<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of
earliest event reported): January 7, 1997
BATTERIES BATTERIES, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-27994 13-383-5420
- ---------------------------- ---------------- ------------------
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
200 Madison Avenue, Second Floor
New York, New York 10016
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including Area Code: (212) 953-0100
--------------------------
<PAGE>
ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS
On January 7, 1997 Batteries Batteries, Inc. (the "Company") acquired
as of December 31, 1996, the business and related assets of Battery Network,
Inc. ("Battery Network") and affiliated companies, a major assembler and
wholesale distributor of specialty batteries servicing customers
nationally. The acquired entities, which operate principally in California,
Illinois and New Jersey, had combined revenues of approximately $23,000,000 for
the year ended December 31, 1996. The purchase was effected through the
acquisition of (i) the outstanding capital stock of Battery Network which in
anticipation of the acquisition by the Company had merged with Alexander
Battery Co. East, Inc., Alexander Battery Co. West, Inc. and Alexander Battery
Co. South, Inc. (collectively, "Alexander Battery"), (ii) the outstanding
capital stock of W.S. Battery Sales & Company, Inc. ("WSB") and (iii)
substantially all the assets of WSJ Enterprises, Inc. ("Enterprises"). Battery
Network, Alexander Battery, WSB and Enterprises were owned by William Steven
Sapp ("WSS") and James Sapp ("JS") and their sister, Susan Grandt ("SG), or
their parents, William S. Sapp, the founder of the companies, and Dolores
Sapp, or an affiliate, W.S. Battery Sales & Co. Inc. Employee Stock Ownership
Plan & Trust (the "ESOP").
The purchase price consisted of (i) the payment of $8,314,551 in
cash, of which $2,000,000 was paid to the ESOP, $6,140,336 was paid to WSS, JS
and SG and William S. Sapp in payment of outstanding indebtedness of the
acquired companies to them and $174,215 was paid to Enterprises, and (ii) the
issuance to WSS, JS and SG of an aggregate of 550,000 shares of Common Stock
and five year options to purchase an additional 225,000 shares at an exercise
price of $4.50 per share. The cash portion of the purchase price is subject to
adjustment to the extent that the combined "net worth" of Battery Network, WSB
and Enterprises as of December 31, 1996, based on a combined balance sheet to
be prepared exceeds or is less than $8 million.
The Battery Network agreement also provides WSS, JS and SG with the
contingent right to receive additional consideration of up to $1 million in
cash, 350,000 shares of Common Stock and five year options to acquire 250,000
shares of Common Stock, of which half are exercisable at $4.50 per share and
half are exercisable at $6.00 per share. Payment of the additional
consideration is to be based on the excess amount by which the combined
"pre-tax income" as defined of the acquired companies and the Company's
California subsidiary, Tauber Electronics Inc. ("Tauber"), exceeds (i)
$2,100,000 for the year ending December 31, 1997 (the "One Year Period"), (ii)
$4,200,000 for the two years ending December 31, 1998 (the "Two Year Period")
or (iii) $6,300,000 for the three years ending December 31, 1999 (the "Three
Year Period"), with the maximum amount of additional consideration to be paid
if the excess for the One Year Period is $400,000, $800,000 for the Two Year
Period or $1,200,000 for the Three Year Period. WSS, who was elected President
of Batteries Network on January 10, 1997, has agreed to supervise the
operations of Tauber which conducts its operations from facilities in
California.
Pursuant to the acquisition agreements, WSS, JS and SG entered into
employment agreements with Battery Network providing for their employment as
officers of Battery Network at a base salary of $100,000 per annum, with WSS
and JS to be employed for three years and SG for six months. WSS and JS are
also to be paid annual bonuses not to exceed $400,000 in the aggregate for the
two individuals for any year computed at 30% of the first $300,000 by
<PAGE>
which the combined pre-tax income of the acquired companies and Tauber exceeds
$2,500,000 for the year ended December 31, 1997, $2,750,000 for the year ended
December 31, 1998 and $3,025,000 for the year ended December 31, 1999 and 40%
of the amount by which the combined pre-tax income for the foregoing years
exceed, respectively, $2,800,000, $3,050,000 and $3,325,000. WSS, JS and SG
also received five year employee stock options under the Company's Employee
Stock Option Plan to purchase an aggregate of 50,000 shares of Common Stock at
a price of $4.50 per share.
Upon consummation of the acquisition, Battery Network entered into
leases with J.W.S. Partnership, an affiliate of WSS, JS and SG, with
respect to its facilities in McHenry, Illinois and Long Branch, New Jersey.
Each lease is for a five year term, and contains a five year renewal option.
The aggregate rent for the two leases is $143,000 per annum subject to
increases commencing with the third year based on increments in the Consumer
Price Index. The lessee is to bear the insurance, real estate taxes and
maintenance related to the properties.
The cash portion of the purchase price was funded with a portion of
the proceeds of a borrowing pursuant to a Revolving Credit, Term Loan and
Security Agreement, dated January 6, 1997 (the "Loan Facility"), between IBJ
Schroder Bank & Trust Company, as Agent ("IBJ") and the Company and all its
subsidiaries. The Loan Facility consists of a $3,000,000 three year Term Loan
payable in 35 monthly installments of $50,000 each with the balance to be paid
at maturity and a revolving credit of up to $10,000,000 to be advanced at the
rate of 80% of eligible accounts receivable and 50% of inventories. The
revolving credit loans bear interest at the rate of 1/4 of 1% plus the higher
of (i) the base commercial lending rate of IBJ or (ii) the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers plus 1/4 of 1%. The interest
on the Term Loan is 1/2% higher than the revolving credit loan interest rate.
The loans are secured by a pledge of the assets of the borrowers and a pledge
of the outstanding capital stock of the subsidiaries of the Company.
Pursuant to its Management Services Agreement with Founders
Management Services, Inc. ("Founders"), the Company will pay Founders, with
which Messrs. Warren H. Haber, Chairman of the Board and Chief Executive
Officer and John L. Teeger, Vice President, Secretary and a Director of the
Company, are affiliated, for its origination and negotiating services in
connection with the acquisitions and loan, $280,000 and five year warrants to
purchase 100,000 shares of Common Stock at a price of $4.125 per share, the
closing sale price of the Common Stock on NASDAQ on the date of the closing
and financing of the acquisitions.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of businesses acquired
(1) Report of independent auditors
(2) Combined Balance Sheet of Battery Network, Inc.,
W.S. Battery & Sales Company, Inc. and WSJ
Enterprises, Inc. (collectively, the "Combined
Corporations")
- ----------
* To be filed by amendment.
<PAGE>
(3) Combined Statements of Operations and Retained
Earnings of the Combined Corporations for the nine
months ended September 30, 1996 and years ended
December 31, 1995 and December 31, 1994
(4) Combined Statements of Cash Flow of the Combined
Corporations for the nine months ended September
30, 1996 and years ended December 31, 1995 and
December 31, 1994
(5) Notes to Combined Financial Statements
(b) Pro Forma Financial Information
(1) Pro Forma Balance Sheet of the Combined Corporations
and the Company as of September 30, 1996
(unaudited)*
(2) Pro Forma Statement of Operations of the Combined
Corporations and the Company for the nine months
ended September 30, 1996 and the twelve months
ended December 31, 1995*
(c) Exhibits
(1) Copy of the Stock Purchase Agreement relating to
acquisition of the outstanding capital stock of
Battery Network, Inc.
(2) Copy of Stock Purchase Agreement relating to
acquisition of outstanding capital stock of W.S.
Battery Sales & Company, Inc.
(3) Copy of Asset Purchase Agreement relating to
acquisition of assets of WSJ Enterprises, Inc.
(4) Form of Option Certificates issued to the former
stockholders of Battery Network, Inc.
(5) Copy of Employment Agreement between Battery
Network, Inc. and Susan Grandt
(6) Copy of Employment Agreement between Battery
Network, Inc. and William Steven Sapp
(7) Copy of Employment Agreement between Battery
Network, Inc. and James Sapp
(8) Copy of Bonus Agreement between the Company and
William Steven Sapp and James Sapp
(9) Copy of Revolving Credit, Term Loan and Security
Agreement, dated January 6, 1997 among IBJ Schroder
Bank & Trust Company as Agent and the Company,
Advanced Fox Antenna, Inc. Tauber Electronics,
Inc., Battery Acquisition Corp. Specific Energy
Corporation, Battery Network, Inc. and W.S. Battery
& Sales Company, Inc.
- ----------
* To be filed by amendment.
<PAGE>
(10) Copy of Term Note issued pursuant to the Loan
Agreement
(11) Copy of Revolving Credit Note issued pursuant to the
Loan Agreement
(12) Form of Pledge Agreement with respect to pledge of
outstanding shares of each subsidiary of the
Company.
(13) Copy of Warrant to be issued to Founders Management
Services, Inc.*
(14) Copy of Lease between J.W.S. Partnership and Battery
Network, Inc. relating to McHenry, Illinois
property
(15) Copy of Lease between J.W.S. Partnership and
Battery Network, Inc. relating to Long Branch, New
Jersey property
- ----------
* To be filed by amendment.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 21, 1997
BATTERIES BATTERIES, INC.
(Registrant)
By: /s/ John L. Teeger
-------------------------------
John L. Teeger, Vice President
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Battery Network, Inc. and Combined Companies:
We have audited the accompanying combined balance sheets of Battery Network,
Inc. and Combined Companies as of September 30, 1996 and December 31, 1995, and
the related combined statements of operations and retained earnings and of cash
flows for the nine months ended September 30, 1996 and for each of the two
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of Battery Network, Inc. and Combined
Companies at September 30, 1996 and December 31, 1995, and the combined results
of their operations and their combined cash flows for the nine months ended
September 30, 1996 and for each of the two years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
/s/Deloitte & Touche LLP
Chicago, Illinois
October 18, 1996 (January 3, 1997 as to Note 9)
<PAGE>
BATTERY NETWORK, INC. AND COMBINED COMPANIES
COMBINED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
- -------------------------------------------------------------------------------
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $1,261,711 $ 547,202
Accounts receivable
(less allowance for doubtful accounts:
1996 - $242,000; 1995 - $161,000) 2,697,463 3,480,022
Inventories 4,804,071 5,527,515
Prepaid expenses and other current assets 160,983 77,948
---------- ----------
Total current assets 8,924,228 9,632,687
PROPERTY AND EQUIPMENT - Net 184,001 243,201
---------- ----------
TOTAL ASSETS $9,108,229 $9,875,888
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,309,932 $2,289,134
Due to stockholders 6,151,963 6,432,179
Other current liabilities 174,257 357,439
---------- ----------
Total current liabilities 7,636,152 9,078,752
STOCKHOLDERS' EQUITY:
Common stock 5,000 5,000
Retained earnings 1,467,077 792,136
---------- ----------
Total stockholders' equity 1,472,077 797,136
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,108,229 $9,875,888
========== ==========
See notes to combined financial statements.
-2-
<PAGE>
BATTERY NETWORK, INC. AND COMBINED COMPANIES
COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995 AND 1994
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
SALES $ 17,069,462 $ 23,040,887 $ 22,720,554
COST OF SALES 13,235,543 17,530,691 18,223,588
------------ ------------ -------------
Gross profit 3,833,919 5,510,196 4,496,966
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,674,785 3,596,203 2,990,791
STOCKHOLDERS' COMPENSATION 583,000 1,017,000
TOOLING PROGRAM ABANDONMENT 1,765,534
------------ ------------ -------------
Total operating expenses 2,674,785 5,944,737 4,007,791
------------ ------------ -------------
INCOME FROM OPERATIONS 1,159,134 (434,541) 489,175
OTHER EXPENSE, NET 106,823 49,627 173,876
------------ ------------ -------------
INCOME (LOSS) BEFORE INCOME TAXES 1,052,311 (484,168) 315,299
INCOME TAXES (BENEFIT) (23,460) 21,416 2,042
------------ ------------ -------------
NET INCOME (LOSS) 1,075,771 (505,584) 313,257
RETAINED EARNINGS, BEGINNING OF PERIOD 792,136 1,297,720 984,463
STOCKHOLDER DISTRIBUTIONS (400,830)
------------ ------------ -------------
RETAINED EARNINGS, END OF PERIOD $ 1,467,077 $ 792,136 $ 1,297,720
============ ============ =============
</TABLE>
See notes to combined financial statements.
-3-
<PAGE>
BATTERY NETWORK, INC. AND COMBINED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995 AND 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ 1,075,771 $ (505,584) $ 313,257
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation 85,124 61,569 113,835
Allowance for doubtful accounts receivable 81,000 130,500 3,000
Tooling program abandonment 1,765,534
Change in operating assets and liabilities:
Accounts receivable 701,559 (1,184) 360,465
Inventories 723,444 (659,635) (302,435)
Prepaid expenses and other current assets (83,035) (38,795) (17,701)
Accounts payable (979,202) (219,190) 40,430
Other current liabilities (183,182) 2,320 121,208
-------- -------- --------
Net cash flows from operating activities 1,421,479 535,535 632,059
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (25,924) (1,397,997) (395,411)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from (payments to) stockholders (681,046) 467,661 (86,525)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 714,509 (394,801) 150,123
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 547,202 942,003 791,880
-------- -------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $1,261,711 $ 547,202 $ 942,003
========== ========== ==========
</TABLE>
See notes to combined financial statements.
-4-
<PAGE>
BATTERY NETWORK, INC. AND COMBINED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995 AND 1994
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BASIS OF PRESENTATION - The accompanying combined financial statements
include the accounts of Battery Network, Inc. ("Battery Network"),
Alexander Battery Company South, Inc. ("South"), Alexander Battery Company
East, Inc. ("East"), Alexander Battery Company West, Inc. ("West"),
Alexander Battery Company, Inc. ("ABC"), and W.S. Battery and Sales
Company, Inc. ("W.S. Battery") (collectively the "Company"). Each of these
entities is affiliated through common ownership. All material intercompany
accounts and transactions between these entities have been eliminated. On
December 12, 1996, South, East and West were merged with and into Battery
Network (see Note 9). The Company's fiscal year ends on December 31.
BUSINESS - The Company is engaged in the distribution of batteries
purchased from manufacturers and the assembly of specialized battery packs
to meet customer specifications. The Company's products are marketed
primarily in the United States.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH EQUIVALENTS - The Company considers all highly liquid investments
with a maturity date of three months or less from the date of purchase to
be cash equivalents.
INVENTORIES - Inventories consist of batteries, battery packs and related
components, and are carried at the lower of cost (first-in, first-out) or
market value.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Additions and improvements are capitalized. Maintenance and repairs are
expensed as incurred. Depreciation and amortization of property and
equipment is calculated under straight-line and accelerated methods over
the estimated useful lives of the respective assets. Estimated useful
lives are three to seven years for equipment and five years for vehicles.
Leasehold improvements are amortized over the shorter of their estimated
useful lives or the terms of their leases.
REVENUE RECOGNITION - Revenue from product sales is recognized at the time
of shipment.
-5-
<PAGE>
INCOME TAXES - Battery Network, East, South and West, have elected to be
taxed as Subchapter S corporations under the Internal Revenue Code. Under
this election, such entities are not liable for taxes on income.
Accordingly, the earnings of such entities are reported on the
stockholders' federal and state income tax returns. ABC and W.S. Battery
are taxed as "C" corporations. The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." There are no material deferred income
tax assets or liabilities included in the combined balance sheets.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value
at September 30, 1996 and December 31, 1995 of the Company's financial
instruments approximated their fair value primarily due to the short
maturities of these instruments.
CONCENTRATION OF RISKS - The Company sells products to original equipment
manufacturers, maintenance and repair organizations, commercial businesses
and institutional users primarily in the United States. No customer
accounts for 10% of the Company's sales.
The Company purchases a significant portion of its battery products from
one supplier. During the nine months ended September 30, 1996 and the
years ended December 31, 1995 and 1994, the Company purchased
approximately 19%, 26%, and 33% of its total purchases from this supplier.
Because the supplier has experienced sporadic shipping difficulties, the
Company has reduced its reliance on this supplier and increased purchases
from alternative sources. The Company believes that adequate alternative
sources of supply are available.
2. INVENTORIES
Inventories consist of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
Raw materials $ 770,393 $1,279,645
Work in process 206,653 190,169
Finished goods 3,827,025 4,057,701
--------- ---------
Total $4,804,071 $5,527,515
========== ==========
3. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
Vehicles $ 337,393 $ 318,217
Equipment 518,718 545,810
--------- ---------
856,111 864,027
Less accumulated depreciation (672,110) (620,826)
--------- ---------
Total $ 184,001 $ 243,201
========= =========
-6-
<PAGE>
4. COMMON STOCK
The common stock of the combined entities at September 30, 1996 and
December 31, 1995 are as follows:
SHARES SHARES PAR COMMON
AUTHORIZED OUTSTANDING VALUE STOCK
Battery Network 1,000,000 1,000 $ -- $ --
South 1,000,000 1,000 1.00 1,000
West 10,000 1,000 1.00 1,000
East 1,000,000 1,000 1.00 1,000
W.S. Battery 500 500 2.00 1,000
ABC 10,000 1,000 1.00 1,000
--------- --------- ---- --------
Total 3,020,500 5,500 $5,000
========= ========= ========
5. LEASE COMMITMENTS
The Company leases three of its office and warehouse facilities from an
affiliate of its stockholders under a month-to-month renewal lease
arrangement. In addition, the Company leases three office and warehouse
facilities under noncancelable operating lease agreements through May
1998. Total rent expense was as follows:
Nine months ended September 30, 1996 $ 228,000
Year ended December 31, 1995 289,000
Year ended December 31, 1994 288,000
----------
Total $ 805,000
==========
Future minimum payments under operating leases with unrelated parties as
of September 30, 1996 are as follows:
Period from September 30, 1996 to December 31, 1996 $ 31,152
Year ending December 31, 1997 44,983
Year ending December 31, 1998 13,854
---------
Total $ 89,989
=========
6. BENEFIT PLANS
The employees of Battery Network, East, South and West participate in a
profit-sharing plan which is applicable to all employees not covered by
collective bargaining agreements, who are at least 18 years of age and
have completed one year of employment. The profit-sharing plan is funded
solely by Company contributions based upon Company profits, determined at
the discretion of the Board of Directors. The Company's contributions to
the profit-sharing plan were $80,642, $89,219, and $80,728 for the nine
months ended September 30, 1996 and for the years ended December 31, 1995
and 1994, respectively.
-7-
<PAGE>
The Company also maintains one defined benefit pension plan for the
employees of ABC, who collectively own all of the shares of the other
entities in the Company's combined group. No contributions were made to
this pension plan in 1994, 1995 or 1996 because the plan has been
overfunded and, as a result, no contributions have been required. At the
date of the most recent actuarial valuation, May 31, 1996, the plan was
determined to be overfunded by $1,151,000.
W.S. Battery also has an ESOP and a money purchase plan. These plans cover
the employees of W.S. Battery, who collectively own all of the shares of
the other entities in the Company's combined group, and no contributions
were made in 1994, 1995 or 1996.
7. RELATED PARTY TRANSACTIONS
The following is a summary of transactions and balances with the
stockholders of the Company or affiliated companies owned by the Company's
stockholders:
SEPTEMBER 30, DECEMBER 31,
1996 1995
Due to stockholders $ 6,151,963 $ 6,432,179
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31
1996 1995 1994
<S> <C> <C> <C>
Stockholders' compensation $ 583,000 $1,017,000
Rent expense paid to affiliates of stockholders $ 135,000 180,000 180,000
</TABLE>
In 1996, a $400,830 distribution to stockholders was accrued and is
included in "due to stockholders."
8. TOOLING PROGRAM ABANDONMENT
During the years ended December 31, 1995 and 1994, the Company, in order
to expand its manufacturing volume, incurred certain costs to develop and
acquire tooling and equipment for the manufacturing of batteries. The
Company intended to manufacture batteries previously supplied by other
manufacturers to the Company and a new line of batteries. At December 31,
1995, the Company decided not to go forward with this manufacturing
expansion and expensed the cost of its investment in the tooling and
equipment incurred at that date and expected to be incurred pursuant to
outstanding agreements.
9. SUBSEQUENT EVENTS
On December 12, 1996, South, East and West were merged with and into
Battery Network.
The Company has entered into an agreement, as amended on January 3, 1997,
with Batteries Batteries, Inc. ("Batteries"), an unrelated entity, whereby
Batteries will acquire the capital stock of Battery Network and W.S.
Battery, and certain assets of ABC for a total of approximately $11
million, which includes payment of amounts due to stockholders. The $11
million is subject to adjustment based on future profitability and also
certain financial events and conditions at closing. The sale transaction
is expected to close in January 1997.
******
-8-
<PAGE>
STOCK PURCHASE AGREEMENT
among
BATTERIES BATTERIES, INC.
("Buyer")
BATTERY NETWORK, INC.
("BATTERY NETWORK")
and
THE STOCKHOLDERS
OF BATTERY NETWORK
("Stockholders")
Dated January 3, 1997 as of December 31, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - SALE AND PURCHASE OF STOCK ................................ 2
1.1. Sale and Purchase of Stock.......................... 2
ARTICLE II - PRICE AND TERMS........................................... 2
2.1. Consideration....................................... 3
2.2. Adjustment of Purchase Price; Determination of
the Closing Combined Net Worth.................... 6
2.3. Resolution of Audit Disputes........................ 8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS....... 11
3.1. Organization and Qualification of Battery Network... 11
3.2. Capitalization...................................... 11
3.3. Transfer and Title to the Shares.................... 12
3.4. Authorization of Agreements; No Violations.......... 12
3.5. Financial Statements................................ 13
3.6. Tangible Assets..................................... 14
3.7. Intangible Assets................................... 14
3.8. Books and Records................................... 15
3.9. Accounts Receivable................................. 15
3.10. Inventory........................................... 16
3.11. Contracts and Commitments........................... 16
3.12. Leases.............................................. 19
3.13. Liabilities......................................... 20
3.14. Litigation.......................................... 20
3.15. Permits, Licenses, Etc.............................. 21
3.16. Taxes............................................... 21
3.17. Absence of Certain Changes or Events................ 22
3.18. Employee Benefit Plans; ERISA....................... 23
3.19. Insurance........................................... 25
3.20. Compliance with Applicable Law...................... 26
3.21. Investment.......................................... 27
3.22. No Consents......................................... 27
3.23. Full Disclosure..................................... 27
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER................... 28
4.1. Organization and Qualification...................... 28
4.2. Authorization of Agreements......................... 28
4.3. Authority to Buy.................................... 28
4.4. No Consents......................................... 28
4.5. No Violation........................................ 29
4.6. Litigation.......................................... 29
-i-
<PAGE>
4.7. Capitalization...................................... 29
4.8. Securities Law Disclosures.......................... 30
4.9. The Common Stock Consideration.................... 30
4.10. Full Disclosure..................................... 30
ARTICLE V - CERTAIN ADDITIONAL AGREEMENTS.............................. 31
5.1. Payment of Affiliated Loans......................... 31
5.2. Employment Agreements............................... 31
5.3. Transfer Taxes...................................... 31
5.4. Resignations........................................ 31
5.5. Employee Stock Options.............................. 32
5.6. Receivables......................................... 32
ARTICLE VI - NON-COMPETITION........................................... 32
6.1. Non-Competition..................................... 32
6.2. Injunctive Relief................................... 33
ARTICLE VII - REMEDIES............................................... 34
7.1. Survival of Representations and Warranties.......... 34
7.2. Indemnification by the Stockholders................. 34
7.3. Indemnification by Buyer............................ 34
7.4. Claims for Indemnification.......................... 35
7.5. Right to Defend..................................... 35
7.6. Limitations......................................... 36
7.7. Litigation; Remedies Cumulative..................... 38
ARTICLE VIII - MISCELLANEOUS......................................... 38
8.1. Expenses............................................ 38
8.2. Further Actions..................................... 38
8.3. Commissions and Finders' Fees....................... 38
8.4. Injunctive Relief................................... 39
8.5. Knowledge of Battery Network....................... 39
8.6. Further Assurances.................................. 39
8.7. Reformation and Severability........................ 39
8.8. Entire Agreement; Modification...................... 40
8.9. Notices............................................. 40
8.10. Waiver.............................................. 41
8.11. Binding Effect; Assignment.......................... 41
8.12. No Third-Party Beneficiaries........................ 42
8.13. Headings............................................ 42
8.14. Counterparts........................................ 42
8.15. Governing Law....................................... 42
-ii-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated January 3, 1997 as of December 31,
1996, by and among BATTERIES BATTERIES, INC., a Delaware corporation, c/o
Founders Management Services, Inc., 200 Madison Avenue, New York, New York
10016 (the "Buyer"), BATTERY NETWORK, INC., an Illinois corporation with
offices at 4071 Albany Street, McHenry, Illinois 60050 ("Battery Network") and
MR. WILLIAM STEVEN SAPP, residing at 17778 Old Winery Way, Poway, California
92064 ("WSS"), MS. SUSAN GRANDT, residing at 3731 Pitzen Road, McHenry,
Illinois 60050 ("SG"), and MR. JAMES SAPP, residing at 2733 Laguna Shores
Lane, Las Vegas, Nevada 89121 ("JS" who along with SG, and WSS are hereinafter
referred to as the "Stockholders").
WHEREAS, the Stockholders are the record and beneficial
owners of all of the issued and outstanding shares of the capital stock of
Battery Network;
WHEREAS, Battery Network is engaged in the business of the
assembly, packaging and wholesale and retail distribution of batteries
(collectively, the " Battery Network Business"); and
WHEREAS, the Buyer desires to acquire the assets of Battery
Network and the Battery Network Business through the acquisition of the
outstanding shares of the capital stock of the Battery Network, and the
Stockholders desire to effect the sale of the outstanding capital stock of the
Battery Network to the Buyer.
WHEREAS, prior to the closing hereof, Alexander Battery Co.
East, Inc., Alexander Battery Co. South, Inc. and Alexander Battery Co. West,
Inc. (collectively the "Merged Companies") were merged effective December 12,
1996 with and into Battery Network, the Surviving Corporation, pursuant to an
Agreement and Plan of Merger , dated December 1, 1996 (the"Merger Agreement")
(References hereinafter to "Batteries Network" shall include historically the
Merged Companies").
<PAGE>
WHEREAS, simultaneously with the execution and Closing
hereof, the Buyer will be acquiring all of the outstanding capital stock of
W.S. Battery & Sales Company, Inc ("WSB") pursuant to a Stock Purchase
Agreement among Buyer, WSB and the WSB Employee Stock Ownership Plan and Trust
(the "ESOP Plan and Trust") which is the sole stockholder of WSB (the "WSB
Stock Agreement") and Battery Acquisition Corp., a subsidiary of the Buyer
("BAC") will be acquiring substantially all the assets of WSJ Enterprises Inc.
("Enterprises") pursuant to an Asset Purchase Agreement among BAC, the Buyer,
Enterprises, the Stockholders, Dolores Sapp and William S. Sapp ("WS Senior")
(the "Enterprises Asset Agreement") (References in this Agreement to the
"Battery Network Business" shall also include the businesses of WSB and
Enterprises).
NOW, THEREFORE, in consideration of the premises and the
mutual agreements, covenants, representations and warranties hereinafter set
forth, the parties agree as follows:
ARTICLE I
SALE AND PURCHASE OF STOCK
1.1. Sale and Purchase of Stock. Subject to all of the
terms and conditions set forth in this Agreement, at the Closing (as defined
herein) the Stockholders shall sell, and transfer and deliver to Buyer, and
Buyer shall purchase and acquire from the Stockholders, all and not less than
all the outstanding shares of the Common Stock, no par value of Battery
Network (the "Shares") with the number of shares being sold by each
Stockholder and his or her Aliquot Percentage as follows:
<TABLE>
<CAPTION>
Name Number of Shares Aliquot Percentage
---- ---------------- ------------------
<S> <C> <C>
Susan Grandt 2,167.33 33.92
William S. Sapp 2,160.33 33.81
James Sapp 2,062.33 32.27
---------- -----
Total 6,390.00 100%
</TABLE>
2
<PAGE>
ARTICLE II
PRICE AND TERMS
2.1. Consideration. Subject to the terms and conditions of
this Agreement, in reliance on the representations, warranties and agreements
of Battery Network and each Stockholder contained herein, and in consideration
of the sale, conveyance, assignment, transfer and delivery of the Shares,
Buyer shall deliver or cause to be delivered to the Stockholders in full
payment to the Stockholders for the sale, conveyance, assignment, transfer and
delivery of the Shares at the Closing, the Purchase Price, as adjusted
pursuant to Section 2.2, consisting of:
(i) $231,220.83 less Foreign Receivables of the
same face amount which are being assigned to Enterprises
pursuant to Section 5.6 of this Agreement.
(ii) an aggregate of 550,000 shares of the Common
Stock, par value $.001 of the Buyer (the "Common Stock
Consideration") with each Stockholder to receive his or her
Aliquot Percentage of the Common Stock Consideration;
(iii) five-year options to the Stockholders in the
form of Exhibit A hereto to purchase at $4.50 per share an
aggregate of 225,000 shares of the Common Stock of the
Company (the "Option Consideration") with each
Stockholder's option to represent the right to acquire the
Stockholder's Aliquot Percentage of the Option
Consideration; and
(iv) the Contingent Right to receive as an
Additional Purchase Price ("APP"): (A) up to an aggregate
of $1,000,000 (the "Additional Cash Consideration") in the
form of wire transfers of federal funds to the bank
accounts designated by the Stockholders, (B) up to an
aggregate of 350,000 shares of the Common Stock, par value
$.001 per share of the Company (the "Additional Stock
Consideration"), (C) options in the form of Exhibit B
hereto to purchase up to an aggregate of 125,000 shares of
the
3
<PAGE>
Common Stock at $4.50 per share during the five year period
commencing with the end of the Designated Period giving
rise to the issuance of the Options ("Additional $4.50
Option Consideration") and (D) options to purchase up to an
aggregate of 125,000 shares at $6.00 per share during the
five year period commencing the end of the Designated
Period giving rise to the issuance of the Options in the
form of Exhibit B (the "Additional $6.00 Option
Consideration"), in the event the Pre-Tax Earnings of
Battery Network and its subsidiaries ("PTE") amounts to a
Maximum Threshold for a Designated Period. To the extent
the PTE is less than the Maximum Threshold but more than
the Minimum Threshold for a Designated Period (the amount
by which the PTE exceeds the Minimum Threshold is referred
to herein as the "Excess"), the percentage of the APP
payable shall equal (i) the percentage of the Maximum
Excess for that Designated Period represented by the Excess
for that Period less (ii) the sum of the percentages of the
APP paid or payable for prior Designated Periods. In no
event shall the Additional Cash Consideration exceed
$1,000,000, the Additional Stock Consideration exceed
350,000 shares, the Additional $4.50 Option Consideration
exceed 125,000 Options and the Additional $6.00 Option
Consideration exceed 125,000 options.
The following are the Minimum Threshold and Maximum Threshold of PTE
and Maximum Excess for each Designated Period.
<TABLE>
<CAPTION>
Maximum Maximum
Designated Periods Minimum Threshold Threshold Excess
------------------ ----------------- --------- ------
<S> <C> <C> <C>
One Year Period - Year ended $2,100,000 $2,500,000 $ 400,000
December 31, 1997 ("1997
Year")
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Maximum Maximum
Designated Periods Minimum Threshold Threshold Excess
------------------ ----------------- --------- ------
<S> <C> <C> <C> <C>
Two Year Period - 1997 Year $4,200,000 $5,000,000 $ 800,000
plus year ending December 31,
1998 ("1998 Year")
Three Year Period - 1997 Year $6,300,000 $7,500,000 $1,200,000
plus 1998 Year plus year ending
December 31, 1999 ("1999
Year")
</TABLE>
For example, if the PTE for the One Year, Two Year and Three Year
Periods were respectively $2,300,000, $4,700,000 and $7,100,000, the
Stockholders would be entitled to receive 50% ($200,000/$400,000) of the APP
with respect to the One Year Period, 12 1/2% ($500,000/$800,000 or 62 1/2%
- -50%) of the APP with respect to the Two Year Period, and 4 1/6%
($800,000/$1,200,000 or 66 2/3% - the sum of 50% + 12 1/2%) of the APP with
respect to the Three Year Period, or an aggregate of 66 2/3%.
Pre-Tax Earnings of Battery Network means the sum of (i) earnings
before extraordinary items and provision for all applicable federal and state
income taxes of Battery Network and WSB, and (ii) earnings before
extraordinary items and provision for applicable federal and state income
taxes of Tauber Electronics, Inc., a subsidiary of Buyer ("Tauber"). Such
determination shall be in accordance with generally accepted accounting
principles consistently applied. In computing such Pre-Tax Earnings, the
following principles shall apply: (i) no allocation to the operations of
Battery Network, WSB or Tauber of the general corporate overhead incurred by
the Buyer or its other subsidiaries including the management fee paid by the
Buyer to Founders Management Services, Inc. shall be made; (ii) a charge shall
be made for the allocable portion of the interest paid or issued by the Buyer
with respect to funds borrowed to the extent such funds are made available,
with the consent of WSS and JS, to Battery Network, WSB or Tauber, which
consent shall not be unreasonably withheld; (iii) the annual management
compensation of WSS, JS and SG shall amount to aggregate salaries of $300,000
plus
5
<PAGE>
benefits paid or payable in connection with their employment; (iv) no charge
will be made for either the rental expense for Tauber under its lease covering
10656 Roselle St., San Diego, California after the date the operations of
Tauber are physically relocated to a building or buildings occupied by Battery
Network or one of its subsidiaries or the cost of relocating such operations;
and (v) to the extent the inventory reserve is reduced to an amount which is
below $500,000.00 during or at the close of the year in accordance with
generally accepted accounting principles, a like amount shall be deducted from
the PTE. The Buyer agrees that until the APP is finally determined the
operations of Battery Network, WSB and Tauber as conducted immediately prior
to the date hereof will be only conducted by Battery Network , WSB and Tauber
(the latter two corporations under the control of Battery Network) and that no
sale of any of such operations or acquisition or introduction of any other
operations by Battery Network will be effected without the written consent of
all of the Stockholders, which consent may not be unreasonably withheld.
Payment, if any, of the Additional Purchase Price shall be made
within 30 days following the delivery of the audited consolidated financial
statement or statements of operations of Buyer and its subsidiaries, which
includes the results of operations of Battery Network, WSB and Tauber, which
statement or statements shall disclose the achievement of PTE giving rise to
an APP payment (the "Related APP Financials"), with each Stockholder to
receive his or her Aliquot Percentage of the Additional Cash Consideration,
Additional Stock Consideration and Additional Option Consideration to be paid.
2.2. Adjustment of Purchase Price; Determination of the
Closing Combined Net Worth.
(a) The Purchase Price shall be increased or decreased by
the amount by which the Combined Net Worth determined pursuant to Section
2.2(c) (the "Closing Combined Net Worth") does not equal $8,000,000. For
purposes of this Section, the Closing Combined Net Worth shall be the
6
<PAGE>
sum of the amounts of combined capital stock, additional paid-in capital,
retained earnings and amounts due to the Stockholders and WS Senior
immediately prior to the payment provided in Section 5.1 set forth in the
Closing Combined Balance Sheet as defined and prepared pursuant to Section 2.2
(c) adjusted to (i) reduce the foregoing sum by the amount, if any, by which
the inventory reserves exceed $500,000, and (ii) to eliminate the reserve for
doubtful accounts applicable to the "Foreign Receivables" being assigned to
Enterprises pursuant to Section 5.1 under this Agreement and those retained by
Enterprises under the Enterprises Asset Agreement.
(b) To the extent the Closing Combined Net Worth set forth
in the Closing Combined Balance Sheet is greater or less than $8,000,000, the
Purchase Price shall be adjusted to the extent of the difference. Accordingly,
if the Closing Combined Net Worth is greater than $8,000,000, then the Buyer
shall pay the amount of such excess to the Stockholders with each Stockholder
to receive his or her Aliquot Percentage of the excess; but if the amount of
the Closing Combined Net Worth is less than $8,000,000, each Stockholder shall
pay his or her Aliquot Percentage of the deficiency to the Buyer,
notwithstanding that such deficiency exceeds the Cash Consideration paid to
the Stockholders at the Closing. Payment in either case shall be by means of
certified check to the order of the party to whom such payment is to be made
within thirty (30) days following the later of receipt of the Closing Combined
Balance Sheet by the Stockholders or the resolution of any dispute.
(c) For purposes of determining the Closing Combined Net
Worth, as soon as practicable after the Closing, but in no event later than
ninety (90) days after the Closing, Buyer shall prepare and deliver to the
Stockholders a Combined Balance Sheet of Battery Network, WSB and Enterprises
(the "Combined Corporations") as of the close of business on December 31, 1996
(the "Closing Combined Balance Sheet") prepared in accordance with generally
accepted accounting principles ("GAAP") applied consistently with those
applied in the preparation of the September 30, 1996 Balance Sheet provided
pursuant to Section 3.5. During the course of the preparation of the
7
<PAGE>
Closing Combined Balance Sheet, Buyer shall permit the Stockholders and their
representatives to review determinations made in connection with the
preparation of the Closing Combined Balance Sheet and to review the documents
underlying such preparation. Buyer shall afford to Stockholders and
Stockholders' Accountants as defined in Section 2.3(a) access to the books and
records of the Combined Corporations as of the Closing Date in order to permit
a review by the Stockholders of the preparation by Buyer of the Closing
Combined Balance Sheet. Buyer and Stockholders agree to use their respective
best efforts to cause Buyer's Accountants and Stockholders' Accountants to
cooperate fully with each other in preparing the Closing Combined Balance
Sheet. Such cooperation shall include, without limitation, the exchange of all
relevant information and documentation. The amount of the Closing Combined Net
Worth shall be the amount reflected on the Closing Combined Balance Sheet,
unless Stockholders shall dispute the amount and shall demand a review (as
hereinafter defined), in which case the amount of the Combined Net Worth shall
be finally determined pursuant to Section 2.3.
2.3. Resolution of Audit Disputes.
(a) If the Stockholders dispute the amount of the Closing
Combined Net Worth set forth on the Closing Combined Balance Sheet pursuant to
Section 2.2(c) or the amount of the APP as determined by Buyer pursuant to
Section 2.1(iv), they shall so notify Buyer within twenty (20) days after the
date upon which the Stockholders shall have received such Balance Sheet or the
Related APP Financials, specifying in detail the points of disagreement and
demand a review (the "Review"). Buyer shall promptly consult with Stockholders
with respect to such points of disagreement in an effort to resolve such
disputes. If any such dispute cannot be resolved by Buyer and Stockholders
within five (5) business days after Buyer receives notice from Sellers of the
existence of such dispute, GLM Financial Group Ltd., the accountants for the
Stockholders ("Stockholders' Accountants"), and Deloitte & Touche LLP, the
accountants for the Buyer ("Buyer's Accountants"), shall jointly select a firm
of independent public accountants which has not performed any services since
January 1, 1993 for any of Buyer,
8
<PAGE>
Battery Network , the Merged Companies, WSB, Tauber, Enterprises, the
Stockholders, WS Senior, Dolores Sapp or any of their affiliates to act as an
arbitrator (the "Arbitrator") to determine all points of remaining
disagreement with respect to such disputed items. All determinations made by
the Arbitrator shall be final, conclusive and binding with respect to such
disputed items on the Closing Date.
(b) Audit Expenses. The fees and expenses of Buyer's
Accountants and Stockholders' Accountants incurred in connection with the
final determination of the amount of the Closing Combined Net Worth shall be
paid by Buyer and Stockholders, respectively. The fees and expenses of the
Arbitrator (if any) incurred in connection with the final determination of any
such items shall be paid by the party, or in the proportions by the parties,
designated by the Arbitrator based on the fault or relative fault of the
parties. In making such determination, the Arbitrator shall consider the
amount in dispute and the net change as finally resolved.
2.4. Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the time
and at the offices of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC,
One Citicorp Center, 153 East 53rd Street, New York, New York at 10:00 a.m. on
January 3, 1997, (the "Closing Date")."
(a) Deliveries by the Stockholders. At the Closing, the
Stockholders shall deliver and shall cause to be delivered to Buyer (unless
delivered previously) the following:
(1) the stock certificates evidencing the Shares,
duly endorsed or accompanied by a duly executed stock power
or powers transferring the ownership to the Buyer;
(2) the Employment Agreements executed by WS and JS
each in the form and substance as annexed hereto as Exhibit
C, and an Employment Agreement executed by SG in form and
substance as annexed hereto as Exhibit C-1;
9
<PAGE>
(3) the written consents of third persons referred
to in Section 3.10 and Schedule 3.11 (other than consents
of certain lessors of personal property specified in
Schedule 3.11);
(4) the executed leases or amendments as provided
in Section 3.11;
(5) the opinion of counsel in the form of Exhibit D
hereof;
(6) the resignations of the Directors provided in
Section 5.4; and
(7) all other previously undelivered documents,
instruments and writings required to be delivered by the
Battery Network or the Stockholders to Buyer at or prior to
the Closing pursuant to this Agreement or otherwise
required in connection herewith.
(b) Deliveries by Buyer. At the Closing, Buyer shall
deliver to or on behalf of the Stockholders (unless delivered previously) the
following:
(1) three stock certificates evidencing the Common
Stock Consideration, of which one is registered in the name
of SG for 186,560 shares, one is registered in the name of
WSS for 185,955 shares and one is registered in the name of
JS for 177,485 shares; each Certificate bearing the
following legend:
"The shares evidenced by this certificate have not
been registered under the Securities Act of 1933,
as amended, and no transfer, disposition or
hypothecation may be effected of such shares or any
interest therein unless registered under the Act
or, in the opinion of counsel to the issuer, such
transaction is exempt from registration
thereunder."
(2) three Option Certificates, executed by the
Buyer, one registered in the name of SG for options with
respect to 76,320 shares, one registered in the name of WSS
for options with respect to 76,072 shares and one
registered in the name of JS for options with respect to
72,608 shares, each in the form of Exhibit A;
(3) the opinion of counsel in the form of Exhibit
D-1;
10
<PAGE>
(4) the wire transfer of federal funds to the
Stockholders and WS Senior in the amount set forth in
Section 5.1;
(5) the wire transfer of federal funds to the
Stockholders in the amount of $75,000 pursuant to Section
6.1; and
(6) all other previously undelivered documents,
instruments and writings required to be delivered by Buyer
to the Stockholders at or prior to the Closing pursuant to
this Agreement or otherwise required in connection
herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
To induce Buyer to enter into this Agreement and consummate
the transactions contemplated hereby, the Stockholders and Battery Network
jointly and severally represent and warrant to Buyer as follows:
3.1. Organization and Qualification of Battery Network.
Battery Network is a corporation duly organized and validly existing under the
laws of Illinois and in each jurisdiction where it owns property or conducts
business except where the failure to do so would not in the aggregate
adversely affect the financial condition or results of operations of Battery
Network . Battery Network has the corporate power to own its assets and to
conduct its business as it is presently being conducted. Copies of the
Certificate of Incorporation and the By-Laws, each as amended to date, of
Battery Network have been previously delivered to Buyer and are correct and
complete. Battery Network does not own any equity interest in any other
corporation.
3.2. Capitalization. The authorized capital stock of
Battery Network consists of 1,000,000 shares of common stock, no par value, of
which the Shares are the only issued and outstanding shares; and there are no
shares of the capital stock of Battery Network held in its treasury. The
Shares are validly issued, fully paid and nonassessable and owned of record
and beneficially by
11
<PAGE>
the Stockholders. Neither Battery Network nor the Stockholders has executed or
granted any, and there is, and at the Closing there will be, no outstanding,
option, warrant or other right or any agreement (other than this Agreement) of
any kind providing for the purchase, or the right to purchase, issuance, sale
or other disposition of any shares of capital stock or security convertible
into or exchangeable for such shares of Battery Network.
3.3. Transfer and Title to the Shares. The Shares are being
sold to the Buyer free and clear of any liens or encumbrances. Upon delivery
of the Shares to Buyer at the Closing, the Buyer will receive good and
marketable title to the Shares, free and clear of any lien, pledge, option,
contractual right, equitable right, charge or other encumbrances of any kind
whatsoever.
3.4. Authorization of Agreements; No Violations.
(a) This Agreement has been, and the instruments and
agreements contemplated herein, including, but not limited to, the Employment
Agreements (collectively, the "Related Instruments") and other agreements and
documents to be executed in connection with the closing of the transaction
contemplated hereby (the "Closing Documents") have been duly executed and
delivered by Battery Network and the Stockholders and constitute the valid and
binding obligations of Battery Network and the Stockholders; and the Agreement
, and each of the Related Instruments and Closing Documents are enforceable in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
except to the extent that the remedy of specific enforcement or injunctive
relief is subject to the discretion of the court before which any proceedings
therefor may be brought.
(b) The execution and delivery and the performance of this
Agreement, the Related Instruments and the Closing Documents (other than the
Employment Agreements) and, to the knowledge
12
<PAGE>
of Battery Network and the Stockholders, the execution, delivery and
performance of the Employment Agreements, do not, with or without the giving
of notice and/or the passage of time:
(i) violate in any material respect any law
applicable to Battery Network and the Stockholders or the
corporate charter or By-Laws of Battery Network;
(ii) violate, conflict with, result in the breach
or termination of, any provision of, constitute a default
under any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which Battery Network or a
Stockholder is a party or by which Battery Network or a
Stockholder or any material asset or property of Battery
Network is or may be bound (the "Binding Agreements") or
give any party, other than a Stockholder or Battery
Network, the right to accelerate any material obligation
thereunder, except where such violation, conflict, breach,
default or termination would not have a materially adverse
effect upon the Battery Network Business or the combined
financial condition or combined results of operations or
prospects of Battery Network, WSB and Enterprises
(collectively, the "Combined Financial Condition" and the
"Combined Results of Operations") or the transferability or
value of the Shares; or
(iii) result in the creation of any lien, charge or
encumbrance upon the Shares, or upon any of the properties
or assets of Battery Network pursuant to any of the Binding
Agreements. Neither such execution, delivery and
performance nor compliance by Battery Network or a
Stockholder with the terms and provisions hereof violate
any law or, with or without the giving of notice and/or the
passage of time, conflict with or result in a breach of any
judgment, order, injunction, decree, regulation or ruling
of any court or other governmental authority to which
Battery Network or a Stockholder is subject or by which any
of the assets of Battery Network or the Shares may be
bound.
13
<PAGE>
3.5. Financial Statements. The Stockholders have caused
Battery Network to deliver to Buyer the Combined Balance Sheets of Battery
Network, WSB and Enterprises as of September 30, 1996, December 31, 1995 and
December 31, 1994 and their combined statements of income, cash flows and
stockholders' equity for the nine months ended September 30, 1996 and for each
of the years ended December 31, 1995, and December 31, 1994 accompanied by the
unqualified report of Deloitte & Touche, independent public accountants
(collectively the "Audited Financial Statements"). The foregoing financial
statements fairly present the Combined Financial Position of Battery Network ,
WSB and Enterprises as of September 30, 1996, December 31, 1995 and December
31, 1994 and the Combined Results of Operations of Battery Network, WSB and
Enterprises for the nine month period ended September 30, 1996 and the years
ended December 31, 1995 and December 31, 1994. The Audited Financial
Statements have been prepaid in conformity with GAAP, consistently applied.
The Closing Combined Net Worth of Battery Network, WSB and Enterprises as
defined in Section 2.2 will be at least $8,000,000.
3.6. Tangible Assets. Battery Network does not own any real
property. Schedule 3.6 hereto is a complete and correct list of all material
items (a book value of at least $25,000) of tangible personal property , other
than inventory, and fixtures of Battery Network, all of which were included on
the September 30, 1996 Balance Sheet, and all of which are currently used or
useable in the conduct of the Battery Network Business and are in the
aggregate in good condition and repair, reasonable wear and tear excepted.
3.7. Intangible Assets.
(a) Schedule 3.7 identifies all patents, trademarks, trade
names, service marks, copyrights, registrations or applications with respect
to any of the foregoing, renewals or assignments, and all rights in, to, or
respecting such renewals and licenses or rights under the same presently
owned, being used, or presently intended to be acquired (identified as such)
by Battery Network (collectively
14
<PAGE>
referred to herein as the "Business Rights"). To the extent indicated in
Schedule 3.7, the same have been duly registered in the offices indicated
therein. There are no claims or demands of any other person, firm, corporation
or entity of which the Stockholders are aware pertaining to any of such
rights; and no proceedings have been instituted, are pending, or, to the
knowledge of Battery Network and the Stockholders, are threatened, which
challenge, oppose or threaten interference, cancellation, nullification or
concurrent use with any of the Business Rights. To the knowledge of Battery
Network and the Stockholders, none of the Business Rights infringed on or
otherwise violate the rights of others or are being infringed on by others;
and none are subject to any outstanding order, decree, judgment or
stipulation. No licenses, sublicenses or agreements pertaining to any of the
Business Rights are in effect, other than as set forth in Schedule 3.7.
