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SETTLEMENT AGREEMENT
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THIS SETTLEMENT AGREEMENT (this "Agreement") is entered into as of June
21, 1994 among JOHN GARAMENDI, as Insurance Commissioner of the State of
California, solely in his capacity as conservator, rehabilitator and
liquidator (the "Rehabilitator") of Executive Life Insurance Company
("ELIC"), and the BASE ASSETS TRUST (the "Trust"), on the one hand, and
CHECKER MOTORS CO., L.P., a Delaware limited partnership (the "Partnership"),
CHECKER MOTORS CORPORATION, a New Jersey corporation and the general partner
of the Partnership ("Motors"), CHECKER HOLDING CORP. III, a Delaware
corporation ("Holding"), and INTERNATIONAL CONTROLS CORP., a Florida
corporation ("ICC"; the Partnership, Motors, Holding and ICC being
hereinafter referred to as the "Checker Entities", jointly, and "Checker
Entity", separately), on the other hand.
RECITALS
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WHEREAS, by order of the Superior Court for the County of Los Angeles
County (the "Court") on April 11, 1991, the Rehabilitator was appointed
conservator of ELIC; and
WHEREAS, the Checker Entities and ELIC are parties to an Amended and
Restated Partnership Agreement dated the 5th day of March, 1986, as amended
on July 28, 1989 and purportedly on June 25, 1991 (the "Partnership
Agreement"); and
WHEREAS, the Checker Entities have filed a claim with the Insurance
Commissioner in Michigan, as ancillary receiver of ELIC (the "Ancillary
Receiver"); and
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WHEREAS, the Rehabilitator has filed a lawsuit against the Checker
Entities in the Court, in Case No. BS 006912 in which, among other things,
the Rehabilitator has challenged the enforceability of the purported June 25,
1991 amendment to the Partnership Agreement and the claim filed with the
purported Ancillary Receiver (the "Lawsuit"); and
WHEREAS, certain disputes have arisen as to the relative rights of
certain of the Checker Entities, on the one hand, and the Rehabilitator, ELIC
and the Trust, on the other hand, in the Partnership, certain of which
disputes are being litigated in the Court; and
WHEREAS, the Checker Entities, the Rehabilitator, ELIC and the Trust
desire to end the litigation and settle their disputes on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Checker Entities and the
Rehabilitator and the Trust hereby agree as follows:
ARTICLE I
DEFINITIONS
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1.1 DEFINITIONS. Capitalized terms used herein without definition
shall have the meanings ascribed thereto in the Partnership Agreement.
ARTICLE II
SALE OF INTERESTS
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2.1 INTERESTS TO BE SOLD. Subject to the terms and conditions of this
Agreement, at the closing of the transactions contemplated by this Agreement
(the "Closing"), the Rehabilitator and the Trust shall sell, assign, transfer
and deliver to Motors or another Checker Entity designated by Motors, and
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Motors or such designee shall purchase from the Rehabilitator and the Trust,
the entire interest of the Rehabilitator, ELIC and the Trust in the
Partnership (including, without limitation, the Limited Partner's Capital
Account, the Excess Capital Account and their interest, if any, in the
assets, the earnings and the Profits of the Partnership, in each case past,
present or future) (the "Interest"), which shall be delivered by the
Rehabilitator, ELIC and the Trust free and clear of any liens, claims,
charges or encumbrances of any nature whatsoever, for a purchase price of
$37,000,000 (the "Purchase Price").
2.2 CLOSING. The Closing will take place on the date (the "Closing
Date") immediately following, and, unless waived by the Checker Entities, is
expressly conditioned on, the closing of and receipt of the cash proceeds of
(i) the sale by ICC of $165,000,000 principal amount of its Senior Secured
Notes due 2002 and of 100,000 Units, each Unit consisting of $1,000 of ICC's
Senior Subordinated Notes due 2004 and a warrant to purchase [4.25] shares of
ICC's common stock (the "Offerings") and (ii) the initial borrowing by ICC
and its subsidiaries pursuant to a loan agreement between ICC and NBD Bank,
N.A., as Agent for certain lenders (the "Borrowing"), providing for a term
loan in the amount of $50,000,000 and a revolving credit loan in the amount
of $95,000,000. At the Closing:
(a) the Checker Entities shall deliver to the Trust the Purchase
Price by wire transfer of funds;
(b) the Rehabilitator and the Trust shall deliver to Motors an
Assignment of Partnership Interest (the "Assignment") in the form attached
hereto as Exhibit A;
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(c) the Checker Entities and the Rehabilitator shall execute the
Stipulation of Dismissal (the "Stipulation") in the form attached hereto as
Exhibit B, which shall be filed promptly by the Rehabilitator;
(d) the Checker Entities shall execute and deliver to the
Rehabilitator the Withdrawal of Claim (the "Withdrawal of Claim") in the form
attached hereto as Exhibit C (which shall be filed by the Rehabilitator
immediately following the filing of the Stipulation) and, regardless of
whether such Withdrawal of Claim is filed, shall agree to take no further
action to pursue such claim; and
(e) the Checker Entities, on the one hand, and the Rehabilitator
and the Trust, on the other hand, shall each execute and deliver to the other
a Release in the form attached hereto as Exhibit D or E, as appropriate.
