NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT, dated as of October 16, 2002, is made by and
between Royalty Holdings LLC, a Delaware limited liability company ("Buyer"),
and Regency Affiliates, Inc., a Delaware corporation (the "Company").
PREAMBLE:
WHEREAS, the Company wishes to obtain financing and the Buyer desires to
provide such financing to the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings for the purposes of
this Agreement:
"5% Convertible Note" has the meaning set forth in Section 2.1 hereof.
"9% Note" has the meaning set forth in Section 2.1 hereof.
"Affiliate" means, with respect to any specified Person, (1) any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(2) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 50 percent or more of any class of
securities of the specified Person or a Person described in clause (1) of this
paragraph, and (3) any relative or spouse of the specified Person or any of the
Persons contemplated in this definition.
"Agreement" means this Note Purchase Agreement together with all Exhibits
and Schedules attached hereto.
"beneficial ownership" or "beneficially own" shall have the meaning under
Section 13(d) of the Exchange Act and the rules and regulations thereunder.
"Business Day" means any day of the year other than (i) any Saturday or
Sunday or (ii) any other day on which commercial banks located in New York City
are generally closed for business.
"Buyer" has the meaning set forth in the initial paragraph of this
Agreement.
"Closing" has the meaning set forth in Section 5.1 of this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, $.01 par value per share, of the
Company.
"Company" has the meaning set forth in the initial paragraph of this
Agreement.
"Company Benefit Plans" has the meaning set forth in Section 3.9.
"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
"Control" or "control" means the possession, directly or indirectly, alone
or with others, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ability to exercise voting power,
by contract or otherwise; and "controlling" and "controlled" have meanings
correlative thereto.
"Dollars" or numbers preceded by the symbol "$" means amounts in United
States Dollars.
"Environment" shall mean soil, surface waters, ground waters, land, stream
sediments, surface or subsurface strata, ambient air, and any environmental
medium.
"Environmental Condition" shall mean any condition with respect to the
Environment on or off any Premises, whether or not yet discovered, which could
or does result in any damage, loss, cost, expense, claim, demand, order, or
liability to or against the Company or any of its Subsidiaries by any third
party (including, without limitation, any Governmental Authority), including,
without limitation, any condition resulting from the operation of the Company's
or any of its Subsidiaries' business and/or the operation of the business of any
other property owner or operator in the vicinity of such Premises and/or any
activity or operation formerly conducted by any person or entity on or off the
Premises.
"Environmental Laws" shall mean (a) Any federal, state, or local law,
regulation, ordinance, rule, guideline or by-law regulating or referring to the
Environment, whether existing as of the date hereof, previously enforced, or
subsequently enacted; (b) any law, ordinance, regulation, rule, guideline or
by-law of any Governmental Authority that asserts or may assert jurisdiction
over the Company, any of its Subsidiaries or the Premises, or the operations or
activities at the Premises, that regulates or refers to the presence, release,
threat of release, use, handling, manufacturing, generation, production,
storage, treatment, processing, transportation or disposal of any Hazardous
Substances, including, but not limited to (i) requiring any permit, license,
approval, consent or authorization, or the renewal thereof; (ii) regulating the
amount, form, manner of storage, transport and/or disposal of Hazardous
Substances; or (iii) requiring any reporting, inspection report, business plan,
notification, or any other dissemination of or access to information regarding
Hazardous Substances, including warnings or notices to tenants, subtenants,
employees, occupants, invitees or consumers.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any business or entity which is a member of the
same "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company within the meaning of Sections
414(b), (c) or (m) of the Code, as required to be aggregated with the Company
under Section 414(o) of the Code, or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA, or any regulations
promulgated or proposed under any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" means all of the financial statements of the
Company included in the SEC Documents.
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time.
"Governmental Authority" means the government of the United States or any
foreign country or any state or political subdivision thereof and any entity,
body or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Group" shall collectively mean all affiliated groups of corporations of
which the Company is or has been a member that have filed any consolidated Tax
returns for any period ending on or before the Closing Date for which the
statute of limitations has not yet expired.
"Hazardous Substances" shall mean (a) any pollutant, toxic substance,
contaminant, chemical, hazardous waste, hazardous material, petroleum product,
oil, radioactive material or energy; (whether such energy is radioactive or not)
(b) any substance, gas material or chemical which is or may be defined as or
included in the definition of "hazardous substances," "toxic substances,"
"hazardous materials," "hazardous wastes," or words of similar import under any
Environmental Law; (c) radon gas, asbestos in any form which could or does
become friable, urea formaldehyde foam insulation, transformers or other
equipment which contain dielectric fluid containing levels of polychlorinated
biphenyls in excess of federal, state or local safety guidelines, whichever are
more stringent; (d) any other chemical, material, gas, or substance, the
exposure or release of which is or may be prohibited, limited or regulated by
any Governmental Authority that asserts or may assert jurisdiction over the
Premises, or the operations or activity at the Premises, or any chemical,
material, gas or substance that does or may pose a hazard to health and/or
safety of the occupants of the Premises or the owners and/or occupants of
property adjacent to or surrounding the Premises.
"Latest Balance Sheet" means the unaudited consolidated balance sheet of
the Company and its Subsidiaries as at June 30, 2002.
