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EXHIBIT 10.17
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RESTRUCTURING AGREEMENT dated as of the 16th day of January, 1996
between BANK LEUMI TRUST COMPANY OF NEW YORK (the "Bank"), a New York banking
corporation, having an office at 579 Fifth Avenue, New York, New York 10017, and
ARTHUR G. COHEN ("Cohen"), an individual with an address at 505 Eighth Avenue,
New York, New York 10018.
WHEREAS, pursuant to certain promissory notes, guarantees and related
agreements, instruments and documents listed on Exhibit A annexed hereto
(collectively, the "Loan Documents"), Cohen is indebted to the Bank (i) in the
aggregate amount set forth on Schedule 1A hereto under the caption "Cohen Grand
Total Prin. + Inter.", which amount is comprised of principal due the Bank on
the date hereof in the amount set forth on Schedule 1A hereto under the caption
"4/16/93 Allocated Principal" (the "Personal Indebtedness"), and accrued and
unpaid interest thereon and fees and other charges due with respect thereto on
the date hereof in the amount set forth on Schedule 1A hereto under the caption
"Cohen Total Inter. + Fees" (the "Personal Interest"), and (ii) in the aggregate
amount set forth on Schedule 1B hereto under the caption "Cohen Grand Total
Prin. + Inter.," such amount representing (x) Cohen's Share (derived as provided
below) of the principal due with respect to the indebtedness described in
Schedule 1B (the full principal balance of each such indebtedness as of 4/16/93
being set forth under the caption "4/16/93 Cust. Balance" and Cohen's Share of
the principal balance of each such indebtedness (as of 4/16/93 and the date
hereof) being set forth under the caption "4/16/93 Allocated Principal"), plus
(y) the unpaid interest and fees and other charges due with respect to Cohen's
Share of each such indebtedness in the amount set forth on Schedule 1B hereto
under the caption "Cohen Total Inter. and Fees." Cohen's Share of the principal
referred to in clause (ii) of the preceding sentence is referred to herein as
the "Secondary Indebtedness" and, together with the Personal Indebtedness, as
the "Indebtedness"; and the interest, fees and other charges referred to in the
preceding sentence are referred to herein as the "Secondary Interest", and
together with the Personal Interest, as the "Interest Due." Cohen's Share was,
in each case, derived by multiplying the appropriate item of indebtedness times
the percentage set forth under the caption "Cohen % Owed" for such indebtedness,
such percentage representing Cohen's percentage interest in the primary obligor
with respect thereto or, in cases in which he is a primary obligor, his
allocated percentage of such indebtedness; and
WHEREAS, pursuant to certain other promissory notes, guarantees and
related agreements, instruments and documents listed on Exhibit B annexed hereto
(collectively, the "Retained Loan Documents"), Cohen is indebted to the Bank in
the aggregate amount set forth on Schedule 2 hereto under the caption "Cohen
Grand Total Prin. + Inter." (such amount being herein sometimes
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called the "Retained Indebtedness"), such amount representing (x) Cohen's Share
(derived as provided above) of the principal due with respect to the
indebtedness described in Schedule 2 (the full principal balance of each such
indebtedness as of 4/16/93 being set forth under the caption "4/16/93 Cust.
Balance" and Cohen's Share of the principal balance of each such indebtedness
being set forth under the caption "4/16/93 Allocated Principal"), plus (y) the
unpaid interest thereon, and fees and other charges due with respect to each
such indebtedness in the amount set forth on Schedule 2 hereto under the caption
"Cohen Total Inter. + Fees"; and
WHEREAS, Rucon Services Corp. ("Rucon") (formerly known as Arlen
Holdings Corp. and, prior to that, as Arlen Automotive, Inc.) has agreed to
acquire all of the Bank's right, title and interest in and to the Indebtedness
and the collateral securing the Indebtedness (the "Rucon Assignment") pursuant
to the terms of the Assignment and Assumption Agreement to be executed
immediately after the execution hereof between the Bank and Rucon (the
"Assignment Agreement"); and
WHEREAS, Cohen has requested that the Bank grant Cohen the right to
satisfy the Retained Indebtedness at a substantial discount by making or causing
to be made payments of principal totaling $2,722,513.33 in the aggregate
together with interest thereon and the Bank is willing to grant such right to
Cohen, all on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:
1. Acknowledgement of Indebtedness and Retained Indebtedness.
1.1 Cohen hereby acknowledges and agrees that:
(a) Each of the Loan Documents and the Retained Loan Documents
and, in the case of Loan Documents and Retained Loan Documents which are
guarantees, each document or instrument evidencing the underlying
obligations to which such Loan Documents and Retained Loan Documents
relate, is in full force and effect, enforceable in accordance with its
terms.
(b) Cohen has no defense, offset, claim or counterclaim of any
kind with respect to the Indebtedness, the Retained Indebtedness, the Loan
Documents or the Retained Loan Documents, nor does there exist any basis
therefor.
(c) The amounts set forth on Schedules 1A, 1B and 2 under the
caption "Cohen Grand Total Prin. + Inter.",
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hereto accurately reflect the amounts owed by Cohen to the Bank as of the
date hereof under the Personal Indebtedness, the Secondary Indebtedness
and the Retained Indebtedness, respectively.
1.2 The Bank acknowledges and agrees that the amounts set forth in
Schedules 1A, 1B and 2 under the caption "Cohen Grand Total Prin. + Inter"
accurately reflect the amounts owed by Cohen to the Bank as of the date hereof
under the Personal Indebtedness, the Secondary Indebtedness and the Retained
Indebtedness.
