Exhibit 2.1
MODIFICATION AGREEMENT
----------------------
THIS MODIFICATION AGREEMENT (this "Agreement") is made effective as of the
28th day of November, 2006, by and among Girls' Life Acquisition Corp. ("GLA"),
Xxxxx Xxxxxx ("Bokram"), TNK, Inc. (f/k/a/ Girls' Life, Inc.) ("TNK"), and
Monarch Services, Inc. ("Monarch") (each a "Party" and, collectively, the
"Parties").
RECITALS
A. Reference is made to that certain Asset Purchase Agreement dated as of
August 18, 2006 by and among GLA, TNK and Monarch (the "Purchase Agreement"),
pursuant to which GLA purchased the assets of TNK. The purchase price for the
assets was $900,000, plus the assumption of the Assumed Liabilities (as
defined in the Purchase Agreement). The purchase price was paid by the
assumption of the Assumed Liabilities by GLA and by the delivery of a
Promissory Note dated August 18, 2006, made by GLA, payable to the order of
TNK, in the principal amount of $900,000.00, which bears interest at a rate of
6% per annum (the "Note"). To secure payment of the Note, Bokram and TNK
entered into a Stock Pledge Agreement dated as of August 18, 2006, pursuant to
which Bokram pledged all of the issued and outstanding stock of GLA (the
"Pledge Agreement," and collectively with the Note and the Purchase Agreement,
the "Transaction Documents"). Each of the Transaction Documents have been
amended pursuant to a Modification Agreement dated as of November 16, 2006
entered into by and among GLA, Bokram, TNK and Monarch (the "First Modif-
ication Agreement").
B. GLA has determined that it will not be able to pay the Note in full at
its maturity. GLA is obtaining a senior debt facility (the "Senior Debt") with
Manufacturers and Traders Trust Company (the "Bank") that includes a $750,000
loan and a $250,000 line of credit. TNK will agree to extend the maturity date
for payment of $600,000 of the outstanding principal amount of the Note, and
all unpaid interest accrued beginning on the date hereof until August 16, 2007
(the "Extended Maturity Date"), so long as $300,000, plus $15,090 (representing
the unpaid interest accrued to date) is paid pursuant to this Agreement, on the
terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants and conditions contained herein, the parties agree as follows:
1. Recitals. The foregoing Recitals are hereby incorporated in this
Agreement to the same extent as if they had been herein stated in full.
Capitalized terms not defined herein shall have the meanings set forth in the
Transaction Documents
2. Payments by the Bank. All of the terms of this Agreement shall be
contingent upon receipt (A) by TNK, not later than the next business day
following the execution of this Agreement, (i) of payment of from the Bank of
the sum of Two Hundred Fifty Thousand ($250,000), and (ii) evidence that the
Bank has made a payment in the amount of Fifty Thousand ($50,000) to the
Strategic Paper Group; and (B) by Xxxxxx, Feinblatt, Rothman, Hoffberger and
Xxxxxxxxx, LLC (the "Escrow Agent"), not later than the next business day
following the execution of this Agreement, of payment of $300,000 (the "Escrow
Amount") to be held in escrow pursuant to Section 3 hereof.
3. Escrow of Funds. Concurrently with the execution of this Agree-
ment, GLA, TNK and the Escrow Agent shall enter into an Escrow Agreement in
the form attached hereto as Exhibit 1, pursuant to which Bokram shall cause
the Bank to deposit with the Escrow Agent the Escrow Amount, to be held by the
Escrow Agent pursuant to and subject to the terms of the Escrow Agreement. The
Escrow Amount shall be held by the Escrow Agent for the purpose of permitting
Monarch to negotiate a settlement with XX Xxxxxxxxx and Sons Company
("Donnelley") for a current liability to Donnelley by Monarch (which is an
Assumed Liability assumed by GLA under the Purchase Agreement) (the "Claim")
(a) Monarch shall contact Donnelley within 30 days of the execution of
this Agreement to negotiate a settlement and will use reasonable efforts to
settle all Claims with Donnelley within 90 days of the execution of this
Agreement. Upon reaching a settlement with Donnelley, Monarch shall be
entitled to keep any difference between the Escrow Amount and the settlement
amount.
