Restructuring Agreement

EXHIBIT 10.17


2
RESTRUCTURING AGREEMENT dated as of the 16th day of January, 1996 between BANK LEUMI TRUST COMPANY OF NEW YORK (the "Bank"), a New York banking corporation, having an office at 579 Fifth Avenue, New York, New York 10017, and ARTHUR G. COHEN ("Cohen"), an individual with an address at 505 Eighth Avenue, New York, New York 10018.


WHEREAS, pursuant to certain promissory notes, guarantees and related agreements, instruments and documents listed on Exhibit A annexed hereto (collectively, the "Loan Documents"), Cohen is indebted to the Bank (i) in the aggregate amount set forth on Schedule 1A hereto under the caption "Cohen Grand Total Prin. + Inter.", which amount is comprised of principal due the Bank on the date hereof in the amount set forth on Schedule 1A hereto under the caption "4/16/93 Allocated Principal" (the "Personal Indebtedness"), and accrued and unpaid interest thereon and fees and other charges due with respect thereto on the date hereof in the amount set forth on Schedule 1A hereto under the caption "Cohen Total Inter. + Fees" (the "Personal Interest"), and (ii) in the aggregate amount set forth on Schedule 1B hereto under the caption "Cohen Grand Total Prin. + Inter.," such amount representing (x) Cohen's Share (derived as provided below) of the principal due with respect to the indebtedness described in Schedule 1B (the full principal balance of each such indebtedness as of 4/16/93 being set forth under the caption "4/16/93 Cust. Balance" and Cohen's Share of the principal balance of each such indebtedness (as of 4/16/93 and the date hereof) being set forth under the caption "4/16/93 Allocated Principal"), plus (y) the unpaid interest and fees and other charges due with respect to Cohen's Share of each such indebtedness in the amount set forth on Schedule 1B hereto under the caption "Cohen Total Inter. and Fees." Cohen's Share of the principal referred to in clause (ii) of the preceding sentence is referred to herein as the "Secondary Indebtedness" and, together with the Personal Indebtedness, as the "Indebtedness"; and the interest, fees and other charges referred to in the preceding sentence are referred to herein as the "Secondary Interest", and together with the Personal Interest, as the "Interest Due." Cohen's Share was, in each case, derived by multiplying the appropriate item of indebtedness times the percentage set forth under the caption "Cohen % Owed" for such indebtedness, such percentage representing Cohen's percentage interest in the primary obligor with respect thereto or, in cases in which he is a primary obligor, his allocated percentage of such indebtedness; and


WHEREAS, pursuant to certain other promissory notes, guarantees and related agreements, instruments and documents listed on Exhibit B annexed hereto (collectively, the "Retained Loan Documents"), Cohen is indebted to the Bank in the aggregate amount set forth on Schedule 2 hereto under the caption "Cohen Grand Total Prin. + Inter." (such amount being herein sometimes 3 called the "Retained Indebtedness"), such amount representing (x) Cohen's Share (derived as provided above) of the principal due with respect to the indebtedness described in Schedule 2 (the full principal balance of each such indebtedness as of 4/16/93 being set forth under the caption "4/16/93 Cust. Balance" and Cohen's Share of the principal balance of each such indebtedness being set forth under the caption "4/16/93 Allocated Principal"), plus (y) the unpaid interest thereon, and fees and other charges due with respect to each such indebtedness in the amount set forth on Schedule 2 hereto under the caption "Cohen Total Inter. + Fees"; and


WHEREAS, Rucon Services Corp. ("Rucon") (formerly known as Arlen Holdings Corp. and, prior to that, as Arlen Automotive, Inc.) has agreed to acquire all of the Bank's right, title and interest in and to the Indebtedness and the collateral securing the Indebtedness (the "Rucon Assignment") pursuant to the terms of the Assignment and Assumption Agreement to be executed immediately after the execution hereof between the Bank and Rucon (the "Assignment Agreement"); and


WHEREAS, Cohen has requested that the Bank grant Cohen the right to satisfy the Retained Indebtedness at a substantial discount by making or causing to be made payments of principal totaling $2,722,513.33 in the aggregate together with interest thereon and the Bank is willing to grant such right to Cohen, all on the terms and conditions set forth herein.


NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows:


1. Acknowledgement of Indebtedness and Retained Indebtedness.


1.1 Cohen hereby acknowledges and agrees that:


(a) Each of the Loan Documents and the Retained Loan Documents
and, in the case of Loan Documents and Retained Loan Documents which are
guarantees, each document or instrument evidencing the underlying
obligations to which such Loan Documents and Retained Loan Documents
relate, is in full force and effect, enforceable in accordance with its
terms.


(b) Cohen has no defense, offset, claim or counterclaim of any
kind with respect to the Indebtedness, the Retained Indebtedness, the Loan
Documents or the Retained Loan Documents, nor does there exist any basis
therefor.


(c) The amounts set forth on Schedules 1A, 1B and 2 under the
caption "Cohen Grand Total Prin. + Inter.",


2 4
hereto accurately reflect the amounts owed by Cohen to the Bank as of the
date hereof under the Personal Indebtedness, the Secondary Indebtedness
and the Retained Indebtedness, respectively.


1.2 The Bank acknowledges and agrees that the amounts set forth in Schedules 1A, 1B and 2 under the caption "Cohen Grand Total Prin. + Inter" accurately reflect the amounts owed by Cohen to the Bank as of the date hereof under the Personal Indebtedness, the Secondary Indebtedness and the Retained Indebtedness.


1.3 Simultaneously with the execution hereof, Cohen is delivering to the Bank a promissory note in the form annexed hereto as Exhibit C-1 (the "Severance Note") in the principal amount of $5,133,334.00, such amount representing the total amount of the Secondary Indebtedness. The Severance Note is being delivered in full satisfaction of the Secondary Indebtedness, and upon delivery of the Severance Note Cohen shall have no further obligations under any other guaranty, note or other document creating or evidencing the Secondary Indebtedness (except any security document being modified as provided in the next sentence). In connection therewith, simultaneously with the execution hereof, Cohen and the Bank shall enter into an amendment to the Security Agreement dated April 16, 1993 in the form annexed hereto as Exhibit D.


1.4 Simultaneously with the execution hereof, Cohen is delivering to the Bank a promissory note in the form annexed hereto as Exhibit C-2 (the "Interest Note") in the principal amount of $1,268,532.18, such amount representing the Interest Due. The Interest Note is being delivered in full satisfaction of the Interest Due and shall hereafter constitute a portion of the Retained Indebtedness.


2. Satisfaction of Retained Indebtedness. Subject to the terms and conditions set forth in this Agreement, the Bank hereby agrees that if (i) Cohen shall have paid or caused to be paid to the Bank the Designated Payment (as defined in Section 3), (ii) Cohen shall have paid the Bank any fees and charges then owed by Cohen to the Bank under this Agreement, and (iii) at the time of the payment of the sums set forth in the preceding clauses (i) and (ii) the Bank shall not have filed the Confession of Judgment referred to in Section 5 in accordance with the terms of this Agreement, then the Retained Indebtedness shall be deemed satisfied in full and subject to the provisions of Section 4.1(b) the Bank shall return the Cohen Collateral (as defined in Section 4 hereof) to the parties entitled thereto.


3. Principal and Interest on Retained Indebtedness. In order to obtain the satisfaction of the Retained Indebtedness as provided in Section 2, Cohen shall pay or cause to be paid to the


3 5 Bank the following, after giving effect to the cure period set forth in Section 5.2(i) hereof (collectively, the "Designated Payment"):


3.1 The principal sum of $2,500,000, said principal sum to be paid in twenty equal consecutive installments of $125,000 on each January 1, April 1, July 1 and October 1, commencing January 1, 1997 and ending October 1, 2001.