1.3 Simultaneously with the execution hereof, Cohen is delivering to
the Bank a promissory note in the form annexed hereto as Exhibit C-1 (the
"Severance Note") in the principal amount of $5,133,334.00, such amount
representing the total amount of the Secondary Indebtedness. The Severance Note
is being delivered in full satisfaction of the Secondary Indebtedness, and upon
delivery of the Severance Note Cohen shall have no further obligations under any
other guaranty, note or other document creating or evidencing the Secondary
Indebtedness (except any security document being modified as provided in the
next sentence). In connection therewith, simultaneously with the execution
hereof, Cohen and the Bank shall enter into an amendment to the Security
Agreement dated April 16, 1993 in the form annexed hereto as Exhibit D.
1.4 Simultaneously with the execution hereof, Cohen is delivering to
the Bank a promissory note in the form annexed hereto as Exhibit C-2 (the
"Interest Note") in the principal amount of $1,268,532.18, such amount
representing the Interest Due. The Interest Note is being delivered in full
satisfaction of the Interest Due and shall hereafter constitute a portion of the
Retained Indebtedness.
2. Satisfaction of Retained Indebtedness. Subject to the terms and
conditions set forth in this Agreement, the Bank hereby agrees that if (i) Cohen
shall have paid or caused to be paid to the Bank the Designated Payment (as
defined in Section 3), (ii) Cohen shall have paid the Bank any fees and charges
then owed by Cohen to the Bank under this Agreement, and (iii) at the time of
the payment of the sums set forth in the preceding clauses (i) and (ii) the Bank
shall not have filed the Confession of Judgment referred to in Section 5 in
accordance with the terms of this Agreement, then the Retained Indebtedness
shall be deemed satisfied in full and subject to the provisions of Section
4.1(b) the Bank shall return the Cohen Collateral (as defined in Section 4
hereof) to the parties entitled thereto.
3. Principal and Interest on Retained Indebtedness. In order to obtain
the satisfaction of the Retained Indebtedness as provided in Section 2, Cohen
shall pay or cause to be paid to the
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Bank the following, after giving effect to the cure period set forth in Section
5.2(i) hereof (collectively, the "Designated Payment"):
3.1 The principal sum of $2,500,000, said principal sum to be paid in
twenty equal consecutive installments of $125,000 on each January 1, April 1,
July 1 and October 1, commencing January 1, 1997 and ending October 1, 2001.
3.2 The principal sum of $53,713.33, said principal sum to be paid in
full on April 16, 1996.
3.3 The principal sum of $168,800.00, said principal sum to be paid in
full on November 15, 1996.
3.4 Interest on the outstanding principal amount referred to in
Section 3.1 shall accrue at a rate per annum equal to 400 basis points above the
rate at which United States Dollar six-month deposits are offered to the Bank in
the London Interbank Eurodollar Market ("LIBOR") on the date hereof, as adjusted
as of the first day of December of each year. Together with each installment due
under Section 3.1 hereof, Cohen shall pay to the Bank interest on the
outstanding amount referred to in Section 3.1 at a rate per annum equal to 100
basis points above LIBOR (determined and adjusted as set forth above). The
difference between the interest required to be paid pursuant to the first
sentence of this Section 3.4 and the interest actually paid pursuant to the
second sentence of this Section 3.4 shall be referred to herein as the "Interest
Deficiency". Provided that Cohen timely makes the payments required to be made
pursuant to Sections 3.1, 3.2 and 3.3, the Bank shall have no right to collect
the Interest Deficiency and Cohen shall have no further obligation with respect
thereto. If, however, Cohen shall fail to timely make the payments required to
be made pursuant to Sections 3.1, 3.2 and 3.3 (after giving effect to any grace,
notice and cure periods), (i) the Interest Deficiency shall be immediately due
and payable, (ii) interest on the outstanding unpaid amounts under Sections 3.1,
3.2 and 3.3 shall thereafter be payable at the rate of 400 basis points above
LIBOR (determined and adjusted as set forth above and payable on demand), and
(iii) Cohen shall no longer have the right to pay interest on the amount set
forth in Section 3.1 at 100 basis points above LIBOR. In the event that the Bank
shall have determined that by reason of the circumstances affecting the London
Interbank Eurodollar Market adequate and reasonable means do not exist for
ascertaining LIBOR for any period, the effective rate of interest during such
period shall be the Bank's Reference Rate (the rate designated by the Bank, and
in effect from time to time, as its "Reference Rate"), adjusted when said
Reference Rate changes. Notwithstanding anything to the contrary set forth
above, in no event shall the interest payable hereunder exceed the maximum rate
permitted by law.
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3.5 Upon the receipt by the Bank of payment in full of the Designated
Payment and any fees and charges due under this Agreement, provided the Bank has
not theretofore filed the Confession of Judgment referred to in Section 5 in
accordance with the terms of this Agreement, (x) the Bank will deliver to Cohen
a release pursuant to which it will release, remise and discharge Cohen from
liability in any capacity for the Retained Indebtedness or hereunder other than
the provisions of Sections 4 and 10, which shall continue to remain in full
force and effect, (y) the Bank will release and return the pledges made pursuant
to Section 4 hereof and the Pledge Agreements and return the collateral pledged
pursuant to the Pledge Agreements, and (z) Cohen shall be deemed to have made
payment of the Retained Indebtedness in full.
