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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9*
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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SQUARE INDUSTRIES, INC.
(Name of Subject Company)
SQUARE INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
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COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
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8522351
(CUSIP Number of Class of Securities)
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LOWELL HARWOOD
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SQUARE INDUSTRIES, INC.
921 BERGEN AVENUE
JERSEY CITY, NEW JERSEY 07306
(201) 798-0090
(Name, address and telephone number of person authorized to receive
notice and communications on behalf of the person(s) filing statement).
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COPIES TO:
DANIEL R. KAPLAN, ESQ. LEO SILVERSTEIN, ESQ.
PROSKAUER ROSE GOETZ & MENDELSOHN LLP BROCK, FENSTERSTOCK, SILVERSTEIN,
1585 BROADWAY MCAULIFFE & WADE, LLC
NEW YORK, NEW YORK 10036 153 EAST 53RD STREET
(212) 969-3200 NEW YORK, NEW YORK 10022
(212) 371-2000
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* This Solicitation/Recommendation Statement on Schedule 14D-9 relates to an
offer for 100% of the outstanding shares of common stock of Square Industries,
Inc. by a wholly-owned subsidiary of Central Parking Corporation.
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Square Industries, Inc., a New York
corporation (the "Company"), and the address of the principal executive offices
of the Company is 921 Bergen Avenue, Jersey City, New Jersey 07306. The title of
the class of equity securities to which this statement relates is the common
stock, par value $.01 per share, of the Company (the "Common Stock" or the
"Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer by Central Parking
System -- Empire State, Inc., a New York corporation ("Purchaser"), an indirect
wholly-owned subsidiary of Central Parking Corporation, a Tennessee corporation
("Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated
December 13, 1996 (the "Schedule 14D-1"), to acquire all of the outstanding
Shares, at a price of $28.50 per Share net to the seller in cash promptly
following the completion of the Offer, without interest thereon with an
additional $2.50 per Share to be deposited by Parent and held in escrow as
contingent consideration for distribution in whole or in part to either
shareholders of the Company or Parent based upon resolution of certain matters
and subject to adjustment pursuant to the Escrow Agreement (as defined in Item
3) (the "Offer Contingent Consideration") (the $28.50 and the Offer Contingent
Consideration, collectively the "Offer Price"), upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated December 13, 1996, as
amended or supplemented (the "Offer to Purchase"), and the related letter of
transmittal (which together with the Offer to Purchase constitute the "Offer"
and are contained within the Schedule 14D-1).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 6, 1996 (the "Merger Agreement"), among the Company, Parent and
Purchaser. The Merger Agreement provides, among other things, that as soon as
practicable after the satisfaction or waiver of the conditions set forth in the
Merger Agreement, Purchaser will be merged with and into the Company (the
"Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is filed herewith as
Exhibit 1 and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Purchaser are located at 2401 21st Avenue South, Suite 200,
Nashville, Tennessee 37212.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings between
the Company and its executive officers, directors and affiliates are described
on pages 2-7 and 11-12 of the Company's Proxy Statement, dated July 17, 1996,
for its 1996 Annual Meeting of Shareholders (the "1996 Proxy Statement") in the
section entitled "ELECTION OF DIRECTORS" in the section "EXECUTIVE COMPENSATION"
under the following subheadings: "Compensation Committee Interlocks and Insider
Participation," "Report of the Compensation Committee on Executive
Compensation," "Summary Compensation Table," and "Stock Options," in the section
entitled "CERTAIN TRANSACTIONS" and in the section entitled "PROPOSAL TO AMEND
THE 1992 STOCK OPTION PLAN." Pages 2-7 and 11-12 of the 1996 Proxy Statement are
filed as Exhibit 2 hereto and are incorporated herein by reference.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which has
been filed as Exhibit 1 hereto and is incorporated herein by reference. Such
summary is qualified in its entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as soon as practicable, but in any event within five business days of the date
of the initial public announcement of the Merger Agreement. The obligation of
Purchaser to commence the Offer and to accept for payment and to pay for any
Shares tendered pursuant to the Offer is subject to the satisfaction of the
Minimum Condition and certain
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other conditions that are described in the Merger Agreement. Purchaser and
Parent have agreed that without the prior written consent of the Company no
change in the Offer may be made which (i) decreases the price per Share payable
in the Offer, (ii) changes the form of consideration to be paid in the Offer, or
(iii) modifies the conditions to the Offer or imposes conditions to the Offer in
addition to those set forth in the Merger Agreement. Purchaser and Parent have
agreed the Offer shall expire 21 business days after it is commenced and shall
not be extended without the prior written consent of the Company; provided
Parent may extend the Offer one time for no more than 10 days and only if at
least 80% of all of the outstanding Shares have been tendered prior to such
extension.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions set forth therein, and in accordance with the New York
Business Corporation Law ("NYBCL"), at the effective time of the Merger (the
"Effective Time") Purchaser will be merged with and into the Company. As a
result of the Merger, the separate corporate existence of the Company will
cease, and the Company will continue as the Surviving Corporation and an
indirect wholly-owned subsidiary of Parent. Upon consummation of the Merger,
each issued and outstanding Share (other than (i) any Shares held in the
treasury of the Company and Shares owned by Parent or any direct or indirect
subsidiary of Parent or the Company (which shall be canceled at the Effective
Time), and (ii) Shares as to which the holder thereof shall have validly
exercised such holder's appraisal rights, if any, under Section 910 of the
NYBCL), without interest, will be converted into the right to receive an amount
net in cash equal to $28.50 per Share and an additional $2.50 per Share to be
deposited by Parent and held in escrow as contingent consideration for
distribution, in whole or in part, to either the shareholders of the Company or
Parent based upon the resolution of certain matters, subject to adjustment
pursuant to the Escrow Agreement (the "Merger Contingent Consideration" and
together with the Offer Contingent Consideration and the Option Contingent
Consideration (as defined below), the "Contingent Consideration") (the $28.50
and the Merger Contingent Consideration, the "Merger Consideration").
Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Purchaser immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement also provides that, at the Effective Time, the Certificate of
Incorporation and Bylaws of the Purchaser, as in effect immediately prior to the
Effective Time, will be the Certificate of Incorporation and Bylaws of the
Surviving Corporation until thereafter amended as provided therein and in the
NYBCL.
Agreements of Parent, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company, acting through the Board, will, subject to its fiduciary
duties under applicable law based on an opinion of outside legal counsel, if all
or any portion of the Merger Agreement or the transactions contemplated thereby
require approval by the shareholders of the Company, duly call, give notice of,
convene and hold a meeting of its shareholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby (the
"Shareholders' Meeting").
Proxy Statement. The Merger Agreement provides that, if shareholder
approval of the Merger is required, the Company will, as soon as practicable,
file with the Commission under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and use its reasonable best efforts to have cleared by the
Commission, a proxy statement and related proxy materials (the "Proxy
Statement") with respect to the Shareholders' Meeting and will cause the Proxy
Statement to be mailed to shareholders of the Company at the earliest
practicable time. The Company has also agreed, subject to its fiduciary duties
under applicable law based on an opinion of outside legal counsel, to include in
the Proxy Statement the recommendation of the Board that the shareholders of the
Company approve and adopt the Merger Agreement and the transactions contemplated
thereby. To the extent permitted by applicable law, Parent and Purchaser have
each agreed to vote all shares beneficially owned by them in favor of the
Merger.
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Conduct of Business. Pursuant to the Merger Agreement, the Company has
agreed, among other things, that the Company will use its commercially
reasonable efforts to preserve the business organization of the Company intact
and to maintain its existing relations with its suppliers, customers, employees
and business associates. In addition, the Company will conduct its business only
in the ordinary and usual course. During the period from the date of the Merger
Agreement until the earlier to occur of the Effective Time or the termination of
the Merger Agreement, the Company has also agreed that, except as required under
or permitted by the Merger Agreement or as disclosed in the Disclosure Schedule
or Annexes to the Merger Agreement, or as otherwise consented to in writing by
Parent, each of the Company and its subsidiaries will not, among other things:
(A) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to the Shares, split, combine or reclassify
the outstanding Shares; (B) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible or exchangeable for, or any
warrants, options, calls, commitments or rights of any kind to acquire any
shares of its capital stock of any class other than shares issued pursuant to
exercise of warrants or options outstanding as of the date of the Merger
Agreement under the Stock Option Plan; (C) amend its certificate of
incorporation, bylaws or other organizational documents; (D) settle or
compromise any material debt, encumbrance, claims or litigation in excess of
$100,000 in the aggregate or, except in the ordinary and usual course of
business, modify, amend or terminate any of its contracts or waive, release or
assign any material rights or claims; (E) transfer, lease, license, guarantee,
sell, mortgage, pledge, dispose of or encumber any of its assets or incur or
modify any indebtedness or other liability other than in the ordinary and usual
course of business and as provided in the Merger Agreement; (F) acquire directly
or indirectly by redemption or otherwise any shares of capital stock of the
Company; (G) enter into, amend or terminate any lease of real property other
than in the ordinary course of business and as provided in the Merger Agreement;
(H) except in the ordinary course of business and as provided in the Merger
Agreement, authorize capital expenditures in excess of $100,000 or make any
significant acquisition of, or investment in, assets or stock of any other
person or entity; (I) except in the ordinary and usual course of business and as
provided in the Merger Agreement, (i) grant any severance or termination pay to,
or enter into any employment or severance agreement with any director, officer
or other employee of the Company other than pursuant to contractual obligations
existing on the date of the Merger Agreement, or except as set forth in the
Merger Agreement, or (ii) establish, adopt, enter into, make any new grants or
awards under or amend, any bonus, profit sharing, thrift, savings, compensation,
stock purchase, stock bonus, stock option, restricted stock, pension,
retirement, employee stock ownership, deferred compensation, employment,
collective bargaining, termination, severance or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any current or former directors,
officers or employees; (J) make any tax election or permit any insurance policy
naming it as a beneficiary or a loss payable payee to be canceled or terminated
without notice to the Parent, except in the ordinary and usual course of
business, and shall maintain insurance upon all of its properties and operations
in such amounts and of such kinds comparable to that in effect on the date of
the Merger Agreement on such properties and with respect to such operations; (K)
in any material respect fail to (i) maintain its books, accounts and records in
the usual, regular and ordinary manner, on a basis consistent with prior years,
(ii) comply with all contractual and other obligations of the Company and its
subsidiaries, and (iii) comply with all applicable laws to which it is subject;
or (L) authorize or enter into an agreement to do any of the foregoing.
Company Board Representation. The Merger Agreement provides that, promptly
upon the purchase by Purchaser of a majority of the outstanding Shares pursuant
to the Offer, Purchaser will be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company as will give Purchaser representation on the Board equal to the product
of the total number of directors on the Board (giving effect to the directors
elected pursuant to this sentence and including current directors serving as
officers of the Company), multiplied by the percentage that the aggregate number
of Shares beneficially owned by Purchaser or any affiliate of Purchaser at such
time bears to the total number of Shares then outstanding, and the Company will,
at such time, promptly take all actions necessary to cause Purchaser's designees
to be elected as directors of the Company, including increasing the size of the
Board or securing the resignations of incumbent directors or both. The Merger
Agreement also provides that, at such times the Company will cause persons
designated by Purchaser to constitute the same percentage of (i) each committee
of the Board (some of the members of which may be required to be independent
under applicable
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law), (ii) each board of directors of each subsidiary of the Company, and (iii)
each committee of each such board, in each case only to the extent permitted by
applicable law, as Purchaser's designees are of the Board of Directors of the
Company.
Section 14(f) of the Exchange Act requires the Company to mail to its
stockholders an Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. A copy
of the Information Statement is attached as Schedule I hereto and is
incorporated herein by reference.
Amendment and Waiver. Subject to certain restrictions, the Merger
Agreement may be amended by the mutual agreement of the parties thereto, by
action taken or authorized by their respective Boards of Directors, prior to the
Effective Time, provided, however, that, after approval of the Merger by the
shareholders of the Company, no amendment may be made which by law requires
further approval by such shareholders without such further approval; provided
further, however, that after the completion of the Offer and the purchase of the
Shares thereunder by Parent or Purchaser, this Agreement will not be amended by
the Company without the approval of a majority of the persons who are directors
of the Company on the date of the Merger Agreement; and provided further,
however, that certain provisions in the Merger Agreement governing
indemnification of the Company's officers and directors and certain employment
matters may not be amended subsequent to the Effective Time.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date of the Merger Agreement until the Effective Time, the Company
shall afford to Parent and to the officers, employees, agents and other
authorized representatives of Parent access during normal business hours
throughout the period prior to the Effective Time to its properties, books,
contracts and records, and shall furnish promptly to Parent all information
concerning its business, properties and personnel as Parent or its
representatives may reasonably request. Parent and Purchaser have agreed to keep
such information confidential in accordance with the agreement, dated as of July
10, 1996, between the Company and Parent (the "Confidentiality Agreement").
No Solicitation of Transactions. The Merger Agreement provides that
neither the Company nor any of the officers and directors of the Company shall,
and the Company shall direct and use its reasonable best efforts to cause the
employees, agents and representatives of the Company or any subsidiary
(including, without limitation, any investment banker, attorney or accountant
retained by the Company) not to, initiate, solicit or encourage, directly or
indirectly, any proposal or offer to acquire all or any substantial part of the
business and properties of the Company and the Subsidiaries or any capital stock
of the Company and the Subsidiaries, whether by merger, purchase of assets,
tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof; provided, however, that the Company may
respond to certain unsolicited requests for information and participate in
negotiations with such parties as required by its fiduciary obligations under
applicable state law or the exercise of its duties under Rule 14e-2 under the
Exchange Act, subject to the terms and conditions described in the Merger
Agreement. The Merger Agreement requires that the Company immediately cease and
cause to be terminated any solicitation, initiation, encouragement, activity,
discussion or negotiation existing as of the date of the Merger Agreement with
any parties concerning an acquisition proposal. The Company has also agreed to
notify Parent promptly if any such proposal or offer, or any inquiry or contact
with any person or entity with respect thereto, is made. Subject to the Board's
fiduciary duties, the Company has further agreed not to enter into any
definitive agreement with any other person or entity unless it has delivered to
Parent, at least two business days prior to execution by the Company, a copy of
the definitive agreement and Parent shall have failed, within such two day
period, to amend the terms of the Merger Agreement so that the Merger would be,
in the good faith determination of the Board, at least as favorable to the
Company's shareholders from a financial point of view as the proposed
acquisition.
Agreement to Support the Transaction. The Company has agreed to cause
certain of its affiliates to (i) tender in the Offer all issued and outstanding
shares owned (or as to which such affiliates have the power of disposition) by
such affiliates which in the aggregate consist of 650,540 shares and to exercise
and tender in the Offer or "cash-out" all options and warrants held by such
affiliates which in the aggregate currently consist
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of options and warrants to acquire 387,500 shares as provided in the Merger
Agreement and (ii) enter into an agreement to support the transaction (the
"Agreement to Support the Transaction") (the Agreement to Support Transaction
was executed by the affiliates on December 6, 1996). The Company has agreed to
cause (i) Lowell and Sanford Harwood to enter into the Non-Competition
Agreements attached as exhibits to the Merger Agreement, (ii) Brett Harwood to
enter into the Employment Agreement attached as an exhibit to the Merger
Agreement, (iii) each of Lowell Harwood and Sanford Harwood to enter into a
Consulting Agreement with terms agreed upon by the parties, and (iv) Leslie
Harwood Ehrlich to enter into a Non-Competition Agreement similar to the
agreements referred to in clause (i) above, but with a one (1) year term. The
Company has also agreed to cause the non-union manager level and above employees
granted severance payments as disclosed in the Merger Agreement to enter into
Non-Competition Agreements equal to the duration of the severance granted.
Treatment of Stock Options. Promptly after the closing of the Offer, each
holder of a then outstanding option or warrant to purchase Shares, will, upon
the consent of each such holder thereof, (whether such options or warrants are
immediately exercisable or not) in settlement thereof, (a) receive a cash
payment from the Company in an amount equal to the product of (i) the difference
between the Offer Price less the Option Contingent Consideration and the per
share exercise price of such options or warrants (the "Option Consideration")
and (ii) the total number of shares which the holder of such option or warrant
is entitled to purchase under such option or warrant such option or warrant, as
provided above (the "Option Shares") and (b) there shall be deposited by Parent
$2.50 per Option Share to be held in escrow as contingent consideration for
distribution to optionholders and warrantholders of the Company or to be
disbursed in whole or in part to Parent subject to adjustment pursuant to the
Escrow Agreement (the "Option Contingent Consideration").
Escrow. The Merger Agreement provides that a portion of the Offer Price
and the Merger Consideration, including the Option Consideration, equal to
approximately $4.4 million in the aggregate shall be deposited by Parent and
held in escrow as Contingent Consideration for the shareholders, optionholders
and warrantholders of the Company by the Escrow Agent in compliance with the
terms and conditions of the Escrow Agreement and subject to adjustment as
provided in the Escrow Agreement. The escrowed funds are subject to and held
solely for the purpose of providing for the following contingencies:
(a) Wooster Property. $1.99 per Share of the Offer Price, Merger
Consideration and Option Consideration (as the case may be) shall be held
in escrow by the Escrow Agent as described in the Escrow Agreement.
(b) Occupancy Tax Escrow. $.51 per Share of the Offer Price, Merger
Consideration and Option Consideration (as the case may be) shall be held
in escrow by the Escrow Agent as described in the Escrow Agreement.
The interests of the shareholders, optionholders and warrantholders with
respect to the Escrowed Funds shall be represented in all matters by the escrow
committee (the "Escrow Committee").
Loan Arrangements. The Merger Agreement provides that promptly after the
purchase by Purchaser of the Shares upon the expiration of the Offer, Purchaser
shall (i) either repay or refinance the obligations of the Company and its
Subsidiaries pursuant to the Credit Agreement among National Westminster Bank
USA (Fleet Bank), the Company and 808 Square Corp. dated July 5, 1988 as amended
to date (the "Natwest Debt"), and (ii) simultaneously therewith repay in full
certain loans made to the Company by Lowell and Sanford Harwood in June, 1995 in
the original principal amount of $500,000, plus interest.
Indemnification and Insurance. The Merger Agreement provides that, for a
period of six years from and after the Effective Time, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify, defend
and hold harmless each present and former officer, director or employee of the
Company from and against all losses, claims, damages, costs, expenses,
liabilities or judgments or amounts that are paid in settlement with, the
approval of indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was a director, officer or employee of the
Company, pertaining to any matter existing or occurring at or prior to the
Effective Time, including liabilities arising as a
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result of the Merger Agreement and the transactions contemplated thereby, to the
fullest extent permitted under the NYBCL and the Surviving Corporation will pay
expenses in advance of the final disposition of any such action or proceeding to
the fullest extent permitted by law. The Merger Agreement provides that for a
period of six years after the Effective Time, the Surviving Corporation shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims or matters existing or occurring before the
Effective Time; provided, that Surviving Corporation shall not be required to
pay an annual premium for such insurance in excess of two times the last annual
premium paid by the Company prior to the date of the Merger Agreement, but in
such case shall purchase as much coverage as possible for such amount.
Employee Benefits. The Merger Agreement provides that Parent will cause
the Surviving Corporation and its Subsidiaries, immediately after the Effective
Time, to honor the employment agreements, arrangements and programs between the
Company or its subsidiaries and their respective employees in accordance with
their terms as in effect on the date of the Merger Agreement (collectively, the
"Employee Arrangements"), to the same extent that the Company and its
subsidiaries would be required to perform them in the event that the Merger were
not consummated. The Merger Agreement provides that for a period of one year
following the Effective Time, Parent shall cause the Surviving Corporation to
provide the garage manager employees and other employees senior thereto of the
Company and its subsidiaries (excluding employees covered by collective
bargaining agreements whose benefits shall be governed by the collective
bargaining agreements in accordance with their terms as in effect on the date of
the Merger Agreement) who are not covered by spousal insurance arrangements with
retirement, pension, medical insurance, life insurance and other similar
benefits following the Effective Time which are, in the aggregate, substantially
comparable to such benefits under the plans and arrangements maintained for its
employees by the Parent as of the date of the Merger Agreement, provided the
Surviving Corporation is not required to continue the employment of the
Company's employees beyond that required by any applicable existing employment
agreement. Parent further agreed to cause the Surviving Corporation to honor,
comply with and perform all obligations of the Company and the subsidiaries
under certain severance arrangements as set forth in the Merger Agreement for a
period of one year following the Effective Time.
Further Action. The Merger Agreement provides that, subject to its terms
and conditions, Parent and the Company will make promptly its respective filing,
and thereafter make any other required submissions under the HSR Act and all
other required regulatory approvals and authorizations with respect to the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement (collectively, the "Transactions"), and except as contemplated by the
Merger Agreement, each of the parties to the Merger Agreement will use its
commercially reasonable best efforts to take or cause to be done, all other
things necessary or advisable to consummate and make effective as promptly as
practicable the Transactions, to obtain in a timely manner all necessary
waivers, consents, and approvals and to effect all necessary registrations and
filings, and to otherwise satisfy or cause to be satisfied all conditions
precedent to its obligations under the Merger Agreement or to vest the Surviving
Corporation with full title to all properties, assets, rights, approvals and
franchises of either Purchaser or the Company.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, regulatory approvals,
litigation, employee benefit plans, labor matters, leases and contracts,
intellectual property, environmental matters, brokers and taxes.
Conditions to the Merger. The respective obligations of Parent, Purchaser
and the Company to effect the Merger are subject to the satisfaction of the
following conditions at or prior to the Effective Time: (i) if required by
applicable law, the Merger Agreement and the Merger will have been approved by
two-thirds of the outstanding Shares of the Company at the Shareholders'
Meeting; (ii) any applicable waiting period under the HSR Act will have expired
or be terminated; (iii) there shall not be threatened, instituted or pending any
action, proceeding or other application before any court or governmental
authority or other regulatory or
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administrative agency or commission, by any government or governmental authority
or by any other person, which challenges or seeks to restrain or prohibit
consummation of the Offer and the Merger, or which seeks to impose any material
restriction on the Parent or the Company in connection with consummation of the
Merger, and no court or governmental or regulatory authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order (whether
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by the Merger Agreement or imposes material
restrictions on the Parent or the Company in connection with consummation of the
Merger; and (iv) the Offer shall have been made and Purchaser shall have
purchased, or caused to be purchased, Shares pursuant to the Offer.
The obligation of the Company to effect the Merger is also subject to the
conditions that (i) each of Parent and Purchaser shall have performed in all
material respects all material obligations and complied with all material
covenants and conditions required by the Merger Agreement to be performed or
complied by it at or prior to the Effective Time, and (ii) the representations
and warranties of the Parent and Purchaser contained in the Merger Agreement
shall be true at the Effective Time, except for (a) changes contemplated under
the Merger Agreement, (b) those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), and (c) where the failure to be true and correct would not have a
material adverse effect on the financial condition, properties, business or
results of operations of Parent.
The obligations of Parent and Purchaser to effect the Merger are also
subject to the conditions that: (i) the Company shall have performed in all
material respects each agreement or covenant to be performed by it at or prior
to the Effective Time; (ii) the representations and warranties of the Company
contained in the Merger Agreement shall be true at the Effective Time, except
for (a) changes contemplated under the Merger Agreement, (b) those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), and (c) where the
failure of the representations and warranties to be true and correct in the
aggregate would not have a Material Adverse Effect on the Company (Material
Adverse Effect as used in the preceding clause shall mean items which in the
aggregate would have (1) a recurring annual pre-tax income effect of $400,000 or
more or (2) a non-recurring income, balance sheet or financial condition effect
of $4,000,000 or more); (iii) Parent and Purchaser shall have received evidence
that the satisfaction of the Natwest Debt can be accomplished without incurring
payment for accrued deferred interest (which evidence has been received as of
the date hereof); (iv) all consents, authorizations, orders and approvals of (or
filings or registration with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of the Merger, the Merger Agreement and the Transactions shall have
been obtained or made, except for filings in connection with the Merger and any
other documents required to be filed after the Effective Time; and (v) since the
date of Merger Agreement, there shall not have occurred a Material Adverse
Change with respect to the Company (for purposes of the preceding clause,
Material Adverse Change shall mean changes or events which in the aggregate
would have (a) a recurring annual pre-tax income effect of $400,000 or more or
(b) a non-recurring income, balance sheet or financial condition effect of
$4,000,000 or more).
Termination. The Merger Agreement provides that it may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval of the Merger Agreement by the
shareholders of the Company: (a) by mutual written consent duly authorized by
the respective Boards of Directors of Parent, Purchaser and the Company; (b) by
Parent or the Company if (i) any court of competent jurisdiction or other
governmental authority or entity shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger or holding that any law applicable to the Merger declares
the Merger to be illegal and such order, decree, ruling or other action shall
have become final and nonappealable, (ii) the requisite approval of shareholders
shall not have been obtained at a meeting duly convened therefor, or (iii) the
Effective Time shall not have occurred on or before May 31, 1997, unless the
absence of such occurrence is due to the failure of the party seeking to
terminate to perform in all material respects any obligation under the Merger
Agreement required to be performed by it at or prior to the Effective Time; (c)
by Parent following the purchase of the Shares in the Offer, if (i) other than
as a direct result of any action or inaction by Parent, the
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<PAGE> 9
Company shall have breached in any material respect any of its representations,
warranties, covenants or agreements contained in the Merger Agreement to the
extent such breach would constitute a Material Adverse Effect as previously
defined, (ii) the Board shall fail to make or shall have withdrawn or modified
in a manner adverse to Parent or Purchaser its approval or recommendation of the
Offer, the Merger Agreement or the Merger or the Board, upon reasonable request
by the Parent, shall fail to reaffirm such approval or recommendation, or shall
have resolved to do any of the foregoing or (iii) (a) all of the conditions to
the obligations of the Company to effect the Merger shall have been satisfied,
and (b) other than as a direct result of any action or inaction by Parent any
condition to the obligations of Parent to effect the Merger is not capable of
being satisfied prior to May 31, 1997; (d) by the Company, upon approval of the
Board, if (i) the Parent or Purchaser shall have breached in any material
respect any of their representations, warranties, covenants or agreements
contained in the Merger Agreement, (ii) prior to the purchase of Shares in the
Offer, the Board receives an unsolicited written offer with respect to a merger,
consolidation or sale of all or substantially all of the Company's assets or if
an unsolicited tender or exchange offer for the Shares is commenced, and the
Board determines in the reasonable exercise of its duties under applicable law,
that such transaction is more favorable from a financial point of view to the
shareholders of the Company than the Offer and the Merger and that approval,
acceptance or recommendation of such transaction is consistent with the
fiduciary obligation of the Board of Directors under applicable law as
determined in good faith by the Board of Directors based upon an opinion of
outside legal counsel (a "Third Party Acquisition"), (iii) the Offer shall be
terminated in accordance with its terms or shall expire without the purchase of
any of the Shares pursuant thereto; or (iv) (a) all of the conditions to the
obligations of Parent to effect the Merger shall have been satisfied, and (b)
any condition to the obligations of the Company to effect the Merger is not
capable of being satisfied prior to May 31, 1997.
Fees and Expenses. Except as set forth below, the Merger Agreement
provides that all expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby will be paid by the party incurring such
expenses.
The Merger Agreement provides for the payment by the Company to Parent of a
termination fee in cash of $2,500,000, including all of Parent's expenses and
fees, within five business days of the occurrence of any of the following
events: (i) if the Merger Agreement is terminated (a) by Parent because the
Board shall have failed to make or shall have withdrawn or modified, in a manner
adverse to Parent or Purchaser, its approval or recommendation of the Offer, the
Merger Agreement or the Merger or the Board, upon reasonable request by the
Parent, shall fail to reaffirm such approval or recommendation, or shall have
resolved to do any of the foregoing; (b) by Company if, prior to the purchase of
Shares in the Offer, the Board approves a Third Party Acquisition; or (ii) as a
result of the failure of certain affiliates of the Company to tender their
Shares in the Offer or support the Merger, based upon a claim that such action
is required in the exercise of their fiduciary duties, and the purchase of
Shares in the Offer or the Merger is not consummated.
EXECUTIVE SEVERANCE PAY PLAN
In October 1996, the Company adopted the Square Industries, Inc. Executive
Severance Pay Plan (the "Severance Plan") for certain executive officers (one of
whom is a member of the Harwood family) and one employee with limited executive
responsibilities (collectively, the "Participants"). The following summary is
qualified in its entirety by reference to the Severance Plan, a copy of which is
filed as Exhibit 3 hereto and is incorporated herein by reference. The severance
program entitles the Participants to a lump sum severance payment upon the
occurrence of any of the following events: (i) termination of employment by an
"Employer" without "Cause" within twelve months of the effective date of a
Change in Control or (ii) termination of employment by a Participant within
thirty days of the occurrence of any "Good Reason" event with regard to such
Participant; or (iii) termination of employment by a Participant after six
months following the effective date of a Change in Control with the "Control
Group" but within twelve months of the effective date of a change in control.
The severance will be a lump sum payment equal to the aggregate salary that such
Participant would have received for the entire period from the last day of such
Participant's employment through the end of the period ended twelve months after
the effective date of a Change in Control.
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EMPLOYMENT AGREEMENT
It is a condition to the Offer that the Company deliver, prior to the
expiration of the Offer, an executed employment agreement from Brett Harwood in
substantially the form included as an exhibit to the Merger Agreement. The
following summary of the form of Employment Agreement among Parent, Central
Parking System, Inc., a subsidiary of Parent ("Employer"), and Brett Harwood is
qualified in its entirety by reference to the text of the Employment Agreement,
a copy of which is filed herewith as Exhibit 4 and is incorporated herein by
reference. Pursuant to the Merger Agreement, the Company will cause Brett
Harwood to serve as Executive Vice President of Employer in New Jersey within
the New York City metropolitan area for a term of three years from the date it
is executed, unless sooner terminated.
For all services to be rendered by Brett Harwood pursuant to the Employment
Agreement, Employer shall pay Brett Harwood a base salary of $200,000 per annum
plus incentive compensation ("Incentive Compensation"). As Incentive
Compensation, Brett Harwood shall be entitled to (i) 10% of all Gross Operating
Income (NOI less 5% of operating expenses G&A burden) derived from new leases or
10% of pre-tax operating profit from newly acquired companies, in each case
where Brett Harwood was primarily responsible for such lease or acquisition and
(ii) 10% of all Gross Operating Income (NOI less 5% of operating expenses G&A
burden) derived from new management agreements where Brett Harwood was primarily
responsible for securing such management agreement. In addition, Parent has
agreed that with respect to the acquisition of any real estate or real estate
venture by Employer or any affiliate of Employer including Parent resulting from
the efforts of Brett Harwood, Employer shall provide or cause to be provided the
opportunity for Brett Harwood or at his direction his immediate family or an
entity of which at least 75% of its equity interests is beneficially owned by
Brett Harwood and his family to acquire up to a 25% interest in such real estate
or real estate venture. For all opportunities generated by Brett Harwood in the
form of the acquisition of Employer leasehold interests and the subsequent
realization of value above the value of such asset operated as a parking
facility, Brett Harwood or Brett Harwood's affiliates will be entitled to
participate in realization of such property value maximization. Parent shall
lend Brett Harwood up to an aggregate of $10 million at a minimum interest rate
of 10% from Employer, with payment terms to be determined by Brett Harwood and
Employer to enable Brett Harwood to invest in such real estate or real estate
venture described above. In addition, Brett Harwood shall be entitled to receive
options, which vest over five years, under Parent's Stock Option Plan to
purchase 10,000 shares of Parent's Common Stock on the commencement of
employment and the first anniversary thereof.
If Brett Harwood leaves the employ of Employer during the three-year term
of the Employment Agreement, he shall be entitled to his Incentive Compensation
for the period during which he was employed, and for up to two and one-half
years from the commencement of the operations generating such Incentive
Compensation, provided that during such period, Brett Harwood complies with the
non-compete provisions of the Employment Agreement (described below) without
geographic limitation. If Mr. Harwood is not offered renewal of the Employment
Agreement at the end of three years, or is offered such renewal and does not
elect to continue his employment, he shall be entitled to receive the Incentive
Compensation for five years from the commencement of operations generating such
Incentive Compensation, provided that he abides by the non-competition
provisions during the payment of Incentive Compensation following termination of
his employment.
Pursuant to the Employment Agreement, Brett Harwood will generally agree to
refrain from engaging in the same or similar business as Parent during the term
of the Employment Agreement and for a period of one year after the expiration of
the term of his employment thereunder (subject to extension in connection with
the Incentive Compensation described above), without geographic limitation, and
for a period of five years following the expiration of the term of the
Employment Agreement with respect to parking locations owned, leased or managed
by Parent or Company (subject to certain exclusions provided for in the
Employment Agreement).
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ESCROW AGREEMENT
The Company, Parent, First American National Bank (the "Escrow Agent") and
Lowell Harwood and Sanford Harwood (such individuals, collectively, the "Escrow
Committee") entered into an escrow agreement (the "Escrow Agreement"), a copy of
which is filed herewith as Exhibit 5 and incorporated herein by reference. The
following summary of the Escrow Agreement is qualified in its entirety by
reference to the full text of the Escrow Agreement. Pursuant to the Merger
Agreement, the Offer Contingent Consideration, the Merger Contingent
Consideration and the Option Contingent Consideration shall be deposited by
Parent and held in escrow as contingent consideration for distribution to the
shareholders, optionholders and warrantholders of the Company (collectively for
purposes of the Escrow Agreement, the "Shareholders") or to be disbursed in
whole or in part to the Parent based upon the resolution of certain matters.
Pursuant to the Escrow Agreement:
(a) $1.99 per Share of the Escrowed Funds shall be held by the Escrow
Agent for a period of up to twelve months from the Effective Time unless
extended (the "Escrow Period") (the "Wooster Escrow") with respect to the
Wooster Property. If during the Escrow Period, the Wooster Property is
leased under a commercially reasonable lease agreement containing certain
terms set forth in the Escrow Agreement, which shall include an annual
rental rate of not less than $900,000 (a "Conforming Lease") or the Wooster
Property is sold on commercially reasonable terms containing certain terms
set forth in the Escrow Agreement which shall include a cash sale price of
not less than $9 million before brokerage fees (a "Conforming Sale"), then
the entire Wooster Escrow shall be promptly distributed on a pro rata basis
to the Shareholders by reason of their contingent rights thereto (based
upon the proportions set forth in the Escrow Certificate) upon notice to
the Escrow Agent that such lease, executed by the lessee, has been
presented to Parent or Surviving Corporation for execution (or a Conforming
Sale has been consummated). If a Conforming Lease is being negotiated but
has not been executed or a contract for a Conforming Sale executed by the
potential purchaser is presented to Parent during the Escrow Period, but
such Conforming Lease is not presented or a contract for such Conforming
Sale has been executed but has not closed during the Escrow Period, the
Escrow Period may be extended for 90 days, in which case a Conforming Lease
executed or a Conforming Sale closed during such extension shall qualify as
a Conforming Lease or Conforming Sale for purposes of the Wooster Escrow.
In the event that a Conforming Lease is not so presented nor a Conforming
Sale so executed during the Escrow Period, as may be extended as provided
above, Parent shall be entitled to receive the entire Wooster Escrow
without any further claim by the Shareholders. In the event that during the
Escrow Period the Wooster Property is leased on commercially reasonable
terms, but with a rental of less than $900,000 per annum, Parent shall be
entitled to receive from the Wooster Escrow a sum in the aggregate equal to
ten times the difference between $900,000 and the actual annual rental, up
to the maximum amount of the Wooster Escrow and the balance shall be
distributed to the Shareholders pro rata based upon the proportions set
forth in the Escrow Certificate. In the event that during the Escrow
Period, the Wooster Property is sold at a purchase price of less than
$9,000,000, payable in cash at the closing of such sale, Parent shall be
entitled to receive from the Wooster Escrow a sum in the aggregate equal to
the difference between $9,000,000 and the actual sales price, up to the
maximum amount of the Wooster Escrow and the balance of the Wooster Escrow,
if any, shall be distributed to the Shareholders pro rata. In the event
during the Escrow Period the Wooster Property is (i) leased for a sum in
excess of $900,000 per year, on commercially reasonable terms, Parent shall
pay over to the Escrow Agent an additional sum of five times the difference
between $900,000 and the actual annual rental; or (ii) the property is sold
for a sum in excess of $9,000,000 payable in cash at closing, Parent shall
pay over to the Escrow Agent an additional sum of fifty percent of the
difference between $9,000,000 and the actual sales price for distribution
to the Shareholders together with the entire Wooster Escrow on a pro rata
basis as additional consideration. In the event of any variation of the
terms other than the rental rate constituting a Conforming Lease, the
parties agreed pursuant to the Escrow Agreement to use their reasonable
efforts to negotiate an equitable distribution of the Wooster Escrow.
(b) $.51 per Share of the Escrowed Funds shall be held in escrow by
the Escrow Agent during the Escrow Period (the "Occupancy Tax Escrow"). In
the event the total commercial rent occupancy tax
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<PAGE> 12
liability of the Company or the Surviving Corporation for all tax periods
from June 1, 1984 through May 31, 1991, in the aggregate (including all
interest, penalties and principal) (the "Occupancy Tax Liability") is less
than or equal to $800,000, the entire Occupancy Tax Escrow shall be
distributed to the Shareholders on a pro rata basis based upon the
proportions set forth in the Escrow Certificate. If the Occupancy Tax
Liability is more than $800,000 but less than or equal to $900,000, the
Escrow Agent shall pay to Parent the Occupancy Tax Escrow funds equal to
the difference between the amount of the Occupancy Tax Liability and
$800,000, and any remaining Occupancy Tax Escrow funds shall be distributed
to the Shareholders on a pro rata basis based upon the proportions set
forth in the Escrow Certificate. If the Occupancy Tax Liability is more
than $900,000 but less than or equal to $1,000,000, the Escrow Agent shall
pay to Parent the Occupancy Tax Escrow funds equal to 110% of the
difference between the amount of the Occupancy Tax Liability and $800,000,
and any remaining Occupancy Tax Escrow funds shall be distributed to the
Shareholders on a pro rata basis based upon the proportions set forth in
the Escrow Certificate. If the Occupancy Tax Liability is more than
$1,000,000, the Escrow Agent shall pay to Parent the Occupancy Tax Escrow
funds equal to 120% of the difference between the amount of the Occupancy
Tax Liability and $800,000, and any remaining Occupancy Tax Escrow funds
shall be distributed to the Shareholders on a pro rata basis based upon the
proportions set forth in the Escrow Certificate. In the event Parent,
Company or Surviving Corporation receives funds from certain lessors or
owners of property for payment of the commercial rent occupancy tax
required by such lease or management agreement for any tax periods from
June 1, 1984 through May 31, 1991, Parent will credit such amounts actually
received from such lessors or owners against the Occupancy Tax Liability
provided that Parent shall be required to make reasonable commercial
efforts to exercise its rights to recover such funds under the terms of the
Company's or the Surviving Corporation's agreements with respect thereto.