2.3 FURTHER COVENANTS AND ASSURANCES. (a) After the Closing, the
Rehabilitator, the Trust and the Checker Entities shall from time to time
execute and deliver such other instruments and documents and take such other
actions as each may reasonably request to evidence and consummate the
transactions contemplated by this Agreement.
(b) At any time after the Closing, Motors may transfer all of the
assets, business and operations of the Partnership, as substantially
constituted on the date of this Agreement and as those assets or proceeds of
those assets may be constituted following replacement, retirement or
substitution in the ordinary course of business ("Partnership Assets"), to
Motors and/or one or more corporations or partnerships entirely owned and
controlled by Motors and/or its whollyowned subsidiaries ("Partnership
Successors"); provided that such corporation(s) or partnership(s) (i) (if
other than Motors) are established solely for the purpose of owning and
operating the Partnership Assets and carrying on the Partnership business,
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(ii) shall not, until the expiration of five years from the Closing Date,
acquire or carry on any business or operations of a type not currently being
carrid on by the Partnership, (iii) shall maintain books and records
reasonably necessary or appropriate to enable Motors to perform its
obligations under this Paragraph 2.3, and (iv) (if other than Motors) shall
assume all obligations of Motors hereunder.
(c) Until the expiration of five years from the Closing Date (i)
without the prior written consent of the Trust, neither any of the Checker
Entities, any Motors designee that acquires all or any portion of the
Interest under this Agreement, nor any Partnership Successor or other
transferee of Partnership Assets (other than transferees in the ordinary
course of business) shall enter into, become a party to, or become liable in
respect of, any contract, agreement or undertaking with any Affiliate except
in the ordinary course of business and on terms not less favorable to such
person than those which could be obtained if such contract, agreement or
undertaking were an arm's length transaction with a person other than an
Affiliate. (The foregoing, however, shall not apply to such contracts,
agreements and undertakings set forth in Schedule I hereto, which are in
effect on the date of this Agreement); and (ii) the Checker Entities shall,
and any Partnership Successor shall be required to covenant and agree to,
operate the businesses of the Partnership in good faith and exercising
reasonable business judgment.
For purposes of this clause (c), the term "Affiliate" shall mean (A) any
person controlling, controlled by or under common control with any other
person, where "control" (including "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such person, whether
through the ownership of voting securities or other wise; or (B) any person
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having beneficial ownership of 5% or more of any of the Checker Entities, any
Motors designee that acquires the Interest under this Agreement, or any
Partnership Successor.
(d) (i) If a Triggering Event (as defined below) occurs within
five years of the Closing Date, Motors, at its own cost, shall promptly
calculate, in accordance with the provisions of and as if the Partnership had
continued operating under the Partnership Agreement (the "Calculation"), the
capital accounts of Motors and ELIC (A) without giving effect to dispositions
of assets contemplated by Section 2.3(b) of this Agreement, (B) as if the
Partnership had continued in accordance with the Partnership Agreement and
ELIC had remained the sole participating Limited Partner in good standing as
a Limited Partner at all relevant times (without regard to any alleged
defaults with respect thereto) and Motors the sole General Partner from the
date of inception of the Partnership until the date of the Triggering Event
and, consistent therewith, by including any and all allocations of Net Income
and Net Loss that would have been allocated to ELIC as a Limited Partner,
pursuant to the Partnership Agreement, from the inception of the Partnership
to the date of the Triggering Event, which allocations shall be added to or
subtracted from ELIC's Capital Account, as appropriate and without
duplication; (C) without increasing or decreasing ELIC's Capital Account or
any distributions as a result of the addition or withdrawal of any Partners
with respect to the Partnership; and (D) without reduction of ELIC's Capital
Account for the Purchase Price. The Rehabilitator and the Trust shall then
be entitled to a payment from the Checker Entities, each being jointly and
severally liable therefor, in addition to the payment of the Purchase Price
received on the Closing Date, equal to the positive difference between (x)
the amount of ELIC's Capital Account (as calculated under the terms of this
Agreement) on the date of the Triggering Event and (y) the future value of
the Purchase Price, calculated at 15% per annum from the Closing Date to the
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date of the Triggering Event. All payments hereunder shall be made in cash
only and shall be payable to the Trust. If the consideration received by the
Checker Entities upon the consummation of a Triggering Event includes
property or securities other than cash, such property or securities shall be
valued in good faith by the board of directors of Motors at their fair market
value for purposes of determining the amount to which the Trust is entitled.