3.2 The principal sum of $53,713.33, said principal sum to be paid in full on April 16, 1996.


3.3 The principal sum of $168,800.00, said principal sum to be paid in full on November 15, 1996.


3.4 Interest on the outstanding principal amount referred to in Section 3.1 shall accrue at a rate per annum equal to 400 basis points above the rate at which United States Dollar six-month deposits are offered to the Bank in the London Interbank Eurodollar Market ("LIBOR") on the date hereof, as adjusted as of the first day of December of each year. Together with each installment due under Section 3.1 hereof, Cohen shall pay to the Bank interest on the outstanding amount referred to in Section 3.1 at a rate per annum equal to 100 basis points above LIBOR (determined and adjusted as set forth above). The difference between the interest required to be paid pursuant to the first sentence of this Section 3.4 and the interest actually paid pursuant to the second sentence of this Section 3.4 shall be referred to herein as the "Interest Deficiency". Provided that Cohen timely makes the payments required to be made pursuant to Sections 3.1, 3.2 and 3.3, the Bank shall have no right to collect the Interest Deficiency and Cohen shall have no further obligation with respect thereto. If, however, Cohen shall fail to timely make the payments required to be made pursuant to Sections 3.1, 3.2 and 3.3 (after giving effect to any grace, notice and cure periods), (i) the Interest Deficiency shall be immediately due and payable, (ii) interest on the outstanding unpaid amounts under Sections 3.1, 3.2 and 3.3 shall thereafter be payable at the rate of 400 basis points above LIBOR (determined and adjusted as set forth above and payable on demand), and (iii) Cohen shall no longer have the right to pay interest on the amount set forth in Section 3.1 at 100 basis points above LIBOR. In the event that the Bank shall have determined that by reason of the circumstances affecting the London Interbank Eurodollar Market adequate and reasonable means do not exist for ascertaining LIBOR for any period, the effective rate of interest during such period shall be the Bank's Reference Rate (the rate designated by the Bank, and in effect from time to time, as its "Reference Rate"), adjusted when said Reference Rate changes. Notwithstanding anything to the contrary set forth above, in no event shall the interest payable hereunder exceed the maximum rate permitted by law.


4 6
3.5 Upon the receipt by the Bank of payment in full of the Designated Payment and any fees and charges due under this Agreement, provided the Bank has not theretofore filed the Confession of Judgment referred to in Section 5 in accordance with the terms of this Agreement, (x) the Bank will deliver to Cohen a release pursuant to which it will release, remise and discharge Cohen from liability in any capacity for the Retained Indebtedness or hereunder other than the provisions of Sections 4 and 10, which shall continue to remain in full force and effect, (y) the Bank will release and return the pledges made pursuant to Section 4 hereof and the Pledge Agreements and return the collateral pledged pursuant to the Pledge Agreements, and (z) Cohen shall be deemed to have made payment of the Retained Indebtedness in full.


3.6 Notwithstanding anything contained herein to the contrary, nothing herein shall be deemed to affect the obligations of Cohen relating to the Indebtedness of Ascot Associates to the Bank, which obligations shall remain in full force and effect.


3.7 Cohen acknowledges and agrees that he shall have no claim to or interest in any real property that secures or formerly secured the Indebtedness or Retained Indebtedness on Schedules 1B and 2 referred to as "SLW" or "34th Street", which property now constitutes the sole and exclusive property of the Bank or its affiliates.


4. Grant of Security Interests.


4.1 Pledge of Stock.


(a) Contemporaneously herewith, as security for the payment by
Cohen of the Retained Indebtedness and for the fulfillment of all of
Cohen's other obligations to the Bank hereunder and as security for the
obligations of Rucon to indemnify the Bank pursuant to Section 5 of the
Assignment Agreement, Cohen shall cause Rucon, and as part of the
consideration for the Rucon Assignment Rucon hereby agrees, (a) to pledge
to the Bank, pursuant to a stock pledge and hypothecation agreement dated
the date hereof (the "Holding Pledge Agreement") between Rucon and the
Bank, 550 outstanding shares of common stock ("Holding Common Stock") and
5.5 outstanding shares of class B stock ("Holding Class B Stock") of
Curtis Holding Corporation, a New Jersey corporation ("Curtis Holding"),
which numbers of shares represent 55% of the number of shares of each
class of capital stock of Curtis Holding issued and outstanding, and (b)
to cause Curtis Holding, and as part of the consideration for the Rucon
Assignment Curtis Holding hereby agrees, to pledge to the Bank, pursuant
to a stock pledge and hypothecation agreement dated the date hereof (the