Neither Battery Network nor any of the Stockholders has been formally charged
with infringement of any adversely-held Business Right with respect to Battery
Network or any Business Right used in connection with the Battery Network
Business.
(b) Battery Network owns and possesses all Business Rights
which, to the knowledge of Battery Network and the Stockholders, are necessary
for, and being used in the conduct of, or in connection with, the Battery
Network Business as was conducted on September 30, 1996 and as is currently
being conducted; all are in full force and effect and have not been amended or
modified. Except as set forth in Schedule 3.7, Battery Network has not sold,
assigned, transferred, licensed, sublicensed or conveyed all or any interest
in any of the Business Rights to any person, and Battery Network has the
right, title and interest (free and clear of all security interests, liens and
encumbrances of every nature) in and to the Business Rights set forth on the
Schedule.
3.8. Books and Records. The books and records of Battery
Network, WSB and Enterprises have been maintained on a basis consistent with
prior years and accurately reflect the basis for amounts set forth on the
Financial Statements delivered pursuant to Sections 2.2 and 3.5.
15
<PAGE>
3.9. Inventory. All of the inventory included on the
September 30, 1996 Combined Balance Sheet and the Closing Combined Balance
Sheet is of a quality and quantity currently usable in the ordinary course of
the Battery Network Business. The present quantity of all current and usable
inventory, after giving effect to the inventory reserve established in
accordance with GAAP, is at a level consistent with the past practice of
Battery Network, WSB and Enterprises.
3.10. Contracts and Commitments.
(a) Except as set forth in Schedule 3.10 or Schedule 3.11,
on the date of this Agreement:
(i) Battery Network is not a party to or bound by
any distribution agreement, sales representative agreement,
dealer agreement, collective bargaining agreement, loan
agreement, agreement guaranteeing the obligations of
liabilities of others, construction or building
modification agreement, or any other agreement, contract or
commitment relating to its operation, condition (financial
or otherwise), liabilities, assets, earnings, working
capital or the prospects of the Battery Network Business
and which provides for future payments or receipts for any
consecutive twelve month period in an amount of at least
$50,000 (or, with respect to purchase orders, $50,000);
(ii) The enforceability of the agreements,
contracts, commitments and licenses referred to in Schedule
3.7 or Schedule 3.10 will not be affected in any manner by
the execution and delivery of this Agreement, the Related
Instruments or the consummation of the transactions
contemplated hereby, except for the need to obtain the
consents set forth in Schedule 3.10 and Schedule 3.11, all
of which consents have been obtained other than those
relating to those equipment leases which have been
specifically indicated on the Schedules as having not been
obtained;
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(iii) No outstanding purchase contract or
commitment of Battery Network relates to any business other
than the Battery Network Business, is materially in excess
of the ordinary and usual requirements of such business at
the time entered into or, to the knowledge of Battery
Network and the Stockholders, was entered into at any price
materially in excess of the price paid or payable by
Battery Network, WSB, Enterprises, or any of the Merged
Companies during the nine months ended September 30, 1996
or the year ended December 31, 1995, comparing where
applicable prices paid or payable for similar quantities;
(iv) Other than the "Affiliated Leases" referred to
in Section 3.11, the "Plans" listed on Schedule 3.17 and as
permitted under Section 3.16, neither Battery Network nor
any of the Stockholders is a party to or bound by any
outstanding agreements, arrangements or contracts relating
to the Battery Network Business or the assets of Battery
Network with any of the officers, employees, agents,
consultants, advisors or salesmen of Battery Network that
(A) is not cancelable by it on notice of not longer than 30
days and without liability, penalty or premium, except for
those agreements set forth, along with their expiration
dates, on Schedule 3.10, or (B) provides for the payment of
any bonus or commission based on sales or earnings.
(v) Battery Network is not a party to or bound by
any employment agreement, consulting agreement or any other
agreement which contains any severance or termination pay
liabilities;
(vi) To the knowledge of Battery Network and the
Stockholders, Battery Network is not in default under or in
violation in a material respect of, nor, is there any basis
for any valid claim of default under or violation of, in a
material respect, any contract, agreement or commitment
made or obligation of Battery Network or relating
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to the Battery Network Business, including, but not
limited to, any material distribution agreement, sales
representative agreement or dealer agreement;
(vii) Battery Network does not have (A)
indebtedness for borrowed money or the deferred purchase
price for property, including guarantees of, or agreements
to acquire, any such indebtedness of others, or (B)
contract, commitment or arrangement for the borrowing of
money or for a line of credit; and
(viii) None of Battery Network, the Stockholders,
any "Affiliate" of a Stockholder (meaning a member of the
immediate family of, or any person controlling or
controlled by, any Stockholder ), an officer or director of
Battery Network is a party to or bound by any agreement or
arrangement for the sale of shares of Battery Network, or
(other than in the ordinary course of business and
consistent with past practice) any of the assets or rights
of Battery Network or which provides for the grant of any
preferential rights to purchase any of the assets or rights
of Battery Network.
(b) With respect to each contract and agreement listed on
Schedule 3.10 attached hereto, except as set forth therein, (A) it is valid,
binding and in full force and effect and is enforceable by Battery Network in
accordance with its terms, subject to bankruptcy, insolvency, reorganization
and other laws and judicial decisions of general applicability relating to or
affecting creditors' rights and to general principles of equity; (B) to the
knowledge of Battery Network and the Stockholders, neither Battery Network nor
any other party thereto is in material breach of any obligation thereunder;
and (C) there does not exist any material default under, or, to the knowledge
of Battery Network and the Stockholders , any event or condition which, with
the giving of notice or passage of time or both, would become a breach or
default in any material respect under the terms of such contract or agreement
on the part of Battery Network or on the part of any other party thereto.
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(c) Since September 30, 1996, none of Battery Network, WSB,
Enterprises and the Merged Companies has written up the value of any
inventory, or written off as uncollectible any notes or accounts receivable or
any portion thereof, except for write-offs and write-ups in accordance with
GAAP consistently applied; waived any rights of substantial value; or, to the
knowledge of Battery Network and Stockholders, omitted to do any act, or
permitted any act or omission to act, which will cause a material breach of
any contract, commitment or obligation, or any breach of any representation,
warranty, covenant or agreement made herein.
3.11. Leases. Schedule 3.11 attached hereto contains an
accurate and complete list of leases (including all amendments thereof and
modifications thereto, the "Leases") pursuant to which Battery Network leases
real property and leases providing for rentals of at least $10,000 per annum
of personal property. None of the Leases relate to any property or equipment
owned or leased by any Stockholder or an Affiliate except those which are in
the form of Exhibits E and F to this Agreement (the "Affiliated Leases"). To
the knowledge of Battery Network and the Stockholders, Battery Network is not
in default in any material respect with respect to any of the Leases which
would permit the lessor thereunder to terminate such Lease and no event or
condition has occurred which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute a default in
any material respect thereunder, or would permit the lessor thereunder to
terminate such Lease, increase any of the lessee's obligations or reduce the
lessee's rights thereunder. All Leases are valid, binding and enforceable in
accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and are in full force and
effect, and, except for the consents of lessors set forth in Schedule 3.11
which consents have been obtained, other than as to those equipment leases so
indicated on the Schedule, the execution and delivery of this Agreement and
consummation of the transactions contemplated hereby, will not require Battery
Network or Buyer to procure the consent of
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any lessor in order for Battery Network to continue as lessee thereunder
without any additional cost to or Buyer or Battery Network or a diminution of
lessee's rights thereunder.
3.12. Liabilities. To the knowledge of Battery Network and
the Stockholders, Battery Network is not, except as set forth in Schedule
3.12, subject to any liabilities other than (i) those included in the
September 30, 1996 Combined Balance Sheet; and (ii) accounts payable and
accrued expenses which have arisen in the ordinary course of the Battery
Network Business subsequent to September 30, 1996.
3.13. Litigation. Except as set forth on Schedule 3.13
attached hereto, there are no claims, actions, proceedings pending and, to the
knowledge of Battery Network and the Stockholders, threatened, and to the
knowledge of Battery Network and the Stockholders, there are no investigations
or inquiries in progress, pending, threatened, against any Stockholder or
Battery Network, that could adversely affect the Shares, Battery Network, its
assets, or the transactions contemplated hereby; nor, to the knowledge of
Battery Network and the Stockholders, is there any valid basis for any such
claim, action, suit, proceeding, inquiry or investigation. As a result of
either the lack of a valid basis for, or the availability of an appropriate
defense to, any claims, actions, suits, proceedings, inquiries or investiga
tions set forth in Schedule 3.13, none of such claims, actions, suits,
proceedings, inquiries or investiga tions will have a material adverse effect
on the Battery Network Business or Combined Financial Condition or Combined
Results of Operations. None of the Stockholders and Battery Network is subject
to any judgment, order or decree entered in any lawsuit or proceeding which
has had or may have a significant adverse effect on the Battery Network
Business or the Combined Financial Condition or Combined Results of
Operations.
3.14. Permits, Licenses, Etc. To the knowledge of Battery
Network and the Stockholders, Battery Network does not require any permits,
licenses, orders or approvals of governmental or administrative authorities
(collectively the "Permits") to permit them to carry on the
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Battery Network Business as presently conducted (including, without
limitation, those required under federal, state or local laws or regulations
relating to pollution or protection of the environment) other than the Permits
which they currently hold, all of which are described in Schedule 3.14. The
conduct by Battery Network of the Battery Network Business through the date
hereof has not and, to the knowledge of Battery Network and the Stockholders,
the continuation of such business by Battery Network under the control of
Buyer after the Closing in the same manner as currently conducted will not
violate or infringe, and has not and, to the knowledge of Battery Network and
the Stockholders, will not cause a default in any material respect under, any
of the Permits or require Battery Network or the Buyer to obtain any
additional Permits, and neither any Stockholder nor Battery Network has
received any written notification of any threatened suspension or cancellation
of any of the Permits which might be reasonably expected to have a material
adverse effect on the Battery Network Business or the Combined Financial
Condition or Combined Results of Operations.
3.15. Taxes. Battery Network has been, and each of the
Merged Companies until the effective date of its merger was, a Subchapter S
corporation under the Internal Revenue Code. Battery Network has: (i) filed
all returns required to be filed with respect to all federal, state, local and
foreign income, payroll, withholding, excise, sales, use, real and personal
property, occupancy, business and occupation, mercantile, real estate, capital
stock and franchise or other tax (all the foregoing taxes, including interest
and penalties thereon and including estimated taxes thereof, are hereinafter
collectively referred to as "Taxes"), (ii) paid all Taxes required by law to
be paid, and (iii) paid all other Taxes for which a notice of assessment or
demand for payment has been received, except, with respect to all of the
foregoing, to the extent that any claimed tax, fee, interest, assessment or
penalty is not due or is being contested in good faith. No reserve is or will
be required of Battery Network with respect to any Taxes relating to the
income of Battery Network or any of the Merged Companies through the Closing
Date. Battery Network has not received any notice of an examination having
been made of Battery Network's
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or any of the Merged Companies' federal income tax returns by the Internal
Revenue Service at least since December 31, 1992. Battery Network has not
agreed to extend the time of assessment or collection of Taxes and is not a
party to any action or proceeding by any governmental authority for the
determination, assessment or collection of any Taxes. There is no examination
pending or, to the knowledge of Battery Network or the Stockholders,
threatened by taxing authorities relating to the determination, assessment or
collection of any Taxes from Battery Network.
3.16. Absence of Certain Changes or Events.
(a) Since September 30, 1996:
(i) Battery Network has not sold or suffered any
material adverse change or loss or termination of or breach
or default of any of the Business Rights set forth or
referred to on the Schedules to this Agreement and there
has been no material adverse change, or, to the knowledge
of Battery Network and the Stockholders, is any material
adverse change threatened or anticipated, in the combined
net sales, Combined Financial Condition or Combined Results
of Operations of Battery Network, WSB and Enterprises from
the amounts reflected on the September 30, 1996 Combined
Balance Sheet and the Combined Statement of Income for the
nine months then ended or, to the knowledge of Battery
Network and the Stockholders, in the prospects for the
Battery Network Business, and Battery Network and the
Stockholders do not know of any event which is or might
reasonably be expected to have a material adverse effect on
such combined net sales, condition or results or prospects;
(ii) Battery Network has not: permitted, allowed or
suffered any of its assets (tangible or intangible) to be
subjected to any mortgage, pledge, lien, encumbrance,
restriction or charge of any kind; canceled any material
indebtedness (individually or in the aggregate) owing to it
or waived any claims or rights of substantial value; or
sold,
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<PAGE>
transferred or otherwise disposed of any of its property or
assets (tangible or intangible) except in the ordinary
course of business and consistent with past practice;
(iii) Battery Network has not paid, loaned or
advanced any amount to, or sold, transferred or leased any
properties or assets (tangible or intangible) to, or
entered into any agreement or arrangement with, any of its
officers, directors or employees, or increased the
compensation to its officers and employees at rates
exceeding the rates of compensation paid during the nine
months ended September 30, 1996;
(iv) Battery Network has not experienced any
material labor dispute or difficulty;
(v) Battery Network has not made capital
expenditures or commitments for additions to property,
plant, equipment or for any other purpose which are more
than Fifty Thousand Dollars ($50,000) in the aggregate,
except an acquisition of certain assets from Enterprises;
or suffered any casualty loss or losses with respect to its
assets (whether or not insured against) which in the
aggregate exceed Twenty-Five Thousand Dollars ($25,000).
3.17. Employee Benefit Plans; ERISA.
(a) Except for the profit-sharing, medical and health
plans set forth on Schedule 3.17, Battery Network does not maintain,
administer or otherwise contribute to any Employee Benefit Plan, as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which is subject to any provision of ERISA and covers any
employee, whether active or retired ("Employee Plans"). None of the Employee
Plans set forth on Schedule 3.17 is a "multi-employer plan," as defined in
Section 3(37) of ERISA, and Battery Network has not been obligated to make a
contribution to any Employee Plan within the past five years on behalf of any
employee. Except for those which will be terminated or canceled on or prior to
the Closing, Battery
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Network does not maintain any form of current or deferred compensation (other
than base salary and base wages), bonus, incentive compensation, profit
sharing, stock option, stock appreciation right, severance pay, retirement,
pension, salary continuation, group or individual health, dental, medical,
life insurance, survivor benefit or similar plan, policy or arrangement for
the benefit of any employee, whether active or retired, of any class or
classes of its employees ("Benefit Arrangements"). The Stockholders have
provided or caused to be provided to Buyer (i) a copy of each Employee Plan
and Benefit Arrangement, and a copy of each of the documents (including trust
agreements and other funding arrangements and summary plan descriptions) under
which each such Employee Plan and Benefit Arrangement is operated; (ii) the
most recent annual report, if any, required to be filed with the government or
any agency thereof; (iii) with respect to any Employee Plans which are
intended to be qualified under Section 401(a) of the Code, a copy of the most
recent determination letter from the Internal Revenue Service on the Plan's
qualified status and a copy of the application for such letter; and (iv) a
schedule showing either the annual cost or the current value of all benefits
of each Employee Plan and Benefit Arrangement. With respect to all Employee
Plans and Benefit Arrangements, Battery Network is in compliance in all
material respects with the terms of each such plan or arrangement and, to the
knowledge of Battery Network and the Stockholders, with the requirements
prescribed by any and all Laws as defined in Section 3.19 currently in effect,
including but not limited to ERISA and the Code, applicable to such plans or
arrangements. Since December 31, 1995, the Employee Plans and Benefit
Arrangements have not been amended nor, except pursuant to their terms as in
effect on December 31, 1995, have any payments or contributions been made
under such Plans or Arrangements. Since December 31, 1995, Battery Network has
not failed to make any contribution to, or pay any amount due and owing as
required by applicable law or by the terms of, any Employee Plan or Benefit
Arrangement. The obligations of Battery Network with respect to any Employee
Plan and Benefit Arrangement is fully funded. There is no pending or, to the
knowledge of Battery Network or the
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Stockholders, threatened legal action, proceeding or investigation against
Battery Network or any Employee Plan or Benefit Arrangement with respect to
the employees of Battery Network, other than routine claims for benefits,
which could result in liability to such plans or Battery Network. The
execution of this Agreement and the consummation of the transactions
contemplated hereby will not result in any payment (whether of separation pay
or otherwise) becoming due from Battery Network to any current or former
consultant or employee of Battery Network or will result in the vesting,
accelera tion of payment or increase in the amount of any benefit payable to
or in respect of any such current or former consultant or employee of Battery
Network.
(b) The Stockholders, who have been employees of WSB and
the sole participants of the ESOP Plan and Trust, represent and warrant to
Buyer that the ESOP Plan and Trust has complied with all Laws, not limited to
ERISA and the Code and regulations thereunder, in connection with its
administration and operation and the sale to the Buyer of the outstanding
shares of Common Stock of WSB pursuant to the WSB Stock Agreement and that any
failure to comply has not and will not result in any loss, liability, expense
or claim against Buyer or any of its subsidiaries, including WSB.
3.18. Insurance. Since December 31, 1992, Battery Network
has, in full force and effect, insurance against fire, liability, and other
claims set forth in Schedule 3.18 hereto in amounts and against such losses
and risks as therein set forth. The Schedule lists all the insurance policies
maintained by Battery Network, each of which is valid, outstanding and
binding. Such policies, to the knowledge of Battery Network and the
Stockholders, are sufficient for compliance with all requirements of law and
of all agreements with respect to the operation of Battery Network and the
Battery Network Business and the coverage provided thereby with respect to any
act or event occurring on or prior to the Closing will not in any way be
affected by or terminate or lapse by reason of this Agreement or the
transactions contemplated by this Agreement.
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3.19. Compliance with Applicable Law. Except as set forth
in Schedule 3.19 attached hereto: (a) Battery Network has complied in all
material respects with respect to its operations, practices, real property,
plants, structures, machinery, equipment, vehicles and other property, and all
other aspects of its business, with all applicable laws (whether statutory or
otherwise), rules, regulations, orders, ordinances, judgments, decrees,
orders, writs and injunctions of all governmental authorities (federal, state,
local, foreign or otherwise) (collectively, "Laws"), including, but not
limited to, all Laws relating to the safe conduct of business, environmental
protection and conservation, antitrust, taxes, consumer protection, currency
exchange, equal opportunity, health, sanitation, fire, zoning, building,
occupational safety, pension, securities, trademark and copyright except where
the failure or failures to comply would not have in the aggregate a materially
adverse effect on the Battery Network Business or its prospects or the
Combined Financial Condition or Results of Operations; and (b) neither Battery
Network nor any of the Stockholders have received notification which is
currently outstanding or uncured of any asserted present or past failure to so
comply. There has not been any storage, generation, manufacture, refinement,
transportation, production, treatment or disposal of solid wastes, toxic
wastes or hazardous wastes or substances by Battery Network or, to the
knowledge of Battery Network and the Stockholders, at the real properties
leased or owned by Battery Network in violation of any applicable Law or
Permit or which would require significant remedial action under any applicable
Law or Permit. There has never been any spill, discharge, leak, emission,
injection, escape, dumping or any other release by Battery Network of any kind
onto any real property into the environment surrounding such real properties
of any solid wastes, toxic wastes or hazardous wastes or substances as such
terms are defined under any law.
3.20. Investment. The Stockholders are acquiring the Common
Stock Consideration, and Option Consideration and will acquire the Contingent
Common Stock Consideration and the
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Contingent Option Consideration for their own respective accounts and for
investment purposes only and not with the view to the distribution thereof.
3.21. No Consents. No consent, authorization, approval,
order, license, certificate or permit of or from, or declaration or filing
with, any federal, state, local or other governmental authority or any court
or other tribunal, and no consent or waiver of any party to any distribution
agreement, sales representative agreement, dealer agreement, or any other
contract, agreement, instrument or lease to which Battery Network or any
Stockholder is a party, is required for the execution, delivery or performance
of this Agreement or any of the Related Instruments by Battery Network or any
Stockholder, as applicable, or the consummation by such party or parties of
the transactions contemplated hereby or thereby, except for those written
consents set forth on Schedules 3.10 and 3.11, all of which have been obtained
by Battery Network or the Stockholders other than those indicated on Schedule
3.11.
3.22. Full Disclosure. No representation or warranty of
Battery Network and Stockholders made in this Agreement, the Related
Instruments or any written statement furnished to the Buyer pursuant hereto or
the Related Instruments or Closing Documents contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements or facts contained herein or therein not
materially misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
To induce Battery Network and the Stockholders to enter
into this Agreement and consummate the transactions contemplated hereby, Buyer
represents and warrants to Battery Network and the Stockholders as follows:
4.1. Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware.
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4.2. Authorization of Agreements. This Agreement has been
duly authorized. This Agreement and the Closing Documents have been duly
executed and delivered by Buyer, constitute the valid and binding obligation
of Buyer and are enforceable against Buyer in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and, except to the extent that the
remedy of specific enforcement or injunctive relief is subject to the
discretion of the court before which any proceedings therefor may be brought.
4.3. Authority to Buy. Buyer has all requisite corporate
power and authority: (i) to execute, deliver and perform this Agreement and
the Closing Documents, and (ii) to carry out the transactions contemplated
hereby and thereby. All necessary corporate proceedings of Buyer have been
duly taken to authorize the execution and delivery of this Agreement by Buyer
and the performance of the transactions contemplated hereby.
4.4. No Consents. No consent, authorization, approval,
order, license, certificate or permit of or from, or declaration or filing
with, any federal, state, local or other governmental authority or any court
or other tribunal, and no consent or waiver of any party to any agreement to
which Buyer is a party, is required for the execution, delivery or performance
by Buyer of this Agreement, except the consent required under the loan
agreement as of the date hereof with IBJ Schroder Bank & Trust Company (the
"Schroder Loan Agreement") which consent has been obtained.
4.5. No Violation. The execution and delivery do not and
the performance of this Agreement and the Closing Documents will not, with or
without the giving of notice and/or the passage of time, violate any
provisions of law applicable to the Buyer or conflict with, result in the
breach or termination of, any provision of, constitute a default under, or
give any party other than the Buyer the right to accelerate any obligation
under, the Buyer's certificate of incorporation, as amended or by-laws, as
amended, or any indenture, mortgage, deed of trust, lease or other agreement
or instrument to which
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Buyer is a party; violate any provision of the General Corporation Law of
Delaware or any other laws or, with or without the giving of notice and/or the
passage of time or conflict with or result in a material breach of any
judgment, order, injunction, decree, regulation or ruling of any court or
other governmental authority to which the Buyer is subject or by which any of
the assets of the Buyer may be bound.
4.6. Litigation. There are no claims, actions, proceedings,
pending or in progress, or, to the knowledge of Buyer, threatened, and to the
knowledge of the Buyer there are no investigations or inquiries in progress,
pending, or, threatened, against the Buyer, that could affect Buyer, or the
transactions contemplated hereby; nor, to the knowledge of the Buyer, is there
any valid basis for any such claim, action, suit, proceeding, inquiry or
investigation.
4.7. Capitalization. The authorized capitalization of the
Buyer consists of: (i) 2,000,000 shares of Preferred Stock, par value $.001
per share, of which 750,000 shares of Series A Preferred Stock are outstanding
and (ii)10,000,000 shares of Common Stock, par value $.001 per share, of which
4,000,000 shares are outstanding. The Buyer has not reserved for issue any
additional shares of Common Stock except for the Stock Consideration and the
shares to be issued: (i) as part of the Additional Stock Consideration, (ii)
upon exercise of the Options constituting the Option Consideration, the
Additional $4.50 Option Consideration and the Additional $6.00 Option
Consideration; (iii) upon exercise of options granted or to be granted under
the Buyer's Stock Option Plan; and (iv) warrants to purchase 2,300,000 shares
of Common Stock exercisable on or prior to April 9, 1999.
4.8. Securities Law Disclosures. Buyer has filed all forms,
reports, statements, or other documents required to be filed by Buyer with the
Securities and Exchange Commission ("SEC") and NASDAQ/ NMS, including, without
limitation: (a) its Registration Statement or Form S-1 as declared effective
by the SEC on April 8, 1996, (b) its Quarterly Reports on Form 10-Q for the
quarters ended April 30, 1996 , June 30, 1996 and September 30, 1996, (c) all
reports on Form 8-K and (d) all
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amendments and supplements to all such reports and registration statement
(collectively, the "Buyer SEC Reports"). As of the respective filing dates,
the Buyer SEC Reports complied as to form in all material respects with the
requirements of the Securities Exchange Act of 1934 (the "Exchange Act") or
the Securities Act of 1933 (the "Securities Act"), as applicable. The Buyer
SEC Reports did not at the time they were filed contain any untrue statement
of material fact, or omit to state a material fact required to be stated
therein that was necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.9. The Common Stock Consideration. Buyer has duly
reserved for issuance the shares of its capital stock which will constitute
the Additional Stock Consideration and the shares of its Common Stock to be
issued upon exercise of the options constituting the Option Consideration, the
Additional $4.50 Option Consideration and the Additional $6.00 Option
Consideration. Such shares when issued in accordance with the terms of this
Agreement, the Option, the Additional $4.50 Options or the Additional $6.00
Options will be validly authorized, legally issued, and fully paid and
nonassessable.
4.10. Full Disclosure. No representation or warranty of
Buyer made in this Agreement or any written statement furnished by the Buyer
to Battery Network or the Stockholders pursuant hereto or the Closing
Documents contains any untrue statement of a material fact or omits or will
omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading.
ARTICLE V
CERTAIN ADDITIONAL AGREEMENTS
5.1. Payment of Affiliated Loans. Buyer will cause Battery
Network to pay at the Closing to the Stockholders and WS Senior by means of a
wire transfer funds in the amount of $6,065,335.69 to the bank account at the
McHenry State Bank designated by the Stockholders representing full payment
for loans payable to the following in the following amounts: $1,566,795.64
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to JS, $1,772,480.01 to SG, $2,046,060.04 to WSS and $680,000.00 to WS Senior.
The Stockholders represent and warrant to the Buyer that the foregoing dollar
amounts constitute all, not less than all, of the loans and indebtedness owing
by Battery Network, WSB and Enterprises to the foregoing individuals
immediately prior to the Closing. The foregoing payments shall constitute
satisfaction for all the loans and indebtedness as of the Closing due and
owing by Battery Network, WSB and Enterprises to those individuals, including
WS Senior, and their affiliates.
5.2. Employment Agreements. WS, JS and SG agree to execute
and deliver to Buyer at the Closing the Employment Agreements with Battery
Network in the form of Exhibits C with respect to WS and JS and C-1 with
respect to SG, which agreements provide for the grants of five year options
under the Buyer's Stock Option Plan (the "Option Plan") to SG to purchase
16,960 Shares, to WSS to purchase 16,905 Shares and to JS to purchase 16,135
Shares of the Buyer's Common Stock.
5.3. Transfer Taxes. Buyer shall pay all transfer taxes
payable with respect to the transfer by the Stockholders to the Buyers of the
Shares.
5.4. Resignations. Stockholders are hereby delivering to
Buyer the resignations of all the Directors of Battery Network.
5.5. Employee Stock Options. Buyer shall grant at such time
or times designated by all the Stockholders options to purchase an aggregate
of 75,000 shares of the Common Stock of the Buyer under the Option Plan to
those key employees of Battery Network (other than a Stockholder or member of
his or her family) and in the respective proportions designated by the
Stockholders; such options to be not exercisable until the stockholders of the
Buyer approve an amendment to the Option Plan to increase the shares subject
to the Plan by at least 75,000 shares. Buyer agrees to effect such amendment
within a year from the Closing.
5.6. Receivables. At or immediately prior to this Closing,
the Stockholders will cause Battery Network to assign to Enterprises all of
its interest in those receivables outstanding at the Closing
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in the amounts and from the customers outside the United States set forth in
Schedule 5.6 which the Stockholders represent and warrant to Buyer constitute
all the receivables of Battery Network as of the Closing from such customers
(the "Foreign Receivables"). To the extent the accounts receivables set forth
on the Closing Combined Balance Sheet, other than the Foreign Receivables, are
not collected in full on or prior to June 30, 1997 without deduction for
allowance for doubtful accounts (the "Uncollected Accounts"), Battery Network
will immediately thereafter assign to Enterprises all of the Uncollected
Accounts and the Stockholders jointly and severally agree to pay or cause
Enterprises to pay to Battery Network on or prior to August 1, 1997 by means
of a certified check or checks to the order of Battery Network the full amount
of the Uncollected Accounts less the amount by which the allowance for
doubtful accounts as of December 31, 1996 exceeded the allowance applicable to
the Foreign Receivables.
ARTICLE VI
NON-COMPETITION
6.1. Non-Competition. Each Stockholder agrees, in
consideration for the payment by Buyer of $25,000 (an aggregate of $75,000 for
the Stockholders) in the form of a certified check or wire transfer of federal
funds in the amount of $75,000 to a bank account at the McHenry State Bank,
McHenry, Illinois designated by the Stockolders, that neither such Stockholder
nor his or her Affiliates will, at any time within a period of two years from
the later of the Closing or the date the Stockholder is no longer employed by
Battery Network, the Buyer or any of its subsidiaries (including Battery
Network) (i) compete, directly or indirectly, with Buyer or any of
subsidiaries, including Battery Network, in the conduct of their then battery
business, or (ii) except on behalf of the Buyer or a subsidiary of Buyer,
directly or indirectly solicit for employment by others any employees of Buyer
or a subsidiary of the Buyer to perform duties with respect to such battery
business; provided, however, that the Buyer or Battery Network is not then in
breach of any obligation to such Stockholder under this
32
<PAGE>
Agreement or under the Stockholder's Employment Agreement; and nothing
contained in this Section 6.1 shall prevent (A) the Stockholders and their
Affiliates from purchasing in the aggregate as an investment less than 5% in
the aggregate of the outstanding securities of any corporation whose
securities are regularly traded on any national security exchange or in the
over-the-counter market, or (B) the wife and brother-in law of WS from
continuing to own and operate Battery Connection Inc., a battery catalogue
business.
6.2. Injunctive Relief. Each Stockholder hereby expressly
acknowledges that money damages might be difficult to calculate and may not
adequately compensate the Buyer or Battery Network in connection with an
actual or threatened breach by the Stockholder of the provisions of Sec tions
6.1 or 6.2 hereof. Accordingly, each Stockholder hereby expressly agrees that
each of Buyer and Battery Network shall be entitled to enforce by injunction
or other equitable relief the due and proper performance and observance of the
provisions of Sections 6.1 or 6.2 hereof without being required to provide
security or post any bond and, in addition, each of Buyer and Battery Network
shall be entitled to pursue any other available remedies at law or equity,
including the recovery of money damages, in respect of the actual or
threatened breach of the provisions of said Section.
ARTICLE VII
REMEDIES
7.1. Survival of Representations and Warranties. The right
of a party to maintain any proceeding or action against another party hereto
based on a breach of a representation and warranty or default of a covenant in
this Agreement or pursuant hereto made by any party shall survive the Closing
for a period of two years except with respect to this (i) representations and
warranties with respect to Taxes or the representations and warranties
contained in Section 3.17(b) which shall survive for the applicable statute of
limitations period and (ii) such right shall survive any investigation made at
any time by or on behalf of any other party.
33
<PAGE>
7.2. Indemnification by the Stockholders. Subject to
Section 7.6, the Stockholders jointly and severally agree to indemnify, defend
and hold harmless Buyer and its controlling persons and controlled persons,
successors and assigns (hereinafter in this Article VII collectively referred
to as Buyer unless the context otherwise indicates) from and against any and
all claims, demands, losses, costs, obligations, liabilities, interest
thereon, penalties and expenses, including reasonable attorneys' fees and
expenses (all the foregoing being hereinafter sometimes collectively referred
to as "Article VII Damages") occasioned by, arising out of or resulting from
any breach or default of any of the representations and warranties of Battery
Network or the Stockholders or of the covenants of Battery Network or the
Stockholders in this Agreement, the Related Instruments or in any Exhibit or
Schedule to, or any certificate, agreement or other instrument furnished
pursuant to, this Agreement or the Related Instruments or any facts or
circumstances constituting such a breach or default.
7.3. Indemnification by Buyer. Subject to Section 7.6,
Buyer agrees to indemnify, defend and hold harmless the Stockholders and their
respective successors and assigns from and against any and all Article VII
Damages occasioned by, arising out of or resulting from any breach or default
of any of the representations, warranties or covenants of Buyer contained in
this Agreement or a Related Instrument or in any Exhibit or Schedule to, or
any certificate, agreement or other instrument furnished pursuant to, this
Agreement or a Related Instrument or any facts or circumstances constituting
such breach or default.
7.4. Claims for Indemnification. A party seeking
indemnification for Article VII Damages (the "Indemnified Party"), as a
condition of asserting claims for indemnification, shall notify the other
party (the "Indemnifying Party") in writing of any event, or of any facts,
which, in its opinion, entitle or may entitle the Indemnified Party to
indemnification under this Article VII. The notice from the Indemnified Party
shall specify all facts then known to it relating to its claim for
indemnification and the amount or estimated amount of the liability arising
therefrom. The right of the Indemnified Party
34
<PAGE>
to indemnification and the amount or the estimated amount thereof, as set
forth in the notice, shall be deemed agreed to by the Indemnifying Party
unless, within 30 days after the mailing of such notice, the Indemnifying
Party notifies the Indemnified Party in writing that it disputes the right of
the Indemnified Party to indemnification as set forth or estimated in the
notice or that the Indemnifying Party elects to defend, in the manner provided
in Section 7.5 hereof, the claim giving rise to such indemnification right. If
the Indemnified Party shall be duly notified that the Indemnifying Party
disputes such claim as aforesaid, the parties shall endeavor to settle and
compromise such dispute but no such settlement or compromise shall be effected
without the consent of both. If unable to do any of the foregoing, such
dispute as to indemnification shall be determined by appropriate litigation
(which shall mean when the claim has been finally determined by a court or
tribunal from which determination no appeal is or may be taken or when the
defense thereto has been abandoned); and any right of an Indemnified Party to
indemnification established by reason of such settlement, compromise, or
litigation shall be promptly thereafter paid and satisfied by the Indemnifying
Party.
7.5. Right to Defend. If the facts giving rise to
indemnification shall involve any actual or threatened claim or demand by any
other third party against an Indemnified Party, the Indemnified Party may upon
written request require the Indemnifying Party, at the expense of the
Indemnifying Party through counsel of its own choosing, to defend or prosecute
such claim or demand in the name of the Indemnified Party, as the case may be
(without prejudice to the right of the Indemnified Party to participate
through counsel of its own choosing at its own expense). The Indemnified Party
shall cooperate in the defense or prosecution of said claim or demand,
including providing the Indemnifying Party with access to such books and
records of the Indemnified Party in the possession of the Indemnified Party,
which shall be reasonably deemed by the Indemnifying Party to relate to said
claim or demand, and shall be entitled to be reimbursed, as provided in
Sections 7.2, 7.3 or 7.7, for all costs and expenses incurred by it in
connection therewith. No settlement shall be effected
35
<PAGE>
by an Indemnified Party to which it may claim indemnification from an
Indemnifying Party without the consent of the Indemnifying Party but such
consent shall not be unreasonably withheld.
7.6. Limitations. Other than Article VII Damages arising
with respect to the representations and warranties of the Stockholders in
Section 3.17(b) and the covenant of the Stockholders in Section 5.6 (hereafter
referred to as the "Unlimited Damages"), neither the Stockholders nor the
Buyer, as the case may be, will be obligated to indemnify, defend or hold the
other party harmless with respect to any Article VII Damages asserted by it
until such damages exceed the sum of $50,000 in the aggregate (the
"Threshold"), and then indemnification shall be to the extent of all Article
VII Damages above the Threshold amount. In determining the Threshold, there
should be included, with respect to the Stockholders' obligations hereunder,
all damages under Article VI of the WSB Stock Agreement (other than Unlimited
Damages as defined therein) and all damages under Article VII of the
Enterprises Asset Agreement (other than Unlimited Damages as defined therein)
suffered by the Buyer (collectively, along with the Article VII damages
hereunder, other than Unlimited Damages, hereinafter referred to as the
"Buyer's Aggregate Damages"). In no event shall the Buyer's Aggregate Damages
exclusive of the Unlimited Damages under this Article, Article VI of the WSB
Stock Agreement and Article VII of the Enterprises Asset Agreement for
purposes of indemnification of the Buyer exceed a limit (the "Damages Limit")
of $3,000,000 (the "Cash Portion") plus the shares of Common Stock of the
Buyer and options to purchase shares of Common Stock of the Buyer issued to
the Stockholders (such shares and options collectively referred to as the
"Equity Portion of the Damages Limit"). Buyer and the Stockholders agree that
(i) all Unlimited Damages shall be paid in cash; (ii) payment of the Buyer's
Aggregate Damages shall be first made in cash up to the Cash Portion and then
in Equity and (iii) payment of the Buyer's Aggregate Damages shall be sought
first from the Stockholders and then Enterprises and the stockholders parties
to the Enterprises Asset Agreement before Buyer requires payment from the
stockholder of WSB of Buyer's Aggregate Damages with the cash payments of
36
<PAGE>
Buyer's Aggregate Damages pursuant to this Agreement and the Enterprises Asset
Agreement to be credited to the Buyer's Aggregate Damages. In no event shall
Buyer require payment of the Equity Portion of the Damages Limit from the ESOP
Plan and Trust, WS Senior or Dolores Sapp.
For the purposes of this Section 7.6, shares of Common Stock of the
Buyer shall be valued at the average of the closing sales price of a share of
Common Stock for the sixty day period immediately preceding the date the
amount of indemnification is conclusively determined hereunder on the National
Market System of the National Association of Securities Dealers Automated
Quotation Systems ("NASDAQ") or if the Common Stock is then listed on one or
more national stock exchanges, the closing sales price for such sixty day
period on the exchange with largest number of issuers whose shares are listed
thereon. If the shares are not then listed on NASDAQ or an exchange, the value
shall be the average of the high bid and low asked price for such sixty day
period for the shares on the over-the-counter Bulletin Board maintained by the
NASD.
The value of the Options or Additional Options as of the date of the
conclusive determination of the amount to be indemnified shall be determined
by an investment banker with experience in valuing options mutually designated
by the Indemnified Party or Parties and the Indemnifying Party or Parties.
7.7. Litigation; Remedies Cumulative. In the event of
litigation to enforce this Agreement or any provision thereof, the prevailing
party, in addition to any other relief such party may be awarded, shall be
entitled to recover its reasonable attorneys' fees, including those incurred
with respect to any appellate proceeding. Except as herein expressly provided,
all remedies provided in this Agreement, including, but not limited to, those
pursuant to Section 6.2 and Articles VII and VIII shall be cumulative and
shall not preclude assertion by any party hereto of any other rights or the
seeking of any other remedies against any other party hereto.
37
<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1. Expenses. Each party hereto shall pay its own expenses
incidental to the negotiation, preparation and consummation of this
Agreement, the Related Instruments and Closing Documents and all other
agreements executed and delivered by it hereunder or in connection herewith
and the transactions provided for herein and therein, including all fees and
expenses of its or their respective counsel and accountants, except that the
fees and expenses of Deloitte & Touche LLP for its services in auditing and
reviewing the Audited Financial Statements of Battery Network provided
pursuant to this Agreement shall be borne by Buyer.
8.2. Further Actions. At any time and from time to time
after the Closing, each party hereto agrees, at its own expense (except as
otherwise provided herein), to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of
this Agreement.
8.3. Commissions and Finders' Fees. Except for the fees of
Founders Management Services, Inc. ("Founders"), the fees of which shall be
the sole responsibility of Buyer, each of the parties represents that it has
not incurred any liability to any broker, finder or agent for any brokerage
fees, finder's fees or commissions with respect to the transactions
contemplated by this Agreement, which may be directly or indirectly asserted
against the other parties. Buyer agrees to be fully responsible to pay all
fees due to or claims of Founders and to indemnify and hold Battery Network
and the Stockholders harmless from and against all liability, loss, cost,
charge or expense, including reasonable counsel fees, arising from claims of
Founders for any fee or commission with respect to the transactions
contemplated by this Agreement or pursuant to all outstanding agreements
between Founders and Buyer.
8.4. Injunctive Relief. The Buyer and the Stockholders
acknowledge and agree that in view of the uniqueness of the Shares and the
Battery Network Business, damages at law would be
38
<PAGE>
insufficient for breach of any of their respective covenants in this
Agreement. Accordingly, the parties hereto agree that in the event of a breach
or threatened breach of any provisions of this Agreement, the Buyer or the
Stockholders, as appropriate, shall be entitled to equitable relief in the
form of an injunction to prevent irreparable injury without being required to
provide any security or post any bond. Nothing herein shall be construed as
prohibiting any party hereto from pursuing any remedies, including damages,
for breach or threatened breach of this Agreement.
8.5. Knowledge of Battery Network. For purposes of this
Agreement "knowledge of Battery Network" shall mean the knowledge of any of
its officers or directors and other persons with managerial responsibilities
employed by Battery Network.
8.6. Further Assurances. Each party hereto shall, from time
to time after the Closing, at the request of any other party hereto and
without further consideration, execute and deliver such other instruments of
conveyance, assignments, transfer and assumption, and take such other actions
as such other party may reasonably request to more effectively consummate the
transactions contemplated by this Agreement.
8.7. Reformation and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof:
(a) in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable; and
(b) the legality, validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby.
8.8. Entire Agreement; Modification. This Agreement, the
Related Instruments and the Exhibits hereto set forth the entire understanding
of the parties with respect to the subject matter hereof, supersede all
existing agreements and understandings between them (and all prior
representations
39
<PAGE>
and warranties) concerning such subject matter and may be modified only by a
written instrument duly executed by each party hereto.
8.9. Notices. Any notice given pursuant to this Agreement
to any party hereto shall be deemed to have been duly given (i) when mailed by
registered or certified mail, return receipt requested, (ii) when telecopied,
provided a copy of the notice is mailed by registered or certified mail,
return receipt requested, within one business day following the date of the
telecopied transmission, or (iii) when hand delivered to the party to whom it
is to be given at the address of such party set forth below, as follows:
If to the Stockholders at his address set forth in the first
paragraph of this Agreement:
with a copy to:
Berger, Newmark & Fenchel, P.C.
222 North LaSalle Street
Suite 1900
Chicago, Illinois 60601-1199
Attention: Michael R. Wolfe, Esq.
Fax (312) 782-6491
If to Buyer:
Batteries Batteries, Inc.
c/o Founders Equity, Inc.
200 Madison Avenue
New York, New York 10016
Attention: Mr. Warren H. Haber
Chairman of the Board
FAX: (212) 953-0626
with a copy to:
Leo Silverstein, Esq.
Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC
Citicorp Center, 56th Floor
153 East 53rd Street
New York, New York 10022
FAX: (212) 371-5500
If to Battery Network, c/o Buyer, with a copy to Leo Silverstein, Esq.
40
<PAGE>
or at such other address as a party shall from time to time designate by
written notice, in the manner provided herein, to the other parties hereto.
8.10. Waiver. Any waiver must be in writing, and any waiver
by any party of a breach of any provision of this Agreement shall not operate
as or be construed to be a waiver of any other breach of that provision or of
any breach of any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one or more
occasions will not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
8.11. Binding Effect; Assignment. The provisions of this
Agreement shall be binding upon and inure to the benefit of Battery Network,
the Stockholders and the Buyer and their respective heirs, representatives,
successors and permitted assigns. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties, and any
purported assignment without such consent shall be void, except that (A) Buyer
may collaterally assign its rights under this Agreement to IBJ Schroder Bank
&Trust Company ("IBJ"), as Agent and Lender under the Revolving Credit, Term
Loan and Security Agreement among the Buyer, its subsidiaries, Battery
Network, WSB and IBJ, as Agent and Lender; and (B) the Buyer may assign this
Agreement to any corporation in which it owns 100% of the outstanding shares
of voting stock and which assignee agrees to be bound by the provisions of the
Agreement, provided that (i) the effect of such assignment will not result in
the reduction of the percentage of outstanding shares of the Buyer at the
Closing represented by the shares constituting the Stock Consideration and
Additional Stock Consideration, and (ii) Buyer guaranties the obligation of
the assignee.
8.12. No Third-Party Beneficiaries. Except for rights of
Indemnified Parties under Article VII hereof or the rights of the parties
under the Related Instruments or a permitted assignee under
41
<PAGE>
Section 8.11, this Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement.
8.13. Headings. The headings in this Agreement are solely
for convenience of reference and shall be given no effect in the construction
or interpretation of this Agreement.
8.14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.15. Governing Law. This Agreement and all amendments
thereof shall be governed by, and construed in accordance with, the internal
laws of the State of Delaware applicable to contracts made and to be performed
entirely within the state, without giving effect to the principles of conflict
of laws which may be applied thereby. Service of process on Buyer, Battery
Network and Stockholders, as the case may be, in any action arising out of or
relating to this Agreement shall be effective upon Buyer, Battery Network or
the Stockholders, as the case may be, if mailed to the address listed in
Section 8.8 hereof.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
BATTERIES BATTERIES, INC.
By: /s/ John Teeger
-----------------------------------
BATTERY NETWORK, INC.
By: /s/ William S. Sapp
-----------------------------------
William S. Sapp, Vice President
STOCKHOLDERS:
/s/ Susan Grandt
-------------------------------------
Susan Grandt
Attorney & Agent
/s/ William Steven Sapp
--------------------------------------
William Steven Sapp
Attorney & Agent
/s/ James Sapp
--------------------------------------
James Sapp
43
<PAGE>
EXHIBITS
A. Form of Option Agreement
B. Form Additional Options Agreement
C. Form of Employment Agreements with William Sapp and JS
C-1. Form of Employment Agreement with SG
D . Opinion of Counsel to Battery Network and Stockholders
D-1. Opinion of Buyer's Counsel
E & F. Affiliated Leases
SCHEDULES
Sections
3.6 Tangible Assets
3.7 Intangible Assets
3.10 Contracts and Commitments
3.11 Leases
3.12 Liabilities
3.13 Litigation
3.14 Permits, Licenses, Etc.
3.17 Employee Benefit Plans, ERISA
3.18 Insurance
3.19 Compliance with Applicable Law
44
<PAGE>
STOCK PURCHASE AGREEMENT AMONG
BATTERIES BATTERIES, INC., BATTERY NETWORK, INC.
AND THE BATTERY NETWORK STOCKHOLDERS
<PAGE>
SCHEDULE 3.6
Tangible Assets: None
<PAGE>
SCHEDULES 3.7
Intangible Assets:
Pending trademark "Absolute"
Registered trademark - "Battery Network"
<PAGE>
SCHEDULE 3.10
Contracts and Commitments
A. Manufacturer/Representative Agreements between Absolute Battery and:
Berry Marketing, Inc. for Alaska, Washington, Western Oregon, Western
Mountana and Western Idaho, commencement 7/12/95
Marketing Services of Kansas for Iowa, Nebraska Missouri and Kansas,
except Intelligent Electronics and Inacom, commencement 9/1/95
New Horizons for Illinois and Wisconsin, commencement 2/23/1995
New Era Sales for Northern NJ and New York, commencement 5/17/95
Silverman Sayer Services for Florida except Tech Data, commencement
2/7/95
TCG, The Connection Group Inc. for Texas, Oklahoma, Louisiana, Arkansas
except Daisytek and CompuCom, commencement 9/1/95
Pioneer Marketing for New England, upstate New York, southern Connecticut
state line to northern Maine west to New York except MacWarehouse,
commencement 2/1/96
Roy Brake & Associates for Colorado, Utah, Idaho, Wyoming and Montana,
commencement 12/7/95 - Note says there is an Addendum adding Arizona,
New Mexico and Southern Nevada.
Incremental Sales for Northern California, except Van Star, Momentum and
MicorSystems, and Northern Nevada
B. Agreement Between Burlington Northern Railroad Company, the Atchison,
Topeka and Santa Fe Railway and Battery Network made on September 1, 1996
through November
C. Distributor Agreements Between Battery Network, Inc., Absolute Battery Co.
and the following distributors:
Absolute Battery Canada, Inc./Battery Network Canada/Philipe Simard Ind.
for the territory of Canada and Cuba
Absolute Battery UK LTD/Battery Network Europe LTD./Martin Agar Ind.
for the United Kingdom and the European Economic Community ("EEC")
<PAGE>
SCHEDULE 3.10 CONTINUED
D. Summaries of McHenry Agreements with:
Jim Lewis
George Johnson
Don Smith
John Miller
Bill Faris
E. Summaries of New Jersey Agreements with:
Tom Mazzante
Sandro Lanni
Ken Wilson
Karen Wilson
Pamco
Mike Langella
Greenshed Sales/Cary Martin
Bryan Whitney
Armondro Toral, Jr.