(ii) Motors or the Partnership Successor, as the case may be,
shall deliver the Calculation to the Rehabilitator and the Trust, together
with a report (the "Report") of the independent accountants of the
Partnership confirming that the Calculation complies with the provisions of
the Partnership Agreement as in effect on the date hereof, with such
modification thereto as are set forth in clause (i) above. In the event that
the Rehabilitator or the Trust notifies Motors in writing, within 30 days of
its receipt of the Calculation and the Report, that it does not agree with
the Calculation, then the Rehabilitator and/or the Trust may select an
independent accountant to review the Calculation. ICC and Motors agree to
cooperate fully with the Trust's and the Rehabilitator's independent
accountant by, among other things, making available to such independent
accountant all documents, including books, records, financial statements and
workpapers relating to the Triggering Event, the Calculation, all assumptions
used in making the Calculation and the financial condition of the Partnership
(or its successor) from the Closing Date to the date of the Triggering Event.
In the event that the Trust's and the Rehabilitator's independent
accountant's calculation of the amount due to ELIC differs from the amount
included in the Calculation by more than five percent and the parties cannot
resolve the difference within twentyone days, then the parties agree to
resolve the dispute in the following manner. The respective independent
accountants for the Checker Entities and the Rehabilitator/Trust shall
appoint a mutually acceptable independent accountant ("Umpire"), who shall
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have fortyfive days to resolve the dispute, and whose decision shall be
final, binding and not appealable to any court or other forum. If the
respective independent accountants for the Checker Entities and
Rehabilitator/Trust, however, are unable to agree upon the selection of an
Umpire, then the New York office of the largest firm of independent auditors
which does not provide services to any of the parties to this Agreement shall
serve as the Umpire. If the Umpire is retained pursuant to this section, its
cost shall be borne by the party whose independent accountant was not within
ten percent of the Umpire's calculation. If both parties were within ten
percent of the Umpire's calculation, then each side will bear half of the
Umpire's costs. Nothing contained in the foregoing shall be deemed to
prevent the Checker Entities from consummating the Triggering Event, and the
acceptance by the Trust of any payment upon consummation of a Triggering
Event shall not be deemed a waiver of its right to challenge the Calculation
in the manner set forth herein.
(e) A "Triggering Event" shall refer to any or all of the
following:
(i) at any time prior to the transfer of the Partnership
Assets from the Partnership to one or more Partnership Successors pursuant to
Section 2.3(b) hereof, upon (A) a sale or other transfer of all or
substantially all of the Partnership Assets, whether in a single sale or
transfer or as a result of more than one sale or transfer that results in the
aggregate in the sale or transfer of all or substantially all of the
Partnership Assets, or (B) any transfer by ICC of any immediate or mediate
ownership of any Partner, directly or indirectly, whether as a result of a
change of ownership or control, merger, consolidation, reorganization or
other change of corporate form, sale of all or substantially all of the
assets of such Partner or any other disposition with respect to such Partner,
provided that a Triggering Event shall not occur upon any such transfer under
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(B) above if such transfer would have been permitted by Section 8.2 of the
Partnership Agreement or otherwise under the Partnership Agreement and if the
transferee expressly agrees in writing to be bound by the terms and
conditions of this Agreement; or
(ii) at any time upon or after the transfer of the
Partnership Assets from the Partnership to one or more Partnership
Successors, upon (A) a sale of all or substantially all of the Partnership
Assets by any Partnership Successor, any of the Checker Entities or any
whollyowned subsidiary thereof, whether in a single sale or transfer or as a
result of more than one sale or transfer that results in the aggregate in a
sale or transfer of all or substantially all of the Partnership Assets; or
(B) any transfer of the immediate or mediate ownership of any Partnership
Successor, any of the Checker Entities or any whollyowned subsidiary thereof,
directly or indirectly, whether as a result of a change of ownership or
control, merger, consolidation, reorganization or other change of corporate
form, that removes from ICC's direct or indirect ownership all or
substantially all of the Partnership Assets. Notwithstanding theforegoing,
neither the sale to the public of the securities of ICC, any Checker Entity,
or any Partnership Successor nor the sale or other transfer by any
shareholder of ICC of shares of ICC stock shall constitute a Triggering
Event.
(f) If the Closing shall not have occurred on or before September
30, 1994, then, after such date, the Rehabilitator and the Trust shall have
the right to sell the Interest or any part thereof to any person on such
terms and conditions as the Rehabilitator and the Trust may deem appropriate
in accordance with the provisions hereof. The Rehabilitator and the Trust
shall deliver written notice to Motors not less than fortyfive days prior to
the closing of the proposed sale describing the terms and conditions thereof
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("Notice of Third Party Sale"). Motors shall have the right, by notifying
the Rehabilitator and the Trust in writing within fifteen days from the date
of the Notice of Third Party Sale, to purchase the Interest, or portion so
offered, on the same terms and conditions set forth in the Notice of Third
Party Sale ("Election Notice"), and shall thereby be contractually bound to
purchase the Interest, or portion thereof proposed to be sold, on those terms
and conditions. If Motors does not deliver the Election Notice to the
Rehabilitator and the Trust or if Motors otherwise fails to close the
transactions under the Election Notice within thirty days from the date of
the Election Notice, notwithstanding anything in this Agreement or in the
Partnership Agreement to the contrary, the Rehabilitator and the Trust shall
have the right to dispose of the Interest, or portion thereof proposed to be
sold, substantially on the terms and conditions set forth in the Notice of
Third Party Sale. If for any reason any proposed sale shall not be
completed, this Agreement (including this Section) shall continue to remain
in full force and effect between the parties hereto.