"Law" means any law, statute, regulation, ordinance, rule, order, decree,
judgment, consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any Governmental
Authority.
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"Lien" means any mortgage, lien (except for any lien for Taxes not yet due
and payable), charge, restriction, pledge, security interest, option, lease or
sublease, claim, proxy, right of any third party, easement, encroachment or
encumbrance.
"Loss" or "Losses" means any and all liabilities, losses, costs, claims,
damages, penalties and expenses (including attorneys' fees and expenses and
costs of litigation).
"Material Adverse Effect" means, when used in connection with a Person,
any change, event or effect, whether or not foreseeable or known as of the
Closing Date, that, individually or in the aggregate with any such other
changes, events or effects, is, or could reasonably be expected to be,
materially adverse to the business, operations, assets, liabilities, results of
operations, cash flows or condition (financial or otherwise) of such Person.
"NOL" shall have the meaning set forth in Section 3.5.
"NRDC" has the meaning set forth in Section 3.3.
"Notes" has the meaning set forth in Section 2.1.
"Permit" shall mean any environmental permit, license, approval, consent,
or authorization issued by a federal, state, or local governmental entity or
otherwise required under any Environmental Law.
"Person" means any individual, corporation, proprietorship, firm,
partnership, limited liability company, limited partnership, trust, association
or other entity, including a government or government department, agency or
instrumentality.
"Preferred Stock" has the meaning set forth in Section 3.3.
"Premises" shall mean any property or location, whether owned, leased, or
otherwise occupied at, from, or which the Company or any of its subsidiaries now
or has heretofore conducted business.
"Release" shall mean any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the Environment.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means each report, schedule, registration statement and
definitive proxy statement filed by the Company.
"Securities" shall have the meaning under Section 2(a)(1) of the
Securities Act and the rules, regulations and case law thereunder.
"Securities Act" means the Securities Act of 1933, as amended.
"Security" has the meaning set forth in Section 3.3.
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"Subsidiary" means, with respect to any Person at any time, (a) any other
Person the accounts of which would be consolidated with those of such first
Person in its consolidated financial statements as of such time under GAAP
consistently applied and (b) any other Person (i) that is a corporation, at
least a majority of the shares of the voting securities of which shall at the
time be owned, directly or indirectly, by the first Person and/or by one or more
direct or indirect Subsidiaries of such first Person and (ii) that is not a
corporation, at least a majority of the equity interests of which shall at the
time be owned, directly or indirectly, by such first Person and/or by one or
more Subsidiaries of such first Person. For purposes of this Agreement, Security
shall be deemed a Subsidiary of the Company.
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational, interest equalization, windfall profits,
severance, employee's income withholding, other withholding (including, without
limitation, dividend withholding and withholding required under Sections 1445
and 1446 of the Code), unemployment and Social Security taxes, which are imposed
by any Governmental Authority, and such term shall include any interest,
penalties or additions to tax attributable thereto.
"Threat of Release" shall mean a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the Environment which may
result from such Release.
"Transaction Documents" mean this Agreement, each of the documents and
agreements attached as Exhibits to this Agreement and any other documents or
Contracts to be entered into pursuant to or in connection with this Agreement or
any Exhibit hereto.
ARTICLE II
PURCHASE OF NOTES
Section 2.1 Purchase of Notes. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the Company
herein set forth, on the Closing Date, Buyer shall purchase an aggregate of
$4,750,000 in notes of the Company (i) $3,500,000 of which will be represented
by a 5% Convertible Promissory Note (the "5% Convertible Note") and (ii)
$1,250,000 of which will be represented by a 9% Promissory Note (the "9% Note"
and, together with the 5% Convertible Note, the "Notes"), each in the form of
Exhibits A and B hereto, respectively.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer, as of the date of this
Agreement, as follows:
Section 3.1 Consents and Approvals; Authority Relative to this Agreement.
(a) Except for the Schedule 14F-1 (as defined in Section 3.14)
and consent to the filing of the Amended Series C Certificate (as defined in
Section 3.12), no consent, authorization or approval of, filing by or
registration with, or cooperation from, any Governmental Authority or any other
Person is necessary in connection with the execution, delivery and performance
by the Company of this Agreement and the other Transaction Documents to which it
is a party or the consummation of the transactions contemplated hereby or
thereby or the taking of any other action by the Company or its board of
directors in connection with the transactions contemplated hereby or thereby.
(b) The actions necessary or required to be taken by the
Company or its board of directors or Subsidiaries in connection with the
transactions contemplated hereby or by the other Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby do not and will
not, (i) violate any Law; (ii) violate or conflict with, result in a breach or
termination of, constitute a default or give any third party any additional
right (including a termination right) under, permit cancellation of, result in
the creation of any Lien upon any of the assets or properties of the Company or
its Subsidiaries under, or result in or constitute a circumstance which, with or
without notice or lapse of time or both, would constitute any of the foregoing
under, any Contract to which the Company or its Subsidiaries is a party or by
which the Company or its Subsidiaries or any of their respective assets or
properties are bound or any Permit; (iii) permit the acceleration of the
maturity of any indebtedness of the Company or its Subsidiaries or indebtedness
secured by their respective assets or properties; or (iv) violate or conflict
with any provision of any of the certificate of incorporation, charter, bylaws,
partnership agreement or similar organizational instruments of the Company or
its Subsidiaries.