The Escrow Period for the Occupancy Tax Escrow may be extended if the
Occupancy Tax Liability is not finally resolved as of twelve months after
the Effective Time, provided in no event may the Escrow Period extend
beyond three years after the Effective Time. In the event that the
Occupancy Tax Liability has not been resolved within such three year period
the Escrow will terminate. If at such time there remains an outstanding
claim regarding resolution of the Occupancy Tax Liability, such matter will
be resolved in accordance with the dispute resolution provisions of the
Escrow Agreement.
The Escrow Agreement provides that the Escrow Agent shall be entitled
to reimbursement from the Escrowed Funds for all reasonable expenses paid
or incurred by it in connection with its duties, including, but not limited
to, reasonably incurred transactional charges, counsel's, advisor's and
agent's fees and disbursements. In the event a portion of the Escrowed
Funds is distributed to the Parent and a portion is distributed to the
Shareholders, the amount to be paid to the Escrow Agent shall be deducted
on a pro rata basis from the amounts distributed to the Parent and the
Shareholders.
The Escrow Committee shall have the right to object to or agree to, on
behalf of the Shareholders, any proposed resolution of the contingencies
described above. In the event that the Escrow Committee and Parent are
unable to resolve any matters concerning the contingencies described above,
the matter shall be determined by binding arbitration and the Escrow
Committee shall represent the interests of the Shareholders of the Company
in such arbitration. Because of the contingent nature of the matters
comprising the Wooster Escrow and the Occupancy Tax Escrow, it is uncertain
whether any Escrowed Funds will ever be distributed to the Shareholders.
All interest on the Escrowed Funds shall accrue on a pro rata basis to the
party receiving such funds.
AGREEMENT TO SUPPORT TRANSACTION
Parent, Purchaser, Lowell Harwood, Mrs. Lowell Harwood, Sanford Harwood,
Brett Harwood, Mrs. Brett Harwood, Brett Harwood as custodian and trustee for
his minor children, Leslie Harwood Ehrlich, Craig Harwood, Scott Harwood and
Scott Harwood as custodian for his minor children (collectively, the
"Significant Shareholders") entered into an Agreement to Support Transaction
dated December 6, 1996, a copy of which is filed herewith as Exhibit 6 hereto
and is incorporated herein by reference. The following summary is qualified in
its entirety by reference to the full text of the Agreement to Support
Transaction.
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Pursuant to the Agreement to Support Transaction, the Significant
Shareholders have agreed to (i) tender all of their Shares (including any Shares
owned by foundations or trusts over which the Significant Shareholder has the
power of distribution) in the Offer and to enter into agreements to cash out all
of their outstanding options and warrants, (ii) to support the Offer and the
Merger, to use their reasonable best efforts to recommend the Offer to the
Company's other shareholders and seek approval of the Merger from the other
shareholders of the Company, unless the Board shall conclude, in good faith, in
compliance with the Merger Agreement, not to recommend, or to withdraw or modify
its recommendation of, the Offer or the Merger to the shareholders of the
Company in a situation which would permit the termination of the Merger
Agreement, (iii) not seek indemnification, contribution, recourse or redress of
any kind against the Company in their capacities as shareholders in connection
with negotiating and approving the Merger and related transactions and any
transaction with the Company in which such person has a direct or indirect
conflict of interest, and (iv) to maintain the confidentiality of certain
proprietary and confidential information regarding the Company.
CONFIDENTIALITY AND NONCOMPETE AGREEMENTS
The Company has agreed to cause Lowell Harwood, Sanford Harwood and Leslie
Harwood Ehrlich each to enter into a Confidentiality and Noncompete Agreement
with Parent and Surviving Corporation on or prior to the expiration of the
Offer. Pursuant to the Noncompete Agreement, each of the above shall agree as
follows: (i) not to give to any person, firm, association, or governmental
agency any confidential information concerning the affairs, business, clients,
customers or other relationships of Parent, Company or the Surviving Corporation
except as required by law or to use such information for its own purposes or for
the benefit of any person or organization other than the Surviving Corporation
and to use its best efforts to prevent the disclosure of such information by
others, (ii) that for a period of five years (one year for Leslie Harwood
Ehrlich) from the closing and within a fifty mile radius of each location from
which the Business of the Company is conducted, such person will not directly or
indirectly (A) acquire, lease, manage, consult for, serve as agent or
subcontractor for, finance, invest in, own any part of or exercise management
control over any parking business or business that provides any services
competitive with the services provided by the Company; (B) solicit for
employment or employ any nonclerical person who at the Effective Time or
thereafter became an employee of Parent or Surviving Corporation unless such
person has not been employed by Parent or the Surviving Corporation for at least
six (6) months; or (C) with respect to any customer, supplier or property owner
with whom Parent or the Surviving Corporation contracts in connection with its
business, either solicit the same in a manner that could adversely affect Parent
or the Surviving Corporation, or make statements to the same that disparage
Parent or Surviving Corporation or its operations in any way, and (iii) to
furnish such information as may be in its possession and cooperate with
Surviving Corporation as may be requested in connection with any claims or legal
actions in which the Surviving Corporation is or may become a party.
Notwithstanding the foregoing, each person party to a Confidentiality and
Noncompete Agreement may: (i) acquire, own and lease real estate used in the
Business in the Noncompete Area, provided that Parent is offered the right of
first refusal to operate or manage parking located thereon, (ii) broker real
estate located in the Noncompete Area, provided that Parent is offered the right
of first refusal to manage parking thereon, and (iii) continue to own and lease
real estate currently owned or leased within the Noncompete Area, with parking
operations, provided that Parent is offered the right of first refusal to
operate or manage parking thereon; such right of first refusal being subject in
each of the foregoing cases to existing agreements with respect to such parking
operations. The foregoing is a summary of the Confidentiality and Noncompete
Agreement and is qualified in its entirety by reference to the text of the form
of Confidentiality and Noncompete Agreement, a copy of which is filed herewith
as Exhibit 7 and is incorporated herein by reference.
CONSULTANCY AGREEMENTS
It is a condition to the Offer that the Company deliver, prior to the
expiration of the Offer an executed Consultancy Agreement from Lowell Harwood, a
form of which is filed herewith as Exhibit 8 hereto and incorporated herein by
reference. Pursuant to the Consultancy Agreement, Lowell Harwood will advise and
consult with Central Parking System, Inc., a subsidiary of Parent in connection
with the acquisition, ownership, leasing, operation and/or management of storage
and parking facilities in the United States. The Consultancy Agreement will be
for a term of one year and provide for the payment of $120,000 payable at the
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rate of $10,000 per month. In addition, the Consultancy Agreement will provide
for the payment of incentive compensation of (i) 10% of all Gross Operating
Income (NOI less 5% of operating expenses G&A burden) derived from new leases or
10% of pretax operating profit from newly acquired companies, in each case where
Lowell Harwood was primarily responsible for such lease or acquisition and (ii)
10% of all Gross Operating Income (NOI less 5% of operating expenses G&A burden)
derived from new management agreements where Lowell Harwood was primarily
responsible for securing the management agreement. The Consultancy Agreement
provides that Lowell Harwood would be offered a seat on the Parent's Board of
Directors. The Consultancy Agreement will be subject and subordinate to Lowell
Harwood's Confidentiality and Noncompete Agreement.
It is a condition to the Offer that the Company deliver, prior to the
expiration of the Offer an executed Consultancy Agreement from Sanford Harwood,
a form of which is filed herewith as Exhibit 9 hereto and incorporated herein by
reference. Pursuant to the Consultancy Agreement, Sanford Harwood will advise
and consult with Central Parking System, Inc., a subsidiary of Parent, in
connection with the acquisition, ownership, leasing, operating and/or management
of storage and parking facilities in the United States. The Consultancy
Agreement will be for a term of six months and provide for the payment of
$60,000 payable at the rate of $10,000 per month. The Consultancy Agreement will
be subject and subordinate to Sanford Harwood's Confidentiality and Noncompete
Agreement.
CONFIDENTIALITY AGREEMENT
Parent and the Company entered into the confidentiality agreement, dated
July 10, 1996 (the "Confidentiality Agreement"), a copy of which is filed
herewith as Exhibit 10 hereto and incorporated herein by reference. Pursuant to
the Confidentiality Agreement, the Parent agreed, among other things, that
Parent would keep confidential certain information (the "Information") furnished
to it by the Company and that Parent would use the Information solely for the
purpose of evaluating a possible transaction between the parties.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
At a meeting of the Board held on December 6, 1996, the Board, based upon
and subject to the terms and conditions set forth in the Merger Agreement, by
unanimous vote, determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, taken together are
fair to and in the best interests of the Shareholders, approved and adopted the
Merger Agreement, the Merger and the Offer; and recommended that the
shareholders of the Company accept the Offer and adopt the Merger Agreement and
the transactions contemplated thereby.
A letter to the Company's shareholders communicating the Board's
recommendation and a press release announcing the Offer, the Merger and the
Merger Agreement are filed herewith as Exhibit 11 and Exhibit 12, respectively,
and are incorporated herein by reference.
(b) Background Reasons for the Board's Recommendation.
Background.
From time to time the Company has considered the desirability or
possibility of effecting material acquisitions or effecting sales of the Company
or a substantial portion of its operations with such considerations being
terminated or abandoned at different stages of development.
In early May 1996, the Company received an unsolicited oral inquiry from
the Chairman of the Board of Parent advising of Parent's interest in effecting a
business combination with the Company. The Chairman of the Board of the Company
advised in response that the Company was not in a position at such time to
respond appropriately to such an inquiry.
On May 10, 1996, the Company engaged The Blackstone Group L.P.
("Blackstone") to act as its financial advisor and review the Company's
financial and strategic alternatives, including possible acquisitions
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<PAGE> 15
or a sale of the Company. The engagement letter with Blackstone provided that in
the event the review by Blackstone resulted in a determination by the Company to
initiate a possible sale, Blackstone would assist the Company in analyzing,
structuring, negotiating and effecting such sale.
Immediately thereafter, Blackstone, as part of its advisory services,
conducted a review of the Company's operations and financial condition,
including a limited inspection of certain of the Company's facilities,
interviews with members of management, a review of the Company's financial
statements, projections and certain material documents and a review of trends in
the parking services industry. The Chairman of the Board, the Assistant Chairman
and the President of the Company, after several conversations with Blackstone,
determined that Blackstone should investigate the feasibility and potential for
effecting a sale transaction at a price which would be fair and attractive to
the Company and its shareholders. In furtherance of this goal, Blackstone
assisted the Company in preparing an offering memorandum containing detailed
information about the Company.
Blackstone suggested that its efforts be directed to companies which met
certain criteria, including those having the financial resources to consummate a
transaction and the potential to realize strategic or financial synergies from a
transaction. Based on these criteria and other considerations developed in the
course of the investigation, representatives of several entities were contacted
by Blackstone to determine their interest in effecting such transaction and
confidentiality agreements were negotiated and executed, restricting the
potential participants from disclosing nonpublic information concerning the
Company. Included among the interested parties was Parent, which executed a
confidentiality agreement on July 10, 1996, a copy of which is attached as
Exhibit 10. Pursuant to the confidentiality agreements, the potential
participants were provided with certain financial and other information
regarding the Company and its operations.
On July 17, 1996, at the Annual Meeting of the Board of the Company, the
engagement of Blackstone was ratified by the Board and the Board was advised of
the decision to have Blackstone continue to conduct its investigation as to the
feasibility and desirability of a sale, including determining the interest of
other entities in effecting a transaction with the Company. Following the
meeting, members of management met with representatives of Blackstone and
analyzed and discussed potential participants in a possible transaction.
In August 1996, Blackstone invited potential participants, including
Parent, to indicate the extent of their interest in effecting such transaction.
On August 19, 1996 Parent submitted to the Company an initial indication of
interest in the acquisition of the Company at a price of $21.00 per share
payable in cash or $24.00 per Share payable in common stock of Parent subject to
due diligence and other contingencies. On August 26, 1996, the Board of
Directors of the Company was advised by Blackstone of those potential
participants who had indicated a preliminary interest as of such date. In early
September 1996 management of the Company determined, based on the responses
received, to continue to explore a possible sale of the Company and in
connection therewith engaged Proskauer Rose Goetz & Mendelsohn LLP, as special
transactional counsel.
During the period from September 10 through October 22, 1996, those
potential participants who indicated a serious interest in effecting a
transaction with the Company, including Parent, were given the opportunity to
conduct their due diligence as to the Company and its financial condition,
including meetings with representatives of management of the Company. Shortly
thereafter, those who had conducted a due diligence review were asked to submit
an acquisition proposal to the Company and comment on a draft of a proposed
acquisition agreement prepared by the Company.
On or about October 23, 1996, offers were submitted by three potential
buyers, accompanied by proposed acquisition agreements, including Parent which
submitted an all cash offer of $30.00 per share and, alternatively, an all stock
offer of $34.00 per share payable in common stock of Parent.
A Special Meeting of the Board of Directors was held on October 29, 1996 at
which the offers were reviewed and the Board authorized management of the
Company and Blackstone to commence discussions with the two highest bidders with
a view to achieving more favorable terms.
14
<PAGE> 16
On November 1 and 4, 1996, management of the Company met separately with
representatives of the two highest bidders to discuss the terms and suggested
improvements to their respective offers, and at each meeting the bidders were
requested to submit final offers by November 8, 1996.
On November 8, 1996, the bidders submitted revised "final" offers which
contained improved terms, including Parent which increased its cash offer to
$31.00 per share and its stock offer to $40.00 per share.
On November 11, 1996, the other bidder contacted the Company to advise that
it was withdrawing its "final" offer due to financing and other issues; however,
on November 20, 1996 it resubmitted a revised offer with new financing sources
indicated and new terms including a revised offer price which was lower than its
"final" offer price as previously submitted, but failed to provide a revised
agreement which would contain the revised terms as requested by Blackstone.
Blackstone was later advised by such other bidder of its determination not to
proceed with a transaction.
During the period from November 15 through December 5, 1996, the Company
and Parent negotiated the specific terms and conditions of the Merger Agreement
and related exhibits.
At a Special Meeting of the Board of the Company held on December 6, 1996,
the Board of Directors reviewed the proposed transaction including the latest
draft of the Merger Agreement. A presentation to the Board was made by
Blackstone which included a report of the history and status of negotiations and
its evaluation of the Agreement and its terms. Blackstone also provided
information as to the market for and market price of the common stock of Parent,
including its public float, trading activity and history and related market
considerations, and a valuation of the Company. The Board was also advised that
in view of the proposed tender offer followed by the Merger for a cash
consideration on the terms set forth in the Merger Agreement, Messrs. Lowell,
Sanford and Brett Harwood and members of their respective families in their
capacities as shareholders would not approve a Merger transaction with the
Parent on the terms of the proposed share exchange with a value of $40 per
share, based on the foregoing market considerations and the additional risk to
which the shareholders would be subjected as a result of the longer period
required to effect the sale on those terms. Following such discussions, the
Board heard presentations by its legal counsel on the terms and conditions
contained in the proposed Merger Agreement, including, the termination
provisions as modified through negotiations. Blackstone then delivered its oral
opinion to the Board, subsequently confirmed in writing, that as of the date of
the meeting, the consideration to be received by the holders of the Company's
Shares pursuant to the Merger Agreement is fair to such holders from a financial
point of view. After further discussion, the Board unanimously authorized its
officers to execute the Merger Agreement on behalf of the Company substantially
in the form presented to the Directors and recommended that the shareholders
tender their shares in the Offer and approve and adopt the Merger Agreement.
Reasons for the Transaction; Factors Considered by the Board. In approving
the Merger, the Offer and the Merger Agreement and recommending that all
shareholders tender their Shares pursuant to the Offer, the Board of Directors
considered a number of factors, including:
1. the financial and other terms and conditions of the Offer, the
Merger and Merger Agreement;
2. the presentation of Blackstone at the December 6, 1996 Board of
Directors' meeting and the opinion of Blackstone (the "Opinion") to the
effect that, as of the date of its Opinion and based upon and subject to
certain matters stated therein, the consideration to be received by the
holders of Shares pursuant to the Offer and the Merger is fair, from a
financial point of view, to the shareholders of the Company. The full text
of the Opinion, which sets forth the assumptions made, matters considered
and limitations on the review undertaken by Blackstone, is attached hereto
as Exhibit 13 and is incorporated herein by reference. Shareholders are
urged to read the Opinion carefully in its entirety;
3. the fact that the Merger Agreement, which prohibits the Company,
its subsidiaries and their respective officers, directors, employees,
representatives, agents or affiliates from initiating, soliciting or
encouraging, directly or indirectly, any proposal or offer to acquire all
or a substantial part of the business and properties of the Company and its
subsidiaries or any capital stock of the Company and its subsidiaries,
whether by merger, purchase of assets, tender offer or otherwise (any such
transaction being referred to herein as an "Acquisition Transaction"),
permits the Company to furnish information
15
<PAGE> 17
concerning the Company and its business, properties and assets to, or to
enter into, maintain or continue discussions and negotiations with, any
person or entity that makes an unsolicited inquiry, offer or proposal
relating to an Acquisition Transaction after the date of the Merger
Agreement, and if such Acquisition Transaction is a tender offer the Board
of Directors may take a position with respect to such tender offer, if the
Board of Directors, determines in good faith, based upon an opinion of
outside counsel, that a failure to furnish the information or participate
in the discussions or negotiations could reasonably conflict with the
proper discharge of the fiduciary duties of the Company's directors;
4. the fact that in the event that the Board decided to accept an
unsolicited tender offer or exchange offer for the Company's Shares, the
Board may terminate the Merger Agreement and pay Parent a termination fee
of $2.5 million. The Board, after considering, among other things, the
advice of Blackstone, did not believe that such termination provision would
be a significant deterrent to a higher offer by a third party interested in
acquiring the Company;
5. the fact that the terms of the Merger Agreement should not unduly
discourage other third parties from making bona fide proposals subsequent
to the execution of the Merger Agreement and, if any such proposals were
made, the Company, in the exercise of its fiduciary duties, could determine
to provide information to and engage in negotiations with any such third
party;
6. the possible alternatives to the Offer and the Merger, including,
without limitations, continuing to operate the Company as an independent
entity and the risks associated therewith;
7. the familiarity of the Board of Directors with the business,
results of operations, properties and financial condition of the Company
and the nature of the industry in which it operates; and
8. the regulatory approvals required to consummate the Merger,
including, among others, antitrust approvals, and the prospects for
receiving such approvals.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendation as being on the totality of the
information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company and Blackstone entered into an agreement dated May 10, 1996
(the "Retention Letter") pursuant to which Blackstone was retained as the
Company's financial advisor in connection with the Company's review of its
financial and strategic alternatives. In the event that the review resulted in a
sale of the Company (the "Transaction") Blackstone would assist the Company in
analyzing, structuring, negotiating and effecting the Transaction. For its
services as financial advisor, the Company agreed to pay Blackstone the
following fees: (a) an initial retainer fee of $100,000, payable upon the
Company's execution of the Retention Letter, and an additional retainer fee in
the event Blackstone continues to provide financial advisory services to the
Company after December 31, 1996; plus (b) an additional fee, payable upon the
consummation of a Transaction, in an amount equal to $1 million, plus (i) 3% of
the consideration paid in connection with the Transaction, on the amount of
consideration paid over $50 million and less than $60 million, (ii) 4% of the
consideration paid in connection with the Transaction, on the amount of
consideration paid over $60 million and less than $70 million, and (iii) 5% of
the consideration paid in connection with the Transaction, on the amount of
consideration paid over $70 million. The Company has also agreed to reimburse
Blackstone for its reasonable out-of-pocket expenses (including the fees and
disbursements of its counsel) which shall not exceed $75,000 without the
Company's consent and to indemnify Blackstone against certain liabilities and
expenses.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to shareholders on its behalf concerning the Offer.
16
<PAGE> 18
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company, other than the
exercise of options, the transfers by Lowell Harwood on December 3, 1996 of (i)
20,000 shares to The Lowell and Toby Harwood Foundation, (ii) 8,000 shares to
The Charitable Remainder Trust of Lowell Harwood for the Benefit of Leslie
Harwood Ehrlich, (iii) 8,000 shares to The Charitable Remainder Trust of Lowell
Harwood for the Benefit of Craig Harwood, (iv) 8,000 shares to The Charitable
Remainder Trust of Lowell Harwood for the Benefit of David Ehrlich, and (v)
8,000 shares to the Charitable Remainder Trust of Lowell Harwood for the Benefit
of Laura Sonny Ehrlich, the transfer on December 6, 1996 of 10,000 shares by
Sanford Harwood to The Sanford Harwood Charitable Remainder Unitrust, the sale
by John Lyon of 100 Shares in the open market in November 1996 and the sale by
James Corr of 500 Shares in the open market in December 1996.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares beneficially owned by them. In addition, the Significant
Shareholders have entered into the Agreement to Support the Transaction
described in Section 3(b) above.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or divided
policy of the Company.
(b) Except as described in Item 3(b) and Item 4, there are no transactions,
Board resolutions, agreements in principle, or signed contracts in response to
the Offer, which relate to or would result in one or more of the matters
referred to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
17
<PAGE> 19
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
----------- -------------------------------------------------------------------------------
<S> <C> <C>
Exhibit 1 -- Agreement and Plan of Merger dated as of December 6, 1996 among Square
Industries, Inc., Central Parking Corporation and Central Parking
System -- Empire State, Inc.
Exhibit 2 -- Pages 2-7 and 11-13 of the Company's Proxy Statement dated July 17, 1996.
Exhibit 3 -- Square Industries, Inc. Executive Severance Pay Plan
Exhibit 4 -- Form of Employment Agreement between Brett Harwood, Central Parking
Corporation, and Central Parking System, Inc.
Exhibit 5 -- Escrow Agreement dated December 6, 1996 among Square Industries, Inc., Central
Parking Corporation, American National Bank and Lowell Harwood and Sanford
Harwood.
Exhibit 6 -- Agreement to Support Transaction dated December 6, 1996 among Central Parking,
Central Parking System -- Empire State, Inc., Lowell Harwood, Mrs. Lowell
Harwood, Sanford Harwood, Brett Harwood, Mrs. Brett Harwood, Brett Harwood as
custodian and trustee for his minor children, Leslie Harwood Ehrlich, Craig
Harwood, Scott Harwood and Scott Harwood as custodian for his minor children.
Exhibit 7 -- Form of Confidentiality and NonCompete Agreement among Lowell Harwood, Sanford
Harwood, Leslie Harwood Ehrlich, Central Parking Corporation and Central
Parking System -- Empire State, Inc.
Exhibit 8 -- Form of Consultancy Agreement between Lowell Harwood and Central Parking
System, Inc.
Exhibit 9 -- Form of Consultancy Agreement between Sanford Harwood and Central Parking
System, Inc.
Exhibit 10 -- Confidentiality Agreement dated July 10, 1996 between Square Industries, Inc.
and Central Parking Corporation.
Exhibit 11 -- Letter to Shareholders of Square Industries, Inc. dated December 13, 1996.
Exhibit 12 -- Press Release issued by Square Industries, Inc. dated December 9, 1996.
Exhibit 13 -- Opinion, dated December 6, 1996, of The Blackstone Group L.P.
</TABLE>
18
<PAGE> 20
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
SQUARE INDUSTRIES, INC.
By: /s/ LOWELL HARWOOD
------------------------------------
Lowell Harwood
Chairman of the Board and Chief
Executive Officer
Dated: December 13, 1996
19
<PAGE> 21
SCHEDULE I
SQUARE INDUSTRIES, INC.
921 BERGEN AVENUE
JERSEY CITY, NEW JERSEY 07306
---------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULES 14F-1 THEREUNDER
---------------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS IS REQUIRED
IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED NOT TO
SEND THE COMPANY A PROXY.
---------------------
This Information Statement, which is being mailed on or about December 13,
1996 to the holders of shares of the common stock, par value $.01 per share (the
"Shares") of Square Industries, Inc., a New York corporation (the "Company"), is
being furnished in connection with the possible election of persons to the
Company's Board of Directors (the "Purchaser's Designees") designated by Central
Parking System -- Empire State, Inc., a New York corporation (the "Purchaser").
Such designation is made pursuant to an Agreement and Plan of Merger, dated as
of December 6, 1996 (the "Merger Agreement"), by and among the Company, Central
Parking Corporation, a Tennessee corporation ("Parent") and Purchaser. Pursuant
to the Merger Agreement, Parent caused the Purchaser to commence the offer to
purchase all of the outstanding Shares, at a price of $28.50 per Share net to
the seller in cash promptly following the completion of the Offer, without
interest thereon and an additional $2.50 per Share to be deposited by Parent and
held in escrow as contingent consideration for distribution in whole or in part
to either shareholders of the Company or Parent based upon resolution of certain
matters, subject to adjustment pursuant to the Escrow Agreement (the "Offer"),
on December 13, 1996. The Offer is scheduled to expire at 12:00 Midnight,
Eastern Standard Time, on January 14, 1997, unless the Offer is extended.
The Merger Agreement provides that promptly upon the purchase by Purchaser
of at least a majority of the outstanding Shares pursuant to the Offer,
Purchaser shall be entitled, subject to compliance with Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to designate
such number of directors, rounded up to the next greatest whole number, on the
Board of Directors of the Company as will give Purchaser representation on the
Board of Directors of the Company equal to that number of directors which equals
the product of the total number of directors on the Board of Directors of the
Company (giving effect to the directors appointed or elected pursuant to this
sentence and including current directors serving as officers of the Company)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Purchaser or any affiliate of Purchaser (including such Shares are as
accepted for payment pursuant to the Offer, but excluding Shares held by the
Company or its affiliates) bears to the number of Shares outstanding. At such
times, the Company will also cause (i) each committee of the Board of Directors
of the Company, (ii) if requested by Purchaser, the Board of Directors of each
of the Company's subsidiaries and (iii) if requested by Purchaser, each
committee of such board to include such persons designated by Purchaser
constituting the same percentage of each such committee or board as Purchaser's
Designees are of the Board of Directors of the Company. The Company shall, upon
request by Purchaser, promptly increase the size of the Board of Directors of
the Company or exercise its best efforts to secure the resignations of such
number of directors as is necessary to enable Purchaser's Designees to be
elected to the Board of Directors of the Company and shall cause Purchaser's
Designees to be so elected.
It is expected that Purchaser's Designees may assume office at any time
following the purchase by Purchaser of at least a majority of the outstanding
Shares on a fully diluted basis pursuant to the Offer, which purchase cannot be
earlier than January 14, 1997, and that, upon assuming office, Purchaser's
Designees
<PAGE> 22
together with the continuing directors of the Company will thereafter constitute
the entire Board of Directors of the Company.
NO ACTION IS REQUIRED BY THE SHAREHOLDERS OF THE COMPANY IN CONNECTION WITH
THE ELECTION OF PURCHASER'S DESIGNEES TO THE COMPANY'S BOARD OF DIRECTORS.
HOWEVER, SECTION 14(F) OF THE EXCHANGE ACT REQUIRES THE MAILING TO THE COMPANY'S
SHAREHOLDERS OF THE INFORMATION SET FORTH IN THIS INFORMATION STATEMENT PRIOR TO
A CHANGE IN A MAJORITY OF THE COMPANY'S DIRECTORS.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, Purchaser and
Purchaser's Designees has been furnished to the Company by Purchaser and Parent,
and the Company assumes no responsibility for the accuracy or completeness of
such information.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
GENERAL
The outstanding voting securities of the Company as of December 6, 1996
consisted of 1,200,856 Shares, each of which is entitled to one vote.
STOCK OWNERSHIP
The following table sets forth as of December 6, 1996, information
concerning the ownership of the Shares by (i) each person who is known to the
Company to own beneficially more than 5% of the outstanding Shares, (ii) by each
director and executive officer, and (iii) by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE
OF
NAME NUMBER OF SHARES CLASS(1)
- -------------------------------------------------------------------- ---------------- ----------
<S> <C> <C>
Lowell Harwood...................................................... 681,081(2) 49.5%
Sanford Harwood..................................................... 612,447(3) 46.2
Brett Harwood....................................................... 187,720(4) 14.7
Leslie Harwood Ehrlich.............................................. 83,879(5) 7.0
Stephen A. Bansak, Jr............................................... 16,250(6) 1.3
Daniel R. Schein.................................................... 7,500(7) *
Leo Silverstein..................................................... 7,242 *
Dan Jeremitsky...................................................... 18,000(9) 1.5
John Hogan.......................................................... 18,050(9) 1.5
John Kowal.......................................................... 4,000(7) *
Scott Harwood....................................................... 95,114(10) 7.9
James Corr.......................................................... 10,925(11) *
John Lyon........................................................... 1,600(7) *
Directors and executive officers as a group......................... 1,106,861(12) 67.5
</TABLE>
- ---------------
* Less than 1%.
(1) Any shares not outstanding which are issuable upon exercise of options held
by an individual named in this table shall be deemed to be outstanding for
the purpose of computing the percentage of shares beneficially owned only
by such individual, but not other percentages in the table and footnotes
thereto.
(2) Includes 208,651 shares beneficially and directly owned by Mr. Sanford
Harwood and 10,000 shares owned by a charitable trust of which Sanford
Harwood is a trustee, all of which are subject to a Voting Agreement
between Mr. Lowell Harwood and Mr. Sanford Harwood (the "Voting
Agreement"), 175,000 shares currently issuable upon exercise of an employee
stock option and a Common Stock Purchase Warrant held by Mr. Lowell Harwood
and 18,634 shares owned by his wife, but excludes 67,759 shares directly
owned by his two children, one of whom is a director of the Company.
2
<PAGE> 23
Mr. Harwood disclaims beneficial ownership of the shares owned by his wife.
Mr. Lowell Harwood's holdings also include an aggregate of 100,000 shares
as to which he has granted options to purchase to his children.
(3) Includes 208,796 shares beneficially and directly owned by Mr. Lowell
Harwood and 60,000 shares owned by a Foundation and trusts of which Lowell
Harwood is a trustee, all of which shares are subject to a Voting Agreement
(see note 2) and 125,000 shares currently issuable upon the exercise of an
employee stock option and a Common Stock Purchase Warrant, but excludes an
aggregate of 95,322 shares directly owned or owned as a custodian or
trustee for their respective minor children by his sons, Brett Harwood and
Scott Harwood. Mr. Sanford Harwood's holdings also include an aggregate of
100,000 shares as to which he has granted options to purchase to his sons.
(4) Includes 12 shares owned by his wife, 13,000 shares owned as custodian or
trustee for his minor children, 80,000 shares issuable upon the exercise of
employee stock options and 50,000 shares issuable upon exercise of an
option granted to him by his father, Mr. Sanford Harwood. Mr. Brett Harwood
disclaims beneficial ownership of the shares owned by his wife.
(5) Includes 50,000 shares currently issuable upon the exercise of a stock
option granted to her by her father, Mr. Lowell Harwood.
(6) Includes 7,500 shares currently issuable upon the exercise of a stock
option issued under the 1992 Stock Option Plan.
(7) Represents shares issuable upon exercise of a stock option issued under the
1992 Stock Option Plan.
(8) Includes 7,500 shares currently issuable upon the exercise of a stock
option issued under the 1992 Stock Option Plan and 242 shares owned by his
wife.
(9) Includes 12,000 shares currently issuable upon exercise of stock options
issued under the 1992 Stock Option Plan.
(10) Includes 7,500 shares currently issuable upon the exercise of a stock
option issued under the 1992 Stock Option Plan and 50,000 shares currently
issuable upon the exercise of a stock option granted to him by his father,
Mr. Sanford Harwood.
(11) Includes 400 shares currently issuable upon the exercise of a stock option
issued under the 1992 Stock Option Plan.
(12) Includes (a) 268,796 shares and 218,651 shares which are directly owned by
Lowell Harwood and Sanford Harwood, respectively, or affiliated trusts or
foundations and which are included in both their individual holdings in the
table above, with respect to which shares they share voting and dispositive
power pursuant to a Voting Agreement, and (b) 440,000 shares currently
issuable upon exercise of employee stock options and Warrants held by
officers and directors.
3
<PAGE> 24
DIRECTOR AND EXECUTIVE OFFICERS
PURCHASER'S DESIGNEES
Purchaser has informed the Company that Purchaser's Designees shall be the
persons set forth in the following table.
The following table sets forth the name, current business address,
citizenship and present occupation or employment, and material occupations,
positions, offices or employments and business address thereof for the past five
years of each of the Purchaser's Designees. Unless otherwise indicated, (i) the
current business address of each person is Central Parking Corporation, 2401
21st Avenue South, Suite 200, Nashville, Tennessee 37212, (ii) each such person
is a citizen of the United States and has held his present position as set forth
below for the past five years, and (iii) each occupation set forth below
opposite an individual's name refers to employment with Parent.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL
POSITIONS HELD DURING THE PAST FIVE YEARS AND BUSINESS
NAME ADDRESS THEREOF
- ------------------------------------- ------------------------------------------------------
<S> <C>
Monroe J. Carell, Jr................. Chief Executive Officer and Chairman of the Board of
Directors of Parent since 1979; trustee of Vanderbilt
University in Nashville, Tennessee, since 1991;
member of the Board of Trust of Urban Land
Institute; member of the Board of Directors of
Vanderbilt University Medical Center.
James H. Bond........................ President, Chief Operating Officer, and a member of
the Board of Directors of Parent since October 1990;
with Parent since 1971 in various positions
including regional manager and Senior Vice
President.
</TABLE>
CURRENT DIRECTORS
The following table sets forth certain information with respect to the
current directors of the Company as of December 6, 1996.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- --------------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Lowell Harwood......................... 66 Chairman of the Board Directors and Chief Executive
Officer of the Company
Sanford Harwood........................ 71 Assistant Chairman and Secretary of the Company
Brett Harwood.......................... 47 President and Chief Operating Officer
Stephen A. Bansak, Jr.................. 56 Director
Leslie Harwood Ehrlich................. 37 Director
Daniel R. Schein....................... 55 Director
Leo Silverstein........................ 66 Director
</TABLE>
Lowell Harwood has been the Chairman of the Board of Directors and Chief
Executive Officer of the Company since the Company's organization.
Sanford Harwood has been the Assistant Chairman and Secretary of the
Company since March 1, 1994. Mr. Harwood was the President and Chief Operating
Officer of the Company from its incorporation until March 1, 1994.
Brett Harwood has been the President and Chief Operating Officer of the
Company since March 1, 1994. Mr. Harwood was the Executive Vice President and
Secretary of the Company from April 1989 until March 1994.
Stephen A. Bansak, Jr. is a director of the Company. Mr. Bansak has been an
independent financial advisor/consultant for more than the prior five years.
4
<PAGE> 25
Leslie Harwood Ehrlich is a director of the Company. Mrs. Harwood Ehrlich
has been the Managing Director since 1993 of Newmark & Company Real Estate Inc.
and former Vice President of G.W. Michaels, Inc., with which she was associated
from 1984 to 1993, both companies engaged in leasing and management of
commercial real estate; a partner of Harber, Inc., engaged in real estate
investment and management; Co-Chairman of the Economic Development Committee of
the Real Estate Board of New York, Inc.; and former Chairman of the Board of
Directors of the Young Men's/Women's Real Estate Association of New York, Inc.
Daniel R. Schein is a director of the Company. Mr. Schein has been an
independent consultant for more than the prior five years.
Leo Silverstein is a director of the Company. Mr. Silverstein is a partner
of the law firm of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC,
general counsel to the Company, since August 1, 1995 and of Carter, Ledyard &
Milburn for more than ten years prior thereto.
MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1995 ("Fiscal 1995"), the Board
of Directors held four meetings, including those in which matters were adopted
by unanimous written consent. All of the meetings were attended by all Directors
except one in which one Director was absent. The Board has an Audit Committee
and a Stock Option and Compensation Committee. The Board of Directors has no
standing nominating committee.
The Audit Committee consists of Messrs. Schein, Bansak and Silverstein. It
held two meetings during Fiscal 1995, at which meetings all members were
present. The duties and responsibilities of the Audit Committee include, among
other things, review of the Company's financial statements, consideration of the
nature and scope of the work to be performed by the Company's independent
auditors, discussion of the results of such work, the receipt from such auditors
of their letters to management which evaluate (as part of their annual audit of
the Company's financial statements) the internal accounting control systems of
the Company, and meeting with representatives of management to discuss
particular areas of the Company's operations.
The Stock Option and Compensation Committee, which held one meeting during
Fiscal 1995, is comprised of Messrs. Bansak, Schein, Silverstein and Ms.
Ehrlich. Its duties include administration of both the Key Employee Incentive
Stock Option Plan, as to which no further options may be granted, and the 1992
Stock Option Plan and a review of the Company's executive compensation policy.