Canada: Contract
U.K.: Contract
Marvin Mocskowicz
F. Summaries of San Diego Verbal Sales Agreements with:
Tim Jacubowski
Dave Zeman
PJH Sales and Marketing Inc. (Pat Huberty)
Dennis Woods
Don Ritchie
<PAGE>
SCHEDULE 3.11
Lease Equipment:
Telephone system in North Branch, New Jersey
Commencement 6/6/94; term 60 months; monthly rental payment $1,022.30
Additional payment of $61.09 per month for 800 GS/LS Module
One Yale Sit Down Electric Forklift
<PAGE>
SCHEDULE 3.12
Liabilities - None
<PAGE>
SCHEDULE 3.13
Litigation:
Blenheim Group USA, Inc. vs. Battery Network
<PAGE>
SCHEDULE 3.14
Permits - Licenses
California - Sellers Permit, California City of Escondido
New Jersey - Sales and Use Tax Recycling Permit
Illinois - Illinois Department of Revenue
Washington - Certificate of Coverage - Master License
License Agreement - De Pew Engineering Inc.
<PAGE>
SCHEDULE 3.17
Employee Benefit Plan:
Alexander Battery Co. East, Inc. Specimen Profit Sharing Plan Adoption
Agreement and
Alexander Battery Co. East, Inc. Specimen Profit Sharing Plan & Trust
Alexander Battery Co. West, Inc. Specimen Profit Sharing Plan & Trust
Alexander Battery Co. South, Inc. Specimen Profit Sharing Plan Adoption
Agreement and
Alexander Battery Co. South, Inc. Specimen Profit Sharing Plan & Trust
W.S. Battery & Sales Co., Inc. Employee Stock Ownership Plan and Trust
and
W.S. Battery & Sales Co., Inc. Specimen Money Purchase Pension
Plan & Trust
Battery Network, Inc. Specimen Profit Sharing Plan Adoption Agreement
and
Battery Network, Inc. Specimen Profit Sharing Plan & Trust
<PAGE>
SCHEDULE 3.18
Insurance:
<TABLE>
<CAPTION>
Insurance Company Policy No. State Type of Insurance
- ----------------- ---------- ----- -----------------
<S> <C> <C> <C>
State Farm 93-95-5868-5 Illinois Business & Liability
State Farm 98-07-3606-4 Washington Business & Liability
State Farm 93-Mo-1343-1 IL, WA, NJ Workers Comp. & Employers
Liability
Met Life 176866 EBPG IL Health/Life
Robt. Drier Co. WN96-538430-05 CA Workers Com. & Employers
Liability
Bankers Std. Co. D2 61 19 479 CA Commercial Property & General
Liability
Blue Shield CA H82188 CA HMO Health Plan
Private MedCare 8634 CA Group Dental Services
Sentry Ins. 44-66422-02-00-961 Commercial Property Liability and
44-66422-01 NJ Umbrella Coverage
Met Life k76892 NJ Health/Life
</TABLE>
<PAGE>
SCHEDULE 3.19
Compliance with Applicable Law: None
<PAGE>
STOCK PURCHASE AGREEMENT
among
BATTERIES BATTERIES, INC.
("Buyer")
W.S. BATTERY & SALES COMPANY, INC.
("WSB")
and
THE STOCKHOLDER
OF WSB
("Stockholder")
Dated January 3, 1997 as of December 31, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I-SALE AND PURCHASE OF STOCK ................................. 2
1.1. Sale and Purchase of Stock......................... 2
ARTICLE II-PRICE AND TERMS............................................ 2
2.1. Consideration...................................... 2
2.2. Possible Repayment; Determination of the
Closing Combined Net Worth....................... 3
2.3. Closing............................................ 3
ARTICLE III-REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER......... 4
3.1. Organization and Qualification of WSB.............. 4
3.2. Capitalization..................................... 5
3.3. Transfer and Title to the Shares................... 5
3.4. Authorization of Agreements; No Violations......... 5
3.5. Financial Statements............................... 7
3.6. Tangible Assets.................................... 7
3.7. Intangible Assets.................................. 7
3.8. Books and Records.................................. 8
3.9. Accounts Receivable................................ 8
3.10. Contracts and Commitments.......................... 12
3.11. Liabilities........................................ 13
3.12. Litigation......................................... 13
3.13. Permits, Licenses, Etc............................. 13
3.14. Taxes.............................................. 14
3.15. Absence of Certain Changes or Events............... 14
<PAGE>
3.16. Employee Benefit Plans; ERISA...................... 16
3.17. Insurance.......................................... 18
3.18. Compliance with Applicable Law..................... 18
3.19. No Consents........................................ 19
3.20. Full Disclosure.................................... 19
ARTICLE IV-REPRESENTATIONS AND WARRANTIES OF BUYER.................... 20
4.1. Organization and Qualification..................... 20
4.2. Authorization of Agreements........................ 20
4.3. Authority to Buy................................... 20
4.4. No Consents........................................ 20
4.5. No Violation....................................... 21
4.6. Litigation......................................... 21
4.7. Securities Law Disclosures......................... 21
4.8. Full Disclosure.................................... 22
ARTICLE V-CERTAIN ADDITIONAL AGREEMENTS............................... 22
5.1. Retention of Trustee; Liquidation of Stockholder... 22
5.2. Transfer Taxes..................................... 22
5.3. Resignations....................................... 23
ARTICLE VI-REMEDIES................................................... 23
6.1. Survival of Representations and Warranties......... 23
6.2. Indemnification by the Stockholder................. 23
6.3. Indemnification by Buyer........................... 23
6.4. Claims for Indemnification......................... 24
6.5. Right to Defend.................................... 25
-ii-
<PAGE>
6.6. Limitations........................................ 25
6.7. Litigation; Remedies Cumulative.................... 26
ARTICLE VII-MISCELLANEOUS............................................. 26
7.1. Expenses........................................... 26
7.2. Further Actions.................................... 27
7.3. Commissions and Finders' Fees...................... 27
7.4. Knowledge of WSB................................... 27
7.5. Injunctive Relief.................................. 27
7.6. Further Assurances................................. 28
7.7. Reformation and Severability....................... 28
7.8. Entire Agreement; Modification..................... 28
7.9. Notices............................................ 28
7.10. Waiver............................................. 29
7.11. Binding Effect; Assignment......................... 30
7.12. No Third-Party Beneficiaries....................... 30
7.13. Headings........................................... 30
7.14. Counterparts....................................... 30
7.15. Governing Law...................................... 30
-iii-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated January 3, 1997 as of December 31,
1996, by and among BATTERIES BATTERIES, INC., a Delaware corporation, c/o
Founders Management Services, Inc., 200 Madison Avenue, New York, New York
10016 (the "Buyer"), W.S. BATTERY& SALES COMPANY , INC., an Illinois
corporation with offices at 4071 Albany, McHenry, Illinois 60050 ("WSB") and
WILLIAM S. SAPP AND DOLORES SAPP AS TRUSTEES OF W.S. BATTERY & SALES CO. INC.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST at the foregoing address in McHenry,
Illinois, an Employee Stock Ownership Plan ("ESOP"), within the meaning of
section 4975(e)(7) of the Internal Revenue Code, as amended, (hereinafter
referred to as the "Stockholder").
WHEREAS, the Stockholder is the record and beneficial owner
of all of the issued and outstanding shares of the capital stock of WSB;
WHEREAS, WSB is engaged in the business of the assembly,
packaging and wholesale and retail distribution of batteries (collectively,
the "WSB Business"); and
WHEREAS, the Buyer desires to acquire the assets of WSB and
the WSB Business through the acquisition of the outstanding shares of the
capital stock of WSB and the Stockholder desires to effect the sale of the
outstanding capital stock of the WSB to the Buyer.
WHEREAS, simultaneously with the execution and Closing
hereof, the Buyer will be acquiring pursuant to a Stock Purchase Agreement
(the "BN Stock Agreement") among Buyer, Battery Network, Inc. ("Battery
Network") and Messrs. William Steven Sapp and James Sapp and Ms. Susan Grandt
(collectively the "BN Stockholders"), all of the outstanding capital stock of
Battery Network, Inc. ("Battery Network") into which Alexander Battery Co.
East, Inc., Alexander Battery Co. South, Inc. and Alexander Battery Co. West,
Inc. (collectively the "Merged Companies") were merged effective December 12,
1996 pursuant to an Agreement and Plan of Merger dated December 1, 1996, and
Battery
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Acquisition Corp. ("BAC"), a subsidiary of the Buyer will be acquiring
substantially all of the assets of WSJ Enterprises Inc. ("Enterprises")
pursuant to an Asset Purchase Agreement among Buyer, BAC, Enterprises, the BN
Stockholders, William S. Sapp ("WS Senior") and Dolores Sapp (the "Enterprises
Asset Agreement" and the foregoing named individuals along with the BN
Stockholders are collectively hereafter referred to as the "Enterprises
Stockholders").
NOW, THEREFORE, in consideration of the premises and the
mutual agreements, covenants, representations and warranties hereinafter set
forth, the parties agree as follows:
ARTICLE I
SALE AND PURCHASE OF STOCK
1.1. Sale and Purchase of Stock. Subject to all of the
terms and conditions set forth in this Agreement the Stockholder is hereby
selling and transferring and delivering to Buyer, at the Closing (as defined
herein), and Buyer is hereby acquiring from the Stockholder, 500 shares of
Common Stock constituting all and not less than all the outstanding shares of
the Common Stock of WSB, no par value of WSB (the "Shares").
ARTICLE II
PRICE AND TERMS
2.1. Consideration. Subject to the terms and conditions of
this Agreement, in reliance on the representations, warranties and agreements
of WSB and the Stockholder contained herein, and in consideration of the sale,
conveyance, assignment, transfer and delivery of the Shares, Buyer shall
deliver or cause to be delivered to the Stockholder in full payment to the
Stockholder for the sale, conveyance, assignment, transfer and delivery of the
Shares at the Closing $2,000,000 in the form of a wire transfer of federal
funds to a bank account designated by the Stockholder at McHenry State Bank,
McHenry, Illinois in the amount of $2,000,000; such payment to be subject to
adjustment as provided in Section 2.2.
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2.2. Possible Repayment. In the event the amount by which
the Closing Combined Net Worth as determined pursuant to Section 2.2 of the BN
Stock Agreement (the "Closing Combined Net Worth") is less than $8,000,000
(the "Deficiency") and such Deficiency exceeds the required payment , if any,
under Section 2.2(b) of the BN Stock Agreement by the BN Stockholders and
Section 2.1(b) of the Enterprises Asset Agreement, the Stockholder shall
promptly repay to the Buyer the amount of such excess in the form of a
certified check in the amount of difference to the order of the Buyer.
2.3. Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the time
and at the offices of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC,
One Citicorp Center, 153 East 53rd Street, New York, New York at 10:00 a.m. on
January 3, 1997 (the "Closing Date")."
(a) Deliveries by the Stockholder. At the Closing, the
Stockholder shall deliver and shall cause to be delivered to Buyer (unless
delivered previously) the following:
(1) the stock certificate evidencing the Shares,
duly endorsed or accompanied by a duly executed stock power
or powers transferring the ownership to the Buyer;
(2) the written consents of third persons required
pursuant to Sections 3.10 and 3.11 other than leases of
certain equipment specified on Schedule 3.11;
(3) the opinion of counsel in the form of Exhibit A
hereto;
(4) the resignations of the Directors provided in
Section 5.3; and
(5) all other previously undelivered documents,
instruments and writings required to be delivered by the
WSB or the Stockholder to Buyer at or prior to the Closing
pursuant to this Agreement or otherwise required in
connection herewith.
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(b) Deliveries by Buyer. At the Closing, Buyer shall deliver
to or on behalf of the Stockholder (unless delivered previously) the
following:
(1) the wire transfer of funds referred to in
Section 2.1(a) hereof;
(2) the opinion of counsel in the form of Exhibit
A-1 hereto; and
(3) all other previously undelivered documents,
instruments and writings required to be delivered by Buyer
to the Seller or the Stockholder at or prior to the Closing
pursuant to this Agreement or otherwise required in
connection herewith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
To induce Buyer to enter into this Agreement and consummate
the transactions contemplated hereby, the Stockholder and WSB jointly and
severally represent and warrant to Buyer as follows:
3.1. Organization and Qualification of WSB. WSB is a
corporation duly organized and validly existing under the laws of Illinois,
the only jurisdiction where it owns property or conducts business except for
jurisdictions in which the failure to do so would not in the aggregate
adversely affect the combined financial condition (the "Combined Financial
Condition") or combined results of operations (the "Combined Results of
Operations") of Battery Network, WSB and Enterprises. WSB has the corporate
power to own its assets and to conduct its business as it is presently being
conducted. Copies of the Certificate of Incorporation and the By-Laws, each as
amended to date, of WSB have been previously delivered to Buyer and are
correct and complete. WSB does not own any equity interest in any other
corporation.
3.2. Capitalization. The authorized capital stock of WSB
consists of 500 shares of common stock, no par value, all of which are issued
and outstanding; and there are no shares of the
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capital stock of WSB held in its treasury. The Shares are validly issued,
fully paid and nonassessable and owned of record and beneficially by the
Stockholder. Neither WSB nor the Stockholder has executed or granted any, and
there is, no outstanding, option, warrant or other right or any agreement
(other than this Agreement) of any kind providing for the purchase, or the
right to purchase, issuance, sale or other disposition of any shares of
capital stock or security convertible into or exchangeable for such shares of
capital stock of WSB.
3.3. Transfer and Title to the Shares. The Shares are being
sold to the Buyer free and clear of any outstanding liens or encumbrances.
Upon delivery of the Shares to Buyer at the Closing, the Buyer will receive
good and marketable title to the Shares, free and clear of any lien, pledge,
option, contractual right, equitable right, charge or other encumbrances of
any kind whatsoever.
3.4. Authorization of Agreements; No Violations.
(a) This Agreement has been, and the instruments and
agreements contemplated herein, (collectively, the "Related Instruments") and
other agreements and documents to be executed in connection with the closing
of the transaction contemplated hereby (the "Closing Documents") will have
been, at the Closing, duly executed and delivered by WSB and the Stockholder
and constitute the valid and binding obligations of WSB and the Stockholder;
and the Agreement, and each of the other Related Instruments and Closing
Documents at the Closing will be, enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and except to the extent that
the remedy of specific enforcement or injunctive relief is subject to the
discretion of the court before which any proceedings therefor may be brought.
(b) The execution and delivery and the performance of this
Agreement, the Related Instruments and the Closing Documents do not, and will
not, with or without the giving of notice and/or the passage of time:
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(i) violate in any material respect any provision
of law applicable to WSB and the Stockholder or the
corporate charter or By-Laws of WSB;
(ii) violate, conflict with, result in the breach
or termination of, any provision of, constitute a default
under any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which WSB or the
Stockholder is a party or by which WSB or a Stockholder or
any material asset or property of WSB is or may be bound
(the "Binding Agreements") or give any party other than the
Stockholder or WSB the right to accelerate any material
obligation thereunder, except where such violation,
conflict, breach, default or termination would not have a
materially adverse effect upon the WSB Business or the
Combined Financial Condition or Combined Results of
Operations the transferability or value of the Shares; or
(iii) result in the creation of any lien, charge or
encumbrance upon the Shares, or upon any of the properties
or assets of WSB pursuant to any of the Binding Agreements.
Neither such execution, delivery and performance nor
compliance by WSB or the Stockholder with the terms and
provisions hereof will violate any law or, with or without
the giving of notice and/or the passage of time, conflict
with or result in a breach of any judgment, order,
injunction, decree, regulation or ruling of any court or
other governmental authority to which WSB or the
Stockholder is subject or by which any of the assets of WSB
or the Shares may be bound.
3.5. Financial Statements. The Stockholder, along with the
BN Stockholders, has caused to be delivered to Buyer: (i) the Combined Balance
Sheet of Battery Network, and WSB and Enterprises as of September 30, 1996,
December 31, 1995 and December 31, 1994 and their combined statements of
income, cash flows and Stockholder's equity for the nine months ended
September 30, 1996 and for each of the years ended December 31, 1995, and
December 31, 1994 accompanied by the
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unqualified report of Deloitte & Touche, independent public accountants
(collectively the "Audited Financial Statements"). The foregoing financial
statements fairly present the Combined Financial Position of Battery Network,
WSB and Enterprises as of September 30, 1996, December 31, 1995 and December
31, 1994 and the Combined Results of Operations of Battery Network, WSB and
Enterprises for the nine months ended September 30, 1996 and the years ended
December 31, 1995 and December 31, 1994. The Audited Financial Statements have
been prepaid in conformity with GAAP, consistently applied. The Closing
Combined Net Worth is at least $8,000,000.
3.6. Tangible Assets. WSB does not own any real property.
Schedule 3.6 hereto is a complete and correct list of each material item (a
book value of at least $25,000) of tangible personal property (other than
inventory) and fixtures of WSB, all of which were included on the September
30, 1996 Combined Balance Sheet, and all of which are currently used or
useable in the conduct of the WSB Business and are in the aggregate in good
condition and repair, reasonable wear and tear excepted.
3.7. Intangible Assets.
(a) Schedule 3.7 identifies all patents, trademarks, trade
names, service marks, copyrights, registrations or applications with respect
to any of the foregoing, renewals or assignments, and all rights in, to, or
respecting such renewals and licenses or rights under the same presently
owned, being used, or presently intended to be acquired (identified as such)
by WSB (collectively referred to herein as the "Business Rights"). To the
extent indicated in Schedule 3.7, the same have been duly registered in the
offices indicated therein. There are no claims or demands of any other person,
firm, corporation or entity of which WSB and the Stockholder is aware
pertaining to any of such rights; and no proceedings have been instituted, are
pending, or, to the knowledge of WSB and the Stockholder, are threatened,
which challenge, oppose or threaten interference, cancellation, nullification
or concurrent use with any of the Business Rights. To the knowledge of WSB and
the Stockholder, none of the Business Rights infringed on or otherwise violate
the rights of others or are being infringed on by others; and none
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are subject to any outstanding order, decree, judgment or stipulation. No
licenses, sublicenses or agreements pertaining to any of the Business Rights
are in effect, other than as set forth in Schedule 3.7. Neither WSB nor the
Stockholder has been formally charged with infringement of any adversely-held
Business Right with respect to WSB or any Business Right used in connection
with the WSB Business.
(b) WSB owns and possesses all Business Rights which, to
the knowledge of WSB and the Stockholder, are necessary for, and being used in
the conduct of, or in connection with, the WSB Business as was conducted on
September 30, 1996 and as is currently being conducted; all are in full force
and effect and have not been amended or modified. Except as set forth in
Schedule 3.7, WSB has not sold, assigned, transferred, licensed, sublicensed
or conveyed all or any interest in any of the Business Rights to any person,
and has the right, title and interest (free and clear of all security
interests, liens and encumbrances of every nature) in and to the Business
Rights set forth on the Schedule.
3.8. Books and Records. The books and records of WSB have
been maintained on a basis consistent with prior years and accurately reflect
the basis for amounts set forth on the financial statements delivered pursuant
to Section 3.5 and to be delivered pursuant to Section 2.2.
3.9. Inventory. All of the inventory of WSB included on the
September 30, 1996 Combined Balance Sheet and the Closing Combined Balance
Sheet is of a quality and quantity currently usable in the ordinary course of
WSB Business. The present quality of all current and usable inventory of WSB,
after giving effect to any inventory reserve established in accordance with
GAAP, is at a level consistent with the past practice of WSB.
3.10. Contracts and Commitments.
(a) Except as set forth in Schedule 3.10 or Schedule 3.11,
on the date of this Agreement:
(i) WSB is not a party to or bound by any
distribution agreement, sales representative agreement,
dealer agreement, collective bargaining agreement, loan
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agreement, agreement guaranteeing the obligations of
liabilities of others, construction or building
modification agreement, or any other agreement, contract or
commitment relating to its operation, condition (financial
or otherwise), liabilities, assets, earnings, working
capital or the prospects of the WSB Business and which
provides for future payments or receipts for any
consecutive twelve month period in an amount of at least
$25,000 (or, with respect to purchase orders, $25,000);
(ii) The enforceability of the agreements,
contracts, commitments and licenses referred to in Schedule
3.7 or Schedule 3.10 will not be affected in any manner by
the execution and delivery of this Agreement, the Related
Instruments or the consummation of the transactions
contemplated hereby, except for the need to obtain the
consents and those consents set forth in Schedule 3.11, all
of which consents have been obtained except for those
consents indicated on the Schedule for certain leases of
equipment;
(iii) No outstanding purchase contract or
commitment of WSB relates to any business other than the
WSB Business, is materially in excess of the ordinary and
usual requirements of such business at the time entered
into or, to the knowledge of WSB and the Stockholder, was
entered into at a price or prices materially in excess of
the price paid or payable by WSB during the nine months
ended September 30, 1996 or the year ended December 31,
1995, comparing where applicable prices paid or payable for
similar quantities;
(iv) Neither WSB nor the Stockholder is a party to
or bound by any outstanding agreement, arrangement or
contract relating to the WSB Business or the assets of WSB
with any of the officers, employees, agents, consultants,
advisors or salesmen of WSB or a trustee of the Stockholder
that (A) is not cancelable by it on
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notice of not longer than 30 days and without liability,
penalty or premium, except for those agreements set forth,
along with their expiration dates, on Schedule 3.10, or (B)
provides for the payment of any bonus or commission based
on sales or earnings, other than the "Plans" listed on
Schedule 3.17 and as permitted under Section 3.16;
(v) WSB is not a party to or bound by any
employment agreement, consulting agreement or any other
agreement which contains any severance or termination pay
liabilities;
(vi) To the knowledge of WSB and the Stockholder,
WSB is not in default under or in violation in a material
respect of, nor, is there any basis for any valid claim of
default under or violation of, in a material respect, any
contract, agreement or commitment made or obligation of WSB
or relating to the WSB Business, including, but not limited
to, any material distribution agreement, sales
representative agreement or dealer agreement;
(vii) WSB does not have any (A) indebtedness for
borrowed money or the deferred purchase price for property,
including guarantees of, or agreements to acquire, any such
indebtedness of others, or (B) contracts, commitments or
arrangements for the borrowing of money or for a line of
credit; and
(viii) None of the Stockholder, any "Affiliate" of
the Stockholder (meaning any person controlling or
controlled by Stockholder), WSB and any officer or director
of WSB is a party to or bound by any agreement or
arrangement for the sale of shares of WSB or (other than in
the ordinary course of business and consistent with past
practice) any of the assets or rights of WSB or of the
Stockholder or for the grant of any preferential rights to
purchase any of the assets or rights of WSB or of the
Stockholder.
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(b) With respect to each contract and agreement listed on
Schedule 3.10 attached hereto, except as set forth therein, (A) it is valid,
binding and in full force and effect and is enforceable by WSB in accordance
with its terms, subject to bankruptcy, insolvency, reorganization and other
laws and judicial decisions of general applicability relating to or affecting
creditors' rights and to general principles of equity; (B) to the knowledge of
the Stockholder and WSB, neither WSB nor any other party thereto is in
material breach of any obligation thereunder; and (C) there does not exist any
material default under, or, to the knowledge of the Stockholder and WSB, any
event or condition which, with the giving of notice or passage of time or
both, would become a breach or default in any material respect under the terms
of such contract or agreement on the part of WSB or on the part of any other
party thereto.
(c) Since September 30, 1996, WSB has not written up the
value of any inventory, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-offs and write-ups in
accordance with GAAP consistently applied; waived any rights of substantial
value; or, to the knowledge of WSB and the Stockholder, omitted to do any act,
or permitted any act or omission to act, which will cause a material breach of
any contract, commitment or obligation, or any breach of any representation,
warranty, covenant or agreement made herein.
3.11. Leases. Schedule 3.11 attached hereto contains an
accurate and complete list of all leases (including all amendments thereof and
modifications thereto, the "Leases") pursuant to which WSB leases real
property and leases providing for rentals of at least $10,000 per annum of
personal property. None of the Leases relate to any property or equipment
owned or leased by the Stockholder or an Affiliate. To the knowledge of WSB
and the Stockholder, WSB is not in default in any material respect with
respect to any of the Leases which would permit the lessor thereunder to
terminate such Lease and no event or condition has occurred which (whether
with or without notice, lapse of time or the happening or occurrence of any
other event) would constitute a default in any
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material respect thereunder, which default would permit the lessor thereunder
to terminate such Lease, increase any of the lessee's obligations or reduce
the lessee's rights thereunder. All Leases are valid, binding and enforceable
in accordance with their respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and are in full force and
effect, and, except for the consents of lessors of personal property set forth
in Schedule 3.11 which consents have been obtained (other than from certain
lessors of personal property on the Schedule designated as lessors from whom
no consent has been obtained), the execution and delivery of this Agreement
and consummation of the transactions contemplated hereby, will not require WSB
or Buyer to procure the consent of any lessor in order for WSB to continue as
lessee thereunder without any additional cost to or Buyer or WSB or a
diminution of lessee's rights thereunder.
3.12. Liabilities. To the knowledge of WSB and Stockholder,
WSB is not, except as set forth in Schedule 3.12, subject to any liabilities
other than (i) those included in the September 30, 1996 Combined Balance
Sheet; and (ii) accounts payable and accrued expenses which have arisen in the
ordinary course of the WSB Business subsequent to September 30, 1996.
3.13. Litigation. Except as set forth on Schedule 3.13
attached hereto, there are no claims, actions, proceedings pending and, to the
knowledge of WSB and the Stockholder, threatened, and to the knowledge of WSB
and the Stockholder, there are no investigations or inquiries in progress,
pending, threatened, against the Stockholder or WSB, that could adversely
affect the Shares, WSB or its assets, or the transactions contemplated hereby;
nor, to the knowledge of WSB and the Stockholder, is there any valid basis for
any such claim, action, suit, proceeding, inquiry or investigation. As a
result of either the lack of a valid basis for, or the availability of an
appropriate defense to, any claims, actions, suits, proceedings, inquiries or
investigations set forth in Schedule 3.13, none of such claims, actions,
suits, proceedings, inquiries or investigations will have a material
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adverse effect on the WSB Business or the Combined Financial Condition or
Combined Results of Operations. Neither Stockholder nor WSB is subject to any
judgment, order or decree entered in any lawsuit or proceeding which has had
or reasonably may have a significant adverse effect on the WSB Business or the
Combined Financial Condition or Combined Results of Operations or the ability
of the Stockholder to effect the sale of the Shares hereunder.
3.14. Permits, Licenses, Etc . To the knowledge of WSB and
the Stockholder, WSB does not require any permits, licenses, orders or
approvals of governmental or administrative authorities (collectively the
"Permits") to permit it to carry on the WSB Business as presently conducted
(including, without limitation, those required under federal, state or local
laws or regulations relating to pollution or protection of the environment)
other than the Permits which they currently hold, all of which are described
in Schedule 3.14. The conduct by WSB of the WSB Business through the Closing
has not, and, to the knowledge of WSB and Stockholder, the continuation of
such business by WSB under the control of Buyer after the Closing in the same
manner as currently conducted will not, violate or infringe, and has not
caused and, to the knowledge of WSB and the Stockholder, will not cause, a
default in any material respect under any of the Permits or require WSB or the
Buyer to obtain any additional Permits, and neither the Stockholder nor WSB
has received any written notification of any threatened suspension or
cancellation of any of the Permits which might be reasonably expected to have
a material adverse effect on the WSB Business or the Combined Financial
Condition or Results of Operations.
3.15. Taxes. WSB has: (i) filed all returns required to be
filed with respect to all federal, state, local and foreign income, payroll,
withholding, excise, sales, use, real and personal property, use and
occupancy, business and occupation, mercantile, real estate, capital stock and
franchise or other tax (all the foregoing taxes, including interest and
penalties thereon and including estimated taxes thereof, are hereinafter
collectively referred to as "Taxes"), (ii) paid all Taxes required
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by law to be paid, and (iii) paid all other Taxes for which a notice of
assessment or demand for payment has been received, except, with respect to
all of the foregoing, to the extent that any claimed tax, fee, interest,
assessment or penalty is not due or is being contested in good faith. No
reserve is or will be required of WSB with respect to any Taxes relating to
the income of WSB through the Closing. WSB has not received any notice of an
examination having been made of WSB's federal income tax returns by the
Internal Revenue Service at least since December 31, 1992. WSB has not agreed
to extend the time of assessment or collection of Taxes and is not a party to
any action or proceeding by any governmental authority for the determination,
assessment or collection of any Taxes. There is no examination pending or, to
the knowledge of WSB or the Stockholder, threatened by taxing authorities
relating to the determination, assessment or collection of any Taxes from WSB.
3.16. Absence of Certain Changes or Events.
(a) Since September 30, 1996:
(i) WSB has not sold or suffered any material
adverse change or loss or termination of or breach or
default of any of the Business Rights set forth or referred
to on the Schedules to this Agreement and there has been no
material adverse change, or, to the knowledge of WSB and
the Stockholder, is any material adverse change threatened
or anticipated, in the combined net sales of WSB and
Battery Network and the Combined Financial Condition
Combined Results of Operations from the amounts reflected
on the September 30, 1996 Balance Sheet and the Combined
Statement of Income for the nine months then ended or, to
the knowledge of WSB and the Stockholder, in the prospects
for the WSB Business, and WSB and the Stockholder do not
know of any event which is or might reasonably be expected
to have a material adverse effect on such combined net
sales, Combined Financial Condition or Combined Results of
Operations or prospects;
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(ii) Neither WSB nor the Stockholder has permitted,
allowed or suffered any of its assets (tangible or
intangible) to be subjected to any mortgage, pledge, lien,
encumbrance, restriction or charge of any kind; and WSB has
not canceled any material indebtedness (individually or in
the aggregate) owing to it or waived any claims or rights
of substantial value; or sold, transferred or otherwise
disposed of any of its property or assets (tangible or
intangible) except in the ordinary course of business and
consistent with past practice;
(iii) WSB has not paid, loaned or advanced any
amount to, or sold, transferred or leased any properties or
assets (tangible or intangible) to, or entered into any
agreement or arrangement with, any of its officers,
directors or employees or those of Battery Network or
Enterprises, or increased the compensation to its officers
and employees at rates exceeding the rates of compensation
paid during the nine months ended September 30, 1996;
(iv) WSB has not experienced any material labor
dispute or difficulty;
(v) WSB has not made capital expenditures or
commitments for additions to property, plant, equipment or
for any other purpose which are more than Twenty-five
Thousand Dollars ($25,000) in the aggregate; or suffered
any casualty loss or losses with respect to its assets
(whether or not insured against) which in the aggregate
exceed Twenty-Five Thousand Dollars ($25,000).
3.17. Employee Benefit Plans; ERISA.
(a) Except for the profit-sharing, medical, and health
plans set forth on Schedule 3.17, WSB does not maintain, administer or
otherwise contribute to any Employee Benefit Plan, as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
which is subject to any provision of ERISA and covers any employee, whether
active or
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retired ("Employee Plans"). None of the Employee Plans set forth on Schedule
3.17 is a "multi-employer plan," as defined in Section 3(37) of ERISA, and WSB
has not been obligated to make a contribution to any Employee Plan within the
past five years on behalf of any employee. Except for those which will be
terminated or canceled on or prior to the Closing. Other than the Stockholder
which will be terminated within six months from the Closing, WSB does not
maintain any form of current or deferred compensation (other than base salary
and base wages), bonus, incentive compensation, profit sharing, severance,
stock option, stock appreciation right, separation pay, retirement, pension,
salary continuation, group or individual health, dental, medical, life
insurance, survivor benefit or similar plan, policy or arrangement for the
benefit of any employee, whether active or retired, of any class or classes of
its employees ("Benefit Arrangements"). Stockholder has provided or caused to
be provided to Buyer (i) a copy of each Employee Plan and Benefit Arrangement,
including the Stockholder, and of each of the documents (including trust
agreements and other funding arrangements and summary plan descriptions) under
which each such Employee Plan and Benefit Arrangement is operated; (ii) the
most recent annual report, if any, required to be filed with the government or
any agency thereof; (iii) with respect to any Employee Plans which are
intended to be qualified under Section 401(a) of the Code, a copy of the most
recent determination letter from the Internal Revenue Service on the Plan's
qualified status and a copy of the application for such letter; and (iv) a
schedule showing either the annual cost or the current value of all benefits
of each Employee Plan and Benefit Arrangement. With respect to all Employee
Plans and Benefit Arrangements, WSB is in compliance in all material respects
with the terms of each such plan or arrangement and, to the knowledge of WSB
and the Stockholder, with the requirements prescribed by any and all Laws as
defined in Section 3.19 currently in effect, including but not limited to
ERISA and the Code, applicable to such plans or arrangements. Since December
31, 1995, the Employee Plans and Benefit Arrangements have not been amended
nor, except pursuant to their terms as in effect
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on December 31, 1995, have any payments or contributions been made under such
Plans or Arrangements. Since December 31, 1995, WSB has not failed to make any
contribution to, or pay any amount due and owing as required by applicable law
or by the terms of, any Employee Plan or Benefit Arrangement. The obligations
of WSB with respect to any Employee Plan and Benefit Arrangement is fully
funded. There is no pending or, to the knowledge of WSB or the Stockholder,
threatened legal action, proceeding or investigation against WSB or any
Employee Plan or Benefit Arrangement, including the Stockholder, with respect
to the employees of WSB, other than routine claims for benefits, which could
result in liability to such plans or WSB. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not result in
any payment (whether of separation pay or otherwise) becoming due from WSB to
any current or former consultant or employee of WSB or will result in the
vesting, acceleration of payment or increase in the amount of any benefit
payable to or in respect of any such current or former consultant or employee
of WSB.
(b) The Stockholder has complied with all Laws, not limited
to ERISA and the Code, and regulations thereunder, in connection with its
administration and operation and the transactions contemplated by this
Agreement except to the extent that any failure to comply will not result in
any loss, liability, expense or claim against WSB, Buyer or any subsidiary of
Buyer.
3.18. Insurance. WSB has had, for at least since December
31, 1992, and WSB now has, in full force and effect, insurance against fire,
liability, and other claims set forth in Schedule 3.18 hereto in amounts and
against such losses and risks as therein set forth. Policies for such
insurance, as is shown on such Schedule are in effect on the date of this
Agreement, are sufficient for compliance with all requirements of law and of
all agreements with respect to the operation of WSB and the WSB Business and
are valid, outstanding and binding policies and the coverage provided thereby
with
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respect to any act or event occurring on or prior to the Closing will not in
any way be affected by or terminate or lapse by reas n of this Agreement or
the transactions contemplated by this Agreement.
3.19. Compliance with Applicable Law. Except as set forth
in Schedule 3.19 attached hereto: (a) WSB and the Stockholder have, through
the Closing, complied in all material respects with respect to its operations,
practices, real property, plants, structures, machinery, equipment, vehicles
and other property, and all other aspects of its business, with all applicable
laws (whether statutory or otherwise), rules, regulations, orders, ordinances,
judgments, decrees, orders, writs and injunctions of all governmental
authorities (federal, state, local, foreign or otherwise) (collectively,
"Laws"), including, but not limited to, all Laws relating to the safe conduct
of business, environmental protection and conservation, antitrust, taxes,
consumer protection, currency exchange, equal opportunity, health, sanitation,
fire, zoning, building, occupational safety, pension, securities, trademark
and copyright to the extent that failures to comply in the aggregate have not
and will not result in a loss, liability or expense to WSB, except where the
failure or failures to comply would not have in the aggregate a materially
adverse effect on the WSB Business or its prospects or the Combined Financial
Condition or Combined Results of Operations; and (b) neither WSB nor the
Stockholder has received notification which is currently outstanding or
uncured of any asserted present or past failure to so comply. There has not
been any storage, generation, manufacture, refinement, transportation,
production, treatment or disposal of solid wastes, toxic wastes or hazardous
wastes or substances by WSB or, to the knowledge of WSB and the Stockholder,
at the real properties leased or owned by WSB in violation of any applicable
Law or Permit or which would require significant remedial action under any
applicable Law or Permit. There has never been any spill, discharge, leak,
emission, injection, escape, dumping or any other release by WSB of any kind
onto any real property into the environment surrounding such real properties
of any solid wastes, toxic wastes or hazardous wastes or substances as such
terms are defined under any law.
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3.20. No Consents. No consent, authorization, approval,
order, license, certificate or permit of or from, or declaration or filing
with, any federal, state, local or other governmental authority or any court
or other tribunal, and no consent or waiver of any party to any distribution
agreement, sales representative agreement, dealer agreement, or any other
contract, agreement, instrument or lease to which WSB or the Stockholder is a
party, is required for the execution, delivery or performance of this
Agreement or any of the Related Instruments by WSB or the Stockholder, as
applicable, or the consummation by such party or parties of the transactions
contemplated hereby or thereby, except for those written consents set forth on
Schedules 3.10 and 3.11, all of which have been obtained by WSB or the
Stockholder, except as indicated on Schedule 3.11.
3.21. Full Disclosure. No representation or warranty of WSB
and the Stockholder made in this Agreement, the Related Instruments or any
written statement furnished to the Buyer pursuant hereto or the Related
Instruments or Closing Documents contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements or facts contained herein or therein not materially
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
To induce WSB and the Stockholder to enter into this
Agreement and consummate the transactions contemplated hereby, Buyer
represents and warrants to WSB and the Stockholder as follows:
4.1. Organization and Qualification. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware.
4.2. Authorization of Agreements. This Agreement and the
Closing Documents have been duly executed and delivered by Buyer and
constitute the valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except as such enforceability may be
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<PAGE>
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
except to the extent that the remedy of specific enforcement or injunctive
relief is subject to the discretion of the court before which any proceedings
therefor may be brought.
4.3. Authority to Buy. Buyer has all requisite corporate
power and authority: (i) to execute, deliver and perform this Agreement, and
(ii) to carry out the transactions contemplated hereby and thereby. All
necessary corporate proceedings of Buyer have been duly taken to authorize the
execution and delivery of this Agreement by Buyer and the performance of the
transactions contemplated hereby.
4.4. No Consents. No consent, authorization, approval,
order, license, certificate or permit of or from, or declaration or filing
with, any federal, state, local or other governmental authority or any court
or other tribunal, and no consent or waiver of any party to any agreement to
which Buyer is a party, is required for the execution, delivery or performance
by Buyer of this Agreement.
4.5. No Violation. The execution and delivery and
performance of this Agreement and the Closing Documents do not, with or
without the giving of notice and/or the passage of time, violate any
provisions of law applicable to the Buyer or conflict with, result in the
breach or termination of, any provision of, constitute a default under, or
give any party, other than the Buyer, the right to accelerate any obligation
under, the Buyer's certificate of incorporation, as amended or by-laws, as
amended, or any indenture, mortgage, deed of trust, lease or other agreement
or instrument to which Buyer is a party. The execution, delivery and
performance and compliance by the Buyer with the terms and provisions hereof
do not and will not violate any provision of the General Corporation Law of
Delaware or any other laws or, with or without the giving of notice and/or the
passage of time, conflict with or result in a material breach of any judgment,
order, injunction, decree, regulation or
20
<PAGE>
ruling of any court or other governmental authority to which the Buyer is
subject or by which any of the assets of the Buyer may be bound.
4.6. Litigation. There are no claims, actions, proceedings,
pending or in progress, or, to the knowledge of Buyer, threatened, and, to the
knowledge of the Buyer, there are no investigations or inquiries in progress,
pending, or threatened, against the Buyer, that could affect Buyer, or the
transactions contemplated hereby; nor, to the knowledge of the Buyer, is there
any valid basis for any such claim, action, suit, proceeding, inquiry or
investigation.
4.7. Securities Law Disclosures. Buyer has filed all forms,
reports, statements, or other documents required to be filed by Buyer with the
Securities and Exchange Commission ("SEC") and NASDAQ/ NMS, including, without
limitation: (a) its Registration Statement or Form S-1 as declared effective
by the SEC on April 8, 1996, (b) its Quarterly Reports on Form 10-Q for the
quarters ended April 30, 1996, June 30, 1996 and September 30, 1996, (c) all
reports on Form 8-K and (d) all amendments and supplements to all such reports
and registration statement (collectively, the "Buyer SEC Reports"). As of the
respective filing dates, the Buyer SEC Reports complied as to form in all
material respects with the requirements of the Securities Exchange Act of 1934
(the "Exchange Act") or the Securities Act of 1933 (the "Securities Act"), as
applicable. The Buyer SEC Reports did not at the time they were filed contain
any untrue statement of material fact, or omit to state a material fact
required to be stated therein that was necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.8. Full Disclosure. No representation or warranty of
Buyer made in this Agreement or any written statement furnished by the Buyer
to WSB or the Stockholder pursuant hereto or the Closing Documents contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements or facts contained
herein or therein not misleading.
21
<PAGE>
ARTICLE V
CERTAIN ADDITIONAL AGREEMENTS
5.1. Retention of Trustee; Liquidation of Stockholder.
Buyer will not change or cause a change any of the trustees of the Stockholder
for a period of not less than sixty days from the Closing. The Buyer agrees to
cooperate with the Trustees of the Stockholder in their efforts to promptly
distribute the assets (which shall consist solely of cash) and liquidate the
Stockholder, including, inter alia, the execution and filing of appropriate
forms as may be required by the Stockholder, the obtaining of an updated fair
market valuation with respect to the participation of the Stockholder in the
transaction contemplated by this Agreement, and the application for a
favorable determination letter from the Internal Revenue Service regarding the
termination of the Stockholder, provided however, that neither the Buyer nor
any of its subsidiaries shall incur any liability, claim, expense or financial
obligation in effecting such cooperation.
5.2. Transfer Taxes. Buyer shall pay all transfer taxes
payable with respect to the transfer by the Stockholder to the Buyer of the
Shares.
5.3. Resignations. Stockholder is hereby delivering to
Buyer the resignations of all the Directors of WSB effective upon the Closing.
ARTICLE VI
REMEDIES
6.1. Survival of Representations and Warranties. The right
of a party to maintain any proceeding or action against another party hereto
based on a breach of a representation and warranty or default of a covenant in
this Agreement or pursuant hereto made by any party shall survive the Closing
for a period of two years except for (i) with respect to representations and
warranties with respect to Taxes and under Section 3.17(b) which shall survive
for the applicable statute of limitations and (ii) such right shall survive
any investigation made at any time by or on behalf of any other party.
22
<PAGE>
6.2. Indemnification by the Stockholder. Subject to Section
6.6, the Stockholder agrees to indemnify, defend and hold harmless Buyer and
its controlling persons and controlled persons (including WSB), successors and
assigns (hereinafter in this Article VI collectively referred to as Buyer
unless the context otherwise indicates) from and against any and all claims,
demands, losses, costs, obligations, liabilities, interest thereon, penalties
and expenses, including reasonable attorneys' fees and expenses (all the
foregoing being hereinafter sometimes collectively referred to as "Article VI
Damages") occasioned by, arising out of or resulting from any breach or
default of any of the representations and warranties of WSB or the Stockholder
or of the covenants of WSB or the Stockholder in this Agreement, the Related
Instruments or in any Exhibit or Schedule to, or any certificate, agreement
or other instrument furnished pursuant to, this Agreement or the Related
Instruments or any facts or circumstances constituting such a breach or
default.
6.3. Indemnification by Buyer. Subject to Section 6.6,
Buyer agrees to indemnify, defend and hold harmless the Stockholder and its
respective successors and assigns from and against any and all Article VI
Damages occasioned by, arising out of or resulting from any breach or default
of any of the representations, warranties or covenants of Buyer contained in
this Agreement or a Related Instrument or in any Exhibit or Schedule to, or
any certificate, agreement or other instrument furnished pursuant to, this
Agreement or a Related Instrument or any facts or circumstances constituting
such breach or default.
6.4. Claims for Indemnification. A party seeking
indemnification for Article VI Damages (the "Indemnified Party"), as a
condition of asserting claims for indemnification, shall notify the other
party (the "Indemnifying Party") in writing of any event, or of any facts,
which, in its opinion, entitle or may entitle the Indemnified Party to
indemnification under this Article VI. The notice from the Indemnified Party
shall specify all facts then known to it relating to its claim for
indemnification and the amount or estimated amount of the liability arising
therefrom. The right of
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<PAGE>
the Indemnified Party to indemnification and the amount or the estimated
amount thereof, as set forth in the notice, shall be deemed agreed to by the
Indemnifying Party unless, within 30 days after the mailing of such notice,
the Indemnifying Party notifies the Indemnified Party in writing that it
disputes the right of the Indemnified Party to indemnification as set forth or
estimated in the notice or that the Indemnifying Party elects to defend, in
the manner provided in Section 6.5 hereof, the claim giving rise to such
indemnification right. If the Indemnified Party shall be duly notified that
the Indemnifying Party disputes such claim as aforesaid, the parties shall
endeavor to settle and compromise such dispute but no such settlement or
compromise shall be effected without the consent of both. If unable to do any
of the foregoing, such dispute as to indemnification shall be determined by
appropriate litigation (which shall mean when the claim has been finally
determined by a court or tribunal from which determination no appeal is or may
be taken or when the defense thereto has been abandoned); and any right of an
Indemnified Party to indemnification established by reason of such settlement,
compromise, or litigation shall be promptly thereafter paid and satisfied by
the Indemnifying Party.
6.5. Right to Defend. If the facts giving rise to
indemnification shall involve any actual or threatened claim or demand by any
other third party against an Indemnified Party, the Indemnified Party may upon
written request require the Indemnifying Party, at the expense of the
Indemnifying Party through counsel of its own choosing, to defend or prosecute
such claim or demand in the name of the Indemnified Party, as the case may be,
(without prejudice to the right of the Indemnified Party to participate
through counsel of its own choosing at its own expense). The Indemnified Party
shall cooperate in the defense or prosecution of said claim or demand,
including providing the Indemnifying Party with access to such books and
records of the Indemnified Party in the possession of the Indemnified Party,
which shall be reasonably deemed by the Indemnifying Party to relate to said
claim or demand, and shall be entitled to be reimbursed, as provided in
Sections 6.2, 6.3 or 6.7, for all costs and expenses incurred by it in
connection therewith. No settlement shall be
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<PAGE>
effected by an Indemnified Party to which it may claim indemnification from an
Indemnifying Party without the consent of the Indemnifying Party but such
consent shall not be unreasonably withheld.
6.6. Limitations. Except for Article VI Damages arising
with respect to Section 3.17(b) (hereafter referred to as "Unlimited
Damages"), neither the Stockholder nor the Buyer, as the case may be, will be
obligated to indemnify, defend or hold the other party harmless with respect
to any Article VI Damages asserted by it until such damages exceed the sum of
$50,000 in the aggregate (the "Threshold") and then indemnification shall be
to the extent of all Article VI Damages, above the Threshold amount. In
determining the Threshold, there should be included, with respect to the
Stockholder's obligations hereunder, all damages under Article VII of the BN
Stock Agreement (other than Unlimited Damages as defined in that agreement)
and all damages under Article VII of the Enterprises Asset Agreement (other
than Unlimited Damages as defined in that agreement), suffered by the Buyer
(collectively, along with the Article VI Damages hereunder, other than
Unlimited Damages, hereinafter referred to as the "Buyer's Aggregate
Damages"). In no event shall the Buyer's Aggregate Damages for purposes of
indemnification of the Buyer exceed a limit (the "Damages Limit") of
$3,000,000 plus the shares of Common Stock of the Buyer and options to
purchase shares of Common Stock of the Buyer issued to the BN Stockholders
pursuant to the Battery Network Stock Agreement (such shares and options
collectively referred to as the "Equity Portion of the Damages Limit"). The
Stockholder agrees that payment of the Unlimited Damages shall be in cash and
that the Buyer's Aggregate Damages shall be sought first from the BN
Stockholders and then from Enterprises and the Enterprises Stockholders before
Buyer requires payment from the Stockholder of Article VI Damages, with the
cash payments of Buyer's Aggregate Damages pursuant to the BN Stock Agreement
and the Enterprises Asset Agreement to be credited to the Buyer's Aggregate
Damages. In no event shall Buyer require the Stockholder to make payment of
the Equity Portion of the Damages Limit.