(b) In the event that Donnelley seeks payment of any Claims from GLA that
were settled by Monarch, Monarch agrees to indemnify and hold GLA harmless for
such Claims, up to the Escrow Amount.
(c) GLA shall remain liable for any Claims made by Donnelley for Assumed
Liabilities in excess of the Escrow Amount, and GLA will indemnify and hold GLA
harmless for any Claims made by Donnelley against Monarch in excess of the
Escrow Amount.
4. Amendment of Note. The Note is hereby further amended as follows:
a) The principal amount of the Note is hereby reduced to Six Hundred
Thousand Dollars ($600,000).
(b) All references to "November 16, 2006" are hereby deleted and "August
16, 2007" shall be inserted in lieu thereof.
(c) Upon an Event of Default, the rate of interest accruing on the
outstanding principal amount of the Note will be raised by two (2) percentage
points above the rate of interest otherwise applicable, to a rate of eight
percent (8%), independent of whether TNK elects to accelerate the unpaid
principal balance as a result of such default (the "Default Rate"). Such
Default Rate shall continue until all defaults are cured.
(d) The following sentence is deleted from the last paragraph of page 1
of the Note: "The Seller's exclusive remedy under this Note if an Event of
Default occurs and is continuing will be as provided in the Stock Pledge," and
the following sentence shall be inserted in lieu thereof: "The Seller's
exclusive remedies under this Note if an Event of Default occurs and is
continuing will be as provided in the Stock Pledge, the Security Agreement
entered into between the Buyer and the Seller, and the Guaranty Agreement
entered into between the Seller and Xxxxx Xxxxxx, each subject to the rights of
Manufacturers Traders and Trust Company (the "Bank") pursuant to a Subord-
ination Agreement between the Seller and the Bank; provided that under no
circumstances shall Seller and/or Monarch Services, Inc. be entitled to recover
as payment under the Note an amount greater than $900,000 plus all accrued
interest and costs of collection."
5. Amendment of Purchase Agreement. The Purchase Agreement is hereby
further amended as follows:
(a) Section 4 of the Purchase Agreement is amended by deleting the
reference to "for a period of 90 days" and inserting "until August 16, 2007
(the "Maturity Date")" in lieu thereof.
(b) Section 9(m) is amended by (i) deleting from the first sentence "For
a period of 90 days beginning on the Closing Date" and inserting "Beginning on
the Closing Date and continuing until the Maturity Date" in lieu thereof, and
ii) by deleting from the second sentence "each of the months of September and
October, 2006" and inserting "each of the months from September, 2006 through
July, 2007" in lieu thereof.
(c) Section 11 is amended by deleting from the first sentence the
reference to "for twelve (12) months" and inserting "until twelve (12) months
after the Maturity Date" in lieu thereof.
(d) Bokram hereby agrees to be bound, jointly and severally with GLA, to
the indemnification provisions of Section 11 of the Purchase Agreement.
e) The last sentence of Section 4 is hereby deleted and the following
sentence shall be inserted in lieu thereof: "The Security Agreement entered
into between the Buyer and the Seller, the Guaranty Agreement entered into
between the Seller and Xxxxx Xxxxxx, and the Pledge Agreement will provide the
Seller's exclusive remedies for a payment default under the Note, each subject
to the rights of Manufacturers Traders and Trust Company (the "Bank") pursuant
to a Subordination Agreement between the Seller and the Bank; provided that
under no circumstances shall Seller and/or Parent be entitled to recover as
payment under the Note an amount greater than $900,000 plus all accrued
interest and costs of collection."
(f) Section 9(j) is hereby amended by deleting from the first sentence
"For the 60 day period following the Closing" and inserting "From and after the
Closing until December 31, 2006" in lieu thereof, and deleting from the last
sentence "at the end of the 60 day use period" and inserting "by December 31,
2006" in lieu thereof.
