected on Schedule 3.9 hereto. Other than as set forth in Schedule
3.9, the Seller has good record and indefeasible title in fee simple to the real
property and improvements listed thereon, free and clear of all mortgages,
material liens, encumbrances, equities, claims and obligations to other persons,
of every kind and character. The buildings, plants, improvements and structures
located on the premises described in Schedule 3.9 and the present use of thereof
comply with all zoning laws, ordinances and regulations of governmental
authorities having jurisdiction thereof. The Seller has all easements, rights of
ingress and egress, utilities, and outside service arrangements necessary for
the conduct of the Business. None of the improvements located on the real
property described on Schedule 3.9 encroach on real property not owned by the
Seller nor are there any encroachments on the real property owned by the Seller.
Neither the whole nor any portion of any real property leased by the Seller or
occupied by and used by the Seller has been condemned, requisitioned or
otherwise taken or claimed by any public authority or private
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person, and there is no such condemnation, requisition or taking or claim
threatened. Notwithstanding anything to the contrary contained in this Section
3.9 or any other provision of this Agreement, this Section 3.9 does not cover
the Little Rock facility, provided such facility is transferred to Little Rock,
LLC prior to Closing.
3.10 LEASES. Schedule 3.10 sets forth a complete and accurate
list of each lease to which the Seller is a party (whether as lessor or lessee),
and includes the name of each current lessor and lessee, and the dates of such
lease and any amendment thereto. Except as set forth in Schedule 3.10, all
leases set forth in Schedule 3.10 are valid and binding, in full force and
effect and enforceable in accordance with their terms. There are no defaults or
arrearages by the Seller, or any default or arrearages by any other party to
such leases, in the performance required thereunder and no waiver or indulgence
has been granted by any of the lessors under such leases. None of the rights of
the Seller under any such leasehold or other interest in the property will be
impaired by the consummation of the transactions contemplated by this Agreement,
and all of such rights will be enforceable by the Company after the Closing
without the consent or agreement of any other party. The merger of Seller into
the Company, pursuant to this Agreement will not constitute a default under any
lease or require the consent of any other party, except as set forth in Schedule
3.10.
3.11 GOVERNMENTAL APPROVALS. The Seller has obtained all
Governmental Approvals necessary for it to own, lease or operate its Properties
and assets and to carry on its business as presently conducted, except where the
failure to obtain such Government Approvals would not result in a Material
Adverse Effect. All such Governmental Approvals are listed on Schedule 3.11. All
Governmental Approvals have been duly obtained and are in full force and effect.
There is no proceeding pending or, to the best knowledge of the Seller or the
Majority Stakeholders, threatened which seeks, or which may be expected, to
rescind, terminate, modify, condition, suspend or otherwise alter any
Governmental Approval. Neither this Agreement nor the transactions contemplated
hereby will cause or result in the rescission, termination, modification,
suspension or alteration of any Governmental Approval, nor will they require the
consent or approval of any Person with respect to any Governmental Approval,
except for the filing of the Certificate of Merger described in Section 1.2.
3.12 INTELLECTUAL PROPERTY.
(a) Schedule 3.12 sets forth a true, correct and
complete list of all patents, copyrights, trademarks, trade names, service
marks, logos and Internet domain names, any registrations thereof and pending
applications therefor which are either owned by the Seller or licensed by or to
the Seller and indicates, with respect to each item of Intellectual Property
listed thereon, the owner thereof and, if applicable, the name of the licensor
and licensee thereof and the date(s) of any licenses or other agreements or
Contracts with respect thereto. The consummation of the transactions
contemplated herein will not adversely affect the nature or usefulness to the
Seller of any material item of Intellectual Property.
(b) Except as set forth in Schedule 3.12:
(i) The Seller has full legal and beneficial
ownership (free and clear of any and all Liens) of, or a valid right
to use (free of any materially adverse restriction), all
Intellectual Property necessary for the conduct of its business, and
the Seller has not received any notice or
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claim (whether written, oral or otherwise) challenging the Seller's
ownership or rights in such Intellectual Property or suggesting that
any other Person has any claim of legal or beneficial ownership with
respect thereto or otherwise raising a dispute or disagreement with
respect to such Intellectual Property;
(ii) All Intellectual Property of the Seller is
legally valid and enforceable without any materially adverse
qualification, limitation or restriction on its use, and the Seller
has not, directly or indirectly or through any of its Affiliates,
received any notice or claim (whether written, oral or otherwise)
challenging the validity or enforceability of any such Intellectual
Property, including, without limitation, the validity or
enforceability of any license or other Contract with respect to such
Intellectual Property;
(iii) Neither the use of any of the Intellectual
Property owned by the Seller nor, to the best knowledge of the
Seller or the Majority Stakeholders, any other Intellectual Property
used or licensed by the Seller conflicts with, infringes upon,
violates or interferes with or constitutes an appropriation of any
right, title or interest held by any other Person, and there have
been no claims made or to the best knowledge of the Seller,
threatened with respect thereto;
(iv) To the best knowledge of the Seller or the
Majority Stakeholders, no other Person is infringing on any part of
the Intellectual Property listed on Schedule 3.12;
(v) The Seller has not done anything to diminish or
otherwise adversely affect the value or usefulness of any material
item of Intellectual Property, and the Seller has not copied or
reproduced and has not caused anyone to copy or reproduce
copyrighted material that would materially diminish the value
thereof or limit the ability of the Seller to enforce its rights
thereto; and
(vi) No individual employee or third party contractor
of, or consultant to, the Seller who has worked on any Intellectual
Property has any individual rights to such Intellectual Property and
each such employee, contractor or consultant has validly assigned
any and all ownership rights in any such Intellectual Property to
the Seller. The Seller has not disclosed any confidential
information in the possession of the Seller which would result in a
breach of an obligation of confidentiality to any third party.
(c) The Seller has not conducted the Seller's
business, and has not used or enforced (or failed to use or enforce) any
Intellectual Property, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the Intellectual Property listed
on Schedule 3.12, and the Seller has not taken or failed to take any action that
would result in the forfeiture or relinquishment of any Intellectual Property
used in the conduct of the Seller's business.
(d) The Seller has taken all reasonable steps to (A)
protect the Seller's rights to the Intellectual Property listed on Schedule 3.12
and the secrecy, confidentiality and value of its trade secrets, and (B) prevent
the unauthorized use thereof by, or the unauthorized disclosure thereof to, any
other Person. Except as set forth on Schedule 3.12, neither the Seller nor any
of its Affiliates has granted to any other Person any rights or permissions to
use any of the Intellectual Property listed on Schedule 3.12. With respect to
any part of the Intellectual Property which was created by the Seller, or any of
its
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agents or representatives other than as set forth on Schedule 3.12, (A) no third
party has any rights (whether non-exclusive or otherwise) in such Intellectual
Property, and, except pursuant to reasonably prudent safeguards, no third party
has received any confidential information relating to such Intellectual
Property, (B) the Seller is not under any contractual or other obligation to
disclose to any third party any such Intellectual Property, and (C) there are no
known significant defects therein and such Intellectual Property substantially
conforms to all documentation and materials produced by the Seller which
described such Intellectual Property.
3.13 ERISA. The Seller has complied and currently is in
compliance, both as to form and operation, with the applicable provisions of the
Employee Retirement Security Act of 1974, as amended ("ERISA"), the Internal
Revenue Code of 1986, as amended (the "Code") and all other applicable laws with
respect to each Employee Benefit Plan (and related trust, insurance contract, or
fund) or any material fringe benefit plan or program which is maintained or has
been established by the Company or to which the Seller contributes or is
required to contribute, in each case except as could not reasonably be
anticipated to result in a Material Adverse Effect. Schedule 3.13 lists all
material Welfare Plans and Pension Plans of the Seller currently in effect. All
documents, reports, descriptions and statements with respect to any Pension Plan
or Welfare Plan which are required to be filed with any government agency within
the past five (5) years have been timely filed in each case except as could not
reasonably be anticipated to result in a Material Adverse Effect and correct and
complete copies have been, or will be delivered to the Company prior to Closing.
Each Pension Plan and related trust are qualified within the meaning of Sections
401(a) and 501(a) of the Code, respectively. With respect to each Pension Plan,
a favorable determination letter as to qualification under Section 401(a) of the
Code has been obtained by the Seller and copies thereof have been or will be,
forwarded to the Company prior to Closing. With respect to any Pension Plan or
any Welfare Plan, neither the Seller nor any fiduciary of any such plan (as
described in Section 21(A) of ERISA) has been engaged in any transaction in
violation of Section 404 of ERISA, Section 406 of ERISA (for which no exemption
exists under Section 408 of ERISA), or Section 4975(c)(1) of the Code (for which
no exemption exists under Section 4975(c)(2) or (d) of the Code) which would
subject the Seller or any such fiduciary to any tax, penalty or liability under
Section 4098 of ERISA or Section 4975 of the Code, to the extent the same could
reasonably be anticipated to result in a Material Adverse Effect. Except as set
forth on Schedule 3.13, the Seller has timely made all contributions required
under the terms of any Pension Plan, any Welfare Plan and any related agreement
to the extent failure to do so could reasonably be anticipated to result in a
Material Adverse Effect. The fair market value of the assets held to fund any
Pension Plan which is a defined benefit plan as defined in Section 3(35) of
ERISA as of June 30, 1999, exceeds the actuarial present value of all accrued
benefits (both vested and non-vested) under such Pension Plan as of June 30,
1999, and such valuation has been determined in accordance with the Pension
Benefit Guaranty Corporation ("PBGC") methods, factors and assumptions
applicable thereto. No Pension Plan has an accumulated funding deficiency as
defined in Section 302 of ERISA or Section 412 of the Code, whether or not
waived and each Pension Plan has been funded in accordance with the minimum
funding standards of ERISA and the Code. The Seller has paid all premiums (and
interest charges and penalties for late payment, if applicable) due PBGC with
respect to each Pension Plan subject to Title IV of ERISA. To the knowledge of
the Majority Stakeholders, a Reportable Event referred to in Section 4043(b) of
ERISA has not occurred with respect to any Pension Plan subject to Title IV of
ERISA. The Seller has taken, and to the knowledge of the Majority Stakeholders,
the Seller has taken, no action and has not made any filing with the PBGC or the
Internal Revenue Service to terminate any Pension Plan. Neither the Seller nor
the Majority Stakeholders has knowledge of any event or condition referred to in
Section 4042(a) or 4043 of ERISA
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which presents a material risk of termination of any Pension Plan by the PBGC.
To the knowledge of the Majority Stakeholders, no proceeding or other action has
been initiated (or threatened) by the PBGC to terminate any Pension Plan, and no
written notice has been given to the Seller of an intention to commence or seek
commencement of any such proceeding or action. Except as set forth on Schedule
3.13, the Seller does not, and to the knowledge of the Majority Stakeholders,
the Seller does not maintain or contribute or has ever maintained or contributed
to any Welfare Plan for current or future retired or terminated employees, their
spouses or dependents (other than in accordance with Code Section 4980B). For
purposes of this Section, Employee Benefit Plan means any qualified or
non-qualified employee welfare benefit plan (as defined in Section 3(1) of ERISA
("Welfare Plan")) and each employee pension benefit plan (as defined in Section
3(2) of ERISA ("Pension Plan")).
3.14 INSURANCE. Schedule 3.14 contains a true and complete
list of all insurance policies and binders to which the Seller is a party or by
which any of its material Property or assets are covered, specifying the
insurer, the policy number or covering note number with respect to binders, the
policy period and describing each pending claim thereunder. All of such
insurance is in full force and effect. The insurance coverage maintained by the
Seller is in such amounts, types, and forms as are, in the opinion of management
of the Seller, appropriate for the Seller's business, operations, properties and
assets. There are no outstanding unpaid claims under any insurance policy or
binder set forth in Schedule 3.14. The Seller has made all premium payments
required to be paid with respect to such policies and the Seller has not
received a notice of cancellation or non-renewal of any such policy or binder.
3.15 LABOR MATTERS. The Seller is not a party to or subject
to any collective bargaining agreement, and there are no strikes or other labor
disputes against the Seller pending or, to the best of the Seller's or the
Majority Stakeholders' knowledge, threatened. The Seller has complied in all
material respects with all Applicable Laws relating to the employment of labor,
including those related to wages, hours, collective bargaining, occupational
safety, and the payment of social security and other payroll related Taxes, and
the Seller has not received any notice alleging a failure to comply in any
material respect with any such laws, rules, regulations decrees, orders,
judgments, injunctions and requirements. Except as set forth in Schedule 3.15
and except (with respect to employees of the Seller at the time of Closing) for
matters which are customary for a business of comparable size within the
manufacturing industry and which could not reasonably be anticipated to result
in a Material Adverse Effect, no material controversies, disputes or proceedings
are pending or, to the best knowledge of the Seller or the Majority
Stakeholders, threatened against the Seller with respect to its employees. As of
the date hereof, to the best knowledge of the Seller or the Majority
Stakeholders, there are no activities or proceedings of any labor union to
organize non-unionized employees.
3.16 EMPLOYMENT ARRANGEMENTS. Except as set forth in Schedule
3.16 and except (with respect to employees of the Seller at the time of Closing)
for arrangements which are customary for a business of comparable size within
the manufacturing industry and which could not reasonably be anticipated to
result in a Material Adverse Effect, the Seller has no obligation, contingent or
otherwise, under any employment agreement, collective bargaining or other labor
agreement, any agreement containing severance or termination pay arrangements,
deferred compensation agreement, retainer or consulting arrangements, bonus or
profit-sharing plan, stock option or purchase plan or other employee contract or
non-terminable (whether with or without penalty) arrangements, group life,
health, medical, hospitalization or other insurance plan or program or other
employee or fringe benefit plan, including vacation, sick leave or disability
plans or programs. The Seller has maintained substantially full and
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complete records regarding its employees, their compensation benefits, length of
service and performance, all of which are located at the Seller's principal
headquarters or at its facility in Little Rock, Arkansas, or the Subsidiary's
facility in Australia. Neither the Seller nor any of the employees of the
Seller, are at any time during the past five years have been subject to,
involved in or threatened with any union elections, petitions therefor or other
organizational activities other than those set forth in Schedule 3.16.
3.17 ACCOUNTS RECEIVABLE. Except as set forth in Schedule
3.17, all accounts receivable that are reflected on the Financial Statements (i)
represent valid obligations arising from sales actually made or services
actually performed, and (ii) either have been or will be collected in full,
without material set off, except for those (x) which are adequately reserved for
in the Financial Statements or (y) which are taken into account in the Reduction
Matters, or (z) which, to the extent not adequately reserved for in the
Financial Statements or taken into account in the Reduction Matters, if not
collected would not have a Material Adverse Effect.
3.18 BROKERS' COMPENSATION. The Seller is not a party to any
agreement nor has any obligation to any broker, finder or investment banker
relating to the transactions contemplated hereby.
3.19 CONTRACTS.
(a) Schedule 3.19 lists all of the following
agreements of Seller or relating to Seller's business or Property:
(i) any Contract permitting a person to borrow money
or for the deferred purchase price of property, letter of credit,
pledge or security agreement, lease, guarantee or subordination
agreement or other similar or related type of Contract as to which
the Seller is a debtor, pledgor, lessee, lender or obligor;
(ii) any Contract dealing with advertising,
distributorship, licensing, consulting, dealership, work-for-hire,
representative or agency relationships;
(iii) any Contract pursuant to which any Person is or
will become pursuant to the terms thereof entitled to any benefit or
right (including, without limitation, a right to notice, termination
or acceleration) upon a change in control of the Seller or the sale
of capital stock of the Seller or any of its Properties or assets;
(iv) any Contract (A) for the sale of Seller's assets
outside of the ordinary course of business, or (B) for the grant of
any preferential right to purchase any of its assets, Properties, or
rights;
(v) any Contract having a value or potential
liability to the Seller in excess of $25,000 which obligates the
Seller for a period in excess of one year, to purchase, sell, or
provide services, materials, supplies, merchandise, facilities or
equipment and which is not terminable without penalty by the Seller
on not more than 30 days' notice without penalty or cost;
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(vi) any Contract for a capital expenditure;
(vii) any Contract for the employment of any officer,
consultant or employee, including, without limitation, any employee
manual or policy (whether oral or written) or any Contract, program
or policy (whether oral or written) providing for severance or
similar benefits, bonuses, profit-sharing payments, post-retirement
benefits or other compensation of any nature;
(viii) any lease, rental or occupancy agreement,
license, installment or conditional sale agreement, or other
Contract affecting the ownership of, leasing of, title to, use of,
or any leasehold or other interest in, any Property;
(ix) any joint venture, partnership, or other
Contract (however named) involving a sharing of profits, losses and
costs of liabilities by the Seller with any other Person;
(x) any Contract containing covenants that purport
to restrict the business activity of the Seller or limit its freedom
to engage in any line of business or compete with any Person or
which restricts the Seller from granting Liens on its Properties or
assets;
(xi) any power of attorney granted by the Seller that
is currently effective; and
(xii) any other Contract not otherwise set forth on
the Schedules hereto which involves an amount or has a value in
excess of $25,000.
The documents identified in Schedule 3.19 are collectively referred to herein as
the "Material Contracts," and individually as a "Material Contract." Each
Material Contract is in full force and effect and is a valid and binding
obligation of the Seller and, to the best knowledge of the Seller and the
Majority Stakeholders, the other parties thereto, and is enforceable in
accordance with its terms. No event or condition has occurred which (whether
with or without notice or lapse of time or both) would constitute a material
default in any of the terms of any Material Contract by the Seller or, to the
best knowledge of the Seller and the Majority Stakeholders, by any third party
thereto. The Seller and the Majority Stakeholders do not have knowledge of any
anticipated breach of any Material Contract.
(b) True and correct copies of all documents listed
on Schedule 3.19 will be made available to the Company prior to the Closing
Date. Except as set forth in Schedule 3.19, to the best knowledge of the Seller
and the Majority Stakeholders, no party to any Material Contract has any
intention to: (a) terminate such Material Contract or materially amend the terms
thereof, (b) refuse to renew such Material Contract upon expiration thereof if
renewable, or (c) renew such Material Contract upon expiration thereof on terms
and conditions which are materially more onerous to the Seller than those
currently set forth therein. Except as set forth on Schedule 3.19, there are not
now, nor have there been in the twelve-month period prior to the date hereof,
any disagreements or disputes which relate to the validity or interpretation of
or performance under any Material Contract.
3.20 BANK ACCOUNTS. Schedule 3.20 contains a true and
complete list, as of the date hereof, of all bank accounts, investment accounts
and safe deposit boxes existing in the name of the Seller, showing the name of
each bank or financial institution in which the Seller has such an account or
safe
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deposit box, the names of all persons authorized to draw thereon or to have
access thereto and the account number of each such account or safe deposit box.
3.21 NO MATERIAL MISSTATEMENTS. No representation contained
herein contains any material misstatement of fact or omits to state any material
fact necessary to make the statements therein not materially misleading.
3.22 PRODUCT LIABILITY; WARRANTIES.
(a) Except as disclosed in Schedule 3.22, (i) there
is no claim now pending or, to the best knowledge of the Seller and the Majority
Stakeholders, threatened against Seller or by or before any Governmental
Authority alleging any defect in any services provided by the Seller, or any
product manufactured, shipped, sold or delivered by the Seller or alleging, with
respect thereto, any failure of the Seller to warn or any breach by the Seller
of any express warranties or representations with respect thereto; (ii) there
has not been any product recall, post-sale warning, rebate offer, or similar
action conducted with respect to any product manufactured, shipped, sold or
delivered by the Seller, or any investigation by any Governmental Authority
concerning any such action; and (iii) during the last three years, there have
been no material defects in, failures to warn, or material breaches by the
Seller of express warranties or representations with respect to, any services
provided or product manufactured, shipped, sold or delivered by the Seller.
(b) Except as described in Schedule 3.22, there are
no pending or, to the best knowledge of the Seller and the Majority
Stakeholders, threatened, claims under or pursuant to any warranty, whether
express or implied, on services provided or products or services sold prior to
the date of this Agreement by the Seller.
(c) Notwithstanding anything to the contrary
contained above, the representations and warranties made in this Section 3.22
shall be deemed breached only to the extent that such breach involves a matter
which is not consistent with the Seller's experience over the past three years,
after taking into account the Reduction Matters, which would have a Material
Adverse Effect.
3.23 ABSENCE OF UNDISCLOSED CHANGES. Since June 30,
1999, other than as set forth on Schedule 3.23, there has not been (a) any
damage, destruction or loss (whether or not covered by insurance) with respect
to any Property or asset of the Seller, or (b) any entry by the Seller into any
commitment or transaction material to the Seller other than in the ordinary
course of business. In addition, since June 30, 1999, other than as set forth on
Schedule 3.23, and other than the transactions contemplated by this Agreement,
(i) the Seller has not incurred any liabilities except liabilities incurred in
the ordinary course of business consistent with past practices, (ii) the Seller
has used commercially reasonably efforts to conduct its businesses only in the
ordinary course of business consistent with past practices, (iii) there has not
been (a) any change by the Seller in its accounting methods, principles and
practices, (b) any reevaluation by the Seller of any assets (other than
write-offs of accounts receivable), (c) any declaration, setting aside or
payment of any dividend or distribution in respect of any capital stock of the
Seller or any redemption, purchase or other acquisition of any of its
securities, (d) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee
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benefit plan, or any other increase in the rate of compensation payable or to
become payable to any officer or key employee of the Seller, (e) any amendment
to its Certificate of Incorporation or Bylaws or any issuance, sale, grant,
pledge, purchase, redemption, or encumbrance, or split, combination or
reclassification, or agreement or commitment to issue, sell, grant, pledge,
purchase, redeem, or otherwise encumber, or split, combine or reclassify, any
shares of its capital stock; or any grant, issuance, creation, sale, pledge,
purchase, redemption or otherwise any encumbrance or agreement to grant, issue,
sell, pledge, purchase, redeem, or otherwise encumber any options, warrants or
rights to purchase shares of its capital stock or securities of any kind
convertible into or exchangeable for shares of its capital stock, or
declaration, set aside, payment of any dividend or other distribution in respect
of its capital stock, (f) any distributions or payments of any kind (other than
as provided in Section 7.1(j)), to the Stakeholders, Affiliates, or any related
parties except for the payment of salaries to management employees who are also
Shareholders at the current monthly rate and the quarterly payment of $10,000 of
the annual monitoring fee to Golub Associates, Incorporated plus the reasonable
out of pocket expenses of such management employees and Golub Associates
Incorporated and Affiliates approved and substantiated by the Seller in
accordance with past practices, (g) the creation or incurrence of any Lien, or
failure to take action to discharge any involuntary Lien, against or in respect
of any Property, (h) any instituting, settlement or agreement to settle any
claim, action or proceeding involving an expenditure in excess of $25,000 before
any court or other Governmental Authority, or (i) any default in any material
respect under any Material Contract in excess of $25,000.
3.24 AFFILIATE TRANSACTIONS. Except as set forth on Schedule
3.24, there are no agreements or proposed agreements (oral or written) between
the Seller or any Stakeholder or any officer, director or employee of the Seller
or any family member of any of the foregoing, on the one hand, and any Affiliate
of Seller, on the other hand. All agreements set forth on Schedule 3.24 have
been fully performed in accordance with their terms and will terminate or will
be terminated on or prior to Closing.
3.25 ABSENCE OF CLAIMS BY SHAREHOLDERS. Other than their
rights as holders of Common Stock or Preferred Stock of the Seller, as the case
may be, under the Seller's Certificate of Incorporation, none of the
Shareholders, any prior shareholder or holder of any equity interest in the
Seller, nor any person claiming by or through them, has any claim or cause of
action, in their status as such, against the Seller, whether such claim or cause
of action is known or unknown, contingent or absolute, now or hereafter
accruing, which arises out of or is related to any act, omission, occurrence,
condition or event of or by the Seller or its Affiliates, their officers,
directors, agents, employees, predecessors or assigns which occurred prior to
Closing. The allocations of the Merger Consideration set forth on Schedule 2.2
to each Stakeholder constitute true and correct allocations of fair value to
each such Stakeholder, and upon receipt thereof, shall represent full and
complete satisfaction of any all Claims which such Stakeholder had, has or may
have against the Seller arising at any time prior to, as of or on account of the
Closing.
3.26 BANKRUPTCY. No bankruptcy, insolvency, reorganization,
arrangement or similar action involving Seller, whether voluntary or
involuntary, is pending or threatened, and Seller has no intention of filing any
such action or proceeding.
3.27 OTHER AGREEMENTS. Except as set forth on Schedule 3.27,
other than this Agreement, neither the Seller nor, to the Seller's and the
Majority Stakeholders' knowledge, any Shareholder has
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entered into any agreement whereby any Person has any rights to acquire any
Property of Seller or any shares of Common or Preferred Stock from the
Shareholders.