(c) The Company has full power and authority to enter into
this Agreement and the other Transaction Documents to which it is a party, and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Company of this Agreement and the other
Transaction Documents to which it is a party have been duly and validly approved
by the Board of Directors of the Company and no other actions or proceedings on
the part of the Company or its shareholders are necessary to authorize this
Agreement and such other Transaction Documents and the transactions contemplated
hereby and thereby. The Company has duly and validly executed and delivered this
Agreement and the other Transaction Documents to which it is a party and this
Agreement and such other Transaction Documents constitute legal, valid and
binding obligations of the Company, in each case, enforceable in accordance with
their respective terms.
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Section 3.2 SEC Documents.
(a) The Company has filed all documents that it was required
to file with the SEC. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
Company does not have any outstanding and unresolved comments from the SEC with
respect to any of the SEC Documents. The financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X
of the SEC) and fairly presented in accordance with applicable requirements of
GAAP (subject, in the case of the unaudited statements, to normal, recurring
adjustments, none of which are material) the consolidated financial position of
the Company and its consolidated Subsidiaries as of their respective dates and
the consolidated statements of income and the consolidated cash flows of the
Company and each of its consolidated Subsidiaries for the periods presented
therein. The books of account and other financial records of the Company on
which such Financial Statements are based are true, complete and correct in all
material respects and are accurately reflected in all material respects in the
Financial Statements. There are no material liabilities, debts, claims or
obligations of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute or determined, other than: (i) liabilities
adequately provided for on the Financial Statements and the Latest Balance
Sheets; and (ii) liabilities incurred in the ordinary course of business
subsequent to the date of the last dated Financial Statement which have not had,
individually or in the aggregate, and could not reasonably be expected to have,
a Material Adverse Effect on the Company or any of its Subsidiaries.
(b) The date of the last audited Financial Statements for the
Company and its Subsidiaries is the Financial Statements for the year ended
December 31, 2001.
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
30,000,000 shares, consisting of 25,000,000 shares of Common Stock, and
5,000,000 shares of Preferred Stock, par value $.10 per share ("Preferred
Stock"). Of the authorized Preferred Stock, (i) 370,747 shares are designated as
Contingent Convertible $10 Stated Value Series B Preferred Stock (the "Series B
Preferred Stock"), (ii) 210,000 shares are designated as Cumulative Senior
Preferred $100 Stated Value Series C Stock (the "Series C Preferred Stock"), and
(iii) 26,000 shares are designated as Cumulative Contingent Convertible Junior
Preferred $10 Stated Value Series D Stock (the "Series D Preferred Stock").
(b) As of the date of this Agreement, the issued and
outstanding capital stock of the Company consists solely of (i) 1,939,874 shares
of Common Stock, (ii) 370,747 shares of Series B Preferred Stock, (iii) 208,850
shares of Series C Preferred Stock and (iv) 25,964 shares of Series D Preferred
Stock.
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(c) Except as set forth in Sections 3.3(a) and (b), there are
no shares of capital stock or other securities (whether or not such securities
have voting rights) of the Company issued or outstanding or, except as set forth
in the SEC Documents, any subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
obligating the Company, or obligating any Person to cause the Company, to issue,
transfer or sell, or cause the issuance, transfer or sale of, any shares of
capital stock or other securities (whether or not such securities have voting
rights) of the Company. Except as set forth in the SEC Documents, there are no
outstanding Contracts which relate to the purchase, sale, issuance, repurchase,
redemption, acquisition, transfer, disposition, holding or voting of any shares
of capital stock or other securities of the Company or its Subsidiaries or the
management or operation of the Company or its Subsidiaries. Other than pursuant
to the Employment Agreement dated as of June 3, 1997 between the Company and
Xxxxxxx X. Xxxxxxxx, Xx., which employment agreement will be terminated at or
prior to Closing without any payment accrued or due, no Person has any "phantom"
stock or any right to participate in, or receive any payment from the Company or
any of its Subsidiaries based on any amount relating to, the revenue, income,
value or net worth of the Company or any its Subsidiaries or any component or
portion thereof, or any increase or decrease in any of the foregoing.
(d) The Company has no Subsidiaries or ownership interests in
any Person other than (i) Rustic Crafts International, Inc., which is
wholly-owned by the Company, (ii) National Resource Development Corporation
("NRDC"), 80% of the outstanding common stock of which is owned by the Company
(without giving effect to the transactions described in Section 3.13), (iii)
Security Land and Development Company Limited Partnership ("Security"), in which
the Company owns a limited partnership interest with the rights and obligations
set forth in Security's Amended and Restated Limited Partnership Agreement and
Restated Certificate of Limited Partnership, dated as of November 25, 1986, as
amended by the first through seventh amendments thereto (the "Partnership
Agreement"), a true and complete copy of which has been delivered to Buyer by
Seller, (iv) Transcontinental Drilling Company ("Drilling"), 80% of the
outstanding common stock of which is owned by the Company, (v) RegTransco, Inc.,
which is wholly-owned by Drilling, (vi) Xxxxx.xxx, Inc., which is wholly-owned
by the Company and (vii) Iron Mountain Resources, Inc., 75% of the common stock
of which is owned by the Company. The Partnership Agreement constitutes the
entire agreement with respect to the rights and obligations of the partners of
Security.