(g) TNK acknowledges that, to date, none of the Covered Persons (as
defined in the Purchase Agreement") have elected to be covered by the medical
insurance of GLA pursuant to Section 9(k)(ii); however, the parties acknowledge
and agree that the right of the Covered Persons to make such election shall
continue through the expiration of the Coverage Period (as defined in the
Purchase Agreement).
6. Amendment of Pledge Agreement. The Pledge Agreement is hereby
further amended as follows:
(a) The word "Exclusive" is deleted from the heading in Section 6.
(b) The third sentence of Section 6(a) is hereby amended by inserting
the following after "together with the remedy provided in the next sentence,":
"and the remedies provided by the Security Agreement entered into between the
Buyer and the Pledge Holder, and the Guaranty Agreement entered into between
the Pledge Holder and the Pledgee, each subject to the rights of Manufacturers
Traders and Trust Company (the "Bank") pursuant to a Subordination Agreement
between the Seller and the Bank; provided that under no circumstances shall
Pledge Holder and/or Monarch Services, Inc. be entitled to recover as payment
under the Note an amount greater than $900,000 plus all accrued interest and
costs of collection."
7. Security Agreement. GLA will execute the security agreement in
favor of TNK, attached hereto as Exhibit 2, granting a security interest in all
of the assets of GLA; provided that all actions related to the collection of
the Note, which will be subject to a Subordination Agreement in the form
attached hereto as Exhibit 3.
8. Guarantee. Bokram hereby agrees to personally guarantee
repayment of the Note, which guarantee shall be evidenced by the execution
of the Guaranty Agreement attached hereto as Exhibit 4.
9. Confirmation of Transaction Documents. This Agreement shall
amplify and amend where specifically provided herein but shall not replace the
Transaction Documents, and except as specifically amended herein, all of the
terms, conditions and obligations of the Transaction Documents remain in full
force and effect, and all of the rights and remedies provided for therein shall
be preserved by each party thereto. GLA hereby agrees to be bound by each of
the covenants and agreements contained therein, as modified by this Agreement
and the First Modification Agreement. Except as modified by this Agreement
and the First Modification Agreement, GLA agrees that the Transaction Documents
shall continue in full force and effect without modification, and that the
Transaction Documents are hereby expressly approved, ratified, confirmed and
reaffirmed by GLA.
10. Representations and Warranties. Bokram hereby represents and
warrants to TNK that since August 18, 2006: (i) GLA has paid all payroll and
all other taxes required to be paid by GLA, (ii) GLA has paid all trade
accounts payable other than amounts owed to Donnelley and Strategic Paper
Company in the ordinary course of the Business, (iii) GLA has operated the
Business in the ordinary course, and (iv) GLA has not made any payments or
incurred any liabilities that are inconsistent with the ordinary course of
the Business.
11. Additional Indebtedness. GLA and Bokram agree that GLA will not
incur any additional indebtedness for borrowed money other than the amounts
outstanding on the date hereof or amounts borrowed from the Bank without the
consent of TNK, unless 50% of such amounts are used to immediately pay down the
Note.
12. Notice of Default. Bokram agrees to promptly notify TNK and
Monarch of any defaults or reasonably anticipated defaults on any existing or
future indebtedness of GLA or under the Transaction Documents, as amended by
this Agreement.
13. Further Assurances. GLA and Bokram will execute such confirmatory
instruments with respect to this Agreement as TNK and/or Monarch may reasonably
require. TNK and/or Monarch will execute such confirmatory instruments with
respect to this Agreement as GLA and Bokram may reasonably require.
14. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal effective as of the date first above written.
GIRLS LIFE ACQUISITION CORPORATION TNK, INC. (f/k/a GIRLS' LIFE, INC.)
By: /s/ Xxxxx Xxxxxx By: A. Xxxx Xxxx
------------------------- -----------------------
Xxxxx Xxxxxx, President A. Xxxx Xxxx, President
MONARCH SERVICES, INC.
/s/ Xxxxx Xxxxxx By: Xxxxxxx X. Xxxx
----------------------------- --------------------------
Xxxxx Xxxxxx, Individually Xxxxxxx X. Xxxx, President