DIRECTORS' COMPENSATION
Directors who are also employees of the Company are excluded from receiving
additional compensation for their service on the Board of Directors and its
committees. Non-employee Director receive a retainer of $20,000 per annum. In
addition, Board members are reimbursed for all expenses incurred for the purpose
of attending a meeting, including airfare, mileage, parking, transportation and
lodgings. The Company currently maintains directors' and officers' liability
insurance policies with a primary limit of five million dollars and an excess
limit of ten million dollars.
The Company's 1992 Stock Option Plan (the "Plan") which relates to 425,000
shares of Common Stock permits the grant of five-year options to non-employee
Directors. Mr. Schein holds options to purchase 5,000 shares, granted in August
1992 under the Plan which are exercisable at $3.5625, the market price on the
date of grant and options to purchase 2,500 shares granted August 17, 1996 under
the Plan which are exercisable at $10.25 per share, the market price on the date
of such grant. Messrs. Silverstein and Bansak each hold options to purchase
7,500 shares granted on August 15, 1996, which are exercisable at $10.25 per
share, the market price on the date of grant.
5
<PAGE> 26
EXECUTIVE OFFICERS
The following table sets forth certain other information with respect to
the current executive officers of the Company as of December 6, 1996.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Lowell Harwood............................. 66 Chairman of the Board of Directors and
Chief Executive Officer of the Company
Sanford Harwood............................ 71 Assistant Chairman and Secretary of the
Company
Brett Harwood.............................. 47 President and Chief Operating Officer
Dan Jeremitsky............................. 58 Vice President -- Design and Consulting
John Hogan................................. 47 Vice President -- Institutional and
Management
John Kowal................................. 35 Acting Vice President -- Finance and Chief
Financial Officer
Scott Harwood.............................. Vice President
John Lyon.................................. Vice President
James Corr................................. Vice President
</TABLE>
Biographical information for Lowell Harwood, Sanford Harwood and Brett
Harwood is set forth above.
James Corr has been a Vice President of the Company since July 17, 1996. He
entered the employ of the Company on May 1993; prior thereto he had been, from
late 1991, the Washington, DC area Manager of Parent.
Scott Harwood has been a Vice President of the Company since July 17, 1996.
He has been employed by the Company for more than the prior five years.
John Hogan has served as Vice President -- Institutional Management since
1980, and the Company's contract administrator for institutions, primarily in
the field of hospital parking since 1978.
Dan Jeremitsky has served as Vice President -- Design and Consulting since
1979.
John Kowal has served as Vice President -- Finance since 1995 and has held
various other positions with the Company for more than the prior ten years,
John Lyon has been a Vice President of the Company since July 17, 1996. He
has been employed by the Company for more than the prior five years.
6
<PAGE> 27
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee until April 1993, at
which time the Stock Option Committee's duties were expanded to review executive
compensation policies. The current members of the Stock Option and Compensation
Committee are Messrs. Daniel Schein, Stephen A. Bansak, Jr. and Leo Silverstein,
and Mrs. Leslie Harwood Ehrlich, four non-employee Directors. Mr. Bansak
replaced Mr. Lowell Harwood in June 1995 as a member.
Mr. Silverstein is a partner in the law firm of Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC. The Company has used the services as general
counsel of this firm since August 1, 1995 and used until that date the services
of Carter, Ledyard & Milburn in which he had been a partner. Fees for legal
services performed for the Company during Fiscal 1995 accounted for less than 5%
of the revenues of each firm during such period.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Since the Company's organization and until April 13, 1993 the cash
compensation of each of its Chairman of the Board (the Chief Executive Officer)
and President (the Chief Operating Officer) had been determined by the Board of
Directors, with the cash compensation of the other executive officers determined
by the Chairman. Grants of stock options have been determined either by the full
Board or the Stock Option Committee. Three of the seven current Directors are
officers of the Company--the Chairman, Assistant Chairman and President of the
Company. On April 13, 1993, the Board expanded the duties of the Stock Option
Committee to provide it with authority to review and make recommendations to the
Board as to the compensation in cash or other forms of the Company's executive
officers, including those whose compensation had been previously determined by
the Chief Executive Officer.
The executive compensation policy with respect to the Chief Executive
Officer, President and Chief Operating Officer and Assistant Chairman, who is
also the President of the Company's operating subsidiaries, has been to provide
for a base salary which in most instances is not greater, and likely lower, than
base salaries paid by other companies of comparable size and capitalization in
or out of the parking industry to officers with the same positions and
responsibilities and provide for cash bonuses based on the attainment of
favorable operating results by the Company. To the knowledge of the Company,
there is only one other company engaged solely or principally in parking
operations which is publicly-held (only since October 1995).
Commencing with the fiscal year ended February 28, 1982, the Board adopted
a cash bonus program for Mr. Lowell Harwood as the Chairman of the Board and Mr.
Sanford Harwood as then President, establishing $300,000 of pre-tax and
pre-bonus income as the threshold, with the bonus for Mr. Sanford Harwood to
equal 7 1/2% of the excess but not to exceed his base salary and the bonus for
Mr. Lowell Harwood to equal 7 1/2% of the first $1,400,000 of the excess and 5%
of the balance, if any. On March 1, 1994 Mr. Brett Harwood, who had been
Executive Vice President and Secretary for approximately five years, was
appointed President and Mr. Sanford Harwood, who had been President, was
appointed Assistant Chairman of the Board. Sanford Harwood continued as
President of the Company's operating subsidiaries.
The compensation policy with respect to the Company's other executive
officers adopted by the Committee, consistent with the prior policy, is to
provide a base salary which the Chairman believes is competitive with those paid
by other companies in the parking industry to individuals with similar
responsibilities and to provide as further inducements a cash bonus equal to
percentages, which vary among such officers, of the Company's operating profits
determined quarterly on a cumulative basis for the fiscal year.
In reviewing the Company's compensation program, the Committee considered a
report by the Company's independent auditors, Deloitte & Touche, LLP, as to the
compensation of executive officers of other publicly-held corporations of
similar size principally engaged in the furnishing of services similar to those
provided by the Company.
7
<PAGE> 28
The Committee was of the view that the salaries of its executive officers,
including those of the Chief Executive and Chief Operations Officers and
President whose salaries reflect $25,000 increases authorized in 1994, compare
favorably for the Company with executive compensation and benefits paid to
executives of other operations of similar scope and size both within and without
the parking industry, particularly in view of the substantial improvements
achieved during 1995. The improvements include the material increase in net
income, the successful extension of the maturity of the Company's principal
credit facility on more favorable terms and success in renegotiating certain
leases resulting in lower rentals.
The Committee believes that the Company's stock option program, as it has
in the past, should be used as a means to conserve cash in rewarding executives
and key employees for good or exceptional performance, the performance of
increased responsibilities, improved performance independent of operating
results, loyalty and seniority.
The Compensation Committee
Daniel R. Schein, Chairman
Stephen A. Bansak, Jr.
Leslie Harwood Ehrlich
Leo Silverstein
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal year ended December 31, 1995,
the ten-month period ended December 31, 1994 and the fiscal year ended February
28, 1994, the compensation for services rendered in all capacities to the
Company and subsidiaries by the Chief Executive Officer and the next four most
highly compensated executive officers of the Company:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------------- AWARDS
SALARY -------------
(1) BONUS STOCK OPTIONS
NAME AND PRINCIPAL POSITION PERIOD ($) ($) (# OF SHARES)
----------------------------- ------------------------- --------- ------- -------------
<S> <C> <C> <C> <C>
Lowell Harwood............... Year Ended 12/31/95 183,420 139,556 --
Chairman of the Board and 10 months ended 12/31/94 151,913 36,722 --
Chief Executive Officer Year ended 2/28/94 161,356 -- --
Sanford Harwood.............. Year ended 12/31/95 137,312 137,312 --
Assistant Chairman, 10 months ended 12/31/94 113,687 36,722 --
Secretary and Director(2) Year ended 2/28/94 136,500 -- --
Brett Harwood................ Year ended 12/31/95 174,912 4,580 50,000
President, Chief Operating 10 months ended 12/31/94 144,681 6,700 --
Officer and Director(3) Year ended 2/28/94 153,504 10,967 --
Dan Jeremitsky............... Year ended 12/31/95 132,004 4,053 10,000
Vice President -- Design 10 months ended 12/31/94 104,068 16,943 --
and Consulting Year ended 2/28/94 115,440 8,311 --
John Hogan................... Year ended 12/31/95 112,245 14,285 10,000
Vice 10 months ended 12/31/94 89,884 12,232 --
President -- Institutional Year ended 2/28/94 94,640 16,589 --
and Management
</TABLE>
- ---------------
(1) Includes car allowances, which represent for each of the officers named,
less than 1.0% of their salary amounts.
(2) He had been President and Chief Operating Officer until March 1, 1994.
(3) He had been Executive Vice President and Secretary until March 1, 1994.
8
<PAGE> 29
The Company paid Directors' fees to each Director who is not an officer or
an employee of the Company at the rate of $20,000 per annum. Mr. Schein holds a
stock option granted August 19, 1992 to him under the 1992 Stock Option Plan to
purchase 5,000 shares of Common Stock at a price of $3.5625, which was the
market price on the date of grant.
The bonuses paid to Messrs. Lowell Harwood and Sanford Harwood are pursuant
to an arrangement originally authorized by the Board of Directors in January
1982 and subsequently amended. The bonuses are contingent upon the achievement
by the Company for the fiscal year of consolidated income of more than $300,000,
before provision for income taxes and accrual of the bonuses for the year and
before giving effect to the additional compensation, with the amount for Mr.
Sanford Harwood to be 7 1/2% of the excess, but not to exceed his base salary,
and for Mr. Lowell Harwood to be 7 1/2% of the first $1,400,000 of the excess
and 5% of the balance of the excess. The bonuses paid to the other executive
officers were authorized by the Chairman of the Board pursuant to a bonus
program under which he established goals and results to be achieved.
STOCK OPTIONS
The Company's 1992 Stock Option Plan (the "1992 Plan"), provides authority
for the grant of options with respect to 425,000 shares of Common Stock to key
employees, non-employee Directors and independent consultants during the
ten-year period ended August 18, 2002. As of December 31, 1995, there were
options outstanding under the 1992 Plan with respect to 393,400 shares. See
"Proposal to Amend the 1992 Stock Option Plan" for proposed increase in the
number of shares subject to the Plan.
The following table shows all grants of options to the executive officers
of the Company named in the Summary Compensation Table during the 1995 Year.
Pursuant to Commission rules, the table also shows the value of the options
granted at the end of the option terms (five years) if the stock price were to
appreciate annually by 5% and 10%, respectively. There is no assurance that the
stock price will appreciate at the rates shown in the table. The table also
indicates that if the stock price does not appreciate, there will be no increase
in the potential realizable value of the options granted:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
---------------------------------------------------------------------------- AT
(C) ASSUMED ANNUAL RATES OF
PERCENT OF STOCK PRICE APPRECIATION
TOTAL FOR OPTION TERM
OPTIONS (D) ----------------------------
(B) GRANTED TO EXERCISE (E)
(A) OPTIONS EMPLOYEES IN PRICE EXPIRATION (F) (G) (H)
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
---------------------------- ------- ------------ -------- ---------- --- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Lowell Harwood.............. 0 N/A N/A N/A $ 0 $ 0 $ 0
Brett Harwood............... 50,000 59.5% $ 6.4625 6/14/2000 $ 0 $51,738 $150,962
Sanford Harwood............. 0 N/A N/A N/A $ 0 $ 0 $ 0
Dan Jeremitsky.............. 10,000 11.9% $ 5.875 6/14/2000 $ 0 $16,231 $ 35,867
John Hogan.................. 10,000 11.9% $ 5.875 6/14/2000 $ 0 $16,231 $ 35,867
</TABLE>
9
<PAGE> 30
No options were exercised by any executive officer or director during the
fiscal year ended December 31, 1995 and the ten months ended December 31, 1994.
The following table reflects information with respect to options which have been
granted to any of the above named officers:
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY-OPTIONS
OPTIONS AS OF 12/31/95 ON 12/31/95*
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
Lowell Harwood............................. 50,000/50,000 $229,062/229/062
Sanford Harwood............................ 50,000/ $229,062/
Brett Harwood.............................. 39,400/40,600 $141,327/99,282
Dan Jeremitsky............................. 8,000/12,000 $34,875/40,750
John Hogan................................. 8,000/12,000 $34,875/40,750
</TABLE>
- ---------------
* Based on the closing sales price of $8.50 on December 29, 1995, the last date
in December on which shares traded on the Nasdaq National Market System (the
"NMS").
10
<PAGE> 31
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
- ----------- --------
<S> <C>
Exhibit 1 Agreement and Plan of Merger dated as of December 6, 1996 among
Square Industries, Inc., Central Parking Corporation and Central
Parking System -- Empire State, Inc.
Exhibit 2 Pages 2-7 and 11-13 of the Company's Proxy Statement dated July
17, 1996.
Exhibit 3 Square Industries, Inc. Executive Severance Pay Plan
Exhibit 4 Form of Employment Agreement between Brett Harwood, Central
Parking Corporation and Central Parking System, Inc.
Exhibit 5 Escrow Agreement dated December 6, 1996 among Square Industries,
Inc., Central Parking Corporation and American National Bank and
Lowell Harwood and Sanford Harwood.
Exhibit 6 Agreement to Support Transaction dated December 6, 1996 among
Central Parking, Central Parking System -- Empire State, Inc.,
Lowell Harwood, Mrs. Lowell Harwood, Sanford Harwood, Brett
Harwood, Mrs. Brett Harwood, Brett Harwood as custodian and
trustee for his minor children, Leslie Harwood Ehrlich, Craig
Harwood, Scott Harwood and Scott Harwood as custodian for his
minor children.
Exhibit 7 Form of Confidentiality and NonCompete Agreement between Lowell
Harwood, Sanford Harwood, Leslie Harwood Ehrlich, Central Parking
Corporation and Central Parking System -- Empire State, Inc.
Exhibit 8 Form of Consultancy Agreement between Lowell Harwood and Central
Parking System, Inc.
Exhibit 9 Form of Consultancy Agreement between Sanford Harwood and Central
Parking System, Inc.
Exhibit 10 Confidentiality Agreement dated July 10, 1996 between Square
Industries, Inc. and Central Parking Corporation.
Exhibit 11 Letter to Shareholders of Square Industries, Inc. dated December
13, 1996.
Exhibit 12 Press Release issued by Square Industries, Inc. dated December 9,
1996.
Exhibit 13 Opinion, dated December 6, 1996, of The Blackstone Group L.P.
</TABLE>
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
AMONG
CENTRAL PARKING CORPORATION,
CENTRAL PARKING SYSTEM -- EMPIRE STATE, INC.
AND
SQUARE INDUSTRIES, INC.
DATED AS OF DECEMBER 6, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE OFFER ........................................................................................... 1
1.1 The Tender Offer ..................................................................................... 1
1.2 Consent by the Company ............................................................................... 2
1.3 Shareholder Lists ................................................................................... 3
1.4 Directors ........................................................................................... 4
1.5 Loan Arrangements ................................................................................... 4
ARTICLE II THE MERGER; CLOSING; EFFECTIVE TIME ................................................................. 5
2.1 The Merger. ......................................................................................... 5
2.2 Closing ............................................................................................. 5
2.3 Effective Time ....................................................................................... 5
2.4 The Certificate of Incorporation ..................................................................... 5
2.5 The By-Laws ......................................................................................... 5
2.6 Directors ........................................................................................... 5
2.7 Officers ............................................................................................. 6
2.8 Effect of Merger ..................................................................................... 6
ARTICLE III CONVERSION OR CANCELLATION OF SHARES IN THE MERGER ................................................... 6
3.1 Conversion or Cancellation of Shares. ............................................................... 6
3.2 Payment for Shares. ................................................................................. 7
3.3 Transfer of Shares After the Effective Time ......................................................... 8
3.4 Dissenting Shares..................................................................................... 8
3.5 Treatment of Stock Options and Warrants ............................................................. 8
3.6 Investment of Exchange Fund ......................................................................... 9
ARTICLE IV REPRESENTATIONS AND WARRANTIES ....................................................................... 9
4.1 Representations and Warranties of the Company ....................................................... 9
4.2 Representations and Warranties of the Purchaser and Merger Sub ..................................... 17
ARTICLE V COVENANTS ......................................................................................... 20
5.1 Interim Operations of the Company ................................................................. 20
5.2 Acquisition Proposals ............................................................................. 22
5.3 Stock Options and Warrants ......................................................................... 23
5.4 Shareholder Approval ............................................................................... 23
5.5 Filings; Other Action ............................................................................. 24
5.6 Access; Confidentiality ........................................................................... 24
5.7 Notification of Certain Matters ................................................................... 25
5.8 Publicity ......................................................................................... 26
5.9 Consents; Approvals ............................................................................... 26
5.10 HSR Act Compliance; Other Filings................................................................... 26
5.11 Indemnification; Directors' and Officers' Insurance ............................................... 26
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
5.12 Employment Matters ................................................................................. 28
5.13 Affiliate Agreements ............................................................................... 28
5.14 Further Actions ................................................................................... 29
ARTICLE VI CONDITIONS TO THE MERGER ........................................................................... 29
6.1 Conditions to Obligations of the Purchaser and Merger Sub to
Effect the Merger ............................................................................... 29
6.2 Conditions to Obligations of the Company to Effect the Merger ..................................... 30
ARTICLE VII TERMINATION ....................................................................................... 31
7.1 Termination by Mutual Consent ..................................................................... 31
7.2 Termination by either the Purchaser or the Company ................................................. 31
7.3 Termination by the Purchaser ....................................................................... 32
7.4 Termination by the Company ......................................................................... 32
7.5 Effect of Termination and Abandonment ............................................................. 33
7.6 Break-up Fee. ..................................................................................... 33
ARTICLE VIII ESCROW ............................................................................................. 34
8.1 Escrow Agreement. ................................................................................. 34
8.2 Escrow Committee ................................................................................... 34
8.3 Non Transferability of Escrowed Funds............................................................... 35
ARTICLE IX MISCELLANEOUS AND GENERAL ......................................................................... 35
9.1 Payment of Expenses ............................................................................... 35
9.2 Survival ........................................................................................... 35
9.3 Modification or Amendment ......................................................................... 35
9.4 Waiver of Conditions ............................................................................... 36
9.5 Counterparts ....................................................................................... 36
9.6 Governing Law ..................................................................................... 36
9.7 Notices ........................................................................................... 36
9.8 Entire Agreement, etc............................................................................... 37
9.9 Assignment; Merger Sub ............................................................................. 37
9.10 Parties in Interest ............................................................................... 37
9.11 Obligation of the Purchaser ....................................................................... 37
9.12 Captions ........................................................................................... 38
9.13 Integration of Disclosure Schedule. ............................................................... 38
9.14 Arbitration......................................................................................... 38
</TABLE>
ii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of December
6, 1996, among Square Industries, Inc., a New York corporation (the "Company"),
Central Parking Corporation, a Tennessee corporation (the "Purchaser"), and
Central Parking System -- Empire State, Inc., a New York corporation and an
indirect wholly-owned subsidiary of the Purchaser ("Merger Sub"), the Company
and Merger Sub sometimes being hereinafter collectively referred to as the
"Constituent Corporations."
RECITALS
WHEREAS, the Boards of Directors of the Purchaser and the Company each
have determined that it is in the best interests of their respective
shareholders for the Purchaser to acquire the Company upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Company, the Purchaser and Merger Sub desire to make
certain representations, warranties, covenants and agreements in connection
with this Agreement;
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE OFFER
1.1 The Tender Offer. Provided that this Agreement shall not have
been terminated in accordance with Article VII, as promptly as practicable, but
in no event later than the fifth business day after the initial public
announcement of this Agreement (which announcement shall occur as promptly as
practicable but in no event later than the first business day following the
execution hereof, Merger Sub shall commence a cash tender offer (the "Offer")
to acquire all of the shares of the Company's common stock, par value $.01 per
share (the "Shares"), at a price of $28.50 per Share net to the seller in cash
at the closing of the Offer, without interest thereon and an additional $2.50
per Share to be deposited by Purchaser and held in escrow as contingent
consideration for distribution in whole or in part to either the shareholders
of the Company or Purchaser based upon resolution of certain matters, subject
to adjustment pursuant to the Escrow Agreement (the "Offer Contingent
Consideration") as provided in Article VIII, (the $28.50 and the Offer
Contingent Consideration collectively the "Offer Price") and shall consummate
the Offer in accordance with its terms. The obligation of Merger Sub to
commence the Offer and to accept for payment and to pay for Shares tendered
pursuant to the Offer shall be subject only to (i) the condition that there
shall be validly tendered in accordance with the terms of the Offer and not
withdrawn prior to the expiration of the Offer a number of Shares which,
together with any Shares then owned by Purchaser or Merger Sub represents at
least sixty-six and two-thirds percent (66 2/3%) of the Shares on a fully
diluted basis (fully diluted
1
<PAGE> 5
shall include, without limitation, all Shares issuable upon the conversion of
any convertible securities or upon the exercise of any options, warrants or
rights, unless the holder of such options, warrants or rights shall have
entered into a binding agreement to cash out such options, warrants or rights
in accordance with Section 3.5) (the "Minimum Condition") and (ii) the
satisfaction of the conditions set forth in Annex A (the "Conditions"). The
Offer shall expire 21 business days after it is commenced and shall not be
extended without the prior written consent of the Company; provided Purchaser
may extend the Offer one time for no more than ten (10) days and only if at
least 80% of all of the outstanding Shares have been tendered prior to such
extension. The Purchaser and Merger Sub expressly reserve the right to waive
any such condition, to increase the price per Share payable in the Offer and to
make any other changes in the terms and conditions of the Offer; provided,
however, that unless the Purchaser and the Merger Sub shall have obtained the
prior written approval of the Company, no change may be made in the Offer which
(i) decreases the price per share payable in the Offer, (ii) changes the form
of the consideration to be paid in the Offer, or (iii) modifies the Conditions
to the Offer or imposes conditions to the Offer in addition to the Minimum
Condition and those set forth in Annex A. As soon as practicable on the date of
the commencement of the Offer, Merger Sub shall file with the Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1
(together with all amendments and supplements thereto, the "Schedule 14D-1")
with respect to the Offer. The Schedule 14D-1 shall contain or shall
incorporate by reference an offer to purchase (the "Offer to Purchase") and
forms of the related letter of transmittal and any related summary
advertisement (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). The Offer Documents will
comply in all material respects with the provisions of applicable federal
securities laws. The Purchaser, Merger Sub and the Company agree to correct
promptly any information provided by any of them for use in the Offer Documents
which shall have become materially false or misleading, and the Purchaser and
Merger Sub further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer Documents as
so corrected to be disseminated to holders of Shares, in each case as and to
the extent required by applicable federal securities laws. The Company and its
counsel shall be given the opportunity to review and comment upon the Schedule
14D-1 prior to its filing with, or being sent to, the SEC. Merger Sub shall,
and the Purchaser shall cause Merger Sub to, accept for payment all Shares
validly tendered and not withdrawn pursuant to the Offer as promptly as
practicable after the satisfaction or waiver by Merger Sub or the Purchaser of
the Conditions (including without limitation the Minimum Condition) and shall
pay for such Shares as promptly as practicable following the expiration of the
Offer. The Purchaser hereby guarantees the obligation of Merger Sub to
consummate the Offer, subject to the Minimum Condition and the Conditions.
1.2 Consent by the Company. The Company hereby approves of and
consents to the Offer and represents and warrants that the Board of Directors
of the Company (i) has unanimously approved and adopted this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, (ii) has
determined that this Agreement and the transactions contemplated hereby,
including without limitation, each of the Offer and the
2
<PAGE> 6
Merger are fair to and in the best interests of the holders of Shares (other
than Purchaser and Merger Sub), (iii) has resolved to recommend that the
shareholders of the Company accept the Offer and approve and adopt this
Agreement and the transaction contemplated hereby, and (iv) has approved the
transactions contemplated hereby and has made all such determinations and taken
all such other actions as are necessary or appropriate under Section 912 of the
New York Business Corporation Law (the "NYBCL") to ensure that such Section 912
does not apply to any of the transactions contemplated hereunder. The
Blackstone Group L.P. has advised the Company on December 6, 1996 that the
Offer Price and Merger Consideration (as defined in Section 3.1) to be received
by the holders of the Shares pursuant to this Agreement, subject to the escrow
provided in Article VIII, is fair to such holders from a financial point of
view (the "Fairness Opinion") and has authorized the Company to include such
Fairness Opinion (or references thereto) in the Offer Documents and in the
Schedule 14D-9 and the Proxy Statement referred to in Section 4.1(j). As soon
as practicable on the date of the commencement of the Offer, the Company shall
file with the SEC and mail to the holders of Shares, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") containing the
recommendation of the Company's Board of Directors. The Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws. The Company, the Purchaser and Merger Sub agree to correct
promptly any information provided by any of them for use in the Schedule 14D-9
which shall have become materially false or misleading, and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws. The
Purchaser, Merger Sub and their counsel shall be given the opportunity to
review and comment upon the Schedule 14D-9 prior to its filing with, or being
sent to, the SEC.
1.3 Shareholder Lists. In connection with the Offer, the Company
shall promptly furnish Merger Sub with a list of the record holders of Shares
and mailing labels containing the names and addresses of all record holders of
Shares and lists of securities positions of Shares held in stock depositories,
each as of the most recent date practicable, together with all other available
listings and computer files containing names, addresses and security positions
of record holders and non-objecting beneficial owners of Shares as of the most
recent date practicable and shall promptly furnish Merger Sub with such
additional information, including updated lists of the holders of Shares,
mailing labels and lists of securities positions, to the extent available, and
such other assistance as Merger Sub or its agents may reasonably request in
connection with the Offer and communicating the Offer to the record and
beneficial holders of Shares. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Offer or the Merger, the
Purchaser and Merger Sub shall and each of the Purchaser and Merger Sub shall
cause its affiliates to (i) hold in confidence all such information, (ii) use
such information only in connection with the Offer and Merger and (iii) if this
Agreement shall be terminated pursuant to Article VII, return all such
information to the Company.
3
<PAGE> 7
1.4 Directors. (a) Promptly upon the purchase by Merger Sub of
at least a majority of the outstanding Shares pursuant to the Offer, Merger Sub
shall be entitled, subject to compliance with Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to designate such number
of directors, rounded up to the next greatest whole number, on the Board of
Directors of the Company as will give Merger Sub representation on the Board of
Directors of the Company equal to that number of directors which equals the
product of the total number of directors on the Board of Directors of the
Company (giving effect to the directors appointed or elected pursuant to this
sentence and including current directors serving as officers of the Company)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Merger Sub or any affiliate of Merger Sub (including for the purposes
of this Section 1.4 such Shares as are accepted for payment pursuant to the
Offer, but excluding Shares held by the Company or its affiliates) bears to the
number of Shares outstanding. At such times, the Company will also cause (i)
each committee of the Board of Directors of the Company, (ii) if requested by
Merger Sub, the Board of Directors of each of the Company's subsidiaries and
(iii) if requested by Merger Sub, each committee of such board to include such
persons designated by Merger Sub constituting the same percentage of each such
committee or board as Merger Sub's designees are of the Board of Directors of
the Company. The Company shall, upon request by Merger Sub, promptly increase
the size of the Board of Directors of the Company or exercise its best efforts
to secure the resignations of such number of directors as is necessary to
enable Merger Sub designees to be elected to the Board of Directors of the
Company and shall cause Merger Sub's designees to be so elected.
(b) Subject to applicable law, the Company shall promptly
take all action necessary pursuant to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder in order to fulfill its obligations under
this Section 1.4 and shall include in the Schedule 14D-9 mailed to shareholders
promptly upon the commencement of the Offer (or an amendment thereof or an
information statement pursuant to Rule 14f-1 if Merger Sub has not theretofore
designated directors) such information with respect to the Company and its
officers and directors as is required under Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section 1.4. The Purchaser and
Merger Sub will supply the Company and be solely responsible for any
information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
1.5 Loan Arrangements. Promptly after the purchase by Merger Sub
of the Shares upon the expiration of the Offer, Merger Sub shall (i) either
repay or refinance the obligations of the Company and its subsidiaries pursuant
to the Credit Agreement among National Westminster Bank USA (Fleet Bank), the
Company and 808 Square Corp. dated July 5, 1988 as amended to date (the
"Natwest Debt") and (ii) simultaneously therewith repay in full certain loans
made by Lowell and Sanford Harwood in June, 1995 in the original principal
amount of $500,000, plus interest.
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ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
2.1 The Merger. Upon the terms and conditions set forth in this
Agreement, at the Effective Time (as defined in Section 2.3) in accordance with
the NYBCL Merger Sub shall be merged with and into the Company and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger"). The
Company shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and shall continue to be governed
by the laws of the State of New York, and the separate corporate existence of
the Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger, except as set forth in Section 2.4 and
2.5.
2.2 Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Harwell Howard Hyne Gabbert & Manner, P.C., 1800 First
American Center, Nashville, Tennessee at 11:00 A.M. on the first business day
after the latest to occur of: (i) the date the Merger is approved and adopted
by the shareholders of the Company pursuant to Section 5.4, if such approval
and adoption is required by applicable law; or (ii) the date on which the last
to be fulfilled or waived of the conditions set forth in Article VI hereof
shall be fulfilled or waived in accordance with this Agreement; or at such
other place and time and/or on such other date as the Company and the Purchaser
may agree.
2.3 Effective Time. Simultaneous with or as soon as practicable
following the Closing, the Company and the Purchaser will cause a Certificate
of Merger (the "Certificate of Merger") to be executed and filed with the
Secretary of State of New York in accordance with the NYBCL. The Certificate of
Merger will become effective on the date of filing of the Certificate of Merger
with the Secretary of State of New York, or as promptly as practicable as the
Company and Purchaser shall agree should be specified in the Certificate of
Merger and such time is hereinafter referred to as the "Effective Time."
2.4 The Certificate of Incorporation. The Certificate of
Incorporation of Merger Sub ("Certificate") in effect at the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation, until
duly amended in accordance with the terms thereof and the NYBCL.
2.5 The By-Laws. The By-Laws of Merger Sub in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the NYBCL.
2.6 Directors. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the initial directors of the
Surviving Corporation until their respective successors have been duly elected
or appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate and By-Laws.
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2.7 Officers. The officers of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the initial officers of the
Surviving Corporation until their respective successors have been duly elected
or appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Certificate of Incorporation and
By-Laws.
2.8 Effect of Merger. The Merger shall have the effects of a
Merger set forth in Section 906 of the NYBCL.
ARTICLE III
CONVERSION OR CANCELLATION OF SHARES IN THE MERGER
3.1 Conversion or Cancellation of Shares. The manner of converting
or canceling shares of the Company and Merger Sub in the Merger shall be as
follows:
(a) At the Effective Time, each Share of the Company
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares as defined in Section 3.4 and Shares canceled in accordance
with Section 3.1(b)) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive, without
interest, an amount net in cash equal to $28.50 per Shareholder and an
additional $2.50 per Share to be deposited by Purchaser and held by the Escrow
Agent in escrow as contingent consideration for distribution in whole or in
part to either the Shareholders of the Company or Purchaser based upon
resolution of certain matters subject to adjustment pursuant to the Escrow
Agreement as described in Article VIII (the "Merger Contingent Consideration"
and together with the Offer Contingent Consideration and the Option Contingent
Consideration as defined in Section 3.5 the "Contingent Consideration") (the
$28.50 and the Merger Contingent Consideration collectively the "Merger
Consideration"). All such Shares, by virtue of the Merger and without any
action on the part of the holders thereof (other than Dissenting Shares), shall
no longer be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive the Merger Consideration subject to escrowed amounts for such
Shares upon the surrender of such certificate in accordance with Section 3.2.
(b) At the Effective Time, each Share issued and held in
the Company's treasury and each Share owned by the Purchaser, Merger Sub or any
direct or indirect wholly-owned subsidiary of the Purchaser or the Company at
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, cease to be outstanding, shall be canceled and
retired without payment of any consideration therefor and shall cease to exist.
(c) At the Effective Time, each share of common stock,
par value $.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of Merger Sub or the holder(s)
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of such shares, be converted into one share of common stock, par value $.01 per
share of the Surviving Corporation.
3.2 Payment for Shares. At or prior to the Effective Time, the
Purchaser shall make available or cause to be made available to the paying
agent appointed by the Purchaser with the Company's prior approval (the "Paying
Agent") amounts sufficient in the aggregate to provide all funds necessary for
the Paying Agent to make payments pursuant to Section 3.1(a) hereof (other than
the Contingent Consideration which is to be deposited with the Escrow Agent
pursuant to Article VIII) to holders of Shares issued and outstanding
immediately prior to the Effective Time (other than Shares canceled pursuant to
Section 3.1(b)). In addition, at or prior to the Effective Time, the Purchaser
shall deposit the Merger Contingent Consideration with the Escrow Agent as
provided in Article VIII. Promptly after the Effective Time, Paying Agent shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of issued and outstanding Shares (other than Dissenting Shares) a form
(mutually agreed to by the Purchaser and the Company) of letter of transmittal
and instructions for use in effecting the surrender of the certificates which,
immediately prior to the Effective Time, represented any of such Shares in
exchange for payment therefor. Upon surrender to the Paying Agent of such
certificates, together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the Paying Agent shall
promptly cause to be paid to the persons entitled thereto a check in the amount
to which such persons are entitled, after giving effect to any required tax
withholdings and the escrow described in Article VIII. No interest will be paid
or will accrue on the amount payable upon the surrender of any such
certificate, except to the extent provided in the Escrow Agreement as defined
in Article VIII. If payment is to be made to a person other than the
registered holder of the certificate surrendered, it shall be a condition of
such payment that the certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that 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 surrendered or
establish to the satisfaction of the Surviving Corporation or the Paying Agent
that such tax has been paid or is not applicable. One year following the
Effective Time, the Surviving Corporation shall be entitled to cause the Paying
Agent to deliver to it any funds (including any interest received with respect
thereto) made available to the Paying Agent which have not been disbursed to
holders of certificates formerly representing Shares outstanding on the
Effective Time, and thereafter such holders shall be entitled to look to the
Surviving Corporation with respect to the cash payable upon due surrender of
their certificates. The Surviving Corporation shall pay all charges and
expenses, including those of the Paying Agent, in connection with the exchange
of cash for Shares and the Purchaser shall reimburse the Surviving Corporation
for such charges and expenses. In the event any certificates shall have been
lost, stolen or destroyed, the Paying Agent shall issue in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, such Merger Consideration as may be required
pursuant to Section 3.1; provided, however that the Purchaser may, in its
discretion and as a condition precedent to the issuance and delivery thereof,
require the owner of such lost, stolen or destroyed certificates to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim
that may be made against the Purchaser or the Paying Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
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3.3 Transfer of Shares After the Effective Time. No transfers of
Shares which were outstanding immediately prior to the Effective Time shall be
made on the stock transfer books of the Surviving Corporation at or after the
Effective Time. If, after the Effective Time, certificates are presented as
provided in this Agreement to the Surviving Corporation, they shall be canceled
and exchanged for cash as provided in this Article III.
3.4 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to
the contrary, Shares which are outstanding immediately prior to the Effective
Time and which are held by shareholders who have not voted such Shares in favor
of the Merger or consented thereto in writing and who shall have available to
them and who shall have demanded properly in writing appraisal for such Shares
in accordance with Sections 623 and 910 of the NYBCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration, but such shareholders shall be entitled only
to such rights as are granted by Section 910 of the NYBCL. Such shareholders
shall be entitled to receive payment of the appraised value of such Shares held
by them in accordance with the provisions of Section 910 of the NYBCL, except
that all Dissenting Shares held by shareholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights of
appraisal of such Shares under Section 910 of the NYBCL shall thereupon be
deemed to have converted into and to have been exchangeable for, as of the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon, upon surrender, in the manner provided in Section 3.2, of the
certificate or certificates that formerly evidenced such Shares.
(b) The Company shall give the Purchaser (i) prompt
notice of any demands for appraisal received by the Company, withdrawals of any
such demands and any other instruments served pursuant to the NYBCL and
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the NYBCL. The Company
shall not, except with the prior written consent of the Purchaser, make any
payment with respect to any demands for appraisal or offer to settle or settle
any such demands unless otherwise required by law.
3.5 Treatment of Stock Options and Warrants. Promptly after the
closing of the Offer, each holder of a then outstanding option or warrant to
purchase Shares heretofore granted, all as more particularly described in the
Disclosure Schedule, will, upon the consent of each such holder thereof,
receive (whether such option or warrants are immediately exercisable or not) in
settlement thereof, (a) a cash payment from the Company in an amount equal to
the product of (i) the difference between the Offer Price less the Option
Contingent Consideration (as defined below), and the per share exercise price
of such options or warrants (the "Option Consideration") and (ii) the total
number of Shares which the holder of each such option or warrant is entitled to
purchase under such option or warrant, as provided above (the "Option Shares")
and (b) a deposit by Purchaser of $2.50 per Option Share to be held in escrow
as contingent consideration for distribution to the optionholders and warrant
holders of the Company or to be disbursed in whole or in part
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to Purchaser based upon the resolution of certain matters, subject to
adjustment pursuant to the Escrow Agreement (the "Option Contingent
Consideration").
3.6 Investment of Exchange Fund. The Paying Agent shall invest
all funds received by Paying Agent, as reasonably directed by Purchaser on a
daily basis. Any interest and other income resulting from such investments
shall be paid to Purchaser.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser and Merger Sub that:
(a) Corporation Organization and Qualification. Except as
disclosed in the Disclosure Schedule, each of the Company and the Subsidiaries
(as defined below) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite corporate power and authority to carry on its business as it is
now being conducted. Each of the Company and the Subsidiaries is in good
standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except where the failure to be so qualified or in such good
standing will not have a material adverse effect on the financial condition,
properties, business or results of operations of the Company and the
Subsidiaries taken as a whole. A true and complete list of the Company's
subsidiaries, (individually, a "Subsidiary", and collectively, the
"Subsidiaries") together with the jurisdiction of incorporation of each
Subsidiary and the percentage of each Subsidiaries' outstanding capital stock
owned by the Company or another Subsidiary, is set forth in the disclosure
schedule delivered to the Purchaser and dated the date hereof (the "Disclosure
Schedule"). The Company has heretofore furnished to the Purchaser a complete
and correct copy of its and each of the Subsidiaries' Certificate of
Incorporation (or other applicable organizational documents) and By-laws as
currently in effect. Neither the Company nor any of the Subsidiaries is in
violation of any of the provisions of their respective Certificate of
Incorporation (or other applicable organizational documents) and By-laws,
except for any such violations as would not have a material adverse effect on
the financial condition, properties, business or results of operations of the
Company and the Subsidiaries taken as a whole. Except as set forth on the
Disclosure Schedule, the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any corporation,
partnership, joint venture or other entity.