(g) Notwithstanding any transfer of Partnership Assets or any
transfer of the assets, ownership or control of Motors, any Motors designee
that acquires the Interest under this Agreement, or any Partnership
Successor, ICC shall remain jointly and severally obligated under this
Agreement with Motors, any Motors designee that acquires the Interest under
this Agreement, any Partnership Successor, or any of their respective
successors or assigns.
(h) The Checker Entities agree that until the Closing Date they
shall continue to make quarterly payments in the same amount as have been
made since June 1991, which payments shall not reduce the Purchase Price.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE CHECKER ENTITIES
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Each of the Checker Entities hereby represents and warrants to the
Rehabilitator and the Trust as follows:
3.1 AUTHORITY. Such Checker Entity has the corporate or partnership
power and authority to execute and deliver this Agreement and perform its
obligations hereunder.
3.2 BINDING EFFECT. This Agreement has been duly and validly
authorized, executed and delivered by such Checker Entity and constitutes the
legal, valid and binding obligation of such Checker Entity, enforceable
against such Checker Entity in accordance with its terms. Neither the
execution and delivery of this Agreement by such Checker Entity, nor the
consummation by it of the transactions contemplated hereby, nor compliance by
it with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of such entity's Certificate of Incorporation or
Bylaws or the Partnership Agreement, (ii) conflict with or result in the
breach of any term, condition or provision of, or constitute a default under,
upon the giving of notice or the termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or assets of such Checker Entity pursuant to, or otherwise
require the consent of any Person under, any agreement or obligation to which
such Checker Entity is a party or by which any of its properties or assets
may be bound, or (iii) violate or conflict with (or require any filing,
notification, report, approval or other similar matter under) any laws
applicable to such Checker Entity or any of its properties or assets.
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3.3 NO CONTRAVENTION OF OFFERINGS OR BORROWING. The execution,
delivery and performance by Motors of this Agreement shall not conflict with
or result in a default under, with the passage of time, the giving of notice,
or both, any material agreement, indenture, instrument or other document
pertaining to the Offerings, or the Borrowing to which any of the Checker
Entities is a party or by which any of their properties are bound.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE REHABILITATOR AND THE TRUST
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4.1 The Rehabilitator hereby represents and warrants to the Checker
Entities as follows:
4.1.1 AUTHORITY. The Rehabilitator has full power and authority
to execute and deliver this Agreement and perform his obligations hereunder.
4.1.2 BINDING EFFECT. This Agreement has been duly and validly
authorized by any and all parties whose authorization is required by the laws
of the State of California and by the Court, and has been duly executed and
delivered by the Rehabilitator and constitutes the legal, valid and binding
obligation of the Rehabilitator and ELIC enforceable against the
Rehabilitator and ELIC in accordance with its terms. Neither the execution
and delivery of this Agreement by the Rehabilitator, nor the consummation by
the Rehabilitator of the transactions contemplated hereby, nor compliance by
the Rehabilitator with any of the provisions hereof will (i) conflict with or
result in the breach of any term, condition or provision of, or constitute a
default under, upon the giving of notice or the lapse of time or otherwise,
give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance upon
any property or assets of ELIC pursuant to, or otherwise require the consent
of any Person under, any agreement or obligation to which the Rehabilitator
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or ELIC is a party or by which any of ELIC's properties or assets may be
bound, or (ii) violate or conflict with (or require any filing, notification,
report, approval (including, without limitation, Court consent or approval)
or other similar matter under) any laws applicable to the Rehabilitator or
ELIC or any of ELIC's properties or assets.
4.2 The Trust hereby represents and warrants to the Checker Entities as
follows:
4.2.1 AUTHORITY. The Trust has full power and authority to
execute and deliver this Agreement and perform its obligations hereunder.
4.2.2 BINDING EFFECT. This Agreement has been duly and validly
authorized, executed and delivered by the Trust and constitutes the legal,
valid and binding obligation of the Trust enforceable against the Trust in
accordance with its terms. Neither the execution and delivery of this
Agreement by the Trust, nor the consummation by the Trust of the transactions
contemplated hereby, nor compliance by the Trust with any of the provisions
hereof will (i) conflict with or result in the breach of any term, condition
or provision of, or constitute a default under, upon the giving of notice or
the lapse of time or otherwise, give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of
any lien, charge or encumbrance upon any property or assets of the Trust
pursuant to, or otherwise require the consent of any Person under, any
agreement or obligation to which the Trust is a party or by which any of the
Trust's properties or assets may be bound, or (ii) violate or conflict with
(or require any filing, notification, report, approval (including, without
limitation, Court consent or approval) or other similar matter under) any
laws applicable to the Trust or any of the Trust's properties or assets.