3.6 Notwithstanding anything contained herein to the contrary, nothing
herein shall be deemed to affect the obligations of Cohen relating to the
Indebtedness of Ascot Associates to the Bank, which obligations shall remain in
full force and effect.
3.7 Cohen acknowledges and agrees that he shall have no claim to or
interest in any real property that secures or formerly secured the Indebtedness
or Retained Indebtedness on Schedules 1B and 2 referred to as "SLW" or "34th
Street", which property now constitutes the sole and exclusive property of the
Bank or its affiliates.
4. Grant of Security Interests.
4.1 Pledge of Stock.
(a) Contemporaneously herewith, as security for the payment by
Cohen of the Retained Indebtedness and for the fulfillment of all of
Cohen's other obligations to the Bank hereunder and as security for the
obligations of Rucon to indemnify the Bank pursuant to Section 5 of the
Assignment Agreement, Cohen shall cause Rucon, and as part of the
consideration for the Rucon Assignment Rucon hereby agrees, (a) to pledge
to the Bank, pursuant to a stock pledge and hypothecation agreement dated
the date hereof (the "Holding Pledge Agreement") between Rucon and the
Bank, 550 outstanding shares of common stock ("Holding Common Stock") and
5.5 outstanding shares of class B stock ("Holding Class B Stock") of
Curtis Holding Corporation, a New Jersey corporation ("Curtis Holding"),
which numbers of shares represent 55% of the number of shares of each
class of capital stock of Curtis Holding issued and outstanding, and (b)
to cause Curtis Holding, and as part of the consideration for the Rucon
Assignment Curtis Holding hereby agrees, to pledge to the Bank, pursuant
to a stock pledge and hypothecation agreement dated the date hereof (the
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"Partition Pledge Agreement", and together with the Holding Pledge
Agreement, the "Pledge Agreements") between Curtis Holding and the Bank,
110 outstanding shares of common stock ("Partition Common Stock") of
Curtis Partition Corporation, a New Jersey corporation ("Curtis
Partition", and together with Curtis Holding, the "Curtis Entities"),
which number of shares represents 55% of the number of shares of capital
stock of Curtis Partition issued and outstanding. The collateral to be
pledged to the Bank pursuant to this Section 4 shall be referred to herein
as the "Cohen Collateral".
(b) Notwithstanding the provisions of Section 2 hereof, the Bank
shall return the Cohen Collateral to the parties entitled thereto and all
obligations under the Pledge Agreements shall terminate (such events,
collectively, the "Pledge Termination") upon the later to occur of (x) the
date which is three years from the date hereof or (y)(i) payment in full
by Cohen to the Bank of the Designated Payment and (ii) delivery
simultaneously with such payment or at any time thereafter by Rucon or its
successors to the Bank of financial statements demonstrating that the net
worth of Rucon and any such successors, determined in accordance with
generally accepted accounting principles ("GAAP") without giving effect to
amounts due from affiliates, is not less than $7,500,000; provided,
however, that in any event the Pledge Termination shall occur not later
than the sixth anniversary of the date hereof, provided that Cohen shall
prior to such anniversary have made the Designated Payment in full.
4.2 Financial Statements. Cohen covenants and agrees with the Bank
that, so long as this Agreement shall remain in effect or any principal or
interest payable pursuant to Section 3 hereof, or any fee, expense or amount
payable hereunder or in connection with any of the transactions contemplated
hereby shall be unpaid, he will cause Curtis Holding to deliver to the Bank:
(a) within 120 days after the end of each fiscal year of Curtis
Partition, (i) a balance sheet showing the financial condition of Curtis
Partition as of the close of such fiscal year and (ii) an income statement
showing the results of its operations during such fiscal year, all of the
foregoing accompanied by the notes thereto and the audit report thereon of
BDO Seidman or other independent certified public accountants reasonably
acceptable to the Bank (which auditor's report shall not contain any
qualification except with respect to new accounting principles mandated by
the Financial Accounting Standards Board);
(b) within 60 days after the end of each fiscal quarter (other
than the fourth quarter of a fiscal year) of
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Curtis Partition, (i) an unaudited balance sheet showing the financial
condition of Curtis Partition as of the close of such fiscal quarter and
(ii) an unaudited statement of income showing the results of its
operations during such fiscal quarter, all of the foregoing accompanied by
the notes thereto and a certificate of the chief executive or financial or
accounting officer of Curtis Partition, to the effect that such unaudited
financial statements fairly present the financial condition and the
results of operations of Curtis Partition for the period indicated in
accordance with GAAP consistently applied (except as indicated in the
notes thereto and subject to year-end audit adjustments); and
(c) within 30 days after the end of each fiscal month of Curtis
Partition, an aging schedule of the Receivables (as defined below) in form
and substance reasonably satisfactory to the Bank (it being understood
that the form of aging schedule of Receivables heretofore provided by
Curtis Partition to the Bank is deemed to be acceptable to the Bank). For
purposes hereof, "Receivables" shall mean and include all of the accounts,
instruments, documents, chattel paper and general intangibles of Curtis
Partition, whether secured or unsecured and whether now existing or
hereafter created.
4.3 Curtis Holding Financial Statements. Cohen covenants and agrees
with the Bank that, if and to the extent any balance sheets or income statements
are prepared by Curtis Holding and delivered to a third party, he will cause
Curtis Holding to deliver a copy thereof to the Bank promptly following such
delivery.
