EXCHANGE AGREEMENT
This Agreement is made and entered into as of April ____, 1999, by and
among Alchemy Holdings, Inc., a Florida corporation ("Alchemy"), Cigarette
Racing Team, Inc., a Florida corporation ("Cigarette") and Central
Manufacturing, Inc., an Alabama corporation ("Central").
WHEREAS, Central is the holder of a promissory note in the original
principal amount of $3.6 million dated May 26, 1994, issued by Cigarette (the
"Note") in connection with the sale of certain assets by Central to Cigarette
pursuant to that certain Asset Purchase and Contribution Agreement dated May 26,
1994, between the predecessors of Cigarette and Central (the "Purchase
Agreement") and secured under the Security Agreement dated May 26, 1994 made by
Cigarette to Central (the "Security Agreement");
WHEREAS, the outstanding principal balance (the "Principal Balance") on the
Note as of March 31, 1999 was $3,280,000 and the interest accrued and owing on
the Note (the "Accrued Interest")as of such date was $1,409,921.74;
WHEREAS, Central is the holder of 100 shares of cumulative preferred stock,
series A, of Cigarette ("Cigarette Preferred Stock"), and is the lessor of
certain premises located in Dade County, Florida, to Cigarette under a Lease
Agreement dated May 26, 1994, between Central and Cigarette (the "Lease
Agreement");
WHEREAS, Cigarette has failed to declare and pay to Central certain
cumulative dividends on the Cigarette Preferred Stock (the "Accrued and Unpaid
Dividends") and has failed to make certain payments under the Lease Agreement
(the "Accrued and Unpaid Lease Amounts");
WHEREAS, the Principal Balance of and the Accrued Interest on the Note, the
Accrued and Unpaid Dividends, and the Accrued and Unpaid Lease Amounts at and as
of the Closing Date (as defined herein) are hereinafter collectively referred to
as the "Cigarette Indebtedness";
WHEREAS, pursuant to an Agreement and Plan of Merger dated _____________,
1999 (the "Merger Agreement") by and among Alchemy, Cigarette and Cigarette
Boats, Inc., a Delaware corporation and wholly-owned subsidiary of Alchemy
("CBI"), CBI will merge into Cigarette (the "Merger") and Cigarette will become
a wholly-owned subsidiary of Alchemy;
WHEREAS, Cigarette desires to extinguish the Cigarette Indebtedness and in
connection therewith obtain Central's consent as holder of the Note to the
Merger, its waiver of all non-monetary defaults of Cigarette under the Purchase
Agreement, the Security Agreement, the Note, the Preferred Stock and the Lease
Agreement, its forgiveness of the Cigarette Indebtedness, and its release of all
collateral pledged to secure the Note (collectively, the "Release and Waiver");
WHEREAS, Cigarette desires to exchange (the "Exchange") shares of its
common stock, $.01 par value ("Cigarette Common Stock") in return for
forgiveness and cancellation of the Principal Balance of and Accrued Interest on
the Note, and Central desires to surrender the Note for forgiveness and
cancellation of the Principal Balance of and Accrued Interest on the Note in
return for shares of Cigarette Common Stock, on the terms and conditions set
forth herein;
WHEREAS, a total of $525,000 has been previously paid by Cigarette to
Central with respect to the Note in anticipation of the settlement contemplated
hereby (the "Prior Payments");
WHEREAS, Central is willing to forgive the Accrued and Unpaid Dividends in
consideration of the issuance of preferred stock of Alchemy pursuant to the
Merger Agreement;
WHEREAS, Central is willing to forgive the Accrued and Unpaid Lease Amounts
in consideration of the execution by Cigarette of the amendment to the Lease
Agreement, as referred to herein, and the guaranty agreement referred to herein;
WHEREAS, as an inducement to Central's agreeing to the Exchange, Alchemy
has agreed to be a party hereto; and
WHEREAS, shares of common stock, $.001 par value of Alchemy ("Alchemy
Common Stock"), will be issued in exchange for outstanding shares of Cigarette
Common Stock, and shares of preferred stock of Alchemy will be issued in
exchange for the Preferred Stock, all pursuant to the Merger Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, the parties agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF CENTRAL
1.1 Representations and Warranties. Central represents and warrants to
Alchemy and Cigarette that:
(a) Corporate Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State of Alabama, and has
all requisite corporate power and authority to enter into this Agreement,
perform its obligations hereunder and consummate the transactions contemplated
hereby.
(b) Authorization. All necessary and appropriate corporate action has been
taken by it with respect to the execution and delivery of this Agreement and the
performance by it of its obligations hereunder, and this Agreement constitutes a
valid and binding obligation of it.