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6.7. Litigation; Remedies Cumulative. In the event of
litigation to enforce this Agreement or any provision thereof, the prevailing
party, in addition to any other relief such party may be awarded, shall be
entitled to recover its reasonable attorneys' fees, including those incurred
with respect to any appellate proceeding. Except as herein expressly provided,
all remedies provided in this Agreement, including, but not limited to, those
pursuant to and Articles VI and VII, shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of
any other remedies against any other party hereto.
ARTICLE VII
MISCELLANEOUS
7.1. Expenses. Each party hereto shall pay its own expenses
incidental to the negotiation, preparation and consummation of this Agreement,
the Related Instruments and Closing Documents and all other agreements
executed and delivered by it hereunder or in connection herewith and the
transactions provided for herein and therein, including all fees and expenses
of its or their respective counsel and accountants, except that the fees and
expenses of Deloitte & Touche LLP for its services in auditing and reviewing
the Audited Financial Statements of WSB, Battery Network and Enterprises
provided pursuant to this Agreement shall be borne by Buyer.
7.2. Further Actions. At any time and from time to time
after the Closing, each party hereto agrees, at its own expense (except as
otherwise provided herein), to take such actions and to execute and deliver
such documents as may be reasonably necessary to effectuate the purposes of
this Agreement.
7.3. Commissions and Finders' Fees. Except for the fee of
Founders Management Services, Inc. ("Founders"), which shall be the sole
responsibility of Buyer, each of the parties represents that it has not
incurred any liability to any broker, finder or agent for any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this Agreement, which
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<PAGE>
may be directly or indirectly asserted against the other parties. Buyer agrees
to be fully responsible to pay all fees due to or claims of Founders and to
indemnify and hold WSB and Stockholder harmless from and against all
liability, loss, cost, charge or expense, including reasonable counsel fees,
arising from claims of Founders for any fee or commission with respect to the
transactions contemplated by this Agreement or pursuant to all outstanding
agreements between Founders and Buyer.
7.4. Knowledge of WSB. The "knowledge of WSB" shall mean
the knowledge of its directors and its executive officers and its employees
with managerial responsibilities.
7.5. Injunctive Relief. The Buyer and the Stockholder
acknowledge and agree that in view of the uniqueness of the Shares and the WSB
Business, damages at law would be insufficient for breach of any of their
respective covenants in this Agreement. Accordingly, the parties hereto agree
that in the event of a breach or threatened breach of any provisions of this
Agreement, the Buyer or the Stockholder, as appropriate, shall be entitled to
equitable relief in the form of an injunction to prevent irreparable injury
without being required to provide any security or post any bond. Nothing
herein shall be construed as prohibiting any party hereto from pursuing any
remedies, including damages, for breach or threatened breach of this
Agreement.
7.6. Further Assurances. Each party hereto shall, from time
to time after the Closing, at the request of any other party hereto and
without further consideration, execute and deliver such other instruments of
conveyance, assignments, transfer and assumption, and take such other actions
as such other party may reasonably request to more effectively consummate the
transactions contemplated by this Agreement.
7.7. Reformation and Severability. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under present or
future laws effective during the term hereof:
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(a) in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable; and
(b) the legality, validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby.
7.8. Entire Agreement; Modification. This Agreement, the
Related Instruments and the Exhibits hereto set forth the entire understanding
of the parties with respect to the subject matter hereof, supersede all
existing agreements and understandings between them (and all prior
representations and warranties) concerning such subject matter and may be
modified only by a written instrument duly executed by each party hereto.
7.9. Notices. Any notice given pursuant to this Agreement
to any party hereto shall be deemed to have been duly given (i) when mailed by
registered or certified mail, return receipt requested, (ii) when telecopied,
provided a copy of the notice is mailed by registered or certified mail,
return receipt requested, within one business day following the date of the
telecopied transmission, or (iii) when hand delivered to the party to whom it
is to be given at the address of such party set forth below, as follows:
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If to the Stockholder at its address set forth in the first
paragraph of this Agreement:
with a copy to:
Berger, Newmark & Fenchel, P.C.
222 North La Salle Street
Suite 1900
Chicago, Illinois 60601-199
Attention: Michael R. Wolfe, Esq.
FAX: (312) 782-6491
If to Buyer:
Batteries Batteries, Inc.
c/o Founders Equity, Inc.
200 Madison Avenue
New York, New York 10016
Attention: Mr. Warren H. Haber
Chairman of the Board
FAX: (212) 953-0626
with a copy to:
Leo Silverstein, Esq.
Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC
Citicorp Center, 56th Floor
153 East 53rd Street
New York, New York 10022
FAX: (212) 371-5500
If to WSB, c/o Buyer, with a copy to Leo Silverstein, Esq.
or at such other address as a party shall from time to time designate by
written notice, in the manner provided herein, to the other parties hereto.
7.10. Waiver. Any waiver must be in writing, and any waiver
by any party of a breach of any provision of this Agreement shall not operate
as or be construed to be a waiver of any other breach of that provision or of
any breach of any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one or more
occasions will not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
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7.11. Binding Effect; Assignment. The provisions of this
Agreement shall be binding upon and inure to the benefit of WSB, the
Stockholder and the Buyer and their respective heirs, representatives,
successors and permitted assigns. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties, and any
purported assignment without such consent shall be void, except that (A) the
Buyer may assign this Agreement to any corporation in which it owns 100% of
the outstanding shares of voting stock and agrees to be bound by the
provisions of the Agreement, provided that Buyer guaranties the obligations of
the assignee, and (B) the Buyer may collaterally assign its rights under this
Agreement to IBJ Schroder Bank & Trust Company ("IBJ") as Agent and Lender
under the Revolving Credit, Term Loan and Security Agreement among Buyer, WSB,
subsidiaries of Buyer and IBJ as Agent and Lender.
7.12. No Third-Party Beneficiaries. Except for rights of
Indemnified Parties under Article VI hereof, the rights of the parties under
the Related Instruments or permitted assignees under Section 7.11, this
Agreement does not create, and shall not be construed as creating, any rights
enforceable by any person not a party to this Agreement.
7.13. Headings. The headings in this Agreement are solely
for convenience of reference and shall be given no effect in the construction
or interpretation of this Agreement.
7.14. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
7.15. Governing Law. This Agreement and all amendments
thereof shall be governed by, and construed in accordance with, the internal
laws of the State of Delaware applicable to contracts made and to be performed
entirely within the state, without giving effect to the principles of conflict
of laws which may be applied thereby. Service of process on Buyer, WSB and
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Stockholder, as the case may be, in any action arising out of or relating to
this Agreement shall be effective upon Buyer, WSB or the Stockholder, as the
case may be, if mailed to the address listed in Section 7.9 hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
BATTERIES BATTERIES, INC.
By: /s/ John Teeger
----------------------------------------
W. S. BATTERY & SALES COMPANY, INC.
By: /s/ Dolores Sapp
----------------------------------------
, President
W.S. BATTERY & SALES CO. INC.
EMPLOYEE STOCK OWNERSHIP
PLAN AND TRUST:
/s/ William S. Sapp
-------------------------------------------
William S. Sapp, Trustee
/s/ Dolores Sapp
-------------------------------------------
Dolores Sapp, Trustee
31
<PAGE>
EXHIBITS
A Opinion of Counsel to WSB and Stockholder
A-1 Opinion of Buyer's Counsel
SCHEDULES
Sections
3.6 Tangible Assets
3.7 Intangible Assets
3.8 Books and Records
3.10 Contracts and Commitments
3.11 Leases
3.12 Liabilities
3.13 Litigation
3.14 Permits, Licenses, Etc.
3.15 Tax Examinations
3.17 Employee Benefit Plans, ERISA
3.18 Insurance
3.19 Compliance with Applicable Law
32
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STOCK PURCHASE AGREEMENT AMONG
BATTERIES BATTERIES, INC. BATTERY NETWORK, INC.
AND THE BATTERY NETWORK STOCKHOLDERS
<PAGE>
SCHEDULE 3.6
Tangible Assets: None
<PAGE>
SCHEDULES 3.7
Intangible Assets:
Pending trademark "Absolute"
Registered trademark - "Battery Network"
<PAGE>
SCHEDULE 3.10
Contracts and Commitments
A. Manufacturer/Representative Agreements between Absolute Battery and:
Berry Marketing, Inc. for Alaska, Washington, Western Oregon, Western
Montana and Western Idaho, commencement 7/12/95
Marketing Services of Kansas for Iowa, Nebraska, Missouri and Kansas,
except Intelligent Electronics and Inacom, commencement 9/1/95
New Horizons for Illinois and Wisconsin, commencement 2/23/95
New Era Sales for Northern NJ and New York, commencement 5/17/95
Silverman Sayer Services for Florida except Tech Data, commencement 2/7/95
TCG, The Connection Group Inc. for Texas, Oklahoma, Louisiana, Arkansas
except Daisytek and CompuCom, commencement 9/1/95
Pioneer Marketing for New England, upstate New York, southern Connecticut
state line to northern Maine west to New York except MacWarehouse,
commencement 2/1/96
Roy Brake & Associates for Colorado, Utah, Idaho, Wyoming and Montana,
commencement 12/7/95 - Note says there is an Addendum adding Arizona,
New Mexico and Southern Nevada
Incremental Sales for Northern California, except Van Star, Momentum and
MicorSystems, and Northern Nevada
B. Agreement Between Burlington Northern Railroad Company, the Atchison, Topeka
and Santa Fe Railway and Battery Network made on September 1, 1996 through
November
C. Distributor Agreements Between Battery Network, Inc., Absolute Battery
Co. and the following distributors:
Absolute Battery Canada, Inc./Battery Network Canada/Philipe Simard Ind.
for the territory of Canada and Cuba
Absolute Battery UK LTD/Battery Network Europe LTD./Martin Agar Ind. for
the United Kingdom and the European Economic Community ("EEC")
<PAGE>
SCHEDULE 3.10 CONTINUED...
D. Summaries of McHenry Agreements with:
Jim Lewis
George Johnson
Don Smith
John Miller
Bill Faris
E. Summaries of New Jersey Agreements with:
Tom Mazzante
Sandro Lanni
Ken Wilson
Karen Wilson
Pamco
Mike Langella
Greenshed Sales/Cary Martin
Bryan Whitney
Armondro Toral, Jr.
Canada: Contract
U.K.: Contract
Marvin Mocskowicz
F. Summaries of San Diego Verbal Sales Agreements with:
Tim Jacubowski
Dave Zeman
PJH Sales and Marketing Inc. (Pat Huberty)
Dennis Woods
Don Ritchie
<PAGE>
SCHEDULE 3.11
Lease Equipment:
Telephone system in North Branch, New Jersey
Commencement 6/6/94; term 60 months; monthly rental payment $1,022.30
Additional payment of $61.09 per month for 800 GS/LS Module
One Yale Sit Down Electric Forklift
<PAGE>
SCHEDULE 3.12
Liabilities -- None
<PAGE>
SCHEDULE 3.13
Litigation:
Blenheim Group, USA, Inc. vs. Battery Network
<PAGE>
SCHEDULE 3.14
Permits -- Licenses
California -- Sellers Permit, California City of Escondido
New Jersey -- Sales and Use Tax Recycling Permit
Illinois -- Illinois Department of Revenue
Washington -- Certificate of Coverage -- Master License
License Agreement -- De Pew Engineering Inc.
<PAGE>
SCHEDULE 3.17
Employee Benefit Plan:
Alexander Battery Co. East, Inc. Specimen Profit Sharing Plan Adoption
Agreement and Alexander Battery Co. East, Inc. Specimen Profit Sharing
Plan & Trust
Alexander Battery Co. West, Inc. Specimen Profit Sharing Plan & Trust
Alexander Battery Co. South, Inc. Specimen Profit Sharing Plan Adoption
Agreement and Alexander Battery Co. South, Inc. Specimen Profit Sharing
Plan & Trust
W.S. Battery & Sales Co., Inc. Employee Stock Ownership Plan and Trust and
W.S. Battery & Sales Co., Inc. Specimen Money Purchase Pension Plan & Trust
Battery Network, Inc. Specimen Profit Sharing Plan Adoption Agreement and
Battery Network, Inc. Specimen Profit Sharing Plan & Trust
<PAGE>
SCHEDULE 3.18
<TABLE>
<CAPTION>
Insurance:
Insurance Company Policy No. State Type of Insurance
- ----------------- ---------- ----- -----------------
<S> <C> <C> <C>
State Farm 93-95-5868-5 Illinois Business & Liability
State Farm 98-07-3606-4 Washington Business & Liability
State Farm 93-Mo-1343-1 IL, WA, NJ Workers Comp. & Employers
Liability
Met Life 176866 EBPG IL Health/Life
Robt. Drier Co. WN96-538430-05 CA Workers Com. & Employers
Liability
Bankers Std. Co. D2 61 19 479 CA Commercial Property & General
Liability
Blue Shield CA H82188 CA HMO Health Plan
Private MedCare 8634 CA Group Dental Services
Sentry Ins. 44-66422-02-00-961 Commercial Property Liability and
44-66422-01 NJ Umbrella Coverage
Met Life k76892 NJ Health/Life
</TABLE>
<PAGE>
SCHEDULE 3.19
Compliance with Applicable Law: None
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated January 3, 1997 as of December 31, 1996, by and
among BATTERIES ACQUISITION CORP., a New York corporation ("Buyer"), BATTERIES
BATTERIES, INC., a Delaware corporation ("BBI"), WSJ ENTERPRISES, INC., an
Illinois corporation 4071 Albany Street, McHenry, Illinois 60050 ("Seller")
and WILLIAM S. SAPP, ("WS Senior") and DOLORES SAPP who reside at 2733 Laguna
Shores Lane, Las Vegas, Nevada 89121, SUSAN GRANDT ("SG") who resides at 3731
Pitzen Road, McHenry, Illinois 60050, WILLIAM STEVEN SAPP ("WSS") who resides
at 17778 Old Winery Way, Poway, California 92064 and JAMES SAPP ("JS") who
resides at 2733 Laguna Shores Lane, Las Vegas, Nevada 89121 (the foregoing
individuals are hereinafter collectively referred to as the "Stockholders").
WHEREAS, the Seller conducts a battery distribution business (the
"WSJ Enterprises Business") and desires to sell, and the Stockholders desire
Seller to sell the WSJ Enterprises Business and the assets comprising that
business to Buyer;
WHEREAS, BBI which owns the outstanding capital stock of the Buyer is
engaged in the ownership and operation of a battery distribution business on a
national basis and is acquiring at the time of the acquisition to be effected
under this Agreement the outstanding capital stock of Battery Network Inc.
("Battery Network") pursuant to a Stock Purchase Agreement among BB1, Battery
Network, SG, WSS and JS (the "BN Stock Agreement") and of W.S. Battery and
Sales Company, Inc. ("WSB") pursuant to a Stock Purchase Agreement among BBI,
WSB and W.S. Battery Sales & Co. Inc. Employee Stock Ownership Plan and Trust
(the "ESOP WSB Stockholder"), the sole stockholder of WSB (the "WSB Stock
Agreement"), and desires to have the Buyer acquire and the Buyer desires to
acquire from the Seller the WSJ Enterprises Business and its related assets;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties hereinafter set forth,
the parties agree as follows:
<PAGE>
ARTICLE I
ASSETS
1.1 Assets to be Sold. In reliance upon the representations,
warranties and agreements of the parties hereto contained herein, Seller
hereby agrees to sell, transfer and convey and the Stockholders have caused
the Seller to agree to sell, transfer and convey, to Buyer at the Closing, and
the Buyer hereby agrees to purchase and BBI hereby agrees to cause Buyer to
purchase from the Seller at the Closing, the Transferred Assets of the Seller,
as hereinafter defined, free and clear of all liens, charges and encumbrances,
and the WSJ Enterprises Business. Seller shall retain the Retained Assets, as
hereinafter defined.
1.2 Transferred Assets. The term "Transferred Assets" shall mean all
of the assets, except the Retained Assets, of the Seller at the Closing,
including, but not limited to, the following specified assets to the extent
that such assets are not Retained Assets:
(a) All outstanding contracts, agreements, leases,
arrangements, commitments and understandings, whether written or oral, related
to the WSJ Enterprises Business or the conduct thereof to which Seller is a
party, including those which are listed or referred to on Schedule 1.2(a)
hereto but none related to the Retained Assets except as they give rise to
insurance or indemnification of the Buyer as successor to the WSJ Enterprises
Business or the Transferred Assets.
(b) Lease security deposits set forth in Schedule 1.2(b)
(the "Schedule 1.2(b) Deposits") and the prepaid expenses relating to but not
limited to, utility deposits and similar monies held by third parties,
drawings, hardware, software and all other operating assets used in or
required for the continuance by the Buyer of the WSJ Enterprises Business,
whether tangible or intangible, at the Closing.
(c) All supply contracts, purchase contracts, service
contracts and confidentiality agreements to which Seller is a party that are
related to or connected with the WSJ Enterprises Business, including those set
forth in Schedule 1.2(c).
(d) All copyrights, reprint, rights, trademarks, trademark
licenses, trade names, the sole and exclusive perpetual right to the use of
the name "Alexander Battery" to the extent possessed by Seller, patents, brand
names, slogans, franchises, licenses, authorizations, inventions, processes,
know-how, formulas, trade secrets and other intangible assets relating to or
used in the
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<PAGE>
WSJ Enterprises Business owned by Seller (the foregoing, together with all
pending applications for any of the above, if and as appropriate, collectively
"Intangible Assets"), all listed on Schedule 1.2(d) attached hereto.
(e) All accounts receivable, bills and notes receivable of,
commercial paper of, acceptances and any other evidences of indebtedness to,
the Seller outstanding as of the Closing Date arising from the WSJ Enterprises
Business, including, but not limited to, those accounts receivable, bills and
notes receivable outstanding listed on Schedule 1.2(e), except for those
receivables in the amounts and from customers set forth on Schedule 1.2(e)-1
generated from sales outside of the United States (the "Foreign Receivables").
(f) The inventory acquired or assembled for the WSJ
Enterprises Business owned by the Seller.
(g) The furniture and fixtures owned by the Seller (including
those listed on Schedule 1.2(g) attached hereto).
(h) All machinery, vehicles and equipment owned by Seller
(including those listed on Schedule 1.2(h) attached hereto)
(i) All supplies and materials, including, but not limited
to, films and plates as to the catalogues, owned by the Seller and used in
connection with the WSJ Enterprises Business.
(j) All lists of customers and vendors and records of Seller
other than those specified as part of the Retained Assets.
(k) All properties, real or personal, leased by Seller
(including those listed on Schedule 1.2(k) hereto) other than those specified
as part of the Retained Assets.
(l) The cash on hand of Seller at the Closing, including all
cash on hand as of the Closing in the bank accounts maintained by Seller.
(m) All rights and claims of Seller, including claims under
insurance policies, for damages or losses suffered by Seller or for damage to
Transferred Assets of the Seller to the extent that any damaged Transferred
Assets have not been repaired or replaced prior to Closing.
(n) All licenses, permits and authorizations issued by any
governmental authority relating to the Transferred Assets or the WSJ
Enterprises Business which are assignable (collectively the "Permits") and
3
<PAGE>
(o) The Books and Records, as defined in Section 2.3(b)(iii)
of Seller, relating to its WSJ Enterprises Business, through the Closing.
1.3 Retained Assets. The term "Retained Assets" shall mean the
following specified assets of the Seller:
(a) The Foreign Receivables set forth on Schedule 1.2(e)-1;
and
(b) The stock books, corporate minutes and original tax
returns of the Seller (except that Seller shall provide copies of the
foregoing to the Buyer).
1.4 Assumed Liabilities. Buyer shall assume and undertake to perform
all obligations of Seller under the leases, agreements and contracts included
in the Transferred Assets, but only those obligations which relate to
purchases or sales effected, or properties provided, after the Closing
("Assumed Liabilities").
ARTICLE II
PRICE AND TERMS
2.1 Consideration. (a) Subject to the terms and conditions of this
Agreement, in reliance on the representations, warranties and agreements of
the Seller and Stockholders contained herein, Seller shall sell, convey,
assign, transfer and delivery at the Closing to the Buyer the WSJ Enterprises
Business and Transferred Assets and Buyer shall pay and BBI shall cause Buyer
to pay at the Closing to Seller, in full payment therefor the purchase price
of $678,443.48 less a credit of $529,228.48 for the Foreign Receivables set
forth on Schedule 1.2(e)-1 and the balance of the amount of the Foreign
Receivables not paid to BBI pursuant to Section 5.6 of the BN Stock Agreement
by the BN Stockholders. Payment of the Purchase Price shall be by means of a
wire transfer in federal funds to the bank account at the McHenry State Bank,
McHenry, Illinois designated to Buyer by the Seller in the amount of $149,215.
(b) In the event the amount by which the Closing Combined
Net Worth of Battery Network, WSB and Enterprises as determined pursuant to
Section 2.2 of the BN Stock Agreement is less than $8,000,000 (the
"Deficiency") and such Deficiency exceeds the payment made by the BN
Stockholders pursuant to Section 2.2(b) of the BN Stock Agreement by the BN
Stockholders, Seller and the Stockholders jointly and severally agree to pay
BBI the balance of the Deficiency not paid in the form of a certified check in
such amount to the order of BBI.
4
<PAGE>
2.2 Liabilities Not Assumed. Except as and to the extent otherwise
expressly provided in this Agreement and the Undertakings, Buyer has not
agreed to pay, shall not be required to assume, and shall have no liability or
obligation with respect to, any of the obligations with respect to the
acquisition, lease rental or maintenance of any of the Retained Assets. Seller
shall pay and discharge any current liability or obligation of Seller not
expressly assumed by Buyer hereunder no later than the Closing Date.
2.3 Documents of Sale and Conveyance.
(a) The sale, conveyance, assignment, transfer and delivery
of the Transferred Assets shall be effected by delivery at the Closing by
Seller to Buyer of:
(i) duly executed bills of sale substantially in
the form of Exhibit A hereto (collectively, the "Bills of
Sale");
(ii) instruments of assignment with respect to any
interest Seller has in all copyrights, patents, trade or
service names and marks, and assumed names and all
applications therefor relating to the WSJ Enterprises
Business or any of Transferred Assets, all in recordable
form (collectively, the "Instruments of Assignment"); and
(iii) such other good and sufficient instruments of
conveyance and transfer as shall be necessary to vest in
Buyer good and valid title to the Transferred Assets
(collectively, the "Other Instruments"), free and clear of
all liabilities, obligations, claims, liens and encumbrances
(whether absolute, accrued, contingent or otherwise) except
to the extent herein otherwise provided.
(b) Additional Deliveries by Seller and Stockholders. In
addition to the items set forth in Section 2.3(a), and as conditions to the
agreements hereunder by the Buyer and BBI, the Seller shall deliver at the
Closing to the Buyer:
(i) executed counterparts of the consents referred
to in Schedule 3.10 hereof;
(ii) the certificates of insurance from the
insurance companies as to the transfer to Buyer of insurance
policies owned by Seller, as referred to in Section 3.18;
and
(iii) the opinion of counsel in the form of Exhibit
B hereto.
5
<PAGE>
Seller shall deliver at the Closing to the Buyer at the
current premises of Seller all books and records (including all computerized
records and other computerized storage media and the software used in
connection therewith) of the Seller other than those relating to the Retained
Assets (collectively, "Books and Records"), including, without limitation, all
Books and Records relating to the catalogues, mail orders, purchase of
materials, supplies and services for, and dealings with vendors, customers and
distributors of, the Seller, and the general ledgers and all other existing
records of the Seller other than the corporate minute books, capital stock
book or original tax returns of the Seller (provided, however, true and
complete copies of Seller's tax returns shall be furnished to Buyer).
(c) Deliveries by Buyer. Buyer shall deliver at the
Closing to the Seller as a condition to the agreements hereunder of the Seller
and Stockholders, the following:
(i) the wire transfer of federal funds referred to
in Section 2.1(a) and Section 6.1 hereof to the Seller;
(ii) undertakings to pay and perform the Assumed
Liabilities; and
(iii) the opinion of counsel in the form of Exhibit
B-1 hereto.
2.4 No Assumption of Obligation Unless Expressed. Except for
obligations expressly assumed by the Buyer hereunder, there shall be no
liability or obligation of the Buyer or BBI to Seller, the creditors of
Seller, the Stockholders, or to others, growing out of or arising from the
sale by the Seller of the WSJ Enterprises Business and Transferred Assets to
the Buyer under the provisions of this Agreement.
2.5 Mail and Funds Received After Closing. Seller and the
Stockholders agree to promptly remit to Buyer all orders, funds and checks
received after the Closing Date by Seller or a Stockholder with respect to the
WSJ Enterprises Business or any of the Transferred Assets, and deliver or
cause to be delivered to Buyer all correspondence addressed to Seller or a
Stockholder relating to the WSJ Enterprises Business or the Transferred
Assets; and (ii) Buyer may open all mail addressed to Seller or a Stockholder
and, to the extent that such mail and the contents thereof relate to WSJ
Enterprises Business or any of the Transferred Assets, deal with the contents
thereof. Buyer shall promptly deliver to the Seller or the Stockholders all
other mail addressed to the Seller or Stockholder and received by Buyer and
shall promptly remit to Seller all funds and checks received after the Closing
Date in payment of the Foreign Receivables and
6
<PAGE>
checks received in payment of the Uncollected Accounts after payment therefor
by the Seller or the BN Stockholders.
2.6 Closing. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the time and at the offices
of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC, One Citicorp
Center, 153 East 53rd Street, New York, New York at 10:00 a.m. on January 3,
1997 (the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDERS
To induce Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, Seller and the Stockholders jointly and
severally represent and warrant to Buyer as follows:
3.1 Organization and Qualification of Seller. Seller is a corporation
duly organized and validly existing under the laws of the State of Illinois,
and has the corporate power to own its assets and to conduct its business as
it is presently being conducted, the only jurisdiction where the failure to
qualify in the aggregate has not and will not have a material adverse effect
on its business or the prospects of the WSJ Enterprises Business or Seller's
ability to enforce its contracts. Seller has previously delivered to the Buyer
correct and complete copies of its Certificate of Incorporation, as amended to
date, and By-Laws, as amended to date.
3.2 Authorization of Agreements; No Violations.
(a) This Agreement has been, and the instruments and
agreements contemplated herein, including, but not limited to, Bills of Sale
and Instruments of Assignment (collectively, the "Related Instruments") and
other agreements and documents executed in connection with the transactions
contemplated hereby (the "Closing Documents") have been duly executed and
delivered and constitute the valid and binding obligations of Seller and the
Stockholders thereto, and each of the foregoing is enforceable against the
Seller and the Stockholders thereto, in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and except to the extent that the remedy of
specific enforcement, injunctive relief or other equitable remedy is subject
to the discretion of the court before which any proceedings therefor may be
brought.
7
<PAGE>
(b) The execution and delivery and the performance of this
Agreement, the Related Instruments and the Closing Documents, to the knowledge
of Seller and Stockholders, do not, with or without the giving of notice
and/or the passage of time:
(i) violate in any material respect any provision
of law applicable to Seller and Stockholders or the
corporate charter or By-Laws of Seller;
(ii) violate, conflict with, result in the breach
or termination of, any provision of, constitute a default
under any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which Seller or a Stockholder is
a party or by which Seller or a Stockholder or any material
asset or property of Seller is or may be bound (the "Binding
Agreements") or give any party other than a Stockholder or
Seller the right to accelerate any material obligation
thereunder, except where such violation, conflict, breach,
default or termination would not have a materially adverse
effect upon the WSJ Enterprises Business or the combined
financial condition or combined results of operations of
Seller, Battery Network and WSB (collectively the "Combined
Financial Condition" and "Combined Results of Operations")
or prospects of Seller or the transferability or value of
the properties or assets of Seller; or
(iii) result in the creation of any lien, charge or
encumbrance upon any of the properties or assets of Seller
pursuant to any of the Binding Agreements. Neither such
execution, delivery and performance nor compliance by Seller
or a Stockholder with the terms and provisions hereof
violate any law or, with or without the giving of notice
and/or the passage of time, conflict with or result in a
breach of any judgment, order, injunction, decree,
regulation or ruling of any court or other governmental
authority to which Seller or a Stockholder is subject or by
which any of the assets of Seller may be bound.
3.3 Financial Statements. The Stockholders have caused Seller to
deliver to Buyer the Combined Balance Sheets of Seller, Battery Network, and
WSB as of September 30, 1996 (the "September 30, 1996 Combined Balance
Sheet"), December 31, 1995 and December 31, 1994 and the related Combined
Statements of Income and Cash Flow of Seller, Battery Network and WSB for the
nine months ended September 30, 1996 and for each of the years ended December
31, 1995, and December 31, 1994 (collectively the "Audited Financial
Statements") prepared from the books
8
<PAGE>
and records of the Seller, and certified by Deloitte & Touche, independent
public accountants. The Audited Financial Statements fairly present the
Combined Financial Condition as of September 30, 1996, December 31, 1995 and
December 31, 1994, and the Combined Results of Operation for the periods then
ended. The Audited Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP"), consistently applied. The
Closing Combined Net Worth as defined in Section 2.2 of the BN Stock Agreement
is at least $8,000,000.
3.4 Transfer and Title to the Transferred Asset. Upon delivery of the
Transferred Assets to Buyer at Closing, the Buyer will receive good and
marketable title to the Transferred Assets, free and clear of any lien,
pledge, option, contractual right, equitable right, charge or other
encumbrances of any kind whatsoever, except for the liens and encumbrances
created under the Revolving Credit, Term Loan and Security Agreement among IBJ
Schroder Bank & Trust Company, BBI and the subsidiaries of BBI.
3.5 Tangible Assets. Seller does not own any real property. Schedule
3.5 hereto is a complete and correct list of all material items (a book value
of at least $25,000) of tangible personal property, other than inventory, and
fixtures of Seller, all of which were included on the September 30, 1996
Balance Sheet, and all of which are currently used or useable in the conduct
of the WSJ Enterprises Business and are in the aggregate in good condition and
repair, reasonable wear and tear excepted.
3.6 Intangible Assets.
(a) Schedule 3.6 identifies all patents, trademarks, trade
names (including the name "Alexander Battery"), service marks, copyrights,
registrations or applications with respect to any of the foregoing, renewals
or assignments, and all rights in, to, or respecting such renewals and
licenses or rights under the same presently owned, being used, or presently
intended to be acquired (identified as such) by Seller (collectively referred
to herein as the "Business Rights"). To the extent indicated in Schedule 3.6,
the same have been duly registered in the offices indicated therein. There are
no claims or demands of any other person, firm, corporation or entity of which
the Seller or the Stockholders are aware pertaining to any of such rights; and
no proceedings have been instituted, are pending, or, to the knowledge of the
Seller or the Stockholders, are threatened, which challenge, oppose or
threaten interference, cancellation, nullification or concurrent use with any
of the Business Rights. To the knowledge of Seller and the Stockholders, none
of the Business Rights infringed on or otherwise violate the rights of others
or are being infringed on by others; and
9
<PAGE>
none are subject to any outstanding order, decree, judgment or stipulation. No
licenses, sublicenses or agreements pertaining to any of the Business Rights
are in effect, other than as set forth in Schedule 3.6. Neither Seller nor any
of the Stockholders has been formally charged with infringement of any
adversely-held Business Right with respect to Seller or any Business Right
used in connection with the WSJ Enterprises Business.
(b) Seller owns and possesses all Business Rights which, to
the knowledge of Seller and the Stockholders, are necessary for, and being
used in the conduct of, or in connection with, the WSJ Enterprises Business as
was conducted on September 30, 1996 and as is currently being conducted; all
are in full force and effect and have not been amended or modified. Except as
set forth in Schedule 3.6, Seller has not sold, assigned, transferred,
licensed, sublicensed or conveyed all or any interest in any of the Business
Rights to any person, and has the right, title and interest (free and clear of
all security interests, liens and encumbrances of every nature) in and to the
Business Rights set forth on the Schedule.
3.7 Books and Records. The books and records of Seller have been
maintained on a basis consistent with prior years and accurately reflect the
basis for amounts set forth on the Audited Financial Statements delivered
pursuant to Section 3.3.
3.8 Inventory. All of the inventory of the Seller, Battery Networks
and WSB included on the September 30, 1996 Combined Balance Sheet and the
Closing Combined Balance Sheet is of a quality and quantity currently usable
in the ordinary course of the Battery Network Business, WSB Business or WSJ
Enterprises Business. The present quantity of all current and usable
inventory, after giving effect to the inventory reserve established in
accordance with GAAP, is at a level consistent with the past practices of
Battery Network, WSB and Seller.
3.9 Contracts and Commitments.
(a) Except as set forth in Schedule 3.9 or Schedule 3.10
on the date of this Agreement:
(i) Seller is not a party to or bound by any
distribution agreement, sales representative agreement,
dealer agreement, collective bargaining agreement, loan
agreement, agreement guaranteeing the obligations of
liabilities of others, construction or building modification
agreement, or any other agreement, contract or commitment
relating to its operation, condition (financial or
otherwise), liabilities, assets, earnings, working capital
or the prospects of the WSJ Enterprises Business
10
<PAGE>
and which provides for future payments or receipts for any
consecutive twelve month period in an amount of at least
$25,000 (or, with respect to purchase orders, $25,000);
(ii) The enforceability of the agreements,
contracts, commitments and licenses referred to in Schedule
3.6 or Schedule 3.9 will not be affected in any manner by
the execution and delivery of this Agreement, the Related
Instruments or the consummation of the transactions
contemplated hereby, except for the need to obtain the
consents and those consents set forth in Schedule 3.10, all
of which consents have been obtained except those as to
certain leases of equipment from lessors indicated in such
Schedule;
(iii) No outstanding purchase contract or
commitment of Seller relates to any business other than the
WSJ Enterprises Business, is materially in excess of the
ordinary and usual requirements of such business at the time
entered into or, to the knowledge of Seller and the
Stockholders, was entered into at any price materially in
excess of the price paid or payable by Seller during the
nine months ended September 30, 1996 or the year ended
December 31, 1995, comparing where applicable prices paid or
payable for similar quantities;
(iv) Neither Seller nor any of the Stockholders is
a party to or bound by any outstanding agreements,
arrangements or contracts relating to the WSJ Enterprises
Business or the Transferred Assets with any of the officers,
employees, agents, consultants, advisors or salesmen of
Seller that (A) is not cancelable by it on notice of not
longer than 30 days and without liability, penalty or
premium, except for those agreements set forth, along with
their expiration dates, on Schedule 3.9, or (B) provides for
the payment of any bonus or commission based on sales or
earnings, the "Plans" listed on Schedule 3.17 and as
permitted under Section 3.19;
(v) Seller is not a party to or bound by any
employment agreement, consulting agreement or any other
agreement which contains any severance or termination pay
liabilities;
(vi) To the knowledge of Seller and the
Stockholders, Seller is not in default under or in violation
in a material respect of, nor, is there any basis for any
valid claim of default under or violation of, in a material
respect, any contract,
11
<PAGE>
agreement or commitment made or obligation of Seller or
relating to the WSJ Enterprises Business, including, but not
limited to, any material distribution agreement, sales
representative agreement or dealer agreement;
(vii) Seller does not have (A) indebtedness for
borrowed money or the deferred purchase price for property,
including guarantees of, or agreements to acquire, any such
indebtedness of others, or (B) contract, commitment or
arrangement for the borrowing of money or for a line of
credit; and
(viii) None of Seller, the Stockholders, any
"Affiliate" of a Stockholder (meaning a member of the
immediate family of, or any person controlling or controlled
by, any Stockholder), an officer or director of Seller is a
party to or bound by any agreement or arrangement for the
sale of shares of Seller or (other than in the ordinary
course of business and consistent with past practice) any of
the assets or rights of Seller or which provides for the
grant of any preferential rights to purchase any of the
assets or rights of Seller.
(b) With respect to each contract and agreement listed on
Schedule 3.9, except as set forth therein, (A) it is valid, binding and in
full force and effect and is enforceable by Seller in accordance with its
terms, subject to bankruptcy, insolvency, reorganization and other laws and
judicial decisions of general applicability relating to or affecting
creditors' rights and to general principles of equity; (B) to the knowledge of
the Stockholders and Seller, neither Seller nor any other party thereto is in
material breach of any obligation thereunder; and (C) there does not exist any
material default under, or, to the knowledge of the Stockholders and Seller,
any event or condition which, with the giving of notice or passage of time or
both, would become a breach or default in any material respect under the terms
of such contract or agreement on the part of Seller or on the part of any
other party thereto.
(c) Since September 30, 1996, the Seller has not written up
the value of any inventory, or written off as uncollectible any notes or
accounts receivable or any portion thereof, except for write-offs and
write-ups in accordance with GAAP consistently applied; waived any rights of
substantial value; or, to the knowledge of Seller and Stockholders, omitted to
do any act, or permitted any act or omission to act, which will cause a
material breach of any contract, commitment or obligation, or any breach of
any representation, warranty, covenant or agreement made herein.
12
<PAGE>
3.10 Leases. Schedule 3.10 attached hereto contains an accurate and
complete list of leases (including all amendments thereof and modifications
thereto, the "Leases") pursuant to which Seller leases real property and
leases providing for rentals of at least $10,000 per annum of personal
property. None of the Leases relate to any property or equipment owned or
leased by any Stockholder or an Affiliate. To the knowledge of Seller and the
Stockholders, Seller is not in default in any material respect with respect to
any of the Leases which would permit the lessor thereunder to terminate such
Lease and no event or condition has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a default in any material respect thereunder, or would permit the
lessor thereunder to terminate such Lease, increase any of the lessee's
obligations or reduce the lessee's rights thereunder. All Leases are valid,
binding and enforceable in accordance with their respective terms, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and are
in full force and effect, and, except for the consents of lessors set forth in
Schedule 3.10 which consents have been obtained, the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby, will
not require Seller or Buyer to procure the consent of any lessor in order for
Buyer to succeed as lessee thereunder without any additional cost to or Buyer
to Seller or a diminution of lessee's rights thereunder.
3.11 Liabilities. To the knowledge of Seller and the Stockholders,
Seller is not, except as set forth in Schedule 3.11, subject to any
liabilities other than (i) those included in the September 30, 1996 Combined
Balance Sheet; and (ii) accounts payable and accrued expenses which have
arisen in the ordinary course of the WSJ Enterprises Business subsequent to
September 30, 1996.
3.12 Litigation. Except as set forth on Schedule 3.12 attached
hereto, there are no claims, actions, proceedings pending and, to the
knowledge of Seller and the Stockholders, threatened, and to the knowledge of
Sellers and the Stockholders, there are no investigations or inquiries in
progress, pending, threatened, against any Stockholder or Sellers, that could
adversely affect the Transferred Assets, or the transactions contemplated
hereby; nor, to the knowledge of Seller and the Stockholders, is there any
valid basis for any such claim, action, suit, proceeding, inquiry or
investigation. As a result of either the lack of a valid basis for, or the
availability of an appropriate defense to, any claims, actions, suits,
proceedings, inquiries or investigations set forth in Schedule 3.12, none of
such claims, actions, suits, proceedings, inquiries or investigations will
have a material adverse effect on the WSJ Enterprises Business or the Combined
Financial Condition or the Combined Results of Operations.
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None of the Stockholders nor the Seller is subject to any judgment, order or
decree entered in any lawsuit or proceeding which has had or may have a
significant adverse effect on WSJ Enterprises Business or the Combined
Financial Condition or Combined Results of Operations.
3.13 Permits, Licenses, Etc. To the knowledge of Seller and the
Stockholders, Seller does not require any permits, licenses, orders or
approvals of governmental or administrative authorities (collectively the
"Permits") to permit it to carry on the WSJ Enterprises Business as presently
conducted (including, without limitation, those required under federal, state
or local laws or regulations relating to pollution or protection of the
environment) other than the Permits which it currently holds, all of which are
described in Schedule 3.13. The conduct by Seller of the WSJ Enterprises
Business through the date hereof has not and, to the knowledge of Seller and
the Stockholders, the continuation of such business by Buyer after the Closing
in the same manner as currently conducted will not, violate or infringe, and
has not and, to the knowledge of Seller and the Stockholders, will not cause a
default in any material respect under, any of the Permits or require Seller or
the Buyer to obtain any additional Permits, and neither any Stockholder nor
Seller has received any written notification of any threatened suspension or
cancellation of any of the Permits which might be reasonably expected to have
a material adverse effect on the WSJ Enterprises Business or the Combined
Financial Condition or Combined Results of Operations.
3.14 Assets Necessary to Business. Except as set forth in Schedule
3.14, the assets, properties, licenses and other agreements of Seller included
in the Transferred Assets comprise all those required of Buyer to conduct the
WSJ Enterprises Business, at least to the extent conducted by Seller as of
September 30, 1996.
3.15 Taxes. Seller has: (I) filed all returns required to be filed
with respect to all federal, state, local and foreign income, payroll,
withholding, excise, sales, use, real and personal property, use and
occupancy, business and occupation, mercantile, real estate, capital stock and
franchise or other tax (all the foregoing taxes, including interest and
penalties thereon and including estimated taxes thereof, are hereinafter
collectively referred to as "Taxes"), (ii) paid all Taxes required by law to
be paid, and (iii) paid all other Taxes for which a notice of assessment or
demand for payment has been received, except, with respect to all of the
foregoing, to the extent that any claimed tax, fee, interest, assessment or
penalty is not due or is being contested in good faith. No reserve is or will
be required of Seller with respect to any Taxes relating to the income of
Seller through the Closing. Seller has not received any notice of an
examination having been made of Seller's federal income tax returns by the
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Internal Revenue Service at least since December 31, 1992. Seller has not
agreed to extend the time of assessment or collection of Taxes and is not a
party to any action or proceeding by any governmental authority for the
determination, assessment or collection of any Taxes. There is no examination
pending or, to the knowledge of Seller or the Stockholders, threatened by
taxing authorities relating to the determination, assessment or collection of
any Taxes from Seller.
3.16 Absence of Certain Changes or Events.
Since September 30, 1996:
(i) Seller has not sold or suffered any material
adverse change or loss or termination of or breach or
default of any of the Business Rights set forth or referred
to on the Schedules to this Agreement and there has been no
material adverse change, or, to the knowledge of Seller and
the Stockholders, is any material adverse change threatened
or anticipated, in the combined net sales, Combined
Financial Condition or Combined Results of Operations from
the amounts reflected on the September 30, 1996 Combined
Balance Sheet and the Combined Statement of Income for the
nine months then ended or, to the knowledge of Seller and
the Stockholders, in the prospects for WSJ Enterprises
Business, and Seller and the Stockholders do not know of any
event which is or might reasonably be expected to have a
material adverse effect on such net sales, condition or
results or prospects;
(ii) Seller has not permitted, allowed or suffered
any of its assets (tangible or intangible) to be subjected
to any mortgage, pledge, lien, encumbrance, restriction or
charge of any kind; not canceled any material indebtedness
(individually or in the aggregate) owing to it or waived any
claims or rights of substantial value; and not sold,
transferred or otherwise disposed of any of its property or
assets (tangible or intangible) except in the ordinary
course of business and consistent with past practice;
(iii) Seller has not paid, loaned or advanced any
amount to, or sold, transferred or leased any properties or
assets (tangible or intangible) to, or entered into any
agreement or arrangement with, any of its officers,
directors or employees, or increased the compensation to its
officers and employees at rates exceeding the rates of
compensation paid during the nine months ended September 30,
1996;
(iv) Seller has not experienced any material labor
dispute or difficulty;
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(v) Seller has not made capital expenditures or
commitments for additions to property, plant, equipment or
for any other purpose which are more than TwentyFive
Thousand Dollars ($25,000) in the aggregate; or suffered any
casualty loss or losses with respect their its assets
(whether or not insured against) which in the aggregate
exceed Twenty-Five Thousand Dollars ($25,000).
3.17 Employee Benefit Plans; ERISA.
(a) Except for the profit-sharing, medical, health and
severance plans set forth on Schedule 3.17, Seller does not maintain,
administer or otherwise contribute to any Employee Benefit Plan, as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), which is subject to any provision of ERISA and covers any
employee, whether active or retired ("Employee Plans"). None of the Employee
Plans set forth on Schedule 3.17 is a "multi-employer plan," as defined in
Section 3(37) of ERISA, and Seller has not been obligated to make a
contribution to any Employee Plan within the past five years on behalf of any
employee. Except for those which will be terminated or canceled on or prior to
the Closing, Seller does not maintain any form of current or deferred
compensation (other than base salary and base wages), bonus, incentive
compensation, profit sharing, stock option, stock appreciation right,
severance or separation pay, retirement, pension, salary continuation, group
or individual health, dental, medical, life insurance, survivor benefit or
similar plan, policy or arrangement for the benefit of any employee, whether
active or retired, of any class or classes of its employees ("Benefit
Arrangements"). The Stockholders have provided or caused to be provided to
Buyer (i) a copy of each Employee Plan and Benefit Arrangement, and a copy of
each of the documents (including trust agreements and other funding
arrangements and summary plan descriptions) under which each such Employee
Plan and Benefit Arrangement is operated; (ii) the most recent annual report,
if any, required to be filed with the government or any agency thereof; (iii)
with respect to any Employee Plans which are intended to be qualified under
Section 401(a) of the Code, a copy of the most recent determination letter
from the Internal Revenue Service on the Plan's qualified status and a copy of
the application for such letter; and (iv) a schedule showing either the annual
cost or the current value of all benefits of each Employee Plan and Benefit
Arrangement. With respect to all Employee Plans and Benefit Arrangements,
Seller is in compliance in all material respects with the terms of each such
plan or arrangement and, to the knowledge of Seller and the Stockholders, with
the requirements prescribed by any and all Laws as defined in Section 3.19
currently in effect, including but not
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limited to ERISA and the Code, applicable to such plans or arrangements. Since
December 31, 1995, the Employee Plans and Benefit Arrangements have not been
amended nor, except pursuant to their terms as in effect on December 31, 1995,
have any payments or contributions been made under such Plans or Arrangements.
Since December 31, 1995, Seller has not failed to make any contribution to, or
pay any amount due and owing as required by applicable law or by the terms of,
any Employee Plan or Benefit Arrangement. The obligations of Seller with
respect to any Employee Plan and Benefit Arrangement is fully funded. There is
no pending or, to the knowledge of Seller or the Stockholders, threatened
legal action, proceeding or investigation against Seller or any Employee Plan
or Benefit Arrangement with respect to the employees of Seller, other than
routine claims for benefits, which could result in liability to such plans of
Seller. The execution of this Agreement and the consummation of the
transactions contemplated hereby will not result in any payment (whether of
separation pay or otherwise) becoming due from Seller to any current or former
consultant or employee of Seller or in the vesting, acceleration of payment or
increase in the amount of any benefit payable to or in respect of any such
current or former consultant or employee of Seller, or in the denial or
reversal of any deductions taken by the Seller with respect to payments or
distributions under such plan.
(b) The Stockholders, some of whom have been employees of
WSB and the participants of the ESOP Plan and Trust have represented and
warranted to BBI in the WSB Stock Agreement that the ESOP Plan and Trust has
complied with all Laws, not limited to ERISA and the Code and regulations
thereunder, in connection with its administration and operation, and the sale
by the ESOP WSB Stockholder to BBI of the outstanding shares of capital stock
of WSB. The Seller and Stockholder hereby represent and warrant that any
failure, of the ESOP WSB Stockholder to so comply has not and will not result
in any loss, liability, expense or claim against BBI or any of its
subsidiaries, including the Buyer.
3.18 Insurance. Since December 31, 1992, Seller has, in full force
and effect, insurance against fire, liability, and other claims set forth in
Schedule 3.18 hereto in amounts and against such losses and risks as therein
set forth. The Schedule lists all the insurance policies maintained by Seller
each of which is valid, outstanding and binding. Such policies are sufficient
for compliance with all requirements of law and of all agreements with respect
to the operation of Seller and WSJ Enterprises Business and the coverage
provided thereby with respect to any act or event occurring on or prior to the
Closing will not in any way be affected by or terminate or lapse by reason of
this
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Agreement or the transactions contemplated by this Agreement and all will be
transferred at the Closing to Buyer, without any cost to Buyer.