4.4 Curtis Partition Debt to the Bank. Without limiting the generality
of Section 11.9 hereof, Cohen, Rucon, Curtis Holding and Curtis Partition hereby
agree that nothing contained in this Section 4 shall be construed as a waiver or
amendment or modification of any obligations of Curtis Partition to the Bank, or
any rights of the Bank against Curtis Partition under any agreement, instrument,
or document pursuant to which Curtis Partition is indebted or obligated to the
Bank, whether as obligor, guarantor or otherwise, or be construed as limiting or
prohibiting the Bank from enforcing any right or remedy the Bank may have
against Curtis Partition (or any other party) pursuant thereto, including
without limitation, the right to enforce its rights to any collateral therefor,
all of which rights and remedies of the Bank are expressly reserved and all of
which agreements, instruments and documents remain in full force and effect.
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5. Confession of Judgment.
5.1 Concurrently with the execution of this Agreement, and again
between September 1, 1998 and September 30, 1998, Cohen shall execute and
deliver to the Bank an Affidavit of Confession of Judgment, each in the form
annexed hereto as Exhibit E (except that the Affidavit delivered in 1998 shall
be in the amount of the then unpaid principal balance of the Retained
Indebtedness), dated the respective dates of delivery, which shall be held by
the Bank pursuant to the terms of this Agreement, relating to the Retained
Indebtedness.
5.2 Without limiting in any way any of the other rights and remedies
available to the Bank, all of which are expressly reserved, the Bank shall have
the right at any time after the tenth day after the Bank has given Cohen notice
of the occurrence of an Event of Default, to file the Affidavit of Confession of
Judgment referred to in Section 5.1 and to enter judgment pursuant thereto
against Cohen in the full unpaid amount thereof plus interest thereon at the
accrual rate of interest set forth in Section 3.4 hereof and to have execution
thereon from and after the occurrence of any of the following, each of which
shall constitute an "Event of Default":
(i) the failure by Cohen to pay any installment of principal or
interest payable pursuant to Sections 3.1, 3.2, 3.3 or 3.4, or any other
fee or charge referred to in this Agreement, as and when due and payable
or within five (5) business days thereafter;
(ii) if any material representation, warranty or other statement
of fact made by or on behalf of Cohen herein shall be false or misleading
in any material respect when given or if any material writing,
certificate, report or statement at any time hereafter furnished to the
Bank by Cohen pursuant to or in connection with this Agreement shall be
false or misleading in any material respect when given;
(iii) if a material default shall be made by Cohen in the
observance or performance of any covenant, agreement or provision
contained in this Agreement on his part to be observed or performed which,
in the case of a default with respect to any covenant, agreement or
provision other than pursuant to Section 3 hereof, is not cured within
twenty (20) days after notice thereof delivered by the Bank to Cohen;
provided, however, that with respect to the delivery of any financial
statements pursuant to this Agreement or the Affidavit of Confession of
Judgment referred to in Section 5.1, an Event of Default shall not be
deemed to have occurred unless failure to so deliver is not cured within
thirty (30) days after notice thereof delivered by the Bank to Cohen;
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(iv) Cohen shall contest the validity or enforceability of this
Agreement or any document or instrument executed by Cohen pursuant hereto,
or if this Agreement or any document or instrument executed pursuant
hereto shall terminate, be terminable or be terminated or become void or
unenforceable for any reason whatsoever pursuant to a final non-appealable
order of a court of competent jurisdiction;
(v) the occurrence of a default of any material obligation under
either of the Pledge Agreements, which default has not been cured within
five (5) business days after notice thereof delivered by the Bank in
accordance with the provisions set forth therein;
(vi) the filing with respect to Curtis Holding or Curtis
Partition of a petition in bankruptcy or of an application for
reorganization, in each case whether voluntary or involuntary (which, in
the case of involuntary petitions or applications only, is not discharged
within ninety (90) days), or any arrangement or readjustment of
indebtedness, the appointment or the filing of an application for the
appointment of any receiver, trustee, liquidator or any committee, an
assignment for the benefit of creditors, in each case with respect to
Curtis Holding or Curtis Partition, or all or any substantial portion of
the assets of Curtis Holding or Curtis Partition;
(vii) this Agreement shall for any reason cease to be, or shall
be asserted by Cohen or either of the Curtis Entities not to be, a legal,
valid and binding obligation of Cohen, Rucon or Curtis Holding enforceable
in accordance with its terms, or any security interest purported to be
created by the Pledge Agreements shall for any reason cease to be, or be
asserted by Cohen or either of the Curtis Entities not to be, a valid,
first priority perfected security interest in any Cohen Collateral (except
to the extent otherwise permitted under this Agreement or either of the
Pledge Agreements), subject to the following provisions of this clause
(vii). Notwithstanding anything to the contrary in this Agreement, Curtis
Partition has received a certificate dated January 5, 1996 issued by the
Secretary of State of the State of New Jersey stating that the charter of
Curtis Partition was revoked "for non-payment of Annual Reports on
December 31, 1993"; and Curtis Holding has received a certificate dated
January 5, 1996 issued by the Secretary of State of the State of New
Jersey stating that the charter of Curtis Holding was revoked "for
non-payment of Annual Reports on March 31, 1994." Upon the filing of the
required reinstatement documents for Curtis Holding and Curtis Partition,
which have not yet been filed, and compliance by the Curtis Entities with
Section 14A:4-5(7) of
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the New Jersey Statutes, the charter of each Curtis Entity will be
reinstated retroactively. Such reinstatement will validate the execution
and delivery by Curtis Holding of the Partition Pledge Agreement and the
Restructuring Agreement. Until the charter of each Curtis Entity is
reinstated, any actions by such Curtis Entity may not have any legal
effect, and no Event of Default shall occur under this Agreement, by
virtue of the revocation of the charter of either Curtis Entity or the
invalidity of any action by either Curtis Entity before such
reinstatement, so long as, by April 16, 1996, such charter is reinstated
and Curtis Holding shall have delivered to the Bank evidence of such
reinstatement together with legal opinions of New Jersey counsel as the
Bank may reasonably request (x) to the effect that such charter has been
reinstated, (y) with respect to the due authority and corporate power of
Holding to execute and deliver the Partition Pledge Agreement and the
Restructuring Agreement, and (z) that the Partition Pledge Agreement and
the Restructuring Agreement constitute the valid and binding obligations
of Holding, enforceable in accordance with their respective terms (subject
to customary qualifications); provided that the foregoing agreement is
subject to the following: (i) each Curtis Entity shall have filed all
required documentation with the appropriate New Jersey State authority not
later than January 19, 1996 to initiate the reinstatement of its charter,
and (ii) the Curtis Entities shall pursue such reinstatement with
diligence and shall report on the status of such reinstatement to the Bank
not less frequently than monthly. At such time the Bank shall also receive
legal opinions, in form and substance reasonably satisfactory to the Bank,
to the effect that it has a first priority, perfected security interest in
the shares of stock subject to the Pledge Agreements.