Section 3.4 Stockholders Meeting. Except for consent to the filing of the
Amended Series C Certificate, no meeting, vote, consent or waiver of the
stockholders of the Company is required in connection with the transactions
contemplated under or in connection with this Agreement or the other Transaction
Documents.
Section 3.5 Taxes.
(a) The Company and each of its Subsidiaries (A) has filed all
Tax returns and reports required to be filed by it (after giving effect to any
filing extension properly granted by a Governmental Entity having authority to
do so), and all such returns and reports are accurate and complete in all
material respects, and (B) has paid (or has had paid on its behalf) all Taxes
shown on such returns and reports as required to be paid by it. The most recent
financial statements contained in the SEC Documents reflect an adequate reserve
for all material Taxes
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payable by the Company and its Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements. The Company and its
Subsidiaries have established (and shall continue to establish and maintain) on
their books and records reserves that are adequate for the payment of all Taxes
not yet due and payable, as and to the extent required by GAAP. Neither the
Company nor any of its Subsidiaries is the subject of any audit, examination, or
other proceeding in respect of Taxes or has received written notice of any
audit, examination or other proceeding in respect of Taxes involving the Company
or any of its Subsidiaries. No material deficiencies for any Taxes have been
proposed, asserted or assessed against the Company or any of its Subsidiaries,
including claims by any taxing authority in a jurisdiction where the Company or
any Subsidiary does not file Tax returns but in which any of them is or may be
subject to taxation, and no requests for waivers of the time to assess any such
Taxes are pending.
(b) Each Subsidiary of the Company which is a partnership,
joint venture or limited liability company (i) has been since its formation and
continues to be treated for federal income tax purposes as a partnership, and
not as a corporation and (ii) has not since the later of its formation or the
acquisition by the Company of a direct or indirect interest therein, been a
publicly traded partnership within the meaning of Section 7704(b) of the Code
that is taxable as a corporation pursuant to Section 7704(a) of the Code.
Neither the Company nor any of its Subsidiaries holds any asset which is subject
to a consent filed pursuant to Section 341(f) of the Code and the regulations
thereunder.
(c) All Taxes which the Company and its Subsidiaries are
required by law to withhold or collect, including Taxes required to have been
withheld in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party and sales, gross receipts
and use Taxes, have been duly withheld or collected and, to the extent required,
have been paid over to the proper Governmental Authorities or are held in
separate bank accounts for such purpose. There are no liens for Taxes upon the
assets of the Company or any of its Subsidiaries except for statutory liens for
Taxes not yet due.
(d) The Company does not have any liability for the Taxes of
any Person other than the Company and its corporate Subsidiaries, and each of
the Company's Subsidiaries does not have any liability for the Taxes of any
Person other than, in the case of corporate Subsidiaries, the Company and its
corporate Subsidiaries, (A) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), (B) as a transferee or
successor, (C) by Contract, or (D) otherwise.
(e) Neither the Company nor any of its Subsidiaries have made
any payments, are obligated to make any payments, or are parties to an agreement
that could obligate them to make any payments that will not be deductible under
Section 280G of the Code.
(f) No Tax returns of the Company or any Subsidiary have been
examined or audited by any taxing authority for any past year or periods.
(g) Neither the Company nor any of its Subsidiaries has
agreed, is required, has requested or has received written notice that it may be
required to make any adjustments pursuant to Section 481 of the Code.
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(h) The Company has provided to Buyer, a schedule prepared by
the Company's outside accountants who prepare the Company's federal income Tax
returns, detailing the amount, utilization and expiration of the Company's net
operating loss ("NOL") carryforwards since the first taxable year of the Company
in which any NOLs arose. The information shown on the schedule is accurate and
complete in all material respects. The Company's NOL carryforwards as determined
for federal income Tax purposes are fully utilizable in each of the states in
which the Company and its Subsidiaries file Tax returns. The Company has not
undergone an "ownership change" within the meaning of Section 382 of the Code at
any time since the commencement of the Company's first taxable year in which it
reported a NOL that either continues to be available (in whole or in part) as a
carryforward or was utilized (in whole or in part) for federal, state or local
income Tax purposes in any taxable year of the Company for which the applicable
statute of limitations remains open.
Section 3.6 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and each of its Subsidiaries is a corporation or partnership
duly organized, validly existing and, where applicable, in good standing under
the laws of its state of incorporation or organization, and the Company and each
of its Subsidiaries has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted, and
is duly qualified and in good standing to do business in each jurisdiction in
which the business it is conducting, or the operation, ownership or leasing of
its properties, makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify would not have a Material Adverse
Effect on such Person.
Section 3.7 Investment Company Act of 1940. No Governmental Authority or
other Person has asserted any claim that the Company is required to be
registered as an investment company under the Investment Company Act of 1940, as
amended, or made any inquiry with respect to such subject matter.