3.28 INFORMATION TECHNOLOGY; YEAR 2000 COMPLIANCE. Except as
set forth on Schedule 3.28,(a) the Seller's information technology systems are
in good operation, condition and repair, capable of performing the functions for
which such systems are currently and normally used by the Seller and all
required maintenance has been consistently performed with such systems, and (b)
the Seller has (i) conducted a review and assessment of all areas material to
its business and operations that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by the Seller may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to, on and after December 31, 1999); and (ii) implemented a
plan and timeline for addressing the Year 2000 Problem on a timely basis. Based
on the foregoing, all computer applications used by the Seller, or to the best
knowledge of the Seller and the Majority Stakeholders, any of the suppliers,
vendors and customers of the Seller that are material to its business or
operations, are able to perform properly date-sensitive functions for all dates
before, on and after January 1, 2000.
3.29 ENVIRONMENTAL. The Seller has all permits, licenses and
other authorizations which are or will be required in respect of the Seller
under all Federal, state and local laws, rules, regulations, ordinances,
programs, permits, guidances, orders and consent decrees relating to health,
safety and environmental matters, including but not limited to the
Environmental, Health or Safety Requirements of Law. The Seller is, and has been
in compliance in all material respects with the terms and conditions of all such
required permits, licenses and authorizations, and all other limitations,
restrictions, conditions, standards, prohibition, requirements, obligations,
schedules and timetables contained in the Environmental, Health or Safety
Requirements of Law. There is no pending civil or criminal litigation, notice of
violation or administrative proceeding relating in any way to the Environmental,
Health or Safety Requirements of Law (including without limitation, notices,
demand letters or claims under any Environmental, Health, or Safety Requirements
of Law) with respect to the Seller. Seller does not suspect or believe that any
civil or criminal litigation, notice of violation or administrative action
relating in any way to the Environmental, Health or Safety Requirements of Law
with respect to the Seller is threatened. There have not been and there are not
any past or present events, conditions, circumstances, activities, practices,
incidents or actions which could reasonably be expected to interfere with or
prevent continued compliance with any Environmental, Health or Safety
Requirements of Law as in effect on the date hereof by the Seller or which may
give rise to any legal liability, or otherwise form the basis of any claim,
action, suit, proceeding, hearing or investigation against or involving the
Seller based on any violation or alleged violation of any Environmental, Health
or Safety Requirements of Law. Schedule 3.29 contains a summary of all past and
current practices, contracts and agreements of the Seller for the disposal of
all materials and wastes generated by the Seller and all of such wastes and
materials have been disposed of in accordance with such practices, contracts and
agreements during the past five (5) years, or with respect to property owned by
the Seller for a period of time less than five (5) years, such shorter period as
the property has been owned. There has been no disposal by the Seller, directly
or indirectly, of any materials or wastes to, on or in any site currently listed
or formally proposed to be listed on the National Priorities List under
Superfund or any site listed or formally proposed to be listed as a major or
priority cleanup site under any comparable state law. Schedule 3.29 lists (i)
all environmental reports or assessments which have been performed on behalf of
the Seller, or to the Seller's and the Majority Stakeholders' knowledge, on
behalf of others, with respect to the real property
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which is subject to the Lease Agreement, and the Seller has provided complete
copies thereof to Company, and (ii) the actions taken by the Seller in response
to the recommendations contained therein.
3.30 GUARANTIES. The Seller is not a guarantor or otherwise
liable for any liability or obligation (including indebtedness) of any other
Person.
B. The Subsidiary represents and warrants to and covenants
and agrees with the Company and the Parent to each and every representation and
warranty set forth above in Sections 3.1 through 3.30, as of the date hereof and
at all time through the Closing Date with respect to the Subsidiary operations
as if the Subsidiary was the Seller; provided, however, except to the extent a
specific reference in a representation or warranty is inapplicable to the
Subsidiary because it deals with a specific reference to United States laws or
regulations.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDERS
Each Shareholder represents and warrants to and covenants and agrees
with the Company and the Parent as to himself, herself or itself only (and not
for any other Shareholder) that as of the date hereof and at all times through
the Closing Date:
4.1 OWNERSHIP OF SHARES. As of the date hereof, and except
as set forth on Schedule 4.1, the Shareholder is the record owner of the shares
of Common Stock and Preferred Stock of Seller owned by such Shareholder as set
forth in Schedule 2.2, and as of the Closing will be the record owner of shares
of Common Stock owned by such Shareholder as set forth on Schedule 2.2, in each
case, free and clear of any Liens, encumbrances, security agreements, claims,
equities, charges, restrictions, voting agreements, proxies, options, rights of
first refusal, calls, contractual rights or other interests. The Shareholder has
good, marketable and indefeasible title to such shares, beneficially and of
record.
4.2 POWER AND AUTHORITY. The Shareholder has all necessary
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and this Agreement constitutes the legal,
valid and binding obligation of the Shareholder, enforceable against the
Shareholder in accordance with its terms. If the Shareholder is a legal entity,
the execution and delivery of this Agreement does not violate any of its
governing documents, and shall be, prior to Closing, duly and validly
authorized.
4.3 NO VIOLATION. Except as set forth in Schedule 4.3,
neither the execution and the delivery by the Shareholder of this Agreement, the
performance by such Shareholder of the obligations hereunder, nor the
consummation by such Shareholder of the transactions contemplated hereby to be
consummated by such Shareholder in accordance with the terms hereof will (i)
violate or conflict with any law, rule, regulation or any court or
administrative order, judgment, decree, injunction or other binding action or
requirement of any Governmental Authority to or by which the Shareholder (or any
Property of such Shareholder) is a party or is bound, (ii) require the approval
of or a filing or registration with any Governmental Authority (other than the
filing of the Certificate of Merger), (iii) violate any
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agreement to which the Shareholder is a party, or (iv) result in the creation or
imposition of any Lien upon any Property of the Shareholder.
4.4 LITIGATION. There are no actions, suits, proceedings,
orders, decrees or judgments at law or in equity or by or before any
Governmental Authority or other agency now pending or, to the best knowledge of
the Shareholder, threatened against or affecting the Shareholder or any Property
or rights of the Shareholder which, if adversely determined, could reasonably be
expected to, individually or in the aggregate, materially impair the ability of
the Shareholder to carry out the transactions contemplated by this Agreement.
4.5 BROKERS' COMPENSATION. The Shareholder is not a party to
any agreement or has any obligation to any broker, finder, or investment banker
relating to the transactions contemplated hereby.
4.6 AFFILIATE TRANSACTIONS. Except as set forth on Schedule
4.6, there are no agreements (oral or written) between the Shareholder or any
officer, director or employee of the Shareholder or any family member of any of
the foregoing, on the one hand, and any Affiliate of Seller, on the other hand.
4.7 ADEQUACY OF MERGER CONSIDERATION. The Shareholder has
had an opportunity to fully review and evaluate the Merger Consideration, the
components and allocation thereof, and has concluded that the amount and terms
of the Merger Consideration represent fair and equivalent value for such
Shareholder's interest in the Seller.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE COMPANY
The Company and the Parent hereby represent and warrant to and
covenant and agree with the Seller and each of the Stakeholders that each of the
following statements is true and correct on the date hereof and at all times
through the Closing Date:
5.1 ORGANIZATION, STANDING AND POWER. The Company and the
Parent are duly organized and existing as a corporation under the laws of the
State of Delaware and the State of Florida, respectively, and each has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as presently conducted and to consummate
the transactions contemplated hereby.
5.2 AUTHORITY OF THE COMPANY AND THE PARENT; NO VIOLATION.
(a) Each of the Company and the Parent has all
requisite corporate power and authority to enter into this Agreement and to
consummate the Merger and the transactions contemplated hereby (as used in this
Agreement, "transactions contemplated hereby" shall be deemed to include,
without limitation, the Company's issuance of Contingent Subordinated Notes if
issued), the Company's assumption of the Existing Subordinated Notes, the
Parent's issuance of Parent Common Stock pursuant to Section 2.1(a)(iv) and the
Parent's guaranty of the Existing Subordinated Notes and Contingent Subordinated
Notes, if issued). The execution and delivery by the Company and the Parent of
this
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Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate and shareholder action on
the part of the Company and the Parent, and this Agreement has been duly
executed and delivered by the Company and the Parent and is a legal, valid and
binding obligation of the Company and the Parent, enforceable against each of
them in accordance with its terms.
(b) Neither the execution and delivery by the
Company or the Parent of this Agreement, the consummation of the transactions
contemplated herein, nor compliance by the Company or the Parent with any of the
provisions hereof, will: (i) conflict with or result in a breach of any
provision of the Company's or the Parent's Certificate of Incorporation,
Articles of Incorporation or Bylaws; (ii) constitute a breach of or result in a
default, or give rise to any rights of termination, cancellation, or
acceleration under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, franchise, license, permit, agreement or other instrument
or obligation to which the Company or the Parent is a party, or by which the
Company, the Parent or their respective properties or assets are bound which
would cause a material adverse effect on the business, operations, condition or
affairs of the Company or the Parent or the ability of the Company or the Parent
to consummate the transactions contemplated hereby; or (iii) violate any order,
writ, injunction, decree, statute, rule, or regulation applicable to the
Company, the Parent or any of their respective properties or assets. No consent
of, approval of, notice to or filing with any Governmental Authority having
jurisdiction over any aspect of the business or assets of the Company or Parent,
and no consent of, approval of, or notice to or filing with any other Person, is
required in connection with the execution and delivery by the Company or the
Parent of this Agreement or the consummation by the Company or the Parent of the
transactions contemplated hereby, except the filing of the Certificate of Merger
contemplated by Section 1.2.
5.3 BROKERS OR FINDERS. Other than the fee payable by the
Parent to U.S. Capital at Closing, neither the Company nor the Parent has not
incurred any obligation or liability, contingent or otherwise, for brokerage or
finder's fees, agents' commissions, or any similar payment in connection with
this Agreement.
5.4 CAPITALIZATION OF COMPANY AND PARENT; ISSUANCE OF PARENT
COMMON STOCK.
(a) As of the date hereof, the authorized capital
stock of the Parent consists of 10,000,000 authorized shares of Common Stock,
$.001 par value, of which 2,591,687 shares are issued and outstanding, excluding
516 contingently issuable shares held by an escrow agent and 15,000,000
authorized shares of Preferred Stock, none of which is issued and outstanding.
The Parent Common Stock to be issued in connection with the Merger, when
delivered hereunder, shall be duly authorized, validly issued, fully paid and
nonassessable and free of any liens or encumbrances created by the Parent or the
Company.
(b) As of the date hereof, the issued and
outstanding stock of the Company shall prior to the Closing consist of 1,000
shares of Common Stock, $.01 par value, of which 0 shares are issued and
outstanding and no shares are reserved for issuance.
5.5 FINANCIAL STATEMENTS. Copies of the audited statements
of the Parent as of December 31, 1998 and the Parent's unaudited balance sheet
and statement of income for the interim period ending September 30, 1999 (the
"Parent Financial Statements") have been furnished to the Seller. The Parent
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Financial Statements (a) have been prepared in accordance with GAAP, (b) fairly
present the financial condition of the Parent as of such dates and the results
of the operations of the Parent for the periods ended on such dates, and (c)
contain and reflect all necessary adjustments and accruals for a fair
presentation of the Parent's financial condition and the results of its
operations for the periods covered by the Parent Financial Statements.
5.6 LITIGATION. Except as disclosed by the Parent in its
public filings with the Securities and Exchange Commission, there are no
actions, suits, proceedings, orders, decrees or judgments at law or in equity or
by or before any Governmental Authority or other agency now pending or, to the
best knowledge of the Company and the Parent, threatened against or affecting
the Company, the Parent or any Property or rights of the Company or the Parent
which, if adversely determined, could reasonably be expected to, individually or
in the aggregate, materially impair the right of the Company or the Parent to
carry on business substantially as now being conducted or as presently
contemplated or would result in a Material Adverse Effect. Neither the Company,
the Parent nor any Property or asset of the Company or the Parent is subject to
any order, writ, judgment, injunction, decree, determination or award which has
had, or could reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
5.7 NO MATERIAL MISSTATEMENTS. No representation contained
herein contains any material misstatement of fact or omits to state any material
fact necessary to make the statements therein not materially misleading.
5.8 CONDITION OF THE BUSINESS. Since December 31, 1998,
there has not been (i) any sale, lease, abandonment or other disposition of
assets by the Parent, other than in the ordinary course of business, or (ii) any
sale, assignment, transfer, license or other disposition by the Parent of any
patent, trademark, trade name, service mark, copyright (or pending application
for any patent, trademark, trade name or copyright), invention, process,
know-how, formula, pattern, design, trade secret or interest thereunder or any
other intangible asset used by the Parent. Since December 31, 1998, (i) the
Parent has been managed in the usual and ordinary course and in a reasonable and
prudent manner to preserve and protect its assets with no additional
liabilities, contingent or otherwise, regardless of materiality, above those
reflected on the Parent Financial Statements or filings with the Securities and
Exchange Commission except as set forth on Schedule 3.1(g) of the Stock Purchase
and Reorganization Agreement, and have not obligated the Parent to perform any
act other than as set forth in the Letter Agreement among Specialty Retail
Group, Inc., Seymour Zises, TBM Capital II, LLC and Colt Services, Inc. dated
February 25, 1999 or Schedule 3.1(g) of the Stock Purchase and Reorganization
Agreement, (ii) other than in the ordinary course of its business, the Parent
has not entered into any contract, agreement or undertaking with respect to the
Parent or its business, nor has it incurred any debt or obligations of any sort
that is not reflected in the Parent Financial Statements or Schedule 3.1(g) of
the Stock Purchase and Reorganization Agreement of the Parent dated June 15,
1999.
5.9 OWNERSHIP AND SUFFICIENCY OF PURCHASED ASSETS. The
Parent has good, marketable and indefeasible title to all of the assets
reflected on the Parent Financial Statements. Except as set forth on Schedule
5.9, the Parent's assets are owned and held by the Parent and are not subject to
any liens, claims, charges, taxes, mortgages, pledges, security interests,
equities, encumbrances or rights of any kind in third parties. Such assets
constitute all of the assets or property used or held for use by the Parent.
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5.10 COMPANY. Prior to the Closing, the Company will not
have conducted any business or have any assets or liabilities.
5.11 SEC FILINGS. All the reports required to be filed by the
Parent under the Securities Exchange Act of 1934, as amended, since June 30,
1999 have been filed, and such reports are true and correct in all material
respects, comply in all material respects with the federal securities laws, are
complete and up-to-date as of the date reported, and neither contain any untrue
statement of a material fact, nor omit to state any material fact necessary, in
the light of the circumstances under which the statements are made, to make the
statements therein not misleading.
5.12 NO EMPLOYMENT AGREEMENTS OR MATERIAL CONTRACTS. Except
with respect to the agreements filed with the Securities and Exchange
Commission, the Parent is not party to any employment agreements or contracts
other than the agreements for the provision of professional or other services.
5.13 OFFICER, DIRECTOR AND EMPLOYEE CLAIMS. Except as
disclosed in the Securities and Exchange Commission filings, the Parent has not
received any claims for, nor is it aware of any facts or circumstances which
would give rise to any claims for, indemnification by any of its current or
former officers, directors or employees.
5.14 OPTIONS AND WARRANTS. Other than as set forth in
Schedule 5.14 and the Parent's obligations under this Agreement, there are no
outstanding options, warrants, subscription or registration rights or other
rights or arrangements relating to, or with respect to, any equity interest in
the Parent.
5.15 TRADING. Assuming registration, the Parent's Common
Stock is eligible for trading on the NASD OTC Bulletin Board.
5.16 LOAN OBLIGATIONS. Immediately prior to the Closing, the
Parent will have no loan obligations, guarantees, credit lines or security
agreements outstanding.
5.17 COMPLIANCE WITH LAWS. Each of the Parent and the Company
is in compliance in all material respects with all laws, governmental rules and
regulations applicable to it or its business, affairs, properties or assets.
5.18 MATERIAL INFORMATION. All written statements, documents,
schedules, financial statements and agreements furnished by or on behalf of the
Parent or the Company to the Seller or the Stakeholders, or any of their
respective agents, advisors, attorneys, accountants or consultants, in
connection with this Agreement and the transactions contemplated hereby are
true, complete, correct and up-to-date as of the date furnished in all material
respects, and neither contain any untrue statement of a material fact, nor omit
to state any material fact necessary, in the light of the circumstances under
which the statements are made, to make the statements therein not misleading.
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ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 ACCESS TO INFORMATION. Between the date of this
Agreement and the Closing Date, the Seller will afford to the officers,
employees, financial advisors, financing sources, consultants, accountants,
attorneys and authorized representatives of the Parent reasonable access during
normal business hours to the premises, personnel, advisors, consultants,
attorneys, accountants, representatives, properties, contracts, commitments and
books and records of the Seller. The Seller shall use its commercially
reasonable efforts to furnish the Parent as promptly as practicable with such
documents or copies thereof, and other information concerning the business and
affairs of the Seller, including without limitation, any financial and operating
data or other periodic financial information, as the Parent shall, from time to
time, reasonably request. All information and documents provided to the Parent
and its agents shall be kept confidential by the Parent in accordance with the
provisions of Section 10.9. In addition to the foregoing, Seller agrees that
Parent's counsel shall have the right to have an environmental audit conducted
of the real properties, facilities and equipment utilized by the Seller and to
have Richard A. Eisner & Company, or another independent certified public
accounting firm, perform an acquisition audit of the Seller, and with the
consent of Seller's accountants (which Seller will use its commercially
reasonable efforts to obtain), to review the working papers of Seller's
accountants pertaining to the Company's financial position or the results of its
operations.
6.2 CONDUCT OF BUSINESS BY THE SELLER. Except as set forth
in Schedule 6.2, between the date of this Agreement and the Closing Date, the
Seller will cause its business to be operated only in the ordinary course and
consistent with past practices. The Seller will use its best efforts to (i)
preserve intact the present business organization, (ii) maintain in effect all
material licenses, permits, and approvals of Governmental Authorities which are
necessary for the conduct of its business and all Material Contracts, (iii) keep
available the services of the present management and workforce, including,
without limitation, independent contractors, and (iv) maintain good business
relationships with suppliers, customers and distributors and others having
business dealings with it. Without limiting the foregoing and except as
otherwise contemplated by or permitted by this Agreement or except as set forth
in Schedule 6.2, or as otherwise consented to or approved by the Company in
writing, the Seller shall not:
(a) amend its Certificate of Incorporation or Bylaws
or issue, sell, grant, pledge, purchase, redeem, or otherwise encumber, or
split, combine or reclassify, or agree or commit to issue, sell, grant, pledge,
purchase, redeem, or otherwise encumber, or split, combine or reclassify, any
shares of its capital stock; or grant, issue, create, sell, pledge, purchase,
redeem or otherwise encumber or agree to grant, issue, sell, pledge, purchase,
redeem, or otherwise encumber any options, warrants or rights to purchase shares
of its capital stock or securities of any kind convertible into or exchangeable
for shares of its capital stock, or declare, set aside, make or pay any dividend
or other distribution in respect of its capital stock;
(b) increase the compensation or rate of
compensation payable or to become payable to any of its former employees,
executive employees, directors, consultants or officers, nor make any increase
in compensation or rate of compensation or benefits payable or to become payable
to directors, employees, consultants or executive officers who are parties to
separation or severance agreements with
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the Seller, increase the compensation or rate of compensation or benefits
payable or to become payable to directors, executive employees, consultants or
executive officers who are parties to employment agreements with the Seller, nor
enter into any separation, severance, or "change in control" agreements with any
of its present or former employees, officers, consultants or directors, nor
enter into any written or oral employment agreement which by its terms cannot be
terminated on thirty (30) days' notice or less without penalty;
(c) set aside, or pay to any present or former
officer, director, consultant or employee any bonus, profit-sharing, severance,
retirement, insurance, death, fringe benefit, or other extraordinary
compensation, nor adopt, amend, fund or commit itself to fund any employee
benefit plan or account related to any Plan with or for the benefit of any of
its present or former employees, consultants, directors or officers;
(d) make distributions or payments of any kind
(other than as provided in Section 7.1(j)), to the Stakeholders, Affiliates, or
any related parties except for the payment of salaries to management employees
who are also Shareholders at the current monthly rate and the quarterly payment
of $10,000 of the annual monitoring fee to Golub Associates, Incorporated plus
the reasonable out of pocket expenses of such management employees and Golub
Associates Incorporated and Affiliates approved and substantiated by the Seller
in accordance with past practices;
(e) acquire any business entity or all or
substantially all of the assets of a business entity;
(f) make any capital expenditures, the aggregate
amount of which are in excess of $10,000, other than emergency repairs;
(g) create or incur any liabilities in excess of
$25,000, other than liabilities incurred in the ordinary course of business or
as contemplated or permitted by or in connection with this Agreement and the
consummation of the Merger;
(h) voluntarily create or incur any Lien, or fail to
take action to discharge any involuntary Lien, against or in respect of any
Property;
(i) terminate any Material Contract, or enter into,
renew, extend, amend, or modify any Material Contract, in each case in any
manner that is materially burdensome to the Seller;
(j) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than (i) the payment, discharge or satisfaction,
in the ordinary course of business consistent with past practices or in
accordance with their terms, of liabilities reflected in the most recent
Financial Statements or incurred since the date of such Financial Statements in
the ordinary course of business consistent with past practices, (ii) the payment
of claims set forth on Schedule 6.2, and (iii) payment of claims for less than
$10,000;
(k) institute, settle or agree to settle any claim,
action or proceeding involving an expenditure in excess of $25,000 before any
court or other Governmental Authority;
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(l) default in any material respect under any
Material Contract;
(m) fail to maintain such liability, casualty,
property, loss, and other insurance coverage upon its Properties and with
respect to the conduct of its business, on such terms, in such amounts, and with
such insurance carriers and to such extent and covering such risks as are
maintained on the date hereof;
(n) acquire or dispose of any assets or rights
except as required for the conduct of its business in the ordinary course and
which would not have a Materially Adverse Effect;
(o) make any loan or advance to any Person, or enter
into any transaction with any Affiliate or employees, except for loans to
employees in accordance with Seller's written existing employee loan policy
which has been delivered to the Company, pursuant to which loans to individual
employees do not exceed $1,000 and loans to employees in the aggregate do not
exceed $15,000;
(p) fail to collect accounts receivable and pay
accounts payable in the ordinary course of business consistent with past
practices;
(q) fail to maintain and comply with all
Governmental Approvals;
(r) cause its Senior Debt to exceed $12 million; or
(s) authorize any of, or commit or agree to take
any of the foregoing actions.
In addition to the foregoing, the Seller shall not take any action that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of the Seller set forth in this Agreement
becoming untrue in any material respect (other than with respect to matters
discovered in the course of the Parent's and the Company's Due Diligence
Investigations), or (ii) any of the conditions of the other parties to the
consummation of the transactions contemplated by this Agreement and set forth in
Article 7 not being satisfied.
6.3 REGULATORY MATTERS/ SHAREHOLDER VOTE. The parties hereto
will each use their commercially reasonable efforts to obtain as promptly as
practicable all necessary Governmental Approvals and consents of all third
parties necessary for the consummation of the transactions contemplated by this
Agreement.
6.4 FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its commercially
reasonable efforts to take, or cause to be taken, all action and to use its
commercially reasonable efforts to do, or cause to be done, all things
necessary, proper, or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its commercially reasonable efforts to defend any lawsuits or
other legal proceedings, whether judicial or administrative, whether brought
derivatively or on behalf of third parties (including any Governmental
Authority), challenging this Agreement or the consummation of the Merger.
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6.5 TRANSACTION PROPOSALS. From the date hereof until the
Closing Date (or the earlier termination of this Agreement), the Shareholders,
the Majority Stakeholders and the Seller shall not, and the Seller shall not
authorize or permit any of its officers, directors, consultants or employees, or
any of its agents to, directly or indirectly (i) solicit, initiate or encourage
the submission of Transaction Proposals, (ii) participate in any discussions or
negotiations regarding any Transaction Proposal or furnish information about the
Seller to any Person with respect to any Transaction Proposal except to the
Majority Stakeholders, the Company or its representatives, (iii) otherwise
cooperate in any way with any effort or attempt by any other Person to make or
enter into a Transaction Proposal, or (iv) accept, approve or authorize, or
enter into any agreement concerning any Transaction Proposal; provided, however,
that the Seller and its directors and officers will remain free to participate
in any discussions or negotiations regarding, furnish any information with
respect to, assist or participate in, or facilitate in any other manner any
unsolicited effort or attempt by any person to do or seek any of the foregoing
in clauses (ii), (iii) or (iv) to the extent their fiduciary duties under
Delaware law may require; provided, further, that if the Seller consummates a
transaction with a party other than the Company as a result of the Seller's
Board of Directors exercise of its fiduciary duties as contemplated above, the
Seller shall pay to the Company a break-up fee of $500,000. The Seller shall
cause its agents, officers, directors, representatives and Affiliates to abide
by the terms of this Section 6.5. The Seller's remedy for any breach of this
Section 6.5 shall be specific performance. In the event that the Seller receives
or becomes aware of any Transaction Proposal, it shall promptly notify the
Company in writing of such communication and keep the Company informed of any
subsequent developments in connection therewith.