5.3 Concurrently, with the execution of this Agreement, the Bank shall
deliver to Cohen the Affidavit of Confession of Judgment dated April 16, 1993,
executed by Cohen, marked "Canceled".
5.4 The Bank agrees that, until such time as there shall occur or
exist an Event of Default, it will not assert any rights available to it with
respect to the Retained Indebtedness as a result of the occurrence or existence
of any default under the Retained Loan Documents, including without limitation
the right to seek payment of principal, accrued interest or fees under the
Retained Indebtedness.
6. Representations and Warranties of Cohen, Rucon and Curtis Holding.
Each of Cohen (as to himself), and Rucon and Curtis Holding (as to themselves
jointly), hereby represents and warrants that:
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6.1 This Agreement has been duly executed and delivered by Cohen,
Rucon and Curtis Holding and constitutes the valid and binding obligation of
Cohen, Rucon and Curtis Holding, enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency, moratorium
or other similar laws currently or hereafter in effect affecting the enforcement
of creditors' rights generally, and the application of general principles of
equity.
6.2 No consent, authorization or approval of, or exemption by, any
governmental or public body or authority, nor any consent of any third party, is
required to be obtained by Cohen, Rucon or Curtis Holding in connection with the
execution, delivery and performance by Cohen, Rucon and Curtis Holding of this
Agreement or any of the instruments or agreements herein referred to or the
taking of any action herein contemplated, or if required, has been obtained.
6.3 The execution, delivery and performance of this Agreement by
Cohen, Rucon and Curtis Holding and the consummation of the transactions
contemplated hereby will not, with or without the giving of notice or the lapse
of time, or both (i) violate any provision of law, statute, rule or regulation
to which Cohen, Rucon or Curtis Holding is subject, (ii) violate any judgment,
order, writ or decree of any court applicable to Cohen, Rucon or Curtis Holding,
or (iii) result in the breach of or conflict with any term, covenant, condition
or provision of, result in the modification or termination of, constitute a
default under, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any properties or assets of Cohen, Rucon or
Curtis Holding pursuant to any commitment, contract or other agreement or
instrument to which any of them is a party or by which any assets or properties
of Cohen, Rucon or Curtis Holding is or may be bound or to which they may be
subject.
6.4 Neither Rucon nor Curtis Holding is now, nor will the consummation
of the transactions contemplated hereby render either of them, (i) "insolvent"
as that term is defined in Section 101(32) of the United States Bankruptcy Code
(the "Bankruptcy Code"), or Section 271 of the New York Debtor and Creditor Law
("NYDCL"), (ii) unable to pay its debts as they mature, within the meaning of
Section 548(a)(2)(B)(iii) of the Bankruptcy Code or Section 275 of the NYDCL, or
(iii) left with an unreasonably small capital. The execution and delivery of
this Agreement by Cohen, Rucon, and Curtis Holding does not constitute a
"fraudulent transfer" within the meaning of the Bankruptcy Code as now
constituted or under any other applicable statute. No bankruptcy or insolvency
proceedings are pending against Cohen, or pending or, to the knowledge of each
of Rucon, Curtis Holding and Curtis Partition, threatened against Rucon, Curtis
Holding or Curtis Partition, respectively.
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6.5 The financial statements of Curtis Partition dated February 28,
1995, previously delivered to the Bank, fairly present the financial condition
of Curtis Partition as of such date and the results of operations for the period
then ended, and there has been no material adverse change in the financial
condition or results of operation of Curtis Partition since such date (it being
understood that no such material adverse change shall be deemed to have occurred
if the operating income before intercompany charges of Curtis Partition for the
nine months ended November 30, 1995 shall have been at least $600,000).