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ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE CHECKER ENTITIES
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The obligation of the Checker Entities to consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver on or
before the day of the Closing (the "Closing Date") of each of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Rehabilitator and the Trust contained herein shall be true and
accurate in all material respects at and as of the date when made and at and
as of the Closing Date as though such representations and warranties were
made at and as of such date.
5.2 PERFORMANCE. The Rehabilitator and the Trust shall have performed
and complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by them on or prior to the Closing
Date.
5.3 CERTIFICATES. The Rehabilitator and the Trust shall have furnished
the Checker Entities with such certificates to evidence compliance with the
conditions set forth in this Article V as may be reasonably requested by the
Checker Entities.
5.4 OPINION OF COUNSEL. The Rehabilitator and the Trust shall have
furnished the Checker Entities with an opinion of counsel in form reasonably
acceptable to the Checker Entities covering the matters set forth on Exhibits
F-1 and F-2, respectively, annexed hereto.
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5.5 DELIVERIES COMPLETE. The Rehabilitator and the Trust shall have
delivered the Assignment and the Stipulation.
5.6 TRANSFER TAXES. The Rehabilitator and the Trust shall have
provided the Checker Entities with evidence satisfactory to them of the
payment of, or the nonliability of the Checker Entities for, any transfer,
stamp or other similar taxes payable in connection with the transfer of the
Interest pursuant to this Agreement.
5.7 CLOSING OF THE OFFERINGS. ICC shall have received the proceeds of
the Offering and the Borrowing.
5.8 RELEASE. The Rehabilitator and the Trust shall have executed and
delivered a Release in the form annexed hereto as Exhibit D.
If the Rehabilitator has transferred the Interest to the Trust prior to
the Closing Date, then the Checker Entities shall be deemed to have waived
all of the foregoing conditions (to the extent they apply to the
Rehabilitator) except for the delivery of the Stipulation and the Release.
ARTICLE VI
CONDITIONS TO THE REHABILITATOR'S AND THE TRUST'S OBLIGATIONS
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The obligation of the Rehabilitator and the Trust to consummate the
transactions contemplated by this Agreement is subject to the satisfaction or
waiver on or before the Closing Date of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Checker Entities contained herein shall be true and accurate in all
material respects at and as of the date when made and at and as of the
Closing Date as though such representations and warranties were made at and
as of such date.
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6.2 PERFORMANCE. The Checker Entities shall have performed and
complied with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
6.3 CERTIFICATES. The Checker Entities shall have furnished the
Rehabilitator and the Trust with such certificates of its authorized
representative to evidence compliance with the conditions set forth in this
Article VI as may be reasonably requested by the Rehabilitator.
6.4 OPINION OF COUNSEL. The Checker Entities shall have furnished the
Rehabilitator and the Trust with an opinion of counsel in form reasonably
satisfactory to the Rehabilitator and the Trust covering the matters set
forth in Exhibit G annexed hereto.
6.5 DELIVERIES COMPLETE. The Checker Entities shall have delivered the
Purchase price, the Stipulation and the Withdrawal of Claim.
6.6 RELEASE. Each of the Checker Entities shall have delivered a
Release in the form annexed hereto as Exhibit E.
If the Rehabilitator has transferred the Interest to the Trust prior to
the Closing Date, then the Rehabilitator shall be deemed to have waived all
of the foregoing conditions except those included in Sections 6.5 and 6.6.