(b) Authorized Capital. The authorized capital stock of
the Company consists of 2,000,000 Shares, of which 1,199,156 Shares were issued
and outstanding on November 4, 1996. All of the issued and outstanding Shares
have been duly authorized and are validly issued, fully paid and nonassessable,
subject to Section 630 of the NYBCL. The Company has no Shares reserved for
issuance, except that, as of November 4, 1996, there were an aggregate of
407,100 Shares reserved for issuance in connection with options
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granted under the Company's 1992 Stock Option Plan, all as more particularly
described in the Disclosure Schedule and 150,000 Shares were reserved for
issuance pursuant to five year Common Stock Purchase Warrants issued on October
30, 1995 to Lowell and Sanford Harwood, as more particularly described in the
Disclosure Schedule (the "Stock Option Plan"). Except as set forth above,
there are no shares of capital stock of the Company authorized, issued or
outstanding and except as set forth above, there are no preemptive rights nor
any outstanding subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character obligating the
Company to issue, transfer or sell any of its issued or unissued capital stock
or other securities. Except as set forth in the Disclosure Schedule and except
for the Voting Agreement dated May 30, 1991 between Lowell and Sanford Harwood,
the Collateral Pledge Agreement to Regent National Bank and the Pledge
Agreements between the Subsidiaries and National Westminster Bank USA (Fleet
Bank) relating to the capital stock of the Subsidiaries, each as more
particularly described in the Disclosure Schedule, there are no voting rights
or other agreements or understandings to which the Company or any of the
Subsidiaries is a party with respect to the voting or transfer of the capital
stock of the Company or the Subsidiaries.
(c) Corporate Authority. (i) The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and, subject to obtaining any necessary approval of its shareholders, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Company's Board of Directors and,
except for the adoption of this Agreement and the approval of the Merger by its
shareholders, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and the consummation by the Company of
the transactions contemplated hereby. This Agreement is a valid and binding
agreement of the Company, and assuming this Agreement constitutes a legal,
valid and binding agreement of each of Merger Sub and the Purchaser, this
Agreement is enforceable against the Company in accordance with its terms,
except that (A) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and (B) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(ii) Except as set forth in the Disclosure
Schedule, the execution and delivery of this Agreement by the Company do not,
and the consummation by the Company of the transactions contemplated by this
Agreement will not, constitute or result in (A) a breach or violation of, or a
default under, the Certificate of Incorporation (or applicable organizational
documents) or By-Laws of the Company or the Subsidiaries, or (B) a breach or
violation of, or a default under, termination of, or the acceleration or the
creation of a lien, pledge, security interest or other encumbrance on the
assets of the Company or the Subsidiaries or the Shares held by affiliates of
the Company (with or without the giving of notice or the lapse of time)
pursuant to, any provision of any material agreement, lease, contract, note,
mortgage, indenture, or other material obligation ("Contracts") of the Company
or any law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which the Shares held by
affiliates
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of the Company, the Company or the Subsidiaries, or their assets are subject,
except, in the case of clause (B) above, for such breaches, violations,
defaults, terminations, accelerations or charges that, in the aggregate, are
not reasonably likely to have a material adverse effect on the financial
condition, properties, business or results of operations of the Company and the
Subsidiaries taken as a whole or that could not prevent, materially delay or
materially burden the transactions contemplated by this Agreement.
(d) Governmental Filings. Except for (i) the filings by
the Purchaser and the Company required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing of the
Schedule 14D-9 and the Proxy Statement with the SEC pursuant to the Exchange
Act, (iii) making of the Merger filing with the Secretary of State of the State
of New York in connection with the Merger, and (iv) the other consents and
filings described in the Disclosure Schedule (collectively, the "Regulatory
Filings"), no declaration, filing or negotiation with or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals, which if not made or obtained, would
not, in the aggregate, have a material adverse effect on the financial
condition, properties, business or results of operations of the Company and the
Subsidiaries taken as a whole or materially delay or restrict the Company's
ability to consummate the Merger.
(e) Compliance; Permits. (i) Except as disclosed in the
Disclosure Schedule, neither the Company nor any of the Subsidiaries is in
conflict with, or in default or violation of, any law, rule, regulation, order,
judgment or decree applicable to the Company or any of the Subsidiaries or by
which the Company or any of the Subsidiaries or any of their respective
properties is bound or affected, except where such conflicts, defaults and
violations would not, in the aggregate, have a material adverse effect on the
financial condition, properties, business or results of operation of the
Company and the Subsidiaries taken as a whole.
(ii) The Company and the Subsidiaries hold all
permits, licenses, easements, variances, exceptions, consents, certificates,
orders and approvals from governmental authorities which are material to the
operation of the business of the Company and the Subsidiaries taken as a whole
(collectively, the "Company Permits") except where the failure to hold or
maintain any of the foregoing would not, in the aggregate, have a material
adverse effect on the financial condition, properties, business or results of
operations of the Company and the Subsidiaries taken as a whole. The Company
and the Subsidiaries are in compliance with the terms of the Company Permits,
except where the failure to so comply would not, in the aggregate, have a
material adverse effect on the financial condition, properties, business or
results of operation of the Company and the Subsidiaries taken as a whole.
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(f) Company Reports; Financial Statements. The Company
has delivered to the Purchaser true and complete copies of (i) each
registration statement, report on Form 8-K, and proxy statement or information
statement filed by it since December 31, 1995, (ii) the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, (iii) the Company's
Registration Statement on Form S-8 (Commission Number 333-05746); and (iv) the
Company's Quarterly Reports on Form 10-Q for the periods ended March 31, 1996,
June 30, 1996 and September 30, 1996, each in the form (including exhibits and
any amendments thereto) filed with the SEC (collectively, the "Company
Reports"). As of their respective dates, the Company Reports were prepared in
all material respects in accordance with the requirements of the Securities Act
of 1933, as amended, (the "Securities Act") and the Exchange Act, as
applicable, and the rules and regulations of the SEC applicable thereto and the
Company Reports did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading. Other than the Company Reports, the Company has not filed any
other definitive reports or statements with the SEC since December 31, 1995.
(g) Absence of Certain Changes. Except as disclosed in
the Company Reports or otherwise disclosed in the Disclosure Schedule, since
December 31, 1995, the Company has conducted its business only in, and has not
engaged in any material transaction other than according to, the ordinary and
usual course of such business, and (i) there has not been any material adverse
change in the financial condition, properties, business or results of
operations of the Company and the Subsidiaries taken as a whole, (ii) the
Company has not made any declaration, setting aside or payment of any dividend
or other distribution with respect to the capital stock of the Company or in
discharge or cancellation of any indebtedness owing to its shareholders and
(iii) the Company has not made any change in accounting methods, principles, or
practices except as required by generally accepted accounting principles and
there has not been any revaluation by the Company or any of the Subsidiaries or
any of their respective assets.
(h) No Undisclosed Liabilities. Except as disclosed in
the Company Reports or the Disclosure Schedule, neither the Company nor any of
the Subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) which are, in the aggregate, material to the business, operations or
financial condition of the Company and the Subsidiaries taken as a whole,
except liabilities (i) adequately provided for in the Company's balance sheet
(including the related notes thereto) as of September 30, 1996, (ii) incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected on the Company's balance sheet (including
the related notes thereto) as of September 30, 1996, (iii) incurred since
September 30, 1996 in the ordinary course of business and consistent with past
practice, or (iv) liabilities incurred in connection with this Agreement.
(i) Litigation. Except as disclosed in the Company
Reports or the Disclosure Schedule, there are no actions, suits, government
investigations or proceedings pending or, to the knowledge of the management of
the Company threatened against or involving the Shares of the Company or the
Subsidiaries or their assets involving, in the
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aggregate, potential liability on the part of the Company or the Subsidiaries
in excess of any applicable insurance coverage with respect thereto and
excluding deductible amounts. There is no order, injunction or decree, in each
case of continuing effect, outstanding against the Company or any of the
Subsidiaries. Since September 30, 1991, neither the Company nor any of the
Subsidiaries has received notice of any material violation of any law, rule,
regulation, ordinance or order of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality (including, without limitation, legislation and regulations
applicable to civil rights, public health and safety and occupational health).
(j) Proxy Statement. All of the information relating to
the Company and its subsidiaries supplied by the Company for inclusion in the
Proxy Statement (as defined below), if any such Proxy Statement is required,
will not, at the time the Proxy Statement is mailed, contain any statement
which, at the time and in the light of the circumstances under which it is
made, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
false or misleading or, at the time of the Special Meeting (as defined in
Section 5.4) or at the Effective Time, as then amended or supplemented to
correct any statement which has become false or misleading in any material
respect in any earlier communication with respect to the solicitation of any
proxy for such meeting. The Proxy Statement will comply in all material
respects, both as to form and otherwise, with the requirements of the Exchange
Act and the rules and regulations thereunder. Neither the Schedule 14D-9 nor
any of the information relating to the Company and its subsidiaries supplied by
the Company for inclusion in the Offer Documents will, at the respective times
filed with the SEC or first sent or given to the shareholders of the Company,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Schedule 14D-9 will comply in all material respects with the
Exchange Act. Notwithstanding the foregoing, the Company makes no
representation or warranty pursuant to this Section 4.1(j) with respect to any
information supplied by Purchaser or Merger Sub or any of their affiliates
which is contained in any of the foregoing documents. The letter to
shareholders, Notice of Meeting, Proxy Statement and form of proxy, or the
information statement, as the case may be, to be distributed to shareholders in
connection with the Merger, or any schedules required to be filed with the SEC
in connection therewith are collectively referred to herein as the "Proxy
Statement."
(k) Employee Benefits. The Company Reports and
Disclosure Schedule together contain a list of all "employee benefit plans,"
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), currently maintained, sponsored, or
contributed to by the Company on behalf any employee of the Company or the
Subsidiaries or such employees' beneficiaries (each a "Plan" and, collectively,
the "Plans"), including, without limitation, any multiemployer plan within the
meaning of Sections 3(37) and 4001(a)(3) of ERISA ("Multiemployer Plan"). With
respect to each Plan (other than each Multiemployer Plan), true and correct
copies of the documents embodying the Plans have been delivered or made
available to the Purchaser. Except as set forth in the Disclosure Schedule or
the Company Reports, and except to the extent that
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any inaccuracy in the following statements, in the aggregate, would not have a
material adverse effect upon the financial condition, properties, business or
results of operations of the Company and the Subsidiaries taken as a whole: (i)
each Plan (other than a Multiemployer Plan) intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
has received a favorable determination letter from the Internal Revenue Service
("IRS") that the Plan is qualified and that its related trust has been
determined to be exempt from taxation under Section 501(a) of the Code and the
IRS has taken no action to revoke such determination or qualification; (ii) the
Company is in material compliance with the terms of each Plan and the
requirements applicable to each Plan prescribed by ERISA and the Code; (iii) to
the Company's knowledge, there are no material actions, lawsuits or claims
pending or instituted against any Plan or its fiduciaries (other than routine
claims for benefits, and appeals of such claims); and (iv) to the Company's
knowledge, no Plan is under audit by the IRS or the Department of Labor.
(l) Properties. Except as set forth in the Disclosure
Schedule and except for Permitted Encumbrances (as defined below), the Company
and the Subsidiaries own free and clear of any liens, charges, claims, or
encumbrances (collectively, "Encumbrances") all of their material properties
and assets reflected on the consolidated balance sheet for the period ended
September 30, 1996, included in the most recent Company Report, which they
purport to own, and all properties and assets acquired by them after September
30, 1996, except such properties and assets as have been disposed of in the
ordinary course of business since such date. As used herein, "Permitted
Encumbrances" means (i) those Encumbrances disclosed on, or reflected in the
September 30, 1996 consolidated balance sheets included in the Company Reports,
(ii) statutory Encumbrances for current taxes or assessments not yet due or
delinquent or which are being contested in good faith, (iii) statutory
mechanics', carriers', workers', repairmens', and other similar statutory
Encumbrances arising or incurred in the ordinary course of business with
respect to charges not yet due and payable, and (iv) such other Encumbrances,
if any, which do not materially detract from the value of, or interfere with
the present use of, the property subject thereto or affected thereby. The
Disclosure Schedule contains a complete list of all of the real property owned,
leased or managed by the Company and the Subsidiaries.
(m) Labor Matters. Except as set forth in the Disclosure
Schedule, (i) there are no controversies pending or, to the knowledge of the
Company threatened, between the Company and any of the Subsidiaries and any of
their respective employees, which controversies are reasonably likely to have a
material adverse effect upon the financial condition, properties, business or
results of operations of the Company and the Subsidiaries taken as a whole,
(ii) neither the Company nor any of the Subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or the Subsidiaries nor does the Company know
of any activities or proceedings of any labor union to organize any such
employees, and (iii) neither the Company nor any of the Subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages, or lockouts, by or with
respect to any employees of the Company or any of the Subsidiaries which are
reasonably likely to have a material adverse effect upon the financial
condition, properties, business or results of operations of the Company and the
Subsidiaries taken as a whole.
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(n) Taxes. Except as set forth in the Disclosure Schedule
or the Company Reports, the Company and each of the Subsidiaries has filed, or
caused to be filed, all federal, state, local and foreign income, sales, use,
property, payroll, franchise, withholding, employment, social security, excise,
occupancy, real estate, parking, transfer, gains and other tax returns required
to be filed by it, and has paid or withheld, or caused to be paid or withheld,
all taxes of any nature whatsoever, with any related penalties and interest
(any of the foregoing referred to herein as a "Tax"), that are shown on such
tax returns as due and payable, other than (i) such Taxes as are being
contested in good faith and for which adequate reserves have been established
or (ii) where the failure to so file, pay or withhold, in the aggregate, is not
reasonably likely to have a material adverse effect upon the financial
condition, properties, business or results of operations of the Company and the
Subsidiaries taken as a whole. As of September 30, 1996, the Company's
liability for New York City commercial rent occupancy Taxes does not exceed
$1,247,160.00 and the Company has adequately accrued for such liabilities on
its balance sheet as of September 30, 1996; provided, to the extent the
Company's liability exceeds such amount but the Company receives money from
certain of its lessors or owners of the property leased or managed by the
Company to satisfy such tax liability as provided in certain leases or
management agreements, then such amounts actually received will be deducted
from the liability of the Company.
(o) Environmental Matters. Except as set forth in the
Disclosure Schedule and except in all cases as, in the aggregate, are not
reasonably likely to have a material adverse effect upon the financial
condition, properties, business or results of operations of the Company and the
Subsidiaries taken as a whole, the Company and each of the Subsidiaries (i)
have obtained all applicable permits, licenses and other authorizations which
are required under federal, state and local laws relating to pollution or
protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants or
hazardous substances, materials or wastes into the ambient air, surface water,
ground water or land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous substances, materials or wastes by the
Company or the Subsidiaries ("Environmental Laws") with respect to all real
property owned by the Company; (ii) to the Company's knowledge, are in
compliance with all terms and conditions of any such required permits, licenses
and authorization, and all applicable requirements of the Environmental Laws
with respect to all real property owned by the Company and (iii) as of the date
hereof have not
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received any written notice of any violation of, noncompliance with, or
liability imposed under, any Environmental Laws which is reasonably likely to
result in a claim against the Company or any of the Subsidiaries. This Section
4.1(o) shall be the exclusive representation and warranty section covering
environmental matters and no other representations with respect thereto are
made or shall be deemed to have been made under any other section of this
Agreement.
(p) Brokers and Finders. Neither the Company nor any of
its officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated hereby, except that the Company
has employed The Blackstone Group L.P. as its financial advisors, the
arrangements with which have been disclosed in writing to the Purchaser prior
to the date hereof.
(q) Shareholder Approval. The affirmative vote of
shareholders of the Company required for approval and adoption of this
Agreement and the Merger is two-thirds of the outstanding shares of the
Company's common stock.
(r) Transactions with Related Parties. Except as set
forth in the Company Reports or the Disclosure Schedule, (a) there have been no
transactions by the Company or the Subsidiaries with any officer or director of
the Company or beneficial owner of more than five percent of the Company's
common stock or their affiliates ("Related Parties") since December 31, 1995,
which are required to be disclosed pursuant to the Exchange Act and (b) there
are no material agreements or understandings now in effect between the Company
or the Subsidiaries and any Related Party.
(s) Leases and Contracts.
(i) The Disclosure Schedule attached hereto sets
forth a complete and accurate list of all contracts, including, agreements,
leases, subleases, options and commitments, oral or written, and all
assignments or amendments thereof, affecting or relating to the business of the
Company and its subsidiaries, the Shares held by affiliates of the Company or
any asset or any interest therein, to which either the Company and/or the
Subsidiaries are a party or by which Company, the Subsidiaries, their assets or
the business of the Company and its subsidiaries is bound or affected,
including, without limitation, service contracts, management agreements,
equipment leases and building leases pertaining to any part of the Real Estate,
and which involve annual payments in excess of $100,000 (collectively, the
"Leases and Contracts"). The Company has previously provided or made available
to Purchaser accurate and complete copies of all written Leases and Contracts
including all schedules, exhibits and appendices thereof, and written summaries
of key terms of all oral Leases and Contracts.
(ii) Each of the Leases and Contracts is in full
force and effect and is valid, binding and enforceable in accordance with its
respective terms, except as
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enforcement may be limited by bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally and by general principles of equity.
(iii) No event or condition has happened or
presently exists which constitutes a material default or breach or, after
notice or lapse of time or both, would constitute a material default or breach
by the Company, or to the knowledge of the Company, any other party under any
of the Leases and Contracts. In addition, no event of default constituting a
payment default has happened or presently exists under the Natwest Debt and no
such event of default will occur prior to the closing of the Offer. There are
no material counterclaims or offsets under any of the Leases and Contracts.
(iv) Except as set forth in the Disclosure
Schedule, there does not exist any security interest, lien, encumbrance or
claim of others created or suffered to exist on any interest created under any
of the Leases and Contracts (except for those that result from or relate to
leased assets).
(t) Intellectual Property. All trademarks, service
marks, trade names, patents, inventions, processes, copyrights and applications
therefor, whether registered or at common law (collectively, the "Intellectual
Property"), owned by the Company or the Subsidiaries are listed and described
in Disclosure Schedule attached hereto. No proceedings have been instituted or
are pending or, to the best knowledge of Company, threatened which challenge
the validity of the ownership by the Company or the Subsidiaries of any such
Intellectual Property. Neither the Company nor the Subsidiaries have licensed
anyone to use any such Intellectual Property, and the neither the Company nor
the Subsidiaries have any knowledge of the use or the infringement of any of
such Intellectual Property by any other person. The Company and the
Subsidiaries own or possess adequate and enforceable licenses or other rights
to use all Intellectual Property now used in the conduct of its business.
(u) No Misrepresentations or Omissions. To the
knowledge of the Company, there is no fact which would have a material adverse
effect on the Shares, assets, liabilities, business, conduct, prospects,
operations or financial condition of the Company and the Subsidiaries which has
not been set forth or described in this Agreement, in the Disclosure Schedule
hereto, or in the Company Reports. None of the information included in this
Agreement, the Annexes hereto and Disclosure Schedule hereto, contains any
untrue statement of a material fact or is misleading in any material respect or
omits to state any material fact necessary in order to make any of the
statements herein or therein not misleading in light of the circumstances in
which they were made.
4.2 Representations and Warranties of the Purchaser and Merger
Sub. The Purchaser and Merger Sub represent and warrant to the Company that:
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(a) Corporation Organization and Qualification. Each of
the Purchaser and Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the business
conducted, by it require such qualification, except where the failure to be so
qualified or in such good standing would not have a material adverse effect on
the financial condition, properties, business or results of operations of the
Purchaser and Merger Sub, taken as a whole.
(b) Corporate Authority. (i) The Purchaser and Merger
Sub each have all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Purchaser and Merger Sub have been duly
and validly authorized by the respective Board of Directors of the Purchaser
and Merger Sub and by the Purchaser as the sole shareholder of Merger Sub, and
no other corporate actions on the part of the Purchaser or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Purchaser and Merger Sub, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, this Agreement
constitutes a valid and binding agreement of the Purchaser and Merger Sub,
enforceable against the Purchaser and Merger Sub in accordance with its terms,
except that (A) such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights and (B) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
(ii) The execution and delivery of this Agreement
by the Purchaser and Merger Sub do not, and the consummation of the
transactions contemplated hereby by the Purchaser and Merger Sub (including,
without limitation, the Offer and the Merger) will not, constitute or result in
(A) a breach or violation of, or a default under the Amended and Restated
Charter of the Purchaser or the Certificate of Incorporation of Merger Sub or
By-Laws of the Purchaser or Merger Sub or (B) a breach or violation of, a
default under, the acceleration of or the creation of a lien, pledge, security
interest or other encumbrance on assets (with or without the giving of notice
or the lapse of time) pursuant to, any provision of any Contract of the
Purchaser or Merger Sub or any law, ordinance, rule or regulation or judgment,
decree, order, award or governmental or non-governmental permit or license to
which the Purchaser or Merger Sub is subject, except in the case of clause (B)
above, for such breaches, violations, defaults or accelerations that, in the
aggregate, could not prevent or materially delay the transactions contemplated
by this Agreement.
(c) Governmental Filings; No Violations. Except for (i)
the filings by the Purchaser and the Company required by the HSR, (ii) the
making of the Merger filings with the Secretary of State of New York in
connection with the Merger, (iii) the approval of, and issuance of appropriate
licenses by, the New Jersey Casino Control Commission with respect
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to operations of certain properties in Atlantic City, New Jersey on and after
the consummation of the Offer and (iv) the other consents and filings described
on Annex B (the filings and approvals referred to in clauses (i) through (iv)
above are collectively referred to as the "Purchaser Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Purchaser or
Merger Sub of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, would not have a material adverse
effect on the financial condition, properties, business or results of operation
of the Purchaser and the Subsidiaries taken as a whole or affect Merger Sub's
ability to consummate the Merger.
(d) Accuracy of Information. All of the information
relating to the Purchaser and Merger Sub supplied by Purchaser or Merger Sub
for inclusion in (i) the Proxy Statement, (ii) the Offer Documents, and (iii)
any amendments or supplements to the foregoing, will not, on the date the Proxy
Statement is first mailed to shareholders, at the time of the Special Meeting
or at the Effective Time, or, with respect to the Offer Documents at the time
the Offer Documents are filed with the SEC or are first published, sent or
given to shareholders of the Company, at the time of the Special Meeting or at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it will be made, be false or misleading with
respect to any material fact, or omit to state a material fact necessary in
order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Special Meeting which has become false or
misleading. Notwithstanding the foregoing, Purchaser and Merger Sub make no
representation or warranty pursuant to this Section 4.2(d) with respect to any
information supplied by the Company or its affiliates other than Purchaser or
Merger Sub which is contained in any of the foregoing documents.
(e) Brokers and Finders. Neither the Purchaser nor Merger
Sub nor any of their respective officers, directors or employees has employed
any broker or finder or incurred any liability for brokerage fees, commissions
or finder's fees as to which the Company will have any liability in connection
with the transactions contemplated hereby.
(f) Funds. The Purchaser and Merger Sub have available
sufficient funds to enable them to acquire the Shares pursuant to the Offer and
the Merger and to pay all fees and expenses related thereto and to carry out
all of their other obligations under this Agreement. Purchaser has delivered
to the Company true and complete
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copies of all agreements and commitments relating to the financing by Purchaser
and Merger Sub of the transactions contemplated by this Agreement and such
agreements and commitments are in full force and effect. Except for the
satisfaction of the conditions to the Offer set forth in Annex A, all
conditions to obtaining such financing have been satisfied as of the date
hereof.
(g) Capitalization and Net Worth. The authorized capital
stock of Merger Sub consists of 1,000 shares of Common Stock, par value $0.01
per share, of which 1,000 shares were issued and outstanding on the date
hereof. As of the date hereof, all of the issued and outstanding shares of
capital stock of Merger Sub are owned indirectly by Purchaser. The Purchaser
and/or Merger Sub have, and shall maintain until the Effective Time, an
aggregate minimum "Tangible Net Worth" (as hereinafter defined) of at least $15
million. For purposes hereof, "Tangible Net Worth" shall mean the excess of
total assets over total liabilities determined in accordance with generally
accepted accounting principles, excluding from the determination of total
assets all assets which would be classified as intangible assets under
generally accepted accounting principles and treating as liabilities the face
amount of all indebtedness as to which Purchaser and/or Merger Sub is the
guarantor.
ARTICLE V
COVENANTS
5.1 Interim Operations of the Company. The Company and each of the
Subsidiaries covenants and agrees that, prior to the earlier of the Effective
Time or the termination of this Agreement (unless the Purchaser shall otherwise
consent in writing and except as otherwise contemplated by this Agreement):
(a) the business of the Company and the Subsidiaries
shall be conducted only in the ordinary and usual course consistent with (i)
the information contained in Annex C (the "Annex C Information") and (ii) the
capital expenditures budget provided to Purchaser for the remainder of the 1996
calendar year which total approximately $220,000 (the "Budget"), and, to the
extent consistent therewith, the Company and the Subsidiaries shall use its and
their commercially reasonable efforts to preserve its business organization
intact and maintain its existing relations with customers, suppliers, employees
and business associates;
(b) the Company and each of the Subsidiaries shall not
(i) amend its Certificate of Incorporation (or applicable organizational
documents) or By-Laws; (ii) split, combine or reclassify the outstanding
Shares; or (iii) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to the Shares;
(c) except as set forth in the Disclosure Schedule, the
Company and the Subsidiaries shall not (i) issue, sell, pledge, dispose of or
encumber any additional shares
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of, or securities convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire any shares of its capital stock of
any class other than Shares issuable pursuant to warrants or options
outstanding on the date hereof under the Stock Option Plan; (ii) transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any
assets or incur or modify any indebtedness or other liability other than in the
ordinary and usual course of business consistent with the Annex C Information
and the Budget; (iii) enter into, amend or terminate any lease of real property
other than in the ordinary course of business consistent with the Annex C
Information and the Budget; (iv) acquire directly or indirectly by redemption
or otherwise any shares of the capital stock of the Company or (v) except in
the ordinary course of business consistent with the Budget, authorize capital
expenditures in excess of $100,000 or make any significant acquisition of, or
investment in, assets or stock of any other person or entity;
(d) except in the ordinary and usual course of business
as disclosed in the Company Reports, Disclosure Schedule, Annex C Information
and the Budget, the Company shall not grant any severance or termination pay
to, or enter into any employment or severance agreement with, any director,
officer or other employee of the Company other than pursuant to contractual
obligations existing on the date hereof and set forth in the Disclosure
Schedule or as contemplated by Annex D of this Agreement; and except in the
ordinary and usual course of business as disclosed in the Company Reports,
Disclosure Schedule, Annex C Information and the Budget, or pursuant to
contractual obligations existing on the date hereof or contemplated by Annex D
of this Agreement or as may be required or desirable under applicable law or by
any governmental agency, the Company shall not establish, adopt, enter into,
make any new grants or awards under or amend, any bonus, profit sharing,
thrift, savings, compensation, stock purchase, stock bonus, stock option,
restricted stock, pension, retirement, employee stock ownership, deferred
compensation, employment, collective bargaining, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit of
any current or former directors, officers or employees;
(e) except as disclosed in the Annex C Information and
the Budget, the Company shall not settle or compromise any material debt,
encumbrance, claims or litigation in excess of $100,000 in the aggregate or,
except in the ordinary and usual course of business, modify, amend or terminate
any of its contracts or waive, release or assign any material rights or claims;
(f) the Company shall not make any tax election or permit
any insurance policy naming it as a beneficiary or a loss payable payee to be
canceled or terminated without notice to the Purchaser, except in the ordinary
and usual course of business and shall maintain insurance upon all of its
properties and operations in such amounts and of such kinds comparable to that
in effect on the date hereof on such properties and with respect to such
operations;
(g) the Company shall not in any material respect fail to
(i) maintain its books, accounts and records in the usual, regular and ordinary
manner, on a basis consistent
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with prior years, (ii) comply with all contractual and other obligations of the
Company and the Subsidiaries, and (iii) comply with all applicable laws to
which it is subject; and
(h) the Company shall not authorize or enter into an
agreement to do any of the foregoing.
5.2 Acquisition Proposals. (a) Neither the Company nor any of the
officers and directors of the Company shall, and the Company shall direct and
use its reasonable best efforts to cause the employees, agents and
representatives of the Company or any Subsidiary (including, without
limitation, any investment banker, attorney or accountant retained by the
Company) not to, initiate, solicit or encourage, directly or indirectly, any
proposal or offer to acquire all or any substantial part of the business and
properties of the Company and the Subsidiaries or any capital stock of the
Company and the Subsidiaries, whether by merger, purchase of assets, tender
offer or otherwise, whether for cash, securities or any other consideration or
combination thereof (any such transaction being referred to herein as an
"Acquisition Transaction"). The Company shall immediately cease and cause to
be terminated any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any parties conducted heretofore by the Company
or any Company representatives with respect to any Acquisition Transaction
existing on the date hereof.
(b) Notwithstanding any other provisions of this
Agreement, in response to an unsolicited proposal or inquiry with respect to an
Acquisition Transaction, (i) the Company may engage in discussions or
negotiations regarding such proposal or inquiry with a third party who (without
solicitation or initiation, directly or indirectly, by or with the Company or
any Company representative after the date of this Agreement) seeks to initiate
such discussions or negotiations and may negotiate with and furnish to such
third party information concerning the Company and its business, properties and
assets, and (ii) if such Acquisition Transaction is a tender offer subject to
the provisions of Section 14(d) under the Exchange Act, the Company's Board of
Directors may take and disclose to the Company's shareholders a position
contemplated by Rule 14e-2(a) under the Exchange Act, in each case, if, but
only if, the Board of Directors of the Company determines in good faith, based
upon an opinion of outside legal counsel, that a failure to furnish the
information or participate in the discussions or negotiations could reasonably
conflict with the proper discharge of the fiduciary duties of the Company's
directors.
(c) In the event the Company shall determine to provide
any information or negotiate as described in paragraph (b) above, or shall
receive any offer of the type referred to in paragraph (b) above, it shall (i)
immediately provide the Purchaser a copy of all information provided to the
third party, (ii) inform the Purchaser that information is to be provided, that
negotiations are to take place or that an offer has been received, as the case
may be, and (iii) furnish to the Purchaser the identity of the person receiving
such information or the proponent of such offer, if applicable, and, if an
offer has been received, unless the Board of Directors of the Company concludes
that such disclosure could reasonably conflict with its fiduciary duties under
applicable law based on an opinion of outside legal counsel, a description of
the material terms thereof.
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(d) The Company may terminate this Agreement, withdraw,
modify or not make its recommendation referred to in Section 5.4 and enter into
a definitive agreement for an Acquisition Transaction if, but only if, (i) the
Company shall have determined in good faith after consultation with its
independent financial advisors that such Acquisition Transaction would be more
favorable to the Company's shareholders from a financial point of view than the
Merger, (ii) the Company is advised by its financial advisor that such third
party has the financial wherewithal to consummate the Acquisition Transaction,
(iii) the Board of Directors of the Company shall conclude in good faith based
upon an opinion of outside legal counsel that such action is necessary in order
for the Board of Directors of the Company to act in a manner that could not
reasonably conflict with the proper discharge of its fiduciary obligations
under applicable law and (iv) the Company shall have furnished the Purchaser
with a copy of the definitive agreement at least two business days prior to its
execution and the Purchaser shall have failed within such two business days to
offer to amend the terms of this Agreement so that the Merger would be, in the
good faith determination of the Board of Directors of the Company, at least as
favorable to the Company's shareholders from a financial point of view as the
Acquisition Transaction.
5.3 Stock Options and Warrants. At or prior to the Effective
Time, the Company shall cause, pursuant to the agreements referred to pursuant
to Section 3.5, each stock option outstanding pursuant to the Stock Option Plan
("Option") and each outstanding warrant, whether or not then exercisable, to be
either canceled or modified to entitle the holder thereof, to receive an amount
in cash (after giving effect to any required tax withholdings) equal to the
difference between the Merger Consideration, subject to the escrow in Article
VIII, and the exercise price per Share of such Option or warrant multiplied by
the number of Shares previously subject to such Option or warrant, such that,
on and as of the Effective Time, there shall be no outstanding stock options or
warrants of the Company.
5.4 Shareholder Approval. (a) If approval of all or a portion of
this Agreement or one or more of the transactions contemplated hereby is
required by the shareholders of the Company by the NYBCL, as soon as
practicable, the Company will take all steps necessary duly to call, give
notice of, convene and hold a meeting of its shareholders (the "Special
Meeting") as soon as practicable for the purpose of adopting and approving this
Agreement (to the extent required by applicable law) and the transactions
contemplated hereby and for such other purposes as may be necessary or
desirable.
(b) The Purchaser and Merger Sub agree that, at the
Special Meeting, all of the Shares then owned by them and their affiliates will
be voted in favor of this Agreement, the Merger and the transactions
contemplated hereby.
(c) Except to the extent necessary so as not to
reasonably conflict with the proper discharge of the fiduciary obligation of
the Board of Directors under applicable law determined in good faith by the
Board of Directors of the Company based upon an opinion of outside legal
counsel, the Company will prepare and file with the SEC the Proxy Statement
with respect to the Special Meeting containing all information required by the
Exchange Act. The Company (i) will use its best efforts to have the Proxy
Statement cleared
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by the SEC as promptly as practicable, (ii) will promptly thereafter mail the
Proxy Statement to shareholders of the Company and (iii) will otherwise comply
in all material respects with all applicable legal requirements in respect of
the aforesaid Special Meeting. Except to the extent otherwise required by the
fiduciary duties of the Board of Directors under applicable law determined in
good faith by the Board of Directors of the Company based upon an opinion of
outside legal counsel, the Proxy Statement shall contain the recommendation of
the Board of Directors in favor of the Merger and the recommendation that the
shareholders vote for and adopt the Merger and this Agreement.
(d) The Company covenants that with respect to
information regarding the Company, supplied by Company for inclusion in Proxy
Statement the Proxy Statement shall not, at the time the Proxy Statement is
filed with the SEC, at the time the Proxy Statement is first mailed to the
Company's stockholders, at the time of the Special Meeting and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any event or
circumstance relating to the Company or any of the Subsidiaries, or its or
their respective officers or directors, should be discovered by the Company
which should be set forth in an amendment to the Proxy Statement or a
supplement thereto, the Company shall promptly inform Purchaser and shall
promptly file such amendment or supplement to the Proxy Statement.
5.5 Filings; Other Action. Subject to the terms and conditions
herein provided and the fiduciary duties of the Board of Directors under
applicable law, the Company, the Purchaser and Merger Sub shall: (a) promptly
make their respective filings and thereafter make any other required
submissions under the Regulatory Filings with respect to the Offer and the
Merger; and (b) use their reasonable efforts to promptly take, or cause to be
taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
as soon as reasonably practicable. The Purchaser shall cause Merger Sub to
perform all of its obligations under this Agreement.
5.6 Access; Confidentiality. 1. Upon reasonable notice and subject
to the restrictions contained within this Section 5.6, the Company shall afford
the Purchaser's officers, employees, counsel, accountants and other authorized
representatives ("Representatives") access, during normal business hours
throughout the period prior to the Effective Time, to its properties, books,
contracts and records and, during such period, the Company shall furnish
promptly to the Purchaser all information concerning its business, properties
and personnel as the Purchaser or its Representatives may reasonably request.
(b) The Purchaser will not, and will cause its Representatives not
to, use any information obtained pursuant to this Section 5.6 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Each of the Merger Sub and the Purchaser will hold and will cause
its Representatives, as well as the authorized representatives of the financial
institutions considering providing any financing, to hold in strict confidence,
unless compelled to disclose by judicial or administrative process or
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otherwise as may be required by law, all documents and information concerning
the Company furnished to the Merger Sub or the Purchaser in connection with the
transactions contemplated by this Agreement (except to the extent that (i) such
information is or becomes readily ascertainable from public or published
information or trade sources or (ii) such information is obtained from third
parties without violation of any other confidentiality agreements with the
Company) and will not release or disclose such information to any other person,
except its Representatives and other financial institutions considering
providing financing in connection with this Agreement (it being understood that
such persons shall be informed by the Merger Sub or the Purchaser, as the case
may be, of the confidential nature of such information and shall be directed by
such parties to treat such information confidentially). If the transactions
contemplated by this Agreement are not consummated, such confidence shall be
maintained except to the extent such information becomes readily ascertainable
from public or published information or trade sources and, if requested by the
Company, Merger Sub and the Purchaser will return to the Company all copies of
written information furnished by the Company to the Merger Sub or the Purchaser
or their Representatives. In addition, if requested by the Company, the Merger
Sub or the Purchaser will and will cause its Representatives to destroy all
documents, memoranda, notes and other writings prepared based on the
confidential information of the Company. Purchaser, Merger Sub and Company
agree that the foregoing is not intended to supersede the Confidentiality
Agreement dated July 10, 1996 between Purchaser and the Company, which shall
remain in full force and effect.