6.6 The shares of Holding Common Stock and Holding Class B Stock being
pledged to the Bank pursuant to the Holding Pledge Agreement represent 55% of
the issued and outstanding shares of each class of capital stock of Curtis
Holding and there are not (i) outstanding any options, warrants or other rights
to purchase or otherwise acquire any shares of capital stock of Curtis Holding,
(ii) any securities outstanding convertible into or exchangeable for shares of
capital stock of Curtis Holding, or (iii) any other issued and outstanding
classes of capital stock of Curtis Holding. The shares of Partition Common Stock
pledged to the Bank pursuant to the Partition Pledge Agreement represent 55% of
the issued and outstanding shares of capital stock of Curtis Partition and there
are not (x) outstanding any options, warrants or other rights to purchase or
otherwise acquire any shares of capital stock of Curtis Partition, (y) any
securities outstanding convertible into or exchangeable for shares of capital
stock of Curtis Partition, or (z) any other issued and outstanding classes of
capital stock of Curtis Partition.
6.7 Morgan Satisfaction. The satisfactions referred to in Section 8.7
hereof serve to discharge all claims made by Morgan Guaranty Trust Company of
New York ("Morgan Guaranty") against The Arlen Corporation ("Arlen") or any of
its subsidiaries, and against Cohen to the extent that such claims against Cohen
relate to Arlen or any of its subsidiaries.
7. Release and Waiver. As an inducement for, and in consideration of, the
Bank's agreements herein, Cohen hereby releases, waives, remises, acquits and
forever discharges the Bank and each of its employees, agents, representatives,
consultants, attorneys, fiduciaries, servants, officers, directors, partners,
predecessors, successors and assigns, subsidiary corporations, parent
corporations, and related corporate divisions (all of the foregoing hereinafter
called the "Released Parties"), from any and all actions and causes of action,
judgments, executions, suits, debts, claims, setoffs, counterclaims, demands,
liabilities, obligations, damages and expenses of any and every character, known
or unknown, direct and/or indirect, at law or in equity, of whatsoever kind or
nature (collectively, "Claims"), whether heretofore or hereafter arising, for or
because of any matter or things done, omitted or
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suffered to be done by any of the Released Parties prior to and including the
date of execution hereof, in any way directly or indirectly arising out of the
Loan Documents, the Retained Loan Documents, the Rucon Assignment, and all
related documents (all of the foregoing hereinafter called the "Released
Matters"), except any Claims arising out of this Agreement. Cohen represents and
warrants to the Bank that the foregoing constitutes a full and complete release
of all Released Matters and confirms that the foregoing release and waiver is
informed and freely given.
8. Bank's Conditions to Close. The Bank shall enter into this Agreement
only upon the satisfaction of the following conditions:
8.1 Representations and Warranties True at Closing. The
representations and warranties of Cohen contained in this Agreement (including
the Exhibits and Schedules hereto) or any certificate or document delivered to
the Bank in connection herewith, including without limitation the Holding Pledge
Agreement and the Partition Pledge Agreement, shall be true in all material
respects.
8.2 No Action/Proceeding. No action or proceeding before a court or
any other governmental agency or body shall have been instituted or threatened
to restrain or prohibit the transaction herein contemplated or the transactions
contemplated by the Rucon Assignment, and no governmental agency or body or
other entity shall have taken any other action or made any request of the Bank
or Cohen as a result of which the Bank reasonably and in good faith deems that
to pursue the transactions hereunder or pursuant to the Rucon Assignment may
constitute a violation of law.
8.3 Compliance with Agreement. Cohen shall have made to the Bank the
deliveries required by this Agreement on or prior to the date hereof.
8.4 Board and Shareholder Approval. Cohen shall have delivered to the
Bank resolutions of the Board of Directors and of the shareholders of each of
Rucon and Curtis Holding, certified by the Assistant Secretary of each of such
entities as being true and in full force and effect, such resolutions approving
the Holding Pledge Agreement and the Partition Pledge Agreement, respectively,
and reflecting the determination that such agreements were entered into for
sufficient consideration.
8.5 Opinion of Counsel. Cohen shall have delivered to the Bank an
opinion of Brown Raysman & Millstein, counsel to Cohen, in a form satisfactory
to the Bank.
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8.6 Legal Fees. Cohen shall have delivered to the Bank a check to the
order of Warshaw Burstein Cohen Schlesinger & Kuh, LLP representing the amount
owed by Cohen in respect of legal fees and disbursements incurred by the Bank in
connection with the Indebtedness and the Retained Indebtedness, whether incurred
in connection with the transactions contemplated by this Agreement or in
connection with any and all previous matters relating to the Indebtedness and
the Retained Indebtedness to the extent such amounts remain unpaid.
8.7 Morgan Satisfaction. Each of Cohen and Arlen shall have satisfied
all claims against them (or any of Arlen's subsidiaries) relating to that
certain action entitled Morgan Guaranty Trust Company of New York v. The Arlen
Corporation, et al., Index No. 122525/95, and all other actions commenced in
connection therewith, and Cohen and Arlen shall have delivered to the Bank
copies of all documentation evidencing such satisfactions, including without
limitation any and all releases and/or discharges signed by Morgan Guaranty in
favor of Cohen and Arlen.
9. Waiver of Provisions of the Automatic Stay. As an inducement for, and
in consideration of the Bank's agreements herein, Cohen agrees that if he (a) is
adjudicated bankrupt or insolvent, or (b) commences a voluntary case under the
Federal Bankruptcy Law (as now or hereafter in effect), any stay imposed by
Section 105 or 362 of the Bankruptcy Code prohibiting the Bank from enforcing
its rights against the Collateral is waived and shall have no force and effect
as against the Bank, and the Bank shall be permitted to continue to exercise all
rights and remedies granted to it under this Agreement, the documents and
instruments executed pursuant hereto and the Retained Loan Documents.