(c) No Conflict or Default. The consummation of the transactions
contemplated by this Agreement will not conflict with any applicable federal,
state or local law, rule, regulation, writ, decree or order to which it is
subject, or conflict with or violate any term, provision or covenant of any
mortgage, indenture, contract, agreement, instrument or judgment applicable to
it or constitute a default (or any event which, with the lapse of time or the
giving of notice, or both, would constitute a default) thereunder.
(d) Brokers, Finders. The transactions contemplated hereby were not
submitted to it by any broker or other person entitled to a commission, finder's
fee or like payment thereon, and were not, with its authority, submitted to
Alchemy or Cigarette by any broker or other person, and its actions have not
given rise to any valid claim by any person against any other party to this
Agreement for a commission, finder's fee or like payment.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ALCHEMY AND CIGARETTE
2.1 Representations and Warranties. Alchemy and Cigarette jointly and
severally represent and warrant to Central that:
(a) Corporate Organization. Each of them is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida,
and has all requisite power and authority to own, lease and operate its
properties and conduct its business as now being conducted. Each of them is duly
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it or the property it owns, leases or
operates requires it to qualify to do business. Each of them has previously
delivered to Central complete and correct copies of its charter and bylaws as
presently in effect, and it is not in default in the performance, observation or
fulfillment of any provision of its charter or bylaws.
(b) Authorization. All necessary and appropriate corporate action has been
taken by each of them with respect to the execution and delivery of this
Agreement and the performance by each of them of their obligations hereunder.
This Agreement constitutes the valid and binding obligations of each of them.
(c) Brokers, Finders. The transactions contemplated hereby were not
submitted to either of them by any broker or other person entitled to a
commission, finder's fee or like payment thereon, and were not, with the consent
of either of them, submitted to Central by any broker or other person, and their
actions have not given rise to any valid claim by any person for a commission,
finder's fee or like payment against any of the parties hereto.
(d) Legal Proceedings. There are no claims, proceedings or investigations
pending or, to the best of their knowledge, threatened against either of them
(or any of their respective officers or directors in connection with its
business or affairs) before any court or governmental body, United States or
foreign which, if finally determined adversely to either of them, might
individually or in the aggregate have a material adverse effect on the business,
operations, assets, or financial condition of either of them. There are no
claims, proceedings or investigations pending or, to the best of their
knowledge, threatened challenging the validity or propriety of the transactions
contemplated by this Agreement.
(e) No Conflict or Default. Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, including
without limitation, the consummation of the transactions contemplated hereby,
will violate any statute, regulation or ordinance of any governmental authority,
or conflict with or result in the breach of any term, condition or provision of
the charter or bylaws of either of them, or of any agreement, deed, contract,
mortgage, indenture, writ, order, decree, legal obligation or instrument to
which either of them is a party or by which either of them or any of their
respective assets is or may be bound, or constitute a default (or any event
which, with the lapse of time or the giving of notice, or both, would constitute
a default) thereunder, or result in the creation or imposition of any lien,
charge, encumbrance or restriction of any nature whatsoever with respect to any
assets of either of them, or give to others any interest or rights, including
rights of termination or acceleration, in or with respect to any of the assets,
contracts or business of either of them.
(f) Issuance and Sale of Cigarette Shares. Upon issuance and exchange
pursuant hereto, each of the shares of Cigarette Common Stock delivered to
Central hereunder will be duly and validly issued, fully paid, nonassessable,
free of preemptive rights, and free and clear of all liens, charges,
encumbrances, security interests, equities, claims and restrictions.
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(g) Merger Agreement. The representations and warranties of Alchemy and
Cigarette included in the Merger Agreement are incorporated in this Agreement as
if restated herein in their entirety by Alchemy and Cigarette. All of such
representations and warranties are true and correct on the date of this
Agreement and will be true and correct on the Closing Date (as defined herein).
Each of Alchemy and Cigarette has complied through the date hereof with all of
its covenants and agreements made in the Merger Agreement and will comply with
all such covenants and agreements from the date hereof through the Closing Date.
(h) Registration Rights. Except for certain registration rights held by
holders (including Masada I, L.P. and Winchester Holdings, L.P.) of warrants or
common stock issued in private placements by Cigarette in November 1996 and
August 1997, there are no contracts, agreements, or understandings between
Alchemy or Cigarette and any person granting such person the right to request or
require Alchemy or Cigarette to include any securities of Alchemy or Cigarette
in any registration statement under the Securities Act of 1933 the ("Act"), or
granting such person the right to request or require Alchemy or Cigarette to
register any securities of Alchemy or Cigarette pursuant to any registration
statement under the Act (the "Existing Rights Agreements").
ARTICLE III
EXCHANGE
3.1 Securities. Upon the terms and subject to the conditions set forth in
this Agreement, Cigarette shall, at the Closing (as defined herein), issue and
deliver to Central, and in Central's name, twenty (20) certificates, each for
50,000 shares of Cigarette Common Stock, making a total of 1,000,000 shares of
such stock to be issued and delivered to Central hereunder (the "Cigarette
Shares").