3.19 Compliance with Applicable Law. Except as set forth in Schedule
3.19 attached hereto: (a) Seller has complied in all material respects with
respect to its operations, practices, real property, plants, structures,
machinery, equipment, vehicles and other property, and all other aspects of
its business, with all applicable laws (whether statutory or otherwise),
rules, regulations, orders, ordinances, judgments, decrees, orders, writs and
injunctions of all governmental authorities (federal, state, local, foreign or
otherwise) (collectively, "Laws"), including, but not limited to, all Laws
relating to the safe conduct of business, environmental protection and
conservation, antitrust, taxes, consumer protection, currency exchange, equal
opportunity, health, sanitation, fire, zoning, building, occupational safety,
pension, securities, trademark and copyright to the extent that failures to
comply in the aggregate have not and will not result in a loss, liability or
expense to Seller or Buyer, except where the failure or failures to comply
would not have in the aggregate a materially adverse effect on the WSJ
Enterprises Business or its prospects or the financial condition or results of
operations of Seller; and (b) neither Seller nor any of the Stockholders have
received notification which is currently outstanding or uncured of any
asserted present or past failure to so comply. There has not been any storage,
generation, manufacture, refinement, transportation, production, treatment or
disposal of solid wastes, toxic wastes or hazardous wastes or substances by
Seller or, to the knowledge of Seller and the Stockholders, at the real
properties leased or owned by Seller in violation of any applicable Law or
Permit or which would require significant remedial action under any applicable
Law or Permit. There has never been any spill, discharge, leak, emission,
injection, escape, dumping or any other release by Seller of any kind onto any
real property into the environment surrounding such real properties of any
solid wastes, toxic wastes or hazardous wastes or substances as such terms are
defined under any law.
3.20 No Consents. No consent, authorization, approval, order,
license, certificate or permit of or from, or declaration or filing with, any
federal, state, local or other governmental authority or any court or other
tribunal, and no consent or waiver of any party to any distribution agreement,
sales representative agreement, dealer agreement, or any other contract,
agreement, instrument or lease to which Seller or any Stockholder is a party,
is required for the execution, delivery or performance of this Agreement or
any of the Related Instruments by Seller or any Stockholder, as applicable, or
the consummation by such party or parties of the transactions contemplated
hereby or thereby, except for
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those written consents set forth on Schedules 3.9 and 3.10, all of which have
been obtained by Seller or the Stockholders other than those relating to
personal property which have been noted on Schedule 3.10 as not having the
consents of the lessors.
3.21 Full Disclosure. No representation or warranty of Seller and
Stockholders made in this Agreement, the Related Instruments or any written
statement furnished to the Buyer pursuant hereto or the Related Instruments or
Closing Documents contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not materially misleading.
3.22 Bulk Sale. The consummation of the sale of the Transferred Assets
is not subject to any laws relating to "bulk sales" .
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND BBI
To induce Seller and the Stockholders to enter into this Agreement
and consummate the transactions contemplated hereby, Buyer and BBI jointly and
severally represent and warrant to Seller and the Stockholders as follows:
4.1 Organization and Qualification. Each of Buyer and BBI is a
corporation duly organized, validly existing and in good standing under the
laws respectively of New York and of Delaware.
4.2 Authorization of Agreements. This Agreement has been duly
authorized. This Agreement and the Closing Documents have been duly executed
and delivered by Buyer and BBI, constitute the valid and binding obligations
of Buyer and BBI and are enforceable against Buyer and BBI in accordance with
their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforce ment of creditors' rights generally and, except to the
extent that the remedy of specific enforcement or injunctive relief is subject
to the discretion of the court before which any proceedings therefor may be
brought.
4.3 Authority to Buy. Buyer and BBI have all requisite corporate
power and authority: (I) to execute, deliver and perform this Agreement and
the Closing Documents, and (ii) to carry out the transactions contemplated
hereby and thereby. All necessary corporate proceedings of Buyer and
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BBI have been duly taken to authorize the execution and delivery of this
Agreement by Buyer and BBI and the performance of the transactions
contemplated hereby.
4.4 No Consents. No consent, authorization, approval, order, license,
certificate or permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority or any court or other tribunal,
and no consent or waiver of any party to any agreement to which Buyer or BBI
is a party, is required for the execution, delivery or performance by Buyer or
BBI of this Agreement.
4.5 No Violation. The execution and delivery by the Buyer and BBI do
not and their performance of this Agreement and the Closing Documents will
not, with or without the giving of notice and/or the passage of time, violate
any provisions of law applicable to the Buyer or BBI or conflict with, result
in the breach or termination of, any provision of, constitute a default under,
or give any party other than the Buyer or BBI the right to accelerate any
obligation under the Buyer's or BBI's certificate of incorporation, as amended
or by-laws, as amended, or any indenture, mortgage, deed of trust, lease or
other agreement or instrument to which Buyer or BBI is a party, or, with or
without the giving of notice and/or the passage of time, conflict with or
result in a material breach of any judgment, order, injunction, decree,
regulation or ruling of any court or other governmental authority to which the
Buyer or BBI is subject or by which any of the assets of the Buyer or BBI may
be bound.
4.6 Litigation. There are no claims, actions, proceedings, pending or
in progress, pending, or, to the knowledge of Buyer and BBI, threatened, and
to the knowledge of the Buyer and BBI, there are no investigations or
inquiries in progress, pending, or, threatened, against the Buyer or BBI, that
could affect Buyer or BBI, or the transactions contemplated hereby; nor, to
the knowledge of the Buyer and BBI, is there any valid basis for any such
claim, action, suit, proceeding, inquiry or investigation.
4.7 Securities Law Disclosures. BBI has filed all forms, reports,
statements, or other documents required to be filed by BBI with the Securities
and Exchange Commission ("SEC") and NASDAQ/ NMS, including, without
limitation: (a) its Registration Statement or Form S-1 as declared effective
by the SEC on April 8, 1996, (b) its Quarterly Reports on Form 10-Q for the
quarters ended April 30, 1996, June 30, 1996 and September 30, 1996, (c) all
reports on Form 8-K and (d) all amendments and supplements to all such reports
and registration statement (collectively, the "BBI SEC Reports"). As of the
respective filing dates, the BBI SEC Reports complied as to form in all
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material respects with the requirements of the Securities Exchange Act of 1934
(the "Exchange Act") or the Securities Act of 1933 (the "Securities Act"), as
applicable. The BBI SEC Reports did not at the time they were filed contain
any untrue statement of material fact, or omit to state a material fact
required to be stated therein that was necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.8 Full Disclosure. No representation or warranty of Buyer or BBI
made in this Agreement or any written statement furnished by the Buyer or BBI
to Seller or the Stockholders pursuant hereto or the Closing Documents
contains any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements or facts contained
herein or therein not misleading.
ARTICLE V
CERTAIN ADDITIONAL AGREEMENTS
5.1 Transfer Taxes. Seller shall pay all transfer taxes payable with
respect to the transfer of the Transferred Assets to Buyer.
5.2 Full Access. Until the earlier of five (5) years after the
Closing Date or the expiration of any applicable statute of limitations, the
Buyer will, with respect to financial, employment or tax matters relating to
the Transferred Assets and the WSJ Enterprises Business for the periods prior
to the Closing, (I) retain, and as the Seller or a Stockholder may reasonably
request, permit the Stockholders and their representatives, including counsel
and accountants, to inspect and copy the Books and Records of the Seller
related to in the Transferred Assets for periods ending on or prior to the
Closing Date.
5.3 Receivables. To the extent payment for the Uncollected Accounts
required by Section 5.6 of the BN Stock Agreement has not been made by the BN
Stockholders as provided in that Section, Seller shall promptly pay BBI the
amount of the deficiency.
ARTICLE VI
NON-COMPETITION
6.1 Non-Competition.
In consideration of this payment of $25,000 to Seller in the
form of a wire transfer of federal funds to the bank account at the McHenry
State Bank, McHenry, Illinois designated to BBI
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by Seller in that amount, each of the Stockholders and the Seller agree that
such Stockholder or the Seller, as the case may be, shall not, directly or
indirectly, at any time during the period commencing with the Closing and
ending on a date two (2) years following the later of the Closing or the date
of the termination of such employment of the Stockholder with BBI or any
subsidiary of BBI, (i) compete, directly or indirectly, with Buyer in the
conduct of the battery distribution business of BBI and its subsidiaries,
including Battery Network and WSB or (ii) except on behalf of the BB1 or its
subsidiary, directly or indirectly solicit for employment by others any
employees of BB1, or any of its subsidiaries to perform duties with respect to
any aspect of such business; provided, however, that Buyer or Battery Network
is not then in breach of any obligation to Seller or such Stockholder under
this Agreement or under an employment agreement with the Stockholder and that
nothing contained in this Section 6.1 shall prevent (A) Seller and
Stockholders and their Affiliates from purchasing in the aggregate as an
investment less than 5% in the aggregate of the outstanding securities of any
corporation whose securities are regularly traded on any national security
exchange or in the over-the-counter market or (B) the wife of WSS and her
brother from continuing to own and operate Battery Connection, Inc. a battery
catalogue business.
6.2 Injunctive Relief. The Seller and each Stockholder hereby
expressly acknowledge that money damages might be difficult to calculate and
may not adequately compensate the Buyer in connection with an actual or
threatened breach by Seller or a Stockholder of the provisions of Sec tion 6.1
hereof. Accordingly, Seller and Stockholders hereby expressly agree that Buyer
and BBI shall be entitled to enforce by injunction or other equitable relief
the due and proper performance and observance of the provisions of Section 6.1
hereof, without being required to post any security or bond, and in addition
shall be entitled to pursue any other available remedies at law or equity,
including the recovery of money damages, in respect of the actual or
threatened breach of the provisions of said Section.
ARTICLE VII
REMEDIES
7.1 Survival of Representations and Warranties. The right of a party
to maintain any proceeding or action against another party hereto based on a
breach of a representation and warranty or default of a covenant in this
Agreement or pursuant hereto made by any party shall survive the Closing for a
period of two years except (i) with respect to representations and warranties
with respect
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to Taxes and under Section 3.17(b) which shall survive for the applicable
statute of limitations period and (ii) such right shall survive any
investigation made at any time by or on behalf of any other party.
7.2 Indemnification by the Stockholders. Subject to Section 7.6,
Seller and the Stockholders jointly and severally agree to indemnify, defend
and hold harmless Buyer and BBI and its controlling persons and controlled
persons, successors and assigns (hereinafter in this Article VII collectively
referred to as Buyer unless the context otherwise indicates) from and against
any and all claims, demands, losses, costs, obligations, liabilities, interest
thereon, penalties and expenses, including reasonable attorneys' fees and
expenses (all the foregoing being hereinafter sometimes collectively referred
to as "Article VII Damages") occasioned by, arising out of or resulting from
any breach or default of any of the representations and warranties of Seller
or the Stockholders or of the covenants of Seller or the Stockholders in this
Agreement, the Related Instruments or in any Exhibit or Schedule to, or any
certificate, agreement or other instrument furnished pursuant to, this
Agreement or the Related Instruments or any facts or circumstances
constituting such a breach or default.
7.3 Indemnification by Buyer and BBI. Subject to Section 7.6, Buyer
and BBI jointly and severally agree to indemnify, defend and hold harmless the
Seller and Stockholders and their respec tive successors and assigns from and
against any and all Article VII Damages occasioned by, arising out of or
resulting from any breach or default of any of the representations, warranties
or covenants of Buyer or BB1 contained in this Agreement or a Related
Instrument or in any Exhibit or Schedule to, or any certificate, agreement or
other instrument furnished pursuant to, this Agreement or a Related Instrument
or any facts or circumstances constituting such breach or default.
7.4 Claims for Indemnification. A party seeking indemnification for
Article VII Damages (the "Indemnified Party"), as a condition of asserting
claims for indemnification, shall notify the other party (the "Indemnifying
Party") in writing of any event, or of any facts, which, in its opinion,
entitle or may entitle the Indemnified Party to indemnification under this
Article VII. The notice from the Indemnified Party shall specify all facts
then known to it relating to its claim for indemnification and the amount or
estimated amount of the liability arising therefrom. The right of the
Indemnified Party to indemnification and the amount or the estimated amount
thereof, as set forth in the notice, shall be deemed agreed to by the
Indemnifying Party unless, within 30 days after the mailing of such notice,
the Indemnifying Party notifies the Indemnified Party in writing that it
disputes the right of the Indemnified Party to indemnification as set forth or
estimated in the notice or that the Indemnifying Party elects to defend, in
the manner provided in Section 7.5 hereof, the claim giving rise to such
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indemnification right. If the Indemnified Party shall be duly notified that
the Indemnifying Party disputes such claim as aforesaid, the parties shall
endeavor to settle and compromise such dispute but no such settlement or
compromise shall be effected without the consent of both. If unable to do any
of the foregoing, such dispute as to indemnification shall be determined by
appropriate litigation (which shall mean when the claim has been finally
determined by a court or tribunal from which determination no appeal is or may
be taken or when the defense thereto has been abandoned); and any right of an
Indemnified Party to indemnification established by reason of such settlement,
compromise, or litigation shall be promptly thereafter paid and satisfied by
the Indemnifying Party.
7.5 Right to Defend. If the facts giving rise to indemnification
shall involve any actual or threatened claim or demand by any other third
party against an Indemnified Party, the Indemnified Party may upon written
request require the Indemnifying Party, at the expense of the Indemnifying
Party through counsel of its own choosing, to defend or prosecute such claim
or demand in the name of the Indemnified Party, as the case may be (without
prejudice to the right of the Indemnified Party to participate through counsel
of its own choosing at its own expense). The Indemnified Party shall cooperate
in the defense or prosecution of said claim or demand, including providing the
Indemnifying Party with access to such books and records of the Indemnified
Party in the possession of the Indemnified Party, which shall be reasonably
deemed by the Indemnifying Party to relate to said claim or demand, and shall
be entitled to be reimbursed, as provided in Sections 7.2, 7.3 or 7.7, for all
costs and expenses incurred by it in connection therewith. No settlement shall
be effected by an Indemnified Party to which it may claim indemnification from
an Indemnifying Party without the consent of the Indemnifying Party but such
consent shall not be unreasonably withheld.
7.6 Limitations. Except for damages arising with respect to the
representation in Section 3.17(b) and the covenant contained in Section 5.3
(the "Unlimited Damages"), neither the Seller and Stockholders nor the Buyer
and BBI, as the case may be, will be obligated to indemnify, defend or hold
the other party or parties harmless with respect to any Article VI Damages
asserted by it until such damages exceed the sum of $50,000 in the aggregate
(the "Threshold") and then indemnification shall be to the extent of all
Article VI Damages above the Threshold amount. In determining the Threshold,
there should be included, with respect to the Seller's and the Stockholders'
obligations hereunder, all damages under Article VII of the BN Stock Agreement
(other than Unlimited Damages as defined in that agreement) and all damages
under Article VI of the WSB Stock Agreement (other than Unlimited Damages as
defined in that agreement) suffered by the Buyer and BBI (collectively,
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along with the Article VII Damages hereunder, other than Unlimited Damages,
hereinafter referred to as the "Buyer's and BBI's Aggregate Damages"). In no
event shall the Buyer's and BBI's Aggregate Damages for purposes of
indemnification of the Buyer and BBI exceed a limit (the "Damages Limit") of
$3,000,000 plus the shares of Common Stock of BBI and options to purchase
shares of Common Stock of BBI issued to the Battery Network Stockholders
pursuant to the BN Stock Agreement (such shares and options collectively
referred to as the "Equity Portion of the Damages Limit"). Buyer and BBI agree
that the Unlimited Damages shall be paid in cash and payment of the Buyer's
and BBI's Aggregate Damages shall be sought first from the BN Stockholders
before Buyer and BBI shall require payment from the Sellers and the
Stockholders of Article VII Damages, with the cash payments of Buyer's and
BBI's Aggregate Damages pursuant to the BN Stock Agreement to be credited to
the Buyer's and BBI's Aggregate Damages. In no event shall Buyer and BBI
require the Seller, WS Senior or Dolores Sapp to make payment of the Equity
Portion of the Damages Limit.
7.7 Litigation; Remedies Cumulative. In the event of litigation to
enforce this Agreement or any provision thereof, the prevailing party, in
addition to any other relief such party may be awarded, shall be entitled to
recover its reasonable attorneys' fees, including those incurred with respect
to any appellate proceeding. Except as herein expressly provided, all remedies
provided in this Agreement, including, but not limited to, those pursuant to
Section 6.2 and Articles VII and Section 8.5 shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of
any other remedies against any other party hereto.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses. Each party hereto shall pay its own expenses incidental
to the negotiation, preparation and consummation of this Agreement, the
Related Instruments and Closing Documents and all other agreements executed
and delivered by it hereunder or in connection herewith and the transactions
provided for herein and therein, including all fees and expenses of its or
their respective counsel and accountants, except that the fees and expenses of
Deloitte & Touche LLP for its services in auditing and reviewing the Audited
Financial Statements and shall be borne by Buyer and BBI.
8.2 Further Actions. At any time and from time to time after the
Closing, each party hereto agrees, at its own expense (except as otherwise
provided herein), to take such actions and to execute and deliver such
documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
25
<PAGE>
8.3 Commissions and Finders' Fees. Except for the fees of Founders
Management Services, Inc. ("Founders"), the fees of which shall be the sole
responsibility of Buyer and BBI, each of the parties represents that it has
not incurred any liability to any broker, finder or agent for any brokerage
fees, finder's fees or commissions with respect to the transactions
contemplated by this Agreement, which may be directly or indirectly asserted
against the other parties. Buyer and BBI agrees to be fully responsible to pay
all fees due to or claims of Founders and to indemnify and hold Seller and
Stockholders harmless from and against all liability, loss, cost, charge or
expense, including reasonable counsel fees, arising from claims of Founders
for any fee or commission with respect to the transactions contemplated by
this Agreement or pursuant to all outstanding agreements between Founders and
Buyer.
8.4 Knowledge of Seller. For purposes of this Agreement "knowledge of
the Seller" shall mean the knowledge of any of its officers or directors and
other persons employed by Seller with managerial responsibilities.
8.5 Injunctive Relief. The Buyer, BBI, the Seller and the
Stockholders acknowledge and agree that in view of the uniqueness of WSJ
Enterprises Business, damages at law would be insufficient for breach of any
of their respective covenants in this Agreement. Accordingly, the parties
hereto agree that in the event of a breach or threatened breach of any
provisions of this Agreement, the Buyer and BBI or the Seller and the
Stockholders, as appropriate, shall be entitled to equitable relief in the
form of an injunction to prevent irreparable injury without being required to
provide any security or post any bond. Nothing herein shall be construed as
prohibiting any party hereto from pursuing any remedies, including damages,
for breach or threatened breach of this Agreement.
8.6 Further Assurances. Each party hereto shall, from time to time
after the Closing, at the request of any other party hereto and without
further consideration, execute and deliver such other instruments of
conveyance, assignments, transfer and assumption, and take such other actions
as such other party may reasonably request to more effectively consummate the
transactions contemplated by this Agreement.
8.7 Reformation and Severability. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under present or future laws
effective during the term hereof:
26
<PAGE>
(a) in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable; and
(b) the legality, validity and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired
thereby.
8.8 Entire Agreement; Modification. This Agreement, the Related
Instruments and the Exhibits hereto set forth the entire understanding of the
parties with respect to the subject matter hereof, supersede all existing
agreements and understandings between them (and all prior representations and
warranties) concerning such subject matter and may be modified only by a
written instrument duly executed by each party hereto.
8.9 Notices. Any notice given pursuant to this Agreement to any party
hereto shall be deemed to have been duly given (I) when mailed by registered
or certified mail, return receipt requested, (ii) when telecopied, provided a
copy of the notice is mailed by registered or certified mail, return receipt
requested, within one business day following the date of the telecopied
transmission, or (iii) when hand delivered to the party to whom it is to be
given at the address of such party set forth below, as follows:
If to the Seller at its address or to the Stockholders at
his address set forth in the first paragraph of this Agreement:
with a copy to:
Berger, Newmark & Fenchel, P.C.
222 North LaSalle Street
Suite 1900
Chicago, Illinois 60601-1199
Attention: Michael R. Wolfe, Esq.
Fax (312) 782-6491
If to Buyer or BBI:
Batteries Batteries, Inc.
Battery Requisition COPY
c/o Founders Equity, Inc.
200 Madison Avenue
New York, New York 10016
Attention: Mr. Warren H. Haber
Chairman of the Board
FAX: (212) 953-0626
27
<PAGE>
with a copy to:
Leo Silverstein, Esq.
Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC
Citicorp Center, 56th Floor
153 East 53rd Street
New York, New York 10022
FAX: (212) 371-5500
or at such other address as a party shall from time to time designate by
written notice, in the manner provided herein, to the other parties hereto.
8.10 Waiver. Any waiver must be in writing, and any waiver by any
party of a breach of any provision of this Agreement shall not operate as or
be construed to be a waiver of any other breach of that provision or of any
breach of any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one or more
occasions will not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
8.11 Binding Effect; Assignment. The provisions of this Agreement
shall be binding upon and inure to the benefit of Seller, the Stockholders,
the Buyer and BBI and their respective heirs, representatives, successors and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties, and any purported assignment without
such consent shall be void, except that (A) the Buyer may assign this
Agreement to any corporation in which it owns 100% of the outstanding shares
of voting stock and agrees to be bound by the provisions of the Agreement,
provided that BBI guaranties the obligation of the assignee, and (B) the Buyer
and BBI may collaterally assign their rights under this Agreement to IBJ
Schroder Bank & Trust Company ("IBJ") as Agent and Lender under the Revolving
Credit, Term Loan and Security Agreement among Buyer, BBI, subsidiaries of
BBI, Battery Network, WSB and IBJ as Agent and Lender.
28
<PAGE>
8.12 No Third-Party Beneficiaries. Except for rights of Indemnified
Parties under Article VII hereof, the rights of the parties under the Related
Instruments or the assignees permitted under Section 8.11, this Agreement does
not create, and shall not be construed as creating, any rights enforceable by
any person not a party to this Agreement.
8.13 Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
8.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.15 Governing Law. This Agreement and all amendments thereof shall
be governed by, and construed in accordance with, the internal laws of the
State of Delaware applicable to contracts made and to be performed entirely
within the state, without giving effect to the principles of conflict of laws
which may be applied thereby. Service of process on Buyer, BBI, Seller and the
Stockholders, as the case may be, in any action arising out of or relating to
this Agreement shall be effective upon Buyer, BBI Seller or the Stockholders,
as the case may be, if mailed to the address listed in Section 8.9 hereof.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
BATTERIES BATTERIES, INC.
By: /s/ John Teeger
-----------------------------------
Title
BATTERY ACQUISITION CORP.
By: /s/ John Teeger
-----------------------------------
WSJ ENTERPRISES, INC.
By: /s/ Dolores N. Sapp
-----------------------------------
, President
STOCKHOLDERS:
/s/ William S. Sapp
--------------------------------------
William S. Sapp
/s/ Dolores Sapp
--------------------------------------
Dolores Sapp
/s/ Susan Grandt
--------------------------------------
Susan Grandt
Attorney & Agent
/s/ William Steven Sapp
--------------------------------------
William Steven Sapp
Attorney & Agent
/s/ James Sapp
--------------------------------------
James Sapp
30
<PAGE>
ASSET PURCHASE AGREEMENT AMONG
BATTERIES BATTERIES, INC., BATTERIES ACQUISITION CORP., WSJ ENTERPRISES, INC.
AND THE WSJ ENTERPRISES, INC. STOCKHOLDERS
<PAGE>
SCHEDULE 1.2(A)
Transferred Assets: None
<PAGE>
SCHEDULE 1.2(B)
Lease Security Deposits: None
<PAGE>
SCHEDULE 1.2(C)
None
<PAGE>
SCHEDULE 1.2(D)
Intangible Assets: None
<PAGE>
SCHEDULE 1.2(E)
None
<PAGE>
SCHEDULE 1.2(E)-1
FOREIGN RECEIVABLES
<PAGE>
SCHEDULE 1.2(G)
None
<PAGE>
SCHEDULE 1.2(H)
None
<PAGE>
SCHEDULE 1.2(L)
None
<PAGE>
SCHEDULE 3.5
Tangible Assets: None
<PAGE>
SCHEDULES 3.6
Intangible Assets:
Pending trademark "Absolute"
Registered trademark - "Battery Network"
<PAGE>
SCHEDULE 3.12
Litigation:
Blenheim Group USA, Inc. vs. Battery Network
<PAGE>
SCHEDULE 3.13
Permits--Licenses
California--Sellers Permit, California City of Escondido
New Jersey--Sales and Use Tax Recycling Permit
Illinois--Illinois Department of Revenue
Washington--Certificate of Coverage--Master License
License Agreement--De Pew Engineering Inc.
<PAGE>
SCHEDULE 3.17
Employee Benefit Plan:
Alexander Battery Co. East, Inc. Specimen Profit Sharing Plan Adoption
Agreement and
Alexander Battery Co. East, Inc. Specimen Profit Sharing Plan & Trust
Alexander Battery Co. West, Inc. Specimen Profit Sharing Plan & Trust
Alexander Battery Co. South, Inc. Specimen Profit Sharing Plan
Adoption Agreement and
Alexander Battery Co. South, Inc. Specimen Profit Sharing Plan & Trust
W.S. Battery & Sales Co., Inc. Employee Stock Ownership Plan and Trust
and
W.S. Battery & Sales Co., Inc. Specimen Money Purchase Pension
Plan & Trust
Battery Network, Inc. Specimen Profit Sharing Plan Adoption Agreement
and
Battery Network, Inc. Specimen Profit Sharing Plan & Trust
<PAGE>
SCHEDULE 3.18
Insurance:
INSURANCE COMPANY POLICY NO. STATE TYPE OF INSURANCE
- ----------------- ---------- ----- -----------------
State Farm 93-95-5868-5 Illinois Business & Liability
State Farm 98-07-3606-4 Washington Business & Liability
State Farm 93-Mo-1343-1 IL, WA, NJ Workers Comp. & Employers
Liability
Met Life 176866 EBPG IL Health/Life
Robt. Drier Co. WN96-538430-05 CA Workers Com. & Employers
Liability
Bankers Std. Co. D2 61 19 479 CA Commercial Property &
General Liability
Blue Shield CA H82188 CA HMO Health Plan
Private MedCare 8634 CA Group Dental Services
Sentry Ins. 44-66422-02-00-961 Commercial Property
44-66422-01 NJ Liability and Umbrella
Coverage
Met Life k76892 NJ Health/Life
<PAGE>
SCHEDULE 3.19
Compliance with Applicable Law: None
<PAGE>
SCHEDULE 3.9
Contracts and Commitments
A. Manufacturer/Representative Agreements between Absolute Battery and:
BERRY MARKETING, INC. for Alaska, Washington, Western Oregon, Western
Montana and Western Idaho, commencement 7/12/95
MARKETING SERVICES OF KANSAS for Iowa, Nebraska Missouri and Kansas,
except Intelligent Electronics and Inacom, commencement 9/1/95
NEW HORIZONS for Illinois and Wisconsin, commencement 2/23/1995
NEW ERA SALES for Northern NJ and New York, commencement 5/17/95
SILVERMAN SAYER SERVICES for Florida except Tech Data, commencement 2/7/95
TCG, THE CONNECTION GROUP INC. for Texas, Oklahoma, Louisiana, Arkansas
except Daisytek and CompuCom, commencement 9/1/95
PIONEER MARKETING for New England, upstate New York, sourthern Connecticut
state line to northern Maine west to New York except MacWarehouse,
commencement 2/1/96
ROY BRAKE & ASSOCIATES for Colorado, Utah, Idaho, Wyoming and Montana,
commencement 12/7/95--Note says there is an Addendum adding Arizona,
New Mexico and Southern Nevada.
INCREMENTAL SALES for Northern California, except Van Star, Momentum and
MicorSystems, and Northern Nevada
B. Agreement Between Burlington Northern Railroad Company, the Atchison, Topeka
and Santa Fe Railway and Battery Network made on September 1, 1996 through
November
C. Distributor Agreements Between Battery Network, Inc., Absolute Battery Co.
and the following distributors:
ABSOLUTE BATTERY CANADA, INC./BATTERY NETWORK CANADA/PHILIPE SIMARD IND.
for the territory of Canada and Cuba
ABSOLUTE BATTERY UK LTD/BATTERY NETWORK EUROPE LTD./MARTIN AGAR IND. for
the United Kingdom and the European Economic Community ("EEC")
<PAGE>
SCHEDULE 3.9 CONTINUED...
D. Summaries of McHenry Agreements with:
Jim Lewis
George Johnson
Don Smith
John Miller
Bill Faris
E. Summaries of New Jersey Agreements with:
Tom Mazzante
Sandro Lanni
Ken Wilson
Karen Wilson
Pamco
Mike Langella
Greenshed Sales/Cary Martin
Bryan Whitney
Armondro Toral, Jr.
Canada: Contract
U.K.: Contract
Marvin Mocskowicz
F. Summaries of San Diego Verbal Sales Agreements with:
Tim Jacubowski
Dave Zeman
PJH Sales and Marketing Inc. (Pat Huberty)
Dennis Woods
Don Ritchie
<PAGE>
SCHEDULE 3.10
Lease Equipment:
Telephone system in North Branch, New Jersey
Commencement 6/6/94; term 60 months; monthly rental payment $1,022.30
Additional payment of $61.09 per month for 800 GS/LS Module
One Yale Sit Down Electric Forklift
<PAGE>
SCHEDULE 3.11
Liabilities--None
<PAGE>
THIS OPTION HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
OTHER SECURITIES STATUTE, INCLUDING, WITHOUT LIMITATION, THE SECURITIES LAWS
OF ANY STATE, AND IS SUBJECT TO RESTRICTIONS ON EXERCISE AND TRANSFER
DESCRIBED IN SECTION 11 HEREOF.
OPTION CERTIFICATE
BATTERIES BATTERIES, INC., a Delaware corporation (the "Company") ,
agrees as of this 3rd day of January 1997, pursuant to this Option Certificate
(this "Option"), issued pursuant to the terms of the Stock Purchase Agreement
among Batteries Network, Inc., an Illinois corporation, James Sapp, Susan
Grandt and William Steven Sapp, and the Company, that James Sapp who resides
at 2733 Laguna Shores Lane, Las Vegas, Nevada 89121 (the "Holder") is entitled
to purchase from the Company at any time or from time to time, subject to the
limitations and conditions hereinafter set forth, up to 72,608 shares of the
Company's Common Stock, $.00l par value per share (the "Shares"). The purchase
price per share of Common Stock (the "Exercise Price") shall be equal to
$4.50. The number of Shares and the Exercise Price are subject to adjustment
as provided herein.
1. EXERCISE OF OPTION.
1.1 Exercise in Full. This Option may be exercised in full by the
Holder hereof by surrender of this Option, with the form of subscription at
the end hereof duly executed by such Holder, to the Company at c/o Founders
Management Services, Inc., 200 Madison Avenue, New York, New York 10016,
accompanied by payment in cash or by wire transfer to the Company, in the
amount obtained by multiplying the number of Shares (giving effect to any
adjustment therein) by the Exercise Price, as adjusted; provided that, in case
such Shares have not been registered under the Securities Act of 1933, as
amended (the "1933 Act"), the Company may also require that such Holder
furnish to the Company a written statement that such Holder is purchasing such
Shares for such Holder's own account for investment and not with a view toward
distribution thereof, and that none of such Shares will be sold or otherwise
distributed in violation of the provisions of the 1933 Act.
1.2 Exercise in Part. This Option may be exercised in part by
surrender of this Option in the manner and at the place provided in section
1.1, except that the amount payable by the Holder on such partial exercise
shall be the amount obtained by multiplying (a) the number of Shares (giving
effect to any adjustment therein) designated by the Holder in the form of
subscription at the end hereof duly executed by such Holder by (b) the
Exercise Price, as adjusted. On any such partial exercise, the Company, at its
expense, will forthwith issue and deliver to the Holder hereof or its designee
a new option or options of like tenor, in the name of such Holder or its
designee (upon payment by such Holder of any applicable transfer taxes),
calling in the aggregate on the face or faces thereof for the number of Shares
equal (giving effect to any adjustment therein) to the number of such Shares
designated by the Holder in the form of subscription at the end hereof.
<PAGE>
1.3 Term of Option; Certain Price Provisions. This Option may be
exercised in full or in part at any time during the period beginning on the
date hereof and ending on January 2, 2002.
2. DELIVERY OF STOCK AND OPTION CERTIFICATES, ETC. ON EXERCISE.
As soon as practicable after the exercise of this Option in full or
in part, and in any event within five (5) business days thereafter, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of, and delivered to, the Holder,
or otherwise as the Holder may direct (upon payment by the Holder of any
applicable transfer taxes), a certificate or certificates for the number of
fully paid and nonassessable Shares to which the Holder shall be entitled on
such exercise, rounded upward to the nearest whole share.
3. ADJUSTMENTS.
3.1 Adjustments to Exercise Price. The number of shares of Common
Stock of the Company purchasable upon exercise of this Option and the Exercise
Price per share shall be increased or decreased proportionately, as the case
may be, without change in the aggregate Exercise Price, in case of the payment
by the Company in shares of Common Stock of dividends on the outstanding
shares of Common Stock of the Company or in case of the subdivision or
combination of the outstanding shares of Common Stock of the Company.
3.2 Effect of Reorganization or Reclassification on Option. In the
case of any reorganization of the Company or reclassification of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result
of a subdivision or combination) or in the case of any consolidation of the
Company with, or merger of the Company into, another corporation, or in the
case of any sale, lease or conveyance of all, or substantially all, of the
property, assets, business and good will of the Company as an entity, then, as
a part of such reorganization, reclassification, consolidation, merger or
sale, provision shall be made so that the Holder of this Option shall
thereafter be entitled to receive upon exercise hereof the number of shares of
stock, warrants, or other securities or property of the Company, or of the
successor corporation resulting from such consolidation, merger or sale, to
which a Holder of that number of Shares deliverable upon the exercise of this
Option would have been entitled on such reorganization, reclassification,
consolidation, merger or sale, as if this Option had been exercised in full
immediately prior to the effectiveness of such reorganization,
reclassification, consolidation, merger or sale.
3.3 Effect of Adjustment on Face of Option. Irrespective of any
adjustments in the Exercise Price or the number or kind of securities issuable
hereunder, this Option may continue to express the same price and number and
kind of shares as are herein stated.
3.4 Effect of Distribution of Assets. In case, prior to the
expiration of this Option by exercise or by its terms, the Company shall at
any time make any distribution of its assets to Holders of its Common Stock as
a liquidating or partial liquidating dividend by way of return of capital or
otherwise (other than as either a cash dividend payable out of any surplus
legally available for the
-2-
<PAGE>
payment of dividends under the laws of the State of Delaware or as a stock
dividend as provided in paragraph 3.1(a) hereof), then the Holder, upon
receipt of a Share upon exercise of this Option after the date of record for
the determination of Holders of Common Stock entitled to such distribution of
assets or dividend, shall also be entitled to receive, in addition to the
Share, the amount of such assets or dividend which the Holder would have
received had it been the Holder of record on the record date for the
determination of those entitled to such distribution of such Share.
4. NO DILUTION OR IMPAIRMENT.
The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Option, but will at all times in good faith assist in carrying out all such
terms and in taking all such action as may be necessary or appropriate in
order to protect the rights of the Holder hereunder. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value
of Shares above the amount payable therefor on such exercise, and (ii) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Shares upon
exercise of this Option.
5. NOTICES OF RECORD DATE, ETC.
In the event of:
(a) any taking by the Company of a record of the Holders of
the Common Stock or any class of other securities for the purpose of
determining the Holders thereof who are entitled to receive any
dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right; or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all of the assets of
the Company to, or consolidation or merger of the Company with, any
other person; or
(c) any voluntary or involuntary dissolution, liquidation, or
winding up of the Company;
then, and in such event, the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right, stating the
amount and character of such dividend, distribution or right, (ii) the date on
which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is to take
place, and the time, if any, to be fixed as to which the Holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon
-3-
<PAGE>
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up, and (iii) the
amount and character of any stock or other securities, or rights or options in
respect thereof, proposed to be issued or granted, the date of such proposed
issue or grant and the persons or class of persons to whom such proposed issue
or grant is to be offered or made. Such notice shall be mailed by certified
mail, return receipt requested, at least 15 days prior to the date therein
specified.
6. RESERVATION OF STOCK, ETC., ISSUABLE UPON EXERCISE OF THIS
OPTION.
The Company will at all times authorize, reserve and keep available,
solely for issuance and delivery upon exercise of this Option as herein
provided, all shares of Common Stock from time to time issuable upon exercise
of this Option.
7. EXCHANGE OF OPTION.
Upon surrender for exchange of this Option properly endorsed to the
Company, the Company, at its expense, will issue and deliver to, or on the
order of, the Holder, a new Option or options of like tenor in the name of the
Holder or as the Holder (upon payment by the Holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the face of this Option.
8. REPLACEMENT OF OPTION.
Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Option and, in the case of
any such loss, theft or destruction, upon delivery of an agreement of
indemnity reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, upon surrender and cancellation of this Option,
the Company, at its expense, will execute and deliver, in lieu thereof, a new
Option of like tenor.
9. REMEDIES.
The Company stipulates that the remedies at law of the Holder in the
event of any default or threatened default by the Company in the performance
of or compliance with any of the terms of this Option are not, and will not
be, adequate and that such terms may be specifically enforced by a decree for
the specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
10. NEGOTIABILITY, ETC.
This Option is issued upon the following terms, to all of which the
Holder by the taking hereof consents and agrees:
-4-
<PAGE>
(a) subject to Section 11 hereof, title to this Option may
be transferred by endorsement (by the Holder' s executing the form of
assignment at the end hereof) and delivery in the same manner as in
the case of a negotiable instrument transferable by endorsement and
delivery;
(b) any person in possession of this Option, properly
endorsed, is authorized to represent himself as absolute owner hereof
and is empowered to transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof for value, subject to
Section 11 hereof; each prior taker or owner waives and renounces all
of his equities or rights in this Option in favor of each such bona
fide purchaser, and each such bona fide purchaser shall acquire
absolute title hereto and to all rights represented hereby; and
(c) until this Option is transferred on the books of the
Company, the Company may treat the Holder as the absolute owner
hereof for all purposes, notwithstanding any notice to the contrary.
11. RESTRICTIONS ON TRANSFER OF OPTION OR SHARES.
11.1 Restrictions in General.
(a) Notwithstanding any provisions contained herein to the contrary,
this Option and the Shares shall not be transferable except upon the
conditions specified in this Section 11, which conditions are intended, among
other things, to insure compliance with the provisions of the 1933 Act with
respect to transfer of this Option or of the Shares. The Holder agrees that it
will not transfer this Option except by will or the laws of descent or
transfer any of the Shares prior to delivery to the Company of the opinion of
counsel referred to, and to the effect described, in Section 11.2 hereof or
until the effectiveness of the registration under the 1933 Act of the Shares
to be transferred.
(b) The Company shall maintain its registration under Section 12 of
the Securities Exchange Act of 1934 (the "1934 Act") as long as this Option
remains outstanding and shall timely file the reports required to be filed as
a result of its registration under said Act.
11.2 Statement of Intention to Transfer; Opinion of Counsel. The
Holder, by its acceptance of this Option, agrees that prior to any transfer of
the Shares, such Holder will deliver a statement to the Company setting forth
the intention of such Holder's prospective transferee with respect to its
retention or disposition of the Shares, together with a signed copy of the
opinion of such Holder's counsel as to the non-necessity for registration
under the 1933 Act in connection with such transfer. If, in the opinion of
such Holder's counsel, which opinion must be reasonably satisfactory to the
Company's counsel, the proposed transfer of the Shares may be effected without
registration under the 1933 Act, then the Holder shall be entitled to transfer
the Shares in accordance with the intended method of disposition specified in
the statement delivered by such Holder to the Company.
-5-
<PAGE>
11.3 Acquisition for Investment. The Holder covenants and agrees
with the Company that the Company may instruct its transfer agent not to
transfer the Shares unless such agent has been advised by the Company or has
otherwise been satisfied that the transferor has complied with the provisions
described above.
11.4 Transfer Restriction Legend.
(a) Each certificate representing Shares initially issued upon
exercise of this Option, unless at the time of exercise such Shares are
registered under the 1933 Act, shall bear the following legend (and any
additional legend required by any securities exchange or organized trading
market on which the Shares may, at the time, be listed) on the face thereof:
"The securities represented hereby have not been registered
under the Securities Act of 1933 and the transfer of such
securities is subject to the restrictions set forth in
Section 11 of an Option Certificate issued by Batteries
Batteries, Inc. (the "Company"), a copy of which is
available for inspection at the head office of the Company,
and no transfer of said securities shall be valid or
effective unless and until the terms and conditions of said
Section 11 shall have been complied with."
(b) Any certificate issued at any time upon transfer of, or in
exchange for or replacement of, any certificate bearing such legend shall also
bear such legend unless, in the opinion of counsel for the Holder thereof,
which opinion is reasonably satisfactory to Company's counsel, addressed and
delivered to the Company and the Holder, the shares represented thereby need
no longer be subject to the restrictions contained in this Article 11. The
provisions of this Article 11 shall be binding upon all subsequent Holders of
certificates bearing the above legend.
12. NO CANCELLATION OR REDEMPTION RIGHTS AS TO THIS OPTION OR
THE SHARES.
The Company shall not have any right to redeem or cancel this Option
or redeem, at its option, any or all of the Shares.
13. NOTICES, ETC.
Except as otherwise provided herein, all notices and other
communications hereunder shall be mailed by first class registered or
certified mail, postage prepaid, to such addresses as may be furnished from
time to time by the Company or the Holder to each other, and prior thereto, as
follows:
-6-
<PAGE>
(a) To the Company, at:
Batteries Batteries, Inc.
c/o Founders Management Services, Inc.
200 Madison Avenue
New York, New York 10016
Attention: Mr. Warren H. Haber, Chairman of the Board
and
(b) To the Holder, at the address set forth in the opening
paragraph.
14. SURVIVAL OF AGREEMENTS.
All covenants and agreements contained herein, whether made by the
Company or by the Holder, shall survive the execution and delivery of this
Option and any investigation at any time made by the Holder or on the Holder's
behalf.
15. MISCELLANEOUS.
This Option and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Option is being delivered in the State of Delaware and shall be construed and
enforced in accordance with and governed by the laws of such state and
applicable federal law. The headings in this Option are for purposes of
reference only, and shall not limit or otherwise affect any of the terms
hereof.
BATTERIES BATTERIES, INC.
By: /s/ John L. Teeger
-------------------------------
John L. Teeger, Vice President
AGREED:
- ----------------------------------
Holder
-7-
<PAGE>
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER
IF HE DESIRES TO EXECUTE THE OPTION
The undersigned hereby exercises the right to purchase shares of
Common Stock covered by this Option according to the conditions thereof and
herewith makes payment of the Exercise Price of such shares in full.
Signature:
-----------------------------------
Address:
-----------------------------------
-----------------------------------
Dated:
---------------------
NOTICE
The signature to the foregoing Subscription Form must correspond to
the name as written upon the face of the within option in every particular,
without alteration or enlargement or any change whatsoever.
-8-
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement dated as of January 3, 1997 between BATTERY
NETWORK, INC., an Illinois corporation (the "Company") and Susan Grandt
("Employee"), an individual residing at 3731 Pitzen Road, McHenry, Illinois
60050.
WITNESSETH:
WHEREAS, the Company desires to employ, and Employee wishes to be
employed as Vice President of the Company on the terms and conditions
hereinafter contained;
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment. The Company hereby employs Employee as Vice President
of the Company for the Term as defined in paragraph 2 to perform the duties
described in Section 3 hereof.
2. Term. Unless terminated earlier pursuant to the provisions of
Section 7 hereof, the employment of Employee by the Company shall begin on the
date hereof (hereinafter the "Effective Date") and continue through a date six
months following the Effective Date. The period from the Effective Date until
the date of termination of employment pursuant to this Agreement is herein
referred to as the "Term of Employment".
3. Duties.
(a) Employee shall devote such time as may be required to
the affairs and business of the Company for which she will serve as Vice
President and perform the duties designated by the Board of Directors of the
Company. Employee shall use her best efforts to promote the interests and
welfare of the Company.
(b) Employee agrees that following the Term of Employment
and as long as the option referred to in Section 7 is outstanding and subject
to her availability, she will provide such consulting services as the Company
may request to the Company as to the operations of the Company. Such services
shall be rendered for no additional compensation from her residence and shall
not require Employee to expend more than 15 hours in any twelve-month period.
4. Salary. As her compensation hereunder, Employee shall be paid by
the Company a base salary at the rate of $100,000 per annum during the Term of
Employment, payable in equal biweekly installments.
5. Expenses. Employee will be authorized to incur reasonable and
necessary expenses in connection with the discharge of Employee's duties and
in promoting the business of the Company. The Company will, according to its
practices, reimburse Employee for all such expenses
<PAGE>
upon presentation of a properly itemized account of such expenditures, setting
forth the business reasons for such expenditures.
6. Other Benefits; Vacation.
6.1 Employee shall be entitled to receive from the Company
such medical, hospital and disability benefits consistent with those
customarily made available to employees of Batteries Batteries, Inc. ("BBI"),
which owns the outstanding capital stock of the Company or its subsidiaries,
with similar responsibilities, except that the medical benefits shall be at
least in the form and coverage as made available to Employee by the Company
during the twelve-month period ended with the Effective Date.
6.2 Employee shall be entitled to vacation at the rate of
four weeks per anum.
7. Options. There are granted on this date options to Employee under
the Stock Option Plan of Batteries Batteries, Inc., which owns the outstanding
capital stock of the Company ("BBI") to purchase 16,960 shares of the Common
Stock of BBI at a price of $4.50 per share which option is in the form of
Exhibit A hereto.
8. Termination By the Company Due to Death, Disability or Cause.
8.1 In the event of Employee's death during the Term, this
Agreement shall terminate automatically as of the date of death, except with
respect to any accrued but unsatisfied obligations^ up to the date of the
termination. In the event of Employee's disability (as hereinafter defined)
for ninety (90) consecutive calendar days or one-hundred and twenty (120)
calendar days in the aggregate during any twelve (12) months of the Term, the
Company shall have right, by written notice to Employee, to terminate this
Agreement as of the date of such notice, except with respect to any accrued
but unsatisfied obligations to the date of such termination. "Disability" for
the purposes of this Agreement shall mean Employee's physical or mental
disability so as to render Employee incapable of carrying out Employee's
essential duties under this Agreement, except with respect to any accrued but
unsatisfied obligation to the date of death.
8.2 The Company shall have the right to discharge Employee
and terminate this Agreement for Cause (as hereinafter defined) by written
notice to Employee and this Agreement shall be deemed terminated as of the
date of such notice. For the purpose of this agreement, "Cause" shall mean (a)
conviction of a felony, (b) gross neglect or gross misconduct (including
conflict of interest) in the carrying out of Employee's duties, (c) repeated
or substantial failure, refusal or neglect to perform Employee's duties in
accordance with paragraph 3 hereof, (d) the engaging by Employee in a material
act or acts of dishonesty affecting the Company, BBI or its subsidiaries, or
(e) drunkenness or the illegal use of drugs by Employee materially and
repeatedly interfering with performance of Employee's obligations under this
Agreement. In the event of a termination by the Company pursuant to this
paragraph 8.2, the Company shall not be under any further obligation to
Employee hereunder except to pay Employee, subject to the rights and remedies
of the Company in the circumstances, (i) salary and benefits accrued and
payable up to the date of such termination,
2
<PAGE>
and (ii) reimbursement for expenses accrued and payable under paragraph 5
hereof through the date of termination.
9. Non-Competition.
9.1 Subject to the Company not then being in default of its
obligations under this Agreement, Employee, for a period ending the later of
(i) two years from the date hereof or (ii) two years following the last day of
his employment as an employee by the Company (the "Noncompetition Period"),
shall not perform services or otherwise act in any capacity (including without
limitation as an employee, independent contractor, officer, director or
consultant) for, or otherwise be engaged by or have any financial interest in
or affiliation with, any individual corporation, partnership or any other
entity involved in or connected with the business in which the Company (for
purposes of Sections 9, 10 and 11, "Company" shall also include BBI and the
subsidiaries of BBI) is engaged other than for or on behalf of the Company;
provided, however, that nothing contained in this Section 8.1 shall prevent
Employee from purchasing as an investment securities of any corporation whose
securities are regularly traded on any national securities exchange or in the
over-the-counter market which securities along with securities held at or
after the purchase by other members of her family including parents and
siblings and members of their families, amount to less than 5% of the
outstanding capital stock of the corporation.
9.2 During the Non-competition Period and subject to the
Company's not being in default of this Agreement, Employee shall not solicit
or induce any employee of the Company to leave the employ of the Company.
9.3 Employee agrees that during and after the Term any
confidential information concerning the Company or its business which comes to
Employee in the course of Employee's employment and which is not (independent
of disclosure by Employee) public knowledge or general knowledge in the trade,
shall remain confidential and, except as required by legal process, may not be
used or made available for any purpose.