10. Reinstatement. If claim is ever made upon the Bank for repayment or
recovery of any amount or amounts received by the Bank pursuant to this
Agreement, or otherwise in connection with the Retained Indebtedness, and the
Bank repays all or part of such amounts, by reason of (i) any final and
non-appealable judgment, decree or order of any court or administrative body
having jurisdiction over the Bank or any property of the Bank (a "Final Order")
(including without limitation a Final Order invalidating such payments or
declaring such payments to be a fraudulent conveyance or preferential and set
aside or required to be paid to a trustee, debtor-in-possession or any other
party under any bankruptcy law or otherwise), or (ii) any settlement or
compromise of any claim effected by the Bank with any such claimant (including
Cohen) but not in excess of an amount equal to 15% of the principal of the
Designated Payment theretofore received by the Bank (the "Settlement Amount"),
then and in such event, Cohen agrees that any such Final Order or Settlement
Amount shall be binding upon Cohen notwithstanding the provisions
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of Section 2 of this Agreement, and Cohen shall be and remain liable to the Bank
hereunder for the amount so repaid or recovered, together with all interest and
costs assessed against or incurred by the Bank in connection therewith to the
same extent as if such amount had never originally been received by the Bank,
anything elsewhere in this Agreement to the contrary notwithstanding. The
provisions of this Section 10 shall be and remain effective notwithstanding any
contrary action which the Bank may have taken in reliance upon such payment, and
any such contrary action so taken shall be without prejudice to the Bank's
rights hereunder and shall be deemed to have been conditioned upon such payment
having become final and irrevocable. The provisions of this Section 10 shall
survive the expiration or termination of this Agreement.
11. Miscellaneous.
11.1 Not less frequently than once per year, Cohen shall deliver to
the Bank a net worth statement in form reasonably satisfactory to the Bank.
11.2 COHEN HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND ANY SUIT,
ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND/OR THE
ENFORCEMENT OF ANY OF THE BANK'S RIGHTS AND REMEDIES HEREUNDER OR UNDER ANY OF
THE LOAN DOCUMENTS OR THE RETAINED LOAN DOCUMENTS.
11.3 Neither the failure nor any delay on the part of the Bank to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
11.4 Cohen hereby agrees that the Bank, in its sole discretion, may
freely sell, assign or otherwise transfer participations, portions, co-lender
interests or other interest in all or any portion of the Retained Indebtedness
or the Bank's rights under this Agreement (subject, however, to the Bank's
obligations hereunder). In the event of any such transfer, the transferee may,
in the Bank's discretion, have and enforce all the rights, remedies and
privileges of the Bank. Cohen consents to the release by the Bank to any bona
fide potential transferee of any and all information (including, without
limitation, financial information) pertaining to Cohen as the Bank, in its sole
discretion, may deem appropriate.
11.5 Each of Cohen and the Bank shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and documents as
the other may
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reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby,
including without limitation, in the case of Cohen only, executing and
delivering one or more powers of attorney in favor of the Bank; provided,
however, that the authority granted pursuant to any power of attorney executed
and delivered by Cohen pursuant to this Section 11.5 shall be limited to
executing a Confession of Judgment pursuant to Section 5.1 hereof.
11.6 Cohen acknowledges that the Bank will not have an adequate remedy
at law if Cohen fails to perform any of his obligations hereunder. Therefore,
the Bank shall have the right, in addition to any other rights it may have, to
specific enforcement of this Agreement if Cohen shall fail to perform any of
Cohen's obligations hereunder.
11.7 Any notice, consent, approval, request, demand or other
communication required or permitted hereunder must be in writing to be effective
and shall be deemed delivered and received (i) if personally delivered or if
delivered by telex or telecopy with electronic confirmation when actually
received by the party to whom sent, or (ii) if delivered by mail (whether
actually received or not), at the close of business on the third day next
following the day when placed in the federal mail, postage prepaid, certified or
registered mail, return receipt requested, or (iii) if delivered by a recognized
overnight mail service, at the close of business on the next day following the
day when placed in the custody of such service, addressed as follows:
If to Cohen:
Arthur G. Cohen
505 Eighth Avenue
New York, New York 10018
FAX: (212) 319-5173
With a copy to:
Rucon Services Corp.
Suite 300
505 Eighth Avenue
New York, New York 10018
FAX: (212) 736-5108
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With a copy to:
Curtis Holding Corporation
Suite 300
505 Eighth Avenue
New York, New York 10018
FAX: (212) 736-5108
With a courtesy copy to:
Brown Raysman & Millstein LLP
120 West 45th Street
New York, New York 10036
Attention: Kenneth J. Block, Esq.
FAX: (212) 840-2429
With a copy to:
Stephen B. Delman, Esq.
Suite 300
505 Eighth Avenue
New York, New York 10018
FAX: (212) 279-9595
and
With a courtesy copy to:
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
Attention: Carl F. Schwartz, Esq.
FAX: (212) 889-7577
If to the Bank:
Bank Leumi Trust Company of New York
562 Fifth Avenue
New York, New York 10017
Attention: Richard I. Schwam,
First Vice President
FAX: (212) 626-1144
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With a copy to:
Warshaw Burstein Cohen Schlesinger & Kuh, LLP
555 Fifth Avenue
New York, New York 10017
Attention: Frederick R. Cummings, Jr., Esq.