6.6 NOTICE OF CERTAIN EVENTS. Each party shall notify the
other parties (by disclosure in the Schedules hereto or otherwise) if:
(a) any notice or other communication is received
from any Person alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this Agreement, or any
notice or other communication from any Governmental Authority in connection with
the transactions contemplated by this Agreement is received;
(b) any actions, suits, claims, investigations or
proceedings are commenced or, to the best knowledge of such party,
threatened against, relating to or involving or otherwise affecting any party
hereto which could interfere with the consummation of the transactions
contemplated by this Agreement or could result in a Material Adverse Effect; and
(c) the occurrence or non-occurrence of any event
would cause either (i) any representation or warranty of any party contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time, (ii) any condition set forth in this
Agreement to be unsatisfied at any time from the date hereof to the Effective
Time, or (iii) any failure by any party to comply with or satisfy any covenant,
condition or agreement to be complied with hereunder; provided, that the
delivery of any notice pursuant to this Section 6.6 shall not limit or otherwise
affect the remedies available hereunder to the parties hereto.
Notwithstanding anything to the contrary contained in this Agreement, the Parent
and the Company will complete all Due Diligence Investigations required for
consummation of the Merger on or prior to February 4, 2000 and will notify the
Seller and the Majority Stakeholders in writing, promptly upon
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discovery thereof (by in any event on or prior to February 4, 2000), of any
information discovered in the course of Such Due Diligence Investigations which
is either (i) negative or unfavorable or (ii) inconsistent with the
representations and warranties of the Seller and the Shareholders contained
herein or with other information provided to the Parent or the Company by or on
behalf of the Seller or the Shareholders.
6.7 TAX COVENANTS. Any Taxes with respect to the Seller that
accrue prior to Closing but are not paid prior to Closing shall be paid by the
Seller and the Seller shall take all appropriate and customary efforts to file
the Seller's Tax Return for the tax period ending June 30, 1999 by the due date,
including any extensions. The Company, in consultation with the Majority
Stakeholders, shall timely prepare and file, or cause to be prepared and filed,
all Tax Returns of the Seller for all taxable periods beginning on or prior to
the Closing Date, and not yet prepared or filed. The Company shall have the
right to represent the interests of the Seller in any Tax audit or
administrative or court proceeding relating to any Taxes or Tax Returns for
pre-closing periods, provided that in any proceeding relating to the Seller for
pre-closing periods for which the holders of the Subordinated Notes have
liability under Section 9.2, the Majority Stakeholders may participate at their
own cost and expense in any such audit or tax litigation. The Company shall not
compromise or settle any Tax claim, or consent or agree to any Tax liability,
relating to the Seller for any Taxes which the holders of the Subordinated Notes
are obligated to pay under Section 9.2, without the prior written consent of the
holders of the Subordinated Notes which shall not be unreasonably withheld. The
Company and the Majority Stakeholders agree to reasonably cooperate in settling
any Tax liability for Pre-Closing Periods.
6.8 FINANCIAL STATEMENTS. Seller acknowledges that audited
financial statements of Seller and its Subsidiaries for the fiscal years ended
June 30, 1997, 1998 and 1999 ("Audited Statements") will need to be included in
Parent's Current Report on Form 8-K ("8-K") to be filed with the Securities and
Exchange Commission and thereafter to be incorporated into Parent's audited
financial statements prepared by Parent's independent certified public
accountants ("Parent CPAs"). Seller and Parent shall negotiate with and enter
into a written engagement arrangement (or similar arrangement) prior to February
15, 2000 pursuant to which KPMG LLP agrees to the requirements of this Section.
Seller shall use its commercial reasonable efforts to cause KPMG LLP to (i)
prepare such Audited Statements in accordance with the requirements of GAAP,
Regulation S-X of the Securities and Exchange Commission, and such other
accounting requirements as are applicable to public reporting companies, and to
certify such Audited Statements to Parent and Parent CPAs, (ii) authorize Parent
and Parent CPAs to rely on such Audited Statements and certification and
incorporate such Audited Statements into Parent's audited financial statements
for inclusion in Parent's 8-K filing and all subsequent required filings and
reporting, and (iii) otherwise cooperate with Parent CPAs in the preparation of
such pro-formas, interim statements, and other reports as are reasonably
required in connection with Parent's filing and reporting obligations. Seller
agrees at all times between the date hereof and the Closing Date, to use its
commercial reasonable efforts to, and to use its commercial reasonable efforts
to cause KPMG LLP to, afford Parent CPAs access to (including copies of) the
Seller's and KPMG LLP's books and records and such other information as Parent
CPAs reasonably request (and KPMG LLP agree) in order to review such Audited
Statements and to incorporate them into Parent's audited financial statements.
At all times during such review, whether before or after the Closing,
Shareholders and the Seller shall, and shall use its commercial reasonable
efforts to cause KPMG LLP to, cooperate fully with Parent CPAs, including taking
such actions as Parent CPAs reasonably require (and KPMG LLP agree), in
connection with such Audited Statements. All expenses of complying with the
provisions of this Section 6.8 shall be
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borne by Parent if the Merger is consummated or if the Merger is not consummated
due to the fault of Parent or Seller.
6.9 PARENT COMMON STOCK. The Parent Common Stock has not
been registered under the Act or under applicable state securities laws and,
therefore, cannot be sold, assigned, or otherwise transferred unless it is
subsequently registered under the Act and under applicable state securities laws
or an exemption from such registration is then available. The Parent Common
Stock to be issued in connection with the Merger shall be afforded the same
rights accorded shares of Parent Common Stock issued pursuant to the Stock
Purchase and Reorganization Agreement, including without limitation,
registration rights, and, when delivered hereunder, shall be duly authorized,
validly issued, fully paid and nonassessable and free of any liens or
encumbrances created by the Parent or the Company.
6.10 POST-CLOSING OBLIGATIONS OF THE PARENT AND THE COMPANY.
(a) After the Closing, (i) each of the Parent and the Company shall maintain in
full force and effect insurance of the types referred to in Section 3.14 which
covers at least the same risks as the insurance currently maintained by the
Seller, and which is in amounts equal to or greater than the insurance currently
maintained by the Seller, and (ii) the Company shall maintain in full force and
effect directors' and officers' liability insurance for the benefit of the
Seller's pre-Closing directors, officers and Majority Stakeholders, provided
however that beyond September 17, 2000 the Majority Stakeholders shall bear the
cost of continued insurance or an applicable discovery period of their choosing
for so long as they choose.
(b) After the Closing, each of the Parent and the
Company shall (i) permit one non-voting representative designated by the
Majority Stakeholders to attend all meetings of the Board of Directors (or any
comparable governing body), and all committees thereof, of each of the Parent
and the Company, (ii) pay the reasonable expenses of such representative in
connection with meetings and other activities of such Boards of Directors,
committees thereof or other such governing bodies of the Parent and the Company,
(iii) provide to such representative all notices, documents and information
furnished to the directors of each of the Parent and the Company, at the same
time as furnished to such directors, and (iv) use best efforts to notify such
representative of, and permit such representative to participate by telephone
in, emergency meetings of the Boards of Directors, committees thereof or other
such governing bodies of each of the Parent and the Company, and to provide such
representative copies of the minutes of all such meetings promptly after they
are held. In no event shall the Majority Stakeholders have more than one
representative.
ARTICLE 7
CONDITIONS
7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
THE PARENT. The obligations of the Company and the Parent to consummate the
transactions provided for by this Agreement are subject to the satisfaction at
or prior to the Closing Date (or such earlier date provided herein) of each of
the following conditions, any one or more of which may be waived by the Company
(but only in writing):
(a) Representations and Warranties. (i) All of the
Seller's, the Majority Stakeholders', the Subsidiary's and Shareholders'
representations and warranties contained in this
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Agreement shall be true and correct in all material respects as of the Cut-Off
Date as though made on and as of the such date, except to the extent such
representations and warranties speak as of an earlier date, and except with
respect to matters discovered in the course of Parent's and Company's Due
Diligence Investigations or taken into account in the Reduction Matters; (ii)
the Seller, the Subsidiary and the Shareholders shall have performed and
complied in all material respects with all agreements and covenants required by
this Agreement to be performed by them on or prior to the Closing Date; and
(iii) with respect to (i) and (ii), at the Closing there shall be delivered to
the Company and Parent a certificate signed by the President of the Seller, the
Subsidiary and each of the Majority Stakeholders to the foregoing effect.
(b) Good Standing Certificates; Certified
Certificate of Incorporation; Other Certifications. The Seller shall have
provided: (i) a certificate of good standing and tax clearance certificates for
the Seller and the Subsidiary from the Secretary of State for Delaware and each
state in which the Seller and the Subsidiary are qualified or authorized to do
business as a foreign corporation, each issued within ten days prior to the
Closing Date; (ii) for each jurisdiction in which the Seller is located or has
property, UCC-1 searches and lien, judgment and tax searches for the Seller,
each certified as of the Closing Date by the Seller, together with UCC-3
termination statements in form and substance satisfactory to the Company which
shall terminate all financing statements and liens which have been previously
filed, other than those relating to leased equipment of the Seller and other
than those in favor of Bank One, Texas, N.A. (if it is to remain as senior
lender) and the Subordinated Noteholders other than the mechanics lien in favor
of Star Construction Services; (iii) a certified copy of resolutions of the
Seller's board of directors and Shareholders authorizing the execution of this
Agreement by the Seller and the consummation of the transactions contemplated
hereby; (iv) a copy of the Seller's and the Subsidiaries' certificate of
incorporation as amended to date, certified by the Secretary of State of
Delaware, together with a copy of the Seller's and the Subsidiaries' Bylaws as
amended to date, all certified by the President and Secretary of the Seller; (v)
a certificate of its Secretary or other authorized officer certifying as to the
names and true signatures of the officers or authorized signatories of the
Seller, authorized to sign the documents to which the Seller is a party; and
(vi) a list of the shareholders consenting to the Merger, including those
shareholders who, prior to Closing, exercised any statutory dissenter's rights
with respect to the Merger.
(c) Orders; Illegality. There shall not be in
effect any statute, rule, regulation, preliminary or permanent injunction or
other order or decree of a Governmental Authority which enjoins, prohibits,
makes illegal or materially restricts or otherwise prevents the consummation of
the Merger or the transactions contemplated hereby, and there shall not be
pending any proceeding in which any Person seeks such a remedy.
(d) Third Party Consents and Waivers. There shall
have been obtained all consents, approvals and waivers from parties to each
Material Contract which involves an amount or has a value in excess of $25,000
that are required in connection with the Merger.
(e) Governmental and Regulatory Consents. All
filings required to be made prior to the Closing Date with, and all consents,
approvals, permits and authorizations required to be made or obtained prior to
the Closing Date from, any Governmental Authority in connection with the
execution and delivery of this Agreement and the consummation of the
transactions hereby by the Seller and the
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Shareholders shall have been made or obtained, except to the extent the failure
to make or obtain the same could not reasonably be anticipated to result in a
Material Adverse Effect.
(f) Opinion of Counsel. The Company and the Parent
shall have received the opinion of counsel to the Seller and Shareholders dated
as of the Closing Date.
(g) Stock Certificates. The Seller shall use
commercially reasonable efforts to receive as many as possible Certificates
representing the issued and outstanding shares of capital stock of the Seller.
(h) Affiliate Agreements. All agreements listed on
Schedule 3.24 will be terminated other than the Security Agreement and
Subordinated Deed of Trust, Security Agreement and Assignment of Rents and
Leases from Seller if favor of Subordinated Lenders.
(i) Lease Agreement. The Seller and the Company
shall have entered into a two year lease agreement substantially in the form of
Exhibit D attached hereto with respect to the plant in Little Rock, Arkansas
providing for total rental payments for the first 18 months of $1.50, and then
$10,000 per month thereafter with the option to vacate the property and
terminate the lease, upon 120 days notice.
(j) Little Rock. The Seller shall have transferred
to Little Rock, LLC the real property assets for the plant located in Little
Rock, Arkansas. Such distributed real property assets include solely the land
and buildings, together with the air distribution system, electrical system,
telephone system and HVAC system contained in such buildings, and the Seller
shall retain title to all other machinery, other equipment (including cranes)
and other personal property located at such plant (provided that, any cranes not
used by the Company in its business at another location shall revert to Little
Rock, LLC).
(k) Dissenters. No more than 20% in interest of the
Shareholders or 20% of Shareholders shall have exercised prior to or on the
Closing any statutory dissenter's rights with respect to the Merger.
(l) Updated Financial Information. From the date
hereof until the Closing, the Seller shall have provided the Company and the
Parent with its monthly financial statements prepared in accordance with past
practice, as they are prepared, and at least three days prior to Closing and on
the Closing, the Seller shall provide the Company and the Parent with its most
recent financial statements, prepared in accordance with past practice,
reflecting its then current status.
(m) No Material Event. Prior to the Cut-Off Date,
no event including, without limitation, fire, flood, earthquake, explosion, act
of God, war, civil commotion, labor disruption, act of any Governmental
Authority, or the termination or modification of a Material Contract or business
relationship of the Seller (whether or not such event is covered by insurance),
shall have occurred which in the Company's or the Parent's reasonable judgment
has a Material Adverse Effect.
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(n) Satisfactory Completion of the Company's Due
Diligence; Etc. On or prior to February 4, 2000, the results of their Due
Diligence Investigations shall be satisfactory to the Company and the Parent.
(o) Books and Records, Additional Documents. Seller
shall have delivered to the Company and the Parent all of the books, data,
documents, instruments and other records relating to the Seller and its
business, and such other documents, instruments or certificates as the Company,
the Parent or their respective counsel shall reasonably request in order to
consummate the transactions contemplated hereby.
(p) Net Worth Test. Parent's accountants shall not
have determined based upon performing accounting procedures (based upon the most
recent internal financial statements and treating the Little Rock, Arkansas
plant as though it has not been distributed), no later than ten (10) days prior
to Closing, that the Seller does not have a Net Worth of at least $3,423,000.00
(as such amount may be adjusted for June 30, 1999 audit adjustments and to the
extent such adjustments were not reflected in the October 31, 1999 balance
sheet). The accounting procedures shall be set forth in an accounting procedure
letter between the Parent and the Parent's CPA. Seller shall have the right to
consent to such procedures, which consent shall not be unreasonably withheld or
delayed.
(q) Bank Financing. The Company shall obtain bank
financing to amend or replace the Senior Debt on terms acceptable to the Parent.
(r) Environmental. No significant environmental
liabilities shall exist on any land or buildings owned or occupied by the
Seller. "Significant environmental liabilities" shall mean total liabilities of
the Seller related to environmental matters in excess of $50,000.
(s) Senior Debt. At Closing, the Seller's Senior
Debt shall not exceed Twelve Million Dollars ($12,000,000).
Notwithstanding the foregoing, the Seller and the Stakeholders shall have the
option of satisfying any of the conditions set forth in this Section 7.1 by
accepting a reduction in the cash portion of the Merger Consideration if and
only to the extent that (i) the condition can be satisfied by the payment of
money, (ii) the condition is discrete and does not involve other matters that
can not be resolved by the payment of money, (iii) the condition will be fully
discharged by the payment of money, and (iv) the aggregate amount of money paid
for the satisfaction of one or more conditions does not exceed $50,000. The
reduction in the cash portion of the Merger Consideration shall be the amount of
money paid or to be paid to satisfy such condition or conditions.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER AND
THE STAKEHOLDERS. The obligations of the Seller and the Stakeholders to
consummate the transactions provided for by this Agreement are subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any one or more of which may be waived by the Seller and the
Majority Stakeholders (but only in writing):
(a) Representations and Warranties of the Company.
(i) All of the Company's and the Parent's representations and warranties
contained in this Agreement shall be true and correct as of the
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Cut-Off Date as though made on and as of the Cut-Off Date, except to the extent
such representations and warranties speak as of an earlier date and except with
respect to matters discovered in the course of Seller's Due Diligence
Investigations; (ii) the Company and the Parent shall have performed and
complied with all agreements and covenants required by this Agreement to be
performed by it on or prior to the Closing Date; and (iii) with respect to (i)
and (ii), at the Closing there shall be delivered to the Seller a certificate
signed by an executive officer or authorized representative of the Company and
the Parent to the foregoing effect.
(b) Good Standing Certificates; Certified
Certificate of Incorporation; Other Certifications. Each of the Company and the
Parent shall have provided: (i) a certificate of good standing and tax clearance
certificates from the Secretary of State of its jurisdiction of incorporation
and each state in which it is qualified or authorized to do business as a
foreign corporation, each issued within ten days prior to the Closing Date; and
(ii) a certified copy of resolutions of each of the Company's and the Parent's
Board of Directors and (if required) Shareholders authorizing the execution of
this Agreement and the consummation of the transactions contemplated hereby
(including without limitation the issuance of the Contingent Subordinated Notes,
the assumption of the Existing Subordinated Notes, and issuance of Parent Common
Stock pursuant to Section 2.1(a)(iv)), (iii) a copy of its certificate or
articles of incorporation as amended to date, certified by the Secretary of
State of its jurisdiction of incorporation, together with a copy of its Bylaws
as amended to date, all certified by its Secretary; and (iv) a certificate of
its Secretary or other authorized officer certifying as to the names and true
signatures of its officers or authorized signatories, authorized to sign the
documents to which it is a party.
(c) Orders; Illegality. There shall not be in
effect any statute, rule, regulation, preliminary or permanent injunction or
other order or decree of a Governmental Authority which enjoins, prohibits,
makes illegal or materially restricts or otherwise prevents the consummation of
the Merger or the transactions contemplated hereby, and there shall not be
pending any proceeding in which any Person seeks such a remedy.
(d) Merger Consideration. At the Closing, the
Company or the Parent shall have paid to each Stakeholder who has delivered to
the Company such Stakeholder's Certificates and or notes, such Stakeholder's
applicable share, if any, of the cash portion of the Merger Consideration as
specified on Schedule 2.2, and shall have issued (i) the Subordinated Notes to
certain Stakeholders as specified on Schedule 2.2, and (ii) the Parent Common
Stock to be issued pursuant to Section 2.1(a)(iii).
(e) Guaranty. Parent shall have delivered the
Guaranty to the holders of the Subordinated Notes.
(f) Discharge of Mortgage. Parent and the Company
shall have discharged the mortgage on the Little Rock plant in favor of
Bank One, Texas, N.A.
(g) Third Party Consents and Waivers. There shall
have been obtained all consents, approvals and waivers from third parties that
are required in connection with the Merger.
(h) Governmental and Regulatory Consents. All
filings required to be made prior to the Closing Date with, and all consents,
approvals, permits and authorizations required to be made or
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obtained prior to the Closing Date from, any Governmental Authority in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by the Company or the
Parent shall have been made or obtained, except to the extent the failure to
make or obtain the same could not reasonably be anticipated to result in a
Material Adverse Effect.
(i) Opinion of Counsel. The Seller and the
Stakeholders shall have received the opinion of counsel to the Company and the
Parent dated as of the Closing Date.
(j) Stock Certificates. The Subordinated
Noteholders shall have received Certificates representing the Parent Common
Stock to be issued to them pursuant to Section 2.1(a)(iii).
(k) Interim Financials. The Seller shall have
received the Parent's unaudited financial statements for the quarter ended
September 30, 1999.
(l) No Material Event. Prior to the Cut-Off Date,
no event including, without limitation, fire, flood, earthquake, explosion, act
of God, war, civil commotion, labor disruption, act of any Governmental
Authority, or the termination or modification of a material contract or business
relationship of the Company or the Parent (whether or not such event is covered
by insurance), shall have occurred which in the Seller's or the Majority
Stakeholders' reasonable judgment has a Material Adverse Effect.
(m) Additional Documents. The Company and the
Parent shall have delivered to the Majority Stakeholders all of the data,
documents and other records relating to the Company or the Parent or their
respective businesses, and such other documents or certificates as the Majority
Stakeholders or their counsel shall reasonably request in order to consummate
the transactions contemplated hereby.
ARTICLE 8
TERMINATION
8.1 TERMINATION. By notice given at or prior to the Closing,
this Agreement may be terminated and the transactions contemplated hereby may be
abandoned:
(a) by the Company or the Parent if a material
breach of any provision of this Agreement has been committed by the Seller or
the Majority Stakeholders and such breach has not been waived, provided that
written notice of such breach has been given to the breaching party and the
breaching party has failed to cure such breach within 30 days of receipt of such
notice;
(b) by any party, if any of the conditions for the
benefit of the terminating party in Article 7 have not been satisfied as of the
Closing Date or become impossible (other than through the failure of that party
to comply with its obligations under this Agreement) and that party has not
waived such condition on or before the Closing Date;
(c) by mutual consent of the Company and the Parent,
on the one hand, and the Seller and the Majority Stakeholders, on the other
hand; or
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(d) by either the Company, the Parent or the Seller
if the Merger shall not have been consummated (other than through the failure of
the party seeking termination to comply fully with its obligations under this
Agreement) on or before the Applicable Target Closing Date or such later date as
the parties may mutually agree upon; provided, however, that the Company and the
Parent shall have the unilateral right to extend the Closing Date to April 15,
2000, but no later than such date by providing the Seller a signed Commitment
Letter for Senior Debt financing on or before February 22, 2000 and depositing
into escrow a refundable deposit of $500,000 with the Escrow Agent by March 1,
2000 subject to the conditions set forth on Exhibit E. A "Commitment Letter"
shall mean a signed commitment letter for Senior Debt financing from a reputable
financial institution other than Bank One, approved by its credit committee,
containing industry standard terms and subject to standard industry conditions,
including due diligence, and accepted by the Parent and the Company. During the
extension of this Agreement pursuant to the following proviso, if the Seller
learns of any event or occurrence at any time or from time to time that would
result in a breach of clauses (a), (b), (c), (d), (e), (k), (m) or (r) of
Section 7.1, it shall have the right to notify the Company and Parent of such
breach and Parent and Company will within three (3) business days notify the
Seller if they wish to proceed with the transaction, and if Parent and Company
elect to proceed, Parent and Company shall not terminate the Agreement as a
result of that specific breach, provided that the Seller shall have the ability
to cure such breach within the earlier of the Closing or fifteen (15) days of
notice if the Parent and Company notify the Seller that they desire to terminate
this Agreement as a result of the breach. If the Parent or the Company learns of
any event or occurrence at any time or from time to time that would result in a
breach of Section 7.1, it will notify the Seller of such event or occurrence.
Notwithstanding the foregoing, after March 31, 2000, the Parent and Company
cannot terminate this Agreement under Section 7.1(q).
No termination of this Agreement under this Section 8.1 for any reason or in any
manner shall release, or be construed as releasing, either party from any
obligations hereunder which by their express terms survive termination,
including Section 10.9 hereof.
Notwithstanding anything to the contrary contained in this Section 8.1, the
Parent and the Company shall notify the Seller and the Majority Stakeholders on
or prior to February 4, 2000 as to whether they are satisfied with the results
of their Due Diligence Investigations and intend to proceed with the
consummation of the Merger. If such notice states that they are not satisfied
with the results of their Due Diligence Investigations and do not intend to
proceed with the consummation of the Merger, this Agreement shall be terminated
and the transactions contemplated hereby abandoned. The Parent and the Company
may not terminate this Agreement or abandon the transactions contemplated hereby
at any time after February 4, 2000 on the basis of any matter discovered during
the course of their Due Diligence Investigations (including without limitation
the carrying value of accounts receivable, plant and equipment and inventory) or
based on the Reduction Matters.
8.2 EFFECT OF TERMINATION OR FAILURE TO CONSUMMATE MERGER.
In the event of the termination of this Agreement as provided in Section 8.1,
(i) written notice thereof shall forthwith be given to the other party or
parties specifying the provision hereof pursuant to which such termination is
made, (ii) all Confidential Information as required by Section 10.9 shall be
returned to the appropriate party, and (iii) this Agreement shall become void
and of no further force or effect, except as set forth in Section 8.1. Upon
termination of this Agreement because of a breach of this Agreement, the parties
shall have remedies generally available to them at law or in equity.
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8.3 EXPENSES. Regardless of whether the transactions
contemplated by this Agreement are consummated, each of Parent and Company and
each Stakeholder shall bear their respective expenses incurred in connection
with the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including the fees and expenses of agents,
representatives, counsel, actuaries and accountants, which expenses shall not be
subject to reimbursement or other payment by any other party.
8.4 SPECIFIC PERFORMANCE. In the event that any party shall
fail or refuse to consummate the transactions contemplated by this Agreement for
any reason not otherwise permitted by this Agreement or if any default under, or
breach of any representation, warranty or covenant of, this Agreement on the
part of any party shall have occurred that results in the failure to consummate
the transactions contemplated hereby, then in addition to the other remedies
provided in this Agreement, the non-breaching party shall be entitled to obtain
an order of specific performance thereof against the breaching party from a
court of competent jurisdiction. In addition, the non-breaching party shall be
entitled to obtain from the breaching party court costs and reasonable
attorneys' fees incurred by it in enforcing its rights hereunder. As a condition
to seeking specific performance hereunder, the Company shall not be required to
tender the Merger Consideration but shall be ready, willing and able to do so.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION; OFFSETS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The covenants contained in this Agreement shall survive the Closing without
limitation. The representations and warranties contained in this Agreement shall
survive the Closing Date and shall continue in effect for two years thereafter,
except that (A) any representation or warranty of the Seller and/or the
Shareholders contained in (i) Sections 3.1 (Organization; Powers; Approvals),
3.2 (Authorization of Transaction; Noncontravention), 3.3 (Capitalization;
Shares), 4.1 (Ownership of Shares), and 4.2 (Power and Authority) shall survive
for the full period of the applicable statute of limitations, and (ii) Sections
3.6 (Tax Returns) and 3.12 (ERISA) shall survive for the full period of the
applicable statute of limitation and for a period of 180 days thereafter, (B)
any representation or warranty of the Company and Parent contained in Section
5.2 (Authority of the Company and Parent; No Violation) shall survive for the
full period of the applicable statute of limitations, and (C) claims, if any,
which are based upon fraud by the Company, the Parent, the Seller, the
Subsidiaries or the Shareholders shall survive for the full period of the
applicable statute of limitations, until finally resolved and satisfied in full
(the applicable date, the "Expiration Date"). Any claim for indemnification must
be made on or prior to the applicable Expiration Date, it being understood that
claims made on or prior to such Expiration Date shall survive such Expiration
Date until resolved.