5 7
"Partition Pledge Agreement", and together with the Holding Pledge
Agreement, the "Pledge Agreements") between Curtis Holding and the Bank,
110 outstanding shares of common stock ("Partition Common Stock") of
Curtis Partition Corporation, a New Jersey corporation ("Curtis
Partition", and together with Curtis Holding, the "Curtis Entities"),
which number of shares represents 55% of the number of shares of capital
stock of Curtis Partition issued and outstanding. The collateral to be
pledged to the Bank pursuant to this Section 4 shall be referred to herein
as the "Cohen Collateral".


(b) Notwithstanding the provisions of Section 2 hereof, the Bank
shall return the Cohen Collateral to the parties entitled thereto and all
obligations under the Pledge Agreements shall terminate (such events,
collectively, the "Pledge Termination") upon the later to occur of (x) the
date which is three years from the date hereof or (y)(i) payment in full
by Cohen to the Bank of the Designated Payment and (ii) delivery
simultaneously with such payment or at any time thereafter by Rucon or its
successors to the Bank of financial statements demonstrating that the net
worth of Rucon and any such successors, determined in accordance with
generally accepted accounting principles ("GAAP") without giving effect to
amounts due from affiliates, is not less than $7,500,000; provided,
however, that in any event the Pledge Termination shall occur not later
than the sixth anniversary of the date hereof, provided that Cohen shall
prior to such anniversary have made the Designated Payment in full.


4.2 Financial Statements. Cohen covenants and agrees with the Bank that, so long as this Agreement shall remain in effect or any principal or interest payable pursuant to Section 3 hereof, or any fee, expense or amount payable hereunder or in connection with any of the transactions contemplated hereby shall be unpaid, he will cause Curtis Holding to deliver to the Bank:


(a) within 120 days after the end of each fiscal year of Curtis
Partition, (i) a balance sheet showing the financial condition of Curtis
Partition as of the close of such fiscal year and (ii) an income statement
showing the results of its operations during such fiscal year, all of the
foregoing accompanied by the notes thereto and the audit report thereon of
BDO Seidman or other independent certified public accountants reasonably
acceptable to the Bank (which auditor's report shall not contain any
qualification except with respect to new accounting principles mandated by
the Financial Accounting Standards Board);


(b) within 60 days after the end of each fiscal quarter (other
than the fourth quarter of a fiscal year) of


6 8
Curtis Partition, (i) an unaudited balance sheet showing the financial
condition of Curtis Partition as of the close of such fiscal quarter and
(ii) an unaudited statement of income showing the results of its
operations during such fiscal quarter, all of the foregoing accompanied by
the notes thereto and a certificate of the chief executive or financial or
accounting officer of Curtis Partition, to the effect that such unaudited
financial statements fairly present the financial condition and the
results of operations of Curtis Partition for the period indicated in
accordance with GAAP consistently applied (except as indicated in the
notes thereto and subject to year-end audit adjustments); and


(c) within 30 days after the end of each fiscal month of Curtis
Partition, an aging schedule of the Receivables (as defined below) in form
and substance reasonably satisfactory to the Bank (it being understood
that the form of aging schedule of Receivables heretofore provided by
Curtis Partition to the Bank is deemed to be acceptable to the Bank). For
purposes hereof, "Receivables" shall mean and include all of the accounts,
instruments, documents, chattel paper and general intangibles of Curtis
Partition, whether secured or unsecured and whether no ...