10. Remedies.
10.1 Nothing herein contained is intended to waive or
diminish any rights the Company may have at law or in equity at any time to
protect and defend its legitimate property interests including its business
relationship with third parties, the foregoing provisions being intended to be
in addition to and not in derogation or limitation of any other rights the
Company may have at law or in equity.
10.2 A breach by Employee of the provisions of Section 9.1,
9.2 or 9.3 of this Agreement may cause the Company irreparable injury and
damage. Employee therefore agrees that damages may be an inadequate remedy and
the Company shall be entitled to injunctive and/or other equitable relief to
prevent any breach of such Section of this Agreement and to secure its
enforcement, without being required to provide any security or post any bond.
3
<PAGE>
11. Employee for Hire. The Company shall own forever and throughout
the world (exclusively during the current and renewed or extended term of
patent anywhere in the world and thereafter, non-exclusively) all rights of
any kind or nature now or hereafter known in and to all of the product of
Employee's services hereunder in any capacity and any and all parts thereof,
including, without limitation, patent, copyright and all other property or
proprietary rights in or to any ideas, concepts, designs, drawings, plans,
prototypes or any other similar creative works and to the product of any or
all of such services, Employee acknowledging and agreeing that for the
foregoing purposes, Employee is performing his services as the Company's
employee-for-hire. Without limiting the generality of the previous sentence,
Employee acknowledges and agrees that all memoranda, notes, records and other
documents made or compiled by Employee or made available to Employee during
the Term concerning the business of the Company, shall be the property of the
Company, and shall be delivered by Employee to the Company, upon termination
of this Agreement or at any other time at the Company's request.
12. Notices. Any notices pertaining to this Agreement if to the
Company shall be addressed to Batteries Network, Inc. c/o Batteries Batteries,
Inc., 200 Madison Avenue, New York, New York 10022, with a copy of any notice
to the Company to be sent to Leo Silverstein, Esq., Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022 and if to Employee shall be addressed to her at her
address stated in the opening of paragraph of this Agreement, with a copy of
any notice to Employee to be sent to Berger, Newmark & Fenchel PC, 222 North
LaSalle Street, Suite 1900, Chicago, Illinois 60601-1196, attention: Michael
R. Wolfe, Esq.. All notices shall be in writing and shall be deemed duly given
if personally delivered or sent by registered or certified mail, overnight or
express mail or by telefax. If sent by registered or certified mail, notice
shall be deemed to have been received and effective three days after mailing;
if by overnight or express mail or by telefax, notice shall be deemed received
the next business day after being sent. Any party may change its address for
notice hereunder by giving notice of such change in the manner provided
herein.
13. Entire Agreement. This Agreement contains the entire agreement of
the parties respecting the subject matter contained herein. No modification of
any provision hereof shall be effective except by a written agreement signed
by the parties hereto.
14. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
entirely made and performed therein.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors, heirs and assigns (where
permitted).
4
<PAGE>
(c) The waiver by one party hereto of any breach by the
other (the "Breaching Party") of any provision of this Agreement shall not
operate or be construed as a waiver of any other (prior or subsequent) breach
by the Breaching Party, and waiver of a breach of a provision in one instance
shall not be deemed a waiver of a breach of such provision in any other
circumstance.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the year and date first above written.
BATTERY NETWORK, INC.
By: /s/ John Teeger
------------------------------
John Teeger
EMPLOYEE:
/s/ Susan Grandt
---------------------------------
Susan Grandt
Attorney & Agent
5
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement dated as of January 3, 1997 between BATTERY
NETWORK, INC., an Illinois corporation (the "Company") and William Steven Sapp
("Employee"), an individual residing at 17778 Old Winery Way, Poway,
California 92064.
WITNESSETH:
WHEREAS, the Company desires to employ, and Employee wishes to be
employed as Vice President of the Company on the terms and conditions
hereinafter contained;
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment. The Company hereby employs Employee as Vice President
of the Company for the Term as defined in paragraph 2 to perform the duties
described in Section 3 hereof.
2. Term. Unless terminated earlier pursuant to the provisions of
Section 7 hereof, the employment of Employee by the Company shall begin on the
date hereof (hereinafter the "Effective Date") and continue through the third
anniversary date of the Effective Date. The period from the Effective Date
until the date of termination of employment pursuant to this Agreement is
herein referred to as the "Term of Employment".
3. Duties.
(a) Employee shall devote substantially all his time to the
affairs and business of the Company for which he will serve as Vice President
and perform the duties designated by the Board of Directors of the Company.
Employee shall use his best efforts to promote the interests and welfare of
the Company.
(b) Employee agrees that following the Term of Employment
and as long as the option referred to in Section 7 is outstanding and subject
to his availability, he will provide such consulting services as the Company
may request to the Company as to the operations of the Company. Such services
shall be rendered for no additional compensation from his residence and shall
not require Employee to expend more than 15 hours in any twelve-month period.
4. Salary. As his compensation hereunder, Employee shall be paid by
the Company a base salary of $100,000 per annum during each year of the Term,
payable in equal biweekly installments.
5. Expenses. Employee will be authorized to incur reasonable and
necessary expenses in connection with the discharge of Employee's duties and
in promoting the business of the Company. The Company will, according to its
practices, reimburse Employee for all such expenses
1
<PAGE>
upon presentation of a properly itemized account of such expenditures, setting
forth the business reasons for such expenditures.
6. Other Benefits; Vacation.
6.1 Employee shall be entitled to receive from the Company
such medical, hospital and disability benefits consistent with those
customarily made available to employees of Batteries Batteries, Inc. ("BBI"),
which owns the outstanding capital stock of the Company or its subsidiaries,
with similar responsibilities, except that the medical benefits shall at least
be in the form and coverage as made available to Employee by the Company
during the twelve-month period ended with the Effective Date.
6.2 Employee shall be entitled to four weeks vacation per
year.
7. Options. There are granted on this date options to Employee under
the Stock Option Plan of Batteries Batteries, Inc., which owns the outstanding
capital stock of the Company ("BBI") to purchase 16,905 shares of the Common
Stock of BBI at a price of $4.50 per share which option is in the form of
Exhibit A hereto.
8. Termination By the Company Due to Death, Disability or Cause.
8.1 In the event of Employee's death during the Term, this
Agreement shall terminate automatically as of the date of death, except with
respect to any accrued but unsatisfied obligations to the date of death. In
the event of Employee's disability (as hereinafter defined) for ninety (90)
consecutive calendar days or one-hundred and twenty (120) calendar days in the
aggregate during any twelve (12) months of the Term, the Company shall have
right, by written notice to Employee, to terminate this Agreement as of the
date of such notice, except with respect to any accrued but unsatisfied
obligation to the date of such termination. "Disability" for the purposes of
this Agreement shall mean Employee's physical or mental disability so as to
render Employee incapable of carrying out Employee's essential duties under
this Agreement, except with respect to any accrued but unsatisfied obligation
to the date of death.
8.2 The Company shall have the right to discharge Employee
and terminate this Agreement for Cause (as hereinafter defined) by written
notice to Employee and this Agreement shall be deemed terminated as of the
date of such notice. For the purpose of this agreement, "Cause" shall mean (a)
conviction of a felony, (b) gross neglect or gross misconduct (including
conflict of interest) in the carrying out of Employee's duties, (c) repeated
or substantial failure, refusal or neglect to perform Employee's duties in
accordance with paragraph 3 hereof, (d) the engaging by Employee in a material
act or acts of dishonesty affecting the Company, BBI or its subsidiaries, or
(e) drunkenness or the illegal use of drugs by Employee materially and
repeatedly interfering with performance of Employee's obligations under this
Agreement. In the event of a termination by the Company pursuant to this
paragraph 8.2, the Company shall not be under any further obligation to
Employee hereunder except to pay Employee, subject to the rights and remedies
of the Company in the circumstances, (i) salary and benefits accrued and
payable up to the date of such termination,
2
<PAGE>
and (ii) reimbursement for expenses accrued and payable under paragraph 5
hereof through the date of termination.
9. Non-Competition.
9.1 Subject to the Company not then being in default of its
obligations under this Agreement, Employee, for a period ending the later of
(i) two years from the date hereof or (ii) two years following the last day of
his employment as an employee by the Company (the "Noncompetition Period"),
shall not perform services or otherwise act in any capacity (including without
limitation as an employee, independent contractor, officer, director or
consultant) for, or otherwise be engaged by or have any financial interest in
or affiliation with, any individual corporation, partnership or any other
entity involved in or connected with the business in which the Company (for
purposes of Sections 9, 10 and 11, "Company" shall also include BBI and the
subsidiaries of BBI) is engaged other than for or on behalf of the Company;
provided, however, that nothing contained in this Section 9.1 shall prevent
(A) Employee from purchasing as an investment securities of any corporation
whose securities are regularly traded on any national securities exchange or
in the over-the-counter market, provided that the amount of such securities
along with securities held at or after such purchase by other members of his
family, including his parents, siblings and members of their families do not
aggregate at least 5% of the outstanding securities of such corporation or (B)
the wife of the Employee and her brother from continuing to own and manage
Battery Connection Inc., a battery catalogue business.
9.2 During the Non-competition Period and subject to the
Company's not being in default of this Agreement, Employee shall not solicit
or induce any employee of the Company to leave the employ of the Company.
9.3 Employee agrees that during and after the Term any
confidential information concerning the Company or its business which comes to
Employee in the course of Employee's employment and which is not (independent
of disclosure by Employee) public knowledge or general knowledge in the trade,
shall remain confidential and, except as required by legal process, may not be
used or made available for any purpose.
10. Remedies.
10.1 Nothing herein contained is intended to waive or
diminish any rights the Company may have at law or in equity at any time to
protect and defend its legitimate property interests including its business
relationship with third parties, the foregoing provisions being intended to be
in addition to and not in derogation or limitation of any other rights the
Company may have at law or in equity.
10.2 A breach by Employee of the provisions of Section 9.1,
9.2 or 9.3 of this Agreement may cause the Company irreparable injury and
damage. Employee therefore agrees that damages may be an inadequate remedy and
the Company shall be entitled to injunctive and/or other
3
<PAGE>
equitable relief to prevent any breach of such Section of this Agreement and
to secure its enforcement, without being required to provide any security or
post any bond.
11. Employee for Hire. The Company shall own forever and throughout
the world (exclusively during the current and renewed or extended term of
patent anywhere in the world and thereafter, non-exclusively) all rights of
any kind or nature now or hereafter known in and to all of the product of
Employee's services hereunder in any capacity and any and all parts thereof,
including, without limitation, patent, copyright and all other property or
proprietary rights in or to any ideas, concepts, designs, drawings, plans,
prototypes or any other similar creative works and to the product of any or
all of such services, Employee acknowledging and agreeing that for the
foregoing purposes, Employee is performing his services as the Company's
employee-for-hire. Without limiting the generality of the previous sentence,
Employee acknowledges and agrees that all memoranda, notes, records and other
documents made or compiled by Employee or made available to Employee during
the Term concerning the business of the Company, shall be the property of the
Company, and shall be delivered by Employee to the Company, upon termination
of this Agreement or at any other time at the Company's request.
12. Notices. Any notices pertaining to this Agreement if to the
Company shall be addressed to Batteries Network, Inc. c/o Batteries Batteries,
Inc., 200 Madison Avenue, New York, New York 10022, with a copy of any notice
to the Company to be sent to Leo Silverstein, Esq., Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022 and if to Employee shall be addressed to him at his
address stated in the opening of paragraph of this Agreement, with a copy of
any notice to Employee to be sent to Berger, Newmark & Fenchel PC, 222 North
LaSalle Street, Suite 1900, Chicago, Illinois 60601-1196, attention: Michael
R. Wolfe, Esq.. All notices shall be in writing and shall be deemed duly given
if personally delivered or sent by registered or certified mail, overnight or
express mail or by telefax. If sent by registered or certified mail, notice
shall be deemed to have been received and effective three days after mailing;
if by overnight or express mail or by telefax, notice shall be deemed received
the next business day after being sent. Any party may change its address for
notice hereunder by giving notice of such change in the manner provided
herein.
13. Entire Agreement. This Agreement contains the entire agreement of
the parties respecting the subject matter contained herein. No modification of
any provision hereof shall be effective except by a written agreement signed
by the parties hereto.
14. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
entirely made and performed therein.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors, heirs and assigns (where
permitted).
4
<PAGE>
(c) The waiver by one party hereto of any breach by the
other (the "Breaching Party") of any provision of this Agreement shall not
operate or be construed as a waiver of any other (prior or subsequent) breach
by the Breaching Party, and waiver of a breach of a provision in one instance
shall not be deemed a waiver of a breach of such provision in any other
circumstance.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the year and date first above written.
BATTERY NETWORK, INC.
By: /s/ John Teeger
--------------------------------
EMPLOYEE:
/s/ William Steven Sapp
-----------------------------------
William Steven Sapp
Attorney & Agent
5
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement dated as of January 3, 1997 between BATTERY
NETWORK, INC., an Illinois corporation (the "Company") and James Sapp
("Employee"), an individual residing at 2733 Laguna Shores Lane, Las Vegas,
Nevada 89121.
WITNESSETH:
WHEREAS, the Company desires to employ, and Employee wishes to be
employed as Vice President of the Company on the terms and conditions
hereinafter contained;
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment. The Company hereby employs Employee as Vice President
of the Company for the Term as defined in paragraph 2 to perform the duties
described in Section 3 hereof.
2. Term. Unless terminated earlier pursuant to the provisions of
Section 7 hereof, the employment of Employee by the Company shall begin on the
date hereof (hereinafter the "Effective Date") and continue through the third
anniversary date of the Effective Date. The period from the Effective Date
until the date of termination of employment pursuant to this Agreement is
herein referred to as the "Term of Employment".
3. Duties.
(a) Employee shall devote substantially all his time to the
affairs and business of the Company for which he will serve as Vice President
and perform the duties designated by the Board of Directors of the Company.
Employee shall use his best efforts to promote the interests and welfare of
the Company.
(b) Employee agrees that following the Term of Employment
and as long as the option referred to in Section 7 is outstanding and subject
to his availability, he will provide such consulting services as the Company
may request to the Company as to the operations of the Company. Such services
shall be rendered for no additional compensation from his residence and shall
not require Employee to expend more than 15 hours in any twelve-month period.
4. Salary. As his compensation hereunder, Employee shall be paid by
the Company a base salary of $100,000 per annum during each year of the Term,
payable in equal biweekly installments.
5. Expenses. Employee will be authorized to incur reasonable and
necessary expenses in connection with the discharge of Employee's duties and
in promoting the business of the Company. The Company will, according to its
practices, reimburse Employee for all such expenses
1
<PAGE>
upon presentation of a properly itemized account of such expenditures, setting
forth the business reasons for such expenditures.
6. Other Benefits; Vacation.
6.1 Employee shall be entitled to receive from the Company
such medical, hospital and disability benefits consistent with those
customarily made available to employees of Batteries Batteries, Inc. ("BBI"),
which owns the outstanding capital stock of the Company or its subsidiaries,
with similar responsibilities, except that the medical benefits shall at least
be in the form and coverage as made available to Employee by the Company
during the twelve-month period ended with the Effective Date.
6.2 Employee shall be entitled to four weeks vacation per
year.
7. Options. There are granted on this date options to Employees under
the Stock Option Plan of Batteries Batteries, Inc., which owns the outstanding
capital stock of the Company ("BBI") to purchase 16,135 shares of the Common
Stock of its Company at a price of $4.50 per share which option is in the form
of Exhibit A hereto.
8. Termination By the Company Due to Death, Disability or Cause.
8.1 In the event of Employee's death during the Term, this
Agreement shall terminate automatically as of the date of death, except with
respect to any accrued but unsatisfied obligations to the date of death. In
the event of Employee's disability (as hereinafter defined) for ninety (90)
consecutive calendar days or one-hundred and twenty (120) calendar days in the
aggregate during any twelve (12) months of the Term, the Company shall have
right, by written notice to Employee, to terminate this Agreement as of the
date of such notice, except with respect to any accrued but unsatisfied
obligation to the date of such termination. "Disability" for the purposes of
this Agreement shall mean Employee's physical or mental disability so as to
render Employee incapable of carrying out Employee's essential duties under
this Agreement, except with respect to any accrued but unsatisfied obligation
to the date of death.
8.2 The Company shall have the right to discharge Employee
and terminate this Agreement for Cause (as hereinafter defined) by written
notice to Employee and this Agreement shall be deemed terminated as of the
date of such notice. For the purpose of this agreement, "Cause" shall mean (a)
conviction of a felony, (b) gross neglect or gross misconduct (including
conflict of interest) in the carrying out of Employee's duties, (c) repeated
or substantial failure, refusal or neglect to perform Employee's duties in
accordance with paragraph 3 hereof, (d) the engaging by Employee in a material
act or acts of dishonesty affecting the Company, BBI or its subsidiaries, or
(e) drunkenness or the illegal use of drugs by Employee materially and
repeatedly interfering with performance of Employee's obligations under this
Agreement. In the event of a termination by the Company pursuant to this
paragraph 8.2, the Company shall not be under any further obligation to
Employee hereunder except to pay Employee, subject to the rights and remedies
of the Company in the circumstances, (i) salary and benefits accrued and
payable up to the date of such termination,
2
<PAGE>
and (ii) reimbursement for expenses accrued and payable under paragraph 5
hereof through the date of termination.
9. Non-Competition.
9.1 Subject to the Company not then being in default of its
obligations under this Agreement, Employee, for a period ending the later of
(i) two years from the date hereof or (ii) two years following the last day of
his employment as an employee by the Company (the "Non-competition Period"),
shall not perform services or otherwise act in any capacity (including without
limitation as an employee, independent contractor, officer, director or
consultant) for, or otherwise be engaged by or have any financial interest in
or affiliation with, any individual corporation, partnership or any other
entity involved in or connected with the business in which the Company (for
purposes of Sections 9, 10 and 11, "Company" shall also include BBI and the
subsidiaries of BBI) is engaged other than for or on behalf of the Company;
provided, however, that nothing contained in this Section 9.1 shall prevent
Employee from purchasing as an investment securities of any corporation whose
securities are regularly traded on any national securities exchange or in the
over-the-counter market which securities along with securities held at or
after the purchase by other members of his family, including parents and
siblings and members of their families , amount to less than 5% of the
outstanding capital stock of the corporation.
9.2 During the Non-competition Period and subject to the
Company's not being in default of this Agreement, Employee shall not solicit
or induce any employee of the Company to leave the employ of the Company.
9.3 Employee agrees that during and after the Term any
confidential information concerning the Company or its business which comes to
Employee in the course of Employee's employment and which is not (independent
of disclosure by Employee) public knowledge or general knowledge in the trade,
shall remain confidential and, except as required by legal process, may not be
used or made available for any purpose.
10. Remedies.
10.1 Nothing herein contained is intended to waive or
diminish any rights the Company may have at law or in equity at any time to
protect and defend its legitimate property interests including its business
relationship with third parties, the foregoing provisions being intended to be
in addition to and not in derogation or limitation of any other rights the
Company may have at law or in equity.
10.2 A breach by Employee of the provisions of Section 9.1,
9.2 or 9.3 of this Agreement may cause the Company irreparable injury and
damage. Employee therefore agrees that damages may be an inadequate remedy and
the Company shall be entitled to injunctive and/or other equitable relief to
prevent any breach of such Section of this Agreement and to secure its
enforcement, without being required to provide any security or post any bond.
3
<PAGE>
11. Employee for Hire. The Company shall own forever and throughout
the world (exclusively during the current and renewed or extended term of
patent anywhere in the world and thereafter, non-exclusively) all rights of
any kind or nature now or hereafter known in and to all of the product of
Employee's services hereunder in any capacity and any and all parts thereof,
including, without limitation, patent, copyright and all other property or
proprietary rights in or to any ideas, concepts, designs, drawings, plans,
prototypes or any other similar creative works and to the product of any or
all of such services, Employee acknowledging and agreeing that for the
foregoing purposes, Employee is performing his services as the Company's
employee-for-hire. Without limiting the generality of the previous sentence,
Employee acknowledges and agrees that all memoranda, notes, records and other
documents made or compiled by Employee or made available to Employee during
the Term concerning the business of the Company, shall be the property of the
Company, and shall be delivered by Employee to the Company, upon termination
of this Agreement or at any other time at the Company's request.
12. Notices. Any notices pertaining to this Agreement if to the
Company shall be addressed to Batteries Network, Inc. c/o Batteries Batteries,
Inc., 200 Madison Avenue, New York, New York 10022, with a copy of any notice
to the Company to be sent to Leo Silverstein, Esq., Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, One Citicorp Center, 153 East 53rd Street,
New York, New York 10022 and if to Employee shall be addressed to him at his
address stated in the opening of paragraph of this Agreement, with a copy of
any notice to Employee to be sent to Berger, Newmark & Fenchel PC, 222 North
LaSalle Street, Suite 1900, Chicago, Illinois 60601-1196, attention: Michael
R. Wolfe, Esq.. All notices shall be in writing and shall be deemed duly given
if personally delivered or sent by registered or certified mail, overnight or
express mail or by telefax. If sent by registered or certified mail, notice
shall be deemed to have been received and effective three days after mailing;
if by overnight or express mail or by telefax, notice shall be deemed received
the next business day after being sent. Any party may change its address for
notice hereunder by giving notice of such change in the manner provided
herein.
13. Entire Agreement. This Agreement contains the entire agreement of
the parties respecting the subject matter contained herein. No modification of
any provision hereof shall be effective except by a written agreement signed
by the parties hereto.
14. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts
entirely made and performed therein.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties, their respective successors, heirs and assigns (where
permitted).
4
<PAGE>
(c) The waiver by one party hereto of any breach by the
other (the "Breaching Party") of any provision of this Agreement shall not
operate or be construed as a waiver of any other (prior or subsequent) breach
by the Breaching Party, and waiver of a breach of a provision in one instance
shall not be deemed a waiver of a breach of such provision in any other
circumstance.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as
of the year and date first above written.
BATTERY NETWORK, INC.
By: /s/ John Teeger
--------------------------------
John Teeger
EMPLOYEE:
/s/ James Sapp
-----------------------------------
James Sapp
5
<PAGE>
BATTERIES BATTERIES, INC.
C/O FOUNDERS EQUITY INC.
200 MADISON AVENUE
NEW YORK, NEW YORK 10016
(212) 953-0100
FAX: (212) 953-0626
January 3, 1997
William Steven Sapp
1778 Old Winery Way
Poway, CA 92064
James Sapp
2733 Laguna Shores Lane
Las Vegas, NY 89121
Gentlemen:
Batteries Batteries, Inc., a Delaware corporation ("Buyer") and
Messrs. William Steven Sapp ("WSS") and James Sapp ("JS") are to enter into an
agreement (the "Stock Agreement") providing for the purchase by Buyer from WSS,
JS and Ms. Susan Grandt of the outstanding capital stock of Battery Network,
Inc., an Illinois corporation ("BN") and the execution by WSS and JS of
employment agreements providing for their employment by BN as executive officers
for a period of three years following consummation of the acquisition.
To induce WSS and JS (collectively the "Two BN Executives") to execute and
deliver the employment agreements at the closing of the acquisition, Buyer
hereby agrees that subject to the Two BN Executives remaining in the employ of
BN under their respective employment agreement during the Bonus Period as
hereinafter defined, the Buyer will cause BN to pay to the Two BN Executives an
aggregate bonus equal to 30% of the first $300,000 by which the combined income
of BN, W.S. Battery & Sales Company, Inc. ("WSB") and Tauber Electronics Inc.
("Tauber") before provision for income taxes and any extraordinary item
("Combined Pre-Tax Income") determined in accordance with generally accepted
accounting principles consistently applied and included in the consolidated
financial statements of the Buyer and its subsidiaries for such period exceeds
the Applicable Minimum as hereinafter defined and 40% of the amount by which the
Combined Pre-Tax Income exceeds the Applicable Second Threshold as hereinafter
defined, but in no event shall the bonus exceed in the aggregate $400,000 for
any Bonus Period.
The Bonus Periods and the Applicable Minimum and Applicable Second
Thresholds are as follows:
APPLICABLE
BONUS PERIOD APPLICABLE MINIMUM SECOND THRESHOLD
------------ ------------------ ----------------
Year ended December 31, 1997 $2,500,000 $2,800,000
Year ended December 31, 1998 2,750,000 3,050,000
Year ended December 31, 1999 3,025,000 3,325,000
<PAGE>
William Steven Sapp
James Sapp
January 3, 1996
Page 2
The bonus, if any, to be paid for a Bonus Period shall be paid to the Two
BN Executives in such proportions as they advised the Buyer in writing within
seven days of the delivery of the consolidated financial statements of Buyer and
its subsidiaries, including BN, WSB and Tauber for the Bonus Period audited by
an independent accounting firm designated by the Buyer. Such financial
statements shall include the combined statement of operations of BN, WSB and
Tauber which need not be audited. Buyer shall transmit a copy of such financial
statements to the Two BN Executives promptly after completion. Payment shall be
made within ten days following the delivery of the written advice from the Two
BN Executives to the Buyer.
Any notice given pursuant to this Agreement to any party hereto shall be
deemed to have been duly given (i) when mailed by registered or certified mail,
return receipt requested, (ii) when telecopied, provided a copy of the notice
is mailed by registered or certified mail, return receipt requested, within one
business day following the date of the telecopied transmission, or (iii) when
hand delivered to the party to whom it is to be given at the address of such
party set forth in the Stock Agreement or at such other address as a party shall
designate by written notice, in the above manner to the other party with copies
to such parties to be sent to the applicable counsel set forth in Section 8.9
of the Stock Agreement.
Any disputes as to the determination of the Combined Pre-Tax Income shall
be resolved in the manner provided for the resolution of Audit Dispute in the
Stock Agreement.
If the foregoing correctly and fully sets forth our agreement, please
execute at the places indicated and return a copy of this letter agreement to
the Buyer.
BATTERIES BATTERIES, INC.
/s/ Warren H. Haber
------------------------
Warren H. Haber
AGREED AND ACCEPTED
/s/ William Steven Sapp
- -----------------------
William Steven Sapp
Attorney & Agent
/s/ James Sapp
- -----------------------
James Sapp
<PAGE>
- -------------------------------------------------------------------------------
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
- -------------------------------------------------------------------------------
IBJ SCHRODER BANK & TRUST COMPANY
(AS LENDER AND AS AGENT)
- -------------------------------------------------------------------------------
WITH
- -------------------------------------------------------------------------------
BATTERIES BATTERIES, INC.
TAUBER ELECTRONICS, INC.
ADVANCED FOX ANTENNA, INC.
SPECIFIC ENERGY CORPORATION
BATTERY NETWORK, INC.
W.S. BATTERY & SALES COMPANY, INC.
BATTERY ACQUISITION CORP.
As of January 6, 1997
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C> <C>
I. DEFINITIONS.................................................................................................. 1
1.1. Accounting Terms............................................................................... 1
1.2. General Terms.................................................................................. 19
1.3. Uniform Commercial Code Terms.................................................................. 19
1.4. Certain Matters of Construction................................................................ 19
II. ADVANCES, PAYMENTS........................................................................................... 19
2.1. (a) Revolving Advances.................................................................. 19
(b) Discretionary Rights................................................................ 20
2.2. Procedure for Revolving Advances Borrowing..................................................... 20
2.3. Disbursement of Advance Proceeds............................................................... 22
2.4. Term Loan...................................................................................... 23
2.5. Maximum Advances............................................................................... 23
2.6. Repayment of Advances.......................................................................... 23
2.7. Repayment of Excess Advances................................................................... 24
2.8. Statement of Account........................................................................... 24
2.9. Letters of Credit.............................................................................. 24
2.10. Issuance of Letters of Credit.................................................................. 25
2.11. Requirements For Issuance of Letters of Credit................................................. 25
2.12. Additional Payments............................................................................ 26
2.13. Manner of Borrowing and Payment................................................................ 27
2.14. Mandatory Prepayments.......................................................................... 28
2.15. Use of Proceeds................................................................................ 29
2.16. Defaulting Lender.............................................................................. 29
III. INTEREST AND FEES............................................................................................ 30
3.1. Interest....................................................................................... 30
3.2. Letter of Credit Fees.......................................................................... 31
3.3. (a) Closing Fee......................................................................... 31
(b) Facility Fee........................................................................ 32
3.4. (a) Collateral Evaluation Fee........................................................... 32
(b) Collateral Monitoring Fee........................................................... 32
3.5. Computation of Interest and Fees............................................................... 32
3.6. Maximum Charges................................................................................ 32
3.7. Increased Costs................................................................................ 32
3.8. Basis For Determining Interest Rate Inadequate or
Unfair......................................................................................... 33
3.9. Capital Adequacy............................................................................... 34
IV. COLLATERAL: GENERAL TERMS................................................................................... 35
4.1. Security Interest in the Collateral............................................................ 35
4.2. Perfection of Security Interest................................................................ 35
4.3. Disposition of Collateral...................................................................... 35
4.4. Preservation of Collateral..................................................................... 36
4.5. Ownership of Collateral........................................................................ 36
4.6. Defense of Agent's and Lenders' Interests...................................................... 36
4.7. Books and Records.............................................................................. 37
4.8. Financial Disclosure........................................................................... 37
4.9. Compliance with Laws........................................................................... 38
4.10. Inspection of Premises......................................................................... 38
4.11. Insurance...................................................................................... 38
4.12. Failure to Pay Insurance....................................................................... 39
4.13. Payment of Taxes............................................................................... 39
4.14. Payment of Leasehold Obligations............................................................... 40
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4.15. Receivables.................................................................................... 40
(a) Nature of Receivables............................................................... 40
(b) Solvency of Customers............................................................... 40
(c) Locations of Borrower............................................................... 40
(d) Collection of Receivables........................................................... 40
(e) Notification of Assignment of Receivables........................................... 41
(f) Power of Agent to Act on Borrowers' Behalf.......................................... 41
(g) No Liability........................................................................ 42
(h) Establishment of a Lockbox Account, Dominion
Account............................................................................. 42
(i) Adjustments......................................................................... 42
4.16. Inventory...................................................................................... 42
4.17. Maintenance of Equipment....................................................................... 43
4.18. Exculpation of Liability....................................................................... 43
4.19. Environmental Matters.......................................................................... 43
4.20. Financing Statements........................................................................... 45
V. REPRESENTATIONS AND WARRANTIES............................................................................... 45
5.1. Authority...................................................................................... 45
5.2. Formation and Qualification.................................................................... 46
5.3. Survival of Representations and Warranties..................................................... 46
5.4. Tax Returns.................................................................................... 46
5.5. Financial Statements........................................................................... 46
5.6. Corporate Name................................................................................. 47
5.7. O.S.H.A. and Environmental Compliance.......................................................... 47
5.8. Solvency; No Litigation, Violation, Indebtedness
or Default..................................................................................... 48
5.9. Patents, Trademarks, Copyrights and Licenses................................................... 49
5.10. Licenses and Permits........................................................................... 50
5.11. Default of Indebtedness........................................................................ 50
5.12. No Default..................................................................................... 50
5.13. No Burdensome Restrictions..................................................................... 50
5.14. No Labor Disputes.............................................................................. 50
5.15. Margin Regulations............................................................................. 50
5.16. Investment Company Act......................................................................... 50
5.17. Disclosure..................................................................................... 51
5.18. Delivery of Acquisition Agreement.............................................................. 51
5.19. Swaps.......................................................................................... 51
5.20. Conflicting Agreements......................................................................... 51
5.21. Application of Certain Laws and Regulations.................................................... 51
5.22. Business and Property of Borrower.............................................................. 51
5.23. Assets of BATS................................................................................. 52
VI. AFFIRMATIVE COVENANTS........................................................................................ 52
6.1. Payment of Fees................................................................................ 52
6.2. Conduct of Business and Maintenance of Existence
and Assets..................................................................................... 52
6.3. Violations..................................................................................... 52
6.4. Government Receivables......................................................................... 52
6.5. Net Worth...................................................................................... 52
6.6. Current Ratio.................................................................................. 53
6.7. Fixed Charge Coverage Ratio.................................................................... 53
6.8. EBITDA......................................................................................... 54
6.9. Execution of Supplemental Instruments.......................................................... 54
6.10. Payment of Indebtedness........................................................................ 54
6.11. Standards of Financial Statements.............................................................. 54
6.12. Exercise of Rights............................................................................. 54
6.13. Termination of ESOP............................................................................ 55
VII. NEGATIVE COVENANTS............................................................................. 55
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<PAGE>
7.1. Merger, Consolidation, Acquisition and Sale of
Assets......................................................................................... 55
7.2. Creation of Liens.............................................................................. 55
7.3. Guarantees..................................................................................... 55
7.4. Investments.................................................................................... 55
7.5. Loans.......................................................................................... 55
7.6. Capital Expenditures........................................................................... 56
7.7. Dividends...................................................................................... 56
7.8. Indebtedness................................................................................... 56
7.9. Nature of Business............................................................................. 56
7.10. Transactions with Affiliates................................................................... 56
7.11. Leases......................................................................................... 56
7.12. Subsidiaries................................................................................... 57
7.13. Fiscal Year and Accounting Changes............................................................. 57
7.14. Pledge of Credit............................................................................... 57
7.15. Amendment of Articles of Incorporation, By-Laws................................................ 57
7.16. Compliance with ERISA.......................................................................... 57
7.17. Prepayment of Indebtedness..................................................................... 57
7.18. Other Agreements............................................................................... 58
7.19. Payments of Additional Cash Consideration...................................................... 58
7.20. Management Fees................................................................................ 58
VIII. CONDITIONS PRECEDENT......................................................................................... 58
8.1. Conditions to Initial Advances................................................................. 58
(a) Note................................................................................ 58
(b) Filings, Registrations and Recordings............................................... 58
(c) Corporate Proceedings of Borrowers.................................................. 58
(d) Incumbency Certificates of Borrowers................................................ 58
(e) Certificates........................................................................ 59
(f) Good Standing Certificates.......................................................... 59
(g) Legal Opinion....................................................................... 59
(h) No Litigation....................................................................... 59
(i) Financial Condition Certificates.................................................... 59
(j) Collateral Examination.............................................................. 59
(k) Fees................................................................................ 59
(l) Pro Forma Financial Statements...................................................... 59
(m) Financial Statements................................................................ 60
(n) Acquisition Documents............................................................... 60
(o) Capitalization...................................................................... 60
(p) Collateral Assignment and Other Documents........................................... 60
(q) Insurance........................................................................... 60
(r) Payment Instructions................................................................ 60
(s) Blocked Accounts.................................................................... 60
(t) Consents............................................................................ 60
(u) No Adverse Material Change.......................................................... 60
(v) Leasehold Agreements................................................................ 61
(w) Net Worth........................................................................... 61
(x) Contract Review..................................................................... 61
(y) Closing Certificate................................................................. 61
(z) Borrowing Base...................................................................... 61
(aa) Undrawn Availability................................................................ 61
(ab) Other............................................................................... 61
8.2. Conditions to Each Advance..................................................................... 61
(a) Representations and Warranties...................................................... 61
(b) No Default.......................................................................... 61
(c) Maximum Advances.................................................................... 62
IX. INFORMATION AS TO BORROWER................................................................................... 62
9.1. Disclosure of Material Matters................................................................. 62
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<PAGE>
9.2. Schedules...................................................................................... 62
9.3. Environmental Reports.......................................................................... 62
9.4. Litigation..................................................................................... 63
9.5. Material Occurrences........................................................................... 63
9.6. Government Receivables......................................................................... 63
9.7. Annual Financial Statements.................................................................... 63
9.8. Monthly Financial Statements................................................................... 64
9.9. Other Reports.................................................................................. 64
9.10. Additional Information......................................................................... 64
9.11. Projected Operating Budget..................................................................... 65
9.12. Variances From Operating Budget................................................................ 65
9.13. Notice of Suits, Adverse Events................................................................ 65
9.14. ERISA Notices and Requests..................................................................... 65
9.15. Additional Documents........................................................................... 66
X. EVENTS OF DEFAULT............................................................................................ 66
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT................................................................... 69
11.1. Rights and Remedies............................................................................ 69
11.2. Agent's Discretion............................................................................. 70
11.3. Setoff......................................................................................... 70
11.4. Rights and Remedies not Exclusive.............................................................. 70
XII. WAIVERS AND JUDICIAL PROCEEDINGS............................................................................. 70
12.1. Waiver of Notice............................................................................... 70
12.2. Delay.......................................................................................... 70
12.3. Jury Waiver.................................................................................... 70
XIII. EFFECTIVE DATE AND TERMINATION............................................................................... 71
13.1. Term........................................................................................... 71
13.2. Termination.................................................................................... 71
XIV. REGARDING AGENT.............................................................................................. 71
14.1. Appointment.................................................................................... 71
14.2. Nature of Duties............................................................................... 72
14.3. Lack of Reliance on Agent and Resignation...................................................... 72
14.4. Certain Rights of Agent........................................................................ 73
14.5. Reliance....................................................................................... 73
14.6. Notice of Default.............................................................................. 73
14.7. Indemnification................................................................................ 74
14.8. Agent in its Individual Capacity............................................................... 74
14.9. Delivery of Documents.......................................................................... 74
14.10. Borrowers' Undertaking to Agent................................................................ 74
XV. BORROWING AGENCY............................................................................................. 74
15.1. Borrowing Agency Provisions.................................................................... 74
15.2. Waiver of Subrogation.......................................................................... 75
XVI. MISCELLANEOUS................................................................................................ 75
16.1. Governing Law.................................................................................. 75
16.2. Entire Understanding........................................................................... 76
16.3. Successors and Assigns; Participations; New
Lenders........................................................................................ 77
16.4. Application of Payments........................................................................ 79
16.5. Indemnity...................................................................................... 79
16.6. Notice......................................................................................... 79
16.7. Survival....................................................................................... 80
16.8. Severability................................................................................... 80
16.9. Expenses....................................................................................... 80
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16.10. Injunctive Relief.............................................................................. 81
16.11. Consequential Damages.......................................................................... 81
16.12. Captions....................................................................................... 81
16.13. Counterparts; Telecopied Signatures............................................................ 81
16.14. Construction................................................................................... 81
16.15. Confidentiality................................................................................ 81
16.16. Publicity...................................................................................... 82
</TABLE>
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<PAGE>
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated as
of January 6, 1997 among BATTERIES BATTERIES, INC., a corporation organized
under the laws of the State of Delaware ("BATS"), TAUBER ELECTRONICS, INC., a
corporation organized under the laws of the State of California ("TEI")
ADVANCED FOX ANTENNA, INC., a corporation organized under the laws of the
State of Delaware ("AFA"), SPECIFIC ENERGY CORPORATION, a corporation
organized under the laws of the State of Arizona ("SEC"), BATTERY NETWORK,
INC., a corporation organized under the laws of the State of Illinois ("BN"),
W.S. BATTERY & SALES, COMPANY INC., a corporation organized under the laws of
the State of Illinois ("WSBS") and BATTERY ACQUISITION CORP., a corporation
organized under the laws of the State of New York ("BAC"), (BATS, TEI, AFA,
SEC, BN, WSBS and BAC, each a "Borrower" and collectively "Borrowers"), the
financial institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and IBJ SCHRODER
BANK & TRUST COMPANY ("IBJS"), a New York banking corporation, as agent for
Lenders (IBJS, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings
herein contained, Borrowers, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or
any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP.
1.2. General Terms. For purposes of this Agreement the
following terms shall have the following meanings:
"Accountants" shall have the meaning set forth in
Section 9.7 hereof.
"Acquisition Agreement" shall mean collectively the
BN Acquisition Agreement, WSBS Acquisition Agreement and BAC
Acquisition Agreement.
"Advances" shall mean and include the Revolving
Advances, Letters of Credit and the Term Loan.
"Advance Rates" shall have the meaning set forth in
Section 2.1(a) hereof.
<PAGE>
"Additional Cash Consideration" shall have the
meaning given to such term in the BN Acquisition Agreement which in no event
shall exceed an aggregate amount of $1,000,000.
"Additional Consideration" shall mean collectively,
the Additional Cash Consideration, the Additional Stock
Consideration, the Additional $4.50 Option Consideration and the
Additional $6.00 Option Consideration.
"Additional $4.50 Option Consideration" shall have
the meaning given to such term in the BN Acquisition Agreement which in no
event shall exceed options to purchase more than 125,000 shares of common
stock of BATS.
"Additional $6.00 Option Consideration" shall have
the meaning given to such term in the BN Acquisition Agreement which in no
event shall exceed options to purchase more than 125,000 shares of common
stock of BATS.
"Additional Stock Consideration" shall have the
meaning given to such term in the BN Acquisition Agreement, which in no event
shall exceed 350,000 shares of common stock of BATS.
"AFA" shall have the meaning set forth in the
preamble to this Agreement.
"Affiliate" of any Person shall mean (a) any Person
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director or officer (i) of such Person, (ii) of any Subsidiary of
such Person or (iii) of any Person described in clause (a) above. For purposes
of this definition, control of a Person shall mean the power, direct or
indirect, (x) to vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person, or (y) to direct or cause
the direction of the management and policies of such Person whether by
contract or otherwise.
"Affiliated Leases" shall mean collectively, (a) the
Lease dated January 1, 1997 between J.W.S.Partnership and BN with respect to
the premises located at 4071 Albany Street, McHenry, (b) the Lease dated
January 1, 1997 between J.W.S. Partnership and BN with respect to the premises
located at 50 Tannery Road, Unit 2, North Branch, New Jersey and (c) the Lease
dated January 2, 1995 between Rare Limited Partnership and AFA with respect to
the premises located at 1840 County Line Road, Huntingdon, Pennsylvania.
"Agent" shall have the meaning set forth in the
preamble to this Agreement and shall include its successors and
assigns.
"Alternate Base Rate" shall mean, for any day, a rate
per annum equal to the higher of (i) the Base Rate in effect on
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<PAGE>
such day and (ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
"Authority" shall have the meaning set forth in
Section 4.19(d).
"BAC" shall have the meaning set forth in the
preamble to this Agreement.
"BAC Acquisition Agreement" shall mean the Asset
Purchase Agreement dated January 3, 1997, as of December 31, 1996 among BAC,
BATS, WSJ Enterprises, Inc, William S. Sapp, Dolores Sapp, Susan Grandt,
William Steven Sapp and James Sapp including all exhibits and schedules
thereto.
"Base Rate" shall mean the base commercial lending
rate of IBJS as publicly announced to be in effect from time to time, such
rate to be adjusted automatically, without notice, on the effective date of
any change in such rate. This rate of interest is determined from time to time
by IBJS as a means of pricing some loans to its customers and is neither tied
to any external rate of interest or index nor does it necessarily reflect the
lowest rate of interest actually charged by IBJS to any particular class or
category of customers of IBJS.
"BATS" shall have the meaning set forth in the
preamble to this Agreement.
"BATS on a combined basis" shall mean the combination
in accordance with GAAP of the accounts or other items of BATS and
its Subsidiaries.
"BATS on a consolidated basis" shall mean the
consolidation in accordance with GAAP of the accounts or other
items of BATS and its Subsidiaries.
"Blocked Accounts" shall have the meaning set forth
in Section 4.15(h).
"BN" shall have the meaning set forth in the preamble
to this Agreement.
"BN Acquisition Agreement" shall mean the Stock
Purchase Agreement dated January 3, 1997 dated as of December 31, 1996 among
BATS, BN, William Steven Sapp, Susan Grandt and James Sapp including all
exhibits and schedules thereto.
"Borrower" or "Borrowers" shall have the meaning set
forth in the preamble to this Agreement and shall extend to all permitted
successors and assigns of such Persons.
"Borrowers' Account" shall have the meaning set forth
in Section 2.8.
"Borrowing Agent" shall mean BATS.
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"Business Day" shall mean with respect to Eurodollar
Rate Loans, any day on which commercial banks are open for domestic and
international business, including dealings in Dollar deposits in London,
England and New York, New York and with respect to all other matters, any day
other than a day on which commercial banks in New York are authorized or
required by law to close.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of
any event (whether in one or more transactions) which results in a transfer of
control of any Borrower (other than BATS) to a Person who is not an Original
Owner; (b) any merger or consolidation of or with any Borrower or sale of all
or substantially all of the property or assets of any Borrower; or (c) a
Person or group of Persons acting in concert as a partnership, limited
partnership, syndicate or other group ("Group of Persons") shall together with
any Affiliates thereof, succeed in having a sufficient number of nominees
elected to the Board of Directors of BATS such that such nominees, when added
to any existing directors remaining on the Board of Directors of BATS after
such election, will constitute a majority of the Board of Directors of BATS.
For purposes of this definition, "control of Borrower" shall mean the power,
direct or indirect (x) to vote 50% or more of the securities having ordinary
voting power for the election of directors of any Borrower or (y) to direct or
cause the direction of the management and policies of any Borrower by contract
or otherwise.
"Charges" shall mean all taxes, charges, fees,
imposts, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation and property taxes, custom duties, fees, assessments, liens, claims
and charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts, imposed by any taxing or
other authority, domestic or foreign (including, without limitation, the
Pension Benefit Guaranty Corporation or any environmental agency or
superfund), upon the Collateral or any Borrower.
"Closing Date" shall mean January 7, 1997 or such
other date as may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time and the regulations promulgated
thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
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(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Subsidiary Stock;
(f) all of each Borrower's right, title
and interest in and to (i) its respective goods and other property including,
but not limited to, all merchandise returned or rejected by Customers,
relating to or securing any of the Receivables; (ii) all of each Borrower's
rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or
other lienor, including stoppage in transit, setoff, detinue, replevin,
reclamation and repurchase; (iii) all additional amounts due to any Borrower
from any Customer relating to the Receivables; (iv) other property, including
warranty claims, relating to any goods securing this Agreement; (v) all of
each Borrower's contract rights, rights of payment which have been earned
under a contract right, instruments, documents, chattel paper, warehouse
receipts, deposit accounts, money and securities; (vi) if and when obtained by
any Borrower, all real and personal property of third parties in which such
Borrower has been granted a lien or security interest as security for the
payment or enforcement of Receivables; and (vii) any other goods, personal
property or real property now owned or hereafter acquired in which any
Borrower has expressly granted a security interest or may in the future grant
a security interest to Agent hereunder, or in any amendment or supplement
hereto or thereto, or under any other agreement between Agent and any
Borrower;
(g) all of each Borrower's ledger
sheets, ledger cards, files, correspondence, records, books of account,
business papers, computers, computer software (owned by any Borrower or in
which it has an interest), computer programs, tapes, disks and documents
relating to (a), (b), (c), (d), (e) or (f) of this Paragraph; and
(h) all proceeds and products of (a),
(b), (c), (d), (e), (f) and (g) in whatever form, including, but not limited
to: cash, deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard, flood and
credit insurance), negotiable instruments and other instruments for the
payment of money, chattel paper, security agreements, documents, eminent
domain proceeds, condemnation proceeds and tort claim proceeds.
"Collateral Assignment" shall mean the Collateral
Assignment of Rights dated as of the Closing Date executed by BATS and BAC
with respect to their respective rights under the Acquisition Agreement.
"Commitment Percentage" of any Lender shall mean the
percentage set forth below such Lender's name on the signature page
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hereof as same may be adjusted upon any assignment by a Lender pursuant to
Section 15.3(b) hereof.
"Commitment Transfer Supplement" shall mean a
document in the form of Exhibit 15.3 hereto, properly completed and otherwise
in form and substance satisfactory to Agent by which the Purchasing Lender
purchases and assumes a portion of the obligation of Lenders to make Advances
under this Agreement.
"Consents" shall mean all filings and all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties, domestic or foreign,
necessary to carry on any Borrower's business, including, without limitation,
any Consents required under all applicable federal, state or other applicable
law.
"Contract Rate" shall mean, as applicable, the
Revolving Interest Rate or the Term Loan Rate.
"Controlled Group" shall mean all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with any Borrower, are
treated as a single employer under Section 414 of the Code.
"Current Assets" at a particular date, shall mean all
cash, cash equivalents, accounts and inventory of BATS on a consolidated basis
and all other items which would, in conformity with GAAP, be included under
current assets on a balance sheet of BATS on a consolidated basis as at such
date; provided, however, that such amounts shall not include (a) any amounts
for any Indebtedness owing by an Affiliate of any Borrower, unless such
Indebtedness arose in connection with the sale of goods or rendition of
services in the ordinary course of business and would otherwise constitute
current assets in conformity with GAAP, (b) any shares of stock issued by an
Affiliate of any Borrower, or (c) the cash surrender value of any life
insurance policy.