9.2 INDEMNIFICATION.
(a) Subject to the limitations set forth in Section
9.2(c), the Subordinated Noteholders agree to jointly and severally (with
respect to clauses (i) and (iii) below) and the Shareholders severally (with
respect to their own breaches) (with respect to clause (ii) below) indemnify,
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defend and hold harmless each of the Company, the Parent and its Affiliates,
officers, directors, advisors and agents against any and all Losses, as
incurred, that arise out of or relate to:
(i) any inaccuracy in or breach of any of
the representations and warranties made by the Seller,
the Majority Stakeholders or the Subsidiary under
Article 3;
(ii) any inaccuracy in or breach of any of
the representations or warranties made by the
Shareholders under Article 4 of this Agreement;
(iii) any breach or nonperformance of any of
the covenants or agreements made by the Seller, the
Subsidiary or the Majority Stakeholders in or pursuant
to this Agreement.
Notwithstanding anything to the contrary contained in this Section 9.2(a) or
elsewhere in this Agreement, no Indemnifying Party under this Section 9.2(a)
shall have any liability with respect to any matter discovered in the course of
the Parent's and the Company's Due Diligence Investigations or with respect to
any Reduction Matters.
(b) The Parent and the Company agree to jointly and
severally indemnify, defend and hold harmless each of the Subordinated
Noteholders and their respective Affiliates, advisors and agents against any and
all Losses, as incurred, that arise out of or relate to (i) any inaccuracy in or
breach of any of the representations and warranties made by the Company or the
Parent in or pursuant to this Agreement, or (ii) any breach or nonperformance of
any of the covenants or agreements made by the Company or the Parent in or
pursuant to this Agreement.
(c) In the event that the Company and the Parent
shall be entitled to indemnification under Section 9.2(a), their exclusive
remedy (except as provided below in the last sentence of the penultimate
paragraph of this Section 9.2) shall be to offset and apply after complying with
Sections 9.3 and 9.4 any amounts that may be due from the Company or the Parent
to the Stakeholders against amounts payable to the Stakeholders under the
Subordinated Notes or to the extent issued, the Contingent Subordinated Notes;
provided however, that the Company and Parent may exercise the right of offset
against amounts payable under the Subordinated Notes only once the aggregate
amount of Losses exceeds $180,000 (the "Threshold Amount") but to the extent the
amount of the indemnification exceeds the Threshold Amount all amounts including
the Threshold Amount, subject to indemnification and offset shall be due and
payable; provided, however, any Losses arising from a breach of Section 3.3
(Capitalization; Shares) or Section 3.27 (Absence of Claims by Shareholders) or
any Claims arising from Stakeholder actions challenging the sufficiency of the
Merger Consideration or allocations set forth on Schedule 2.2 (collectively
"Stakeholder 2.2 Claims") may be offset against the Subordinated Notes without
regard to the Threshold Amount. Offset will be first made against the Contingent
Subordinated Notes, if issued, on a pro rata basis in proportion to the
outstanding amount thereof. To the extent the amount of Losses exceeds the face
amount (including accrued interest) of the Contingent Subordinated Notes,
offsets will be against the Existing Subordinated Notes on a pro rata basis in
proportion to the outstanding amount thereof. The aggregate amount of Losses
which may be offset shall be $3,500,000, of which only $2,000,000 may be for
liabilities that are not tax liabilities or Stakeholder 2.2 Claims.
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The parties hereto agree that the Parent's and Company's indemnification
hereunder, for any Losses arising from the Fischer Lime & Cement accidental
death incident from May, 1999 or the failure of the Seller to timely renew its
stormwater permit or arising from the IRS audit of the tax returns for the
period ended June 30, 1998 will not be subject to any limitation.
Notwithstanding anything to the contrary contained herein, there shall be no
limit on indemnification for Stakeholder 2.2 Claims, provided that the Company
and the Parent shall first exhaust their ability to claim further offsets
against the Existing Subordinated Notes or Contingent Subordinated Notes (if
issued) prior to resorting to other remedies. To the extent the Company's right
to offset pursuant to the last sentence of the first paragraph of this clause
(c) has been exhausted by Stakeholder 2.2 Claims and subsequently, the Company
incurs any Losses, the Company shall have the right to offset such Losses up to
the face amount (including accrued interest) of the Existing Subordinated Notes
and, if issued, the Contingent Subordinated Notes (with all offsets to be made
first against the Contingent Subordinated Notes if they have at that time been
issued, to the extent thereof, and then against the Existing Subordinated
Notes).
Notwithstanding anything to the contrary contained herein, provided the Merger
is consummated, the Parent and the Company's exclusive remedy for breach of a
representation, warranty or covenant by the Seller or the Majority Stakeholders
shall be to seek indemnification as provided in Sections 9.2, 9.3 and 9.4.
9.3 PROCEDURE FOR PAYMENT FOR THIRD-PARTY CLAIMS.
(a) A party entitled to indemnification hereunder
shall be referred to herein as an "Indemnified Party." A party obligated to
indemnify an Indemnified Party hereunder shall be referred to herein as an
"Indemnifying Party." If an Indemnified Party determines that it is or may be
entitled to indemnification hereunder with respect to claims for Losses
resulting from the assertion of liability by third parties, it shall give notice
("Claim Notice") to the Indemnifying Party (or if the Indemnifying Party is the
Shareholders, the Claim Notice shall be delivered to the Majority Stakeholders)
within 30 days of it becoming aware of any such claim and the facts upon which
any such claim for Losses will be based, and the Claim Notice shall set forth
such material information with respect thereto as is then reasonably available
to the Indemnified Party. The rights of the Indemnified Party in respect of
claims for Losses shall not be adversely affected by its failure to give notice
pursuant to the foregoing unless, and, if so, only to the extent that, as a
result of such failure to give notice, the Indemnifying Party incurs an
out-of-pocket expense or is materially prejudiced thereby. After receipt of the
Claim Notice, the Indemnifying Party shall be entitled, at any time that it so
elects, to assume the defense thereof, at its own expense. If the Indemnifying
Party does not so assume the defense, the Indemnified Party shall not, without
the prior written consent of the Indemnifying Party (which shall not be
unreasonably withheld or delayed), settle or compromise any Loss or consent to
entry of any judgment.
(b) The Indemnifying Party shall have the right to
defend, compromise or settle such claim for Losses if it assumes the defense of
such claim, at the cost and expense of the Indemnifying Party.
(c) The parties shall cooperate in the defense of
all third party claims. In connection with the defense of any claim, each party
shall make available to the party controlling such defense any
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<PAGE> 51
books, records or other documents within its control and access to employees
that are reasonably requested in the course of such defense.
9.4 NON-THIRD PARTY CLAIMS. In the event that an Indemnified
Party asserts the existence of a claim for Losses (excluding claims resulting
from the assertion of liability by third parties), it shall give written notice
to the Indemnifying Party specifying the nature and amount of the claim
asserted, provided that if the Indemnifying Party is a Shareholder, such notice
may be given to the Majority Stakeholders. If the Indemnifying Party, within 30
days or such greater time as may be necessary for the Indemnifying Party to
investigate such claim not to exceed 90 days, after receiving the notice from
the Indemnified Party, shall not give written notice to the Indemnified Party
announcing its intent to contest such assertion, such assertion shall be deemed
accepted and the amount of such claim shall be deemed a valid claim for Losses.
During the time period set forth in the preceding sentence, the Indemnified
Party shall cooperate fully with the Indemnifying Party in respect of such claim
for Losses. In the event that the Indemnifying Party contests the assertion of a
claim by giving such written notice to the Indemnified Party within said period,
the parties shall, acting in good faith, attempt to reach agreement with respect
to such claim within ten days after such notice. If the parties cannot reach
agreement, the claim or claims asserted shall be submitted to binding
arbitration pursuant to Section 10.12.
ARTICLE 10
GENERAL
10.1 NOTICES. All notices and other communications hereunder
shall be in writing and may be delivered personally, sent by fax, sent by a
nationally-recognized overnight courier, or mailed by registered or certified
mail, postage prepaid, return receipt requested. Any such notice sent by fax
shall be deemed given when transmitted upon receipt of a confirmation thereof,
any notice sent by overnight courier shall be deemed given one business day
after being delivered to the nationally-recognized overnight courier for next
business day delivery, and any such notice sent by registered or certified mail
shall be deemed given on the date such receipt is acknowledged or refused.
Notices should be sent as follows:
If to the Parent or the Company, addressed to:
TBM Holdings, Inc.
136 Main Street
Westport, Connecticut 06880
Attention: William A. Schwartz
Fax No.: (203) 227-1050
with a copy to:
Levett Rockwood P.C.
33 Riverside Avenue
Westport, Connecticut 06880
Attention: Cheryl L. Johnson, Esq.
Fax No.: (203) 226-8025
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If to the Seller or the Majority Stakeholders, addressed
to:
Long Reach Holdings, Inc.
c/o Lawrence Golub
Golub Associates, Inc.
230 Park Avenue, 19th Floor
New York, New York 10169
Attention: Lawrence Golub
Fax No. (212) 207-1579
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with a copy to:
Eaton & Van Winkle
3 Park Avenue
New York, New York 10016
Attn: Clement B. Wood, Esq.
Fax No. (212) 779-9928
If to the other Shareholders to:
D. Michael Buchanan
c/o Long Reach Holdings, Inc.
12300 Amelia Drive
Houston, Texas 77045
Fax No. (713) 433-5917
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.2 EXTENSION; WAIVER. At any time prior to the Closing,
each party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto and (c) waive compliance by the other
party with any of the agreements or conditions contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid if
set forth in an instrument in writing signed on behalf of such party by a senior
officer of the waiving party.
10.3 CHOICE OF LAW; CONSENT TO JURISDICTION. This Agreement
shall be governed by, construed, interpreted, and the rights of the parties
enforced in accordance with the internal laws of the State of Delaware.
10.4 AMENDMENT; ENTIRE AGREEMENT. This Agreement may not be
amended except by an instrument in writing signed by each of the parties hereto.
This Agreement, together with the exhibits and attachments hereto, and the
schedules hereto, constitutes the entire Agreement between the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations, and discussions,
whether oral or written, of the parties. Notwithstanding the foregoing, the
Seller shall have the right to amend and supplement the schedules hereto on or
prior to February 4, 2000.
10.5 COUNTERPARTS; HEADINGS. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. The headings of
the several Articles and Sections herein and the Table of Contents are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
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<PAGE> 54
10.6 PUBLICITY. No public announcement, press release, or
communication regarding the Merger shall be made without the prior written
consent (which consent shall not be unreasonably withheld) of the parties as to
the content and timing thereof, except as required by Applicable Law, including,
without limitation, federal securities laws. After the Closing, any public
statements and press releases shall be made by the Parent in its sole
discretion.
10.7 SEVERABILITY. If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable, or against its regulatory
policy, the remainder of the terms, provisions, covenants, and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated so long as the economic or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
Applicable Law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
10.8 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT. This Agreement
is not intended to confer upon any employee of the Seller, the Company or any
other Person, other than the parties hereto and their respective successors and
permitted assigns, any legal or equitable rights or remedies, except that, with
respect to the Indemnified Parties described in Section 9.3, the provisions of
said section are intended for the benefit of, and enforceable by, such Persons.
Neither this Agreement nor any of the rights, interests, or obligations of the
parties may be assigned by any party hereto, whether by operation of law or
otherwise, without the prior written consent of the other parties hereto and any
such assignment that is not consented to shall be null and void; provided,
however, the Company may assign its rights and obligations under this Agreement
to any of its Affiliates without the consent of Seller or the Shareholders.
Subject to the foregoing, this Agreement shall be binding on and inure to the
benefit of and be enforceable by the parties and their respective successors and
permitted assigns.
10.9 CONFIDENTIALITY. From the date hereof until the
Closing Date:
(a) The Parent, the Company and the Seller (together
with the Shareholders) acknowledge the confidential and proprietary nature of
the Confidential Information of the other party (as defined below), and agree
not to disclose and to hold and keep the same confidential as provided herein.
As used herein, the term "Confidential Information" means and includes any and
all:
(i) trade secrets concerning the business
and affairs of a Person, product specifications, data, know-how,
formulae, compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions and ideas, past, current, and
planned research and development, current and planned manufacturing
or distribution methods and processes, customer lists, current and
anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object
code and source code), computer software and database technologies,
systems, structures and architectures (and related processes,
formulae, composition, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods and information) and
any other information, however documented, that is a trade secret
within the meaning of applicable law; and
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<PAGE> 55
(ii) information concerning the business and
affairs of a Person (which includes historical financial statements,
financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key
personnel, personnel training techniques and materials), however
documented, that has been or may hereafter be provided or shown to
such Person by the other party hereto or by the directors, officers,
employees, agents, consultants, advisors, legal counsel,
accountants, financial advisors or other representatives of such
party. Any trade secrets of a Person will also be entitled to all of
the protections and benefits under Applicable Law.
(b) Each party agrees that the Confidential
Information of the other party (a) will be kept confidential by such party and
such party's representatives, and (b) without limiting the foregoing, will not
be disclosed by such party or the party's representatives to any person except
for the purpose of evaluating the transactions contemplated by this Agreement,
including the financing for such transactions.
(c) All of the foregoing obligations and
restrictions do not apply to that part of the Confidential Information that (a)
was or becomes generally available to the public other than as a result of a
disclosure in violation of this Section 10.9, (b) was available, or becomes
available, to a party on a non-confidential basis prior to its disclosure to
such party by the other party, or (c) in the reasonable opinion of such party,
is required to be disclosed by Applicable Law.
(d) If this Agreement terminates for any reason or
if the Merger is not consummated, then the parties hereto (i) will promptly
deliver to the other party all documents or other materials furnished to such
party constituting Confidential Information, together with all copies and
summaries thereof in the possession or under the control of the such party, and
(ii) will destroy materials generated by such party or such party's
representatives that include or refer to any part of the Confidential
Information, without retaining a copy of any such material.
(e) Notwithstanding anything to the contrary set
forth in this Agreement, in the event that either party defaults under or
breaches this Section 10.9, the other party shall be entitled to seek and obtain
money damages from the other party, and shall further be entitled to seek and
obtain an injunction or injunctions to prevent breaches of this Section 10.9
and/or to compel specific performance of this Section 10.9, and, in addition, to
obtain from such other party court costs and reasonable attorney's fees incurred
in the pursuit of remedies hereunder.
10.10 TAX IMPLICATIONS. The Shareholders shall be responsible
for obtaining such assurances regarding the tax implications to them personally
of the Merger as they deem appropriate, and shall assume the risk of any adverse
tax consequence to them personally relating to the Merger or any of the
transactions contemplated hereby. Neither the Company nor any Affiliate of the
Company makes or shall make any representations and warranties to or for the
benefit of the Shareholders with respect to such implications or consequences.
10.11 INTERPRETATION. The parties hereto acknowledge and agree
that: (i) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its revision; (ii) the rule
of construction to the effect that any ambiguities are resolved against the
drafting
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<PAGE> 56
party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
10.12 DISPUTE RESOLUTION. Any and all disputes, claims or
controversies arising out of or relating to this Agreement that are not resolved
within 10 business days may be submitted to final and binding arbitration in New
York City before J-A-M-S, or its successor, pursuant to the United States
Arbitration Act, 9 U.S.C. Sec. 1 et seq. A party may commence the arbitration
process called for in this agreement by filing a written demand for arbitration
with J-A-M-S, with a copy to all persons and entities entitled to notices
hereunder. The arbitration will be conducted in accordance with the provisions
of J-A-M-S' Streamlined Arbitration Rules and procedures in effect at the time
of filing of the demand for arbitration. The parties to the arbitration will
cooperate with J-A-M-S and with one another in selecting an arbitrator from
J-A-M-S' panel of neutrals, and in scheduling the arbitration proceedings so
that a final determination can be made within 30 days after submission to
arbitration. The parties to the arbitration covenant that they will participate
in the arbitration in good faith, and that they will share equally in its costs
except as provided in Section 10.13 below. The provisions of this Section 10.12
may be enforced by any court of competent jurisdiction, and the party seeking
enforcement shall be entitled to an award of all costs, fees and expenses,
including attorneys' fees, to be paid by the party against whom enforcement is
ordered.
10.13 LEGAL FEES. In connection with any action, arbitration
or legal proceeding brought in connection with this Agreement, the prevailing
party shall be entitled to full recovery of its legal fees and expenses from the
non-prevailing party.
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IN WITNESS WHEREOF, the Parent, the Company, the Seller, the
Subsidiary and the Shareholders have each caused this Agreement to be executed
by their respective officers as of the date first above written.
PARENT:
TBM HOLDINGS, INC.
By: /s/ William A. Schwartz
-----------------------------
Name: William A. Schwartz
Title: President
COMPANY:
TBM ACQUISITION I, INC., a Delaware
corporation
By: /s/ William A. Schwartz
-----------------------------
Name: William A. Schwartz
Title: President
SELLER:
LONG REACH HOLDINGS, INC., a Delaware
corporation
By: /s/ D. Michael Buchanan
-----------------------------
Name: D. Michael Buchanan
Title: President
SUBSIDIARY:
LONG REACH BRUDI PACIFIC PTY LTD.
By: /s/ D. Michael Buchanan
-----------------------------
Name: D. Michael Buchanan
Title: Director
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MAJORITY STAKEHOLDERS AND
HAREHOLDERS:
LEG PARTNERS, SBIC L.P.
By: Golub GP II Corporation,
General Partner
By: /s/ Lawrence E. Golub
---------------------------------
Lawrence E. Golub, President
LEG PARTNERS, L. P.
By: LEG GP Limited Partnership,
General Partner
By: Golub GP Corporation,
General Partner
By: /s/ Lawrence E. Golub
---------------------------------
Lawrence E. Golub, President
LEG PARTNERS, II L. P.
By: Golub GP II, LLC,
General Partner
By: /s/ Lawrence E. Golub
---------------------------------
Lawrence E. Golub, Managing Member
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SHAREHOLDERS:
/s/ D. Michael Buchanan
---------------------------------
D. Michael Buchanan
/s/ E. Peters
---------------------------------
D. E. Peters
/s/ R. A. Scott
---------------------------------
R. A. Scott
/s/ Fred R. Lummis
---------------------------------
Fred R. Lummis
SUMMIT CAPITAL, INC.
By:/s/ Fred R. Lummis
---------------------------------
Fred R. Lummis, President
/s/ Mary Anne Duncan
---------------------------------
Mary Anne Duncan
/s/ Charles W. Duncan, III
---------------------------------
Charles W. Duncan, III
DUNCAN EQUITIES & REAL ESTATE FUND, L.P.
By: Duncan Equities & Real Estate
Management, Inc., General Partner
By: /s/ Charles W. Duncan, III
---------------------------------
Charles W. Duncan, III, General Partner
DE-LR PARTNERS, L.P.
By: Duncan Equities, Inc., General Partner
By: /s/ Charles W. Duncan, III
---------------------------------
Charles W. Duncan, III, General Partner
BRENDA AND JOHN DUNCAN GROUP, LTD.
By: /s/ John H. Duncan
---------------------------
John H. Duncan
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<PAGE> 60
EXHIBIT A
FORM OF SUBORDINATED NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE NOTE UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED.
THIS NOTE IS SUBORDINATED TO CERTAIN SENIOR INDEBTEDNESS OF THE COMPANY. THE
HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT AMOUNTS
OWING WITH RESPECT TO THIS NOTE SHALL BE SUBORDINATED IN ACCORDANCE WITH THE
PROVISIONS OF THE SUBORDINATION AND STANDBY AGREEMENT DATED AS OF FEBRUARY ,
2000 AMONG THE ORIGINAL HOLDERS OF THE NOTES, BANK ONE, TEXAS, N.A. AND THE
COMPANY, AND THE HOLDER ACCEPTS AND AGREES TO BE BOUND BY SUCH PROVISIONS.
TBM ACQUISITION I, INC.
SUBORDINATED PROMISSORY NOTE
$______________ February _____, 2000 Westport, Connecticut
TBM ACQUISITION I, INC., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to ______________________
(the "Holder"), or registered assigns, in lawful money of the United States of
America, the principal sum of ______________ Dollars ($ _______) or such lesser
principal amount as shall then be unpaid, or, if not sooner paid on February
___, 2005, and shall accrue interest (computed on the basis of the actual number
of days elapsed over a year of 360 days) from the date hereof on the unpaid
principal amount hereof at a rate of six percent (6.0%) per annum, compounded
monthly, subject to adjustment as provided herein. Interest accruing on this
Note until [February 1, 2002] shall be added to principal.
Commencing on [March 1, 2002] and thereafter on the first day
of each month occurring during the remainder of the term of this Note, the
Company shall make payments of interest as follows: (i) from [March 1, 2002]
through and including [ February 1, 2004], at a rate of six percent (6.0%) per
annum, and (ii) from March 1, 2004 through maturity, at a rate per
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<PAGE> 61
annum equal to the Senior Debt Rate (as defined in the Merger Agreement) plus
two percent (2.0%).
If any principal of or interest on this Note is not paid when
due, or there exists a material Event of Default, this Note shall bear interest
thereafter, until such overdue principal or interest is paid in full or such
material Event of Default is cured, at a rate per annum equal to the Senior Debt
Rate plus two percent (2.0%).
Payments of principal and interest shall be made in lawful
currency of the United States of America by check mailed and addressed to the
registered holder hereof at the address shown in the register maintained by the
Company for such purpose, or, at the option of the Holder, at such other place
in the United States of America as the Holder shall have designated to the
Company in writing.
This Note is one of the Subordinated Notes (collectively, the
"Notes") referred to in, and is entitled to the benefits and obligations of (i)
the Agreement and Plan of Merger dated January , 2000 among the Company, TBM
Holdings, Inc. (the "Parent"), Long Reach Holdings Inc. ("LRH") and certain
shareholders of LRH, (the "Merger Agreement"), pursuant to which LRH was merged
with and into the Company on February , 2000, (ii) the Guaranty dated
February , 2000 (the "Guaranty") by the Parent in favor of the Holder and the
holders of the other Notes (collectively, the "Holders"), and (iii) the Security
Documents referred to below (the Notes, the Merger Agreement, the Guaranty and
the Security Documents being collectively referred to as the "Note Documents").
Capitalized terms used herein without definition have the
meanings given thereto in the Merger Agreement.
The Notes may be prepaid, in whole at any time or in part from
time to time, without premium or penalty, provided that any such prepayment
shall be made pro rata among all the Notes.
This Note is a registered Note and is transferable only by
surrender hereof at the principal office of the Company in Westport,
Connecticut, duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of this Note or his attorney duly
authorized in writing. The Company may treat the registered holder hereof (or,
when presented duly endorsed, the holder hereof) as the absolute owner of this
Note for the purpose of receiving any payments hereon and for all other
purposes; and each holder from time to time of this Note, by accepting or
holding the same, consents to and agrees with the provisions hereof.
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<PAGE> 62
Collateral Security for the Notes
The Notes are secured pursuant to the following security
documents (the "Security Documents"): (i) the Security Agreement dated as of
April 20, 1999, as amended as of February , 2000, by the Company (as successor
by merger to LRH) in favor of Golub Associates Incorporated, as agent (the
"Agent") for the Holders, and (ii) the Subordinated Deed of Trust, Security
Agreement and Assignment of Rents and Leases dated as of April 20, 1999, as
amended as of February , 2000, by the Company (as successor by merger to LRH)
in favor of the Agent, in respect of the Company's property located at 12300
Amelia Drive, Houston, Texas 77045.