Section 3.8 Resolutions. The Board of Directors of the Company has
established and appointed a duly and validly constituted committee of
independent, disinterested directors of the Board of Directors of the Company
(the "Committee") and the Committee, acting with full authority of the Board of
Directors pursuant to the resolutions of the full Board of Directors in the form
of Exhibit C-1, has unanimously approved resolutions in the form of Exhibit C-2
and has duly and validly authorized the actions contemplated in such
resolutions. The full Board of Directors has ratified and approved all such
resolutions requiring ratification or approval of the full Board of Directors
pursuant to the resolutions attached as Exhibit C-3. The resolutions set forth
in Exhibit C-1, C-2 and C-3 have not been amended, rescinded or modified in any
respect since their adoption and remain in full force and effect, and such
resolutions are the only resolutions adopted by the Board of Directors of the
Company and/or the Committee pertaining to the subject matter thereof.
Section 3.9 Employee Benefit Plans.
(a) With the exception of any Foreign Plans, all employee
benefit plans, compensation arrangements and other benefit arrangements covering
employees of the Company or any Subsidiary, any employee pension benefit plan
(as defined in Section 3(2) of ERISA,
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including, without limitation, any multi-employer plan within the meaning of
Section 3(37) of ERISA; employee welfare benefit plan (as defined in Section
3(1) of ERISA); or bonus, deferred compensation, stock purchase, stock option,
severance plan, salary continuation, vacation, sick leave, fringe benefit,
incentive, insurance, welfare or similar arrangement (the "Company Benefit
Plans") and all employee agreements providing compensation, severance or other
benefits to any employee or former employee of the Company or any Subsidiary are
disclosed in the SEC Documents. Buyer has been provided a current, accurate and
complete copy (or where no copies are available, a description) of each Company
Benefit Plan, and, where applicable: (a) any related trust agreement or
insurance or annuity contracts; (b) the most recent determination letter; (c) a
summary plan description; (d) the most recent audited financial statement with
respect to each such Company Benefit Plan that is required to have an audited
financial statement; and (e) copies of the three most recent (i) actuarial
reports with respect to each Company Benefit Plan that is required to have an
actuarial report; and (ii) annual reports (Forms 5500) and any related schedules
with respect to each Company Benefit Plan required to file an annual report. Any
of the Company Benefit Plans intended to be qualified under Section 401(a) of
the Code has received a determination letter and continues to satisfy the
requirements for such qualification. Neither the Company, nor any Subsidiary nor
any ERISA Affiliate of the Company maintains, contributes to or is obligated to
contribute to, or has maintained, contributed to, or been obligated to
contribute to in the past six (6) years any benefit plan which is covered by
Title IV of ERISA or Section 412 of the Code or a "multi-employer plan" within
the meaning of Section 3(37) of ERISA or Section 4001(a)(3) of the Code. All
material contributions required to be made as of the date hereof to the Company
Benefit Plans have been made or provided for and reserved against in the
Company's financial statements. As of the date hereof, there does not exist any
accumulated funding deficiency within the meaning of either Section 412 of the
Code or Section 302 of ERISA as to any Company Benefit Plan, nor would there
exist any such deficiency but for the application of an alternative minimum
funding standard. On or prior to the date hereof, there has not been issued any
waiver of the minimum funding standards imposed by any applicable law, including
the Code, with respect to any such Company Benefit Plan. Each Company Benefit
Plan has been maintained and administered in compliance with its terms and with
ERISA and the Code to the extent applicable thereto, except for such
non-compliance which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. There is no pending or, to the
knowledge of the Company, anticipated, litigation against, or otherwise
involving, any of the Company Benefit Plans and no litigation (excluding claims
for benefits incurred in the ordinary course of the Company Benefit Plan
activities) has been brought against or with respect to any such Company Benefit
Plan. Neither the Company nor any Subsidiary maintains, contributes to, or has
any other material liability with respect to any plan or arrangement which
provides or has any liability to provide life insurance or medical or other
employee welfare benefits to any employee or former employee upon his retirement
or termination of employment, and neither the Company nor any Subsidiary has
ever represented, promised or contracted (whether in oral or written form) to
any employee or former employee that such benefits would be provided. To the
knowledge of the Company: (i) no Company Benefit Plan is under investigation or
audit by either the United States Department of Labor or the Internal Revenue
Service, and (ii) there are no matters pending before the Pension Benefit
Guaranty Corporation.
11
(b) Each employee benefit plan, program or arrangement
applicable to employees located outside of the United States (a "Foreign Plan")
is disclosed in the SEC Documents. Each Foreign Plan has been maintained, funded
and administered in compliance with all laws applicable thereto and with the
respective requirements of such Foreign Plan's governing documents, except to
the extent that any non-compliance would not reasonably be expected to result in
a Material Adverse Effect.
Section 3.10 Environmental.
(a) (i) The activities, operations and business carried out at
or on the Premises by the Company and its Subsidiaries including, but not
limited to, the business conducted at the Premises or any past or ongoing
alterations or improvements at the Premises is, and has been at all times in
compliance with all Environmental Laws and with all agreements with Governmental
Authorities, court and administrative orders regarding the Environment, (ii)
Hazardous Substances have not been generated, used, treated, handled, stored,
released or disposed of, on, at, under or about the Premises, and (iii) the
Company has no knowledge of the existence of any Environmental Condition at any
of the Premises.