3.2 No Liens. The Cigarette Shares, if and when issued, shall be free and
clear of all liens, security interests, encumbrances, charges, equities, claims
and restrictions.
3.3 Consideration. In consideration of the issuance and delivery of the
Cigarette Shares in accordance with this Agreement and receipt of the Prior
Payments, at the Closing Central shall surrender the Note for cancellation of
the Principal Balance and the Accrued Interest.
3.4 Investment Intent. Cigarette hereby advises Central that the Cigarette
Shares will not be registered under the Securities Act of 1933 (the "Act") or
under any state securities laws, in reliance upon an exemption from registration
thereunder, and that therefore the Cigarette Shares cannot be sold or otherwise
transferred unless they are registered under the Act or unless an exemption from
registration is available. Central represents and warrants to Cigarette that it
is acquiring the Cigarette Shares for its own account for investment only and
not with any intent or view to any distribution, resale or other disposition
thereof (except pursuant to the Merger Agreement) and that it will not sell or
transfer the Cigarette Shares (except pursuant to a registration statement
effective under the Act or the Merger Agreement) unless and until counsel
satisfactory to Cigarette shall have advised Cigarette, in a written opinion
satisfactory to it, that no registration under the Act or under applicable state
securities laws is required in connection with any such proposed sale or
transfer. Central agrees to the imprinting, so long as appropriate, of the
following legend on certificates representing the Cigarette Shares: "These
securities have not been registered under the Securities Act of 1933 and may be
re-offered and sold only if so registered or if any exemption from registration
is available and an opinion of counsel satisfactory to the Issuer is delivered
to the Issuer to the effect that registration is not required for such sale."
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ARTICLE IV
CONDITIONS TO OBLIGATIONS
4.1 Conditions to Obligations of Central. Each and every obligation of
Central to be performed under this Agreement shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions:
(a) Conditions Under the Merger Agreement. All conditions in Article VII of
the Merger Agreement shall have been satisfied and Central shall be satisfied
that the parties to the Merger Agreement shall be prepared to proceed to effect
the Merger immediately following the closing of the transactions contemplated by
this Agreement.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
shall have been issued and be in effect, nor shall any proceeding brought by any
administrative agency or commission or other governmental entity seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
transactions contemplated by this Agreement which makes the consummation of such
transactions illegal or prohibits any of them.
(c) Representations and Warranties. The representations and warranties of
Cigarette and Alchemy set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date, and Central shall have received a certificate signed on
behalf of the Chief Executive Officer and the Chief Financial Officer of each of
Alchemy and Cigarette to the foregoing effect.
(d) Performance of Obligations. Each of Alchemy and Cigarette shall have
performed all of its obligations required to be performed by it under this
Agreement at or prior to the Closing Date; and Central shall have received a
certificate signed on behalf of each of Alchemy and Cigarette by its Chief
Executive Officer and Chief Financial Officer to the foregoing effect.
(e) Consent of Ohio Savings Association. Central shall have obtained from
Ohio Savings Bank, an Ohio corporation ("Savings"), written consent to the
transactions contemplated by this Agreement and to the release of the Note from
the pledge thereof granted to Savings by Central in connection with a loan made
to the sole stockholder of Central by Savings.
(f) Offshore Racing. Offshore Racing, Inc. ("Offshore"), shall have
contributed to the capital of Alchemy on or before the Closing Date all shares
of Alchemy Common Stock owned by Offshore at such date. Following the Merger,
Offshore will not own any shares of capital stock of Alchemy other than
1,000,000 shares of preferred stock of Alchemy.
ARTICLE V
CLOSING
5.1 The Closing. The transactions contemplated by this Agreement shall be
closed, and all deliveries to be made at such time in connection therewith shall
be made (the "Closing"), on the date set for and at a time immediately prior to
the closing under the Merger Agreement (the "Closing Date") and at the place set
for closing thereunder, subject to satisfaction of all conditions set forth in
Article IV hereof.
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ARTICLE VI
TERMINATION
6.1 Termination. This Agreement may be terminated by Central at any time
prior to the Closing Date if:
(a) a court of competent jurisdiction or other governmental entity issues a
non-appealable final order, decree or ruling or takes any other action having
the effect of permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby or by the Merger Agreement;
(b) the Merger Agreement is terminated;
(c) there occurs a breach of any representation, warranty, covenant or
agreement herein by Alchemy or Cigarette; or
(d) any event occurs that gives Alchemy or Cigarette the right to terminate
the Merger Agreement (regardless of whether Alchemy or Cigarette, as the case
may be, actually terminates the Merger Agreement as a result of such event).
6.2 Further Rights. Central may terminate this Agreement at any time on or
after June 1, 1999, if the Closing has not occurred on or before May 31, 1999.