Covenants of the Company
1. The Company agrees that, without the prior written consent of
the Majority Stakeholders, so long as any amounts are due and owing under the
Notes, the Company will not:
(a) incur any indebtedness or guaranty obligation which ranks pari
passu with or senior to the Notes, except for the Senior Debt and other
indebtedness which ranks pari passu (both as to payment and collateral security)
with the existing Senior Debt;
(b) sell, lease, transfer or otherwise dispose of any of its
properties, assets and rights to any person except (i) sales of inventory in the
ordinary course of business, (ii) sales or other dispositions in the ordinary
course of business of equipment which is obsolete, uneconomical or no longer
useful in its business or which is being replaced with other equipment of
substantially equal or greater utility, (iii) dispositions of obsolete
inventory, and (iv) other sales or other dispositions of property, the aggregate
fair market value of which, together with all such other property so sold or
disposed of in any 12-month period, shall not exceed 20% of the Company's
consolidated tangible assets as at the beginning of such 12-month period;
provided, that if the holder(s) of the Senior Debt (the "Senior Lender")
consents to actions of the Company set forth above in this paragraph (b), the
Holder shall be deemed to have consented to such action;
(c) (i) declare or pay, or set apart any funds for the payment of,
any dividends in any fiscal year on any shares of its capital stock ("Shares")
of the Company, (ii) apply any of its funds, property or assets to, or set apart
any funds, property or assets for, the purchase, redemption or retirement of, or
make any distribution, by reduction of capital or otherwise, in respect of any
of its Shares or other securities, whether now or hereafter outstanding, except
that any Subsidiary may from time to time declare and pay dividends to the
Company and the Company may make distributions to the Parent in order to satisfy
any tax liability of the Parent resulting solely from the operations of the
Company;
(d) except as provided in the next sentence of this paragraph (d),
transfer any cash or property to any Affiliate of the Company, enter into any
contract or transaction with any such
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<PAGE> 63
Affiliate, or modify any outstanding contract or transaction with any such
Affiliate, including without limitation the purchase, lease, sale or exchange of
property or the rendering of any service to any such Affiliate. Notwithstanding
anything to the contrary contained in this paragraph (d), without the consent of
the Majority Holders the Company may (i) pay compensation to its full-time
employees (whether or not Affiliates) in the ordinary course of business in
amounts that are customary for businesses similar to that of the Company to pay
to employees with similar responsibilities, (ii) pay compensation to any
employee hired pursuant to the Consulting Agreement with TBM Consulting, Inc.,
and (iii) so long as no Default or Event of Default is in existence or would be
caused thereby, pay compensation to TBM Consulting, Inc. or to a stockholder or
Affiliate of the Company who is not an employee of the Company for services
rendered in accordance with the provisions of an agreement which is approved by
a majority of the disinterested members of the Company's Board of Directors and
is on terms comparable in all material respects to the terms which would prevail
in an arm's-length transaction between unaffiliated third parties; or
(e) make any principal payment of or interest payment on, or
purchase or acquire, or prepay, any indebtedness which is subordinate or junior
to, or pari passu with, the Notes other than trade debt, or permit any notes or
agreements evidencing indebtedness which is subordinate or junior to, or pari
passu with, the Notes, or any subordination agreement executed in connection
therewith, to be modified or amended or any agreement or consent to be given
thereunder, whereby (i) any provisions thereof relating to the subordination
thereof to the Notes are waived, modified or discharged, or (ii) there is any
acceleration of the maturities therein provided.
2. The Company agrees that it will:
(a) (i) permit one non-voting representative designated by the
Majority Stakeholders to attend all meetings of the Board of Directors (or any
comparable governing body), and of all committees thereof, of each of the Parent
and the Company, (ii) pay the reasonable expenses of such representative in
connection with meetings and other activities of such Boards of Directors,
committees thereof or other such governing bodies of the Parent and the Company,
(iii) provide to such representative all notices, documents and information
furnished to the directors of each of the Parent and the Company, at the same
time as furnished to such directors, and (iv) use best efforts to notify such
representative of, and permit such representative to participate by telephone
in, emergency meetings of the Boards of Directors, committees thereof or other
such governing bodies of each of the Parent and the Company, and to provide such
representative copies of the minutes of all such meetings promptly after they
are held;
(b) maintain in full force and effect (i) insurance of the types
referred to in Section 3.14 of the Merger Agreement which covers at least the
same risks as the insurance maintained by LRH immediately prior to its merger
into the Company, and which is in amounts equal to or
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<PAGE> 64
greater than the insurance maintained by LRH at such time, and (ii) directors'
and officers' liability insurance for the benefit of LRH's pre-Merger directors,
officers and Majority Stakeholders (at the expense of the Majority
Stakeholders);
(c) keep proper books of record and account in which full and true
entries will be made of all dealings or transactions relating to the business
and affairs of the Company, and the Company shall cause to be furnished to the
Holder:
(i) as soon as practicable and in any event within thirty
(30) days after the end of each month, but only if the same are
prepared for internal use by the Company or for creditors, equity
holders or others: (x) unaudited consolidated statements of income,
retained earnings and cash flows of the Company and its consolidated
Subsidiaries for such month, and unaudited consolidated balance sheets
of the Company and its consolidated Subsidiaries as of the end of such
month, in the forms prepared by the Company and its consolidated
Subsidiaries for their internal use consistent with past practice, and
(y) in comparative form, figures for the actual results for the
corresponding month in the immediately preceding fiscal year) and
amounts projected for such month, together with explanations of any
material variances;
(ii) at the same time furnished to the Senior Lender, a copy
of all financial and other information furnished to the Senior Lender;
and
(iii) as soon as practicable (but in any event not more than
five (5) business days after any officer of the Company obtains
knowledge of the occurrence of an event or the existence of a
circumstance giving rise to a Default or an Event of Default), notice
of any and all Defaults and Events of Default hereunder;
(d) Golub Associates Incorporated, as agent (the "Agent") for the
Holders, or any person designated by such agent, shall have the right, from time
to time hereafter, upon prior notice to the Company to call at the place or
places of business of the Company during ordinary business hours (i) to inspect,
audit and check any of their books, records, journals, orders, receipts and any
correspondence and other data relating to the business of the Company or to any
transactions among the parties to the Note Documents, and (ii) to discuss the
affairs, finances and business of the Company with any of its officers or
directors;
(e) the Company shall, and shall cause each Subsidiary to (i)
maintain its corporate existence, (ii) maintain in full force and effect all
bonds, franchises, patents and trademarks, and all governmental licenses,
permits and authorizations, in each case which are material to the conduct of
its business, (iii) maintain in full force and effect all leases, contracts and
other rights, and all non-governmental licenses, permits and authorizations, in
each case the loss of which would have a Material Adverse Effect, unless the
Company is able to replace the same to the reasonable satisfaction of the
Holders within 30 days, and (iv) comply with all applicable laws,
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orders, regulations and ordinances of all Governmental Authorities, except for
such laws, orders, regulations and ordinances the violation of which would not
be reasonably likely to have a Material Adverse Effect;
(f) the Company shall pay or cause to be paid all of the Company's
license fees, bonding premiums and related taxes and charges and shall pay or
cause to be paid all of the Company's real and personal property taxes,
assessments and charges and all of the Company's franchise, income,
unemployment, use, excise, old age benefit, withholding, sales and other taxes
and other governmental charges assessed against the Company, or payable by the
Company, at such times and in such manner as to prevent any penalty from
accruing or any lien or charge from attaching to its property (except for liens
or charges relating to such taxes that are not yet payable), provided that the
Company shall have the right to contest in good faith, by an appropriate
proceeding promptly initiated and diligently conducted, the validity, amount or
imposition of any such tax, assessment or charge, and upon such good faith
contest to delay or refuse payment thereof, if the Company establishes adequate
reserves to cover such contested taxes, assessments or charges;
(g) the Company shall, as soon as possible, and in any event
within five (5) days after the Company learns of any of the following, give
written notice to the Holder of:
(i) any proceeding(s) being instituted or threatened to be
instituted by or against the Company in any federal, state, local or
foreign court or before any Governmental Authority in which injunctive
relief is requested or in which the amount in controversy exceeds
$50,000, and any litigation, proceeding, investigation or claim that
relates in any material way to (i) any of the Note Documents, or (ii)
the Certificate of Incorporation or By-laws of the Company;
(ii) any change in the business, assets or condition,
financial or otherwise, of the Company which can reasonably be expected
to have a Material Adverse Effect; and
(iii) the occurrence of any Event of Default as defined in the
documents governing any Senior Debt; and
(h) the Company shall promptly provide the Holder with copies of
all amendments, consent letters, waivers or modifications to, and any material
notices or reports provided by any Person to the Company pursuant to the terms
of or in connection with, any Note Document or any document governing the Senior
Debt, or the Certificate of Incorporation or By-laws of the Company, or by the
Company to any such Person.
Events of Default
If any of the following conditions or events shall occur and be
continuing:
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(1) the Company fails to pay all or any portion of the
principal of the Notes when due; or the Company fails to pay any
interest on the Notes and such failure continues for more than ten (10)
days after such interest becomes due in accordance with the terms
hereof; or
(2) the Company or the Parent, as the case may be, shall
default in the performance of or compliance with any other term of the
Note Documents, and such default shall continue for thirty (30) days
(or, if such default is susceptible of cure, an additional period of up
to thirty (30) days so long as the Company or the Parent, as the case
may be, is diligently working to cure or remedy the same); or a default
shall occur under any other indebtedness or guaranty of the Company or
Parent or under any agreement relating thereto; or
(3) any warranty or representation heretofore, now or
hereafter made by the Company or the Parent in or pursuant to the
Merger Agreement or the Guaranty is untrue or incorrect in any material
respect, or any schedule, certificate, statement, report, financial
data, notice or other writing furnished at any time to the Majority
Stakeholders by the Company or the Parent under or pursuant to the
Merger Agreement or the Guaranty, is untrue or incorrect in any
material respect on the date as of which made; or
(4) the Company or the Parent shall make an assignment for
the benefit of creditors, or shall admit in writing its inability to
pay its debts generally as they become due, or shall file a voluntary
petition in bankruptcy, or shall file any petition or answer seeking
for itself any reorganization, arrangement, composition, adjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, or shall file any answer admitting or not
contesting the material allegations of a petition filed against it in
any such proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of it or of all or
any substantial part of its properties, or it or its directors shall
take any action looking to its dissolution or liquidation; or the
Company or the Parent voluntarily or involuntarily dissolves or is
dissolved, or its existence terminates or is terminated; or the Company
or the Parent becomes insolvent or fails generally to pay its debts as
they become due; or
(5) within 90 days after the commencement of any action
against the Company or the Parent seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any present or future statute, law or regulation,
such action shall not have been dismissed or all orders or proceedings
thereunder affecting its operations or the business stayed, or if the
stay of any such order or proceeding shall thereafter be set aside, or
within 90 days after the appointment without the consent or
acquiescence of the Company or the Parent or of any trustee,
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receiver or liquidator of it or of all or any substantial part of
properties, such appointment shall not have been vacated; or
(6) any material portion of the assets of the Company or the
Parent is attached, seized, subjected to a writ or distress warrant, or
is levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors; or
(7) the Agent, for the benefit of the Holders, shall cease
to have a valid and perfected security interest in or mortgage of any
of the collateral or property securing the Notes, subject only to the
prior security interest therein or mortgage thereof in favor of the
Senior Lender; or
(8) the Guaranty or any Security Document shall cease to be
in full force and effect or shall be declared by a court or other
Governmental Authority of competent jurisdiction to be void, voidable
or unenforceable against any obligor party thereto; the validity or
enforceability of any thereof against any Obligor party thereto shall
be contested by any Obligor or any Affiliate; or any Obligor or
Affiliate shall deny that any Obligor has any further liability or
obligation thereunder; or
(9) there shall occur a Change of Control (as defined below)
of the Parent; or the Parent shall no longer own all of the outstanding
capital stock of the Company;
then, and in any such event, (x) if such event is of the type described in
paragraph (4) or (5) above, the Notes shall automatically become due and
payable, or (y) in any other such event, and at any time thereafter, the
Majority Holders by notice to the Company may declare the entire outstanding
principal amount of the Notes to be, and the same shall thereupon become,
immediately due and payable.
As used herein, "Default" shall mean any of the events
specified in paragraphs (1) through (9) above, whether or not any requirement
for the giving of notice, the lapse of time, or both, or the happening of any
other condition, has been satisfied; and "Event of Default" shall mean any of
the events specified in paragraphs (1) through (9) above, provided that any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
As used herein, "Change of Control" shall mean the occurrence
of any of the following events: (i) any person or any persons acting together
which would constitute a "group" for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (other than TBM Consulting Group, Inc., Colt
Services, Inc., J.H. Whitney & Co. and each of their respective Affiliates),
together with any Affiliates thereof, shall beneficially own, directly or
indirectly, at least 50% of the total voting stock of the Parent; or (ii) all or
substantially all of the
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Parent's assets are sold as an entirety to any person or related group of
persons or there shall be consummated any consolidation or merger of the Parent
(A) in which the Parent is not the continuing or surviving corporation (other
than a consolidation or merger with a wholly-owned Subsidiary of the Parent in
which all shares of Common Stock of the Parent outstanding immediately prior to
the effectiveness thereof are changed into or exchanged for the same
consideration) or (B) pursuant to which the Common Stock of the Parent would be
converted into cash, securities or other property, other than (in the case of
each of (A) and (B) above) a sale of assets or consolidation or merger of the
Parent in which the holders of the Common Stock of the Parent immediately prior
to the sale of assets or consolidation or merger have, directly or indirectly,
at least a majority of the common stock of the transferee or continuing or
surviving corporation immediately after such sale of assets or consolidation or
merger.
No remedy granted under the Note Documents or otherwise
available to the Holder is intended to be exclusive of any other available
remedy, but each and every remedy shall be cumulative and in addition to every
other remedy granted to the Holder under the Note Documents. The Holder may
exercise any all remedies concurrently or in any order which the Holder, in its
sole discretion, elects.
This Note shall be governed by and construed in accordance
with the laws of the State of Connecticut.
TBM ACQUISITION I, INC.
By:
----------------------------
Name:
Title:
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EXHIBIT B
FORM OF GUARANTY AGREEMENT
GUARANTY, dated as of February ___, 2000, by TBM Holdings,
Inc. (the "Parent"), in favor of Golub Associates Incorporated, as agent (the
"Agent") for the benefit of the holders from time to time of the Subordinated
Notes hereinafter referred to (the "Noteholders").
W I T N E S S E T H:
WHEREAS, capitalized terms used in this Guaranty have the
meanings given thereto in the Agreement and Plan of Merger, dated as of January
___, 2000, among the Parent, TBM Acquisition I, Inc. (the "Company"), Long Reach
Holdings, Inc. ("LRH") and certain shareholders of LRH (the "Merger Agreement");
WHEREAS, the Parent is sole holder of all of the capital stock
of the Company; and
WHEREAS, the Noteholders are unwilling to consummate the
transactions contemplated by the Merger Agreement unless the Parent issues this
Guaranty;
NOW, THEREFORE, in consideration of the premises, the Parent
hereby agrees with and for the benefit of the Agent and the Noteholders as
follows:
1. Guaranty. The Parent hereby unconditionally guarantees
to the Agent for the benefit of the Noteholders and their respective successors,
endorsees, transferees and assigns, (a) the prompt payment when due of (whether
at stated maturity, upon demand, by acceleration or otherwise, including amounts
which would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) or any successor
provision thereto or any comparable provision under the laws of any foreign
jurisdiction), and the faithful performance of and compliance with, all
obligations of the Company now or hereafter existing under the Subordinated
Notes (as defined in the Merger Agreement) whether for principal, interest,
fees, expenses or otherwise (the "Obligations"), and (b) the prompt and complete
payment on demand of any and all out-of-pocket expenses incurred by or on behalf
of the Agent or the Noteholders in enforcing any rights under this Guaranty
("Expenses"). The Parent will take all lawful and reasonable steps to assist the
Agent and the Noteholders in their efforts to collect the Obligations.
2. No Subrogation, Contribution, Reimbursement or
Indemnity. Notwithstanding anything to the contrary in this Guaranty, the Parent
hereby irrevocably waives all rights which may have arisen in connection with
this Guaranty to be subrogated to any of the rights of the Agent or the
Noteholders against any other party or against any collateral security or
guaranty held by the Agent or the Noteholders for the payment of the Obligations
hereunder as
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long as this Guaranty remains in effect. The Parent hereby further irrevocably
waives all contractual, common law, statutory or other rights of reimbursement,
contribution or exoneration (or any similar right) from or against any other
person which may have arisen in connection with this Guaranty.
3. Guaranty Absolute. (a) The liabilities of the Parent
under this Guaranty shall be absolute and continuing guaranties of payment and
performance (and not merely of collection) and shall in no way be released,
limited or affected by: (i) the validity, regularity, or enforceability of the
Subordinated Notes, the Security Documents referred to therein or any other
agreement or instrument relating to the Obligations; (ii) any change in the
time, manner, or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to or departure
from the Subordinated Notes; (iii) any exchange, release, or non-perfection of
any collateral, or any release or amendment or waiver of, or consent to or
departure from any other guaranty, securing all or any of the Obligations; or
(iv) any other circumstance which might otherwise constitute a defense available
to, or a discharge of, the Company or the Parent in respect of the Obligations.
(b) This Guaranty shall continue to be effective, or be
reinstated, as the case may be, if at any time any payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned
by the Agent or the Noteholders upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company, the Parent or any other person, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Company or any other person, or any
substantial part of any of their respective property, or otherwise, all as
though such payments had not been made. This provision shall survive any
termination of this Guaranty. Neither the Agent nor the Noteholders shall be
required (i) to proceed against the Company, or any other person, corporation,
or other business entity, or any collateral securing all or any of the
Obligations before resorting to the Parent for payment, or (ii) to protect,
secure, perfect or insure any collateral security document or property subject
thereto at any time held as security for the Obligations or this Guaranty.
(c) The Parent shall remain obligated hereunder notwithstanding
that, without any reservation of rights against the Parent and without notice to
or further assent by the Parent (i) any demand for payment of any of the
Obligations hereunder made by or on behalf of the Agent or the Noteholders may
be rescinded by or on behalf of the Agent or the Noteholders and any of the
Obligations continued, (ii) the obligations, or the liability of the Company or
any other party upon or for any part thereof, or any collateral security or
guaranty therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by or on behalf of the Agent or the
Noteholders, as the Agent or the Noteholders may deem advisable from time to
time, (iii) the Subordinated Notes and the Security Documents referred to
therein, and any agreement, instrument, schedule, annexure, supplement,
collateral security document or guaranty, or other document delivered in
connection therewith, may be amended, modified, increased, renewed, extended,
supplemented or terminated, in whole or in part, as the Agent or
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the Noteholders may deem advisable from time to time, and (iv) any collateral
security, guaranty or right of offset at any time held by the Agent or the
Noteholders for the payment of the obligations may be sold, exchanged, waived,
surrendered or released.
(d) Subject to paragraph 3(b) above, the Parent's obligations
under this Guaranty shall terminate one year and one day following the payment,
performance and satisfaction in full of all of the Obligations and Expenses.
4. Covenants.
I. The Parent agrees that, without the prior written consent of
the Agent, so long as any amounts are due and owing under the Notes, the Parent
will not:
(a) (i) declare or pay, or set apart any funds for the payment of,
any dividends in any fiscal year on any shares of its capital stock ("Shares")
of the Parent, (ii) apply any of its funds, property or assets to, or set apart
any funds, property or assets for, the purchase, redemption or retirement of, or
make any distribution, by reduction of capital or otherwise, in respect of any
of its Shares or other securities, whether now or hereafter outstanding, except
that the Company may make distributions to the Parent in order to satisfy any
tax liability of the Parent resulting solely from the operations of the Company
any other Subsidiary may from time to time declare and pay dividends to the
Parent and; or
(b) except as provided in the next sentence of this paragraph (b),
transfer any cash or property to any Affiliate of the Parent, enter into any
contract or transaction with any such Affiliate, or modify any outstanding
contract or transaction with any such Affiliate, including without limitation
the purchase, lease, sale or exchange of property or the rendering of any
service to any such Affiliate. Notwithstanding anything to the contrary
contained in this paragraph (b), without the consent of the Agent the Parent may
(i) pay compensation to its full-time employees (whether or not Affiliates) in
the ordinary course of business in amounts that are customary for businesses
similar to that of the Parent to pay to employees with similar responsibilities,
(ii) pay compensation to any employee hired pursuant to the Consulting Agreement
with TBM Consulting, Inc., (iii) pay compensation to TBM Consulting, Inc.
pursuant to the Consulting and Management Services Agreement between the Parent
and TBM Consulting, Inc., (iv) pay compensation to Colt Services, Inc. ("Colt")
pursuant to the Consulting agreement between Colt and the Parent, (v) pay
compensation to either Colt or TBM Consulting, Inc. pursuant to the Consulting
Agreement among Colt, TBM Consulting, Inc. and the Parent, and (vi) so long as
no Default or Event of Default is in existence or would be caused thereby, pay
compensation to TBM Consulting, Inc. or to a stockholder or Affiliate of the
Parent who is not an employee of the Parent for services rendered in accordance
with the provisions of an agreement which is approved by a majority of the
disinterested members of the Parent's Board of Directors and is on terms
comparable in all material respects to the terms which would prevail in an
arm's-length transaction between unaffiliated third parties.
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II. The Parent agrees that it will:
(a) (i) permit one non-voting representative designated by
the Majority Stakeholders to attend all meetings of the Board of Directors (or
any comparable governing body), and of all committees thereof, of each of the
Parent and the Company, (ii) pay the reasonable expenses of such representative
in connection with meetings and other activities of such Boards of Directors,
committees thereof or other such governing bodies of the Parent and the Company,
(iii) provide to such representative all notices, documents and information
furnished to the directors of each of the Parent and the Company, at the same
time as furnished to such directors, and (iv) use best efforts to notify such
representative of, and permit such representative to participate by telephone
in, emergency meetings of the Boards of Directors, committees thereof or other
such governing bodies of each of the Parent and the Company, and to provide such
representative copies of the minutes of all such meetings promptly after they
are held;
(b) (i) maintain in full force and effect insurance of the types
referred to in Section 3.14 of the Merger Agreement which covers at least the
same risks as the insurance maintained by LRH immediately prior to its merger
into the Company, and which is in amounts equal to or greater than the insurance
maintained by LRH at such time, and (ii) cause the Company to maintain in full
force and effect directors' and officers' liability insurance for the benefit of
LRH's pre-Merger directors, officers and Majority Stakeholders (at the expense
of the Majority Stakeholders);
(c) keep proper books of record and account in which full and true
entries will be made of all dealings or transactions relating to the business
and affairs of the Parent, and the Parent shall cause to be furnished to the
Agent:
(i) as soon as practicable and in any event within thirty
(30) days after the end of each month, but only if the same are
prepared for internal use by the Parent or for creditors, equity
holders or others: (x) unaudited consolidated statements of income,
retained earnings and cash flows of the Parent and its consolidated
Subsidiaries for such month, and unaudited consolidated balance sheets
of the Parent and its consolidated Subsidiaries as of the end of such
month, in the forms prepared by the Parent and its consolidated
Subsidiaries for their internal use consistent with past practice, and
(y) in comparative form, figures for the actual results for the
corresponding month in the immediately preceding fiscal year) and
amounts projected for such month, together with explanations of any
material variances;
(ii) at the same time furnished to the Senior Lender, a copy
of all financial and other information furnished to the Senior Lender;
and
(iii) as soon as practicable (but in any event not more than
five (5) business days after any officer of the Parent obtains
knowledge of the occurrence of an event or the
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existence of a circumstance giving rise to a Default or an Event of
Default), notice of any and all Defaults and Events of Default
hereunder;
(d) the Agent, or any person designated by the Agent, shall have
the right, from time to time hereafter, to call at the place or places of
business of the Parent during ordinary business hours (i) to inspect, audit and
check any of their books, records, journals, orders, receipts and any
correspondence and other data relating to the business of the Parent or to any
transactions among the parties to the Note Documents, and (ii) to discuss the
affairs, finances and business of the Parent with any of its officers or
directors;
(e) the Parent shall, and shall cause each Subsidiary to (i)
maintain its corporate existence, (ii) maintain in full force and effect all
bonds, franchises, patents and trademarks, and all governmental licenses,
permits and authorizations, in each case which are material to the conduct of
its business, (iii) maintain in full force and effect all leases, contracts and
other rights, and all non-governmental licenses, permits and authorizations, in
each case the loss of which would have a Material Adverse Effect, unless the
Parent is able to replace the same to the reasonable satisfaction of the Agent
within 30 days, and (iv) comply with all applicable laws, orders, regulations
and ordinances of all Governmental Authorities, except for such laws, orders,
regulations and ordinances the violation of which would not be reasonably likely
to have a Material Adverse Effect;
(f) the Parent shall pay or cause to be paid all of the Parent's
license fees, bonding premiums and related taxes and charges and shall pay or
cause to be paid all of the Parent's real and personal property taxes,
assessments and charges and all of the Parent's franchise, income, unemployment,
use, excise, old age benefit, withholding, sales and other taxes and other
governmental charges assessed against the Parent, or payable by the Parent, at
such times and in such manner as to prevent any penalty from accruing or any
lien or charge from attaching to its property (except for liens or charges
relating to such taxes that are not yet payable), provided that the Parent shall
have the right to contest in good faith, by an appropriate proceeding promptly
initiated and diligently conducted, the validity, amount or imposition of any
such tax, assessment or charge, and upon such good faith contest to delay or
refuse payment thereof, if the Parent establishes adequate reserves to cover
such contested taxes, assessments or charges;
(g) the Parent shall, as soon as possible, and in any event within
five (5) days after the Parent learns of any of the following, give written
notice to the Agent of:
(i) any proceeding(s) being instituted or threatened to be
instituted by or against the Parent in any federal, state, local or
foreign court or before any Governmental Authority in which injunctive
relief is requested or in which the amount in controversy exceeds
$50,000, and any litigation, proceeding, investigation or claim that
relates in any material way to (i) any of the Note Documents, or (ii)
the Certificate of Incorporation or By-laws of the Parent;
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(ii) any change in the business, assets or condition,
financial or otherwise, of the Parent which can reasonably be expected
to have a Material Adverse Effect; and
(iii) the occurrence of any Event of Default as defined in the
documents governing any Senior Debt; and
(h) the Parent shall promptly provide the Agent with copies of all
amendments, consent letters, waivers or modifications to, and any material
notices or reports provided by any Person to the Parent pursuant to the terms of
or in connection with, any Note Document or any document governing the Senior
Debt, or the Certificate of Incorporation or By-laws of the Parent, or by the
Parent to any such Person.