(b) The Company is not aware of any pending or threatened
litigation or proceedings before any administrative agency in which any person
or entity alleges the violation of any Environmental Law or the presence,
release, threat of release, placement, storage, disposal or use, generation or
treatment of Hazardous Substances on, at, under or from any of the Premises,
including, without limitation, that hazardous substances used, generated, stored
or treated at any Premises were released or treated to be released at any site
other than the Premises, nor has the Company (i) received any notice of and has
no actual or constructive knowledge that any third party, Governmental Authority
or any employee or agent thereof, has determined, threatens to determine or
requires an investigation to determine that there exists any violation of any
Environmental Law or the presence, release, threat of release, or placement,
use, gain, storage, disposal or treatment of Hazardous Substances on, at, under
or from the Premises, (ii) received any notice under a citizen suit provision of
any Environmental Law; or (iii) received any request for inspection or request
for information, notice, demand, administrative inquiry or any formal or
informal complaint or claim with respect to or in connection with any
Environmental Law.
(c) No lien has been imposed on any of the assets of the
Company or its Subsidiaries by any Governmental Authority in connection with
Environmental Law.
(d) The Company and its Subsidiaries have all Permits
necessary for the operation of their respective businesses and for any past or
ongoing alterations or improvements at any Premises.
(e) No storage tanks presently exist on, at, under or about
any Premises or previously existed on, at, under or about any Premises, or to
the best of the Company's knowledge, are located on any adjoining property.
12
Section 3.11 Absence of Certain Changes and Events. Since December 31,
2001, (i) the Company has conducted its business, taken as a whole, in the
ordinary course with such exceptions as have not had a Material Adverse Effect
and (ii) neither the financial condition nor the business of the Company has
materially adversely changed. Since the date of reported beneficial ownership of
common stock of the Company in the Company's Form 10-K for the year ended
December 31, 2001, no capital stock of the Company or of any of its Subsidiaries
and no options or warrants or other rights to acquire any such capital stock
have been issued. Since the date of the Latest Balance Sheet, no payments have
been made to or on behalf of, and no amounts accrued on the books of the Company
or any of its Subsidiaries with respect to amounts payable to or on behalf of,
any officer or director of the Company or of any of its Subsidiaries (or to or
on behalf of any member of any such officer's or director's extended family) or
to on behalf of any entity with which any such officer, director or family
member is affiliated or associated or in which any such officer, director,
family member, affiliate or associate holds any equity or other participation
interest. No issuance, payment or accrual referred to above arises in connection
with the transactions contemplated hereby or by the other Transaction Documents.
Section 3.12 Preferred Stock Amendment. The requisite consent of holders
of Series C Preferred Stock has been validly obtained for the filing of the
Amended and Restated Certificate of Designation, Preferences and Rights of the
Series C Preferred Stock, in the form of Exhibit D hereto (the "Amended Series C
Certificate"), with the Secretary of State of the State of Delaware.
Section 3.13 Section 14(f) Filing. The information relating to the
Company, the current shareholders of the Company and the current officers and
directors of the Company (the Company Information") contained in the Schedule
14F-1 (the "Schedule 14F-1") of the Company attached as Exhibit E hereto, is
true, accurate and complete in all material respects and does not omit any
material fact necessary to make such information not misleading.
Section 3.14 Exemption from Registration. Neither the Company nor any
Person authorized to act on its behalf has, in connection with the offering of
the Notes engaged in (a) any form of general solicitation or general advertising
(as those terms are used within the meaning of Rule 502(c) under the Securities
Act), (b) any action involving a public offering within the meaning of Section
4(2) of the Securities Act and the judicial interpretations of such section or
(c) any action that would require the registration under the Securities Act of
the offering and sale of the Notes pursuant to this Agreement. As used herein,
the terms "offer" and "sale" have the meanings specified in Section 2(3) of the
Securities Act.
Section 3.15 Brokers. Neither the Company nor any Subsidiary nor any of
their respective Affiliates is a party to any Contract relating to any brokerage
or finder's fee or other commission payable in connection with any of the
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company, as of the date of this
Agreement as follows:
Section 4.1 Due Organization. Buyer is a limited liability company, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite power and authority to own, lease and operate its
properties and to carry on its business as they are now being owned, leased,
operated and conducted. The managing member of Buyer is Royalty Management, Inc.
13
Section 4.2 Due Authorization. Buyer has full power and authority to enter
into this Agreement and the other Transaction Documents to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by Buyer of this Agreement and Transaction
Documents to which it is a party have been duly and validly approved by the
members of Buyer and no other actions or proceedings on the part of Buyer are
necessary to authorize this Agreement, the Transaction Documents to which it is
a party and the transactions contemplated hereby and thereby. Buyer has duly and
validly executed and delivered this Agreement and has duly and validly executed
and delivered (or prior to or at the Closing will duly and validly execute and
deliver) the Transaction Documents to which it is a party. This Agreement
constitutes, and the Transaction Documents to which Buyer is a party when
executed and delivered prior to or at the Closing will constitute, legal, valid
and binding obligations of Buyer, in each case enforceable in accordance with
their respective terms.
Section 4.3 Consents and Approvals; Authority Relative to this Agreement.
(a) No consent, authorization or approval of, filing or
registration with, or cooperation from, any Governmental Authority or any other
Person not a party to this Agreement is necessary to be made or obtained by
Buyer in connection with the execution, delivery and performance by Buyer of
this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby.