"Current Liabilities" at a particular date, shall
mean all amounts which would, in conformity with GAAP, be included under
current liabilities on a balance sheet of BATS on a consolidated basis, as at
such date, but in any event including, without limitation, the amounts of (a)
all Indebtedness of BATS on a consolidated basis payable on demand, or, at the
option of the Person to whom such Indebtedness is owed, not more than twelve
(12) months after such date, (b) any payments in respect of any Indebtedness
of any Borrower (whether installment, serial maturity, sinking fund payment or
otherwise) required to be made not more than twelve (12) months after such
date, (c) all reserves in respect of liabilities or Indebtedness payable on
demand or, at the option of the Person to whom such Indebtedness is owed, not
more than twelve (12) months after such date, the validity of which is not
contested at such date, and (d) all accruals for federal or other taxes
measured by income payable within a twelve (12) month period and in any event
excluding (i) Revolving Advances and (ii)
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the payment in respect of the Term Loan required to be made at the
end of the Term.
"Customer" shall mean and include the account debtor
with respect to any Receivable and/or the prospective purchaser of goods,
services or both with respect to any contract or contract right, and/or any
party who enters into or proposes to enter into any contract or other
arrangement with any Borrower, pursuant to which such Borrower is to deliver
any personal property or perform any services.
"Default" shall mean an event which, with the giving
of notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" shall have the meaning set forth in
Section 3.1 hereof.
"Defaulting Lender" shall have the meaning set forth
in Section 2.16(a) hereof.
"Depository Accounts" shall have the meaning set
forth in Section 4.15(h) hereof.
"Documents" shall have the meaning set forth in
Section 8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of
the United States of America.
"Domestic Rate Loan" shall mean any Advance that
bears interest based upon the Alternate Base Rate.
"Early Termination Date" shall have the meaning set
forth in Section 13.1 hereof.
"Earnings Before Interest and Taxes" shall mean for
any period an amount equal to the sum of (i) net income (or loss) of BATS on a
consolidated basis for such period (excluding extraordinary gains and losses),
plus (ii) all interest expense of BATS on a consolidated basis for such
period, plus (iii) all charges against income of BATS on a consolidated basis
for such period for federal, state and local taxes actually paid, plus (iv)
the after tax effect of the Additional Consideration, if any, in the event the
Additional Consideration is deemed to be treated as an expense.
"EBITDA" shall mean for any period the sum of (i)
Earnings Before Interest and Taxes for such period plus (ii) depreciation
expenses for such period, plus (iii) amortization expenses for such period.
"Eligible Inventory" shall mean and include Inventory
consisting of finished goods, with respect to each Borrower valued at the
lower of cost or market value, determined on a first-in-
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first-out basis, which is not, in Agent's reasonable opinion, obsolete, slow
moving or unmerchantable and which Agent, in its reasonable discretion, shall
not deem ineligible Inventory, based on such considerations as Agent may from
time to time deem appropriate including, without limitation, whether the
Inventory is subject to a perfected, first priority security interest in favor
of Agent and whether the Inventory conforms to all standards imposed by any
governmental agency, division or department thereof which has regulatory
authority over such goods or the use or sale thereof.
"Eligible Receivables" shall mean and include with
respect to each Borrower, each Receivable of such Borrower arising in the
ordinary course of such Borrower's business and which Agent, in its reasonable
credit judgment, shall deem to be an Eligible Receivable, based on such
considerations as Agent may from time to time deem appropriate. A Receivable
shall not be deemed eligible unless such Receivable is subject to Agent's
first priority perfected security interest and no other Lien (other than
Permitted Encumbrances), and is evidenced by an invoice or other documentary
evidence satisfactory to Agent. In addition, no Receivable shall be an
Eligible Receivable if:
(a) it arises out of a sale made by any Borrower
to an Affiliate of any Borrower or to a Person controlled by an Affiliate of
any Borrower;
(b) it is due or unpaid more than one hundred and
twenty (120) days after the original invoice date or more than sixty (60) days
after the due date;
(c) fifty percent (50%) or more of the
Receivables from such Customer are not deemed Eligible Receivables hereunder.
Such percentage may, in Agent's reasonable discretion, be increased or
decreased from time to time;
(d) any covenant, representation or warranty
contained in this Agreement with respect to such Receivable has
been breached;
(e) the Customer shall (i) apply for, suffer, or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property or call a meeting of its creditors, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, any petition which is filed against it in any involuntary case
under such bankruptcy laws, or (viii) take any action for the purpose of
effecting any of the foregoing;
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(f) the sale is to a Customer outside the
continental United States of America or Canada, unless the sale is on letter
of credit, guaranty or acceptance terms or covered by credit insurance, in
each case acceptable to Agent in its reasonable discretion;
(g) the sale to the Customer is on a bill-and-
hold, guaranteed sale, sale-and-return, sale on approval, consignment or
any other repurchase or return basis or is evidenced by chattel paper;
(h) Agent believes, in its reasonable credit
judgment, that collection of such Receivable is insecure or that such
Receivable may not be paid by reason of the Customer's financial inability to
pay;
(i) the Customer is the United States of America,
any state or any department, agency or instrumentality of any of
them, unless Borrower assigns its right to payment of such
Receivable to Agent pursuant to the Assignment of Claims Act of
1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C.
Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have
not been shipped and delivered to and accepted by the Customer or the services
giving rise to such Receivable have not been performed by the applicable
Borrower and accepted by the Customer or the Receivable otherwise does not
represent a final sale;
(k) the Receivables of the Customer exceed a
credit limit determined by Agent, in its reasonable discretion, to the
extent such Receivable exceeds such limit;
(l) the Receivable is subject to any offset,
deduction, defense, dispute, or counterclaim, the Customer is also a creditor
or supplier of a Borrower or the Receivable is contingent in any respect or
for any reason; provided, however, the portion of each Receivable that would
otherwise be deemed an Eligible Receivable, which is not subject to offset,
deduction, defense, dispute, counterclaim or contingency shall be deemed an
Eligible Receivable;
(m) the applicable Borrower has made any agreement
with any Customer for any deduction therefrom, except for discounts or
allowances made in the ordinary course of business for prompt payment, all of
which discounts or allowances are reflected in the calculation of the face
value of each respective invoice related thereto;
(n) shipment of the merchandise or the rendition
of services has not been completed;
(o) any return, rejection or repossession of the
merchandise has occurred;
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(p) such Receivable is not payable to a Borrower;
or
(q) such Receivable is not otherwise satisfactory
to Agent as determined in good faith by Agent in the exercise of its discretion
in a reasonable manner.
"Environmental Complaint" shall have the meaning set
forth in Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state
and local environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the protection of
the environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include as to each
Borrower all of such Borrower's goods (other than Inventory) whether now owned
or hereafter acquired and wherever located including, without limitation, all
equipment, machinery, apparatus, motor vehicles, fittings, furniture,
furnishings, fixtures, parts, accessories and all replacements and
substitutions therefor or accessions thereto.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and the rules and
regulations promulgated thereunder.
"ESOP" shall mean the W.S. Battery & Sales Co. Inc.
Employee Stock Ownership Plan and Trust.
"Eurodollar Rate Loan" shall mean an Advance at any
time that bears interest based on the Eurodollar Rate.
"Eurodollar Rate" shall mean for any Eurodollar Rate
Loan for the then current Interest Period relating thereto the rate per annum
(such Eurodollar Rate to be adjusted to the next higher 1/100 of one (1%)
percent) equal to the quotient of (a) LIBOR, divided by (b) a number equal to
1.00 minus the aggregate of the rates (expressed as a decimal) of reserve
requirements current on the day that is two Business Days prior to the
beginning of the Interest Period (including without limitation basic,
supplemental, marginal and emergency reserves) under any regulation
promulgated by the Board of Governors of the Federal Reserve System (or any
other governmental authority having jurisdiction of IBJS) as in effect from
time to time, dealing with reserve requirements prescribed for Eurocurrency
funding including any reserve requirements with respect to "Eurocurrency
liabilities" under Regulation D of the Board of Governors of the Federal
Reserve System.
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"Event of Default" shall mean the occurrence of any
of the events set forth in Article X hereof.
"Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such
rate is not so published for any day which is a Business Day, the average of
quotations for such day on such transactions received by IBJS from three
Federal funds brokers of recognized standing selected by IBJS.
"Fixed Charge Coverage Ratio" shall mean and include,
with respect to any fiscal period, the ratio of (a) EBITDA, minus taxes
actually paid during such period, minus capitalized expenditures made during
such period to (b) all Senior Debt Payments during such period.
"Formula Amount" shall have the meaning set forth in
Section 2.1(a).
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect from time to
time.
"General Intangibles" shall mean and include as to
each Borrower all of such Borrower's general intangibles, whether now owned or
hereafter acquired including, without limitation, all choses in action, causes
of action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, service marks, trade secrets, goodwill,
copyrights, design rights, registrations, licenses, franchises, customer
lists, tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to such
Borrower to secure payment of any of the Receivables by a Customer all rights
of indemnification and all other intangible property of every kind and nature
(other than Receivables).
"Governmental Body" shall mean any nation or
government, any state or other political subdivision thereof or any entity
exercising the legislative, judicial, regulatory or administrative functions
of or pertaining to a government.
"Hazardous Discharge" shall have the meaning set
forth in Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation,
any flammable explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum and
petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous
or Toxic Substances or related
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materials as defined in CERCLA, the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of the
New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
"Hazardous Wastes" shall mean all waste materials
subject to regulation under CERCLA, RCRA or applicable state law, and any
other applicable Federal and state laws now in force or hereafter enacted
relating to hazardous waste disposal.
"Indebtedness" of a Person at a particular date shall
mean all obligations of such Person which in accordance with GAAP would be
classified upon a balance sheet as liabilities (except capital stock and
surplus earned or otherwise) and in any event, without limitation by reason of
enumeration, shall include all indebtedness, debt and other similar monetary
obligations of such Person whether direct or guaranteed and all indebtedness
secured by a Lien on assets owned by such Person, whether or not such
indebtedness actually shall have been created, assumed or incurred by such
Person. Any indebtedness of such Person resulting from the acquisition by such
Person of any assets subject to any Lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the
indebtedness secured thereby, whether or not actually so created, assumed or
incurred.
"Interest Period" shall mean the period provided for
any Eurodollar Rate Loan pursuant to Section 2.2(b).
"Inventory" shall mean and include as to each
Borrower all of such Borrower's now owned or hereafter acquired goods,
merchandise and other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all raw materials,
work in process, finished goods and materials and supplies of any kind, nature
or description which are or might be used or consumed in such Borrower's
business or used in selling or furnishing such goods, merchandise and other
personal property, and all documents of title or other documents representing
them.
"Inventory Advance Rate" shall have the meaning set
forth in Section 2.1(a)(ii) hereof.
"Lender" and "Lenders" shall have the meaning ascribed
to such term in the preamble to this Agreement and shall include each Person
which is a transferee, successor or assign of any Lender.
"Letter of Credit Application" shall have the meaning
set forth in Section 2.10 hereof.
"Letters of Credit" shall have the meaning set forth
in Section 2.9.
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"Letter of Credit Fees" shall have the meaning set
forth in Section 3.2.
"LIBOR" shall mean for any Eurodollar Rate Loan for
the then current Interest Period relating thereto, the rate per annum quoted
by Agent to Borrowers two (2) Business Days prior to the first day of such
Interest Period as the rate available to Agent in the interbank market for
offshore Dollar deposits in immediately available funds for a period equal to
such Interest Period and in an amount equal to the amount of such Eurodollar
Rate Loan.
"Lien" shall mean any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien (whether statutory
or otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Management Agreement" shall mean the Management
Services Agreement dated as of June 6, 1995 and amended on March 21, 1996
between BATS and Founders Management Services, Inc.
"Material Adverse Effect" shall mean a material
adverse effect on (a) the condition, operations, assets, business or prospects
of the applicable Person or Persons, (b) any Borrower's ability to pay the
Obligations in accordance with the terms thereof, (c) the value of the
Collateral, or Agent's Liens on the Collateral or the priority of any such
Lien or (d) the practical realization of the benefits of Agent's and each
Lender's rights and remedies under this Agreement and the Other Documents.
"Maximum Loan Amount" shall mean $13,000,000 less
repayments of the Term Loan.
"Maximum Revolving Advance Amount" shall mean
$10,000,000.
"Monthly Advances" shall have the meaning set forth
in Section 3.1 hereof.
"Multiemployer Plan" shall mean a "multiemployer
plan" as defined in Sections 3(37) and 4001(a)(3) of ERISA.
"Net Cash Flow" of BATS on a consolidated basis for
any fiscal period shall mean (a) the sum of (i) net income of BATS on a
consolidated basis (excluding losses) for such period; plus (ii) depreciation
and amortization expenses of BATS on a consolidated basis for such period;
plus (iii) all tax refunds for prior fiscal years received in such period;
plus (iv) to the extent deducted in determining net income for such period,
the effect of
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issuing any Additional Stock Consideration, Additional $4.50 Option
Consideration and Additional $6.00 Option Consideration; minus (b) the sum of
(i) scheduled payments of the Term Loan during such period, plus (ii)
scheduled payments of all Indebtedness during such period including the
Preferred Stock Redemption, plus (iii) capital expenditures (net of
Indebtedness incurred to finance such expenditures) in an amount for such
period not to exceed the amount permitted under Section 7.6, plus (iv) the
Additional Cash Consideration to the extent included in net income for such
period.
"Net Worth" at a particular date, shall mean an
amount equal to (a) the aggregate amount of all assets of BATS on a
consolidated basis as may properly be classified as such in accordance with
GAAP consistently applied and such other assets as are properly classified as
"intangible assets", less (b) the aggregate amount of all Indebtedness of BATS
on a consolidated basis, plus (c) the repurchase of 20,000 shares of BATS
owned by Donald L. Luke for an aggregate purchase price not to exceed
$100,000.
"Note" shall mean collectively, the Term Note and the
Revolving Credit Note.
"Obligations" shall mean and include any and all of
each Borrower's Indebtedness and/or liabilities to Agent or Lenders or any
corporation that directly or indirectly controls or is controlled by or is
under common control with Agent or any Lender of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint
and several, absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated,
regardless of how such indebtedness or liabilities arise or by what agreement
or instrument they may be evidenced or whether evidenced by any agreement or
instrument, including, but not limited to, any and all of any Borrower's
Indebtedness and/or liabilities under this Agreement, the Other Documents or
under any other agreement between Agent or Lenders and any Borrower and all
obligations of any Borrower to Agent or Lenders to perform acts or refrain
from taking any action.
"Original Owner" shall mean with respect (a) to any
Borrower (other than BATS), BATS and (b) to SEC, BAC.
"Other Documents" shall mean the Note, the Pledge
Agreement, the Questionnaire and any and all other agreements, instruments and
documents, including, without limitation, guaranties, pledges, powers of
attorney, consents, and all other writings heretofore, now or hereafter
executed by any Borrower and/or delivered to Agent or any Lender in respect of
the transactions contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or
other entity owning, directly or indirectly at least 50% of the shares of
stock or other ownership interests having ordinary voting
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power to elect a majority of the directors of the Person, or other Persons
performing similar functions for any such Person.
"Participant" shall mean each Person who shall be
granted the right by any Lender to participate in any of the Advances and who
shall have entered into a participation agreement in form and substance
satisfactory to such Lender.
"Payment Office" shall mean initially One State
Street, New York, New York 10004; thereafter, such other office of Agent, if
any, which it may designate by notice to Borrowing Agent and to each Lender to
be the Payment Office.
"Permitted Encumbrances" shall mean (a) Liens in
favor of Agent for the benefit of Agent and Lenders; (b) Liens for taxes,
assessments or other governmental charges not delinquent or being contested in
good faith and by appropriate proceedings and with respect to which proper
reserves have been taken by Borrowers; provided, that, the Lien shall have no
effect on the priority of the Liens in favor of Agent or the value of the
assets in which Agent has such a Lien and a stay of enforcement of any such
Lien shall be in effect; (c) Liens disclosed in the financial statements
referred to in Section 5.5, the existence of which Agent has consented to in
writing; (d) deposits or pledges to secure obligations under worker's
compensation, social security or similar laws, or under unemployment
insurance; (e) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations,
surety and appeal bonds and other obligations of like nature arising in the
ordinary course of any Borrower's business; (f) judgment Liens that have been
stayed or bonded and mechanics', workers', materialmen's or other like Liens
arising in the ordinary course of any Borrower's business with respect to
obligations which are not due or which are being contested in good faith by
the applicable Borrower; (g) Liens placed upon fixed assets hereafter acquired
to secure a portion of the purchase price thereof, provided that (x) any such
lien shall not encumber any other property of the Borrowers and (y) the
aggregate amount of Indebtedness secured by such Liens incurred as a result of
such purchases during any fiscal year shall not exceed the amount provided for
in Section 7.6; and (h) Liens disclosed on Schedule 1.2.
"Person" shall mean any individual, sole
proprietorship, partnership, corporation, business trust, joint stock company,
trust, unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean any employee benefit plan within
the meaning of Section 3(3) of ERISA, maintained for employees of Borrowers or
any member of the Controlled Group or any such Plan to which any Borrower or
any member of the Controlled Group is required to contribute on behalf of any
of its employees.
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"Pledge Agreement" shall mean, collectively, (a) the
Stock Pledge Agreement dated as of the Closing Date between BATS and Lender
pursuant to which BATS pledges all of the issued and outstanding common stock
of TEI, AFA, SEC, BN, WSBS and BAC and the Stock Pledge Agreement dated as of
the Closing Date between, BAC and Lender pursuant to which BAC pledges all of
the issued and outstanding common stock of SEC.
"Preferred Stock" shall mean 750,000 shares of Series
A Preferred Stock of BATS.
"Preferred Stock Redemption" shall mean the
redemption of the Preferred Stock at a price equal to $1.00 per share required
to be made by BATS on April 11, 1997.
"Pro Forma Balance Sheet" shall have the meaning set
forth in Section 5.5(a) hereof.
"Pro Forma Financial Statements" shall have the
meaning set forth in Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in
Section 5.5(b) hereof.
"Purchasing Lender" shall have the meaning set forth
in Section 15.3 hereof.
"Questionnaire" shall mean the Documentation
Information Questionnaire and the responses thereto provided by Borrowers and
delivered to Agent.
"RCRA" shall mean the Resource Conservation and
Recovery Act, 42 U.S.C. ss.ss. 6901 et seq., as same may be amended
from time to time.
"Real Property" shall mean all real property owned,
leased or occupied by any Borrower.
"Receivables" shall mean and include as to each
Borrower all of such Borrower's accounts, contract rights, instruments
(including those evidencing indebtedness owed to Borrowers by their
Affiliates), documents, chattel paper, general intangibles relating to
accounts, drafts and acceptances, and all other forms of obligations owing to
such Borrower arising out of or in connection with the sale or lease of
Inventory or the rendition of services, all guarantees and other security
therefor, whether secured or unsecured, now existing or hereafter created, and
whether or not specifically sold or assigned to Agent hereunder.
"Receivables Advance Rate" shall have the meaning set
forth in Section 2.1(a)(i) hereof.
"Release" shall have the meaning set forth in Section
5.7(c)(i) hereof.
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"Reportable Event" shall mean a reportable event
described in Section 4043(b) of ERISA or the regulations
promulgated thereunder.
"Required Lenders" shall mean Lenders holding at
least sixty six and two-thirds percent (66 2/3%) of the Advances.
"Revolving Advances" shall mean Advances made other
than Letters of Credit or the Term Loan.
"Revolving Credit Note" shall mean, collectively, the
promissory notes referred to in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate
per annum equal to (a) the sum of the Alternate Base Rate plus one quarter of
one percent (.25%) percent with respect to Domestic Rate Loans, or (b) the sum
of the Eurodollar Rate plus two percent (2%) percent with respect to
Eurodollar Rate Loans.
"SEC" shall have the meaning set forth in the
preamble to this Agreement.
"Senior Debt Payments" shall mean and include all
cash actually expended by Borrowers to make (a) interest payments on any
Advances hereunder, plus, (b) scheduled principal payments on the Term Loan,
plus (c) payments for all fees, commissions and charges set forth herein and
with respect to any Advances, plus (d) capitalized lease payments, plus (e)
payments with respect to any other Indebtedness for borrowed money.
"Settlement Date" shall mean the Closing Date and
thereafter Wednesday of each week unless such day is not a Business Day in
which case it shall be the next succeeding Business Day.
"Subsidiary" shall mean a corporation or other entity
of whose shares of stock or other ownership interests having ordinary voting
power (other than stock or other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the directors
of such corporation, or other Persons performing similar functions for such
entity, are owned, directly or indirectly, by such Person.
"Subsidiary Stock" shall mean all of the issued and
outstanding shares of stock owned by BATS of each Borrower (other than BATS)
and all of the issued and outstanding shares of stock owned by any Borrower
(other than BATS) in any subsidiary of such Borrower together with the
certificates representing the Subsidiary Stock and all dividends, cash,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for any and
all of the Subsidiary Stock.
"TEI" shall have the meaning set forth in the
preamble to this Agreement.
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"Term" shall have the meaning set forth in Section
13.1 hereof.
"Term Loan" shall mean the Advances made pursuant to
Section 2.4 hereof.
"Term Loan Rate" shall mean an interest rate per
annum equal to (a) the sum of the Alternate Base Rate plus three-quarters of
one percent (.75%) with respect to Domestic Rate Loans or, (b) the sum of the
Eurodollar Rate plus two and one-half percent (2.50%) with respect to
Eurodollar Rate Loans.
"Term Note" shall mean collectively, the promissory
notes described in Section 2.4 hereof.
"Termination Event" shall mean (i) a Reportable Event
with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any
Borrower or any member of the Controlled Group from a Plan or Multiemployer
Plan during a plan year in which such entity was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of
intent to terminate a Plan in a distress termination described in Section
4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate
a Plan or Multiemployer Plan; (v) any event or condition (a) which is
reasonably likely to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (b) that is reasonably likely to result in termination
of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of any Borrower or any member of the Controlled Group from a
Multiemployer Plan.
"Toxic Substance" shall mean and include any material
present on the Real Property or the Leasehold Interests which has been shown
to have significant adverse effect on human health or which is subject to
regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. ss.ss.
2601 et seq., applicable state law, or any other applicable Federal or state
laws now in force or hereafter enacted relating to toxic substances. "Toxic
Substance" includes but is not limited to asbestos, polychlorinated biphenyls
(PCBs) and lead-based paints.
"Transactions" shall have the meaning set forth in
Section 5.5 hereof.
"Transferee" shall have the meaning set forth in
Section 15.3(b) hereof.
"Undrawn Availability" at a particular date shall
mean an amount equal to (a) the lesser of (i) the Formula Amount or (ii) the
Maximum Revolving Advance Amount, minus (b) the sum of (i) the outstanding
amount of Advances (other than the Term Loan) plus (ii) all amounts due and
owing to Borrowers' trade creditors which are outstanding sixty (60) days or
more past due date trade terms,
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plus (iii) fees and expenses for which Borrowers are liable but which have not
been paid or charged to Borrowers' Account.
"Week" shall mean the time period commencing with the
opening of business on a Wednesday and ending on the end of
business the following Tuesday.
"WSBS" shall have the meaning set forth in the
preamble to this Agreement.
"WSBS Acquisition Agreement" shall mean the Stock
Purchase Agreement dated January 3, 1997 as of December 31, 1996
among BATS, WSBS and William S. Sapp and Dolores Sapp, as Trustees
of W.S. Battery & Sales Co. Inc. Employee Stock Ownership Plan and
Trust, including all exhibits and schedules thereto.
1.3. Uniform Commercial Code Terms. All terms used herein
and defined in the Uniform Commercial Code as adopted in the State
of New York shall have the meaning given therein unless otherwise
defined herein.
1.4. Certain Matters of Construction. The terms "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular section, paragraph or
subdivision. Any pronoun used shall be deemed to cover all genders. Wherever
appropriate in the context, terms used herein in the singular also include the
plural and vice versa. All references to statutes and related regulations
shall include any amendments of same and any successor statutes and
regulations. Unless otherwise provided, all references to any instruments or
agreements to which Agent is a party, including, without limitation,
references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally and
not jointly, will make Revolving Advances to Borrowers in aggregate
amounts outstanding at any time equal to such Lender's Commitment
Percentage of the lesser of (x) the Maximum Revolving Advance
Amount less the aggregate amount of outstanding Letters of Credit
or (y) an amount equal to the sum of:
(i) up to 80%, subject to the provisions of
Section 2.1(b) hereof ("Receivables Advance Rate"), of
Eligible Receivables, plus
(ii) up to the lesser of (A) 50%, subject to the
provisions of Section 2.1(b) hereof ("Inventory
Advance Rate"), of the value of the Eligible
Inventory (the Receivables Advance Rate and the
Inventory Advance Rate shall be referred to
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collectively, as the "Advance Rates") or (B)
$6,000,000 in the aggregate at any one time, plus
(iii) the product of (a) the aggregate amount of
outstanding Letters of Credit times (b) the Inventory
Advance Rate, minus
(iv) the aggregate amount of outstanding Letters of
Credit, minus
(v) such reserves as Agent may reasonably deem
proper and necessary from time to time.
The amount derived from the sum of (x) Sections 2.1(a)(y)(i) (ii)
and (iii) minus (y) Section 2.1 (a)(y)(v) at any time and from time to time
shall be referred to as the "Formula Amount". The Revolving Advances shall be
evidenced by the secured promissory notes ("Revolving Credit Note")
substantially in the form attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may
be increased or decreased by Agent at any time and from time to time in the
exercise of its reasonable discretion. Each Borrower consents to any such
increases or decreases and acknowledges that decreasing the Advance Rates or
increasing the reserves may limit or restrict Advances requested by Borrowing
Agent.
2.2. Procedure for Revolving Advances Borrowing.
(a) Borrowing Agent on behalf of any Borrower may
notify Agent prior to 11:00 a.m. on a Business Day of a Borrower's request to
incur, on that day, a Revolving Advance hereunder. Should any amount required
to be paid as interest hereunder, or as fees or other charges under this
Agreement or any other agreement with Agent or Lenders, or with respect to any
other Obligation, become due, same shall be deemed a request for a Revolving
Advance as of the date such payment is due, in the amount required to pay in
full such interest, fee, charge or Obligation under this Agreement or any
other agreement with Agent or Lenders, and such request shall be irrevocable.
(b) Notwithstanding the provisions of (a) above,
in the event any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing
Agent on behalf of any Borrower shall give Agent written notice prior to 11:00
a.m. on a Business Day at least three (3) Business Days' prior to the date of
the proposed borrowing, specifying (i) the date of the proposed borrowing
(which shall be a Business Day), (ii) the type of borrowing and the amount on
the date of such Advance to be borrowed, which amount shall be a minimum
amount of $500,000, and (iii) the duration of the first Interest Period
therefor. Interest Periods for Eurodollar Rate Loans shall be for one, two or,
three months. No Eurodollar Rate Loan shall be made available to Borrower
during the continuance of a Default or an Event of Default.
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(c) Each Interest Period of a Eurodollar Rate Loan
shall commence on the date such Eurodollar Rate Loan is made and shall end on
such date as Borrowing Agent may elect as set forth in (b)(iii) above provided
that the exact length of each Interest Period shall be determined in
accordance with the practice of the interbank market for offshore Dollar
deposits and no Interest Period shall end after the last day of the Term.
Borrowing Agent shall elect the initial Interest Period
applicable to a Eurodollar Rate Loan by its notice of borrowing given to Agent
pursuant to Section 2.2(b) or by its notice of conversion given to Agent
pursuant to Section 2.2(d), as the case may be. Borrowing Agent shall elect
the duration of each succeeding Interest Period by giving irrevocable written
notice to Agent of such duration not less than three (3) Business Days prior
to the last day of the then current Interest Period applicable to such
Eurodollar Rate Loan. If Agent does not receive timely notice of the Interest
Period elected by Borrowing Agent, Borrowers shall be deemed to have elected
to convert to a Domestic Rate Loan subject to Section 2.2(d) hereinbelow.
(d) Provided that no Event of Default shall have
occurred and be continuing, any Borrower may, on the last Business Day of the
then current Interest Period applicable to any outstanding Eurodollar Rate
Loan, or on any Business Day with respect to Domestic Rate Loans, convert any
such loan into a loan of another type in the same aggregate principal amount
provided that any conversion of a Eurodollar Rate Loan shall be made only on
the last Business Day of the then current Interest Period applicable to such
Eurodollar Rate Loan. If a Borrower desires to convert a loan, Borrowing Agent
shall give Agent not less than three (3) Business Days' prior written notice
to convert from a Domestic Rate Loan to a Eurodollar Rate Loan or one (1)
Business Day's prior written notice to convert from a Eurodollar Rate Loan to
a Domestic Rate Loan, specifying the date of such conversion, the loans to be
converted and if the conversion is from a Domestic Rate Loan to any other type
of loan, the duration of the first Interest Period therefor. After giving
effect to each such conversion, there shall not be outstanding more than three
(3) Eurodollar Rate Loans, in the aggregate.
(e) At its option and upon three (3) Business
Days' prior written notice, any Borrower may prepay the Eurodollar Rate Loans
in whole at any time or in part from time to time, without premium or penalty,
but with accrued interest on the principal being prepaid to the date of such
repayment. Such Borrower shall specify the date of prepayment of Advances
which are Eurodollar Rate Loans and the amount of such prepayment. In the
event that any prepayment of a Eurodollar Rate Loan is required or permitted
on a date other than the last Business Day of the then current Interest Period
with respect thereto, such Borrower shall indemnify Agent and Lenders therefor
in accordance with Section 2.2(f) hereof.
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(f) Each Borrower shall indemnify Agent and
Lenders and hold Agent and Lenders harmless from and against any and all
losses or expenses that Agent and Lenders may sustain or incur as a
consequence of any prepayment, conversion of or any default by any Borrower in
the payment of the principal of or interest on any Eurodollar Rate Loan or
failure by any Borrower to complete a borrowing of, a prepayment of or
conversion of or to a Eurodollar Rate Loan after notice thereof has been
given, including, but not limited to, any interest payable by Agent or Lenders
to lenders of funds obtained by it in order to make or maintain its Eurodollar
Rate Loans hereunder. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrowing Agent shall be conclusive absent manifest error.
(g) Notwithstanding any other provision hereof,
if any applicable law, treaty, regulation or directive, or any change therein
or in the interpretation or application thereof, shall make it unlawful for any
Lender (for purposes of this subsection (g), the term "Lender" shall include
any Lender and the office or branch where any Lender or any corporation or
bank controlling such Lender makes or maintains any Eurodollar Rate Loans) to
make or maintain its Eurodollar Rate Loans, the obligation of Lenders to make
Eurodollar Rate Loans hereunder shall forthwith be cancelled and Borrowers
shall, if any affected Eurodollar Rate Loans are then outstanding, promptly
upon request from Agent, either pay all such affected Eurodollar Rate Loans or
convert such affected Eurodollar Rate Loans into loans of another type. If any
such payment or conversion of any Eurodollar Rate Loan is made on a day that
is not the last day of the Interest Period applicable to such Eurodollar Rate
Loan, Borrowers shall pay Agent, upon Agent's request, such amount or amounts
as may be necessary to compensate Lenders for any loss or expense sustained or
incurred by Lenders in respect of such Eurodollar Rate Loan as a result of
such payment or conversion, including (but not limited to) any interest or
other amounts payable by Lenders to lenders of funds obtained by Lenders in
order to make or maintain such Eurodollar Rate Loan. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by
Lenders to Borrowing Agent shall be conclusive absent manifest error.
2.3. Disbursement of Advance Proceeds. All Advances shall be
disbursed from whichever office or other place Agent may designate from time
to time and, together with any and all other Obligations of Borrowers to Agent
or Lenders, shall be charged to Borrowers' Account on Agent's books. During
the Term, Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowers or deemed to have
been requested by Borrowers under Section 2.2(a) hereof shall, with respect to
requested Revolving Advances to the extent Lenders make such Revolving
Advances, be made available to the applicable Borrower on the day so requested
by way of credit to such Borrower's operating account at IBJS, or such other
bank as Borrowing Agent may designate following
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notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to
have been requested by any Borrower, be disbursed to Agent to be applied to
the outstanding Obligations giving rise to such deemed request.
2.4. Term Loan. Subject to the terms and conditions of this
Agreement, each Lender, severally and not jointly, will make a Term Loan to
Borrowers in the sum equal to such Lender's Commitment Percentage of
$3,000,000. The Term Loan shall be advanced on the Closing Date and shall be,
with respect to principal, payable as follows, subject to acceleration upon
the occurrence of an Event of Default under this Agreement or termination of
this Agreement: equal monthly installments of $50,000 each commencing on
February 1, 1997 and on the first day of each month thereafter with the unpaid
principal balance due on the last day of the Term. The Term Loan shall be
evidenced by a secured promissory notes (collectively, "Term Note") in
substantially the form attached hereto as Exhibit 2.4.
2.5. Maximum Advances. The aggregate balance of Revolving
Advances outstanding at any time shall not exceed the lesser of (a) Maximum
Revolving Advance Amount, less outstanding Letters of Credit or (b) the
Formula Amount, less outstanding Letters of Credit.
2.6. Repayment of Advances.
(a) The Advances shall be due and payable in full
on the last day of the Term subject to earlier prepayment as herein provided.
The Term Loan shall be due and payable as provided in Section 2.4 hereof and in
the Term Note.
(b) Each Borrower recognizes that the amounts
evidenced by checks, notes, drafts or any other items of payment relating to
and/or proceeds of Collateral may not be collectible by Agent on the date
received. In consideration of Agent's agreement to conditionally credit
Borrowers' Account as of the Business Day on which Agent receives those items
of payment, each Borrower agrees that, in computing the charges under this
Agreement, all items of payment shall be deemed applied by Agent on account of
the Obligations one (1) Business Day after the Business Day Agent receives
such payments via wire transfer or electronic depository check. Agent is not,
however, required to credit Borrowers' Account for the amount of any item of
payment which is unsatisfactory to Agent and Agent may charge Borrowers'
Account for the amount of any item of payment which is returned to Agent
unpaid.
(c) All payments of principal, interest and other
amounts payable hereunder, or under any of the related agreements shall be
made to Agent at the Payment Office not later than 1:00 P.M. (New York Time)
on the due date therefor in lawful money of the United States of America in
federal funds or other funds immediately available to Agent. Agent shall have
the right to
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effectuate payment on any and all Obligations due and owing hereunder by
charging Borrowers' Account or by making Advances as provided in Section 2.2
hereof.
(d) Borrowers shall pay principal, interest, and
all other amounts payable hereunder, or under any related agreement, without
any deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
2.7. Repayment of Excess Advances. The aggregate balance of
Advances outstanding at any time in excess of the maximum amount of Advances
permitted hereunder shall be immediately due and payable without the necessity
of any demand, at the Payment Office, whether or not a Default or Event of
Default has occurred.
2.8. Statement of Account. Agent shall maintain, in accordance
with its customary procedures, a loan account ("Borrowers' Account") in the
name of Borrowers in which shall be recorded the date and amount of each
Advance made by Lenders and the date and amount of each payment in respect
thereof; provided, however, the failure by Agent to record the date and amount
of any Advance shall not adversely affect Agent or any Lender. Each month,
Agent shall send to Borrowing Agent a statement showing the accounting for the
Advances made, payments made or credited in respect thereof, and other
transactions between Lenders and Borrowers, during such month. The monthly
statements shall be deemed correct and binding upon Borrowers in the absence
of manifest error and shall constitute an account stated between Lenders and
Borrowers unless Agent receives a written statement of Borrowers' specific
exceptions thereto within thirty (30) days after such statement is received by
Borrowing Agent. The records of Agent with respect to the loan account shall
be conclusive evidence absent manifest error of the amounts of Advances and
other charges thereto and of payments applicable thereto.
2.9. Letters of Credit. Subject to the terms and conditions
hereof, Agent shall issue or cause the issuance of documentary Letters of
Credit ("Letters of Credit") on behalf of any Borrower; provided, however,
that Agent will not be required to issue or cause to be issued any Letters of
Credit to the extent that the face amount of such Letters of Credit would then
cause the sum of (i) the outstanding Revolving Advances plus (ii) outstanding
Letters of Credit (with the requested Letter of Credit being deemed to be
outstanding for purposes of this calculation) to exceed the lesser of (x) the
Maximum Revolving Advance Amount or (y) the Formula Amount which is calculated
as if the requested Letter of Credit has been issued. The maximum amount of
outstanding Letters of Credit shall not exceed $2,000,000 in the aggregate at
any time. All disbursements or payments related to Letters of Credit shall be
deemed to be Revolving Advances and shall bear interest at the Revolving
Interest Rate; Letters of Credit that have not been drawn upon shall not bear
interest. Letters of Credit shall be subject to the terms and conditions set
forth in the Letter of Credit and Security Agreement attached hereto as
Exhibit 2.9.
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2.10. Issuance of Letters of Credit.
(a) Borrowing Agent on behalf of Borrowers may
request Agent to issue or cause the issuance of a Letter of Credit by
delivering to Agent at the Payment Office, Agent's standard form of Letter of
Credit and Security Agreement together with Agent's standard form of Letter of
Credit Application (collectively, the "Letter of Credit Application")
completed to the satisfaction of Agent; and, such other certificates,
documents and other papers and information as Agent may reasonably request.
(b) Each Letter of Credit shall, among other
things, (i) provide for the payment of sight drafts when presented for honor
thereunder in accordance with the terms thereof and when accompanied by the
documents described therein and (ii) have an expiry date not later than six
(6) months after such Letter of Credit's date of issuance and in no event
later than the last day of the Term. Each Letter of Credit Application and
each Letter of Credit shall be subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any amendments or revision thereof and, to the extent
not inconsistent therewith, the laws of the State of New York.
2.11. Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter
of Credit, Borrowers shall indemnify, save and hold Agent and each Lender
harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent and any Lender, and expenses and reasonable
attorneys' fees incurred by Agent or any Lender arising out of, or in
connection with, any Letter of Credit to be issued or created for any
Borrower. Borrowers shall be bound by Agent's or any issuing or accepting
bank's regulations and good faith interpretations of any Letter of Credit
issued or created for Borrowers' Account, although this interpretation may be
different from its own; and, neither Agent nor any Lender, the bank which
opened the Letter of Credit, nor any of its correspondents shall be liable for
any error, negligence, or mistakes, whether of omission or commission, in
following Borrowing Agent's or any Borrower's instructions or those contained
in any Letter of Credit or of any modifications, amendments or supplements
thereto or in issuing or paying any Letter of Credit, except for Agent's or
any Lender's or such correspondents' willful misconduct.
(b) Borrowing Agent shall authorize and direct
any bank which issues a Letter of Credit to name the applicable Borrower as the
"Account Party" therein and to deliver to Agent all instruments, documents,
and other writings and property received by the bank pursuant to the Letter of
Credit and to accept and rely upon Agent's instructions and agreements with
respect to all matters arising in connection with the Letter of Credit, the
application therefor or any acceptance therefor.
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(c) In connection with all Letters of Credit
issued or caused to be issued by Agent under this Agreement, each Borrower
hereby appoints Agent, or its designee, as its attorney, with full power and
authority (i) to sign and/or endorse such Borrower's name upon any warehouse
or other receipts, letter of credit applications and acceptances; (ii) to sign
such Borrower's name on bills of lading; (iii) to clear Inventory through the
United States of America Customs Department ("Customs") in the name of such
Borrower or Agent or Agent's designee, and to sign and deliver to Customs
officials powers of attorney in the name of such Borrower for such purpose;
and (iv) to complete in such Borrower's name or Agent's, or in the name of
Agent's designee, any order, sale or transaction, obtain the necessary
documents in connection therewith, and collect the proceeds thereof. Neither
Agent nor its attorneys will be liable for any acts or omissions nor for any
error of judgment or mistakes of fact or law, except for Agent's or its
attorney's willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.
(d) Each Lender shall to the extent of the
percentage amount equal to the product of such Lender's Commitment Percentage
times the aggregate amount of all unreimbursed reimbursement obligations
arising from disbursements made or obligations incurred with respect to the
Letters of Credit be deemed to have irrevocably purchased an undivided
participation in each such unreimbursed reimbursement obligation. In the event
that at the time a disbursement is made the unpaid balance of Revolving
Advances exceeds or would exceed, with the making of such disbursement, the
lesser of the Maximum Revolving Advance Amount or the Formula Amount, and such
disbursement is not reimbursed by Borrowers within two (2) Business Days,
Agent shall promptly notify each Lender and upon Agent's demand each Lender
shall pay to Agent such Lender's proportionate share of such unreimbursed
disbursement together with such Lender's proportionate share of Agent's
unreimbursed costs and expenses relating to such unreimbursed disbursement.
Upon receipt by Agent of a repayment from any Borrower of any amount disbursed
by Agent for which Agent had already been reimbursed by Lenders, Agent shall
deliver to each Lender that Lender's pro rata share of such repayment. Each
Lender's participation commitment shall continue until the last to occur of
any of the following events: (A) Agent ceases to be obligated to issue Letters
of Credit hereunder; (B) no Letter of Credit issued hereunder remains
outstanding and uncancelled or (C) all Persons (other than the applicable
Borrower) have been fully reimbursed for all payments made under or relating
to Letters of Credit.
2.12. Additional Payments. Any sums expended by Agent or any
Lender due to any Borrower's failure to perform or comply with its obligations
under this Agreement or any Other Document including, without limitation, any
Borrower's obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1
hereof, may be charged to Borrowers' Account as a Revolving Advance and added
to the Obligations.
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2.13. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be
advanced according to the applicable Commitment Percentages of Lenders. The
Term Loan shall be advanced according to the Commitment Percentages of
Lenders.
(b) Each payment (including each prepayment) by
Borrowers on account of the principal of and interest on the Revolving
Advances, shall be applied to the Revolving Advances pro rata according to the
applicable Commitment Percentages of Lenders. Each payment (including each
prepayment) by Borrowers on account of the principal of and interest on the
Term Note, shall be made from or to, or applied to that portion of the Term
Loan evidenced by the Term Note pro rata according to the Commitment
Percentages of Lenders. Except as expressly provided herein, all payments
(including prepayments) to be made by Borrower on account of principal,
interest and fees shall be made without set off or counterclaim and shall be
made to Agent on behalf of the Lenders to the Payment Office, in each case on
or prior to 1:00 P.M., New York time, in Dollars and in immediately available
funds.
(c) (i) Notwithstanding anything to the
contrary contained in Sections 2.12(a) and (b) hereof, commencing with the
first Business Day following the Closing Date, each borrowing of Revolving
Advances shall be advanced by Agent and each payment by any Borrower on
account of Revolving Advances shall be applied first to those Revolving
Advances made by Agent. On or before 1:00 P.M., New York time, on each
Settlement Date commencing with the first Settlement Date following the
Closing Date, Agent and Lenders shall make certain payments as follows: (I) if
the aggregate amount of new Revolving Advances made by Agent during the
preceding Week (if any) exceeds the aggregate amount of repayments applied to
outstanding Revolving Advances during such preceding Week, then each Lender
shall provide Agent with funds in an amount equal to its applicable Commitment
Percentage of the difference between (w) such Revolving Advances and (x) such
repayments and (II) if the aggregate amount of repayments applied to
outstanding Revolving Advances during such Week exceeds the aggregate amount
of new Revolving Advances made during such Week, then Agent shall provide each
Lender with funds in an amount equal to its applicable Commitment Percentage
of the difference between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to
earn interest at the applicable Contract Rate on outstanding Advances which it
has funded.
(iii) Promptly following each Settlement
Date, Agent shall submit to each Lender a certificate with respect to payments
received and Advances made during the Week immediately preceding such
Settlement Date. Such certificate of Agent shall be conclusive in the absence
of manifest error.
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(d) If any Lender or Participant (a "benefitted
Lender") shall at any time receive any payment of all or part of its Advances,
or interest thereon, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily or by set-off) in a greater proportion than any
such payment to and Collateral received by any other Lender, if any, in
respect of such other Lender's Advances, or interest thereon, and such greater
proportionate payment or receipt of Collateral is not expressly permitted
hereunder, such benefitted Lender shall purchase for cash from the other
Lenders a participation in such portion of each such other Lender's Advances,
or shall provide such other Lender with the benefits of any such Collateral,
or the proceeds thereof, as shall be necessary to cause such benefitted Lender
to share the excess payment or benefits of such Collateral or proceeds ratably
with each of Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such benefitted
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. Each Lender so
purchasing a portion of another Lender's Advances may exercise all rights of
payment (including, without limitation, rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such
portion.
(e) Unless Agent shall have been notified by
telephone, confirmed in writing, by any Lender that such Lender will not make
the amount which would constitute its applicable Commitment Percentage of the
Advances available to Agent, Agent may (but shall not be obligated to) assume
that such Lender shall make such amount available to Agent and, in reliance
upon such assumption, make available to Borrowers a corresponding amount.
Agent will promptly notify Borrowers of its receipt of any such notice from a
Lender. If such amount is made available to Agent on a date after a Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product
of (i) the daily average Federal Funds Rate (computed on the basis of a year
of 360 days) during such period as quoted by Agent, times (ii) such amount,
times (iii) the number of days from and including such Settlement Date to the
date on which such amount becomes immediately available to Agent. A
certificate of Agent submitted to any Lender with respect to any amounts owing
under this paragraph (e) shall be conclusive, in the absence of manifest
error. If such amount is not in fact made available to Agent by such Lender
within three (3) Business Days after such Settlement Date, Agent shall be
entitled to recover such an amount, with interest thereon at the rate per
annum then applicable to such Revolving Advances hereunder, on demand from
Borrowers; provided, however, that Agent's right to such recovery shall not
prejudice or otherwise adversely affect Borrowers' rights (if any) against
such Lender.
2.14. Mandatory Prepayments.
(a) When any Borrower sells or otherwise disposes
of any Collateral other than Inventory in the ordinary course of business,
Borrowers shall repay the Advances in an amount equal to
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the net proceeds of such sale (i.e., gross proceeds less the reasonable costs
of such sales or other dispositions), such repayments to be made promptly but
in no event more than one (1) Business Day following receipt of such net
proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. The foregoing shall not be deemed to be implied consent to any such
sale otherwise prohibited by the terms and conditions hereof. Such repayments
shall be applied first, to the outstanding principal installments on the Term
Loan in the inverse order of the maturities thereof and, second, to the
remaining Advances in such order as Agent may determine, subject to Borrowers'
ability to reborrow Revolving Advances in accordance with the terms hereof.
(b) Borrowers shall prepay the outstanding amount
of the Advances in an amount equal to fifty (50%) of Net Cash Flow for each
fiscal year commencing on or after January 1, 1997, payable upon delivery of
the financial statements to Agent referred to in and required by Section 9.7
for such fiscal year but in any event not later than one hundred and twenty
(120) days after the end of each such fiscal year, which amount shall be
applied first, to the outstanding principal installments in the inverse order
of the maturities thereof and, second, to the remaining Advances in such order
as Agent may determine subject to Borrowers' ability to reborrow Revolving
Advances in accordance with the terms hereof. In the event that the financial
statement is not so delivered, then a calculation based upon estimated amounts
shall be made by Agent upon which calculation Borrowers shall make the
prepayment required by this Section 2.14(b), subject to adjustment when the
financial statement is delivered to Agent as required hereby. The calculation
made by Agent shall not be deemed a waiver of any rights Agent or Lenders may
have as a result of the failure by Borrowers to deliver such financial
statement.
2.15. Use of Proceeds. Borrowers shall apply the proceeds of
Advances to (i) enable BATS to acquire the stock of BN and WSBS, (ii) enable
BAC to acquire the assets of WSJ Enterprises, Inc., (iii) repay existing
indebtedness of AFA owed to Fleet Bank, (iv) pay fees and expenses relating to
the transactions, and (v) to provide for their working capital needs.
2.16. Defaulting Lender.
(a) Notwithstanding anything to the contrary
contained herein, in the event any Lender (x) has refused (which refusal
constitutes a breach by such Lender of its obligations under this Agreement)
to make available its portion of any Advance or (y) notifies either Agent or
Borrowing Agent that it does not intend to make available its portion of any
Advance (if the actual refusal would constitute a breach by such Lender of its
obligations under this Agreement) (each, a "Lender Default"), all rights and
obligations hereunder of such Lender (a "Defaulting Lender") as to which a
Lender Default is in effect and of the other parties hereto shall be modified
to the extent of the express provisions of this Section 2.16 while such Lender
Default remains in effect.