5. Default. If any Event of Default (as defined in the
Subordinated Notes) shall occur, then the Obligations shall at the election of
the Agent be deemed immediately due and payable and the Parent's liabilities
hereunder shall forthwith become and be immediately due and payable.
6. Demands and Notices. The Parent hereby waives demand,
presentment, protest, notice of acceptance and all other demands and notices of
any description in connection with this Guaranty.
7. No Waiver; Remedies Cumulative. No failure to exercise
and no delay in exercising, on the part of the Agent or the Noteholders, any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege preclude any
other or further exercise thereof, or the exercise of any other power or right.
The rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies provided by law.
8. Payments. The Parent hereby guarantees that payments
hereunder by the Parent will be paid to the Agent for the benefit of the
Noteholders in U.S. Dollars at the Agent's office at 230 Park Avenue, 19th
Floor, New York, NY 10169.
9. Severability. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. The paragraph headings
used in this Guaranty are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
10. Rights Limited to Agent and Noteholders. This Guaranty
shall not create any right in any person except the Agent and the Noteholders
(and their permitted successors and
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assigns), and shall not be construed in any respect to be a contract in whole or
in part for the benefit of any other person.
11. Further Assurances. The Parent agrees that at any time
and from time to time upon the reasonable written request of the Agent or the
Noteholders, the Parent will furnish to the Agent or the Noteholders such
information and execute and deliver such further documents and instruments and
do such other things as the Agent or the Noteholders may reasonably request in
order to preserve the Agent and/or the Noteholders' rights under, and otherwise
to effect the purposes of, this Guaranty.
12. Integration; Waivers and Amendments; Successors and
Assigns; Governing Law. This Guaranty represents the agreement of the Parent
with respect to the subject matter hereof and there are no promises or
representations relative to the subject matter hereof not reflected in this
Guaranty, the Merger Agreement, the Subordinated Notes or the Security Documents
referred to therein. None of the terms or provisions of this Guaranty may be
waived, amended or supplemented or otherwise modified except by a written
instrument executed by the Parent and the Agent. This Guaranty shall be binding
upon the assigns of the Parent and shall inure to the benefit of the Agent and
the Noteholders and their respective successors and assigns. This Guaranty may
not be assigned by the Parent without the prior written consent of the Agent and
the Noteholders. This Guaranty shall be governed by and be construed and
interpreted in accordance with the laws of the State of Connecticut. EACH OF THE
AGENT, THE NOTEHOLDERS AND THE PARENT HEREBY WAIVES TRIAL BY JURY IN ANY ACTION
ARISING OUT OF THIS GUARANTY AND ANY COUNTERCLAIM THEREON.
13. Submission to Jurisdiction; Waiver of Jury Trial. The
Parent represents that the Parent has no immunity with respect to any action or
proceeding brought in connection with this Guaranty, and agrees that any legal
or equitable action or proceeding with respect to this Guaranty may be brought
in any Federal or State court of competent jurisdiction located in the State of
Connecticut and, by execution and delivery of this Guaranty, the Parent accepts
for the Parent the jurisdiction of the aforesaid courts and any related
appellate court, and irrevocably waives any objection the Parent may now or
hereafter have as to the venue of any such action or proceeding brought in such
a court or that such court is an inconvenient forum. Nothing herein shall affect
the right of the Agent or the Noteholders to serve process in any other manner
prescribed by law or the right to bring legal or equitable actions or
proceedings in other competent jurisdictions. Any judicial proceeding by the
Parent against the Agent and/or the Noteholders involving, directly or
indirectly, any matter in any way arising out of, related to or connected with
this Guaranty shall be brought only in a court located in the State of
Connecticut.
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IN WITNESS WHEREOF, the undersigned has executed this Guaranty
as of the date first above written.
TBM HOLDINGS, INC.
By:
------------------------------
Name:
Title:
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EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT
AGREEMENT made as of the _____ day of ________________, 2000 (the
"Effective Date"), between Long Reach Holdings, Inc., a Delaware corporation
(the "Company"), and D. MICHAEL BUCHANAN, an individual (the "Executive").
1. EMPLOYMENT.
(a) The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to serve the Company, on the terms and
conditions set forth herein.
(b) The Executive represents and warrants to the Company
that by entering into and performing the Executive's obligations under
this Agreement, the Executive has not breached and will not breach
duties or obligations (whether fiduciary, contractual or arising by
operation of law or otherwise) owed to any third party, whether in
connection with any prior employment or position or otherwise.
2. TERM. Subject to the provision for termination as hereinafter
provided, the Executive's employment by the Company under this Agreement shall
commence on the Effective Date and continue for a term of two years from the
date hereof (such period or earlier terminated pursuant to Section 7, the
"Employment Period").
3. POSITION AND DUTIES. The Executive shall initially serve as
President of the Company and shall have such responsibilities, duties and
authority as are consistent with this position and as may, from time to time, be
assigned to the Executive by the Vice President of Operations of TBM Holdings,
Inc. (the "VP Ops"). The Executive shall devote all of his customary working
time and efforts to the business and affairs of the Company; provided, however,
if the Company significantly reduces the weekly business time required by the
Executive, the Executive will have the right to engage in consulting services
for businesses that are not competitive with the business then being carried on
by the Company. The Executive shall perform faithfully the duties which may be
assigned to him from time to time by the VP Ops and shall use his best efforts
and skills to promote the Company's business and shall follow, at all times
during the course of his employment hereunder, prudent and ethical business
practices. The Executive acknowledges that his duties, responsibilities and
title may change following the date hereof; provided, however, that duties and
responsibilities will in all cases be "executive level" responsibilities. During
the continuance of the Executive's employment hereunder the Executive shall
comply with all reasonable requests and directions from time to time given to
the Executive by the VP Ops and with all rules and regulations from time to time
promulgated by the Company concerning employees.
4. PLACE OF PERFORMANCE. In connection with the Executive's employment
by the Company, the Executive shall be based at the principal operating location
of the Company, which is currently located at 12300 Amelia Drive, Houston,
Texas, or at a new principal office of
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the Company that is no more than 50 miles from such office, except for
reasonably required travel on the Company's business.
5. COMPENSATION AND REIMBURSEMENT OF EXPENSES.
(a) Compensation.
(i) For all services rendered by the Executive during
his employment under this Agreement, the Company shall pay the Executive as
compensation a base salary of $188,000 per year, payable in installments on the
Company's regular payroll dates. All taxes and governmentally required
withholdings shall be deducted in conformity with applicable laws.
(ii) The Executive shall have four (4) weeks paid
vacation in addition to all established state and federal holidays observed by
the Company. The vacation shall be taken at such time as shall be mutually
convenient to the VP Ops and the Executive.
(b) Reimbursement of Expenses. The Company shall pay or
reimburse the Executive during his employment under this Agreement for all
reasonable documented out-of-pocket travel expenses and other reasonable and
customary expenses incurred by the Executive in performing his obligations under
this Agreement.
6. PARTICIPATION IN BENEFIT PLANS. The Executive shall be eligible to
receive during the Employment Period, such benefits as are generally provided to
executive officers of the Company, as determined from time to time by the Board
of Directors of the Company.
7. CERTAIN TERMINATION EVENTS.
(a) Termination. Upon the occurrence of an event of
termination (as hereinafter defined) during the Employment Period, except as set
forth in Section 7(c) below, the Employment Period shall terminate and all
obligations of the parties hereunder shall cease except those which survive
termination as specifically set forth herein. As used in this Agreement, an
"event of termination" shall mean and include any one or more of the following:
(i) the termination by the Company of the Executive's
employment hereunder without Cause (as defined below) upon thirty (30) days'
prior written notice; or
(ii) the Executive's disability (as defined below),
death or resignation from the Company's employ; or.
(iii) the Executive's employment is terminated for
Cause.
(b) Definitions: For purposes of this Agreement:
(i) the term "Cause " means (i) the Executive pleads
guilty or no contest to or is convicted of any felony or any other criminal
offense (other than routine traffic violations) that (A) requires the Executive
to be incarcerated or (B) in the judgment of the Board of Directors of the
Company, involves dishonesty or moral turpitude; or
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(ii) the Executive commits an act of fraud, theft,
larceny or embezzlement (including the unauthorized use or disclosure of
confidential or proprietary information of the Company or its subsidiaries) or
the Executive intentionally engages in conduct demonstrably injurious to the
Company or any of its subsidiaries or demonstrably tending to bring the Company
or any of its subsidiaries or direct or indirect shareholders into disrepute; or
(iii) the Executive breaches any representation or
warranty set forth in Section 1 of this Agreement; or
(iv) the Executive willfully fails to perform the
duties and responsibilities which have been reasonably assigned to him in
accordance with this Agreement, other than failure resulting from the
Executive's death or disability; provided that the Executive fails to correct
such breach within ten days after the Executive's receipt of written notice from
the Company of such breach; or
(v) the Executive breaches any material term of this
Agreement and (if such breach may be corrected) fails to correct such breach
within ten days after the Executive's receipt of written notice from the Company
of such breach;
then, and in each such case, the Company shall have the right to give notice of
termination effective immediately and this Agreement (other than the provisions
of Sections 8, 9 and 15 hereof) shall terminate on the date of such notice
without any further obligation hereunder on the part of the Company.
(vi) the term "disability" shall have the meaning set
forth in any duly adopted long term disability plan maintained by the Company
or, if no such plan is maintained, shall mean the inability of the Executive to
perform his duties under this Agreement for three consecutive months or for 180
days in any twelve-month period due to physical or mental illness or incapacity
that requires the regular attention of a physician as determined in the written
opinion of a qualified physician selected by the Board of Directors of the
Company in good faith. Executive shall be entitled to any benefits under such
disability plan in accordance with the terms of such plan.
(c) Payments. Upon the occurrence of an event of termination
under clause (i) of Section 7(a), the Company shall pay the Executive, as
severance pay or liquidated damages or both, on a monthly basis in arrears, the
Executive's monthly base salary for the remainder of the Employment Period and
continue to provide the benefits provided pursuant to Section 6 for such period.
8. DUTIES UPON TERMINATION.
(a) The Executive agrees that he will, upon termination of
his employment hereunder for any reason whatsoever, deliver to the Company any
and all records, forms, contracts, memoranda, work papers, lists of names or
other customer data and any other articles or papers which have come into his
possession by reason of his employment with the Company
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or which he holds for the Company, irrespective of whether or not any of said
items were prepared by him, and he shall not retain memoranda or copies of any
said items.
(b) After any termination of the Executive's employment
hereunder, the Executive shall not at any time thereafter represent himself as
being in any way connected with or interested in the business of or employed by
the Company or any of its subsidiaries, or use for trade or other purposes the
name of the Company or of its subsidiaries or any name capable of confusion
therewith.
(c) Upon the termination of the Executive's employment for
whatever reason the Executive shall immediately be deemed to have resigned from
all directorships, if any, and offices the Executive holds in the Company or any
of its subsidiaries and affiliates and any directorships held at the request of
or on behalf of the Company or any of its subsidiaries. For purposes of this
Section 8(c), "affiliate" shall mean any person controlled by or under direct or
indirect common control with the Company.
9. RESTRICTIONS.
(a) Non-Competition and Non-Solicitation.
(i) During the Employment Period and for a period of
twelve months thereafter, the Executive shall not directly or indirectly:
(A) encourage or solicit any officer or employee
of the Company or any of its subsidiaries to leave the employ of any such entity
or have such officer or employee; or
(B) interfere with or otherwise disrupt (1) the
relationships between the Company and its subsidiaries, on the one hand, and any
client or customer of the Company and its subsidiaries, on the other hand,
including any insured party, or (2) the supply to the Company and its
subsidiaries of any services by any supplier or agent or broker who during the
period of twelve (12) months immediately preceding the Executive's termination
shall have supplied services to the Company or any of its subsidiaries, nor will
the Executive interfere with the terms on which such supply or agency or
brokering services during such period as aforesaid have been made or provided or
cause any such supplier, agent or broker to discontinue its relationship with
the Company and its subsidiaries; or
(ii) If the Executive is terminated for without Cause,
during the remainder of the Employment Period the Executive will not entice or
solicit away from the Company or any of its subsidiaries the business of any
person, firm or company who during the period of twelve (12) months preceding
the date of the Executive's termination was a client of the Company.
(iii) If the Executive resigns from his employment
with the Company or is terminated for Cause, then during a period equaling the
shorter of the remainder of Employment Period or a period of twelve (12) months,
the Executive will not entice or solicit
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away from the Company or any of its subsidiaries the business of any person,
firm or company who during the period of twelve (12) months preceding the date
of the Executive's termination was a client of the Company.
(iv) As used in this Section 9 "client" shall include
any third party with whom the Company or any of its subsidiaries was during the
said period in negotiation in respect of the sale of product or provision of
services by the Company or any of its subsidiaries or to whom the Company or any
of its subsidiaries had (during the said period) made or been requested to make
a bona fide offer to sell a product or provide such services.
(v) While the restrictions set forth in this Section 9
are considered by both parties to be reasonable in all the circumstances it is
recognized that restrictions of the nature in question may fail for reasons
unforeseen and accordingly it is hereby declared and agreed that if any of such
restrictions shall be adjudged to be void as going beyond what is reasonable in
all the circumstances for the protection of the interests of the Company and its
subsidiaries but would be valid if part of the wording thereof were deleted
and/or the periods (if any) thereof reduced and/or the area dealt with thereby
reduced in scope then said restrictions shall apply with such modifications as
may be necessary to make them valid and effective.
(vi) The limitations on the Executive set forth in this
Section 9 shall also apply to any agent or other representative acting in his or
her capacity as an agent or representative of the Executive.
(vii) Nothing contained in this Section 9 shall limit
in any manner any additional obligations to which the Executive may be bound
pursuant to any other agreement or any applicable law, rule or regulation.
(b) Proprietary Rights; Confidentiality.
(i) The Executive agrees that the products of the
Company and its subsidiaries shall constitute the exclusive property of the
Company and its subsidiaries. The Executive hereby assigns to the Company and
its subsidiaries all of the Executive's right, title and interest, if any,
pertaining to the products developed or improved upon by the Executive while
employed by the Company, including any patent, trademark, trade name, copyright
or other right that may pertain thereto. As used herein, "products" shall
include prospective products under development during the Executive's employment
with the Company.
(ii) For the avoidance of doubt, all trademarks, trade
names, service marks, designs, utility models, copyrights, know-how and
confidential information, applications for registration of any of the foregoing
and the right to apply for them in any part of the world (whether any of the
foregoing shall be registered or unregistered) created or discovered or
participated in or contributed to by the Executive during the course of his
employment with the Company or under the instructions of the Company shall be
the absolute property of the Company.
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(iii) The Executive recognizes and acknowledges that, by
reason of his employment with the Subsidiary, he may have acquired, and will
acquire, information of a proprietary, confidential, or secret nature regarding
the Company and its subsidiaries and their respective businesses and operations,
including but not limited to, information concerning trade secrets, know-how,
software, data processing systems, inventions, designs, processes, formulae,
notations, improvements, financial information, business plans, prospects,
referral sources, lists of suppliers and customers and other information with
respect to the affairs, business, clients, customers, agents or other business
relationships of the Company and its subsidiaries (the "Confidential
Information"). The Executive shall hold in a fiduciary capacity for the benefit
of the Company, all Confidential Information relating to the Company and any of
its subsidiaries and their respective businesses which shall have been obtained
by the Executive during his employment by the Company. The Executive agrees that
he will not, during or after his employment with the Company, disclose the
Confidential Information, or any part thereof, to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, the provisions of this Section 9(b)(iii) shall
not apply to Confidential Information which (a) becomes or is generally
available to the public (other than by acts of the Executive or his
representatives); (b) becomes known to the Executive on a non-confidential basis
from a source other than the Company or any of its subsidiaries, provided that
such source is not bound by a confidentiality agreement with or other obligation
of secrecy to the Company or any of its subsidiaries; or (c) the Executive is
required to disclose in a judicial, administrative or governmental proceeding
(any such proceeding, a "Legal Proceeding"). In the event the Executive is
required to disclose Confidential Information in a Legal Proceeding, the
Executive shall provide the Company with prompt notice of such request so that
the Company may timely seek an appropriate protective order or waive compliance
with this Section 9(b)(iii).
(c) Remedies. The Executive acknowledges that the Company
and its subsidiaries will suffer irreparable injury, not readily susceptible of
valuation in monetary damages, if the Executive breaches his obligations under
this Section 9. Accordingly, the Executive agrees that the Company and its
subsidiaries will be entitled, in addition to any other available remedies, to
obtain injunctive relief against any breach or prospective breach by the
Executive of his obligations under this Section 9 in any Federal or Connecticut
state court. The Executive hereby submits to the exclusive jurisdiction of all
those courts, regardless of where the Executive may be resident, for the
purposes of any actions or proceedings instituted by the Company or any
subsidiary to obtain that injunctive relief, and the Executive agrees that
process in any or all of those actions or proceedings may be served by
registered mail, addressed to the last address of the Executive known to the
Company, or in any other manner authorized by law.
10. EFFECT OF PRIOR AGREEMENTS. This Agreement contains the entire
understanding between the parties hereto with respect to its subject matter and,
upon effectiveness of this Agreement, replaces and supersedes any prior
agreements either written or oral.
11. GENERAL PROVISIONS.
(a) Binding Agreement. This Agreement shall be binding upon,
and inure to the benefit of the Executive and Company and their respective
permitted successors and assigns.
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(b) Legal Counsel. The parties hereto acknowledge that this
is a legally binding contract and acknowledge and agree that they have had the
opportunity to consult with legal counsel of their choice in connection with the
drafting, negotiation and execution of this Agreement.
(c) Rights and Remedies Cumulative. No right or remedy
herein conferred upon the Company is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or implementation of any other appropriate right or remedy.
(d) Survival. The respective rights and obligations of the
parties under Section 8. Section 9, Section 10 and Section 15 shall survive any
termination of the Executive's employment hereunder for any reason to the extent
necessary to the intended provision of such rights and the intended performance
of such obligations.
12. SUCCESSORS AND ASSIGNS.
(a) Assignment by the Company. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company, and unless clearly inapplicable, reference herein to the Company shall
be deemed to include its successors and assigns.
(b) Assignment by Executive. The Executive may not assign
this Agreement in whole or in part.
13. BENEFICIARIES. This Agreement shall be for the express benefit of
the Company (including its successors and assigns) and the Executive only.
14. SEVERABILITY. In the event any provision of this Agreement or any
part thereof is held invalid, such invalidity shall not affect any remaining
part of such provision or any other provision, and to this end, the provisions
of this Agreement are intended to be and shall be deemed severable.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT.
16. NOTICES. Notices, demands and all other communications provided for
in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, and when received if delivered otherwise, addressed as set
forth in the signature pages to this Agreement or to such other address as any
party may have furnished to the other in writing in accordance herewith, except
that notices of change shall be effective only upon receipt.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer, and Executive has signed this Agreement,
all as of the day and year first above written.
LONG REACH HOLDINGS, INC.
By: _____________________________________
Name: ___________________________________
Title: ____________________________________
Notice Address: 136 Main Street
Westport, CT 06880
Attention: Chief Executive Officer
_________________________________________
D. Michael Buchanan
Notice Address:
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EXHIBIT D
FORM OF LEASE AGREEMENT
AGREEMENT OF LEASE made as of the ___ day of ______________, 2000,
between LITTLE ROCK, LLC, with an address at _______________ Little Rock,
Arkansas ("Landlord") and TBM Acquisition I, Inc. (d/b/a LONG REACH HOLDINGS,
INC.), a Delaware corporation with an address at 136 Main Street, Westport,
Connecticut 06880 ("Tenant").
W I T N E S S E T H
Terms not otherwise defined herein shall have the meaning given to them
in the Merger Agreement among TBM Holdings, Inc., TBM Acquisition I, Inc. and
Long Reach Holdings, Inc., among others (the "Merger Agreement"). Landlord and
Tenant, for themselves and their respective successors and assigns, hereby
covenant and agree as follows:
ARTICLE 1
Demise; Premises; Term; Use
1.01 Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord, upon and subject to the covenants, agreements, terms, provisions and
conditions of this Lease, the "Demised Premises" (as hereinafter defined),
subject to an easement hereby reserved in favor of Landlord in, over and through
the Demised Premises for access purposes and in connection with Landlord's
rights and obligations under this Lease, use of such easement not to
unreasonably interfere with Tenant's operations. The Demised Premises consist of
the land described in Exhibit A attached to this Lease and incorporated herein
("Land"), and the building and improvements on the Land (collectively,
"Building"), located at 3700 Old Shackleford Road, Little Rock, Arkansas.
1.02 The term of this Lease shall commence on the Effective Time of the
Merger Agreement ("Commencement Date"), and shall terminate on the day
immediately preceding the second anniversary of the Commencement Date
("Expiration Date"), or shall end on such earlier date upon which said term may
expire or be canceled or terminated pursuant to any of the provisions of this
Lease or pursuant to law. Notwithstanding anything to the contrary contained
herein, provided Tenant is not in default under this Lease, Tenant may terminate
this Lease at any time upon 120 days' prior written notice. All rent under this
Lease shall be apportioned as of the Expiration Date.
1.03 Tenant shall use and occupy the Demised Premises solely for the
manufacture of construction and excavation equipment and machinery substantially
similar to that being manufactured at the Demised Premises on the date hereof,
and for no other purpose, without first obtaining Landlord's prior written
consent (which consent shall not be unreasonably withheld or delayed).
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1.04 Tenant shall not suffer or permit the Demised Premises or any part
thereof to be used in any manner, or anything to be done therein, which would in
any way (a) violate any laws, ordinances or requirements of public authorities
or any covenants or agreement to which the Demised Premises are subject, (b)
make void or voidable any fire or liability or other insurance policy then in
force with respect to the Demised Premises, (c) make unobtainable from reputable
insurance companies authorized to do business in the State of Arkansas at
standard rates any casualty insurance or liability, boiler or other insurance
that Landlord or Tenant may carry, (d) constitute a public or private nuisance,
or (e) constitute a breach or Event of Default (as hereinafter defined) under
this Lease.
1.05 Tenant shall not at any time use or occupy, or suffer or permit
anyone to use or occupy the Demised Premises, or do or permit anything to be
done in the Demised Premises, in violation of the Certificate of Occupancy for
the Demised Premises and/or Building. Tenant shall conduct its business at the
Demised Premises at all times in a professional and businesslike manner
consistent with all reputable business standards and practices.
1.06 Tenant's use of the systems and equipment in the Building
(including, without limitation, the electrical, HVAC, plumbing and heating
systems) shall not exceed the recommended mechanical or electrical loads of such
Building equipment or systems.
1.07 Tenant acknowledges that it has inspected the Demised Premises and
accepts them in their "AS IS" condition on the Commencement Date. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
promises or representations regarding the Demised Premises or the use or
occupancy thereof upon which Tenant is relying in entering into this Lease.
Tenant acknowledges that there are no agreements, representations,
understandings or obligations on the part of Landlord to perform any
alterations, repairs or improvements with respect to the Demised Premises except
as specifically provided for in this Lease.
ARTICLE 2
Rent
2.01 For the first eighteen months of this Lease, Tenant shall pay to
Landlord as rent for the Demised Premises ("Net Rent") the aggregate amount of
ONE and 50/100 Dollars ($1.50), and thereafter for the remaining six months of
the term at the rate of TEN THOUSAND and 00/100 DOLLARS ($10,000) per month. The
Net Rent shall be paid in advance, without demand, on the first day of each
calendar month, as applicable, and shall be paid at Landlord's address set forth
above or at such other address as Landlord may designate by notice.
2.02 In addition to Net Rent, all other amounts which Tenant is or
becomes obligated to pay Landlord hereunder shall be deemed additional rent and,
unless
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otherwise provided herein, shall be paid within ten days after demand by
Landlord. All amounts payable by Tenant to Landlord pursuant to this Lease shall
be paid without any deduction, recoupment, set-off or counterclaim.
2.03 If Tenant shall fail to pay any Net Rent or additional rent within
fifteen days after the due date thereof, the late payment shall be subject to a
late charge of three percent (3%) of the overdue amount.
2.04 It is the purpose and intent of Landlord and Tenant that the Net
Rent shall be absolutely net to Landlord so that this Lease shall yield, net to
Landlord, the Net Rent specified herein in each year during the term of this
Lease, and that all operating costs, expenses and obligations of every kind and
nature whatsoever, relating to the Demised Premises which may arise or become
due during or out of the term of this Lease shall be paid by Tenant, except as
otherwise set forth in this Lease.