FAX: (212) 972-9150
11.8 This Agreement shall inure to the benefit of and shall be binding
upon the parties and their respective heirs, successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to or shall (a)
confer on any person other than the parties, and their respective heirs,
successors or assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, or (b) constitute the parties partners or
participants in a joint venture.
11.9 No person shall be deemed to be a third party beneficiary of this
Agreement, and, except for the provisions of Sections 1.3, 1.4, 2 and 3.5
hereof, nothing contained herein shall be construed as a waiver or amendment or
modification of any rights of the Bank against any other person or entity
pursuant to any agreement, instrument or document or be construed as limiting or
prohibiting the Bank from enforcing any right or remedy the Bank may have
against any other person or entity or from amending, modifying, limiting,
waiving, releasing any such right or remedy that it may have against any other
person or entity, including, without limitation, any other obligor or guarantor
of the Retained Indebtedness, or any part thereof, or from amending, modifying
or extending the terms of the Retained Indebtedness, all of which rights and
remedies of the Bank are expressly reserved, and all of which agreements,
instruments and documents remain in full force and effect.
11.10 This Agreement may not be modified or amended except by an
agreement or instrument in writing signed by the party against whom enforcement
of any such modification or amendment is sought. Any party may waive performance
or compliance by any other party with respect to any term or provision of this
Agreement on the part of such other party to be performed or complied with;
provided, however, that such waiver shall be effective only if evidenced by an
instrument in writing signed by the party waiving such compliance or
performance. The waiver by any party of a breach of any term or provision of
this Agreement shall not be construed as a waiver of any subsequent breach. No
failure or delay by the Bank in exercising any right or remedy it may have shall
operate as a waiver thereof.
11.11 Neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof
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shall be assignable by Cohen, except by will or intestacy, without the prior
written consent of the Bank.
11.12 This Agreement may be executed in counterparts, each of which
shall be deemed to be an original and all of which together shall be deemed to
be one and the same instrument.
11.13 Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
11.14 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to the conflicts
of law provisions thereof. Cohen hereby consents and submits to the jurisdiction
of the courts of the State of New York within the City of New York and of the
courts of the United States located within the City of New York for all purposes
of this Agreement, including, without limitation, any action for the enforcement
of any right, remedy, obligation or liability arising under or by reason of this
Agreement.
11.15 In the event of any inconsistency between the provisions of this
Agreement and the provisions of any of the Loan Documents, the provisions hereof
shall be controlling.
11.16 Cohen agrees to pay all costs and expenses incurred by the Bank
in connection with the preparation of this Agreement or any amendments,
modifications, waivers, extensions, renewals, renegotiations or "workouts" of
the provisions hereof or thereof (whether or not the transactions hereby
contemplated shall be consummated); or incurred by the Bank after the occurrence
of an Event of Default in connection with the enforcement or protection of its
rights in connection with this Agreement or with the transactions contemplated
hereby; or in connection with any pending or threatened action, proceeding, or
investigation relating to the foregoing, including but not limited to the
reasonable fees and disbursements of counsel for the Bank.
11.17 All prior or contemporaneous agreements, contracts, promises,
representations and statements, if any, among the parties hereto, or their
representatives, as to the subject matter hereof, including without limitation
that certain letter dated October 17, 1995 from the Bank to Cohen, are merged
into this Agreement, and this Agreement shall constitute the entire agreement
between them with respect to the subject matter hereof.
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11.18 Cohen hereby waives any obligation the Bank may have pursuant to
the last sentence of Section 11.8 of that certain Agreement dated April 16, 1993
to obtain an agreement from Rucon in connection with the Rucon Assignment that
Rucon will not apply any assets of Cohen (or proceeds from the disposition
thereof) which are held by Rucon as collateral for another obligation of Cohen
against payment of the Indebtedness.
11.19 Cohen and the Bank hereby agree that whenever the phrase
"causing to be made" or "causing to be paid" or any variation thereof appears in
this Agreement referring to payments made on behalf of Cohen, it is agreed that
the party entitled to perform pursuant to such phrase shall not include any
co-guarantor or co-obligor under the Retained Indebtedness.
11.20 Cohen agrees that he will not assert any right of contribution
he may have against any co-guarantor of any underlying indebtedness to which the
Indebtedness or the Retained Indebtedness relates, except by way of defense,
set-off, counterclaim or cross-claim, in each case in a related claim.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
BANK LEUMI TRUST COMPANY
OF NEW YORK
By:
----------------------------
Name: Richard I. Schwam
Title: First Vice
President
-------------------------------
ARTHUR G. COHEN
The undersigned is executing this Agreement only with respect to the
provisions of, and acknowledges and consents to the assignment of, pledge of and
grant of security interests in and to the Holding Common Stock and the Holding
Class B Stock set forth in, Sections 4.1, 4.4 and 6 hereof.
RUCON SERVICES CORP.
By:
----------------------------
President
The undersigned is executing this Agreement only with respect to the
provisions of, and acknowledges and consents to the assignment of, pledge of and
grant of security interests in and to the Partition Common Stock set forth in,
Sections 4.1, 4.4 and 6 hereof.
CURTIS HOLDING CORPORATION
By:
----------------------------
President
The undersigned is executing this Agreement only with respect to the
provisions of Section 4.4 hereof.
CURTIS PARTITION CORPORATION
By:
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