(b) The execution, delivery and performance by Buyer of this
Agreement and the Transaction Documents to which it is a party do not and will
not, and the consummation of the transactions contemplated hereby and thereby
does not and will not, (i) violate any Law, (ii) violate or conflict with,
result in a breach or termination of, constitute a default or give any third
party any additional right (including a termination right) under, permit
cancellation of, result in the creation of any Lien upon any of the assets or
properties of Buyer under, or result in or constitute a circumstance which, with
or without notice or lapse of time or both, would constitute any of the
foregoing under, any Contract to which Buyer is a party or by which Buyer or any
of its assets or properties are bound; (iii) permit the acceleration of the
maturity of any indebtedness of Buyer or indebtedness secured by its assets or
properties; or (iv) violate or conflict with any provision of the certificate of
formation and operating agreement of Buyer.
Section 4.4 Brokers. Neither the Company nor any of its Subsidiaries has
or shall have any liability or otherwise suffer or incur any Loss as a result of
or in connection with any brokerage or finder's fee or other commission of any
Person retained by Buyer or any of its Affiliates in connection with any of the
transactions contemplated by this Agreement and the Transaction Documents.
14
ARTICLE V
CLOSING
Section 5.1 Closing. The Closing of the transactions described in Section
2.1 (the "Closing") shall be scheduled to occur at the offices of the Company,
simultaneously with the execution of this Agreement.
Section 5.2 Conditions to Buyer's Obligations. Buyer's obligations to
consummate the transactions contemplated hereby shall be conditioned on the
satisfaction of the following conditions at or prior to Closing:
(a) All conditions precedent to the consummation of the
transactions contemplated by the Redemption Agreement attached hereto as Exhibit
F shall have been satisfied;
(b) Buyer shall have received a certificate of the Company's
Secretary, in the form of Exhibit G hereto;
(c) The Employment Agreements in the form of Exhibits H-1 and
H-2 hereto shall have been executed by the Company;
(d) The Amended Series C Certificate shall have been filed
with the Secretary of State of the State of Delaware; and
(e) The Company shall have executed and delivered the Notes.
Section 5.3 Conditions to Company's Obligations. The Company's obligations
to consummate the transactions contemplated hereby shall be conditioned on the
satisfaction of the following condition at or prior to Closing:
(a) The Buyer shall have delivered to the Company an amount
equal to $4,750,000 less the aggregate amount of Buyer Reimbursable Expenses (as
defined in Section 6.1);
ARTICLE VI
MISCELLANEOUS
Section 6.1 Expenses. The Company shall pay all expenses of the Company
(including attorneys' fees and expenses) and the Company shall reimburse the
Buyer for all expenses of Buyer (including attorneys' fees and expenses), in
each case incurred in connection with this Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby (the "Buyer
Reimbursable Expenses"), provided, however, that the aggregate amount of such
Buyer Reimbursable Expenses shall not exceed $250,000.
15
Section 6.2 Indemnity
The Company agrees to indemnify, defend and hold harmless the
Buyer and its members, directors, officers, agents, employees, legal
representatives and affiliates (individually an "Indemnified Person" and
collectively the "Indemnified Persons"), from and against any and all losses,
claims, damages, and liabilities, joint or several (and all actions, claims,
proceedings and investigations in respect thereof), caused by, related to,
arising out of, directly or indirectly, the transactions contemplated by this
Agreement and the other Transaction Documents, whether under any statute, under
common law, or otherwise. The Company will also reimburse the Buyer and any
other Indemnified Person for all reasonable expenses (including reasonable fees
and disbursements of legal counsel), as such expenses are incurred, in
connection with investigating, preparing to defend or defending any such action,
claim, proceeding or investigation, whether or not in connection with pending or
threatened litigation in which the Buyer or any other Indemnified Person is a
party or target. However, the Company will not be liable under this paragraph to
the extent that any loss, damage or liability is found in a final judgment of a
court of competent jurisdiction to have resulted from the gross negligence or
intentional wrongdoing of the Buyer. If for any reason the foregoing
indemnification is unavailable to any Indemnified Person or insufficient to hold
it harmless, then the Company will contribute to the amount paid or payable by
such Indemnified Person as a result of such loss, damage or liability in such
proportion as is appropriate to reflect the relative fault of the Company and
the Buyer, as well as any relevant equitable considerations. If notice of any
action, claim, proceeding or investigation is received by an Indemnified Person
in respect of which indemnity may be sought against the Company hereunder, such
Indemnified Person will promptly notify the Company in writing of the
commencement thereof. However, the omission to so notify the Company will not
relieve the Company from any liability to such Indemnified Person hereunder,
except to the extent that such failure will have actually prejudiced the defense
of such action. The Buyer will have the right to retain counsel of its own
choice to represent the Buyer and all other Indemnified Persons (provided such
counsel will be reasonably satisfactory to the Company). The Buyer and such
counsel will fully cooperate with the Company and any counsel designated by the
Company. The reasonable fees and expenses of such counsel retained by the Buyer
will be paid by the Company. Notwithstanding anything in this Agreement or
implied by law to the contrary, the agreements of the Company set forth in this
Section 6.2 shall survive the payment of the Notes and the termination of this
Agreement.