5.7 Notification of Certain Matters. Each of the Company, the
Purchaser and Merger Sub shall give prompt notice to each other of: (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate and (ii) any failure of the Company,
the Purchaser or Merger Sub, as the case may be, materially to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder, provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice. Each of the Company, the
Purchaser and Merger Sub shall give prompt notice to the other parties of any
notice or other communication from any third party alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement.
5.8 Publicity. The parties (i) shall consult with each other
prior to issuing any press release or any written public statement with respect
to this Agreement or the transactions contemplated hereby, and (ii) shall not
issue any such press release or written public statement without the prior
written consent of the other parties hereto unless required by law.
Notwithstanding anything herein to the contrary, the parties agree to jointly
issue a press release, in form and substance satisfactory to both parties,
promptly upon the execution and delivery of this Agreement.
5.9 Consents; Approvals. The Company at the request of Purchaser,
shall use its reasonable best efforts to assist Purchaser in its efforts to
obtain all consents, waivers, approvals, authorizations or orders (including,
without limitation, all United States and
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foreign governmental and regulatory agencies) required in connection with the
authorization, execution and delivery of this Agreement by the Company and the
Purchaser and consummation by them of the transactions contemplated hereby.
The Company shall not be obligated to deliver any such consent and obtaining
such consents shall not be a condition to the consummation of the Offer or the
Merger.
5.10 HSR Act Compliance; Other Filings. As soon as practicable
after the execution of this Agreement, Purchaser and the Company shall prepare
and file all other filings, applications, and registrations required under the
HSR Act, the Exchange Act, or other applicable law with respect to the
transactions contemplated by this Agreement. Purchaser shall furnish to the
Company and its representatives and professional advisors all information
concerning Purchaser, Merger Sub, and their respective officers, directors,
affiliates, and stockholders that is reasonably necessary for the Company (A)
to prepare, ascertain the accuracy and completeness of, and file a Pre-Merger
Notification and Report pursuant to the HSR Act, and (B) to respond to any
request from the Federal Trade Commission or the United States Department of
Justice for additional information or documentary materials in connection with
the filing of a Pre-Merger Notification and Report under the HSR Act. The
Company shall keep, and shall cause each of its officers, directors,
affiliates, representatives, and professional advisors to keep, all such
information confidential to the same extent that Purchaser is required to keep
information confidential pursuant to the Confidentiality Agreement. The
Company shall furnish to Purchaser and Merger Sub and the representatives and
professional advisors all information concerning the Company and its officers,
directors, affiliates, and shareholders that is reasonably necessary for
Purchaser and Merger Sub to take the actions specified in clauses (A) and (B)
of the preceding sentence.
5.11 Indemnification; Directors' and Officers' Insurance. (a) The
Company shall, to the fullest extent permitted under applicable law, and for
six years from and after the Effective Time, the Surviving Corporation shall,
to the fullest extent permitted under applicable law, indemnify, defend and
hold harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer, director or
employee of the Company (the "Indemnified Parties") from and against all
losses, claims, damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director, officer or employee of the Company, pertaining to any matter existing
or occurring at or prior to the Effective Time ("Indemnified Liabilities"),
including liabilities arising as a result of this Agreement and the
transactions contemplated hereby, to the full extent permitted under the NYBCL,
and the Surviving Corporation will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law. Without limiting the foregoing, in the event any
such claim, action, suit, proceeding or investigation is brought against any
Indemnified Party, (i) the Company (or the Surviving Corporation after the
Effective Time) shall retain counsel on behalf of the Indemnified Party,
subject to approval of the Indemnified Party; (ii) the Company (or after the
Effective Time, the Surviving Corporation)
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shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; (iii) the Company (or
after the Effective Time, the Surviving Corporation) will use all reasonable
efforts to assist in the vigorous defense of any such matter, provided that
neither the Company nor the Surviving Corporation shall be liable for any
settlement of any claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 5.11, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company or the
Surviving Corporation (but the failure so to notify an indemnifying party shall
not relieve it from any liability which it may have under this Section 5.11
except to the extent such failure prejudices such party). The indemnifying
party is required to retain only one law firm to represent the Indemnified
Parties with respect to such matter (in addition to local counsel) unless there
is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
(b) For a period of six years after the Effective Time,
the Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims or matters
existing or occurring before the Effective Time; provided, that Surviving
Corporation shall not be required to pay an annual premium for such insurance
in excess of two times the last annual premium paid by the Company prior to the
date hereof, but in such case shall purchase as much coverage as possible for
such amount.
(c) For purposes of this Section 5.11, Purchaser and
Surviving Corporation agree that they will not transfer a material portion of
the Surviving Corporation's assets unless such transferee agrees to be bound by
this Section 5.11 and such transferee has a tangible net worth at least equal
to the tangible net worth of the Surviving Corporation. This Section 5.11
shall survive the consummation of the Merger.
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The provisions of this Section 5.11 are intended to be for the benefit of, and
shall be enforceable by, each Indemnified Party, his heirs and his
representatives. The rights provided Indemnified Parties shall be in addition
to, and not in lieu of, any rights to indemnity which such parties may have
under the Certificate or By-Laws of the Company or the Surviving Corporation or
any other agreements or otherwise.
5.12 Employment Matters. (a) The Purchaser hereby agrees to cause
the Surviving Corporation and the Subsidiaries, immediately after the Effective
Time, to honor the employment agreements, arrangements and programs between the
Company or the Subsidiaries and their respective employees in accordance with
their terms as in effect on the date hereof as set forth in the Disclosure
Schedule (collectively, the "Employee Arrangements"), to the same extent that
the Company and the Subsidiaries would be required to perform them in the event
that the Merger contemplated by this Agreement were not consummated.
(b) For a period of one year following the Effective
Time, the Purchaser shall cause the Surviving Corporation to provide the garage
manager and other employees senior thereto of the Company and the Subsidiaries
(excluding for purposes of this paragraph (b) employees covered by collective
bargaining agreements whose benefits shall be governed by the collective
bargaining agreements in accordance with their terms as in effect on the date
hereof) who are not covered by spousal insurance arrangements with retirement,
pension, medical insurance, life insurance and other similar benefits following
the Effective Time which are, in the aggregate, substantially comparable to
such benefits under the plans and arrangements maintained for its employees by
the Purchaser as of the date hereof, provided nothing in this Section 5.12
shall require the Surviving Corporation to continue the employment of the
Company's employees beyond that required by any applicable existing employment
agreement. Purchaser further agrees to cause the Surviving Corporation to
honor, comply with and perform all obligations of the Company and the
Subsidiaries under the severance arrangements set forth on Annex D for a period
of one year following the Effective Time.
5.13 Affiliate Agreements. The Company shall cause the persons
listed in Annex E hereto to (i) tender in the Offer or enter into the agreement
to "cash-out" their options and warrants as provided in Section 3.5 which
represent the number of Shares set forth opposite their respective names and
which in the aggregate constitutes 1,038,040 Shares as of the date hereof and
(ii) to enter into the Agreement to Support the Transaction attached as Annex F
hereto. The Company shall cause (i) Lowell Harwood and Sanford Harwood to
enter into the Non-Competition Agreements attached as Annex G hereto, (ii)
Brett Harwood to enter into an Employment Agreement attached as Annex H hereto,
(iii) Lowell Harwood and Sanford Harwood to enter into a Consulting Agreement
with terms agreed upon between the parties and (iv) Leslie Harwood Ehrlich to
enter into a Non-Competition Agreement similar to the Non-Competition Agreement
attached hereto as Annex G, but with a one (1) year term. The Company will
cause the nonunion manager level and above employees granted severance payments
as disclosed on Annex D to enter into Non-Competition Agreements equal to the
duration of the severance granted.
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5.14 Further Actions. Upon the terms and subject to the conditions
hereof, each of the parties hereto in good faith shall use all commercially
reasonable efforts to take, or cause to be done, all other things necessary or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, to obtain in a timely manner all
necessary waivers, consents, and approvals and to effect all necessary
registrations and filings, and to otherwise satisfy or cause to be satisfied
all conditions precedent to its obligations under this Agreement or to vest the
Surviving Corporation with full title to all properties, assets, rights,
approvals and franchises of either constituent corporation.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of the Purchaser and Merger Sub to
Effect the Merger. The respective obligations of the Purchaser and Merger Sub
to consummate the Merger are subject to the fulfillment of each of the
following conditions, any or all of which may be waived in whole or in part by
the Purchaser or Merger Sub, as the case may be, to the extent permitted by
applicable law:
(a) Shareholder Approval. This Agreement shall have been
duly approved by the holders of two-thirds of the Shares, in accordance with
the NYBCL and the Certificate and By-Laws of the Company.
(b) Legal Proceeding; Order. There shall not be
threatened, instituted or pending any action, proceeding or other application
before any court or governmental authority or other regulatory or
administrative agency or commission, by any government or governmental
authority or by any other person, which challenges or seeks to restrain or
prohibit consummation of the transactions contemplated by this Agreement, or
which seeks to impose any material restriction on the Purchaser or the Company
in connection with consummation of the Merger. No court or governmental or
regulatory authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order (whether preliminary or permanent) which is
in effect and prohibits consummation of the transactions contemplated by this
Agreement or imposes material restrictions on the Purchaser or the Company in
connection with consummation of the Merger.
(c) HSR Act. The waiting period (and any extension
thereof) applicable to the consummation of the Merger under HSR Act shall have
expired or been terminated.
(d) Offer. The Purchaser shall have made, or caused to be
made, the Offer and shall have purchased, or caused to be purchased, Shares
pursuant to the Offer.
(e) Covenants. Each of the agreements or covenants of
the Company to be performed at or prior to the Closing Date pursuant to the
terms hereof shall have been duly performed in all material respects and the
Company shall have performed in all
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material respects all of the acts required to be performed by it at or prior to
the Closing Date by the terms hereof.
(f) Compliance. The representations and warranties of the
Company herein contained shall be true at the Effective Time with the same
effect as though made at such time, except for (i) changes contemplated
hereunder, (ii) those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such date),
and (iii) where the failure of the representations and warranties to be true
and correct in the aggregate would not have a Material Adverse Effect on the
Company. For purposes of this provision, representations and warranties of the
Company in this Agreement which are qualified by materiality shall be true
without regard to the materiality limitation, except as provided in (iii)
above. Material Adverse Effect as used in this provision shall mean items
which in the aggregate would have (i) a recurring annual pre-tax income effect
of $400,000 or more or (ii) a non-recurring income, balance sheet or financial
condition effect of $4,000,000 or more.
(g) Natwest Debt. Purchaser and Merger Sub shall have
received evidence that the Natwest Debt can be satisfied without incurring
payment for accrued deferred interest.
(h) Regulatory Consents. All consents, authorizations,
orders and approvals of (or filings or registration with) any governmental
commission, board or other regulatory body required in connection with the
execution, delivery and performance of the Merger, this Agreement and the
transactions contemplated thereby shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time.
(i) No Material Adverse Change. Since the date of this
Agreement, there shall not have occurred a Material Adverse Change with respect
to the Company. For purposes of this provision, Material Adverse Change shall
mean changes or events which in the aggregate would have (i) a recurring annual
pre-tax income effect of $400,000 or more or (ii) a non-recurring income,
balance sheet or financial condition effect of $4,000,000 or more.
6.2 Conditions to Obligations of the Company to Effect the Merger.
The obligations of the Company to consummate the Merger are subject to the
fulfillment of each of the following conditions, any or all of which may be
waived in whole or in part by the Company to the extent permitted by applicable
law:
(a) Shareholder Approval. This Agreement shall have been
duly approved by the holders of two-thirds of the Shares, in accordance with
the NYBCL and the Certificate and By-Laws of the Company.
(b) Legal Proceeding; Order. There shall not be
threatened, instituted or pending any action, proceeding or other application
before any court or governmental authority or other regulatory or
administrative agency or commission, by any government
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or governmental authority or by any other person, which challenges or seeks to
restrain or prohibit consummation of the transactions contemplated by this
Agreement, or which seeks to impose any material restriction on the Purchaser
or the Company in connection with the consummation of the Merger. No court or
governmental or regulatory authority of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any order (whether
preliminary or permanent) which is in effect and prohibits the consummation of
the transactions contemplated by this Agreement or imposes material
restrictions on the Purchaser or the Company in connection with the
consummation of the Merger.
(c) HSR Act. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(d) Offer. The Purchaser shall have made, or caused to be
made, the Offer and shall have purchased, or caused to be purchased, Shares
pursuant to the Offer.
(e) Compliance. The representations and warranties of the
Purchaser and Merger Sub herein contained shall be true at the Effective Time
with the same effect as though made at such time, except for (i) changes
contemplated hereunder, (ii) those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), and (iii) where the failure to be true and correct would not have a
material adverse effect on the financial condition, properties, business or
results of operations of the Purchaser. The Purchaser and Merger Sub shall
have in all material respects performed all material obligations and complied
with all material covenants and conditions required by this Agreement to be
performed or complied with by them at or prior to the Effective Time.
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by holders of Shares, by the mutual written
consent of Merger Sub, the Purchaser and the Company duly authorized by their
respective Boards of Directors.
7.2 Termination by either the Purchaser or the Company. This
Agreement may be terminated and the Merger may be abandoned by action of the
Board of Directors of either Merger Sub or the Purchaser on the one hand or the
Company on the other hand if (i) the Merger shall not have been consummated by
May 31, 1997, (ii) the requisite approval of shareholders required by Sections
6.1(a) and 6.2(a) shall not have been obtained at a meeting duly convened
therefor, or (iii) if any state or federal court of competent jurisdiction or
other governmental authority or entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger or holding that any law applicable to the
Merger declares the Merger to be illegal, and such order, decree, ruling or
other action shall have become final and nonappealable;
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provided, however, that neither the Merger Sub nor the Purchaser on the one
hand, and the Company, on the other hand, may terminate this Agreement if the
absence of such occurrence is due to the failure by Merger Sub or the Purchaser
on the one hand, and the Company on the other hand, to perform in all material
respects each of its or their obligations under this Agreement required to be
performed prior to the Effective Time.
7.3 Termination by the Purchaser. This Agreement may be terminated
following the purchase of the Shares in the Offer and the Merger may be
abandoned at any time thereafter and prior to the Effective Time, before or
after the approval by holders of Shares, by action of the Board of Directors of
the Purchaser, if (i) other than as a direct result of any action or inaction
by Purchaser, the Company shall have breached any of its representations,
warranties, covenants or agreements contained in this Agreement and such breach
would constitute a Material Adverse Effect as defined in Section 6.1(f) (for
purposes of this provision, representations, warranties, covenants and
agreements which are qualified by materiality shall be true without regard to
the materiality limitation, except as provided in 6.1(f)(iii), (ii) the Board
of Directors of the Company shall fail to make or shall have withdrawn or
modified in a manner adverse to the Purchaser or Merger Sub its approval or
recommendation of the Offer, this Agreement or the Merger or the Board of
Directors of the Company, upon reasonable request by the Purchaser, shall fail
to reaffirm such approval or recommendation, or shall have resolved to do any
of the foregoing or (iii) (A) all of the conditions to the obligations of the
Company to effect the Merger set forth in Section 6.2 shall have been
satisfied, and (B) other than as a direct result of any action or inaction by
Purchaser, any condition to the obligations of Purchaser to effect the Merger
set forth in Section 6.1 is not capable of being satisfied prior to the end of
the period referred to in Section 7.2.
7.4 Termination by the Company. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by holders of Shares, by action of the Board of Directors
of the Company, if (i) the Purchaser or Merger Sub shall have breached in any
material respect any of their representations, warranties, covenants or
agreements contained in this Agreement, (ii) prior to the purchase of Shares in
the Offer, the Board of Directors of the Company receives an unsolicited
written offer with respect to a merger, consolidation or sale of all or
substantially all of the Company's assets or if an unsolicited tender or
exchange offer for the Shares is commenced, and the Board of Directors of the
Company determines in the reasonable exercise of its duties under applicable
law (based upon such factors and in reliance upon such third party advisors as
the Board of Directors deems reasonable, including, to the extent deemed
necessary by the Board of Directors, receipt of an opinion to such effect from
The Blackstone Group L.P. or other nationally recognized investment banking
firm), that such transaction is more favorable from a financial point of view
to the shareholders of the Company than the Offer and the Merger and that
approval, acceptance or recommendation of such transaction is consistent with
the fiduciary obligation of the Board of Directors under applicable law as
determined in good faith by the Board of Directors based upon an opinion of
outside legal counsel, (iii) if the Offer shall be terminated in accordance
with its terms or shall expire without the purchase of any of the Shares
pursuant thereto or (iv) (A) all of the conditions to the obligations of
Purchaser to effect the Merger set forth in Section 6.1
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shall have been satisfied, and (B) any condition to the obligations of the
Company to effect the Merger set forth in Section 6.2 is not capable of being
satisfied prior to the end of the period referred to in Section 7.2.
7.5 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article VII, no party hereto (or any of its directors or officers) shall have
any liability or further obligation to any other party to this Agreement,
except (i) as provided in Section 9.2 and 7.6 and (ii) nothing herein shall
relieve any party from liability for any willful or intentional breach hereof.
7.6 Break-up Fee. If this Agreement is terminated in accordance
with the provisions of Section 7.3(ii), or 7.4(ii) or as a result of the
failure of the Affiliates to tender their Shares in the Offer or support the
Merger, based upon a claim that such action is required in the exercise of
their fiduciary duties and the purchase of Shares in the Offer or the Merger
shall not be consummated, then in such case the Company shall promptly (but in
no event later than five business days after such termination) pay to Purchaser
a termination fee in cash of $2,500,000, including all of Purchaser's expenses
and fees. The provision for the payment of these costs and compensatory
expenses in this Section 7.6 are an integral part of the transactions
contemplated by this Agreement and without these provisions Purchaser would not
have entered into this Agreement. Accordingly, if payment shall become due and
payable pursuant to this Section 7.6, and, in order to obtain such payment,
suit is commenced which results in a judgment against Company, the Company
shall pay to Purchaser, Purchaser's reasonable costs and expenses, including
attorneys' fees, in connection with such suit, together with court costs and
prejudgment interest.
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ARTICLE VIII
ESCROW
8.1 Escrow Agreement. Purchaser, Company and First American
National Bank (the "Escrow Agent") will as soon as reasonably practicable after
the execution of this Agreement enter into an Escrow Agreement (the "Escrow
Agreement") in the form attached as Annex I. References in this Agreement to
this Article or the escrow obligations created hereby, shall be references to
the Escrow Agreement. The provisions of the Escrow Agreement are incorporated
as if fully stated herein.
A portion of the Offer Price and the Merger Consideration including
the Option Merger Consideration equal to approximately $4.4 Million in the
aggregate shall be deposited by the Purchaser and held in escrow as Contingent
Consideration for the shareholders, optionholders and warrantholders of the
Company by the Escrow Agent in compliance with the terms and conditions of the
Escrow Agreement. The funds held in escrow pursuant to this Article VIII will
be invested by the Escrow Agent provided the funds may only be invested in
short-term government securities. The escrowed funds are subject to and held
solely for the purpose of providing for the following contingencies:
(a) Wooster Property. $1.99 per Share of the Offer Price
or Merger Consideration or Option Merger Consideration (as the case
may be) shall be held in escrow by the Escrow Agent (the "Wooster
Escrow") as described in the Escrow Agreement.
(b) Occupancy Tax Escrow. $.51 per Share of the Offer
Price, Merger Consideration or Option Merger Consideration, as the
case may be, shall be held in escrow by the Escrow Agent (the
"Occupancy Tax Escrow") as described in the Escrow Agreement.
8.2 Escrow Committee. In all matters respecting the Escrow
Agreement the Escrow Committee (as defined in the Escrow Agreement) shall
represent the former shareholders, optionholders and warrantholders of the
Company. The Escrow Committee will agree to serve as such. The Escrow
Committee shall act by majority (if more than 1 person) and may act upon
written consent or telephonic or personal meetings. If one or more of the
members of the Escrow Committee resign or become unable to serve: (1) the
remaining member or members shall comprise the Escrow Committee, (2) the
remaining member or members are empowered to appoint a replacement for such
terminated member and they shall give notice to Purchaser thereof, and (3) if
there are no members of the Escrow Committee, the former shareholders,
optionholders and warrantholders of the Company shall promptly elect a member
or members of the Escrow Committee based on their proportional contingent right
to the Escrowed Funds, but if after three months of there not being members of
the Escrow Committee and during this period they fail to make such appointments
and give notice thereof to Purchaser within such three months then Purchaser
will appoint an independent third party to the Escrow Committee to represent
the former shareholders, optionholders and warrantholders under the Escrow
Agreement. Purchaser,
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Surviving Corporation and the Escrow Agent shall be entitled to rely upon any
statements or other communications by or purported to be on behalf of the
Escrow Committee without the necessity of determining the validity of the
actions taken. Actions taken by the Escrow Committee (or failures to act)
shall be deemed binding and conclusive on all former shareholders,
optionholders or warrantholders of the Company.
8.3 Non Transferability of Escrowed Funds. The funds held in
escrow shall be held for the benefit of the shareholders of Company and
Purchaser only and shall not be transferrable by any potential recipient
thereof, except by will, intestate succession or operation of law.
ARTICLE IX
MISCELLANEOUS AND GENERAL
9.1 Payment of Expenses. Whether or not the Offer and/or the
Merger shall be consummated (but subject to Section 7.5(ii) above), each party
hereto shall pay its own expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the Offer and the Merger.
9.2 Survival. The agreements of the Company, the Purchaser and
Merger Sub contained in Sections 3.2 (but only to the extent that such Section
expressly relates to actions to be taken after the Effective Time), 3.3, 3.4,
3.5, 5.11, 5.12, 5.13, 8.1, 8.2, 8.3 and 9.1 shall survive the consummation of
the Merger. The agreements of the Company, the Purchaser and Merger Sub
contained in Sections 7.5, 7.6 and 9.1 shall survive the termination of this
Agreement. All other representations, warranties, agreements and covenants in
this Agreement shall not survive the consummation of the Merger or the
termination of this Agreement.
9.3 Modification or Amendment. Subject to the applicable
provisions of the NYBCL, this Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after approval of
the Merger by the shareholders of the Company, no amendment may be made which
by law requires further approval by such shareholders without such further
approval; provided further, however, that after the closing of the Offer and
the purchase of the Shares thereunder by Purchaser or Merger Sub, this
Agreement will not be amended by the Company without the approval of a majority
of the persons who are directors of the Company on the date hereof; and
provided further, however, that Section 5.11 and 5.12 may not be amended
subsequent to the Effective Time. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
9.4 Waiver of Conditions. The conditions to each of the parties'
obligations (other than the conditions set forth in Section 6.1(c) and 6.2(c))
to consummate the Merger are for the sole benefit of such party and may be
waived by such party in whole or in part to the extent permitted by applicable
law.
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9.5 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
9.7 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (a) if delivered
personally or sent by facsimile, on the date received if received prior to 5:00
p.m., (b) if delivered by overnight courier, on the day after mailing, and (c)
if mailed, five (5) days after mailing with postage prepaid. Any such notice
shall be sent as follows:
TO PURCHASER OR MERGER SUB:
Central Parking Corporation
2401 21st Avenue South
Suite 200
Nashville, Tennessee 37212
Attention: Chairman
WITH COPIES TO:
Mark Manner, Esq.
Harwell Howard Hyne Gabbert & Manner, P.C.
315 Deaderick Street
Suite 1800
Nashville, Tennessee 37238
TO COMPANY:
Square Industries, Inc.
921 Bergen Avenue
Jersey City, New Jersey 07306
Attention: Chairman of the Board
WITH COPIES TO:
Daniel R. Kaplan, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
36
<PAGE> 40
New York, New York 10036
and
Leo Silverstein, Esq.
Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLP
One Citicorp Center
153 East 53rd Street
56th Floor
New York, New York 10022
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
9.8 Entire Agreement, etc. This Agreement (including the
Disclosure Schedule and any exhibits or schedules hereto) constitutes the
entire agreement, and supersedes all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof, and, except as otherwise expressly
provided herein, are not intended to confer upon any other person any rights or
remedies hereunder except for the provisions of Sections 5.11 and 5.12.
9.9 Assignment; Merger Sub. This Agreement shall not be assignable
by operation of law or otherwise; provided, however, that the Purchaser may
designate, by written notice to the Company, another wholly-owned direct or
indirect subsidiary to be a Constituent Corporation in lieu of Merger Sub, in
the event of which, all references herein to Merger Sub shall be deemed
references to such other subsidiary except that all representations and
warranties made herein with respect to Merger Sub as of the date of this
Agreement shall be deemed representations and warranties made with respect to
such other subsidiary as of the date of such designation.
9.10 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, except for Section 5.11 (which is intended to be for the benefit of
the Indemnified Parties and may be enforced by such Indemnified Parties) and
Section 5.12 (which is intended to be for the benefit of certain employees and
may be enforced by such employees).
9.11 Obligation of the Purchaser. Whenever this Agreement requires
Merger Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of the Purchaser to cause Merger Sub to take such
action.
9.12 Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
37
<PAGE> 41
9.13 Integration of Disclosure Schedule. The Disclosure Schedule
is an integral part of this Agreement and is considered a part of this
Agreement as if fully set forth herein.
9.14 Arbitration. Any dispute among the parties hereto shall be
settled by final and binding arbitration in New York, New York in accordance
with the then effective rules of the American Arbitration Association, and
judgment upon the award rendered may be entered in any court having
jurisdiction thereof. In any action or proceeding brought to enforce any
provision of this Agreement, the prevailing party shall be entitled to recover
its costs from the opposing party, including reasonable legal fees and expenses
38
<PAGE> 42
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first above written.
Square Industries, Inc.
By:
-----------------------------------
Its:
-----------------------------------
Central Parking Corporation
By:
-----------------------------------
Its:
-----------------------------------
Central Parking System -- Empire State, Inc.
By:
-----------------------------------
Its:
-----------------------------------
39
<PAGE> 43
ANNEX A
Conditions to the Offer
The capitalized terms used in this Annex shall have the meaning set
forth in the attached Agreement.
Notwithstanding any other provision of the Offer, subject to the terms
of this Agreement, Merger Sub shall not be required to accept for payment or
pay for any Shares tendered pursuant to the Offer, and may terminate or amend
the Offer and may postpone the acceptance for payment of and payment for Shares
tendered, if (i) the Minimum Condition is not satisfied; (ii) any applicable
waiting period under the HSR Act shall not have expired or been terminated
prior to the expiration of the Offer, or (iii) at any time on or after the date
of this Agreement, and prior to the acceptance for payment of Shares, any of
the following conditions shall exist:
(a) there shall have been instituted or be pending any
action or proceeding by any governmental or quasi-governmental
authority or agency, domestic or foreign, before any court or
governmental, administrative or regulatory authority or agency, of
competent jurisdiction, domestic or foreign, (i) challenging or
seeking to make illegal, materially delay or otherwise directly or
indirectly restrain or prohibit the making of the Offer, the
acceptance for payment of, or payment for, any Shares by the
Purchaser, Merger Sub or any other affiliate of the Purchaser, or the
consummation of any other transaction contemplated by this Agreement,
including the Offer and the Merger, or seeking to obtain material
damages in connection therewith; (ii) seeking to prohibit or limit
materially the ownership or operation by the Company, the Purchaser or
any of their subsidiaries of all or any material portion of the
business or assets of the Company, the Purchaser and their respective
subsidiaries taken as a whole, or to compel the Company, the Purchaser
or any of their respective subsidiaries to dispose of or hold separate
all or any material portion of the business or assets of the Company,
the Purchaser and any of their respective subsidiaries taken as a
whole, as a result of the transactions contemplated by this Agreement,
including the Offer and the Merger; (iii) seeking to impose or confirm
material limitations on the ability of the Purchaser, Merger Sub or
any other affiliate of the Purchaser to exercise effectively full
rights of ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by Merger Sub pursuant to the Offer
or otherwise on all matters properly presented to the Company's
shareholders, including, without limitation, the approval and adoption
of this Agreement and the transactions contemplated hereby; (iv)
seeking to require divestiture by the Purchaser, Merger Sub or any
other affiliate of the Purchaser of any Shares; or (v) which otherwise
has a material adverse effect on the financial condition, business,
properties or results of operations of the Company and the
Subsidiaries taken as a whole or the Purchaser and its subsidiaries
taken as a whole.
(b) there shall have been any action taken, or any
statute, rule, regulation, legislation, interpretation, judgment,
order or injunction enacted, entered, enforced, promulgated, amended,
issued or deemed applicable to (i) the Purchaser, the
A-1
<PAGE> 44
Company or any subsidiary or affiliate of the Purchaser or the Company
or (ii) any transaction contemplated by this Agreement, including the
Offer and the Merger, by any legislative body, court, government or
governmental, administrative or regulatory authority or agency,
domestic or foreign, other than the routine application of the waiting
period provisions of the HSR Act to the Offer or the Merger, which is
reasonably likely in the good faith judgment of the Purchaser to
result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred (i) any general suspension
of, or limitation on prices for, trading in securities on the New York
Stock Exchange or the Nasdaq national market system, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) a commencement of a war
or armed hostilities or other national or international crisis
directly or indirectly involving the United States or (iv) in the case
of any of the foregoing existing on the date hereof, in the good faith
judgment of the Purchaser a material acceleration or worsening thereof;
(d) (i) it shall have been publicly disclosed or the
Purchaser shall have otherwise learned that beneficial ownership
(determined for the purposes of this paragraph as set forth in Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the
outstanding Shares has been acquired by any person, other than the
Purchaser or any of its affiliates or any affiliates of the Harwood
family or (ii) (A) the Board of Directors of the Company or any
committee thereof shall have failed to make, shall have withdrawn or
modified in a manner adverse to the Purchaser or Merger Sub the
approval or recommendation of the Offer, the Merger or this Agreement,
or approved or recommended any Acquisition Transaction, takeover
proposal or any other acquisition of Shares other than the Offer and
the Merger or (B) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing;
(e) any representation or warranty of the Company in this
Agreement shall not be true and correct as if such representation or
warranty was made as of such time on or after the date of this
Agreement, except for (i) changes contemplated by this Agreement, (ii)
those representations and warranties which address matters only as of
a particular date (which shall remain true and correct as of such
date) and (iii) where the failure to be true and correct would not
have a Material Adverse Effect on the Company; for purposes of this
provision, (A) representations and warranties of the Company in this
Agreement which are qualified by materiality shall be determined
without regard to the materiality limitation, except as provided in
(iii) above and (B) Material Adverse Effect shall mean items which in
the aggregate would have (x) a recurring annual pre-tax income effect
of $400,000 or more or (y) a non-recurring income, balance sheet or
financial condition effect of $4,000,000 or more;
(f) the Company shall have failed to perform in any
material respect any obligation or to comply in any material respect
with any agreement or covenant of
A-2
<PAGE> 45
the Company to be performed or complied with by it under this
Agreement prior to the expiration of the Offer;
(g) the Company shall have failed to deliver prior to the
expiration of the offer executed (i) Noncompetition Agreements in
substantially the form included in Annex G attached hereto from each
of Lowell and Sanford Harwood, (ii) Employment Agreement from Brett
Harwood in substantially the form included in Annex H attached hereto,
(iii) Consulting Agreement from Lowell Harwood and Sanford Harwood and
(iv) Noncompetition Agreement from Leslie Harwood Ehrlich as
contemplated in Section 5.13 of this Agreement;
(h) any change shall have occurred since the date hereof
in the business, operations, assets, financial condition or results of
operations of the Company or any of the Subsidiaries that, in the
reasonable good faith judgment of Purchaser, is or is reasonably
likely to constitute a Material Adverse Change with respect to the
Company; for purposes of this provision, Material Adverse Change shall
mean changes or events which in the aggregate would have (i) a
recurring annual pre-tax income effect of $400,000 or more or (ii) a
non-recurring income, balance sheet or financial condition effect of
$4,000,000 or more;
(i) the Company shall have failed to take any steps
reasonably required to be taken under the NYBCL (including, without
limitation, the requirements of Section 912 of the NYBCL) to allow
Purchaser and Merger Sub to promptly consummate the Merger and
exercise full ownership rights over the Shares without violating any
provision of the NYBCL; or
(j) this Agreement shall have been terminated in
accordance with its terms;
(k) Merger Sub and the Company may mutually agree that
Merger Sub shall terminate the Offer or postpone the acceptance for
payment of or payment for Shares thereunder;
which, in the reasonable good faith judgment of Merger Sub in any such case,
and regardless of the circumstances (including any action or inaction by the
Purchaser or any of its affiliates) giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment.
The foregoing conditions are for the sole benefit of Merger Sub and
the Purchaser and may be asserted by Merger Sub or the Purchaser regardless of
the circumstances giving rise to any such condition or may be waived by Merger
Sub or the Purchaser in whole or in part at any time and from time to time in
their sole discretion. The failure by the Purchaser or Merger Sub at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
such right; the waiver of any such right with respect to particular facts and
other circumstances shall not be deemed a waiver with respect to any other facts
A-3
<PAGE> 46
and circumstances; and each such right shall be deemed an ongoing right that
may be asserted at any time and from time to time.
A-4
<PAGE> 47
ANNEX B
Purchaser Statutory Approvals
A-5
<PAGE> 48
ANNEX C
Additional Information
A-6
<PAGE> 49
ANNEX D
Severance Arrangements to be adopted after consultation with final bidders
A-7
<PAGE> 50
ANNEX E
<TABLE>
<CAPTION>
Employee
Shares Stock
Owned Options Warrants Total
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Lowell Harwood ...................... 268,796(a) 100,000 75,000 443,796
Sanford Harwood ...................... 218,651 50,000 75,000 343,651
Brett Harwood ........................ 57,720(b) 80,000 ---- 137,720
Leslie Harwood Ehrlich .............. 33,879 ---- ---- 33,879
Craig Harwood ........................ 33,880 ---- ---- 33,880
Scott Harwood ........................ 37,614(c) 7,500 ---- 45,114
------- ------- ------- ---------
Total 650,540 237,500 150,000 1,038,040
</TABLE>
(a) Includes 18,674 Shares owned by Mrs. Lowell Harwood and 60,000 Shares
owned by certain foundations over which he has the power of
disposition.
(b) Includes 12 Shares owned by Mrs. Brett Harwood and 13,000 Shares
owned as custodian or trustee for his minor children.
(c) Includes 9,500 Shares owned as custodian for his minor children.
A-8
<PAGE> 51
ANNEX F
Agreement to Support the Transaction
A-9
<PAGE> 52
ANNEX G
Confidentiality and Non Competition Agreement
A-10
<PAGE> 53
ANNEX H
Employment Agreement for Brett Harwood
A-11
<PAGE> 54
Annex I
Form of Escrow Agreement
A-12
<PAGE> 1
EXHIBIT 2
ELECTION OF DIRECTORS
The Board of Directors consists of seven Directors. The Board recommneds
the election of the seven nominees for Director listed below, all of whom are
the current Directors of the Company. The Directors to be elected are to hold
office until the next Annual Meeting of Shareholders and until their respective
successors are elected and shall have qualified. If for any reason any of said
nominees shall become unavailable for election, proxies will be voted for a
substitute nominee designated by the Board, but the Board has no reason to
believe that this will occur.
Directors of the Company are elected by a plurality of the votes cast at a
meeting of shareholders. Certain officers and Directors of the Company who
hold in the aggregate more than a majority of the outstanding shares of Common
Stock have advised the Company that they intend to vote their shares for the
nominees below, thereby assuring their election. See "Principal Shareholders."
INFORMATION CONCERNING NOMINEES
The name and age of each nominee, his five-year business experience and
the year he became a Director of the Company, according to information
furnished by each, is as follows:
<TABLE>
<CAPTION>
FIRST PRINCIPAL OCCUPATION
BECAME A DURING PAST
NAME AGE DIRECTOR FIVE YEARS
---- --- -------- --------------------------------------
<S> <C> <C> <C>
Lowell Harwood 66 1968 Chairman of the Board of Directors and
Chief Executive Officer of the Company
Sanford Harwood 71 1968 Assistant Chairman and Secretary of the
Company since March 1, 1994, President
and Chief Operating Officer of the
Company from incorproation until March
1, 1994
Brett Harwoof 47 1988 President of the Company and Chief
Operating Officer since March 1, 1994;
Executive Vice President and Secretary
of the Company from April 1989 to March
1994
Stephen A. Bansak, Jr. 56 1995 Independent financial advisor/consultant
for more than five years; previously
held senior management positions at
Kidder, Peabody & Co., Inc., including
member of the Board of Directors and
Executive Committee, Co-Director of the
Corporate Finance Department, and Vice
President of Kidder, Peabody
International; former Chairman of the
Securities Industry Association's
Corporate Finance and Rule 415
Committees
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C> <C>
Leslie Harwood Ehrlich 37 1995 Managing Director since 1993 of Newmark &
Company Real Estate Inc. and former Vice
President of G.W. Michaels, Inc., with
which she was associated from 1984 to
1993, both companies engaged in leasing
and management of commercial real estate;
a partner of Harber, Inc., engaged in
real estate investment and management;
Co-Chairman of the Economic Development
Committee of the Real Estate Board of New
York, Inc.; and former Chairman of the
Board of Directors of the Young
Men's/Women's Real Estate Association of
New York, Inc.
Daniel R. Schein 55 1973 Independent Consultant
Leo Silverstein 65 1993(1) Partner of the law firm of Brock,
Fensterstock, Silverstein, McAuliffe &
Wade, LLC, general counsel to the
Company, since August 1, 1995 and of
Carter, Ledyard & Milburn for more than
ten years prior thereto.
</TABLE>
- -------------------------
(1) He had been a Director from January 1973 to February 27, 1975.
Lowell Harwood was a Director of Keystone Camera Products Corporation
("Keystone"), a camera manufacturer, from January 1989 through April 1991.
Keystone filed a petition under Chapter 11 of the United States Bankruptcy Code
in January 1991 and the business and property of Keystone was placed under the
jurisdiction of a receiver under Chapter 7 of the Code in April 1991.