ARTICLE 3
Insurance; Nonliability; Indemnity
3.01 (a) During the term of this Lease, Tenant, at its sole cost
and expense, shall keep the Demised Premises insured for the benefit of Landlord
and any mortgagee of Landlord against loss or damage by (i) fire and other risks
set forth in insurance policies of "all risk of physical loss" insurance,
including difference in conditions insurance (inclusive of earthquake and flood
coverage, to the extent same is in effect on the date hereof), and (ii) boiler
and machinery insurance with "comprehensive" coverage, which policies of
insurance shall be in an amount at least equal to one hundred percent (100%) of
the current replacement cost of the Demised Premises (per loss, exclusively
available to the Demised Premises), which replacement cost shall be determined
annually by Tenant's insurer and which as of the Commencement Date be no less
than $5,000,000.
(b) The insurance required in (a) above shall: (i) be on a
"replacement cost" claim recovery basis; (ii) include "contingent liability"
coverage for the value of the undamaged building portion, actual demolition
costs and increased costs of construction in the event of a governmentally
mandated demolition following a casualty; (iii) permit a waiver of subrogation
as contained in this Lease, the existence of which will not affect otherwise
available insurance recovery; (iv) not contain a deductible provision without
Landlord's prior written consent; and (v) satisfy any coinsurance requirements
under the applicable policy.
3.02 Tenant, at its sole cost and expense, but for the mutual benefit
of Landlord and Tenant and such other party or parties as may be designated by
Landlord as named insureds as their interests may appear, shall maintain: (a)
standard Comprehensive General Commercial Liability Insurance covering the
Demised Premises on an occurrence basis with minimum limits of liability in an
amount of not less than $2,000,000 combined single limit, with a contractual
liability endorsement covering Tenant's indemnity obligations under this Lease,
and with respect to damage to property
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including water damage and sprinkler leakage legal liability arising out of any
one occurrence, which insurance shall contain products/completed operations
coverage and which insurance shall be primary (and any insurance maintained by
Landlord or any other additional insureds hereunder shall be excess and
noncontributory); (b) rent insurance against loss of rent due to any risk
included in the policies required to be maintained under Subsection 3.01(a), for
the Net Rent and additional rent payable under this Lease, with respect to each
loss; (c) workers' compensation insurance as required by statute, and employer's
liability insurance in the amount of at least $500,000 per occurrence; and (d)
such other insurance, and in such greater amounts as may from time to time be
reasonably required by Landlord against the same and/or other insurable hazards
which at the time are commonly insured against in the case of premises similarly
situated and utilized.
3.03 All insurance provided for in this Article shall be effected under
valid and enforceable policies issued by insurers of recognized responsibility
which are licensed to do business in the State of Arkansas, are well rated by
national rating organizations, and have been approved in writing by Landlord,
which approval shall not be unreasonably withheld. On or before the occupancy of
any part of the Demised Premises, and thereafter not less than 30 days prior to
the expiration dates of the expiring policies theretofore furnished pursuant to
this Article, or any other Article of this Lease, originals of the policies
bearing notations evidencing the payment of premiums or accompanied by other
evidence reasonably satisfactory to Landlord of such payments, shall be
delivered by Tenant to Landlord and certificates showing Landlord and others
designated by Landlord as additional insureds (and similarly with respect to
leasehold improvements). All such policies shall contain a provision to the
effect that the same will be nonalterable and noncancellable except upon 30 days
written notice to Landlord and the holder of any mortgage on the Demised
Premises. Landlord and Tenant waive their right to recover damages against each
other for any reason whatsoever to the extent the damaged party recovers
indemnity from its insurance carrier and waive all rights of subrogation of
their respective insurers. Any insurance policy procured by a party with respect
to the Demised Premises or its property therein which does not name the other
party as an additional insured shall contain a waiver of subrogation as
contained in this Lease, the existence of which will not affect otherwise
available insurance recovery. All public liability and property damage policies
shall contain a severability of interest clause.
3.04 If at any time during the term of this Lease, Landlord shall
request that the amount of insurance provided by Tenant, as required by this
Article, be increased on the ground that such coverage is inadequate properly to
protect the interest of Landlord, or if Landlord shall require other insurance
pursuant to subsection 3.02(c), and Tenant shall refuse to comply with any such
request or requirement, the dispute shall be submitted to arbitration as
provided in Article 18 hereof. Tenant shall thereafter carry the amount, and
such kind, of insurance as determined by such arbitration to be adequate and
required, but in no event shall the amount of insurance be less than the amount
specified in Sections 3.01 and 3.02.
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3.05 Landlord shall have the right, at its expense, to maintain any
additional insurance with respect to the Demised Premises not required under
this Article.
3.06 Tenant waives all claims against Landlord or its employees or
agents for any injury or damage to persons or property resulting from any
occurrence in or about the Demised Premises, including, without limitation,
fire, explosion, falling debris, steam, gas, electricity, water, rain or snow or
any other casualty, or leaks from any part of the Demised Premises, or from the
pipes, appliances or plumbing works or from the roof, street or subsurface or
from any other place or by dampness or by any other cause of any nature
whatsoever, unless arising out of the gross negligence of Landlord or its
agents, employees or contractors. Tenant agrees to look solely to and seek
recovery only from its insurance carriers in the event of any such losses; for
purposes hereof, any deductible amount shall be treated as though it were
recoverable under such policies.
3.07 Tenant will indemnify against, and hold Landlord and Landlord's
employees and agents harmless from, any and all demands, claims, causes of
action, proceedings, fines, penalties, damages, losses, liabilities, judgments,
orders, decrees, costs and expenses (including, without limitation, court costs
and reasonable attorneys' fees and disbursements) incurred in connection with or
arising materially from: (a) the use or occupancy of the Demised Premises by
Tenant or any person claiming under Tenant; (b) any activity, work or thing
done, or permitted or suffered by Tenant on or about the Demised Premises; (c)
any acts, omissions, or negligence of Tenant or any person claiming under
Tenant, or the contractors, agents, employees, invitees, customers or visitors
of Tenant or any such person; (d) any breach, violation or nonperformance by
Tenant or any person claiming under Tenant or the employees, agents,
contractors, invitees, customers or visitors of Tenant or any such person of any
term, covenant or provision of this Lease or of law or any legal requirements or
requirements of governmental authorities; or (e) (except for loss of use of all
or any portion of the Demised Premises or Tenant's property located within the
Demised Premises which is proximately caused by or results proximately from the
gross negligence of Landlord or Landlord's employees or agents), any injury or
damage to the person, property or business of Tenant, its employees, agents,
contractors, invitees, customers, visitors or any other person entering upon or
about the Demised Premises. If any action or proceeding is brought against
Landlord or Landlord's employees or agents by reason of any such claim, Tenant,
upon notice from Landlord, will defend the claim at Tenant's expense with
counsel reasonably satisfactory to Landlord. Without limiting the generality of
the foregoing, Tenant specifically acknowledges that the indemnity undertaking
herein shall apply to claims in connection with or arising out of the
transportation, use, storage, maintenance, generation, manufacturing,
handling, disposal, release or discharge of any "Hazardous Material" as
described in ARTICLE 20 (whether or not such matters shall have been
theretofore approved by Landlord) by Tenant or any person claiming under
Tenant, or the contractors, agents, employees, invitees, customers or visitors
of Tenant or any such person. Landlord acknowledges that it or its Affiliates
(as defined in the Merger Agreement) remains liable for the transportation,
use, storage, maintenance, generation,
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manufacturing, handling, disposal, release or discharge of any "Hazardous
Material" arising at or with respect to the Demised Premises at all times prior
to the date hereof.
3.08 Tenant shall give Landlord notice in case of fire or accidents in
the Demised Premises, which notice shall be given promptly after Tenant becomes
aware of any such event.
3.09 Tenant agrees to look solely to Landlord's estate and interest in
the Demised Premises for the satisfaction of any right or remedy of Tenant or
for the collection of a judgment (or other judicial process) requiring the
payment of money by Landlord, in the event of any liability by Landlord under
this Lease, and no other property or assets of Landlord shall be subject to
levy, execution, attachment or other enforcement procedure for the satisfaction
of Tenant's remedies under or with respect to this Lease, the relationship of
Landlord and Tenant hereunder, or Tenant's use and occupancy of the Demised
Premises, or any other liability of Landlord to Tenant hereunder.
3.10 In any litigation between the parties regarding this Lease, the
losing party shall pay to the prevailing party all reasonable expenses and court
costs including attorneys' fees incurred by the prevailing party. A party shall
be considered the prevailing party if:
(a) it initiated the litigation and substantially obtains
the relief it sought, either through a judgment or
the losing party's voluntary action before
arbitration (after it is scheduled), trial, or
judgment;
(b) the other party withdraws its action without
substantially obtaining the relief it sought; or
(c) it did not initiate the litigation and judgment is
entered for either party, but without substantially
granting the relief sought.
ARTICLE 4
Maintenance; Repairs; Services
4.01 Throughout the term of this Lease, Tenant, at its sole cost and
expense, will take good care of the Demised Premises and will keep the same in
good working order, repair and condition (which condition shall also be safe,
clean and sanitary and generally will be maintained in the condition as of the
date hereof, ordinary wear and tear excepted), and make all necessary repairs
thereto (which repairs shall include necessary replacements and capital
expenditures and compliance with laws). Landlord, at its expense, shall make all
necessary repairs to the (a) roof, exterior walls, foundation and other
structural elements of the Building; (b) parking areas, driveways and sidewalks
on the Land; and (c) to the pipes, conduits and utilities serving the Building
up to the perimeter of the Building, provided the cost of such repairs is fully
covered by insurance
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proceeds from coverage maintained by Tenant as contemplated by ARTICLE 3 hereof.
Landlord shall make such repairs promptly after receiving reasonable notice from
Tenant of the necessity for such repairs, provided that any damage shall not
have been caused as a result of ordinary wear and tear or by any act or omission
of, or violation of this lease by, Tenant or any other occupant of the Demised
Premises, or any of their employees, agents, invitees or contractors (in which
cases Tenant shall be obligated to make the necessary repairs in accordance with
the first sentence of this Section 4.01). When used in this Article 4, the term
"repairs" shall include all necessary replacements, renewals, alterations,
additions and betterments. No repairs will be required to be made by Landlord or
Tenant to a standard higher than pertains with respect to the Demised Premises
as of the Commencement Date (after reasonable allowance for ordinary wear and
tear) or as required by law.
4.02 The necessity for and adequacy of repairs to the Demised Premises
pursuant to Section 4.01 hereof shall be measured by the standard which is
appropriate for buildings of similar construction and class and use, provided
that neither Landlord nor Tenant shall have an obligation to repair or maintain
the Demised Premises in any condition superior to that which pertains with
respect to the Demised Premises as of the Commencement Date (after reasonable
allowance for ordinary wear and tear) or as required by law.
4.03 Tenant shall put, keep and maintain all portions of the Demised
Premises and the sidewalks, curbs, parking areas and passageways adjoining the
same in a clean and orderly condition, free of dirt, rubbish, snow, ice and
unlawful obstructions.
4.04 Landlord shall not be required to furnish any services or
facilities or to make any repairs or alterations in or to the Demised Premises,
except as set forth above. Tenant shall pay all charges for electricity
(including, without limitation, for HVAC), gas, fuel oil, water, telephones,
sanitary sewer and any other utilities used by it in connection with the Demised
Premises. Tenant, at its expense, shall supply its own requirements for heat,
hot water, air-conditioning, cleaning, refuse removal and any other services
required with respect to the Demised Premises.
4.05 With respect to the maintenance and operation of the Demised
Premises, Tenant shall comply with all applicable governmental laws, ordinances,
rules and regulations.
4.06 In case any dispute shall arise at any time between Landlord and
Tenant as to the standard of care and maintenance of the Demised Premises, such
dispute shall be determined by arbitration as provided in Article 18 hereof.
4.07 If Tenant shall fail to make repairs in accordance with its
obligations hereunder, Landlord shall have the right, at its option, after
Landlord shall have given to Tenant ten days' notice (except in case of an
emergency), to make such repairs on behalf and for the account of Tenant, to
enter upon the Demised Premises for such purposes, and
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Tenant shall pay the cost thereof as additional rent within ten days after
demand by Landlord.
ARTICLE 5
Changes and Alterations; Ownership of Improvements
5.01 Tenant shall have the right at any time and from time to time
during the term of this Lease, whether at the commencement of the term hereof or
at any time thereafter, to make, at its sole cost and expense, changes and
alterations in or of the Demised Premises, subject, however, in all cases to the
following:
(a) No change or alteration which is (i) non-interior, (ii)
structural, (iii) affects the mechanical, electrical, plumbing or HVAC systems
of the Demised Premises, or (iv) involves an estimated cost of more than
$25,000, shall be made without the prior written consent of Landlord (which
approval shall not be unreasonably withheld or delayed).
(b) Landlord reserves the right to impose reasonable
requirements as a condition of any such consent, including, without limitation,
payment by Tenant of Landlord's reasonable costs and expenses in connection with
evaluating, monitoring or otherwise responding to any such request by or on
behalf of Tenant.
(c) No change or alteration shall be undertaken until Tenant
shall have procured and paid for, so far as the same may be required from time
to time, all permits and authorizations of all municipal departments and
governmental subdivisions having jurisdiction. Landlord shall join in the
application for such permits or authorizations whenever such action is
necessary.
(d) Any change or alteration requiring Landlord's consent
under subsection (a) above shall be conducted under the supervision of an
architect and/or engineer selected by Tenant and approved in writing by Landlord
(which approval shall not be unreasonably withheld), and no such change or
alteration shall be made except in accordance with detailed plans and
specifications and cost estimates prepared and approved in writing by Landlord
(which approval shall not be unreasonably withheld).
(e) Any change or alteration shall, when completed, be of such
a character as not to reduce the value of the Demised Premises below its value
immediately before such change or alteration.
(f) Any change or alteration shall be made promptly
(unavoidable delays excepted) and in a good and workmanlike manner, with
materials that are new, high quality and free of material defects, and in
compliance with all applicable permits and authorizations and building and
zoning laws and ordinances and with all other laws, ordinances, orders, rules,
regulations and requirements of all federal, state and municipal governments,
departments, commissions, boards and officers, any national or local Board
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of Fire Underwriters, or any other body hereafter exercising functions similar
to those of any of the foregoing, and strictly in compliance with the detailed
plans and specifications approved by Landlord.
(g) The cost of any such change or alteration shall be paid in
cash or its equivalent, so that the Demised Premises shall at all times be free
of liens for labor and materials supplied or claimed to have been supplied to
Tenant.
(h) Worker's compensation insurance in statutory limits
covering all persons employed in connection with the work and with respect to
whom death or bodily injury claims could be asserted against Landlord, Tenant or
the Demised Premises, and general liability insurance for the mutual benefit of
Tenant and Landlord in such limits as Landlord may reasonably require, shall be
maintained by Tenant at Tenant's sole cost and expense at all times when any
work is in process in connection with any change or alteration. All such
insurance shall be in a company or companies of recognized responsibility, and
all policies or certificates therefor issued by the respective insurers, bearing
notations evidencing the payment of premiums or accompanied by other evidence
satisfactory to Landlord of such payment, shall be delivered to Landlord.
5.02 All alterations, installations, additions or improvements upon the
Demised Premises made by any party prior to or during the term of this Lease
shall, at the expiration of the term hereof, become the property of Landlord and
be surrendered with said premises as part thereof at the end of the term, unless
Landlord shall give Tenant notice to remove any of same, in which event Tenant
shall remove same prior to the expiration of the term.
5.03 At or before the Expiration Date, or the date of any earlier
termination of this Lease, Tenant at its expense, shall remove from the Demised
Premises all of Tenant's property and shall repair any damage to the Demised
Premises resulting from such removal. Any other items of Tenant's property which
shall remain in the Demised Premises after the Expiration Date or after a period
of 15 days following an earlier termination date, may, at the option of
Landlord, be deemed to have been abandoned, and in such case either may be
retained as Landlord as its property or may be disposed of, without
accountability, in such manner as Landlord may see fit at Tenant's expense.
5.04 (a) Tenant, at its expense, shall procure promptly the
cancellation or discharge of all notices of violation arising from or otherwise
connected with Tenant's work which shall be issued by any public authority
having or asserting jurisdiction. Tenant shall defend, indemnify and save
harmless Landlord against any and all mechanic's and other liens in connection
with Tenant's work, repairs or installations, including but not limited to the
liens of any conditional sale of, or chattel mortgages upon, any materials,
fixtures, or articles so installed in and constituting part of the Demised
Premises and against all cost, attorneys' fees, fines, expenses and liabilities
reasonably incurred in connection with any such lien, conditional sale or
chattel mortgage
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or any action or proceeding brought thereon. Tenant shall pay in full for all
materials, fixtures, equipment and other articles prior to installation in the
Demised Premises.
(b) Tenant, at its expense, shall procure the satisfaction or
discharge, by bonding or otherwise, of all such liens within 30 days of the
filing of such lien against the Demised Premises. If Tenant shall fail to cause
such lien to be discharged within the period aforesaid, then in addition to any
other right or remedy, Landlord may, but shall not be obligated to, discharge
the same either by paying the amount claimed to be due or by procuring the
discharge of such lien, by deposit or by bonding proceedings, and in any such
event Landlord shall be entitled, if Landlord so elects, to compel the
prosecution of an action for the foreclosure of such lien by the lienor and to
pay the amount of the judgment in favor of the lienor with interest, costs and
allowances. Any amount so paid by Landlord and all costs and expenses incurred
by Landlord in connection therewith, together with Interest thereon from the
respective dates of Landlord's making of the payment or incurring the cost and
expenses shall constitute additional rent payable by Tenant under this Lease and
shall be paid by Tenant on demand.
ARTICLE 6
[INTENTIONALLY LEFT BLANK]
ARTICLE 7
Assignment and Subletting
Except with respect to any security interest required by the Senior
Debt, neither this Lease, nor the term and estate hereby granted, nor any part
hereof or thereof, nor the interest of Tenant in any sublease or the rentals
thereunder, shall be assigned, mortgaged, pledged, encumbered, hypothecated, or
otherwise transferred by Tenant, Tenant's legal representative or successors in
interest by operation of law or otherwise, and neither the Demised Premises, nor
any part thereof, shall be encumbered in any manner by reason of any act or
omission on the part of Tenant or anyone claiming under or through Tenant, or
shall be sublet or be used or occupied or permitted to be used or occupied by
anyone other than Tenant (all of the foregoing are hereinafter collectively
referred to as "Transfers" and any party to whom or which any Transfer is made
or sought to be made is hereinafter referred to as a "Transferee"), or for any
purpose other than as permitted by this Lease without the prior written consent
of Landlord in each case, which consent may be withheld, conditioned or delayed
in Landlord's sole discretion; provided, however, no consent shall be required
for a Transfer to an Affiliate. Any Transfer made without complying with this
ARTICLE shall, at Landlord's option, be null, void and of no effect (which shall
not be in limitation of Landlord's other remedies).
For purposes of this Lease, the term "Transfer" shall also include each
of the following, whether accomplished directly or indirectly: (i) the
dissolution, merger, consolidation or other reorganization of Tenant; (ii) the
sale or other transfer of more than a cumulative aggregate of 50% of the voting
shares of Tenant or the effective transfer of
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the power to direct the policies and management of Tenant; and (iii) the sale,
mortgage, hypothecation or pledge of more than a cumulative aggregate of 50% of
Tenant's net assets.
ARTICLE 8
Damage and Destruction
8.01 If the Demised Premises shall be partially or totally damaged or
destroyed by fire or other casualty, Landlord shall, subject to Section 8.03
hereof and any requirements of any mortgagee(s) and such mortgagee(s)' right to
control, apply or withhold the applicable insurance proceeds, if any, repair the
damage and restore and rebuild the Demised Premises as nearly as may be
reasonably practicable to its condition and character immediately prior to such
damage or destruction, with reasonable diligence, after notice to it of the
damage or destruction; provided that Landlord shall not be obligated to expend
upon such repair or restoration any amount in excess of the net insurance
proceeds received by Landlord pursuant to insurance maintained under Article 3
and provided that Landlord's obligations shall be subject to then applicable
zoning and planning regulations and no part of such proceeds shall be applied to
restore or repair Tenant's property. Landlord shall not be liable in any way for
any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's
business or property resulting in any way from such casualty, damage or the
repair thereof.
8.02 If the Demised Premises and/or access thereto shall be partially
or totally damaged or destroyed by fire or other casualty, the rents payable
hereunder shall be abated to the extent that the Demised Premises shall have
been rendered untenantable, from the date of such damage or destruction to the
date the damage shall be substantially repaired or restored. Should Tenant
reoccupy a portion of the Demised Premises during the period that the repair or
restoration is in progress and prior to the date that the same are made
completely tenantable, rents allocable to such portion shall be payable by
Tenant from the date of such occupancy to the date the Demised Premises are made
tenantable.
8.03 Landlord and Tenant shall each have the option of terminating this
Lease and the term and estate hereby granted upon the occurrence of either of
the following events: (1) if Landlord estimates that renovation of the Demised
Premises shall exceed the shorter of (a) 180 days (60 days in the event of a
casualty within the last six months of the term) from the date of the damage, or
(b) the unexpired term of this Lease, or (2) the Building is rendered
untenantable by fire or other casualty and Landlord elects not to repair or
restore the same. Either party shall exercise such termination option by
notifying the other party in writing of such termination within 45 days of the
date of the damage. Tenant agrees that Landlord's obligation to restore, and the
abatement of rent provided for hereunder, shall be Tenant's sole recourse in the
event of such damage, and waives any other rights Tenant may have under any
applicable law to terminate this Lease by reason of such damage except as
provided herein.
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8.04 In the event that a notice of termination shall be given pursuant
to Section 8.03, this Lease and the term and estate hereby granted shall expire
as of the date of such termination with the same effect as if that were the date
hereinbefore set for the expiration of the term of this Lease, and the rent due
and to become due hereunder shall be apportioned as of such date if not earlier
abated pursuant to Section 8.01.
8.05 No damages, compensation or claim shall be payable by Landlord for
inconvenience, loss of business or annoyance arising from any repair or
restoration of any portion of the Demised Premises pursuant to this Article
Landlord shall use diligent efforts to effect any required repair or restoration
promptly and in such manner as not to unreasonably interfere with Tenant's use
and occupancy.
8.06 Landlord shall not carry insurance of any kind on Tenant's
property, and shall not be obligated to repair any damage thereto or replace the
same.
8.07 The provisions of this Article shall be considered an express
agreement governing any case of damage or destruction of the Demised Premises by
fire or other casualty, and any law to the contrary, now or hereafter in force,
shall have no application in such case.
8.08 Notwithstanding any of the foregoing provisions of this Article,
if Landlord or the holder of any superior mortgage shall be unable to collect
all of the insurance proceeds (including rent insurance proceeds) applicable to
damage or destruction of the Demised Premises by fire or other cause, by reason
of some action or inaction on the part of the Tenant or any of its employees,
agents or contractors, then, without prejudice to any other remedies which may
be available against Tenant, the abatement of Tenant's rents provided for in
this Article shall not be effective to the extent of the uncollected insurance
proceeds.
ARTICLE 9
EMINENT DOMAIN
9.01 In the event that the Demised Premises or any part thereof shall
be taken in condemnation proceedings or by the exercise of any right of eminent
domain or by agreement between Landlord on the one hand and any governmental
authority authorized to exercise such right on the other hand for a period in
excess of the shorter of (i) one year, and (ii) the balance of the term
remaining under this Lease, Landlord shall be entitled to collect from any
condemnor the entire award or awards that may be made in any such proceeding
without deduction therefrom for any estate hereby vested in or owned by Tenant,
to be paid out as in this Article provided and except as provided in Section
9.04 hereof. Tenant hereby expressly assigns to Landlord all of its right, title
and interest in or to every such award and also agrees to execute any and all
further documents that may be required in order to facilitate the collection
thereof by Landlord.
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9.02 (a) At any time during the term of this Lease if title to 20% or
more of the Land shall be taken in condemnation proceedings or by the exercise
of any right to eminent domain or by agreement between Landlord on the one hand
and any governmental authority authorized to exercise such right on the other
hand, Landlord or Tenant shall have the right to terminate this Lease by written
notice to the other party within 30 days after the taking. In the event a notice
of termination shall be given pursuant to the immediately-preceding sentence,
this Lease shall terminate and expire on the date of such taking, and the Net
Rent and additional rent provided to be paid by Tenant shall be apportioned and
paid to the date of such taking.
(b) At any time during the term of this Lease if title to the
Building or 40% or more of the Land shall be taken in condemnation proceedings
or by the exercise of any right to eminent domain or by agreement between
Landlord on the one hand and any governmental authority authorized to exercise
such right on the other hand, this Lease shall terminate and expire on the date
of such taking and the Net Rent and additional rent provided to be paid by
Tenant shall be apportioned and paid to the date of such taking.
9.03 If this Lease does not terminate under Section 9.02, this Lease
shall continue in full force and effect, and the Net Rent apportioned to the
part taken shall be prorated and adjusted as of the date of taking, and from
such date the Net Rent and additional rent shall be reduced to the amount
apportioned to the remainder of the Demised Premises.