ARTICLE VII
EFFECT OF FAILURE OF CONDITIONS TO OCCUR OR BE WAIVED
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If the Closing shall not have occurred within seven months of the
execution of this Agreement, then the Rehabilitator, ELIC and the Trust, on
the one hand, and/or the Checker Entities, on the other hand, shall be
entitled to terminate this Agreement by giving notice to the other ("Notice
<PAGE-17>
Party") so long as the Notice Party has not caused through any act within its
control the Agreement not to close. Upon termination of this Agreement, (a)
this Agreement shall be null and void except for the provisions of Section
2.3(f) and this Article VII; (b) the Interest, if not previously assigned to
the Trust, shall be assigned to the Trust and the Trust shall be admitted to
the Partnership as a Limited Partner and shall be treated as a nondefaulting
Partner from the date of the Partnership's formation through the date of its
admission pursuant to this Article VII and thereafter in accordance with the
terms of the Partnership Agreement as in effect on the date hereof, and,
accordingly, the Capital Account of the Limited Partner shall be restated to
an amount equal to the Capital Account the Limited Partner would have had if
it had not been treated as a defaulting Partner for any period; PROVIDED,
HOWEVER, that (i) the Limited Partner's Capital Account shall be reduced
(without duplication with respect to the foregoing) for the principal
component of the distributions by the Partnership to the Limited Partner as
a defaulting Partner and pursuant to Section 2.3(h) of this Agreement; and
(ii) the Limited Partner shall have no right to distributions in excess of
those received by it either as a Partner (including as a defaulting Partner)
or pursuant to the terms of this Agreement; (c) the Stipulation and the
Withdrawal of Claim shall be delivered and filed as set forth in Paragraphs
2.2(c) and (d) and the Releases in the forms attached hereto as Exhibits D
and E shall be delivered; (d) the Trust and Motors shall amend the
Partnership Agreement, to be effective with respect to all distributions
after December 31, 1993, to provide that notwithstanding anything in Section
4.5 thereof to the contrary, distributions to the General Partner may reduce
the General Partner's Capital Account below zero and the General Partner
shall not be required to repay any such excess distribution pursuant to
Section 4.6; PROVIDED, HOWEVER, that the Checker Entities shall jointly and
severally guaranty the obligations of the General Partner pursuant to Section
<PAGE-18>
2.1.3 of the Partnership Agreement in an amount equal to the cash
distributions to the General Partner after December 31, 1993 pursuant to
Section 4.4.6 of the Partnership Agreement, PROVIDED THAT, for purposes of
determining the amount owed under the guaranty only, the positive balance in
the General Partner's Capital Account shall be increased, or the negative
balance in the General Partner's Capital Account shall be reduced, by the
difference between the value of the Partnership's medallions on the date
hereof (which, based on the good faith determination of ICC, are valued at
$38,000 per medallion) and the value of such medallions (including all
amounts received from sales or other transfers of medallions after the date
hereof) on the date the Partnership is terminated.
ARTICLE VII
MISCELLANEOUS
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8.1 WAIVERS AND AMENDMENTS. This Agreement may not be amended or
terminated except upon the written consent of all parties. By an instrument
in writing, a party may waive compliance by the other party with any term or
provision of this Agreement that such other party was or is obligated to
comply with or perform; PROVIDED, HOWEVER, that such waiver shall not operate
as a waiver of, or estoppel with respect to, any other or subsequent failure.
No failure to exercise and no delay in exercising any right, remedy, or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, or power hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, or power
provided herein or by law or in equity. The waiver by any party of the time
for performance of any act or condition hereunder does not constitute a
waiver of the act or condition itself.
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8.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California as such laws are
applied to agreements between California residents entered into and to be
performed entirely within California.
8.3 ASSIGNMENT; SUCCESSORS AND ASSIGNS. Each party agrees that it will
not assign, sell, transfer, delegate, or otherwise dispose of, whether
voluntarily or involuntarily, or by operation of law, any right or obligation
under this Agreement except as specifically permitted hereunder. Any
purported assignment, transfer, or delegation in violation of this paragraph
shall be null and void. Subject to the foregoing limits on assignment and
delegation, this Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and assigns.
8.4 ENTIRE AGREEMENT. The parties intend that the terms of this
Agreement (including the Exhibits hereto) shall be the final expression of
their agreement with respect to the subject matter hereof and may not be
contradicted by evidence of any prior contemporaneous agreement. The parties
further intend that this Agreement shall constitute the complete and
exclusive statement of their terms and that no extrinsic evidence whatsoever
may be introduced in any judicial, administrative, or other legal proceeding
involving this Agreement.
8.5 SEVERABILITY OF THIS AGREEMENT. If any provision of this
Agreement, or the application hereof to any person, place or circumstance,
shall be held by a court of competent jurisdiction to be invalid,
unenforceable or void, the remainder of this Agreement and such provisions as
applied to other persons, places and circumstances shall remain in full force
and effect only if, after excluding the portion deemed to be unenforceable,
the remaining terms shall provide for the consummation of the transactions
<PAGE-20>
contemplated hereby in substantially the same manner as o
at the later of the date this Agreement was executed or last amended.
8.6 GENDER; NUMBER. Whenever the context of this Agreement requires,
the masculine gender shall include the feminine or neuter, and the singular
number shall include the plural.
8.7 CAPTIONS. The section and other headings used in this Agreement
are for reference purposes only and shall not constitute a part hereof or
affect the meaning or interpretation of this Agreement.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which taken
together shall constitute one and the same instrument.
8.9 EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, each party shall pay all expenses incurred by it
or on its behalf in connection with the Agreement and the transactions
contemplated hereby.