MEETING AND COMMITTEES
During the fiscal year ended December 31, 1995 ("Fiscal 1995"), the Board
of Directors held four meetings, including those in which matters were adopted
by unanimous written consent. All of the meetings were attended by all
Directors except one in which one Director was absent. The Board has an Audit
Committee and a Stock Option and Compensation Committee. The Board of
Directors has no standing nominating committee.
The Audit Committee consists of Messrs. Schein, Bansak and Silverstein.
It held two meetings during Fiscal 1995, at which meetings all members were
present. The duties and responsibilities of the Audit Committee include, among
other things, review of the Company's financial statements, consideration of
the nature and scope of the work to be performed by the Company's independent
auditors, discussion of the results of such work, the receipt from such
auditors of their letters to management which evaluate (as part of their annual
audit of the Company's financial statements) the internal accounting control
systems of the Company, and
2
<PAGE> 3
meeting with representatives of management to discuss particular areas of the
Company's operations.
The Stock Option and Compensation Committee, which held one meeting during
Fiscal 1995, is comprised of Messrs. Bansak, Schein, Silverstein and Ms.
Ehrlich. Its duties include administration of both the Key Employee Incentive
Stock Option Plan, as to which no further options may be granted, and the 1992
Stock Option Plan and a review of the Company's executive compensation policy.
DIRECTORS' COMPENSATION
Directors who are also employees of the Company are excluded from
receiving additional compensation for their service on the Board of Directors
and its committees. Non-employee Directors
3
<PAGE> 4
receive a retainer of $20,000 per annum. In addition, Board members are
reimbursed for all expenses incurred for the purpose of attending a meeting,
including airfare, mileage, parking, transportation and lodgings. The Company
currently maintains directors' and officers' liability insurance policies with
a primary limit of five million dollars and an excess limit of ten million
dollars.
The Company's 1992 Stock Option Plan (the "Plan") which relates to 425,000
shares of Common Stock permits the grant of five-year options to non-employee
Directors. Mr. Schein holds options to purchase 5,000 shares, granted in
August 1992 under the Plan. The options are exercisable at $3.5625, the market
price on the date of grant.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee until April 1993, at
which time the Stock Option Committee's duties were expanded to review
executive compensation policies. The current members of the Stock Option and
Compensation Committee are Messrs. Daniel Schein, Stephen A. Bansak, Jr. and
Leo Silverstein, and Mrs. Leslie Harwood Ehrlich, four non-employee Directors.
Mr. Bansak replaced Mr. Lowell Harwood in June 1995 as a member.
Mr. Silverstein is a partner in the law firm of Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC. The Company has used the services as
general counsel of this firm since August 1, 1995 and used until that date the
services of Carter, Ledyard & Milburn in which he had been a partner. Fees for
legal services performed for the Company during Fiscal 1995 accounted for less
than 5% of the revenues of each firm during such period.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Since the Company's organization and until April 13, 1993 the cash
compensation of each of its Chairman of the Board (the Chief Executive Officer)
and President (the Chief Operating Officer) had been determined by the Board of
Directors, with the cash compensation of the other executive officers
determined by the Chairman. Grants of stock options have been determined
either by the full Board or the Stock Option Committee. Three of the seven
current Directors are officers of the Company--the Chairman, Assistant Chairman
and President of the Company. On April 13, 1993, the Board expanded the duties
of the Stock Option Committee to provide it with authority to review and make
recommendations to the Board as to the compensation in cash or other forms of
the Company's executive officers, including those whose compensation had been
previously determined by the Chief Executive Officer.
4
<PAGE> 5
The executive compensation policy with respect to the Chief Executive
Officer, President and Chief Operating Officer and Assistant Chairman, who is
also the President of the Company's operating subsidiaries, has been to provide
for a base salary which in most instances is not greater, and likely lower,
than base salaries paid by other companies of comparable size and
capitalization in or out of the parking industry to officers with the same
positions and responsibilities and provide for cash bonuses based on the
attainment of favorable operating results by the Company. To the knowledge of
the Company, there is only one other company engaged solely or principally in
parking operations which is publicly-held (only since October 1995).
Commencing with the fiscal year ended February 28, 1982, the Board adopted
a cash bonus program for Mr. Lowell Harwood as the Chairman of the Board and
Mr. Sanford Harwood as then President, establishing $300,000 of pre-tax and
pre-bonus income as the threshold, with the bonus for Mr. Sanford Harwood to
equal 7 1/2 of the excess but not to exceed his base salary and the bonus for
Mr. Lowell Harwood to equal 7 1/2 of the first $1,400,000 of the excess and 5%
of the balance, if any. On March 1, 1994 Mr. Brett Harwood, who had been
Executive Vice President and Secretary for approximately five years, was
appointed President and Mr. Sanford Harwood, who had been President, was
appointed Assistant Chairman of the Board. Sanford Harwood continued as
President of the Company's operating subsidiaries. See "Executive
Compensation--Summary Compensation Table."
5
<PAGE> 6
The compensation policy with respect to the Company's other executive
officers adopted by the Committee, consistent with the prior policy, is to
provide a base salary which the Chairman believes is competitive with those
paid by other companies in the parking industry to individuals with similar
responsibilities and to provide as further inducements a cash bonus equal to
percentages, which vary among such officers, of the Company's operating profits
determined quarterly on a cumulative basis for the fiscal year.
In reviewing the Company's compensation program, the Committee considered
a report by the Company's independent auditors, Deloitte & Touche, LLP, as to
the compensation of executive officers of other publicly-held corporations of
similar size principally engaged in the furnishing of services similar to those
provided by the Company.
The Committee was of the view that the salaries of its executive officers,
including those of the Chief Executive and Chief Operations Officers and
President whose salaries reflect $25,000 increases authorized in 1994, compare
favorably for the Company with executive compensation and benefits paid to
executives of other operations of similar scope and size both within and
without the parking industry, particularly in view of the substantial
improvements achieved during 1995. The improvements include the material
increase in net income, the successful extension of the maturity of the
Company's principal credit facility on more favorable terms and success in
renegotiating certain leases resulting in lower rentals.
The Committee believes that the Company's stock option program, as it has
in the past, should be used as a means to conserve cash in rewarding executives
and key employees for good or exceptional performance, the performance of
increased responsibilities, improved performance independent of operating
results, loyalty and seniority.
The Compensation Committee
Daniel R. Schein, Chairman
Stephen A. Bansak, Jr.
Leslie Harwood Ehrlich
Leo Silverstein
6
<PAGE> 7
SUMMARY COMPENSATION TABLE
The following table sets forth for the fiscal year ended December 31,
1995, the ten-month period ended December 31, 1994 and the fiscal year ended
February 28, 1994, the compensation for services rendered in all capacities to
the Company and subsidiaries by the Chief Executive Officer and the next four
most highly compensated executive officers of the Company:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
- ---------------------------------------------------------------------------------- --------------
SALARY (1) BONUS STOCK OPTIONS
NAME AND PRINCIPAL POSITION PERIOD ($) ($) (# OF SHARES)
- ----------------------------------- ------------------------ ------------ ------- --------------
<S> <C> <C> <C> <C>
Lowell Harwood Year Ended 12/31/95 183,420 139,556 __
Chairman of the Board 10 months ended 12/31/94 151,913 36,722 __
and Chief Executive Officer Year ended 2/28/94 161,356 __ __
Sanford Harwood Year ended 12/31/95 137,312 137,312 __
Assistant Chairman, Secretary 10 months ended 12/31/94 113,687 36,722 __
and Director (2) Year ended 2/28/94 136,500 __ __
Brett Harwood Year ended 12/31/95 174,912 4,580 50,000
President, Chief Operating 10 months ended 12/31/94 144,681 6,700 __
Officer and Director(3) Year ended 2/28/94 153,504 10,967 __
Dan Jeremitsky Year ended 12/31/95 132,004 4,053 10,000
Vice President - Design and 10 months ended 12/31/94 104,068 16,943 __
Consulting Year ended 2/28/94 115,440 8,311 __
John Hogan Year ended 12/31/95 112,245 14,285 10,000
Vice President - Institutional 10 months ended 12/31/94 89,884 12,232 __
and Management Year ended 2/28/94 94,640 16,589 __
</TABLE>
- -----------------------
(1) Includes car allowances, which represent for each of the officers named,
less than 1.0% of their salary amounts.
(2) He had been President and Chief Operating Officer until March 1, 1994.
(3) He had been Executive Vice President and Secretary until March 1, 1994.
The Company paid Directors' fees to each Director who is not an officer or
an employee of the Company at the rate of $20,000 per annum. Mr. Schein holds
a stock option granted August 19, 1992 to him under the 1992 Stock Option Plan
to purchase 5,000 shares of Common Stock at a price of $3.5625, which was the
market price on the date of grant.
The bonuses paid to Messrs. Lowell Harwood and Sanford Harwood are
pursuant to an arrangement originally authorized by the Board of Directors in
January 1982 and subsequently amended. The bonuses are contingent upon the
achievement by the Company for the fiscal year of consolidated income of more
than $300,000, before provision for income taxes and accrual of the bonuses for
the year and before giving effect to the additional compensation, with the
amount for Mr. Sanford Harwood to be 7 1/2% of the excess, but not to exceed
his base salary, and for Mr. Lowell Harwood to be 7 1/2% of the first
$1,400,000 of the excess and 5% of the
7
<PAGE> 8
balance of the excess. The bonuses paid to the other executive officers
were authorized by the Chairman of the Board pursuant to a bonus program under
which he established goals and results to be achieved.
STOCK OPTIONS
The Company's 1992 Stock Option Plan (the "1992 Plan"), provides authority
for the grant of options with respect to 425,000 shares of Common Stock to key
employees, non-employee Directors and independent consultants during the
ten-year period ended August 18, 2002. As of December 31, 1995, there were
options outstanding under the 1992 Plan with respect to 393,400 shares. See
"Proposal to Amend the 1992 Stock Option Plan" for proposed increase in the
number of shares subject to the Plan.
8
<PAGE> 9
The following table shows all grants of options to the executive officers
of the Company named in the Summary Compensation Table during the 1995 Year.
Pursuant to Commission rules, the table also shows the value of the options
granted at the end of the option terms (five years) if the stock price were to
appreciate annually by 5% and 10%, respectively. There is no assurance that
the stock price will appreciate at the rates shown in the table. The table
also indicates that if the stock price does not appreciate, there will be no
increase in the potential realizable value of the options granted:
9
<PAGE> 10
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- --------------------------------------------------------------------- ---------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
PERCENT OF
TOTAL
GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
---- ------- --------------- ------------ ---------- ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Lowell Harwood.. 0 N/A N/A N/A $0 $ 0 $ 0
Brett Harwood... 50,000 59.5% $6.4625 6/14/2000 $0 $51,738 $150,962
Sanford Harwood. 0 N/A N/A N/A $0 $ 0 $ 0
Dan Jeremitsky.. 10,000 11.9% $ 5.875 6/14/2000 $0 $16,231 $ 35,867
John Hogan...... 10,000 11.9% $ 5.875 6/14/2000 $0 $16,231 $ 35,867
</TABLE>
No options were exercised by any executive officer or director during the
fiscal year ended December 31, 1995 and the ten months ended December 31, 1994.
The following table reflects information with respect to options which have
been granted to any of the above named officers:
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY-OPTIONS
AS OF 12/31/95 ON 12/31/95*
--------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------------------- -------------------------
<S> <C> <C>
Lowell Harwood... 50,000/50,000 $ 229,062/229/062
Sanford Harwood.. 50,000/______ $ 229,062/_______
Brett Harwood.... 39,400/40,600 $ 141,327/99,282
Dan Jeremitsky... 8,000/12,000 $ 34,875/40,750
John Hogan....... 8,000/12,000 $ 34,875/40,750
</TABLE>
- -----------------------
* Based on the closing sales price of $8.50 on December 29, 1995, the last
date in December on which shares traded on the Nasdaq National Market
System (the "NMS").
See "Certain Transactions" with respect to the issuance in October 1995 of
warrants to Messrs. Lowell and Sanford Harwood in consideration for financial
accommodations made by them to the Company.
10
<PAGE> 11
CERTAIN TRANSACTIONS
Messrs. Lowell and Sanford Harwood, officers and Directors of the Company,
have diverse real estate interests and/or positions in three other parking
operations in the New York metropolitan area, none of which is within 250 feet
of a parking operation of the Company. An agreement originally entered into in
January 1969 among these officers and the Company, as amended from time to time
and extended with the agreement of the individual parties through December 31,
1996, provides that as long as each of these officers, or his spouse,
beneficially owns Common Stock of the Company, he will not engage as principal,
officer, or employee, or acquire a 5% or greater stock interest in any garage
or parking lot operation within a 250-mile radius of a parking operation of the
Company, other than operations in which, at the time of the agreement, he held
an equity interest or was a principal, officer or employee, except in
connection with a real estate transaction subject to the conditions described
below.
The agreement further provides that each will not enter into any real
estate transactions at any location or acquire any interest in any property
involving parking operations for his own account unless he has used his best
efforts to secure, on behalf of the Company, the rights to the parking
operations or the opportunity to conduct the parking operations, if any,
located or to be located thereon on terms comparable to those available to
non-affiliated persons. This prohibition is not limited to the area within a
250-mile radius of a parking operation of the Company. The restriction does
not apply to the acquisition of real estate involving parking operations
adjacent to or within 250 feet of parking lot operations in which he holds an
equity interest or in the operation of which he is an officer, director, or
employee at the time of the agreement, nor does it apply if the shareholder
first offers the opportunity in writing to the Company and the Company either
rejects it or fails to act within 20 days after the proposal is presented to
it. The agreement does not prohibit the interested party from voting on the
transaction. No offers were made or opportunities presented to the Company
pursuant to the agreement during the fiscal year ended December 31, 1995 and
the ten-month period ended December 31, 1994. Mr. Brett Harwood, Director,
President and Secretary of the Company, has agreed to be bound by the
provisions of the agreement as if he had been a party thereto.
Messrs. Lowell and Sanford Harwood have owned, either solely or along
with members of their respective families, including Mr. Brett Harwood,
(collectively the "Harwood Families"), since prior to the formation of the
Company, all the outstanding shares of three corporations, all of which have
been engaged in New York or New Jersey, in the operation of six parking
facilities since the formation of those companies (operations at three of the
facilities terminated subsequent to December 31, 1995). The Company has
rendered bookkeeping services to the three private entities since June 1, 1979
or, if later, the commencement of their parking operation, at a fee equal
initially to 1 1/2% which increased to 2% as of March 1, 1992, of the parking
revenues of those entities during the period the services were furnished.
Messrs. Lowell and Sanford Harwood have agreed that such fees shall amount to
no less than the Company's related costs (such determination to be reviewed by
the Company's independent public accountants) plus $5,000, annually. For the
fiscal year ended December 31, 1995 and the ten months ended December 31, 1994,
the fees were $32,640 and $28,640, respectively, which Messrs. Lowell and
Sanford Harwood have represented to be for each of the periods at
11
<PAGE> 12
least $5,000 in excess of the cost of the Company in furnishing such services
and to be at least as favorable to the Company as available from
non-affiliated companies.
The Company has managed a garage in Boston and two lots in Philadelphia
for affiliates of the Harwood Families. The management of each of these
facilities by the Company commenced with the operation of the facility by the
affiliate. The garage and lots were acquired by the affiliates as part of real
estate transactions which involved non-parking properties. The management fees
for the 1995 Year and the ten months ended December 31, 1994 were,
respectively, $58,891 and $39,255. The management arrangements are as
favorable to the Company as those provided in the Company's comparable
management agreements with non-affiliated owners or lessees.
Messrs. Lowell and Sanford Harwood extended to the Company pursuant to a
June 1995 agreement demand loans aggregating $500,000, bearing interest at a
rate equivalent to the rate payable by the Company to its bank lender under its
Credit Facility and to be collateralized by a pledge of assets to be
12
<PAGE> 13
selected by mutual agreement. In October 1995, Messrs. Harwood agreed to amend
their loan agreement to satisfy a condition imposed by the bank lender for the
bank to agree to Amendment No. 10 to its credit agreement with the Company
providing, among other things, for an extension of the maturities of principal
payments and deferral and possible excuse of portions of the interest on the
Credit Facility loans. The amendment to the Harwoods' loan agreement provides
for payments of principal of, and interest on, the $500,000 loans to be
subordinated and deferred to designated loan repayments made to the bank lender
under the amended Credit Agreement and for a surrender of their rights to
receive collateral. In consideration for their agreements to make the demand
loans and to amend the loan agreement, the Company issued, on October 30, 1995
to each of Lowell Harwood and Sanford Harwood five-year Common Stock Purchase
Warrants to purchase 75,000 shares of the Company's Common Stock at a price of
$6.40 per share, the average of the closing sales prices of the Common Stock on
Nasdaq for June 28, 1995, the date of the original loan agreement and the two
immediately preceding days in which trades were effected in the stock.
Pursuant to an agreement with the Company, Mr. Lowell Harwood, in March
1995, transferred to the Company 39,196 shares of Common Stock valued at $4.50
per share, the market price on March 16, 1995, the date of the agreement, in
satisfaction of the principal installments and interest in the aggregate amount
of $176,381.57 of a promissory note issued by him to the Company in September
1988. The note was issued by him in connection with his exercise of a Warrant,
originally issued in September 1986, to purchase 25,000 shares of Common Stock
at a price of $9.50 per share.
The Company has borne certain Company-related travel expenses incurred by
Messrs. Schein and Bansak during the 1995 Year in the aggregate amount of
approximately $6,900.
PROPOSAL TO AMEND THE 1992 STOCK OPTION PLAN
In June 1995 the Board of Directors of the Company adopted, subject to
shareholder approval, an amendment to the Company's 1992 Stock Option Plan (the
"Plan") increasing by 100,000 shares the number of shares of the Company's
Common Stock subject to the Plan. The Plan originally related to 425,000
shares. A previous stock option plan originally adopted in 1981 expired in
1991, pursuant to which options with respect to 100,470 had been granted, of
which options to purchase 78,870 shares were exercised and options to purchase
21,600 shares expired.
The Plan authorizes the grant of options to key employees, non-employee
Directors and independent consultants or advisors to the Company. As of May
31, 1996, there were outstanding options to purchase 386,600 shares granted
under the Plan and options with respect to 13,400 an additional shares had been
exercised. Accordingly, there was available, as of May 31, 1996, for future
grants under the Plan options with respect to 25,000 shares.
The Plan terminates on August 19, 2002. The approval of the holders of a
majority of the shares of Common Stock outstanding is required to approve the
amendment to the Plan. The
13
<PAGE> 14
Board of Directors believes that the granting of options is important as a
method of assisting the Company to attract and retain key personnel without the
cash costs which are associated with other incentive compensation plans.
Accordingly, the Board of Directors recommends a vote FOR the proposal.
The Plan provides that options granted thereunder to employees of the
Company may, at the election of the Committee, be either (a) incentive stock
option ("ISOs") meeting the requirements set forth in Section 422 of the
Internal Revenue Code, or (b) options which do not qualify as ISOs
("nonqualified options"). Non-employee Directors, consultants and advisors
will only be eligible to receive nonqualified options.
The Plan provides that the per share exercise price of an ISO shall not be
less than 100% of the fair market value of a share of Common Stock on the date
the option is granted (or 110%, if at the time of grant the optionee owns,
directly or indirectly, more than 10% of the outstanding Common Stock). The
per share exercise price of a nonqualified option shall not be less than 75% of
the fair market value of a share of Common Stock on the date the option is
granted. Fair market value on a particular date (the
14
<PAGE> 15
valuation date) means the closing sale price of a share of Common Stock on the
NMS on that date or, if there are no NMS sales on the valuation date or the
preceding trading day, or, if there are no NMS sales on the three preceding
trading days, fair market value will be the mean between the high bid and low
ask prices on the valuation date.
Under the Plan, no option agreement may provide for a term in excess of
ten years from the date of grant (five years, in the case of an option granted
to a person who at the time of grant owns, directly or indirectly, more than
10% of the outstanding Common Stock). In addition, all ISOs granted by the
Company to any one person may not become exercisable in any calendar year for
shares having an aggregate fair market value (determined as of the dates such
ISOs were granted) exceeding $100,000.
The Plan also permits the grant by the Committee of stock appreciation
rights ("SARs") in tandem with ISOs granted under the Plan or any time with
respect to nonqualified options. An SAR is the right of an optionee, without
making any payment to the Company (except applicable withholding taxes), to
receive cash or shares of Common Stock having a value equal to the amount by
which the fair market value per share on the date on which an SAR is exercised
exceeds the option price per share as provided in the related underlying
option. The number of shares of Common Stock subject to an SAR shall be
determined by the Committee but shall not exceed the number of shares subject
to the related option. An SAR shall be forfeited to the extent that the
related option is exercised, and vice versa. The Committee may impose
conditions upon the exercise of an SAR, including a condition that the SAR then
granted or previously granted may only be exercised in accordance with rules
and regulations adopted by the Committee from time to time.
The following table sets forth pertinent information as of December 31,
1995 with respect to options granted or exercised under the Plan since
inception of Plan in August 1992 by those persons set forth in the "Election of
Directors -- Summary Compensation Table," all executive officers as a group,
all current Directors who are not executive officers and the employees of the
Company:
<TABLE>
<CAPTION>
ALL
EXECUTIVE
LOWELL SANFORD BRETT DAN JOHN OFFICERS AS A
HARWOOD HARWOOD HARWOOD JEREMITSKY HOGAN GROUP
-------- ------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Option Granted.............. 100,000 50,000 80,000 20,000 20,000 292,000
Average exercise price...... $ 3.919 $ 3.919 $ 5.509 $ 4.719 $ 4.443 $ 4.443
Options exercised........... __ __ __ __ __ 5,200
Average exercise price...... __ __ __ __ __ $ 3.346
<CAPTION>
ALL CURRENT
DIRECTORS
NOT
OTHER EXECUTIVE
EMPLOYEES OFFICERS
--------- -------------
<S> <C> <C>
Option Granted........... 103,000 5,000
Average exercise price... $ 3.866 $ 3.563
Options exercised........ 8,200 __
Average exercise price... $ 3.563
</TABLE>
15
<PAGE> 1
EXHIBIT 3
SQUARE INDUSTRIES, INC.
EXECUTIVE SEVERANCE PAY PLAN
(Effective October 29, 1996)
INTRODUCTION
The purpose of this Executive Severance Pay Plan (the "Plan") is to
enable Square Industries, Inc., a New York corporation (the "Company") to offer
a form of protection to certain designated employees of the Company or its
Affiliates in the event that a Change of Control of the Company occurs and
their employment terminates within a designated period thereafter.
Accordingly, the Company's Board of Directors has adopted this Plan,
effective October 29, 1996 for the employees designated on Schedule A hereto
who were employed by the Company on October 29, 1996 in an effort to assist in
replacing the loss of income caused by a termination of employment under the
circumstances described herein.
The Plan, effective October 29, 1996, amends and supersedes any
severance plans, policies and/or practices of the Company or any of its
Affiliates.
ARTICLE I
Definitions
1.1. "Affiliates" shall mean the Company and any entity affiliated
with the Company within the meaning of Code Section 414(b) with respect to a
controlled group of corporations, Code Section 414(c) with respect to trades
or businesses under common control with the Company, Code Section 414(m) with
respect to affiliated service groups and any other entity required to be
aggregated with the Company under Code Section 414(o). No entity shall be
treated as an Affiliate for any period during which it is not part of the
controlled group, under common control or otherwise required to be aggregated
under Code Section 414.
1.2. "Base Period" shall mean six months from the Effective Date
from the Change of Control.
1.3. "Board" shall mean the Board of Directors of the Company.
1.4. "Cause" shall mean (with regard to a Participant's termination
of employment with the Control Group: (a) the Participant's conviction for a
felony; (b) the Participant's embezzlement, willful breach of fiduciary duty or
fraud with regard to the Control Group or any of their assets or businesses; or
(c) the Participant's substantial failure to perform the material duties of his
or her position, unless with respect to the performance deficiencies such
failure is corrected within thirty (30) days after the Employer provides the
Participant with written notice of the failure.
<PAGE> 2
1.5. "Change of Control" shall mean any of the following: (a) the
merger, consolidation or sale of all or substantially all of the assets of the
Company, or (b) the acquisition by a person or an affiliated group of persons
of at least 50% of the outstanding Shares of Common Stock of the Company.
1.6. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.7. "Committee" shall mean those executives officers of the
Company appointed by the Board. In the event no Committee is appointed, the
Board shall be deemed the Committee.
1.8. "Company" shall mean Square Industries, Inc., a New York
corporation.
1.9. "Control Group" shall mean the Company and its Affiliates.
1.10. "Designated Employee" shall mean the individual employee of the
Company or an Affiliate, the name of which employee is set forth in Schedule A
hereto.
1.11. "Designated Period" shall mean twelve months from the effective
date of a Change of Control.
1.12. "Effective Date" shall mean October 29, 1996.
1.13. "Employer" shall mean the Company and any Affiliate which has
adopted the Plan under Section 6.1 hereof.
1.14. "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
1.15. "Good Reason" shall mean (with respect to a Participant's
termination of employment within the Control Group): (a) the elimination of a
Participant's position, unless the Participant, if employed on the Effective
Date, is offered a comparable or better position at one of the Company's
facilities in the same metropolitan area; (b) the Participant's voluntary
termination due to a reduction in Salary; or (c) the Participant's voluntary
termination due to a material reduction in job responsibilities or material
demotion in job title or position.
1.16. "Noncompetition Agreement" shall mean this agreement in the
form of Exhibit A hereto not to compete with the Control Group for the period
commencing with the Termination Date and ending with the last day of the
Designated Period.
1.17. "Participant" shall mean any Designated Employee who is set
forth in Schedule A hereto.
1.18. "Plan" shall mean the Square Industries, Inc. Executive
Severance Pay Plan.
2
<PAGE> 3
1.19. "Salary" shall mean a Participant's regular annual salary or
wages (whether paid on an hourly or salaried basis) from the Employer on his or
her Termination Date or the Effective Date, whichever is greater, inclusive of
a Participant's pre-tax 401(k) contributions but exclusive of overtime,
bonuses, commissions, awards, imputed income and all other incentive
compensation, supplemental compensation, and extraordinary payments. In
calculating the amount of Severance Benefit, the Committee shall use the
following guidelines:
(a) the monthly Salary rate shall be computed by dividing
the Participant's Salary by twelve (12); and
(b) the weekly Salary rate shall be computed by dividing
the Participant's Salary by fifty-two (52).
1.20. "Severance Benefit" shall mean the benefit paid to the
Participant by the Employer in accordance with Section 2.2 hereof, payable in a
lump sum.
1.21. "Termination Date" shall mean the last official work day for
which the Participant receives pay for service with the Employer and
specifically excludes any period for which a Severance Benefit payment is made.
ARTICLE II
Benefits
2.1. Eligibility for Benefits. (a) Any Participant whose employment
with the Control Group is terminated without Cause by an Employer at any time
during the Designated Period; or (b) who terminates employment with the Control
Group within sixty days of the occurrence of any Good Reason event with regard
to such Participant with the Control Group or (c) who terminates employment at
any time during the Designated Period for any reason at any time after the Base
Period but within the Designated Period shall be entitled to Severance Benefit
in the manner set forth in Section 2.2 below.
2.2. Amount and Form of Benefits. Any Participant described in
Section 2.1 above shall be entitled to receive a Severance Benefit in the
amount equal to the aggregate Salary he or she would have received for the
entire period from the Termination Date through the end of the Designated
Period, with such payment to be made in cash or certified check within ten days
following the Termination Date. There shall be withheld from such payment the
amount of taxes the Company is required to withhold under applicable federal,
state and local law. In the event the termination is effected after the Base
Period by the Participant without Good Reason, the payment of Severance Benefit
shall be contingent upon the receipt by the Company of a Noncompetition
Agreement executed by the Participant.
2.3. Benefit in the Event of Death. In the event a Participant dies
prior the receipt of his or her Severance Benefit, such Benefit shall be paid
to the Participant's spouse or if the Participant is not married on the date of
death, to the Participant's estate.
3
<PAGE> 4
2.4. No Duty to Mitigate/Set-off. No Participant entitled to
receive a Severance Benefit hereunder shall be required to seek other
employment or to attempt in any way to reduce any amounts payable to him or her
pursuant to this Plan. An Employer's obligations to make payment of Severance
Benefits and otherwise to perform its obligations hereunder shall not be
effected by any circumstances, including without limitation, any set-off,
counterclaim, recoupment, defense or other right which an Employer may have
against the Participant.
ARTICLE III
Funding
3.1. Funding. The Plan shall be funded out of the general assets of
the Company as and when benefits are payable under the Plan. All Participants
shall be solely general creditors of the Company. If the Company decides to
establish any advance accrued reserve on its books against the future expense
of benefits payable hereunder, such reserve shall not under any circumstances
be deemed to be an asset of the Plan.
ARTICLE IV
Administration of the Plan
4.1. Plan Administrator. The general administration of the Plan on
behalf of the Employers shall be placed with the Committee. The Committee
shall administer and interpret the Plan subject to the terms set forth herein.
4.2. Liability. No member of the Committee and no officer, director
or employee of the Company or any other member of the Control Group shall be
liable for any action or inaction with respect to his or her functions under
the Plan unless such action or inaction is adjudged to be due to gross
negligence, willful misconduct or fraud. Further, no member of the Committee
shall be personally liable merely by virtue of any instrument executed by him
or her or on his or her behalf as a member of the Committee.
4.3. Indemnification. Each Employer shall indemnify, to the full
extent permitted by law and its Certificate of Incorporation and By-laws (but
only to the extent not covered by insurance) its officers and directors (and
any employee involved in carrying out the functions of such Employer under the
Plan) and each member of the Committee against any expenses, including amounts
paid in settlement of a liability, which are reasonably incurred in connection
with any legal action to which such person is a party by reason of his or her
duties or responsibilities with respect to the Plan, except with regard to
matters as to which he or she shall be adjudged in such action to be liable for
gross negligence, willful misconduct or fraud in the performance of his or her
duties.
4.4. Claims Procedure. Any claim by a Participant with respect to
benefits or other aspects of the operation of the Plan shall be made in writing
to the Committee. If the Committee determines that the claim should be denied,
the Committee shall notify the Participant in writing of the denial of the
claim within thirty (30) days after its receipt thereof (this period
4
<PAGE> 5
may be extended an additional thirty (30) days in special circumstances and, in
such event, the Participant shall be notified in writing of the extension).
Such notice shall (a) set forth the specific reason or reasons for the denial
making reference to the pertinent provisions of the Plan or of Plan documents
on which the denial is based, (b) describe any additional material or
information necessary to perfect the claim, and explain why such material or
information, if any, is necessary, and (c) inform the Participant of his or her
right pursuant to this Section 4.10 to request view of the decision. A
Participant may appeal the denial of a claim by submitting a written request
for review to the Committee, within thirty (30) days after the date on which
such denial is received.
A Participant or his or her duly authorized representative may discuss
any issues relevant to the claim, may review pertinent documents and may submit
issues and comments in writing. If the Committee deems it appropriate, it may
hold a hearing as to a claim. If a hearing is held, the Participant shall be
entitled to be represented by counsel, at the Participant's sole expense. The
Committee shall decide whether or not to grant the claim within thirty (30) days
after receipt of the request for review, but this period may be extended by the
Committee for up to an additional thirty (30) days in special circumstances.
Written notice of any such special circumstances shall be sent to the
Participant. All interpretations, determinations and decisions of the Committee
with respect to any claim shall be made in its sole discretion based on the Plan
and other relevant documents and shall be final, conclusive and binding on all
persons.
ARTICLE V
Amendment and Termination
5.1. Amendment and Termination. The Company reserves the right, in
its sole and absolute discretion to amend or terminate, in whole or in part,
any or all of the provisions of this Plan by action of the Board (or a duly
authorized committee thereof) at any time, provided that any amendment reducing
the benefits provided hereunder or any Plan termination shall not be effective
prior to the later of (i) the date all benefits have been paid to Designated
Employees hereunder or (ii) first anniversary of the date of the Change of
Control. Any termination or amendment of the Plan, however, shall not affect
the Severance Benefit hereunder, if any, payable to any Participant who was a
Designated Employee on or prior to the Effective Date or whose Termination Date
has occurred prior to the date of the amendment or termination of the Plan.
ARTICLE VI
Miscellaneous
6.1. Rights of Employees. Nothing herein contained shall be held or
construed to create any liability or obligation upon the Employer to retain any
Designated Employee in its service. All Designated Employees shall remain
subject to discharge at any time for any reason.
5
<PAGE> 6
6.2. Controlling Law. The construction and administration of the
Plan shall be governed by ERISA. To the extent not so governed, it shall be
governed by the laws of the State of New York (without reference to rules
relating to conflicts of law).
6.3. Withholding. The Employer shall have the right to make such
provisions as it deems necessary or appropriate to satisfy any obligations it
reasonably believes it may have to withhold federal, state or local income or
other taxes incurred by reason of payments pursuant to this Plan. In lieu
thereof, the Employer shall have the right to withhold the amount of such taxes
from any other sums due or to become due from the Employer to the Participant
upon such terms and conditions as the Committee may prescribe.
6.4. Assignment and Alienation. The benefits payable under the Plan
shall not be subject to alienation, transfer, assignment, garnishment,
execution or levy of any kind, and any attempt to cause any benefits to be so
subjected shall not be recognized.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed this ______day of _______, 1996.
By: /s/ Lowell Harwood
--------------------------------
Lowell Harwood
Title: Chairman of the Board
-----------------------------
6
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into effective this ____ day of
__________, 1997, by and among CENTRAL PARKING CORPORATION, INC., a Tennessee
corporation ("Parent"), CENTRAL PARKING SYSTEM, INC., a Tennessee corporation
wholly owned by Parent, with its principal place of business in Nashville,
Tennessee, ("EMPLOYER"), and BRETT HARWOOD, ("EMPLOYEE").
W I T N E S S E T H
WHEREAS, the parties hereto have reached an understanding as to their
contract of employment, and desire to reduce same to writing.
NOW, THEREFORE, in consideration of the premises, the parties hereto
have agreed as follows:
1. EMPLOYER does hereby employ EMPLOYEE as Executive Vice
President of EMPLOYER. EMPLOYER agrees to make available an office to EMPLOYEE
at one of its locations in New Jersey within the New York metropolitan area
in connection with the performance by EMPLOYEE of the duties set forth in
Section 2.
2. EMPLOYEE agrees to serve in the capacity referenced in
paragraph 1 to perform all the duties required thereof, including but not
limited to, marketing, acquisition of new parking opportunities (whether in the
form of acquisition of fee, leases or management agreements), supervising
personnel reasonably necessary to perform his duties hereunder, maintaining
true and correct records, reporting same to EMPLOYER as required, and to devote
substantial time and best efforts thereto necessary to perform such services.
3. EMPLOYER agrees to pay commencing with the date hereof
EMPLOYEE for said services the sum of Two Hundred Thousand Dollars
($200,000.00) gross per annum (Base), plus incentive compensation (the
"Incentive Compensation") as set forth below:
- 10% of all Gross Operating Income (NOI less 5% of
operating expenses G&A burden) derived from new
leases or 10% of pre tax operating profit from newly
acquired companies, in each case where EMPLOYEE was
primarily responsible for such lease or acquisition.
- 10% of all Gross Operating Income (NOI less 5% of
operating expenses G&A burden) derived from new
management agreements where EMPLOYEE was primarily
responsible for securing the management agreement.
<PAGE> 2
- Incentive compensation will be paid to EMPLOYEE for
the greater of the period during which EMPLOYEE is
employed by EMPLOYER or any of its affiliates, or for
five years from the date of commencement of operation
pursuant to the lease or management agreement (the
"Incentive Compensation Period"), provided, however,
(a) In the event that Employee leaves the employ of
the Company during the Term of Employment as defined
in Section 5, the Employee shall be entitled to the
Incentive Compensation for the period during which he
was employed, and for an additional period following
the termination of his employment up to an aggregate
duration not to exceed two and one half (2 1/2) years
from the date of commencement of operation pursuant to
the lease or management agreement, provided that
during such period of time after termination of
employment, the Employee complies with the
noncompetition provisions of subsection (i) of Section
6 of this Agreement for the period during which
Employee is paid Incentive Compensation (the "General
Noncompete"); and (b) In the event that Employee is
not offered renewal of the Term of Employment at the
end of three (3) years, or in the event that Employee
is offered such renewal and does not elect to continue
his employment, the Employee shall be entitled to
continue to receive the Incentive Compensation for the
full Incentive Compensation Period, provided that
Employee abides by the provisions of the General
Noncompete during the payment of Incentive
Compensation following termination of his employment.
- Incentive Compensation will be paid to EMPLOYEE
annually within forty-five days after the EMPLOYER'S
fiscal year end.
4. EMPLOYER agrees that with respect to the acquisition of any
real estate or the equity interest in a corporation, partnership or joint
venture substantially all of its assets of which are real estate or real estate
interests (a "Real Estate Company") by EMPLOYER or any affiliate of EMPLOYER
including Parent (collectively the "EMPLOYER AFFILIATED GROUP") resulting
primarily from the efforts of EMPLOYEE, EMPLOYER shall provide or cause to be
provided the opportunity for EMPLOYEE or at his direction his immediately
family or an entity of which at least 75% of its equity interests is
beneficially owned by EMPLOYEE and his family (collectively the "EMPLOYEE
AFFILIATED GROUP") to acquire 25% (or such lesser amount as the EMPLOYEE
determines) of the equity interest in such real estate or Real Estate Company
on the same terms and conditions as the EMPLOYER AFFILIATED GROUP.
For all opportunities generated by EMPLOYEE in the form of the fee
acquisition of EMPLOYER leasehold interests and the subsequent realization of
value above the value of such asset operated as a parking facility, EMPLOYEE
or EMPLOYEE'S affiliates will be entitled to participate in realization of such
property value maximization.