9.04 Notwithstanding the foregoing provisions of this Article and
subject to the interest of any mortgagee of Landlord, Tenant shall be entitled
separately to appear, claim, prove and receive in the proceedings relating to
any such taking such portion of each award made therein as represents the then
value of Tenant's property, if any, and/or the costs of relocating, if any are
granted, provided any such award is separately payable to Tenant and the same
does not reduce Landlord's or any mortgagee's award.
9.05 In the event of any such taking which does not result in a
termination of this Lease, Landlord, at its expense, shall proceed with
reasonable diligence to repair, alter and restore the remaining part of the
Demised Premises to substantially the same condition as it was in immediately
prior to such taking to the extent that the same may be feasible, so as to
constitute a tenantable Demised Premises, provided that Landlord's liability
under this Section shall be limited to the net amount received by Landlord from
the award arising out of such taking.
ARTICLE 10
Access to Premises
Landlord and its authorized representatives shall have the right to
enter upon the Demised Premised during all regular business hours for the
purpose of inspecting the same or exhibiting the same to prospective purchasers,
mortgagees and tenants. Landlord and its authorized representatives shall also
have the right to enter upon the Demised Premises during all regular business
hours (and in emergencies at all times) for the
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purpose of making any repairs thereto as Landlord may deem necessary; and in
connection therewith, Landlord shall have the right to bring and store
materials, tools and equipment, without the same constituting an actual or
constructive eviction of Tenant from the Demised Premises or any part thereof.
All entries by Landlord and its representatives (except in case of emergency)
shall be upon reasonable prior notice to Tenant, which notice may be by means of
personal or telephonic communication or by ordinary mail. Any such entry by
Landlord shall be conducted in a manner designed to minimize interference with
the conduct of Tenant's business.
ARTICLE 11
Subordination; Attornment; Estoppel Certificate
11.01 Provided Tenant receives a so-called non-disturbance agreement
from the Lender (and further provided that furnishing such non-disturbance
agreement shall not be a condition to Tenant's subordination if Tenant is in
default hereunder), this Lease and all of Tenant's rights hereunder are and
shall be subject and subordinate at all times to all mortgages, deeds of trust,
ground leases or any other method of financing or refinancing, in any amount,
and all advances thereon, which may now or hereafter be placed against or affect
any or all of the Demised Premises by Landlord, and to all renewals,
modifications, consolidations, replacements and extensions thereof. The
aforesaid provisions shall be self operative and no further instrument of
subordination shall be necessary unless required by any such mortgagee or other
lender, in which case Tenant shall execute, acknowledge and deliver any
requested subordination agreement within 10 days after request. If any
foreclosure or power of sale proceedings are initiated by any mortgagee(s) or a
deed in lieu is granted, Tenant agrees, upon written request of any such
mortgagee(s) or any purchaser at such sale, to attorn and pay Net Rent and other
amounts payable hereunder to such party and to execute and deliver any
instruments necessary or appropriate to effectuate such attornment. Tenant
agrees to give any mortgagee(s) by certified mail, return receipt requested, a
copy of any notice of default served by Tenant upon Landlord, provided that
prior to such notice Tenant has been notified in writing of the name and address
of any such mortgagee(s). Tenant further agrees that if Landlord has failed to
cure any such default within the time permitted Landlord for cure under this
Lease, any such mortgagee(s) whose address has been so provided to Tenant shall
have an additional period of thirty days in which to cure (or such additional
time as may be required due to causes beyond such mortgagee's control, including
time to obtain possession of the Demised Premises by power of sale or judicial
action).
11.02 Within ten days after request, Tenant shall execute and deliver to
Landlord or to any party designated by Landlord a so-called "estoppel
certificate", in the form submitted by Landlord to Tenant, whereby Tenant
represents and certifies as to such various facts and matters relating to this
Lease as Landlord may reasonably request.
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ARTICLE 12
Default
12.01 The following are "Events of Default": (a) Tenant fails to pay
when due any Net Rent; or Tenant fails to pay when due any additional rent or
other sums or charges reserved hereunder and such default continues for five
days after written notice from Landlord;
(b) Tenant vacates or abandons the Demised Premises;
(c) This Lease or the Demised Premises or any part of the
Demised Premises are taken upon execution or by other process of law directed
against Tenant, or are taken upon or subjected to any attachment by any creditor
of Tenant or claimant against Tenant, and such attachment is not discharged
within 30 days after its levy;
(d) Tenant files a petition in bankruptcy or insolvency or for
reorganization or arrangement under the bankruptcy laws of the United States or
under any insolvency act of any state, or is dissolved, or makes an assignment
for the benefit of creditors;
(e) Involuntary proceedings under any such bankruptcy laws or
insolvency act or for the dissolution of Tenant are instituted against Tenant,
or a receiver or trustee is appointed for all or substantially all of Tenant's
property, and such proceeding is not dismissed or such receivership or
trusteeship is not vacated within 90 days after such institution or appoint;
(f) Tenant admits its insolvency or its inability to pay its
debts as they come due; or
(g) Tenant fails to observe or perform any term or condition of
this :Lease (other than the payment of amounts as described in clause (a) above)
unless such failure is cured, if susceptible to cure, within the time specified
herein or within a reasonable time (and in any event no later than forty-five
(45) days after written notice thereof is given by Landlord to Tenant).
Failure by Tenant to comply with the same term or condition of
this Lease on three occasions during any twelve month period shall, at
Landlord's discretion, constitute an incurable Event of Default.
12.02 If any one or more Events of Default set forth in Section
12.01 above occurs, then Landlord may elect the alternatives set forth in
subsections (a) or (b) below as follows (which remedies are distinct, separate
and cumulative with and in addition to any other right or remedy allowed under
any law or other provision of this Lease):
(a) Give Tenant written notice of its intention to terminate all
of Tenant's rights under this Lease on the date of such notice or on any later
date specified in such notice, and, on the date specified in such notice,
Tenant's right to possession of the
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Demised Premises will cease and this Lease will be terminated (except as to
Tenant's obligations under the Lease which shall continue), as if the expiration
of the term fixed in such notice were the end of the term of this Lease. In such
event, Landlord may recover from Tenant (i) any unpaid Net Rent and other
amounts payable hereunder, (ii) the amount by which any unpaid Net Rent and
other amounts payable hereunder which would have accrued after the termination
date during the balance of the term of this Lease exceeds the reasonable rental
value of the Demised Premises under substantially equivalent terms to those of
this Lease (after deduction of all reasonable costs of reletting), and (iii) any
other amounts necessary to compensate Landlord for all damages proximately
caused by Tenant's failure to perform its obligations under this Lease. Landlord
will be entitled to collect such damages from Tenant monthly on the days on
which the rent and other amounts would have been payable under this Lease if
this Lease had not been terminated and Landlord will be entitled to receive such
damages from Tenant on each such day; or
(b) (1) Without demand or notice, re-enter and take possession
of the Demised Premises or any part of the Demised Premises; and repossess the
Demised Premises as of Landlord's former estate; and expel Tenant from the
Demised Premises and those claiming through or under Tenant; and remove the
effects of both or either, without being deemed guilty of any manner of trespass
and without prejudice to any remedies for arrears of rent or preceding breach of
covenants or conditions (and if applicable law permits, and Landlord shall not
have expressly terminated this Lease in writing, any such action shall be deemed
a termination of Tenant's right of possession only). If Landlord elects to
re-enter, as provided in this subsection (b) or if Landlord takes possession of
the Demised Premises pursuant to legal proceedings or pursuant to any notice
provided by law, Landlord may, from time to time, without terminating this
Lease, re-let the Demised Premises or any part of the Demised Premises, in
Landlord's or Tenant's name but for the account of Tenant, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the term of this Lease) and on such terms and
conditions (which may include, without limitation, concessions of free rent, and
the alteration and repair of the Demised Premises) as Landlord, in its
reasonable discretion, may determine. Landlord reserves the right following any
such re-entry or re-letting, or both, to exercise its right to terminate this
Lease by giving Tenant such written notice, and, in that event the Lease will
terminate as specified in such notice. (2) If Landlord elects to take possession
of the Demised Premises according to this subsection (b) without terminating the
Lease, Tenant will pay Landlord (i) the rent and other sums which would be
payable under this Lease if such repossession had not occurred, less (ii) the
net proceeds, if any, of any re-letting of the Demised Premises after deducting
all of Landlord's reasonable expenses incurred in connection with such
re-letting, including, without limitation, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, expenses of employees, alteration,
remodeling, repair costs, and expenses of preparation for such re-letting. If,
in connection with any reletting, the new lease term extends beyond the existing
term or the Demised Premises covered by such re-letting include areas which are
not part of the Demised Premises, a fair apportionment of the rent received from
such re-letting and the
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expenses incurred in connection with such re-letting will be made in determining
the net proceeds received from such re-letting. In addition, in determining the
net proceeds from such re-letting, any rent concessions will be apportioned over
the term of the new lease. Tenant will pay such amounts to Landlord monthly on
the days on which the rent and all other amounts owing under this Lease would
have been payable if possession had not been retaken and Landlord will be
entitled to receive the rent and other amounts from Tenant on each such day.
12.03 Landlord shall at all times have the right without prior demand or
notice except as required by applicable law to: (i) seek any declaratory,
injunctive or other equitable relief, and specifically enforce this Lease or
restrain or enjoin a violation of any provision hereof, and Tenant hereby waives
any right to require that Landlord post a bond in connection therewith, and (ii)
sue for and collect any unpaid Net Rent or other amounts payable hereunder which
has accrued. Notwithstanding anything to the contrary contained in this Lease,
to the extent not expressly prohibited by applicable law, upon the occurrence of
any Event of Default, Landlord may terminate this Lease or Tenant's right to
possession of the Demised Premises and accelerate and declare that all Net Rent
and other amounts payable hereunder reserved for the remainder of the term of
this :Lease shall be immediately due and payable, provided that such amounts
shall be discounted to the then present value at 6% per annum in accordance with
accepted financial practice, and Landlord, after receiving payment of same from
Tenant, shall be obligated to turn over to Tenant any actual net reletting
proceeds thereafter received during the remainder of the term of this Lease, up
to the amount so received from Tenant pursuant to this provision. Any failure by
Landlord to mitigate its damages shall only reduce the amounts otherwise payable
by Tenant to Landlord hereunder and shall not give rise to a claim by Tenant
against Landlord for damages.
12.04 The parties waive trial by jury in any action, proceeding or
counterclaim brought by either party against the other on any matter whatsoever
arising out of or in any way connected with this Lease, the relationship of
landlord and tenant created hereby, Tenant's use or occupancy of the Demised
Premises, or any claim for injury or damage. Tenant hereby irrevocably waives
any right otherwise available under any applicable law to redeem or reinstate
this Lease or Tenant's right to possession after this Lease or Tenant's right to
possession is terminated based on an Event of Default.
12.05 Tenant shall pay, as additional rent, a service charge of $200
for bookkeeping and administrative expenses, if any portion of rent is not
received when due. Any amounts payable hereunder not paid when due shall accrue
interest from the due date at the rate of 12% per annum until payment is
received by Landlord. If Tenant fails to perform any obligation under this
Lease, Landlord shall have the right (but not the duty) to perform such
obligation on behalf and for the account of Tenant. In such event, Tenant shall
reimburse Landlord upon demand, as additional rent, for all expenses incurred by
Landlord in performing such obligation together with interest thereon at 12% per
annum from the date such expenses were incurred.
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ARTICLE 13
Quiet Enjoyment
Tenant, upon performing and observing all of the terms, covenants and
condition of this Lease on Tenant's part to be performed and observed, shall
peaceably and quietly have and enjoy the Demised Premises during the term of
this Lease, free of interference from Landlord or any party claiming through or
under Landlord.
ARTICLE 14
Surrender of Premises
Upon the expiration or sooner termination of the term of this Lease,
Tenant shall quit and surrender the Demised Premises, broom clean, in as good
condition and repair as Tenant is required to maintain the same throughout the
term of this Lease, together with all keys. All leasehold improvements and other
fixtures, whether installed by Tenant or Landlord, shall be Landlord's property
and shall remain, all without compensation, allowance or credit to Tenant and as
though conclusively conveyed by Tenant to Landlord as if by bill of sale,
including, without limitation, all electrical, mechanical, HVAC, plumbing and
other utility systems, connections and appliances and all installed cranes,
except those cranes which Tenant re-installs and uses at another location owned
by Tenant. If Tenant shall fail to remove any of Tenant's property at the
Demised Premises, such property shall, at the option of Landlord, either be
deemed abandoned and become the exclusive property of Landlord, or Landlord
shall have the right to remove and dispose of such property in accordance with
ARTICLE 5, at the expense of Tenant, and hold Tenant responsible for any and all
net charges and expenses incurred by Landlord therefor.
ARTICLE 15
Holding Over
Should Tenant remain in possession of the Demised Premises after the
expiration of the term hereof without the execution of a new lease, such holding
over, in the absence of a written agreement to the contrary, shall be deemed to
have created and be construed to be a tenancy at sufferance terminable
immediately at any time by Landlord, at a monthly Net Rent equal to $20,000,
subject to all the other terms, covenants and conditions of this Lease, and
Landlord shall have such other remedies for holdover as may be available to
Landlord under other provisions of this Lease or applicable laws.
ARTICLE 16
No Waiver
The failure of Landlord or Tenant to insist upon the strict performance
of any provision of this Lease, or the failure of Landlord or Tenant to exercise
any right, option or remedy hereby reserved shall not be construed as a waiver
for the future of any such provision, right, option or remedy or as a waiver of
a subsequent breach thereof. The
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consent or approval by Landlord of any act by Tenant requiring Landlord's
consent or approval shall not be construed to waive or render unnecessary the
requirement for Landlord's consent or approval of any subsequent similar act by
Tenant. The receipt by Landlord of rent or other charges or sums with knowledge
of a breach of any provision of this Lease shall not be deemed a waiver of such
breach. No provision of this Lease shall be deemed to have been waived unless
such waiver shall be in writing signed by the party to be charged. No payment by
Tenant or receipt by Landlord of a lesser amount than the rents, charges and
other sums hereby reserved shall be deemed to be other than on account of the
earliest rents, charges and other sums then unpaid, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment by Tenant
be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rents, charges and other sums due, or Landlord may pursue any other remedy in
this Lease provided or by law permitted.
ARTICLE 17
Notices
Except as otherwise provided in this Lease, every notice, demand,
consent, approval, request or other communication which may be or is required to
be given under this Lease or by law shall be in writing and shall be sent either
by United States Certified Mail, postage prepaid, return receipt requested, or
by Federal Express or another nationally recognized overnight courier service,
and shall be addressed or delivered, as set forth in the Merger Agreement. Every
notice or other communication hereunder shall be deemed to have been given as of
the second business day following the date of such mailing or dispatch by
courier or immediately if personally delivered.
ARTICLE 18
ARBITRATION
18.01 Landlord and Tenant shall not have been deemed to have agreed to
determination of any dispute arising out of this Lease by arbitration unless
determination in such manner shall have been specifically and unequivocally
provided for in this Lease and in no other case or cases.
18.02 Every dispute between the parties which is expressly provided in
this Lease to be determined by arbitration shall be resolved in the manner
provided in this Article.
18.03 The party requesting arbitration shall do so by giving notice to
that effect to the other party and shall simultaneously request the appointment
of a single arbitrator by the American Arbitration Association (or any successor
thereto) in accordance with its rules then prevailing, or, if the American
Arbitration Association (or such successor organization) shall fail to appoint
said arbitrator within sixty (60) days after such request is made, then either
party may apply, on notice to the other, to any court having jurisdiction for
the appointment of such arbitrator and the other party shall not raise any
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question as to such court's full power to entertain the application and make the
appointment. Each arbitrator appointed pursuant to this Section shall be a
disinterested person having at least ten years experience in the State of
Arkansas in a calling connected with the dispute.
18.04 The arbitrator shall render his or her decision and award within
30 days after the final hearing. Such decision and award shall be in writing and
counterpart copies thereof shall be delivered to each of the parties. In
rendering such decision and award, the arbitrator shall not add to, subtract
from or otherwise modify the provisions of this Lease. Judgment may be entered
on the determination and award made by the arbitrator in any court of competent
jurisdiction and may be enforced in accordance with the Laws of the State of
Arkansas.
18.05 If, for any reason whatsoever, the written decision and award of
the arbitrator shall not be rendered within the time limit set forth in Section
18.04, either party may apply to any court having jurisdiction, by action,
proceeding or otherwise (but not by a new arbitration proceeding) as may be
proper to determine the question in dispute consistently with the provisions of
this Lease.
18.06 The arbitrator shall determine the division, if any, between the
parties, of the expenses of the arbitration, including fees to the arbitrators,
counsel and witness fees.
ARTICLE 19
Taxes
19.01 The term "Taxes" shall mean the total of all taxes and special,
general, extraordinary or other assessments, sewer rents, water charges,
occupancy taxes, school taxes, and other taxes, fees, levies or other
impositions of every kind and nature, whether foreseen or unforeseen or charges
of any kind or nature levied, assessed, imposed or attributable at any time by
any governmental authority (including, without limitation, any town, city,
district, county, village, school district or public transportation authority)
upon or against or in connection with the Demised Premises, and also any tax,
assessment, or charge, levied, assessed or imposed at any time by any
governmental authority in connection with the receipt of income or rents from
the Demised Premises, and personal property taxes imposed upon the fixtures,
machinery, equipment, apparatus, systems, appurtenances, furniture and other
personal property used in connection with the Demised Premises. Notwithstanding
the foregoing, Taxes shall not include excess profits taxes, franchise taxes,
gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes,
federal and State income taxes, and other taxes to the extent applicable to
Landlord's general or net income. If, due to a future change in the method of
taxation or in the taxing authority, or for any other reason, a franchise,
income, transit, profit or other tax or governmental imposition, however,
designated, shall be levied against Landlord in substitution in whole or in part
for the Taxes, then such franchise, income, transit, profit or other tax or
governmental imposition shall be deemed to be included within the definition of
"Taxes" for the purposes of this Article. As to special assessments which
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are payable over a period of time extending beyond the term of this Lease, only
a pro rata portion thereof, covering the portion of the term of this Lease
unexpired at the time of the imposition of such assessment, shall be included
in Taxes.
19.02 Tenant shall pay all Taxes directly to the taxing authority on or
before the due date of the required payments and shall simultaneously therewith
provide evidence thereof to Landlord. Any failure to pay any Taxes in a timely
manner shall be deemed a failure to pay rent under this Lease. If Tenant fails
to pay any Taxes on or before the due date thereof, Landlord may, but shall not
be obligated to, pay such Taxes and notify Tenant of the same. Tenant shall
reimburse Landlord for any such payment, as additional rent, within ten (10)
days after receipt of any such statement. Taxes payable by Tenant shall be
apportioned to the term of this Lease. Tenant shall pay increased Taxes whether
Taxes are increased as a result of increases in the assessment or valuation of
the Demised Premises (whether based on a sale, change in ownership or
refinancing of the Demised Premises or otherwise), increases in tax rates,
reduction or elimination of any rollbacks or other deductions available under
current law, scheduled reductions of any tax abatement, elimination, invalidity
or withdrawal of any tax abatement, or for any other cause whatsoever.
ARTICLE 20
Miscellaneous
20.01 This Lease, including the Exhibits and Schedules attached hereto,
sets forth the entire agreement between the parties with respect to the Demised
Premises. All prior conversations or writings between the parties hereto or
their representatives with respect to the Demised Premised are merged herein and
extinguished. Tenant has relied on Tenant's inspections, due diligence and
investigations in entering into this Lease and not on any representations or
warranties made by or on behalf of Landlord concerning the condition or
suitability of the Demised Premises for any particular purpose.
20.02 This Lease shall not be modified except by a writing signed by the
party to be charged. The Article captions appearing herein are inserted as a
matter of convenience and are not intended to define, construe or describe the
scope or intent of any provision of this Lease.
20.03 If any provision of this Lease or the application thereof to any
person or circumstance shall be held void or unenforceable, then the remainder
of this Lease or the application of such provision to persons or circumstances
other than those as to which it is held void or unenforceable shall not be
affected thereby.
20.04 Except as otherwise expressly provided in this Lease, all the
terms, covenants conditions and provisions of this Lease shall be binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
administrators, executors, successors and permitted assigns.
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20.05 The person or persons executing this Lease on behalf of Tenant
hereby covenant, represent and warrant that Tenant is a duly incorporated
corporation authorized to do business in Arkansas; and that the person or
persons executing this Lease on behalf of Tenant is an officer or are officers
of such Tenant, and that he or they as such officers are duly authorized to
execute, acknowledge and deliver this Lease to Landlord.
20.06 This Lease may be executed in several counterparts, each of which
shall be deemed an original, and all such counterparts shall together constitute
one and the same instrument.
20.07 This Lease shall be governed and controlled by the law of the
State of Arkansas.
20.08 IN THE INTEREST OF OBTAINING A SPEEDIER AND LESS COSTLY HEARING
AND RESOLUTION OF ANY DISPUTE, EACH OF LANDLORD AND TENANT HEREBY EXPRESSLY
WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
PARTY AGAINST THE OTHER AND ANY RIGHTS TO A TRIAL BY JURY UNDER ANY STATUTE,
RULE OF LAW OR PUBLIC POLICY IN CONNECTION WITH ANY MATTER WHATSOEVER ARISING
OUT OF OR IN ANY WAY RELATING TO THIS LEASE.
20.09 Neither this Lease nor any memorandum of lease or short form lease
shall be recorded by Tenant in connection with the Demised Premises without the
prior written consent of Landlord (which consent shall not unreasonably be
withheld or delayed).
20.10 If Landlord shall fail to perform any obligation under this Lease
required to be performed by Landlord, Landlord shall not be deemed to be in
default hereunder nor subject to claims for damages of any kind, unless such
failure shall have continued for a period of thirty days after written notice
thereof by Tenant to Landlord or such additional time as may be required due to
force majeure. Except in case of emergency, Tenant shall have no right of
self-help to perform repairs or any other obligation of Landlord, and shall have
no right to withhold, set off, or abate any amount otherwise payable hereunder.
20.11 In case Landlord or any successor owner of the Demised Premises
shall convey or otherwise dispose of any portion thereof to another party (and
nothing herein shall be construed to restrict or prevent such conveyance or
disposition), such other party shall thereupon be and become landlord hereunder
and shall be deemed to have fully assumed and be liable for all obligations of
this Lease to be performed by Landlord. Tenant shall attorn to such party, and
Landlord or such successor owner shall, from and after the date of conveyance ,
be free of all liabilities and obligations hereunder.
20.12 Tenant shall be responsible for compliance with all requirements
of the Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.)
and the regulations and guidelines promulgated thereunder.
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20.13 For purposes hereof, "Hazardous Material" means any chemical,
substance, material or waste or component thereof which is now or hereafter
listed, defined or regulated as a hazardous or toxic chemical, substance,
material or waste or component thereof by any federal, State or local governing
or regulatory body having jurisdiction, or which would trigger any employee or
community "right-to-know" requirements adopted by any such body, or for which
any such body has adopted any requirements for the preparation or distribution
of a material safety data sheet issued by the manufacturer thereof. All actions
relating in any manner whatsoever (except in case of emergency) to Hazardous
Material in connection with the Demised Premises shall require and be subject to
delivery of prior written notice to Landlord. If any Hazardous Material is
released, discharged or disposed of by Tenant or any other occupant of the
Demised Premises, or their employees, agents or contractors, on or about the
Demised Premises, Tenant shall immediately inform Landlord and shall be
responsible for all remediation thereof in compliance with applicable law at
Tenant's expense.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Lease to be executed as of the day and year first above written.
Landlord:
LITTLE ROCK, LLC
By:
-------------------------------
Name:
Title:
Tenant:
TBM ACQUISITION I, INC.
By:
-------------------------------
Name:
Title:
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EXHIBIT E
Terms of Escrow Agreement
- - Refundable deposit of $500,000 contributed to Escrow by March 1, 2000 if
Closing has not occurred to extend Closing Date to April 15, 2000.
- - Deposit will be held in an interest bearing account.
- - After March 1, the Parent and the Company will proceed expeditiously and in
good faith towards consummating the Merger.
- - After March 1, if Seller learns of breach pursuant to Section 7.1(a), (b),
(c), (d), (e), (k), (m) or (r) it has the right to notify Parent and
Company.
- - Upon notice, Parent has three (3) business days to notify Seller if it
elects to proceed. Parent shall notify Escrow Agent if it has elected to
terminate. Upon notification, deposit plus interest shall be returned to
Company.
- - After March 31, 2000, Parent and Company cannot terminate Merger Agreement
pursuant to Section 7.1(q) (Bank Financing) and if Parent or Company does
terminate because it does not have bank financing, the deposit plus
interest will be forfeited to the Seller.
- - Unless both parties to the Escrow agree to continuation, unless sooner
terminated, the Escrow will terminate on April 15, 2000 and the deposit
plus interest will be (i) returned to Company if the Agreement has
terminated as a result of a failure of the conditions contained in Section
7.1 (other than clause (q)); or (ii) paid to Seller if the Agreement has
been terminated as a result of the Parent's or the Company's failure of the
conditions contained in Section 7.2 or Parent's or the Company's failure
after March 31, 2000 to close the transactions contemplated hereunder even
though all Closing conditions under Section 7.1 (other than Section 7.1(q))
have been satisfied or waived by the Parent or the Company.