8.10 NOTICES. Any notice or communication required or permitted
hereunder shall be sufficiently given if in writing and (i) delivered in
person or by overnight delivery or courier service, (ii) sent by facsimile,
or (iii) deposited in the United States mail, by certified mail postage
prepaid and return receipt requested (provided that any notice given pursuant
to clause (ii) is also confirmed by the means described in clause (i) or
(iii)), as follows:
To the Rehabilitator:
To the Trust:
<PAGE-21>
To the Checker Entities: Checker Motors Corporation
2016 North Pitcher Street
Kalamazoo, Michigan 49007
Attn: David R. Markin
President
Tel. (616) 343-6121
Fax. (616) 343-1660
with a copy to: Hutton Ingram Yuzek Gainen
Carroll & Bertolotti
250 Park Avenue
New York, New York 10177
Attn: Paulette Kendler
Tel. (212) 907-9650
Fax. (212) 907-9682
Such notice or other communication shall be deemed given when so delivered
personally, or sent by facsimile transaction, or, if sent by overnight
delivery or courier service, the business day after being sent from within
the United States, or if mailed, four days after the date of deposit in the
United States mails.
8.11 RECOVERY OF COSTS AND ATTORNEYS' FEES.
(a) Except as provided in Paragraph 2.3(d)(ii), any disputes
arising out of or relating to this Agreement, any document or instrument
delivered pursuant to, in connection with, or simultaneously with this
Agreement, or any breach of this Agreement or any such document or instrument
shall be settled by arbitration to be held in Los Angeles, California, in
accordance with the rules then in effect of the American Arbitration
Association or any successor thereto. The arbitrator ("Arbitrator") shall be
a party mutually acceptable to the Checker Entities, the Rehabilitator and
the Trust; PROVIDED, HOWEVER, that if they cannot agree on an arbitrator, the
Regional Director of the American Arbitration Association shall choose the
Arbitrator. The Arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the Arbitrator shall be final,
<PAGE-22>
conclusive, and binding on the parties to the arbitration. Judgment may be
entered on the Arbitrator's decision in any court having jurisdiction.
(b) Any prevailing party or parties described in Section 8.11(a)
above shall be entitled to reasonable attorneys' fees and any other costs
incurred in enforcing, or on appeal from, a judgment entered with respect to
any arbitration described in Section 8.11(a), separately from and in addition
to any other amount included in such judgment. This Section 8.11 shall be
severable from the other provisions of this Agreement and shall survive and
not be merged into any such judgment.
8.12 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give to any Person other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
8.13 SECTION 1654 INTERPRETATION. This Agreement has been negotiated
at arm's length and between persons sophisticated and knowledgeable in the
matters dealt with in this Agreement. Each party has been represented by
experienced and knowledgeable legal counsel. Accordingly, any rule of law
(including California Civil Code Section 1654) or legal decision that would
require interpretation of any ambiguities in this Agreement against the party
that has drafted it is not applicable and is waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect the purpose
of the parties and this Agreement.
8.14 AVAILABILITY OF EQUITABLE REMEDIES. Since a breach of the
provisions of this Agreement could not adequately be compensated by money
damages, any party shall be entitled, either before or after the Closing, in
addition to any other right or remedy available to him, to an injunction
<PAGE-23>
granted by the Arbitrator restraining such breach or a threatened breach and
to specific performance of any such provision of this Agreement, and in
either case no bond or other security shall be required in connection
therewith, and the parties hereby consent to this issuance of such injunction
and to the ordering of specific performance.
8.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE-24>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
CHECKER MOTORS CO., L.P.
By: Checker Motors Corporation
General Partner
By: /s/ David R. Markin
-------------------------------------------
Name: David R. Markin
Title: President
CHECKER MOTORS CORPORATION
By: /s/ David R. Markin
-----------------------------------------
Name: David R. Markin
Title: President
CHECKER HOLDING CORP. III
By: /s/ David R. Markin
-------------------------------------------
Name: David R. Markin
Title: President
INTERNATIONAL CONTROLS CORP.
By: /s/ David R. Markin
-------------------------------------------
Name: David R. Markin
Title: President
/s/ John Garamendi
- - ------------------------------------
JOHN GARAMENDI, in his capacity as
Rehabilitator, but not Individually
BASE ASSETS TRUST
By: /s/ Richard Baum
---------------------------------
Trustee
By: /s/ Thomas Arnold
---------------------------------
Trustee - Thomas Arnold
By: /s/ Anthony Buonaguro
---------------------------------
Trustee - Anthony Buonaguro
<PAGE-25>
SCHEDULE I
AFFILIATE TRANSACTIONS
As of December 31, 1993, American Country Insurance Company holds $0.9
million principal amount of Enhance Financial Services Group Inc., 7% Notes
due December 1, 1996, of which company Mr. Markin and Mr. Tessler are
directors.
Each of Messrs. Markin, Solomon, Tessler and Thomas provides consulting
services to Yellow Cab Company and each receives for such services
(commencing in January 1988) $10,000 per month. Messrs. Solomon, Tessler and
Thomas also provide consulting services (a) to Motors for which they each
receive monthly fees of $5,000 (commencing in January 1988) and (b) to
Country for which they each receive monthly fees of approximately $18,300.