EMPLOYER agrees to lend EMPLOYEE up to an aggregate of $10 million in
order to assist EMPLOYEE in making the necessary investments related to the
opportunities described hereinabove. Such loans shall bear interest at
NationsBank Prime plus 2% (provided, however, that the minimum interest rate
shall be 10%), shall only be secured by EMPLOYEE AFFILIATED GROUP interest in
the properties and shall be payable at such times as EMPLOYER and EMPLOYEE may
agree. In the event the EMPLOYER AFFILIATED GROUP sells part or all of its
interest in the real estate or the Real Estate Company, EMPLOYER shall provide
the EMPLOYEE AFFILIATED GROUP through EMPLOYEE the opportunity to participate
in the sale pro rata based on their respective interests on the same terms and
conditions.
5. This contract shall have a term of three (3) years, but may be
terminated immediately by EMPLOYER upon the commission by EMPLOYEE of an act
involving theft, embezzlement, fraud, intentional mishandling of Company funds
or any other material act or
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<PAGE> 3
omission which is materially injurious to the financial condition or business
reputation of EMPLOYER.
6. It is understood and agreed that in the course of employment,
EMPLOYEE will become familiar with EMPLOYER'S clientele, contracts, and methods
of operation. In consideration thereof, and as part of the consideration for
this agreement, EMPLOYEE agrees that except as provided in Annex A, during the
term hereof he will not, directly or indirectly, as an individual or through any
other person or entity, participate as an employee, director, consultant, owner,
advisor or in any other capacity in the same or similar business as the EMPLOYER
during the term hereof and (i) for a period of one (1) year from the expiration
of his employment hereunder without geographical limitation and (ii) for a
period of five (5) years following expiration of the Term of Employment
hereunder with Parent or Square Industries, Inc. ("Square") with respect to
parking locations owned, leased or managed by Parent or Square during said five
year period.
7. A. EMPLOYER shall provide health, disability and life
insurance, automobile allowance, and profit sharing and other benefits on terms
no less favorable than EMPLOYER'S Senior Vice Presidents, in accordance with
the ordinary policies of EMPLOYER, as the same may be modified from time to
time. The automobile allowance to be provided to EMPLOYEE shall at his option
be either (i) $600 per month or the provision of an automobile of the same
model and type as made available as the other Senior Vice Presidents of
EMPLOYER. In addition, EMPLOYEE shall be entitled to receive options under the
Parent's Stock Option Plan to purchase 10,000 shares of the Company's Common
Stock on each of (i) the date of the commencement of employment and (ii) the
first anniversary date of such date. Each option shall be exercisable in five
equal installments with the installments of the first option to vest on
September 30 of each of 1997, 1998, 1999, 2000 and 2001 and the installments
of the second option to vest on September 30 of each of 1998, 1999, 2000, 2001
and 2002.
B. In the event of a disability resulting in the termination
of EMPLOYEE's employment, EMPLOYEE shall be entitled to the disability payments
provided under the disability policy provided in Section 7 in lieu of the
compensation provided in Section 3 hereunder. In the event of the death of
EMPLOYEE during the term of his employment, the Incentive Compensation provided
in Section 3 shall continue to be paid to his heirs under the terms hereof for
the period provided therein.
C. EMPLOYER and Parent agree that EMPLOYEE during the term of
this Agreement shall be the representative of the Parent to the National
Parking Association and EMPLOYER or Parent shall bear all related fees and
expenses with respect to such representation.
8. In the event of a Change of Control of EMPLOYER or PARENT and
the failure thereafter of EMPLOYER to continue to offer EMPLOYER employment on
the same terms and conditions set forth herein, EMPLOYEE shall be entitled to a
lump sum payment at the time of termination of three (3) years of the latest
year's annual compensation immediately prior to the Change of Control, provided
EMPLOYEE agrees to abide by the non-compete provisions of paragraph 6 of this
Agreement. A Change of Control shall mean the acquisition
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<PAGE> 4
within a 12 month period by a person or persons not affiliated with EMPLOYER or
Parent of all the outstanding shares of capital stock of EMPLOYER or PARENT.
9. Any dispute among the parties hereto shall be settled by
binding arbitration in Newark, New Jersey in accordance with the then effective
rules of the American Arbitration Association, and judgment upon the award
rendered may be entered in any court having jurisdiction thereof. In any
action or proceeding brought to enforce any provision of this Agreement, the
prevailing party shall be entitled to recover its costs from the opposing
party, including reasonable legal fees and expenses.
10. This Agreement shall be construed, interpreted and enforced in
accordance with the laws of the State of New Jersey.
11. PARENT agrees to cause EMPLOYER to perform the terms and
conditions of this Agreement.
WITNESS our hands the day and date first above written.
CENTRAL PARKING SYSTEM
By:
-------------------------------------
ATTEST Title:
----------------------------------
CENTRAL PARKING CORPORATION
By:
- ----------------------------------- -------------------------------------
APPROVED
Title:
----------------------------------
- ----------------------------------- ----------------------------------------
APPROVED BRETT HARWOOD
4
<PAGE> 5
ANNEX A
EXCLUSIONS FROM NONCOMPLETE AGREEMENT
1. EMPLOYEE may acquire, own and lease real estate used in the
Business in the Noncompete Area, provided that Central Parking
Corporation is offered right to first refusal to operate or manage
parking located thereon unless the real estate subject to an
existing agreement at the time of the acquisition, in which case,
Central Parking Corporation's right of first refusal will be
delayed until the termination of such existing agreement.
2. EMPLOYEE may continue to own and lease real estate currently owned
or leased by corporations of which EMPLOYEE is a shareholder
and Director within the Noncompete Area with parking operations,
provided that Central Parking Corporation is offered right of
first refusal to operate or manage parking located thereon. The
parties acknowledge that the currently owned properties consist of
the following:
Location City/State
-------- ----------
206 E. 59th Street New York/NY
135 Sip Avenue Jersey City/NJ
801 Pavonia Jersey City/NJ
275 Washington Street Boston/MA
421 North Seventh Street Philadelphia/PA
1919 Market Street Philadelphia/PA
For purposes of this Confidentiality and Noncompete Agreement, Central Parking
shall notify EMPLOYEE of its intention to exercise its right to first refusal
as provided in paragraphs 1 or 2 above within fifteen (15) business days of its
receipt of notice of such right.
3. EMPLOYEE will be permitted to practice law and have clients and if
such clients include parking service providers or parking
owners, EMPLOYEE will seek EMPLOYER's consent, where such consent
will not be unreasonably withheld.
<PAGE> 1
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is entered into this 6th day of
December, 1996 by and among Central Parking Corporation, a Tennessee corporation
("Purchaser"), Square Industries, Inc., a New York corporation (the "Company"),
First American National Bank ("Escrow Agent"), and Lowell Harwood and Sanford
Harwood (such individuals, collectively, the "Escrow Committee").
RECITALS
WHEREAS, Purchaser, the Company, and Central Parking System -- Empire
State, Inc., a New York corporation and a wholly-owned subsidiary of the
Purchaser ("Merger Sub"), have entered into an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of December 6, 1996, pursuant to which Company
will merge with Merger Sub with the Company surviving as a wholly-owned
subsidiary of Purchaser ("Surviving Corporation"); and
WHEREAS, Pursuant to the Merger Agreement, Purchaser will commence a cash
tender offer (the "Offer") to acquire all the outstanding stock of the Company;
and
WHEREAS, Pursuant to the Merger Agreement, a portion of the Offer Price,
the Merger Consideration and the Option Consideration (collectively the
"Consideration"), shall be deposited by Purchaser and held in escrow as
contingent consideration for distribution to the shareholders, optionholders and
warrantholders of the Company (collectively the "Shareholders") or to be
disbursed in whole or in part to Purchaser based upon resolution of the matters
described in Section 1.2 hereof; and
WHEREAS, the parties believe that there may be significant value that will
result from the resolution of certain contingent events which should accrue to
the benefit of the Shareholders but which can not currently be determined; and
WHEREAS, the resolution of such matters is dependent upon contingent events
beyond the control of the parties; and
WHEREAS, the Merger Agreement authorizes the Escrow Committee to represent
the interests of the Shareholders with respect to the Contingencies (as
hereinafter defined); and
WHEREAS, capitalized terms not otherwise defined in this Agreement shall
have the respective definitions assigned to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the premises of the Merger Agreement
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties have agreed to establish an escrow (the
"Escrow") pursuant to which a portion of the Consideration is to be deposited by
Purchaser to be held as contingent consideration for the Shareholders or
disbursed in whole or in part to Purchaser based upon resolution of the matters
described in Section 1.2 hereof (collectively, the "Contingencies") pursuant to
the terms of this Agreement. Accordingly, the parties hereto agree as follows:
SECTION 1. ESCROW.
1.1. Establishment of Escrow. Simultaneously with the deposit of
sufficient funds with the Depositary as required to consummate the tender offer,
Purchaser is delivering directly to the Escrow Agent a portion of the
Consideration, the payment of which is contingent upon the resolution of the
matters described in Section 1.2 hereof, equaling $2.50 per Share for each Share
tendered in the Offer by the Shareholders and for each Share which the holder of
any option or warrant is entitled to purchase under such option or warrant to
the extent that the holder of such option or warrant has agreed to the
"cash-out" provisions of Section 3.5 of the Merger Agreement. In addition, at
the Effective Time, Purchaser will deliver to the Escrow Agent $2.50 per Share
of the remaining Shares outstanding. The Depositary shall keep a list of (i) all
Shareholders who have tendered Shares which have been accepted for payment by
Purchaser in the Offer and the number of Shares so tendered, (ii) the number of
Shares converted into Option Consideration promptly after the closing of the
Offer and (iii) the Shareholders whose Shares are converted into Merger
Consideration in the Merger
<PAGE> 2
and the number of shares so converted (the "Escrow Certificate"). The Escrow
Agent shall invest such Escrowed Funds, provided the Escrowed Funds may only be
invested in short-term government securities (30 day maximum). Any interest
earned on the Escrowed Funds shall become part of the Escrowed Funds and be
available to be distributed pursuant to this Escrow Agreement. The contingent
rights in the Escrow are an integral part of the Consideration and shall be held
as contingent consideration for the Shareholders in the proportions set forth in
the Escrow Certificate. Such rights shall not be evidenced by a certificate or
any document other than this Escrow Agreement and the Merger Agreement, and do
not represent an interest in Purchaser, Merger Sub or Surviving Corporation.
1.2. Contingent Matters. The Escrowed Funds have been deposited by the
Purchaser with the Escrow Agent because of certain outstanding contingent
matters, which if resolved favorably could result in additional value to the
Company. The parties believe that in the event of a favorable resolution of
either or both of these contingencies the Shareholders should be entitled to the
distribution of the Escrowed Funds in whole or in part in accordance with the
terms hereof. The contingent matters contemplated by this Escrow Agreement are
set forth in Section 1.2.1 and 1.2.2.
1.2.1. The Wooster Escrow. $1.99 per Share of the Escrowed Funds (the
"Wooster Escrow") shall be held by the Escrow Agent for a period of up to
twelve (12) months from the Effective Time unless extended as provided in
this Section 1.2.1 (the "Escrow Period") solely in connection with the
resolution of the matters described in this Section 1.2.1. If during the
Escrow Period, the Company's property at 75 Wooster, New York, New York is
leased under a commercially reasonable lease agreement containing at least
the terms included in Exhibit 1.2(a) attached hereto, which include an
annual rental rate of no less than $900,000.00, (a "Conforming Lease") or
the Wooster property is sold on commercially reasonable terms that contain
at least the terms included in Exhibit 1.2(b) (a "Conforming Sale"), then
the entire Wooster Escrow shall be promptly delivered to the Depositary to
be distributed on a pro rata basis to the Shareholders based upon their
contingent rights thereto (based upon the proportions set forth in the
Escrow Certificate) upon notice from the Escrow Committee or Purchaser to
the Escrow Agent that such lease, executed by the lessee, has been
presented to Purchaser or Surviving Corporation for execution (or a
Conforming Sale has been consummated). If a Conforming Lease is being
negotiated but has not been executed or a contract for a Conforming Sale
executed by the potential purchaser is presented to Purchaser during the
Escrow Period, but such Conforming Lease is not presented or such
Conforming Sale is not closed during the Escrow Period, the Escrow Period
may be extended for ninety (90) days, in which case a Conforming Lease
executed or a Conforming Sale closed during such extension shall qualify as
a Conforming Lease or a Conforming Sale for purposes of the Wooster Escrow.
In the event that a Conforming Lease (or Conforming Sale) is not so
presented during the Escrow Period, as may be extended as provided above,
Purchaser shall be entitled to receive the entire Wooster Escrow without
any further claim by Shareholders. In the event that during the Escrow
Period, the property is leased on commercially reasonable terms, including
the terms included in Exhibit 1.2(a), but with a rental of less than
$900,000.00 per annum, Purchaser shall be entitled to receive from the
Wooster Escrow a sum in the aggregate equal to ten (10) times the
difference between $900,000.00 and the actual annual rental, up to the
maximum amount of the Wooster Escrow, if any, and the balance of the
Wooster Escrow shall be delivered to the Depositary to be distributed to
the Shareholders pro rata based upon the proportions set forth in the
Escrow Certificate. In the event that during the Escrow Period, the
property is sold at a purchase price of less than $9,000,000.00, payable in
cash at closing, Purchaser shall be entitled to receive from the Wooster
Escrow a sum in the aggregate equal to the difference between $9,000,000.00
and the actual sales price, up to the maximum amount of the Wooster Escrow
and the balance of the Wooster Escrow, if any, shall be delivered to the
Depositary to be distributed to the Shareholders pro rata based upon the
proportions set forth in the Escrow Certificate. In the event that during
the Escrow Period (i) the property is leased for a sum in excess of
$900,000.00 per year, on commercially reasonable terms including the terms
included in Exhibit 1.2(a), Purchaser shall pay over to the Escrow Agent an
additional sum of five (5) times the difference between $900,000.00 and the
actual annual rental; or (ii) the property is sold for a sum in excess of
$9,000,000.00, payable in cash at closing, Purchaser shall pay over to the
Escrow Agent an additional sum of fifty percent (50%) of the difference
between $9,000,000.00 and the actual sales price, which shall be delivered
to the Depositary for distribution to the
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<PAGE> 3
Shareholders of the Company together with the entire Wooster Escrow on a
pro-rata basis as additional Consideration. In the event of any variation
of the other terms set forth on Exhibit 1.2, the parties agree to use their
reasonable efforts to negotiate an equitable distribution of the Wooster
Escrow. Any interest on the Wooster Escrow shall accrue on a pro rata basis
to the party receiving such funds. All requests for distribution of the
Wooster Escrow pursuant to this Section 1.2.1 shall be made in accordance
with and shall be subject to Section 2 of this Agreement.
1.2.2. Occupancy Tax Escrow. $.51 per Share of the Escrowed Funds
shall be held in escrow by the Escrow Agent during the Escrow Period solely
in connection with the resolution of the matters described in this Section
1.2.2 (the "Occupancy Tax Escrow"). In the event the total commercial rent
occupancy tax liability of the Company or the Surviving Corporation for all
tax periods from June 1, 1984 through May 31, 1991, in the aggregate
(including all interest, penalties and principal) (the "Occupancy Tax
Liability") is less than or equal to $800,000, the Escrow Agent shall
promptly deliver to the Depositary the entire Occupancy Tax Escrow to be
distributed to the Shareholders on a pro rata basis based upon the
proportions set forth in the Escrow Certificate. If the Occupancy Tax
Liability is more than $800,000 but less than or equal to $900,000, the
Escrow Agent shall pay to Purchaser the Occupancy Tax Escrow funds equal to
the difference between the amount of the Occupancy Tax Liability and
$800,000, and any remaining Occupancy Tax Escrow funds shall be delivered
to the Depositary to be distributed to the Shareholders on a pro rata basis
based upon the proportions set forth in the Escrow Certificate. If the
Occupancy Tax Liability is more than $900,000 but less than or equal to
$1,000,000, the Escrow Agent shall pay to Purchaser the Occupancy Tax
Escrow funds equal to 110% of the difference between the amount of the
Occupancy Tax Liability and $800,000, and any remaining Occupancy Tax
Escrow funds shall be delivered to the Depositary to be distributed to the
Shareholders on a pro rata basis based upon the proportions set forth in
the Escrow Certificate. If the Occupancy Tax Liability is more than
$1,000,000, the Escrow Agent shall pay to Purchaser the Occupancy Tax
Escrow funds equal to 120% of the difference between the amount of the
Occupancy Tax Liability and $800,000, and any remaining Occupancy Tax
Escrow funds shall be delivered to the Depositary to be distributed to the
Shareholders on a pro rata basis based upon the proportions set forth in
the Escrow Certificate. In the determination of the Occupancy Tax
Liability, funds received from certain lessors or owners of property for
payment of the commercial rent occupancy tax required by such lease or
management agreement for any tax periods from June 1, 1984 through May 31,
1991, will be credited against the Occupancy Tax Liability provided that
Purchaser shall be required to make reasonable commercial efforts to
exercise its rights to recover such funds under the terms of the Company's
or the Surviving Corporation's agreements with respect thereto. The Escrow
Period may be extended by either the Escrow Committee or the Purchaser if
the tax liability for all tax periods ending on or prior to May 31, 1991 is
not finally resolved as of 12 months after the Effective Time provided in
no event may the Escrow Period extend beyond three years after the
Effective Time. Any interest on the Occupancy Tax Escrow shall accrue on a
pro rata basis to the party receiving such funds. All requests for
distribution of the Occupancy Tax Escrow pursuant to this Section 1.2.2
shall be made in accordance with and shall be subject to Section 2 of this
Agreement.
1.2.3. No Commingling. There shall be no commingling of the Wooster
Escrow and the Occupancy Tax Escrow, each of which is available solely to
satisfy its respective Contingency. Any expenses or costs of the Escrow
Agent in connection with disputes shall be allocated solely to the escrow
relating to the Contingency which is the subject of the dispute. Any
expenses relating generally to the escrow will be allocated proportionately
to the Wooster Escrow and the Occupancy Tax Escrow.
SECTION 2. DISTRIBUTION OF FUNDS.
2.1. Distributions. The Escrowed Funds will be distributed in accordance
with the procedures described in this Section 2.
2.2. Right to Release of Funds. Subject to any conflicting provisions of
Section 3 below, any time prior to the termination of this Escrow Agreement,
Purchaser may give written notice to the Escrow Committee or the Escrow
Committee may give written notice to Purchaser (in either case, with a copy to
the Escrow Agent)
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<PAGE> 4
of the resolution of either of the Contingencies (the "Notice"). Any Notice
shall briefly set forth the basis of the Notice and a reasonable estimate of the
amount to be distributed to the Depositary for distribution to each of the
Shareholders and Purchaser.
2.3. Holdback by Escrow Agent. Upon receipt by the Escrow Agent of such a
Notice, the Escrow Agent shall hold in escrow such portion of the Escrowed Funds
which will be sufficient to pay such resolution of the Contingencies, until
there has been a determination of the pending Contingencies in accordance with
the provisions of Section 2.4 hereof and such Escrowed Funds are distributable
pursuant to Section 2.5.
2.4. Resolution of Contingencies. If within ten (10) days after Notice as
provided in Section 2.2 Purchaser or Escrow Committee, as applicable, shall not
have received written objection (in the form specified later in this Section
2.4) to the resolution of such Contingency, then the Contingency shall be deemed
to have been resolved as provided in such Notice. If within this ten (10) day
period, written objection to such Notice is received from the other party (which
written objection shall state the nature and basis of the objection to the
Notice or the amount thereof, all in good faith, and a copy of which shall be
sent to the Escrow Agent), then for a period of ten (10) days after receipt of
such objection the parties shall attempt to settle the disputed resolution of
such Contingency. If they are unable to settle the dispute, the unresolved issue
or issues shall be settled in accordance with Section 5 hereof. The Purchaser
and the Escrow Committee, jointly (or, in the event of an arbitration proceeding
pursuant to Section 5, the prevailing party) shall promptly certify the final
determination of any resolution of such Contingency under this Section 2.4 by
written instruction to the Escrow Agent, upon which the Escrow Agent shall be
entitled to rely (provided that any unilateral notice by the prevailing party in
any arbitration proceeding is accompanied by a certified copy of the arbitration
award).
2.5. Distribution of Funds. Contingencies as to which a final
determination has been made pursuant to Section 2.4 shall be distributed in
accordance with this Section 2.5 promptly upon final determination of such
Contingency. The Escrow Agent shall distribute such Escrowed Funds, free and
clear of any interest of the other party as provided in any Notice which is not
contested or as provided in any joint Notice from Purchaser and Escrow Committee
of any contested Notice.
SECTION 3. TERMINATION OF ESCROW.
The Escrow will terminate one (1) year after the Effective Time unless
extended pursuant to Section 1.2 hereof. Immediately prior to such termination,
in the event there is then pending any contested resolution of a Contingency
which has (have) not been finally determined, the Purchaser or Escrow Committee
shall certify to the Escrow Agent in writing (with a copy to the other party)
the continuing validity of its Notice regarding such Contingency and the
Contingency shall be resolved in accordance with Section 2.4.
Upon termination of the Escrow, the Escrow Agent shall release and deliver
to the Depositary for distribution to the Shareholders the Escrowed Funds to be
delivered to the Shareholders pursuant to this Escrow Agreement in proportion to
the Shareholders' respective contingent rights as then reflected in the Escrow
Certificate held by the Depositary, free and clear of any escrow or
contingencies.
SECTION 4. ESCROW AGENT.
4.1 Appointment. Purchaser and the Escrow Committee hereby designate and
appoint First American National Bank, as Escrow Agent to serve in accordance
with the terms and conditions of this Agreement. The Escrow Agent hereby accepts
such appointment and agrees to act as Escrow Agent in accordance with such terms
and conditions.
4.2 Compensation and Expenses. Purchaser and the Escrow Committee agree
that the Escrow Agent shall be compensated for its services hereunder out of the
Escrowed Funds in accordance with Exhibit 4.2 hereto. Escrow Agent shall also be
entitled to reimbursement from the Escrowed Funds for all reasonable expenses
paid or incurred by it in the administration of its duties hereunder, including,
but not limited to, reasonably incurred transactional charges, counsel,
advisors' and agents' fees and disbursements. In the event a portion of the
Escrowed Funds is distributed to the Purchaser and a portion is delivered to the
Depositary to
4
<PAGE> 5
be distributed to the Shareholders under the terms of this Escrow Agreement, the
amount paid to the Escrow Agent shall be deducted on a pro rata basis from the
amount distributed to the Purchaser and the Shareholders.
4.3 Resignation and Discharge. The Escrow Agent may resign and be
discharged from its duties or obligations hereunder at any time by giving notice
of such resignation to the Purchaser and the Escrow Committee specifying a date
(not less than 30 days after the giving of such notice) when such resignation
shall take effect. Promptly after such notice, a successor Escrow Agent shall be
appointed at the joint direction of the Purchaser and Escrow Committee, and such
successor Escrow Agent will become Escrow Agent hereunder upon the resignation
date specified in the notice. The Escrow Agent shall continue to serve until its
successor accepts the Escrow and receives the Escrowed Funds. The Purchaser and
the Escrow Committee may agree at any time to substitute a new Escrow Agent by
giving notice thereof to the Escrow Agent then acting, provided that in the
event the Escrow Agent is removed it shall be entitled to receive its
compensation pursuant to Section 4.2 hereof earned prior to the date of removal.
4.4 Liability of Escrow Agent. The Escrow Agent undertakes to perform only
such duties as are specifically set forth in this Agreement, and shall have no
implied duties or obligations and shall not be charged with knowledge or notice
of any fact or circumstance not set forth herein. The Escrow Agent, acting or
refraining from acting in good faith, shall not be liable for any mistake of
fact or error of judgment by it or for any acts or omissions by it of any kind
taken in good faith, unless caused by willful misconduct or gross negligence.
Escrow Agent shall not be bound by any notice or demand, or any waiver,
modification, termination or rescission of this Agreement or any of its terms,
unless evidenced by a writing delivered to Escrow Agent, signed by the proper
party or parties. Escrow Agent shall be entitled to rely on any written document
delivered to it by the Purchaser and the Escrow Committee which the Escrow Agent
in good faith reasonably believes to be genuine, to have been signed or
presented by the person or parties purporting to sign the same and to conform to
the provisions of this Agreement.
4.5 Indemnification of Escrow Agent. From and at all times after the date
of this Agreement, Purchaser shall, to the fullest extent permitted by law and
to the extent provided herein, indemnify and hold harmless Escrow Agent and each
director, officer, employee, attorney, agent and affiliate of Escrow Agent
against any and all actions, claims (whether or not valid), losses, damages,
liabilities, costs and expenses of any kind or nature whatsoever (including
without limitation reasonable attorneys' fees, costs and expenses) incurred by
or asserted against any of the Escrow Agent from and after the date hereof,
whether direct, indirect or consequential, as a result of or arising from or in
any way relating to any claim, demand, suit, action or proceeding (including any
inquiry or investigation) by any person, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or failure of performance of this Agreement or any transactions
contemplated herein, whether or not the Escrow Agent is a party to any such
action, proceeding, suit or the target of any such inquiry or investigation;
provided, however, that the Escrow Agent shall not have the right to be
indemnified for any liability determined by a court of competent jurisdiction,
subject to no further appeal, to have resulted from the gross negligence or
willful misconduct of the Escrow Agent. If any such action or claim shall be
brought or asserted against the Escrow Agent, the Escrow Agent shall promptly
notify Purchaser in writing, and Purchaser shall assume the defense thereof,
including the employment of counsel satisfactory to the Escrow Agent and the
payment of all expenses. Escrow Agent shall, in its sole discretion, have the
right to employ separate counsel in any such action and to participate in the
defense thereof, and the fees and expenses of such counsel shall be paid by the
Escrow Agent unless (a) Purchaser agrees to pay such fees and expenses, or (b)
Purchaser shall fail to assume the defense of such action, or (c) the named
parties to any such action or proceeding (including any impleaded parties)
include both Escrow Agent and Purchaser and the Escrow Agent shall have been
advised in writing by counsel that there are one or more legal defenses
available to it which are different from or additional to those available to
Purchaser. The obligations of Purchaser under this Section 4.5 shall survive any
termination of this Agreement and the resignation or removal of Escrow Agent.
5
<PAGE> 6
4.6 Further Assurances. Purchaser and the Escrow Committee shall deliver
or cause to be delivered to Escrow Agent such further documents and instruments
and shall do and cause to be done such further acts as Escrow Agent shall
reasonably request (it being understood that Escrow Agent shall have no
obligation to make any such request) to carry out more effectively the
provisions and purposes of this Agreement, to evidence compliance herewith or to
assure itself that it is protected in acting hereunder.
4.7 Reports to Parties. The Escrow Agent shall, at least once during each
twelve-month period of the Escrow, deliver to the Depositary a report showing
the value (in dollars) of the Escrowed Funds and the status of the Escrowed
Funds. The Escrow Agent will request the Depositary to distribute to each
Shareholder a report showing the above plus the value (in dollars) of such
Shareholder's contingent rights in the Escrow.
SECTION 5. DISPUTES.
Any dispute that may arise under this Escrow Agreement with respect to (a)
any Notice by Purchaser or Escrow Committee; (b) the delivery, ownership, or
right to possession of the Escrowed Funds or any portion thereof; (c) the
instructions given to the Escrow Agent; and (d) any other questions arising
under this Agreement, shall be settled by (i) mutual agreement of the parties to
such dispute (evidenced by appropriate instructions in writing to the Escrow
Agent jointly by the Purchaser and the Escrow Committee, upon which the Escrow
Agent may rely) or (ii) by a binding and final arbitration in accordance with
the rules and procedures of the American Arbitration Association, whose
determination shall be final and conclusive. The Purchaser shall cooperate in
the voluntary exchange of information to expedite any such arbitration,
including without limitation, providing access to the Surviving Corporation's
tax and financial information as required to verify occupancy tax matters. The
Arbitration shall be conducted in New York City and shall be submitted to a
panel of three arbitrators who shall be recognized as experts in the New York
City Commercial Real Estate Market and issues related thereto, one of which
shall be selected by Purchaser, one of which shall be selected by the Escrow
Committee and the third of which shall be selected by the first two. The Escrow
Agent shall be under no duty to institute or defend any such proceedings and
none of the costs and expenses of any such proceedings shall be borne by the
Escrow Agent. Prior to the settlement of any dispute as provided in this Section
5, the Escrow Agent is authorized and directed to retain in its possession,
without liability to anyone (but subject to Section 4.4 hereof), the portion of
the Escrowed Funds that is the subject of or involved in the dispute. The Escrow
Agent shall be entitled to rely on a copy of the arbitration award with respect
to any such dispute delivered to it and certified as true and correct by the
prevailing party. If the Purchaser is the prevailing party in any such dispute,
it shall be entitled to recover as an addition to the Escrowed Funds
distributable pursuant to the final resolution of the Contingency in dispute,
Escrowed Funds equal to all reasonable costs and expenses including legal fees,
incurred by Purchaser in connection with the dispute. If the Shareholders are
the prevailing party in any such dispute, they shall be entitled to recover from
the Purchaser, all reasonable costs and expenses, including legal fees and
Escrow Agent fees and expenses incurred by the Shareholders in connection with
the dispute.
SECTION 6. ALLOCATION OF INTEREST.
Any interest earned on the Escrowed Funds during the Escrow Period, but not
distributed to either the Shareholders or the Purchaser at the end of any
taxable period will be deemed interest income of the Escrow pursuant to Section
468B of the Internal Revenue Code of 1986, as amended and will not be treated as
interest income to the Shareholders or Purchaser prior to distribution.
SECTION 7. MISCELLANEOUS.
7.1. No Waiver. No failure to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, provided
that the exercise of the remedies hereunder are exclusive of any other remedies
provided by law or contract.
7.2. Governing Law; Amendments. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Tennessee,
without giving effect to principles of conflict or laws. This
6
<PAGE> 7
Agreement may not be changed orally or modified, amended or supplemented without
an express written agreement executed by Escrow Agent and the other parties.
7.3. Assignment. This Agreement, and the terms, covenants and conditions
hereof, shall be binding upon and inure to the benefit of each party's
respective successors and legal representatives. Neither Purchaser nor the
Escrow Committee may assign any right or delegate any obligation under this
Agreement without the
prior written consent of Escrow Committee or Purchaser as the case may be and
any such attempted assignment or delegation will be null and void. A Shareholder
may not transfer its contingent rights with respect to the Escrow except by
will, intestate succession, or operation of law.
7.4. Headings. Section headings used herein are for convenience only and
are not to affect the construction of or be taken into consideration in
interpreting this Agreement.
7.5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
when taken together shall constitute one and the same instrument.
7.6. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given: (a) if delivered
personally or sent by facsimile, on the date received, (b) if delivered by
overnight courier, on the day after mailing, and (c) if mailed, five (5) days
after mailing with postage prepaid. Any such notice shall be sent as follows:
if to the Purchaser:
Central Parking Corporation
2401 21st Avenue South, Suite 200
Nashville, TN 37212
Attention: Chairman
(with copies to)
Mark Manner, Esq.
Harwell Howard Hyne Gabbert & Manner, P.C.
1800 First American Center
315 Deaderick Street
Nashville, Tennessee, 37238;
if to the Escrow Committee:
Lowell Harwood
c/o Leo Silverstein
Brock Fensterstock Silverstein McAuliffe & Wade, LLC
153 East 53rd Street, 56th Floor
New York, New York 10022-4611
Sanford Harwood
c/o Leo Silverstein
Brock Fensterstock Silverstein McAuliffe & Wade, LLC
153 East 53rd Street, 56th Floor
New York, New York 10022-4611
(with copies to)
Daniel R. Kaplan, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
7
<PAGE> 8
and
Leo Silverstein, Esq.
Brock Fensterstock Silverstein McAuliffe & Wade, LLP
One Citicorp Center
153 East 53rd Street
56th Floor
New York, New York 10022
If to the Escrow Agent:
First American National Bank
First American Center, 4th Floor
315 Deaderick Street
Nashville, Tennessee 37237-0404
Attention: Tammy Johnston
or to such other addresses as may be designated in writing by the party to
receive such notice. The Depositary can be notified at SunTrust Bank, Atlanta,
58 Edgewood Avenue, Room 225, Atlanta, Georgia 30303, Attention: Letitia
Radford.
7.7. Entire Agreement, etc. This Agreement constitutes the entire
agreement, and supersedes all other prior agreements, understandings,
representations and warranties both written and oral, among the parties, with
respect to the subject matter hereof, and, except as otherwise expressly
provided herein, are not intended to confer upon any other person any rights or
remedies hereunder.
7.8. Parties in Interest. This Agreement shall be binding upon and inure
to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person, other than the
Shareholders, any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow
Agreement as of the date first above written.
PURCHASER
By:
--------------------------------------
Title:
--------------------------------------
COMPANY
By:
--------------------------------------
Title:
--------------------------------------
ESCROW COMMITTEE
--------------------------------------
--------------------------------------
--------------------------------------
ESCROW AGENT
By:
--------------------------------------
Title:
--------------------------------------
9
<PAGE> 10
EXHIBIT 1.2
(a) A Conforming Lease shall include at least the following terms:
1. provide for an annual rental rate of no less than $900,000.00
2. have a non-cancelable term of at least fifteen (15) years
3. contain triple net lease provisions
4. provide for at least a two percent annual rental escalation
5. grant no more than one year free rent and
6. grant no more than a $750,000 build out allowance
(b) A Conforming Sale shall include at least the following terms:
1. a sale price of no less than $9,000,000.00 before deduction for or
the payment of any broker fees payable in cash at closing.
10
<PAGE> 1
AGREEMENT TO SUPPORT THE TRANSACTION
This Agreement (the "AGREEMENT") is made and entered into as of the
6th day of December, 1996 in favor of CENTRAL PARKING CORPORATION, a Tennessee
corporation ("PURCHASER"), and CENTRAL PARKING SYSTEM -- EMPIRE STATE, INC., a
New York corporation and wholly-owned indirect subsidiary of Purchaser ("MERGER
SUB"), by Lowell Harwood, Mrs. Lowell Harwood, Sanford Harwood, Brett Harwood,
Mrs. Brett Harwood, Brett Harwood as custodian and trustee for his minor
children, Leslie Harwood Ehrlich, Craig Harwood, Scott Harwood and Scott
Harwood as custodian for his minor children (collectively, the "SIGNIFICANT
SHAREHOLDERS").
W I T N E S S E T H:
WHEREAS, effective simultaneously herewith Purchaser, Merger Sub and
Square Industries, Inc. ( the "Company") have entered into an Agreement and
Plan of Merger dated as of the date hereof (the "Plan of Merger") pursuant to
which the Merger Sub will offer to purchase all of the outstanding common stock
of the Company; and
WHEREAS, under the conditions set forth herein the Significant
Shareholders have agreed to tender all of their shares of common stock, par
value $.01 of the Company (the "Company Common Stock") to Merger Sub in the
Offer.
NOW, THEREFORE, in order to induce Purchaser and Merger Sub to enter
into the Plan of Merger and in consideration of the foregoing and the covenants
and agreements set forth herein, and good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
ARTICLE 1.
1.1 Agreement to Tender Shares. The Significant Shareholders
agree to tender all of their Shares (including any Shares owned by foundations
or trusts over which the Shareholder has the power of disposition) of Company
Common Stock to Merger Sub in the Offer prior to the expiration of the Offer
and to enter into agreements to cash out all of their outstanding options and
warrants as provided in Section 3.5 of the Plan of Merger. In the event the
Board of Directors of the Company shall conclude, in good faith, in compliance
with Section 5.2 of the Plan of Merger, not to recommend, or to withdraw or
modify its recommendation of, the Offer or the Merger to the shareholders of
the Company in a situation which would permit the termination of the Plan of
Merger pursuant to Sections 7.3(ii) or 7.4(ii) of the Plan of Merger, then the
Significant Shareholders shall no longer be required to tender their Shares in
the Offer pursuant to this Section 1.1 and may withdraw any Shares tendered.
1.2 Support of Merger by Significant Shareholders. The Significant
Shareholders
<PAGE> 2
agree in their capacity as shareholders to support the Offer and the Merger, to
use their reasonable best efforts to recommend the Offer to the Company's other
shareholders, to seek approval of the Merger, and to take all actions and
execute all documents reasonably requested by Purchaser to carry out the
foregoing matters, the Offer and the Plan of Merger, including, but not limited
to the execution of written consent actions. In the event the Board of
Directors of the Company, including the Significant Shareholders in their
capacity as directors, shall conclude, in good faith, in compliance with
Section 5.2 of the Plan of Merger, not to recommend, or to withdraw or modify
its recommendation of, the Offer or the Merger to the shareholders of the
Company in a situation which would permit the termination of the Plan of Merger
pursuant to Sections 7.3(ii) or 7.4(ii) of the Plan of Merger, then the
Significant Shareholders shall no longer be required to support the Offer and
the Merger as provided in this Section 1.2.
1.3 Corporation Not Liable. From and after the Effective Date,
Significant Shareholders will not seek indemnification, contribution, recourse
or redress of any kind against Company or any of its subsidiaries in connection
with any indemnification or similar obligations pursuant to corporate law, or
contractual rights with respect to:
(a) in their positions and capacities as Company
shareholders with respect to any claims they may have as Company shareholders
against the Company and/or any officers or directors or employees of Company
and its subsidiaries with respect to the actions of Company and its
subsidiaries and its officers and directors and employees in connection with
negotiating and approving the Merger and related transactions; and
(b) any transaction with the Company (or any of its
subsidiaries) in which such person has a direct or indirect conflict of
interest.
provided, however, this waiver shall not affect the right of such persons to
indemnification under the Merger Agreement.
Significant Shareholders agree, however, that in the event that they
receive any benefits as shareholders or former shareholders of the Company as a
result of actions taken by shareholders or former shareholders of the Company
against the Company or Purchaser based on wrongdoing of the Company or its
officers or directors (including, but not limited to, fiduciary duty breach)
relating to the Merger then all such benefits shall be promptly returned to the
Company or Purchaser (or the Company and Purchaser can fail to pay such
benefits to the Significant Shareholder).