Section 6.3 Amendment. This Agreement may be amended, modified or
supplemented but only in writing signed by each of the parties hereto.
Section 6.4 Notices. Any notice, request, instruction or other document to
be given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, when received:
16
(a) If to the Company, addressed as follows:
Regency Affiliates, Inc.
000 X.X. Xxxxxx Xxxxx Xxxxxxxxx
Xxxxxx Xxxxx, Xxxxxxx 00000
Attention: President
with a copy to:
(b) If to Buyer, addressed as follows:
Royalty Holdings LLC
c/o Hyde Park Holdings, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx Xxxxx Xxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
Section 6.5 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
Section 6.6 Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed an original, but all of which together
shall constitute one and the same instrument.
Section 6.7 Interpretation. Consummation of the transactions contemplated
herein shall not be deemed a waiver of a breach of or inaccuracy in any
representation, warranty or covenant or of any party's rights and remedies with
regard thereto. No specific representation, warranty or covenant contained
herein shall limit the generality or applicability of a more general
representation, warranty or covenant contained herein. A breach of or inaccuracy
in any representation, warranty or covenant shall not be affected by the fact
that any more general or less general representation, warranty or covenant was
not also breached or inaccurate.
Section 6.8 Governing Law; Arbitration. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
17
The Company consents and submits to the jurisdiction of the Supreme Court
of the State of New York, and of the United States District Court for the
Southern District of New York, for all purposes in connection with any dispute,
controversy or claim directly or indirectly relating to or arising out of this
Agreement, including the entry of judgment on any award; and consent that any
process, notice of motion or other application to either of said courts may be
served by registered or certified mail, return receipt requested, by personal
service, or in such other manner as may be permissible under the rules of the
applicable court, provided a reasonable time for appearance is allowed. The
Company waives to the extent not prohibited by applicable law, and agrees not to
assert, by way of motion, as a defense or otherwise, in any such action, suit,
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that it is immune from extraterritorial injunctive
relief or other injunctive relief, that its property is exempt or immune from
attachment or execution, that any such action, suit, or proceeding may not be
brought or maintained in one of the above-named courts, that any such action,
suit, or proceeding brought or maintained in one of the above-named courts
should be dismissed on the grounds of forum non conveniens, should be
transferred to any court other than one of the above-named courts, or that this
Agreement or the subject matter hereof may not be enforced in or by any of the
above-named courts.
Section 6.9 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective estates, heirs, legal
representatives, successors and assigns; provided, however, that no assignment
of any rights or obligations shall be made by any party hereto without the
written consent of each other party hereto.
Section 6.10 No Third-Party Beneficiaries. This Agreement is solely for
the benefit of the parties hereto and no provision of this Agreement shall be
deemed to confer upon other third parties any remedy, claim, liability,
reimbursement, cause of action or other right.
Section 6.11 Publicity. Except as required by Law or the rules of any
stock exchange, no public announcement or other publicity regarding the
transactions referred to herein shall be made by Buyer, the Company or any of
their respective Subsidiaries, Affiliates, officers, directors, employees,
representatives or agents, without the prior written agreement of Buyer and the
Company.
Section 6.12 Further Assurances. Upon the reasonable request of Buyer, the
Company shall, and shall cause any of its Affiliates and Subsidiaries to, on and
after the date hereof execute and deliver to Buyer such other documents,
releases, assignments and other instruments as may be required to completely
carry out the purposes of this Agreement and the other Transaction Documents.
Section 6.13 Severability. If any provision of this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality or enforceability
of the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
Section 6.14 Remedies Cumulative. Unless otherwise specified, the remedies
provided in this Agreement shall be cumulative and shall not preclude the
assertion or exercise of any other rights or remedies available by law, in
equity or otherwise.
18
Section 6.15 Entire Understanding. This Agreement and the Transaction
Documents set forth the entire agreement and understanding of the parties hereto
and supersede any and all prior agreements, arrangements and understandings
among the parties, and all prior agreements, contracts, promises,
representations and statements among the parties hereto or their respective
advisors, if any, whether written or oral, with respect to the subject matter
hereof are merged into this agreement.
Section 6.16 Company's Legal Counsel. The Company acknowledges that it has
had ample opportunity to consult legal counsel of its choosing in connection
with the transactions contemplated by this Agreement and the other Transaction
Documents. The absence or limited use of legal representation by the Company
shall not serve as the basis of any claim or defense in any dispute arising out
of or relating to this Agreement, the other Transaction Documents or the
transactions contemplated hereby and thereby. The Company shall not, and shall
not be permitted to, rely for any purpose on any statement or representation of
fact or law by Buyer's legal counsel in connection with the transactions
contemplated hereby and by the other Transaction Documents. In addition, the
Company shall not, and shall not be permitted to, draw any inference or
conclusion with respect to the legality of the transactions contemplated hereby
or by the other Transaction Documents from statements or representations by
Buyer's legal counsel.
[Signature Page Follows]
19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
ROYALTY HOLDINGS LLC
By: Royalty Management, Inc., Manager
By:
-------------------------------------
Name: Xxxxxxxx X. Xxxx
Title: President
REGENCY AFFILIATES, INC.
By:
-------------------------------------
Name:
Title:
20
The exhibits to this document are either filed as separate exhibits to this Form
8-K or omitted.
21