Mr. Markin serves as a consultant to Chicago AutoWerks, a division of Checker
L.P., for which he receives monthly fees of approximately $1,200 (commencing
in January 1988), and to Country, for which he receives monthly fees of
approximately $4,600.
Frances Tessler, the wife of Allan R. Tessler, is employed by Smith
Barney Shearson which executes trades for Country's investment portfolio.
During 1993 and 1992, Mrs. Tessler received for her services approximately
$78,000 and $69,000, respectively, of the commissions paid to Smith Barney
Shearson.
On September 24, 1992, American Country Financial Services Corp.
("AFSC"), a subsidiary of Country, purchased from The Mid City National Bank
of Chicago the promissory note dated July 30, 1992, made by King Cars, Inc.
("King Cars") in the principal amount of $381,500 plus accrued interest in
the amount of $3,560. The note, which has been renewed several times, has a
current principal amount outstanding of $407,691 and matures in December
1994. King Cars is owned by Messrs. Markin, Tessler, Solomon, Thomas and
Feldman. King Cars is a party to an agreement dated December 15, 1992, with
Yellow Cab pursuant to which Yellow Cab purchases from King Cars display
frames for installation in its taxicabs and King Cars furnishes Yellow Cab
advertising copy for insertion into the frames. King Cars receives such
advertising copy as an agent in Chicago for an unrelated company which is in
the business of selling and arranging for local and national advertising. Of
the revenues generated from such advertising, 30% will be retained by King
Cars and the balance will be delivered to Yellow Cab until such time as
Yellow Cab has recovered costs advanced by it for the installation of
advertising frames in 500 of its taxicabs (approximately $78,000). The terms
to Yellow Cab are the same or more favorable than those offered by King Cars
to unrelated third parties.
EMPLOYMENT AGREEMENTS
Checker L.P., as the assignee of Motors, is party to an Amended and
Restated Employment Agreement dated as of November 1, 1985, as further
amended, with David R. Markin pursuant to which Mr. Markin is to serve as
President, Chief Executive Officer and Chief Operating Officer of Checker
L.P. until April 30, 1996, subject to extension (the "Termination Date"), at
a minimum salary of $600,000 per annum, together with the payment of certain
insurance premiums. The beneficiaries of these insurance policies are
designated by Mr. Markin. Mr. Markin continues to be eligible to participate
in profit sharing, pension or other bonus plans of Checker L.P. Pursuant to
the Amended and Restated Employment Agreement, in the event of Mr. Markin's
<PAGE-26>
death, Checker L.P. shall pay Mr. Markin's estate the compensation which
would otherwise be payable to him for the period ending on the last day of
the month in which death occurs. In addition, Checker L.P. shall pay to Mr.
Markin's beneficiaries deferred compensation from the date of his death
through the Termination Date in an annual amount equal to onethird of his
base salary at the date of his death. In the event of termination of the
Amended and Restated Employment Agreement for any reason other than cause,
disability or death, Mr. Markin shall continue to serve as a consultant to
Checker L.P. for a period of five years, for which he shall receive
additional compensation in the amount of $50,000 per annum. Checker L.P. has
agreed to indemnify Mr. Markin from certain liabilities arising out of his
service to Checker L.P., except for liabilities resulting from his gross
negligence or willful misconduct.
Checker L.P. is party to an Amended and Restated Employment Agreement
dated as of June 1, 1992, with Jeffrey Feldman pursuant to which Mr. Feldman
serves as President of the vehicular operations segment until February 1,
1996 subject to extension (the "Termination Date"), at a minimum salary of
$200,000 per annum, together with the payment of certain insurance premiums.
The beneficiaries of these insurance policies are designated by Mr. Feldman.
Mr. Feldman is eligible to participate in profit sharing, pension or other
bonus plans implemented by the vehicular operations segment. Pursuant to the
Amended and Restated Employment Agreement, in the event of Mr. Feldman's
death, Checker L.P. shall pay Mr. Feldman's estate the amount of compensation
which would otherwise be payable to him for the period ending on the last day
of the month in which death occurs. In addition, Checker L.P. shall pay to
Mr. Feldman's estate deferred compensation form the date of his death to the
Termination Date in an annual amount equal to onethird of his base salary at
the date of his death. In the event of the termination of the Amended and
Restated Employment for any reason other than cause, disability or death, Mr.
Feldman shall continue to serve as a consultant to Checker L.P. for a period
of five years (if terminated by Mr. Feldman) or seven years (if terminated by
Checker L.P.), for which he shall receive compensation in the amount of
$75,000 per annum. Checker L.P. has agreed to indemnify Mr. Feldman from
certain liabilities, except for those resulting from his gross negligence or
willful misconduct.
Jeffrey M. Feldman is the nephew of David R. Markin.
Motors has guaranteed certain of Checker Taxi Association's obligations.
The outstanding principal balance of these obligations was approximately $0.7
million, as of December 31, 1993.
American Country Insurance Company holds mortgages on certain of Checker
L.P.'s property, securing loans in the amount of approximately $3 million.