ARTICLE VII
INDEMNIFICATION
7.1 Survival of Representations, Warranties and Agreements. Notwithstanding
any investigation conducted at any time with regard thereto by or on behalf of
any party hereto, all representations, warranties, covenants and agreements of
the parties in this Agreement shall survive the execution, delivery and
performance of this Agreement.
7.2 Indemnification. Alchemy and Cigarette hereby agree jointly and
severally to indemnify and hold harmless Central, and Central hereby agrees to
indemnify and hold harmless Cigarette and Alchemy, from and against any and all
losses, liabilities, damages, demands, claims, suits, actions, judgments or
causes of action, assessments, costs and expenses, including, without
limitation, interest, penalties, attorneys' fees, any and all expenses incurred
in investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement
of any claim or litigation, asserted against, resulting to, imposed upon, or
incurred or suffered by Central or by Cigarette or Alchemy, as the case may be,
directly or indirectly, as a result of or arising from any breach or
nonfulfillment of any of the representations, warranties, covenants or
agreements made by Central or by Cigarette or Alchemy, as the case may be, in
this Agreement.
ARTICLE VIII
COVENANTS
8.1 Registration Rights. On the Closing Date, immediately following the
consummation of the Merger, Alchemy and Central shall execute and deliver to
each other the Registration Rights Agreement in substantially the form attached
hereto as Exhibit B.
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8.2 Pooling Release. If the Merger is to be accounted for as a pooling of
interests, Alchemy covenants to release to the public and file with the
Securities and Exchange Commission ("SEC") on Form 8-K or Form 8-KSB, by no
later than the fifteenth day of the month following the first full calendar
month after the closing under the Merger Agreement, combined financial results
of Alchemy and Cigarette covering a period of thirty days of combined operations
of such entities after such closing and complying with the accounting rules
promulgated by the SEC for acquisitions accounted for as poolings.
8.3 Stockholders' Agreement. On the Closing Date, immediately following the
consummation of the Merger, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, and all affiliates of
each of them (including Winchester Holdings, L.P., a New York limited
partnership ("WHLP"), and Offshore), shall execute and deliver to Central, and
Central shall execute and deliver to them, the Stockholders' Agreement in
substantially the form attached hereto as Exhibit C.
8.4 Amendment to Lease Agreement. On the Closing Date, Central and
Cigarette shall enter into the Amendment to Lease Agreement in substantially the
form attached hereto as Exhibit D (the "Lease Amendment") and ▇▇▇▇ ▇▇▇▇▇▇▇, WHLP
and Alchemy shall enter into the Guaranty Agreement (the "Guaranty") in
substantially the form attached hereto as Exhibit E, all in consideration of
Central's forgiving of the Accrued and Unpaid Lease Amounts.
8.5 Prior Payments. Upon consummation of the transactions contemplated
hereby at the Closing, the Prior Payments will constitute a portion of the
settlement contemplated hereby resulting in a discharge of the Principal Balance
of and Accrued Interest on the Note, and the two Letter Agreements dated April
21, 1998, and the Letter Agreement dated October 9, 1998, all between Cigarette
and Central, will be deemed null and void.
8.6 Waiver and Release. At the Closing, Central shall deliver the Release
and Waiver in the form attached hereto as Exhibit A.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 Entire Agreement. This Agreement and the exhibits hereto embody the
entire agreement and understanding of the parties hereto with respect to the
subject matter hereof, and supersede all prior and contemporaneous agreements
and understandings relative to said subject matter.
9.2 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
9.3 Waiver; Consent. No waiver of any of the provisions or conditions of
this Agreement or any of the rights of a party hereto shall be effective or
binding unless such waiver shall be in writing and signed by the party claimed
to have given or consented thereto. Except to the extent that a party hereto may
have otherwise agreed in writing, no waiver by that party of any breach by the
other party of any of its obligations or representations hereunder shall be
deemed to be a waiver of any other condition or subsequent breach of the same or
any other obligation or representation by the other party, nor shall any
forbearance by the first party or parties to seek a remedy for any noncompliance
or breach by the other
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party be deemed to be a waiver by the first party of its rights and remedies
with respect to such noncompliance or breach.
9.4 Other and Further Covenants. The parties shall, in good faith, execute
such other and further instruments, assignments or documents as may be necessary
for the consummation of the transactions contemplated by this Agreement, and
shall assist and cooperate with each other in connection with these activities.
9.5 Multiple Counterparts. This Agreement may be executed in multiple
counterparts, which when taken together shall constitute a single document.
9.6 Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ALCHEMY HOLDINGS, INC.
By:
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Name:
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Title:
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CIGARETTE RACING TEAM, INC.,
By:
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Name:
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Title:
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CENTRAL MANUFACTURING, INC.
By:
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Name:
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Title:
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