2
<PAGE> 3
1.4 Confidentiality Covenant by Significant Shareholders. Other
than their support of the Offer and the Merger contemplated hereby, Significant
Shareholders covenant and agree that they will not divulge, furnish, publish or
use for any purpose whatsoever, including but not limited to for any of their
personal benefit or for the direct or indirect benefit of any other person or
business entity, whether or not for monetary gain, any information which is not
generally known in the real estate or parking industries, regarding the
Company, the Merger or the transactions contemplated by the Plan of Merger or
of Purchaser or its subsidiaries, including without limitation, any information
relating to any business methods, marketing and business plans, financial
contacts, financial data, systems, customers, suppliers, procedures,
techniques, research, knowledge or processes used or developed by Purchaser or
its subsidiaries, or any other proprietary or confidential information relating
to Purchaser or its subsidiaries and their respective businesses. Each will
inform any of its representatives who receive information relating to the
Merger (the "Representatives") to treat such information confidentially and not
to use it other than for the purpose of analyzing and evaluating the Merger.
Each shall cause it and its Representatives to not trade securities of
Purchaser or Company or tip other persons until there is a public announcement
of the Merger.
1.5 Bankruptcy, etc. Each of the Significant Shareholders
represents that as to himself or herself, he or she is not involved as a debtor
in any proceedings in any court under any bankruptcy law or any other
insolvency or debtor's relief law, whether federal or state, or for the
appointment of a trustee, receiver, liquidator, assignee, sequesteror or other
similar official for a Significant Shareholder or any of their property.
ARTICLE 2.
2.1 Definitions. All terms which are capitalized and not defined
herein shall have the same meanings as given them in the Plan of Merger.
2.2 Several Obligations. The obligations of each of the
Significant Shareholders under this agreement are several and not joint.
2.3 Assignment by Purchaser. Purchaser may freely assign this
Agreement to an affiliate; provided Purchaser remains liable for any of its
obligations hereunder, without the express written consent of Significant
Shareholder(s). No Significant Shareholder(s) may assign any right or
delegate any obligation under this Agreement without the prior written consent
of Purchaser, and any prohibitive assignment or delegation will be null and
void. Purchaser will not unreasonably withhold consent to a transfer of
Company Common Stock from a Significant Shareholder to this Agreement if the
transferee agrees in writing to be bound by the terms of this Agreement.
2.4. Notices. All notices, requests, consents and other
communications hereunder
3
<PAGE> 4
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid by registered mail, return receipt
requested, or when delivered if by hand, overnight delivery service or
confirmed facsimile transmission, to the following:
(a) If to Purchaser, Merger Sub or Surviving Corporation,
c/o Central Parking, Central Parking Corporation at 2401 21st Avenue South,
Suite 200, Nashville, TN 37212, Attention: Chairman, or at such other address
as may have been furnished to Significant Shareholders by Purchaser in writing;
or
(b) If to Significant Shareholder(s), at c/o Leo
Silverstein, Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC, 153 E.
53rd Street, 56th Floo, New York, New York 10022 or such other address as may
have been furnished to Purchaser by Significant Shareholder(s) in writing.
2..5. Controlling Law. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State of New York.
2.6. Headings. Any paragraph headings in this Agreement are for
convenience of reference only and shall not be considered or referred to in
resolving questions of interpretation.
2.7 Binding Nature. Subject to Paragraph 2.3, this Agreement
shall be binding upon and shall inure to the exclusive benefit of the parties
hereto and their respective heirs, legal representatives, successors and
assigns.
2.8. Validity of Provisions. If any provision of this Agreement
shall be held to be illegal, invalid or unenforceable under any applicable law,
then such contravention or invalidity shall not invalidate the entire
Agreement. Such provision shall be deemed to be automatically modified to the
extent necessary to render it legal, valid and enforceable, and if no such
modification shall render it legal, valid and enforceable, then this Agreement
shall be construed as if not containing the provision held to be invalid, and
the rights and obligations of the parties shall be construed and enforced
accordingly.
2.9. Waiver. Neither the failure nor any delay on the part of any
party hereto in exercising any rights, power or remedies hereunder shall
operate as a waiver thereof, or of any other right, power or remedy; nor shall
any single or partial exercise of any right, power or remedy preclude any
further or other exercise thereof, or the exercise of any other right, power or
remedy.
2.10. Entire Agreement. This Agreement, those documents expressly
referred to herein, and other documents of even date herewith embody the
complete Agreement and understanding among the parties with respect to the
subject matter hereof, and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
4
<PAGE> 5
2.11. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
ARTICLE 3.
3.1 Effectiveness. This agreement is effective upon the execution
of the Plan of Merger.
5
<PAGE> 6
IN WITNESS WHEREOF, this agreement has been duly executed as of the
date first written above.
SIGNIFICANT SHAREHOLDERS:
-------------------------
----------------------------------------------
Lowell Harwood
----------------------------------------------
Mrs. Lowell Harwood
----------------------------------------------
Sanford Harwood
----------------------------------------------
Brett Harwood
----------------------------------------------
Mrs. Brett Harwood
----------------------------------------------
Brett Harwood, as custodian and trustee
for his minor children
----------------------------------------------
Leslie Harwood Ehrlich
----------------------------------------------
Craig Harwood
----------------------------------------------
Scott Harwood
----------------------------------------------
Scott Harwood, as custodian for
his minor children
6
<PAGE> 1
CONFIDENTIALITY AND NONCOMPETE AGREEMENT
This Confidentiality and Noncompete Agreement is entered into as of
the ______ day of ____________, 199__, between ___________________
("Shareholder"), and Central Parking Corporation, a Tennessee corporation
("Purchaser") and ________________, a New York corporation (the "Surviving
Corporation").
WHEREAS, Purchaser, Square Industries, Inc., a New York corporation
(the "Company"), and Central Parking System -- Empire State, Inc., a New York
corporation and a wholly-owned subsidiary of the Purchaser ("Merger Sub")
entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated
as of December 6, 1996 pursuant to which Company will merge with and into
Merger Sub with Company surviving as a wholly owned subsidiary of Purchaser;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements made herein and in the Merger Agreement, the Offer Price, the Merger
Consideration and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound thereby, agree as follows:
1. Non-Compete.
(a) Shareholder recognizes and acknowledges that all
information pertaining to the parking ownership and management business of the
Company, Purchaser and Surviving Corporation (the "Business") and the related
affairs, clients, customers or other relationships of Company, Purchaser and
Surviving Corporation that is not generally known to the real estate or parking
industries or to the public generally is confidential and is a unique and
valuable asset of Purchaser and Surviving Corporation. Access to and knowledge
of this information were and are essential to the performance of Surviving
Corporation's operation. Shareholder will not give to any person, firm,
association, or governmental agency any information concerning the affairs,
business, clients, customers or other relationships of Purchaser, Company or
Surviving Corporation except as required by law. Shareholder will not make use
of this type of information for its own purposes or for the benefit of any
person or organization other than Surviving Corporation. Shareholder shall use
its best efforts to prevent the disclosure of this information by others. All
records, memoranda, etc. relating to the Business which is deemed confidential
hereunder whether made by Company, Shareholder or otherwise coming into its
possession will remain the property of Surviving Corporation.
<PAGE> 2
(b) Shareholder hereby covenants and agrees with
Purchaser and Surviving Corporation that, during the "NONCOMPETE PERIOD" and
within the "NONCOMPETE AREA," it shall not directly or indirectly: (i) acquire,
lease, manage, consult for, serve as agent or subcontractor for, finance,
invest in, own any part of or exercise management control over any parking
business or business that provides any services competitive with the services
provided by the Business; (ii) solicit for employment or employ any nonclerical
person who at Closing or thereafter became an employee of Purchaser or
Surviving Corporation unless such person is no longer employed by Purchaser or
Surviving Corporation for at least six (6) months; or (iii) with respect to any
customer, supplier or property owner with whom Purchaser or Surviving
Corporation contracts in connection with the Business, either solicit the same
in a manner that reasonably could adversely affect Purchaser or Surviving
Corporation, or make statements to the same that disparage Purchaser or
Surviving Corporation or its operations in any way. The "NONCOMPETE PERIOD"
shall commence at Closing and terminate on the fifth anniversary thereof. The
"NONCOMPETE AREA" shall mean a fifty (50) mile radius of each location from
which the Business of Company is operated as of Closing. Ownership of less
than five percent (5%) of the stock of a publicly-held company shall not be
deemed a breach of this covenant. Provided; however, nothing in the Agreement
shall prohibit Shareholder from engaging in the activities disclosed on Exhibit
1 attached hereto.
(c) In the event Purchaser or Surviving Corporation
materially breaches that certain Consultancy Agreement dated ____________,
199__, between Purchaser and Shareholder, then paragraph 1(b) of this Agreement
shall terminate and be of no further force and effect. [THIS PROVISION WOULD BE
IN LOWELL'S AND SANFORD'S AGREEMENTS ONLY]
2. Enforcement.
(a) Shareholder acknowledges that its breach or
threatened or attempted breach of any provision of Section 1 would cause
irreparable harm to Purchaser or Surviving Corporation not compensable in
monetary damages and that Purchaser and Surviving Corporation shall be
entitled, in addition to all other applicable remedies, to a temporary and
permanent injunction and a decree for specific performance of the terms of
Section 1. Nothing herein contained shall be construed as prohibiting
Purchaser or Surviving Corporation from pursuing any other remedy available to
it for such breach or threatened breach.
(b) All parties hereto acknowledge the necessity of
protection against the competition of Shareholder and that the nature and scope
of such protection as been carefully considered by the parties. The period
provided and area covered are expressly acknowledged and agreed to be fair,
reasonable and necessary. In the event any covenant contained in Section 1 is
held to be invalid, illegal or unenforceable because of the duration of such
covenant, the geographic area covered thereby or otherwise, the parties agree
that the court making such determination shall have the power to reduce the
duration, the area and/or other provision(s) of any such covenant to the
maximum permissible and to include
2
<PAGE> 3
as much of its nature and scope as will render it enforceable, and, in its
reduced form said covenant shall be valid, legal and enforceable.
3. No Agency. Shareholder shall have no right, authority or
power to act for or on behalf of Surviving Corporation.
4. General Assistance. Shareholders will furnish information as
may be in its possession and cooperate with Surviving Corporation as may be
requested in connection with any claims or legal actions in which Surviving
Corporation is or may become a party.
5. Assignment; Successors and Assigns. The obligations of
Shareholder hereunder are personal in nature and are not assignable or
delegable by it. Any prohibited assignment or delegation will be null and
void. Purchaser or Surviving Corporation may assign and delegate this
Agreement to a successor of substantially all of its business assets or to a
party involved in the parking industry. The provisions hereof shall inure to
the benefit of and be binding upon the permitted successors and assigns of the
parties hereto.
6. Governing Law. This Agreement shall be interpreted under,
subject to and governed by the substantive laws of the State of Tennessee, and
all questions concerning its validity, construction, and administration shall
be determined in accordance thereby.
7. Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original but
all of which shall together constitute one and the same instrument.
8. Invalidity. The invalidity or unenforceability of any
provision of this Agreement shall not affect any other provision hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision was omitted. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision there shall be added automatically as a
part of this Agreement a provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible and be legal, valid and
enforceable.
9. Exclusiveness. [SUBJECT TO PROVISION OF SECTION 1(C),] this
Agreement constitutes the entire understanding and agreement between the
parties with respect to the subject matter hereof and supersedes any and all
other agreements, oral or written, between the parties. [BOLD LANGUAGE FOR
LOWELL'S AND SANFORD'S AGREEMENTS ONLY]
10. Modification; Waiver. This Agreement may not be modified or
amended except in writing signed by the parties. No term or condition of this
Agreement will be deemed to have been waived except in writing by the party
charged with waiver. A waiver
3
<PAGE> 4
shall operate only as to the specific term or condition waived and will not
constitute a waiver for the future or act on anything other than that which is
specifically waived.
11. Arbitration. Any dispute among the parties hereto shall be
settled by binding arbitration in Nashville, Tennessee in accordance with the
then effective rules of the American Arbitration Association, and judgment upon
the award rendered may be entered in any court having jurisdiction thereof. In
any action or proceeding brought to enforce any provision of this Agreement,
the prevailing party shall be entitled to recover its costs from the opposing
party, including reasonable legal fees and expenses.
12. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first-class postage prepaid by registered mail,
return receipt requested, or when delivered if by hand, overnight delivery
service or confirmed facsimile transmission, to the following:
(a) If to Purchaser or Surviving Corporation, c/o Central
Parking, Central Parking Corporation at 2401 21st Avenue South, Suite 200,
Nashville, TN 37212, Attention: Chairman, or at such other address as may
have been furnished to Shareholder by Purchaser or Surviving Corporation in
writing; or
(b) If to Shareholder, at ______________________________
or such other address as may have been furnished to Purchaser or Surviving
Corporation by Shareholder in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CENTRAL PARKING CORPORATION
--------------------------------
By:
---------------------------
Title:
---------------------------
4
<PAGE> 5
EXHIBIT 1
EXCLUSIONS FROM NONCOMPETE AGREEMENT
1. Shareholder may acquire, own and lease real estate
used in the Business in the Noncompete Area, provided that
Central Parking Corporation is offered right of first refusal
to operate or manage parking located thereon unless the real
estate is subject to an existing agreement at the time of the
acquisition, in which case, Central Parking Corporation's
right of first refusal will be delayed until the termination
of such existing agreement
2. Shareholder may broker real estate located in the
Noncompete Area, provided Central Parking Corporation is
offered right of first refusal to manage parking located
thereon unless the real estate is subject to an existing
agreement at the time of the acquisition, in which case,
Central Parking Corporation's right of first refusal will be
delayed until the termination of such existing agreement
3. Shareholder may continue to own and lease real estate
currently owned or leased by Shareholder within the Noncompete
Area with parking operations, provided that Central Parking
Corporation is offered right of first refusal to operate or
manage parking located thereon. The parties acknowledge that
the currently owned properties consist of the following:
Location City/State
206 E. 59th Street New York/NY
135 Sip Avenue Jersey City/NJ
801 Pavonia Jersey City,/NJ
275 Washington Street Boston/ MA
421 North Seventh Street Philadelphia/PA
20th and Market Street Philadelphia/PA
For purposes of this Confidentiality and Noncompete Agreement, Central Parking
shall notify Shareholder of its intention to exercise its right of first
refusal as provided in paragraphs 1, 2 or 3 above within fifteen (15) business
days of its receipt of notice of such right.
5
<PAGE> 1
EXHIBIT 8
CONSULTANCY AGREEMENT
This Agreement made and entered into as of this 1st day of January, 1997
between Central Parking Systems, Inc., a Tennessee corporation ("CPS") and
Lowell Harwood, an individual who presently resides in New York City
(hereinafter "Harwood").
W I T N E S S E T H
WHEREAS, Harwood is knowledgeable of real estate opportunities for
parking facilities in the United States; and
WHEREAS, CPS has need for the experience and expertise of Harwood.
NOW, THEREFORE, the parties hereto agree as follows:
1. Term. The term of the Consultancy Agreement will be for one
year running from January 1, 1997 through December 31, 1997.
2. Compensation. In consideration of the duties to be performed
by Harwood pursuant hereto, CPS will pay to Harwood the sum of
One Hundred Twenty Thousand Dollars ($120,000) payable at the
rate of Ten Thousand Dollars ($10,000) per month on or before
the last day of each calendar month during the term hereof.
In addition, Harwood will be entitled incentive compensation
as provided in Exhibit 2.
3. Duties. Harwood will advise and consult CPS in connection
with the acquisition, ownership, leasing, operation and/or
management of storage and parking facilities for automobiles
and motor vehicles throughout the United States.
Harwood will be reimbursed the reasonable out-of pocket
expenses he incurs in connection with the performance of
services set forth herein provided that he first obtains CPS'
written approval of such expenses in advance.
4. This Agreement is subject and subordinate to that certain
Confidentiality and Noncompete Agreement dated ______________,
1997 between Central Parking Corporation and Harwood. Harwood
agrees that all services rendered by him in connection with
this Agreement will be for the sole benefit of CPS and Harwood
agrees that this Consultancy Agreement is not to be
<PAGE> 2
construed or interpreted as in any way derogating the effect
of the Confidentiality and Noncompete Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
January 1, 1997.
CENTRAL PARKING SYSTEM, INC.
ATTEST: By:
---------------------------- ------------------------------------
Monroe J. Carell, Jr., Chairman
ATTEST: By:
---------------------------- ------------------------------------
Lowell Harwood
<PAGE> 3
EXHIBIT 2
TO
CONSULTING AGREEMENT FOR LOWELL HARWOOD
- - Lowell Harwood would be offered a seat on the Board of Directors of
Central Parking Corporation as proposed in the Letter from Monroe
Carell dated October 22, 1996.
- - In addition, Lowell Harwood would be eligible for incentive payments
for every acquisition or business opportunity realized by Central
Parking Corporation that he originates or identifies, after
consummation of the transaction.
- 10% of all Gross Operating Income (NOI less 5% of operating
expenses G&A burden) derived from new leases or 10% of pretax
operating profit from newly acquired companies, in each case
where Lowell Harwood was primarily responsible for such lease
or acquisition.
- 10% of all Gross Operating Income (NOI less 5% of operating
expenses G&A burden) derived from new management agreements
where Lowell Harwood was primarily responsible for securing
the management agreement.
- Incentive compensation will be paid to Lowell Harwood for
seven one-half years from the date of commencement of
operation pursuant to the lease on management agreement or
company acquisition.
- Incentive compensation will be paid to Lowell Harwood annually
within forty-five (45) days after the fiscal year end.
- Incentive compensation will be in addition to reimbursement of
any expenses incurred in acquiring new leases, management
contracts and properties, provided Harwood complies with the
provisions of Section 3 of the Consulting Agreement.
<PAGE> 1
EXHIBIT 9
CONSULTANCY AGREEMENT
This Agreement made and entered into as of this 1st day of January, 1997
between Central Parking Systems, Inc., a Tennessee corporation ("CPS") and
Sanford Harwood, an individual who presently resides in New York City
(hereinafter "Harwood").
W I T N E S S E T H
WHEREAS, Harwood is knowledgeable of real estate opportunities for
parking facilities in the United States; and
WHEREAS, CPS has need for the experience and expertise of Harwood.
NOW, THEREFORE, the parties hereto agree as follows:
1. Term. The term of the Consultancy Agreement will be for six
months running from January 1, 1997 through June 30, 1997.
2. Compensation. In consideration of the duties to be performed
by Harwood pursuant hereto, CPS will pay to Harwood the sum of
Sixty Thousand Dollars ($60,000) payable at the rate of Ten
Thousand Dollars ($10,000) per month on or before the last day
of each calendar month during the term hereof.
3. Duties. Harwood will advise and consult CPS in connection
with the acquisition, ownership, leasing, operation and/or
management of storage and parking facilities for automobiles
and motor vehicles throughout the United States.
Harwood will be reimbursed the reasonable out-of pocket
expenses he incurs in connection with the performance of
services set forth herein provided that he first obtains CPS'
written approval of such expenses in advance.
4. This Agreement is subject and subordinate to that certain
Confidentiality and Noncompete Agreement dated ______________,
1997 between Central Parking Corporation and Harwood. Harwood
agrees that all services rendered by him in connection with
this Agreement will be for the sole benefit of CPS and Harwood
agrees that this Consultancy Agreement is not to be construed
or interpreted as in any way derogating the effect of the
Confidentiality and Noncompete Agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Agreement as of
January 1, 1997.
CENTRAL PARKING SYSTEM, INC.
ATTEST: By:
---------------------------- ------------------------------------
Monroe J. Carell, Jr., Chairman
ATTEST: By:
---------------------------- ------------------------------------
Sanford Harwood
<PAGE> 1
EXHIBIT 10
July 10, 1996
Square Industries, Inc.
c/o The Blackstone Group L.P.
345 Park Avenue
New York, NY 10154
CONFIDENTIALITY AGREEMENT
Dear Sirs:
In connection with our possible interest in an acquisition of or merger
with Square Industries, Inc. (the "Transaction"), you or your Representatives
(as defined below) are furnishing us or our Representatives with certain
information (written or oral) which is either non-public, confidential or
proprietary in nature. This information shed to us or our Representatives,
together with any notes, analyses, compilations, forecasts, studies, memoranda,
computer-stored data or other documents prepared by us or our Representatives
which contain or otherwise reflect such information, is hereinafter referred to
as the "Information". As used in this agreement, the term "Representative"
means, as to any person, such person's affiliates and its and their respective
directors, officers, employees, partners, shareholders, members, agents,
advisors (including financial advisors, attorneys and accountants) and other
representatives.
In consideration of your furnishing us with the Information, we agree that
the Information will be kept confidential and shall not, without your prior
written consent, be disclosed by us or our Representatives, in any manner
whatsoever, in whole or in part, and shall not be used by us or our
Representatives other than in connection with evaluating a possible
Transaction. For purposes hereof, the term "Information" shall not include
such portion of the information which (i) is or becomes generally available to
the public other than as a result of a disclosure by us or our Representatives
or (ii) is or becomes available to us or our Representatives on a
nonconfidential basis from a source which, to our knowledge, is not prohibited
from disclosing such information to us or our Representatives. With respect to
the latter it shall be assumed that any source which provides us with
information has been prohibited from disclosing the Information to us or our
Representatives unless the Company prior to any disclosure has been advised by
us of the source and the Company has not advised us of the prohibition.
We agree to reveal the Information only to our Representatives who need to
know the Information for the purpose of evaluating the possible Transaction,
who are informed by us of the confidential nature of the Information and who
shall agree to act in accordance with the
<PAGE> 2
terms and conditions of this agreement. We shall be responsible for any breach
of this agreement by our Representatives.
Without your prior written consent, except as required by law (as advised
by counsel), and in which case prior notice will be given to you, we and our
Representatives will not disclose to any person the fact that the Information
has been made available, that discussions or negotiations are taking place or
have taken place concerning a possible Transaction involving us and Square
Industries, Inc. (the "Company") or any of the terms, conditions or other facts
with respect to any such possible Transaction, including the status thereof.
The term "person" as used in this agreement shall be interpreted broadly to
include the media and any governmental representative or authority, company,
partnership, joint venture group, partner, co-venturer, individual or other
entity.
All copies of the Information, except for that portion of the Information
which consists of notes, analyses, compilations, forecasts, studies, memoranda,
other computer-stored data or other documents prepared by us or our
Representatives ("Internal Materials"), will be returned to you immediately
upon your request. In addition, Internal Materials will be kept confidential
for a period of five (5) years from the date hereof. Notwithstanding such
return, we and our Representatives will continue to be bound by our obligations
of confidentiality (including with respect to oral Information) and our other
obligations as provided hereunder.
It is understood that all (i) communications regarding a possible
Transaction, (ii) requests for additional information, (iii) requests for
facility tours or management meetings and (iv) discussions or questions
regarding procedures, will be submitted or directed to The Blackstone Group
L.P. ("Blackstone").
We acknowledge that none of you, Blackstone or your or their
Representatives, makes any express or implied representation or warranty as to
the accuracy or completeness of the Information, and each of you, Blackstone
and your and their Representatives, expressly disclaims any and all liability
that may be based on the Information, efforts therein or omissions therefrom.
We agree that we are not entitled to rely on the accuracy or completeness of
the Information and that any reliance would be as specifically provided in the
definitive agreement, if any, regarding the Transaction.
In the event that we or any of our Representatives are required to
disclose any of the Information pursuant to any applicable law, regulation or
legal process, we will provide you with prompt notice thereof so that you may
seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this agreement. In the event that such protective order
or other remedy is not obtained, or that the Company waives compliance with the
provisions of this agreement, we will furnish only that portion of the
Information which we are advised by counsel is legally required and will
exercise our reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded the Information.
We agree that you reserve the right, in your sole and absolute discretion,
to reject any or all proposals, to decline to furnish further information and
to terminate discussions and
2
<PAGE> 3
negotiations with us at any time. The exercise by you of these rights shall not
affect the enforceability of any provision of this agreement.
We agree that until the expiration of two (2) years from the date of this
agreement, we shall not, without the prior approval of the Board of Directors
of the Company, (i) in any manner acquire, agree to acquire or make any
proposal to acquire, directly or indirectly, any securities of the Company or
any of its subsidiaries, (ii) propose to enter into, directly or indirectly,
any merger or business combination involving the Company or any of its
subsidiaries or to purchase, directly or indirectly, a material portion of the
assets of the Company or any of its subsidiaries, (iii) make, or in any way
participate, directly or indirectly, in any "solicitation" of "proxies" (as
such terms are defined under Regulation 14A of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) to vote, or seek to advise or influence
any person with respect to the voting of any voting securities of the Company
or any of its subsidiaries, (iv) form, join or in any way participate in a
"group" (within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations thereunder) with respect to any voting securities of the
Company or any of its subsidiaries, (v) otherwise act, alone or in concert with
others, to seek to control or influence the management, Board of Directors or
policies of the Company or any of its subsidiaries, (vi) disclose any
intention, plan or arrangement inconsistent with the foregoing or (vii) advise,
assist or encourage any other persons in connection with any of the foregoing.
We also agree during such period not to (a) request the Company or its
Representatives, directly or indirectly, to amend or waive any provision of
this paragraph (including this sentence) or (b) take any action which might
require the Company to make a public announcement regarding the possibility of
an acquisition, business combination or merger.
Until two (2) years from the date of this agreement, except with the prior
written consent of the Company, we agree not to, and will direct our
Representatives not to, (a) based on the Information hold any discussions with
lessors, property owners, suppliers, customers and/or any other person with
whom the Company or any of its subsidiaries have a relationship regarding the
Company or any of its subsidiaries for the purpose of negotiating or executing
a lease or management contract with respect to any parking facility or property
to include a parking facility which facility or property is included in the
Information or (b) solicit for hire any of the executive officers or
management-level employees of the Company or any of its subsidiaries.
We hereby acknowledge that we are aware, and that we will advise our
Representatives who are furnished Information, that securities laws prohibit
any person who has received from an issuer material, non-public information
concerning the matters which are the subject of this agreement from purchasing
or selling securities of such issuer or from communicating such information to
any other person.
We understand and agree that no failure or delay by you or your
Representatives in exercising any right, power or privilege hereunder shall
operate as a waiver hereof nor shall any single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege
hereunder. We acknowledge that remedies at law may be inadequate to protect
against breach of this agreement, and we hereby in advance agree to the
granting of specific performance and/or injunctive relief in your favor without
proof of actual damage without the
3
<PAGE> 4
Company being required to post any bond or any security. Such relief shall not
be deemed to be the exclusive relief for a breach by us or our Representatives
of this agreement but shall be in addition to all other remedies available to
you at law or equity. In addition, in the event that any portion of this
agreement shall be held to be invalid or unenforceable for any reason, it is
hereby agreed that such invalidity or unenforceability shall not affect the
other portions of this agreement.
We hereby confirm that we are not acting as a broker for or a
representative of any person and are considering the Transaction only for our
own account. Any assignment of this agreement by us without your prior written
consent shall be void.
Except as otherwise provided herein, the terms and provisions of this
agreement will terminate three years from the date hereof.
We agree that this agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York. We hereby
irrevocably consent to the exclusive jurisdiction of the federal and state
courts located in the City of New York (and appellate courts therefrom) for any
actions or proceedings arising out of or relating to this agreement,
irrevocably waive any objection to the venue of any such action or proceeding
in any such court and unconditionally waive any objection that such action or
proceeding has been brought in an inconvenient forum and agree not to plead or
claim the same.
Please confirm your agreement with the foregoing, by signing and returning
to the undersigned the duplicate copy of this agreement enclosed herewith.
Very truly yours,
Central Parking Corp.
By:
-----------------------------
Name: Monroe J. Carell, Jr.
Title: Chairman and CEO
Accepted:
Square Industries, Inc.
By:
-----------------------
Name:
Title:
4
<PAGE> 1
(LOGO) SQUARE INDUSTRIES, INC.
December 13, 1996
Dear Shareholder:
On behalf of the Board of Directors of Square Industries, Inc. ("Square"),
I am pleased to inform you that on December 6, 1996 Square entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Central Parking
Corporation ("Parent") and Central Parking System -- Empire State, Inc., an
indirect wholly-owned subsidiary of Parent ("Purchaser"), pursuant to which
Purchaser has commenced today a tender offer to purchase all of the outstanding
shares of Square's common stock at a price of $28.50 per share net to the seller
in cash promptly following the completion of the Offer, without interest, and an
additional $2.50 per share to be deposited by Parent and held in escrow as
contingent consideration (subject to adjustment pursuant to the terms of an
Escrow Agreement among the parties) for distribution in whole or in part to
either the shareholders, option holders or warrant holders of the Company or to
Parent based upon resolution of certain contingent matters, which if favorably
resolved, would result in additional value to the Company (the "Offer").
Following the completion of the Offer, upon the terms and subject to the
conditions of the Merger Agreement, Purchaser will be merged into Square and
each of the shares of Square not owned by Parent or any direct or indirect
wholly-owned subsidiary of Purchaser or Square or by any dissenting shareholders
will be converted into the right to receive the Merger Consideration. However,
if fewer than two-thirds of all outstanding shares of Square on a fully diluted
basis are tendered and not withdrawn pursuant to the Offer, Purchaser shall not
be required to accept and pay for the shares tendered.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF SQUARE'S SHAREHOLDERS AND
RECOMMENDS THAT THE SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES OF
SQUARE COMMON STOCK PURSUANT TO THE OFFER.
In arriving at its decision, your Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9
that is being filed with the Securities and Exchange Commission. Among other
things, your Board considered the opinion of its financial advisor, The
Blackstone Group L.P., that the consideration to be received pursuant to the
Offer is fair, from a financial point of view, to the shareholders of Square.
The enclosed Schedule 14D-9 describes the Board's decision and contains other
important financial information relating to that decision. We urge you to read
it carefully.
Accompanying this letter, in addition to the Schedule 14D-9 and the
financial advisor's fairness opinion, is the Offer to Purchase, together with
related materials including a letter of transmittal for use in tendering shares.
These documents set forth the terms and conditions of the Offer and provide
instructions as to how to tender your shares. We urge you to read the enclosed
materials carefully and consider all factors set forth therein before making
your decision with respect to the Offer.
I, personally, along with the entire Board of Directors, management and
employees of Square thank you for your loyal support throughout the years.
Sincerely,
/s/ LOWELL HARWOOD
Lowell Harwood
Chairman and Chief Executive Officer
<PAGE> 1
Exhibit 12
FOR IMMEDIATE RELEASE
Contact: Sanford Harwood
Assistant Chairman
(201) 798-0090
SQAI
SQUARE INDUSTRIES ANNOUNCES AGREEMENT TO BE
ACQUIRED BY CENTRAL PARKING
New York, New York, December 9, 1996 -- Square Industries, Inc. (NASDAQ -
SQAI), announced today that it has entered into an agreement providing for the
acquisition of the Company by Central Parking Corporation, a leading provider
of parking in the United States. The proposed acquisition is to be effected by
a cash tender offer by Central Parking for the outstanding shares of the
Company's common stock and subsequent merger with a subsidiary of Central
Parking. Shareholders of the Company are to receive $28.50 for each outstanding
share in cash at the closing of the offer or effectiveness of the merger and
$2.50 per share to be held in escrow and disbursed to the Shareholders if
certain conditions are satisfied.
The transaction has been recommended by the Board of Directors of the
Company and of Central Parking. Notice of the cash tender offer is expected to
be filed by Central Parking with the Securities and Exchange Commission on
December 13, 1996. The cash tender offer is subject to certain conditions
including the acceptance of the offer by at least 66 2/3% of the outstanding
common stock of the Company.
Of the escrowed funds, payment of $1.99 per share is contingent on the
execution of a lease or effecting a sale, meeting certain criteria with respect
to one specific property, and may be held in escrow for up to twelve months.
Payment of $0.51 per share is contingent on the resolution of certain tax
issues, and may be held for up to three years. The escrow agreement provides
that any interest earned on the escrowed funds will be distributed to the party
receiving the funds and that certain expenses will be paid out of the escrowed
funds.
Lowell Harwood, Chairman and Chief Executive Officer of Square Industries,
stated "we look forward to joining forces with Central, and we believe that
Square's leadership in the Northeast, U.S. will complement and strengthen
Central's position in the parking industry".
Monroe J. Carell, Jr., Chairman and Chief Executive Officer of Central
Parking, remarked, "we are confident that this proposed acquisition will
contribute positively to our continued growth in earnings, starting in our 1997
fiscal year. The majority of parking facilities which Square
<PAGE> 2
Industries controls and manages are in geographic areas where we already have
established operations. We believe this transaction represents another logical
and profitable way of enhancing our overall competitive position."
Square Industries, headquartered in Jersey City, New Jersey, currently
operates approximately 117 parking facilities containing over 61,000 spaces
located primarily in the Northeast (New York City, 49; Philadelphia, 30;
Newark, 17; Pittsburgh, 11 and other cities, 10.) Included in Square's
facilities are Rockefeller Center and One Penn Plaza as well as sports
complexes such as Shea Stadium, home of the New York Mets and Corel
Centre/Palladium in Ottawa, Canada. Square Industries reported revenue of $65.9
million for the year ended December 31, 1995.
Central Parking reported revenue of $143.3 million for its fiscal year
ended September 30, 1996. Headquartered in Nashville, Tennessee, Central
Parking is a leading provider of parking services in the United States. The
Company currently operates in excess of 1,360 parking facilities containing
over 546,000 parking spaces located in 32 states, the District of Columbia, the
United Kingdom, Mexico, Puerto Rico and Germany. The Company provides parking
consulting services in Malaysia and Spain and has a business development office
in Amsterdam.
<PAGE> 1
(LOGO) THE BLACKSTONE GROUP
December 6, 1996
Board of Directors
Square Industries, Inc.
921 Bergen Avenue
Jersey City, NJ 07306
Dear Sirs:
You have asked our opinion with respect to the fairness, from a financial
point of view, to the holders, excluding shares as to which dissenters' rights
have properly been exercised, of the common stock, par value $0.01 per share
(the "Shares"), of Square Industries, Inc. (the "Company") of the consideration
to be received by such holders in connection with (a) the proposed tender offer
(the "Offer") by Central Parking System -- Empire State, Inc. (the "Acquisition
Sub"), a wholly-owned subsidiary of Central Parking Corporation (the "Parent"),
for all outstanding Shares at a price equal to $28.50 per Share, in cash, plus
an additional amount placed into escrow, as more fully set forth in the
Agreement (defined below) (the "Consideration"), and (b) the proposed merger of
the Acquisition Sub with and into the Company pursuant to the Merger Agreement
(the "Agreement") dated as of December 6, 1996 among the Company, the Parent and
the Acquisition Sub (the "Merger", and together with the Offer, the
"Transaction"), pursuant to which all Shares remaining outstanding, other than
Shares owned by the Parent, the Acquisition Sub or their affiliates, or Shares
as to which dissenters' rights have properly been exercised, will be converted
into the right to receive an amount in cash equal to the Consideration. The
terms and conditions of the Merger are more fully set forth in the Agreement.
In arriving at our opinion, we have reviewed and analyzed: (i) the terms of
the Agreement and certain related documents, including the Escrow Agreement,
Agreement to Support the Transaction, and Confidentiality and Noncompete
Agreement; (ii) certain publicly available information concerning the business,
financial condition, assets and operations of the Company which we believe to be
relevant to our inquiry; (iii) certain publicly available information relating
to financial markets and industry and economic conditions; and (iv) certain
financial and other information, including financial forecasts, with respect to
the business operations, assets, financial condition and prospects of the
Company furnished to us by the Company that is not publicly available. We have
met with management of the Company to discuss the business, operations, assets,
financial condition, history and prospects of the Company's business.
In conducting our analysis, we have also considered (i) certain publicly
available and other information concerning the trading of, and the trading
market for, the Shares; (ii) the historical and current financial position and
the historical and projected cash flows and results of operations of the
Company; (iii) publicly available historical and current financial information
and stock price data with respect to certain public
BLACKSTONE LETTERHEAD
<PAGE> 2
companies with operations that we considered comparable to those of the Company
or otherwise considered relevant; (iv) the financial terms of certain business
combination transactions involving companies with operations that we considered
comparable to the Company; and (v) the appraised and book values of the
Company's owned real estate. In addition to the foregoing, we have conducted
such other studies, analyses and investigations as we have deemed appropriate in
arriving at our opinion.
In the course of our investigation, we have relied upon, and have assumed
the accuracy and completeness of, all of the foregoing information, and we have
not assumed any responsibility for independent verification of any such
information. We have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make such information
inaccurate, incomplete or misleading. With respect to financial forecasts of the
Company, we have relied upon the Company's assurances that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgements of the Company's management as to the future financial
performance of the Company. We express no view as to such financial forecasts or
the assumptions on which they are based. We have made a limited physical
inspection of the properties and facilities of the Company, but have not made an
independent appraisal of the assets of the Company. We reviewed independent
appraisals of the Company's owned real estate and have assumed that these
appraisals were prepared on a reasonable basis. (We note that these appraisals
on the majority of the Company's owned real estate were prepared in 1994.) Our
opinion is necessarily based upon business, market, economic, regulatory and
other conditions as they exist on, and can be evaluated as of, the date hereof.
We have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for our services, including for rendering
this opinion, which is in part contingent upon the consummation of the
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of the rendering of this opinion.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be received by holders of the Shares pursuant
to the Agreement is fair to such holders from a financial point of view.
This opinion is solely for the use and benefit of the Board of Directors of
the Company and shall not be disclosed publicly or made available to, or relied
upon by, any third party without prior written approval. Our opinion does not
constitute a recommendation to any stockholder of the Company as to how such a
stockholder should respond to the Offer or otherwise take any other action with
respect to the Transaction.
Very truly yours,
(SIG) THE BLACKSTONE GROUP