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(b) Advances shall be incurred pro rata from
Lenders (the "Non-Defaulting Lenders") which are not Defaulting Lenders based
on their respective Commitment Percentages, and no Commitment Percentage of
any Lender or any pro rata share of any Advances required to be advanced by
any Lender shall be increased as a result of such Lender Default. Amounts
received in respect of principal of any type of Advances shall be applied to
reduce the applicable Advances of each Lender pro rata based on the aggregate
of the outstanding Advances of that type of all Lenders at the time of such
application; provided, that, such amount shall not be applied to any Advances
of a Defaulting Lender at any time when, and to the extent that, the aggregate
amount of Advances of any Non-Defaulting Lender exceeds such Non-Defaulting
Lender's Commitment Percentage of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to
give instructions to Agent or to approve, disapprove, consent to or vote on
any matters relating to this Agreement and the Other Documents. All
amendments, waivers and other modifications of this Agreement and the Other
Documents may be made without regard to a Defaulting Lender and, for purposes
of the definition of "Required Lenders", a Defaulting Lender shall be deemed
not to be a Lender and not to have Advances outstanding.
(d) Other than as expressly set forth in this
Section 2.16, the rights and obligations of a Defaulting Lender (including the
obligation to indemnify Agent) and the other parties hereto shall remain
unchanged. Nothing in this Section 2.16 shall be deemed to release any
Defaulting Lender from its obligations under this Agreement and the Other
Documents, shall alter such obligations, shall operate as a waiver of any
default by such Defaulting Lender hereunder, or shall prejudice any rights
which any Borrower, Agent or any Lender may have against any Defaulting Lender
as a result of any default by such Defaulting Lender hereunder.
(e) In the event a Defaulting Lender
retroactively cures to the satisfaction of Agent the breach which caused a
Lender to become a Defaulting Lender, such Defaulting Lender shall no longer
be a Defaulting Lender and shall be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in arrears
on the first day of each month with respect to the preceding month with
respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans at
the end of each Interest Period. Interest charges shall be computed on the
actual principal amount of Advances outstanding during the month (the "Monthly
Advances") at a rate per annum equal to (i) with respect to Revolving
Advances, the applicable Revolving Interest Rate and (ii) with respect to the
applicable Term Loan, the Term Loan Rate. Whenever, subsequent to the date of
this Agreement, the Alternate
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Base Rate is increased or decreased, the applicable Contract Rate shall be
similarly changed without notice or demand of any kind by an amount equal to
the amount of such change in the Alternate Base Rate during the time such
change or changes remain in effect. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, the Obligations shall bear
interest at the applicable Contract Rate plus two percent (2%) per annum (the
"Default Rate").
3.2. Letter of Credit Fees.
Borrowers shall pay Agent (i) for the ratable benefit
of Lenders for issuing or causing the issuance of a Letter of Credit, a fee
equal to 1% of the original and each increase in the face amount thereof for
each 120 days or part thereof of its term (the "Letter of Credit Fees"), and
(ii) the issuing bank's other customary charges payable in connection with
Letters of Credit as in effect from time to time. A current schedule of such
charges is attached hereto as Exhibit 3.2. Such fees and charges shall be
payable (i) on the opening of such Letter of Credit and (ii) at the time of
each increase in face amount thereof. Any such charge in effect at the time of
a particular transaction shall be the charge for that transaction,
notwithstanding any subsequent change in the issuing bank's prevailing charges
for that type of transaction. All Letter of Credit Fees payable hereunder
shall be deemed earned in full on the date when the same are due and payable
hereunder and shall not be subject to rebate or proration upon the termination
of this Agreement for any reason.
Upon occurrence of an Event of Default and during the
continuation thereof upon the request of Agent, and upon termination of this
Agreement Borrowers will cause cash to be deposited and maintained in an
account with Agent, as cash collateral, in an amount equal to one hundred and
five percent (105%) of the outstanding Letters of Credit, and each Borrower
hereby irrevocably authorizes Agent, in its discretion, on such Borrower's
behalf and in such Borrower's name, to open such an account and to make and
maintain deposits therein, or in an account opened by such Borrower, in the
amounts required to be made by such Borrower, out of the proceeds of
Receivables or other Collateral or out of any other funds of such Borrower
coming into any Lender's possession at any time. Agent will invest such cash
collateral (less applicable reserves) in such short-term money-market items as
to which Agent and such Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral. No Borrower may withdraw amounts credited to any such account
except upon payment and performance in full of all Obligations and termination
of this Agreement.
3.3. (a) Closing Fee. Upon the execution of this
Agreement, Borrowers shall pay to Agent for the ratable benefit of
Lenders a closing fee of $50,000 less that portion of the
commitment fee of $25,000 heretofore paid by Borrowers to Agent.
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(b) Facility Fee. If, for any month during the Term, the
average daily unpaid balance of the Revolving Advances for each day of such
month does not equal the Maximum Revolving Advance Amount, then Borrowers
shall pay to Agent for the ratable benefit of Lenders a fee at a rate equal
to three eights of one percent (3/8 of 1%) per annum on the amount by which
the Maximum Revolving Advance Amount exceeds such average daily unpaid
balance. Such fee shall be payable to Agent in arrears on the first day of
each month with respect to the preceding month.
3.4. (a) Collateral Evaluation Fee. Borrowers shall pay Agent a
collateral evaluation fee equal to $1,500 per month commencing on the first
day of the month following the Closing Date and on the first day of each month
thereafter during the Term. The collateral evaluation fee shall be deemed
earned in full on the date when same is due and payable hereunder and shall
not be subject to rebate or proration upon termination of this Agreement for
any reason.
(b) Collateral Monitoring Fee. Borrowers shall pay to Agent
on the first day of each month following any month in which Agent performs any
collateral monitoring - namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's benefit - a collateral
monitoring fee in an amount equal to $600 per day for each person employed to
perform such monitoring, plus all costs and disbursements incurred by Agent in
the performance of such examination or analysis.
3.5. Computation of Interest and Fees. Interest and fees
hereunder shall be computed on the basis of a year of 360 days and for the
actual number of days elapsed. If any payment to be made hereunder becomes due
and payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the applicable Contract Rate during such extension.
3.6. Maximum Charges. In no event whatsoever shall interest and
other charges charged hereunder exceed the highest rate permissible under law.
In the event interest and other charges as computed hereunder would otherwise
exceed the highest rate permitted under law, such excess amount shall be first
applied to any unpaid principal balance owed by Borrowers, and if the then
remaining excess amount is greater than the previously unpaid principal
balance, Lenders shall promptly refund such excess amount to Borrowers and the
provisions hereof shall be deemed amended to provide for such permissible
rate.
3.7. Increased Costs. In the event that any applicable law,
treaty or governmental regulation, or any change therein or in the
interpretation or application thereof, or compliance by any Lender (for
purposes of this Section 3.7, the term "Lender" shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender) and the
office or branch where Agent or any
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Lender (as so defined) makes or maintains any Eurodollar Rate Loans with any
request or directive (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any
kind whatsoever with respect to this Agreement or change the basis of taxation
of payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except for changes in
the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve,
special deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by, any office of Agent or any Lender, including (without limitation)
pursuant to Regulation D of the Board of Governors of the Federal Reserve
System; or
(c) impose on Agent or any Lender or the London
interbank Eurodollar market any other condition with respect to
this Agreement or any Other Documents;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender reasonably deems to be
material, then, in any case Borrowers shall promptly pay Agent or such Lender,
upon its demand, such additional amount as will compensate Agent or such
Lender for such additional cost or such reduction, as the case may be. Agent
or such Lender shall certify the amount of such additional cost or reduced
amount to Borrowers, and such certification shall be conclusive absent
manifest error.
3.8. Basis For Determining Interest Rate Inadequate or
Unfair. In the event that Agent or any Lender shall have
determined that:
(a) reasonable means do not exist for ascertaining
the Eurodollar Rate applicable pursuant to Section 2.2 hereof for
any Interest Period; or
(b) Dollar deposits in the relevant amount and for
the relevant maturity are not available in the London interbank Eurodollar
market, with respect to an outstanding Eurodollar Rate Loan, a proposed
Eurodollar Rate Loan, or a proposed conversion of a Domestic Rate Loan into a
Eurodollar Rate Loan, then Agent shall give Borrowing Agent prompt written,
telephonic or telegraphic notice of such determination. If such notice is
given, (i) any such requested Eurodollar Rate Loan shall be made as a Domestic
Rate Loan, unless Borrowing Agent shall notify Agent no later than 10:00 a.m.
(New York City time) two (2) Business Days prior to the
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date of such proposed borrowing, that its request for such borrowing shall be
cancelled or made as an unaffected type of Eurodollar Rate Loan, (ii) any
Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to
an affected type of Eurodollar Rate Loan shall be continued as or converted
into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent, no later
than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify
Agent, no later than 10:00 a.m. (New York City time) two (2) Business Days
prior to the last Business Day of the then current Interest Period applicable
to such affected Eurodollar Rate Loan, shall be converted into an unaffected
type of Eurodollar Rate Loan, on the last Business Day of the then current
Interest Period for such affected Eurodollar Rate Loans. Until such notice has
been withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans
and no Borrower shall have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar
Rate Loan.
3.9. Capital Adequacy.
(a) In the event that Agent or any Lender shall
have determined that any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Agent or any Lender (for purposes of
this Section 3.9, the term "Lender" shall include Agent or any Lender and any
corporation or bank controlling Agent or any Lender) and the office or branch
where Agent or any Lender (as so defined) makes or maintains any Eurodollar
Rate Loans with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on Agent or any Lender's capital as a consequence of its obligations hereunder
to a level below that which Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into consideration Agent's and
each Lender's policies with respect to capital adequacy) by an amount deemed
by Agent or any Lender to be material, then, from time to time, Borrowers
shall pay upon demand to Agent or such Lender such additional amount or
amounts as will compensate Agent or such Lender for such reduction. In
determining such amount or amounts, Agent or such Lender may use any
reasonable averaging or attribution methods. The protection of this Section
3.9 shall be available to Agent and each Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable
law, regulation or condition.
(b) A certificate of Agent or such Lender setting
forth such amount or amounts as shall be necessary to compensate
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Agent or such Lender with respect to Section 3.9(a) hereof when delivered to
Borrowers shall be conclusive absent manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt
payment and performance to Agent and each Lender of the Obligations, each
Borrower hereby assigns, pledges and grants to Agent for the ratable benefit
of each Lender a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Each Borrower shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent's security interest and
shall cause its financial statements to reflect such security interest.
4.2. Perfection of Security Interest. Each Borrower shall take
all action that may be necessary or desirable, or that Agent may request, so
as at all times to maintain the validity, perfection, enforceability and
priority of Agent's security interest in the Collateral or to enable Agent to
protect, exercise or enforce its rights hereunder and in the Collateral,
including, but not limited to, (i) immediately discharging all Liens other
than Permitted Encumbrances, (ii) obtaining landlords' or mortgagees' lien
waivers, (iii) delivering to Agent, endorsed or accompanied by such
instruments of assignment as Agent may specify, and stamping or marking, in
such manner as Agent may specify, any and all chattel paper, instruments,
letters of credits and advices thereof and documents evidencing or forming a
part of the Collateral, (iv) entering into warehousing, lockbox and other
custodial arrangements satisfactory to Agent, and (v) executing and delivering
financing statements, instruments of pledge, mortgages, notices and
assignments, in each case in form and substance satisfactory to Agent,
relating to the creation, validity, perfection, maintenance or continuation of
Agent's security interest under the Uniform Commercial Code or other
applicable law. Agent is hereby authorized to file financing statements signed
by Agent instead of Borrower in accordance with Section 9-402(2) of Uniform
Commercial Code as adopted in the State of New York. All charges, expenses and
fees Agent may incur in doing any of the foregoing, and any local taxes
relating thereto, shall be charged to Borrowers' Account as a Revolving
Advance and added to the Obligations, or, at Agent's option, shall be paid to
Agent for the ratable benefit of Lenders immediately upon demand.
4.3. Disposition of Collateral. Each Borrower will safeguard and
protect all Collateral for Agent's general account and make no disposition
thereof whether by sale, lease or otherwise except (a) the sale of Inventory
in the ordinary course of business and (b) the disposition or transfer of
obsolete and worn-out Equipment in the ordinary course of business during any
fiscal year having an aggregate fair market value of not more than $250,000
and only to the extent that (i) the proceeds of any such disposition are used
to acquire replacement Equipment which is subject to
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Agent's first priority security interest or (ii) the proceeds of which are
remitted to Agent as a prepayment on the Term Loan to be applied in the manner
set forth in Section 2.14(a).
4.4. Preservation of Collateral. Following the occurrence of a
Default or Event of Default in addition to the rights and remedies set forth
in Section 11.1 hereof, Agent: (a) may at any time take such steps as Agent
deems necessary to protect Agent's interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any of Borrower's premises a custodian who shall have full authority to do
all acts necessary to protect Agent's interests in the Collateral; (c) may
lease warehouse facilities to which Agent may move all or part of the
Collateral; (d) may use any Borrower's owned or leased lifts, hoists, trucks
and other facilities or equipment for handling or removing the Collateral; and
(e) shall have, and is hereby granted, a right of ingress and egress to the
places where the Collateral is located, and may proceed over and through any
of Borrower's owned or leased property. Each Borrower shall cooperate fully
with all of Agent's efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Agent may direct. All of Agent's
expenses of preserving the Collateral, including any expenses relating to the
bonding of a custodian, shall be charged to Borrowers' Account as a Revolving
Advance and added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at
the time the Collateral becomes subject to Agent's security interest: (a) each
Borrower shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest in each and
every item of the its respective Collateral to Agent; and, except for
Permitted Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by each
Borrower or delivered to Agent or any Lender in connection with this Agreement
shall be true and correct in all respects; (c) all signatures and endorsements
of each Borrower that appear on such documents and agreements shall be genuine
and each Borrower shall have full capacity to execute same; (d) each
Borrower's Equipment and Inventory shall be located as set forth on Schedule
4.5 and shall not be removed from such location(s) without the prior written
consent of Agent except with respect to the sale of Inventory in the ordinary
course of business and Equipment to the extent permitted in Section 4.3
hereof; and (f) Borrowers shall not consign Inventory to or keep Inventory
having an aggregate fair market value in excess of $85,000 at Control
Products, Inc., Automotive Technologies and Magnacharge.
4.6. Defense of Agent's and Lenders' Interests. Until (a)
payment and performance in full of all of the Obligations and (b)
termination of this Agreement, Agent's interests in the Collateral
shall continue in full force and effect. During such period no
Borrower shall, without Agent's prior written consent, pledge, sell
(except Inventory in the ordinary course of business and Equipment
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to the extent permitted in Section 4.3 hereof), assign, transfer, create or
suffer to exist a Lien upon or encumber or allow or suffer to be encumbered in
any way except for Permitted Encumbrances, any part of the Collateral. Each
Borrower shall defend Agent's interests in the Collateral against any and all
Persons whatsoever. At any time following demand by Agent for payment of all
Obligations, Agent shall have the right to take possession of the indicia of
the Collateral and the Collateral in whatever physical form contained,
including without limitation: labels, stationery, documents, instruments and
advertising materials. If Agent exercises this right to take possession of the
Collateral, Borrowers shall, upon demand, assemble it in the best manner
possible and make it available to Agent at a place reasonably convenient to
Agent. In addition, with respect to all Collateral, Agent and Lenders shall be
entitled to all of the rights and remedies set forth herein and further
provided by the Uniform Commercial Code or other applicable law. Each Borrower
shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehouses or others receiving or holding cash, checks, Inventory,
documents or instruments in which Agent holds a security interest to deliver
same to Agent and/or subject to Agent's order and if they shall come into any
Borrower's possession, they, and each of them, shall be held by such Borrower
in trust as Agent's trustee, and such Borrower will immediately deliver them
to Agent in their original form together with any necessary endorsement.
4.7. Books and Records. Each Borrower shall (a) keep proper books
of record and account in which full, true and correct entries will be made of
all dealings or transactions of or in relation to its business and affairs;
(b) set up on its books accruals with respect to all taxes, assessments,
charges, levies and claims; and (c) on a reasonably current basis set up on
its books, from its earnings, allowances against doubtful Receivables,
advances and investments and all other proper accruals (including without
limitation by reason of enumeration, accruals for premiums, if any, due on
required payments and accruals for depreciation, obsolescence, or amortization
of properties), which should be set aside from such earnings in connection
with its business. All determinations pursuant to this subsection shall be
made in accordance with, or as required by, GAAP consistently applied in the
opinion of such independent public accountant as shall then be regularly
engaged by Borrowers.
4.8. Financial Disclosure. Each Borrower hereby irrevocably
authorizes and directs all accountants and auditors employed by such Borrower
at any time during the Term to exhibit and deliver to Agent and each Lender
copies of any of the Borrower's financial statements, trial balances or other
accounting records of any sort in the accountant's or auditor's possession,
and to disclose to Agent and each Lender any information such accountants may
have concerning such Borrower's financial status and business operations. Each
Borrower hereby authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or examinations relating to
such
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Borrower, whether made by such Borrower or otherwise; however, Agent and each
Lender will attempt to obtain such information or materials directly from such
Borrower prior to obtaining such information or materials from such
accountants or such authorities.
4.9. Compliance with Laws. Each Borrower shall comply with all
acts, rules, regulations and orders of any legislative, administrative or
judicial body or official applicable to its respective Collateral or any part
thereof or to the operation of such Borrower's business the non-compliance
with which could reasonably be expected to have a Material Adverse Effect on
Borrowers taken as a whole. The Collateral at all times shall be maintained in
accordance with the requirements of all insurance carriers which provide
insurance with respect to the Collateral so that such insurance shall remain
in full force and effect.
4.10. Inspection of Premises. At all reasonable times Agent and
each Lender shall have full access to and the right to audit, check, inspect
and make abstracts and copies from each Borrower's books, records, audits,
correspondence and all other papers relating to the Collateral and the
operation of each Borrower's business. Agent, any Lender and their agents may
enter upon any of Borrower's premises at any time during business hours and at
any other reasonable time, and from time to time, for the purpose of
inspecting the Collateral and any and all records pertaining thereto and the
operation of such Borrower's business.
4.11. Insurance. Each Borrower shall bear the full risk of
any loss of any nature whatsoever with respect to the Collateral. At each
Borrower's own cost and expense in amounts and with carriers acceptable to
Agent, each Borrower shall (a) keep all its insurable properties and
properties in which each Borrower has an interest insured against the hazards
of fire, flood, sprinkler leakage, those hazards covered by extended coverage
insurance and such other hazards, and for such amounts, as is customary in the
case of companies engaged in businesses similar to such Borrower's including,
without limitation, business interruption insurance;, (b) maintain a bond in
such amounts as is customary in the case of companies engaged in businesses
similar to such Borrower insuring against larceny, embezzlement or other
criminal misappropriation of insured's officers and employees who may either
singly or jointly with others at any time have access to the assets or funds
of such Borrower either directly or through authority to draw upon such funds
or to direct generally the disposition of such assets; (c) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) maintain all such worker's
compensation or similar insurance as may be required under the laws of any
state or jurisdiction in which Borrower is engaged in business; (e) furnish
Agent with (i) copies of all policies and evidence of the maintenance of such
policies by the renewal thereof at least thirty (30) days before any
expiration date, and (ii) appropriate loss payable endorsements in form and
substance satisfactory to Agent, naming Agent as a co-insured and loss payee
as its interests may appear with respect to all insurance coverage referred to
in clauses (a) and c) above, and
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providing (A) that all proceeds thereunder shall be payable to Agent, (B) no
such insurance shall be affected by any act or neglect of the insured or owner
of the property described in such policy, and (C) that such policy and loss
payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days' prior written notice is given to Agent. In the event of any
loss thereunder, the carriers named therein hereby are directed by Agent and
the applicable Borrower to make payment for such loss to Agent and not to such
Borrower and Agent jointly. If any insurance losses are paid by check, draft
or other instrument payable to any Borrower and Agent jointly, Agent may
endorse such Borrower's name thereon and do such other things as Agent may
deem advisable to reduce the same to cash. Agent is hereby authorized to
adjust and compromise claims under insurance coverage referred to in clauses
(a) and (c) above. All loss recoveries received by Agent upon any such
insurance may be applied to the Obligations, in such order as Agent in its
sole discretion shall determine. Any surplus shall be paid by Agent to
Borrowers or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by Borrowers to Agent, on demand.
4.12. Failure to Pay Insurance. If any Borrower fails to obtain
insurance as hereinabove provided, or to keep the same in force, Agent, if
Agent so elects, may obtain such insurance and pay the premium therefor for
Borrowers' Account, and charge Borrowers' Account therefor and such expenses
so paid shall be part of the Obligations.
4.13. Payment of Taxes. Each Borrower will pay, when due, all
taxes, assessments and other Charges lawfully levied or assessed upon such
Borrower or any of the Collateral including, without limitation, real and
personal property taxes, assessments and charges and all franchise, income,
employment, social security benefits, withholding, and sales taxes. If any tax
by any governmental authority is or may be imposed on or as a result of any
transaction between any Borrower and Agent or any Lender which Agent or any
Lender may be required to withhold or pay or if any taxes, assessments, or
other Charges remain unpaid after the date fixed for their payment, or if any
claim shall be made which, in Agent's or any Lender's opinion, may possibly
create a valid Lien on the Collateral, Agent may without notice to Borrowers
pay the taxes, assessments or other Charges and each Borrower hereby
indemnifies and holds Agent and each Lender harmless in respect thereof. Agent
will not pay any taxes, assessments or Charges to the extent that any Borrower
has contested or disputed those taxes, assessments or Charges in good faith,
by expeditious protest, administrative or judicial appeal or similar
proceeding provided that any related tax lien is stayed and sufficient
reserves are established to the reasonable satisfaction of Agent to protect
Agent's security interest in or Lien on the Collateral. The amount of any
payment by Agent under this Section 4.13 shall be charged to Borrowers'
Account as a Revolving Advance and added to the Obligations and, until
Borrowers shall furnish Agent with an indemnity therefor (or supply Agent with
evidence satisfactory to Agent that due provision for the payment thereof has
been made),
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Agent may hold without interest any balance standing to Borrowers' credit and
Agent shall retain its security interest in any and all Collateral held by
Agent.
4.14. Payment of Leasehold Obligations. Each Borrower shall at
all times pay, when and as due, its rental obligations under all leases under
which it is a tenant, and shall otherwise comply, in all material respects,
with all other terms of such leases and keep them in full force and effect
and, at Agent's request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the
Receivables shall be a bona fide and valid account representing a bona fide
indebtedness incurred by the Customer therein named, for a fixed sum as set
forth in the invoice relating thereto (provided immaterial or unintentional
invoice errors shall not be deemed to be a breach hereof) with respect to an
absolute sale or lease and delivery of goods upon stated terms of a Borrower,
or work, labor or services theretofore rendered by a Borrower as of the date
each Receivable is created. Same shall be due and owing in accordance with the
applicable Borrower's standard terms of sale without dispute, setoff or
counterclaim except as may be stated on the accounts receivable schedules
delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the
best of each Borrower's knowledge, as of the date each Receivable is created,
is and will be solvent and able to pay all Receivables on which the Customer
is obligated in full when due or with respect to such Customers of any
Borrower who are not solvent such Borrower has set up on its books and in its
financial records bad debt reserves adequate to cover such Receivables.
(c) Locations of Borrower. Each Borrower's chief
executive office is located at the addresses set forth on Schedule 4.15(c)
hereto. Until written notice is given to Agent by Borrowing Agent of any other
office at which any Borrower keeps its records pertaining to Receivables, all
such records shall be kept at such executive office.
(d) Collection of Receivables. Until any
Borrower's authority to do so is terminated by Agent (which notice Agent may
give at any time following the occurrence of an Event of Default or a Default
or when Agent in its reasonable discretion deems it to be in Lenders' best
interest to do so), each Borrower will, at such Borrower's sole cost and
expense, but on Agent's behalf and for Agent's account, collect as Agent's
property and in trust for Agent all amounts received on Receivables, and shall
not commingle such collections with any Borrower's funds or use the same
except to pay Obligations. Each Borrower shall, upon request, deliver to
Agent, or deposit in the Blocked Account, in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash
and other evidences of Indebtedness.
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(e) Notification of Assignment of Receivables.
At any time following the occurrence of an Event of Default or a Default, Agent
shall have the right to send notice of the assignment of, and Agent's security
interest in, the Receivables to any and all Customers or any third party
holding or otherwise concerned with any of the Collateral. Thereafter, Agent
shall have the sole right to collect the Receivables, take possession of the
Collateral, or both. Agent's actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrowers' Account and added to the Obligations.
(f) Power of Agent to Act on Borrowers' Behalf.
Agent shall have the right to receive, endorse, assign and/or deliver in the
name of Agent or any Borrower any and all checks, drafts and other instruments
for the payment of money relating to the Receivables, and each Borrower hereby
waives notice of presentment, protest and non-payment of any instrument so
endorsed. Each Borrower hereby constitutes Agent or Agent's designee as such
Borrower's attorney with power (i) to endorse such Borrower's name upon any
notes, acceptances, checks, drafts, money orders or other evidences of payment
or Collateral; (ii) to sign such Borrower's name on any invoice or bill of
lading relating to any of the Receivables, drafts against Customers,
assignments and verifications of Receivables; (iii) to send verifications of
Receivables to any Customer; (iv) to sign such Borrower's name on all
financing statements or any other documents or instruments deemed necessary or
appropriate by Agent to preserve, protect, or perfect Agent's interest in the
Collateral and to file same; (v) to demand payment of the Receivables; (vi) to
enforce payment of the Receivables by legal proceedings or otherwise; (vii) to
exercise all of Borrowers' rights and remedies with respect to the collection
of the Receivables and any other Collateral; (viii) to settle, adjust,
compromise, extend or renew the Receivables; (ix) to settle, adjust or
compromise any legal proceedings brought to collect Receivables; (x) to
prepare, file and sign such Borrower's name on a proof of claim in bankruptcy
or similar document against any Customer; (xi) to prepare, file and sign such
Borrower's name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Receivables; and (xii) to do all other
acts and things necessary to carry out this Agreement. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission nor for
any error of judgment or mistake of fact or of law, unless done maliciously or
with gross (not mere) negligence; this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. Agent shall have the
right at any time following the occurrence of an Event of Default or Default,
to change the address for delivery of mail addressed to any Borrower to such
address as Agent may designate and to receive, open and dispose of all mail
addressed to any Borrower.
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(g) No Liability. Neither Agent nor any Lender
shall, under any circumstances or in any event whatsoever, have any liability
for any error or omission or delay of any kind occurring in the settlement,
collection or payment of any of the Receivables or any instrument received in
payment thereof, or for any damage resulting therefrom, except for Agent's or
such Lender's gross (not mere) negligence or willful misconduct. Following the
occurrence of an Event of Default or Default, Agent may, without notice or
consent from any Borrower, sue upon or otherwise collect, extend the time of
payment of, compromise or settle for cash, credit or upon any terms any of the
Receivables or any other securities, instruments or insurance applicable
thereto and/or release any obligor thereof. Agent is authorized and empowered
to accept, following the occurrence of an Event of Default or Default, the
return of the goods represented by any of the Receivables, without notice to
or consent by any Borrower, all without discharging or in any way affecting
any Borrower's liability hereunder.
(h) Establishment of a Lockbox Account, Dominion
Account. All proceeds of Collateral shall, at the direction of Agent, be
deposited by Borrowers into a lockbox account, dominion account or such other
"blocked account" ("Blocked Accounts") as Agent may require pursuant to an
arrangement with such bank as may be selected by Borrowers and be acceptable
to Agent. Borrowers shall issue to any such bank, an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to Agent,
either to any account maintained by Agent at said bank or by wire transfer to
appropriate account(s) of Agent. All funds deposited in the Blocked Account
shall immediately become the property of Agent and Borrower shall obtain the
agreement by such bank to waive any offset rights against the funds so
deposited. Neither Agent nor any Lender assumes any responsibility for any
Blocked Account arrangement, including without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by any bank
thereunder. Alternatively, Agent may establish depository accounts
("Depository Accounts") in the name of Agent at a bank or banks for the
deposit of such funds and Borrowers shall deposit all proceeds of Collateral
or cause same to be deposited, in kind, in such Depository Accounts of Agent
in lieu of depositing same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without
Agent's consent, compromise or adjust any Receivables (or extend the time for
payment thereof) or accept any returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances as have been
heretofore customary in the business of such Borrower.
4.16. Inventory. To the extent Inventory held for sale or
lease has been produced by any Borrower, it has been and will be
produced by such Borrower in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and
orders thereunder.
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4.17. Maintenance of Equipment. The Equipment shall be maintained
in good operating condition and repair (reasonable wear and tear excepted) and
all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment shall be maintained and
preserved. No Borrower shall use or operate the Equipment in violation of any
law, statute, ordinance, code, rule or regulation. Each Borrower shall have
the right to sell Equipment to the extent set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender as any Borrower's agent for any
purpose whatsoever, nor shall Agent or any Lender be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause
thereof. Neither Agent nor any Lender, whether by anything herein or in any
assignment or otherwise, assume any of Borrower's obligations under any
contract or agreement assigned to Agent or such Lender, and neither Agent nor
any Lender shall be responsible in any way for the performance by Borrower of
any of the terms and conditions thereof.
4.19. Environmental Matters. (a) Borrowers shall ensure
that the Real Property remains in compliance with all Environmental
Laws and they shall not place or permit to be placed any Hazardous
Substances on any Real Property except as not prohibited by applicable law or
appropriate governmental authorities.
(b) Borrowers shall establish and maintain a
system to assure and monitor continued compliance with all applicable
Environmental Laws which system shall include periodic reviews of such
compliance.
(c) Borrowers shall (i) employ in connection with
the use of the Real Property appropriate technology necessary to maintain
compliance with any applicable Environmental Laws and (ii) dispose of any and
all Hazardous Waste generated at the Real Property only at facilities and with
carriers that maintain valid permits under RCRA and any other applicable
Environmental Laws. Borrowers shall use their best efforts to obtain
certificates of disposal, such as hazardous waste manifest receipts, from all
treatment, transport, storage or disposal facilities or operators employed by
Borrowers in connection with the transport or disposal of any Hazardous Waste
generated at the Real Property.
(d) In the event any Borrower obtains, gives or
receives notice of any Release or threat of Release of a reportable quantity
of any Hazardous Substances at the Real Property (any such event being
hereinafter referred to as a "Hazardous Discharge") or receives any notice of
violation, request for information or notification that it is potentially
responsible for investigation or cleanup of environmental conditions at the
Real Property, demand letter or complaint, order, citation, or other written
notice with regard to any Hazardous Discharge or violation of Environmental
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Laws affecting the Real Property or any Borrower's interest therein (any of
the foregoing is referred to herein as an "Environmental Complaint") from any
Person, including any state agency responsible in whole or in part for
environmental matters in the state in which the Real Property is located or
the United States Environmental Protection Agency (any such person or entity
hereinafter the "Authority"), then Borrowing Agent shall, within five (5)
Business Days, give written notice of same to Agent detailing facts and
circumstances of which any Borrower is aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to be provided to
allow Agent to protect its security interest in the Real Property and is not
intended to create nor shall it create any obligation upon Agent or any Lender
with respect thereto.
(e) Borrowers shall promptly forward to Agent
copies of any request for information, notification of potential liability,
demand letter relating to potential responsibility with respect to the
investigation or cleanup of Hazardous Substances at any other site owned,
operated or used by any Borrower to dispose of Hazardous Substances and shall
continue to forward copies of correspondence between any Borrower and the
Authority regarding such claims to Agent until the claim is settled. Borrowers
shall promptly forward to Agent copies of all documents and reports concerning
a Hazardous Discharge at the Real Property that any Borrower is required to
file under any Environmental Laws. Such information is to be provided solely
to allow Agent to protect Agent's security interest in the Real Property and
the Collateral.
(f) Borrowers shall respond promptly to any
Hazardous Discharge or Environmental Complaint and take all necessary action
in order to safeguard the health of any Person and to avoid subjecting the
Collateral or Real Property to any Lien. If any Borrower shall fail to respond
promptly to any Hazardous Discharge or Environmental Complaint or any Borrower
shall fail to comply with any of the requirements of any Environmental Laws,
Agent on behalf of Lenders may, but without the obligation to do so, for the
sole purpose of protecting Agent's interest in Collateral: (A) give such
notices or (B) enter onto the Real Property (or authorize third parties to
enter onto the Real Property) and take such actions as Agent (or such third
parties as directed by Agent) deem reasonably necessary or advisable, to clean
up, remove, mitigate or otherwise deal with any such Hazardous Discharge or
Environmental Complaint. All reasonable costs and expenses incurred by Agent
and Lenders (or such third parties) in the exercise of any such rights,
including any sums paid in connection with any judicial or administrative
investigation or proceedings, fines and penalties, together with interest
thereon from the date expended at the Default Rate for Domestic Rate Loans
constituting Revolving Advances shall be paid upon demand by Borrowers, and
until paid shall be added to and become a part of the Obligations secured by
the Liens created by the terms of this Agreement or any other agreement
between Agent, any Lender and any Borrower.
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(g) Promptly upon the written request of Agent
from time to time, Borrowers shall provide Agent, at Borrowers' expense, with
an environmental site assessment or environmental audit report prepared by an
environmental engineering firm acceptable in the reasonable opinion of Agent,
to assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within the Real
Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to an appropriate Authority that is charged to oversee the clean-up
of such Hazardous Discharge shall be acceptable to Agent. If such estimates,
individually or in the aggregate, exceed $100,000, Agent shall have the right
to require Borrowers to post a bond, letter of credit or other security
reasonably satisfactory to Agent to secure payment of these costs and
expenses.
(h) Borrowers shall defend and indemnify Agent
and Lenders and hold Agent, Lenders and their respective employees, agents,
directors and officers harmless from and against all loss, liability, damage
and expense, claims, costs, fines and penalties, including attorney's fees,
suffered or incurred by Agent or Lenders under or on account of any
Environmental Laws, including, without limitation, the assertion of any Lien
thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable
to any Hazardous Discharge resulting from actions on the part of Agent or any
Lender. Borrowers' obligations under this Section 4.19 shall arise upon the
discovery of the presence of any Hazardous Substances at the Real Property,
whether or not any federal, state, or local environmental agency has taken or
threatened any action in connection with the presence of any Hazardous
Substances. Borrowers' obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
4.20. Financing Statements. Except as respects the
financing statements filed by Agent and the financing statements described on
Schedule 1.2, no financing statement covering any of the Collateral or any
proceeds thereof is on file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. Authority. Such Borrower has full power, authority
and legal right to enter into this Agreement and the Other Documents and to
perform all its respective Obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and of the Other
Documents (a) are within such Borrower's
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corporate powers, have been duly authorized, are not in contravention of law
or the terms of such Borrower's by-laws, certificate of incorporation or other
applicable documents relating to such Borrower's formation or to the conduct
of such Borrower's business or of any material agreement or undertaking to
which such Borrower is a party or by which such Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, or other instrument to
which such Borrower or its property is a party or by which it may be bound.
5.2. Formation and Qualification. (a) Such Borrower is duly
incorporated and in good standing under the laws of the state listed on
Schedule 5.2(a) and is qualified to do business and is in good standing in the
states listed on Schedule 5.2(a) which constitute all states in which
qualification and good standing are necessary for such Borrower to conduct its
business and own its property and where the failure to so qualify could
reasonably be expected to have a Material Adverse Effect on such Borrower.
Each Borrower has delivered to Agent true and complete copies of its
certificate of incorporation and by-laws and will promptly notify Agent of any
amendment or changes thereto.
(b) The only Subsidiaries of each Borrower are
listed on Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All
representations and warranties of such Borrower contained in this Agreement
and the Other Documents shall be true at the time of such Borrower's execution
of this Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto.
5.4. Tax Returns. Such Borrower's federal tax identification
number is set forth on Schedule 5.4. Each Borrower has filed all federal,
state and local tax returns and other reports each is required by law to file
and has paid all taxes, assessments, fees and other governmental charges that
are due and payable. The provision for taxes on the books of each Borrower are
adequate for all years not closed by applicable statutes, and for its current
fiscal year, and no Borrower has any knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
5.5. Financial Statements.
(a) The pro forma balance sheet of BATS on a
combined basis (the "Pro Forma Balance Sheet") furnished to Agent on the
Closing Date reflects the consummation of the transactions contemplated by the
Acquisition Agreement and under this Agreement (the "Transactions") fairly
reflects the financial condition of BATS on a combined basis as of the Closing
Date after giving effect
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to the Transactions, and has been prepared in accordance with GAAP,
consistently applied. The Pro Forma Balance Sheet has been certified to the
best of their knowledge, as fairly reflecting the financial condition of BATS
on a combined basis as of the Closing Date after giving effect to the
Transactions in all material respects by the Vice-President and Chief
Financial Officer of BATS. All financial statements referred to in this
subsection 5.5(a), including the related schedules and notes thereto, have
been prepared, in accordance with GAAP, except as may be disclosed in such
financial statements.
(b) The twelve-month cash flow projections of BATS
on a consolidated basis and their projected balance sheets as of the Closing
Date, copies of which are annexed hereto as Exhibit 5.5(b) (the "Projections")
were prepared by Agent are based on underlying assumptions which provide a
reasonable basis for the projections contained therein. The cash flow
Projections together with the Pro Forma Balance Sheet, are referred to as the
"Pro Forma Financial Statements".
5.6. Corporate Name. No Borrower has been known by any other
corporate name in the past five years and does not sell Inventory under any
other name except as set forth on Schedule 5.6, nor has any Borrower been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the preceding five (5)
years.
5.7. O.S.H.A. and Environmental Compliance.
(a) Each Borrower has duly complied with, and its
facilities, business, assets, property, leaseholds and Equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws; there have been no outstanding citations,
notices or orders of non-compliance issued to any Borrower or relating to its
business, assets, property, leaseholds or Equipment under any such laws, rules
or regulations.
(b) Each Borrower has been issued all required
federal, state and local licenses, certificates or permits relating to all
applicable Environmental Laws.
(c) (i) There are no visible signs of releases,
spills, discharges, leaks or disposal (collectively referred to as "Releases")
of Hazardous Substances at, upon, under or within any Real Property; (ii)
there are no underground storage tanks or polychlorinated biphenyls on the
Real Property; (iii) the Real Property has never been used as a treatment,
storage or disposal facility of Hazardous Waste; and (iv) no Hazardous
Substances are present on the Real Property or any premises leased by
Borrower, excepting such quantities as are handled in accordance with all
applicable manufacturer's instructions and governmental regulations and in
proper storage containers and as are necessary for the
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operation of the commercial business of any Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or
Default.
(a) After giving effect to the Transactions, each
Borrower will be solvent, able to pay its debts as they mature, have capital
sufficient to carry on its business and all businesses in which it is about to
engage, and (i) as of the Closing Date, the fair present saleable value of its
assets, calculated on a going concern basis, is in excess of the amount of
their liabilities and (ii) subsequent to the Closing Date, the fair saleable
value of its assets (calculated on a going concern basis) will be in excess of
the amount of their liabilities.
(b) Except as disclosed in Schedule 5.8(b), no
Borrower has (i) any pending or threatened litigation, arbitration, actions or
proceedings which involve the possibility of having a Material Adverse Effect
on Borrowers taken as a whole, and (ii) any liabilities nor indebtedness for
borrowed money other than the Obligations.
(c) No Borrower is in violation of any applicable
statute, regulation or ordinance in any respect which could reasonably be
expected to have a Material Adverse Effect on Borrowers taken as a whole, nor
is any Borrower in violation of any order of any court, governmental authority
or arbitration board or tribunal.
(d) No Borrower nor any member of the Controlled
Group maintains or contributes to any Plan other than those listed on Schedule
5.8(d) hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has
incurred any "accumulated funding deficiency," as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Code, whether or not waived, and each
Borrower and each member of the Controlled Group has met all applicable
minimum funding requirements under Section 302 of ERISA in respect of each
Plan, (ii) each Plan which is intended to be a qualified plan under Section
401(a) of the Code as currently in effect has been determined by the Internal
Revenue Service to be qualified under Section 401(a) of the Code and the trust
related thereto is exempt from federal income tax under Section 501(a) of the
Code, (iii) no Borrower nor any member of the Controlled Group has incurred
any liability to the PBGC other than for the payment of premiums, and there
are no premium payments which have become due which are unpaid, (iv) no Plan
has been terminated by the plan administrator thereof nor by the PBGC, and
there is no occurrence which would cause the PBGC to institute proceedings
under Title IV of ERISA to terminate any Plan, (v) at this time, the current
value of the assets of each Plan exceeds the present value of the accrued
benefits and other liabilities of such Plan and no Borrower nor any member of
the Controlled Group knows of any facts or circumstances which would
materially change the value of such assets and accrued benefits and other
liabilities, (vi) no Borrower or any member of
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the Controlled Group has breached any of the responsibilities, obligations or
duties imposed on it by ERISA with respect to any Plan, (vii) no Borrower nor
any member of a Controlled Group has incurred any liability for any excise tax
arising under Section 4972 or 4980B of the Code, and no fact exists which
could give rise to any such liability, (viii) no Borrower nor any member of
the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has
engaged in a "prohibited transaction" described in Section 406 of the ERISA or
Section 4975 of the Code nor taken any action which would constitute or result
in a Termination Event with respect to any such Plan which is subject to
ERISA, (ix) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan, (x) there exists no
event described in Section 4043(b) of ERISA, for which the thirty (30) day
notice period contained in 29 CFR ss.2615.3 has not been waived, (xi) no
Borrower nor any member of the Controlled Group has any fiduciary
responsibility for investments with respect to any plan existing for the
benefit of persons other than employees or former employees of any Borrower
and any member of the Controlled Group, and (xii) no Borrower nor any member
of the Controlled Group has withdrawn, completely or partially, from any
Multiemployer Plan so as to incur liability under the Multiemployer Pension
Plan Amendments Act of 1980.
(e) Borrowers have received copies of letters
from all of the participants in the ESOP agreeing to receive their
distribution from the sale by the trustees of the ESOP of the stock of WSBS to
BATS pursuant to the WSBS Acquisition Agreement only in cash and approving
such sale.
5.9. Patents, Trademarks, Copyrights and Licenses. All
patents, patent applications, trademarks, trademark applications, service
marks, service mark applications, copyrights, copyright applications, design
rights, tradenames, assumed names, trade secrets and licenses owned or
utilized by any Borrower are set forth on Schedule 5.9, are valid and have
been duly registered or filed with all appropriate governmental authorities
and constitute all of the intellectual property rights which are necessary for
the operation of its business; there is no objection to or pending challenge
to the validity of any such material patent, trademark, copyright, design
right, tradename, trade secret or license and no Borrower is aware of any
grounds for any challenge, except as set forth in Schedule 5.9 hereto. Each
patent, patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service mark
license, copyright, copyright application and copyright license owned or held
by any Borrower and all trade secrets used by any Borrower consist of original
material or property developed by such Borrower or was lawfully acquired by
such Borrower from the proper and lawful owner thereof. Each of such items has
been maintained so as to preserve the value thereof from the date of creation
or acquisition thereof. With respect to all software used by any Borrower,
such Borrower is in possession of all source and object codes related to each
piece of software or is the beneficiary of a
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source code escrow agreement, each such source code escrow agreement being
listed on Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10,
each Borrower (a) is in compliance with and (b) has procured and is now in
possession of, all material licenses or permits required by any applicable
federal, state or local law or regulation for the operation of its business in
each jurisdiction wherein it is now conducting or proposes to conduct business
and where the failure to procure such licenses or permits could have a
Material Adverse Effect on Borrowers taken as a whole.
5.11. Default of Indebtedness. No Borrower is in default in the
payment of the principal of or interest on any Indebtedness or under any
instrument or agreement under or subject to which any Indebtedness has been
issued and no event has occurred under the provisions of any such instrument
or agreement which with or without the lapse of time or the giving of notice,
or both, constitutes or would constitute an event of default thereunder.
5.12. No Default. No Borrower is in default in the payment
or performance of any of its contractual obligations which default
could have a Material Adverse Effect Borrowers taken as a whole.
5.13. No Burdensome Restrictions. No Borrower, to its knowledge,
is party to any contract or agreement the performance of which could have a
Material Adverse Effect Borrowers taken as a whole. No Borrower has agreed or
consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien which is not a Permitted Encumbrance.
5.14. No Labor Disputes. No Borrower is involved in any labor
dispute; there are no strikes or walkouts or union organization of any
Borrower's employees in existence or to any Borrower's knowledge threatened
and no labor contract is scheduled to expire during the Term other than as set
forth on Schedule 5.14 hereto.
5.15. Margin Regulations. No Borrower is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U or Regulation G of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the
proceeds of any Advance will be used for "purchasing" or "carrying" "margin
stock" as defined in Regulation U of such Board of Governors.
5.16. Investment Company Act. No Borrower is an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, nor is it controlled by such a company.
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5.17. Disclosure. No representation or warranty made by any
Borrower in this Agreement or in the Acquisition Agreement, or in any
financial statement, report, certificate or any other document furnished in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements
herein or therein not misleading. There is no fact known to any Borrower or
which reasonably should be known to any Borrower which Borrowers have not
disclosed to Agent in writing with respect to the transactions contemplated by
the Acquisition Agreement, or this Agreement which could reasonably be
expected to have a Material Adverse Effect on Borrowers taken as a whole.
5.18. Delivery of Acquisition Agreement. Agent has received
complete copies of the Acquisition Agreement (including all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto, if any) and all amendments thereto, waivers relating thereto and
other side letters or agreements affecting the terms thereof. None of such
documents and agreements has been amended or supplemented, nor have any of the
provisions thereof been waived, except pursuant to a written agreement or
instrument which has heretofore been delivered to Agent.
5.19. Swaps. No Borrower is a party to, nor will it be a party
to, any swap agreement whereby such Borrower has agreed or will agree to swap
interest rates or currencies unless same provides that damages upon
termination following an event of default thereunder are payable on an
unlimited "two-way basis" without regard to fault on the part of either party.
5.20. Conflicting Agreements. No provision of any mortgage,
indenture, contract, agreement, judgment, decree or order binding on any
Borrower or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the
Other Documents.
5.21. Application of Certain Laws and Regulations. No Borrower
nor any Affiliate of any Borrower is subject to any statute, rule or
regulation which regulates the incurrence of any Indebtedness, including
without limitation, statutes or regulations relative to common or interstate
carriers or to the sale of electricity, gas, steam, water, telephone,
telegraph or other public utility services.
5.22. Business and Property of Borrower. Upon and after the
Closing Date, Borrowers do not propose to engage in any business other than
the distribution of batteries and cellular accessories to commercial,
industrial and retail markets and activities necessary to conduct the
foregoing. On the Closing Date, each Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct of the
business of such Borrower.
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5.23. Assets of BATS. BATS has no assets other than the
Subsidiary Stock owned by BATS on the Closing Date.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual and
customary fees and expenses which Agent incurs in connection with (a) the
forwarding of Advance proceeds and (b) the establishment and maintenance of
any Blocked Accounts or Depository Accounts as provided for in Section
4.15(h). Agent may, without making demand, charge Borrowers' Account for all
such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in
its business in good working order and condition (reasonable wear and tear
excepted and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, tradenames, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property
right or other right included in the Collateral; (b) keep in full force and
effect its existence and comply in all material respects with the laws and
regulations governing the conduct of its business where the failure to do so
could reasonably be expected to have a Material Adverse Effect on Borrowers
taken as a whole; and (c) make all such reports and pay all such franchise and
other taxes and license fees and do all such other acts and things as may be
lawfully required to maintain its rights, licenses, leases, powers and
franchises under the laws of the United States or any political subdivision
thereof where the failure to do so could reasonably be expected to have a
Material Adverse Effect on Borrowers taken as a whole.
6.3. Violations. Promptly notify Agent in writing of any
violation of any law, statute, regulation or ordinance of any Governmental
Body, or of any agency thereof, applicable to any Borrower which could
reasonably be expected to have a Material Adverse Effect on Borrowers taken as
a whole.
6.4. Government Receivables. Take all steps necessary to
protect Agent's interest in the Collateral under the Federal Assignment of
Claims Act or other applicable state or local statutes or ordinances and
deliver to Agent appropriately endorsed, any instrument or chattel paper
connected with any Receivable arising out of contracts between any Borrower
and the United States, any state or any department, agency or instrumentality
of any of them.
6.5. Net Worth. Maintain at (a) at the Closing Date a Net
Worth in an amount not less than $9,250,000, (b) the end of each
fiscal quarter commencing with the fiscal quarter ending March 31,
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1997, a Net Worth in an amount not less than the amount of Net Worth on the
last day of the prior fiscal quarter minus the payment, if any, of the
Additional Cash Consideration which was not deducted in determining Net Worth
for such fiscal quarter provided, however, this covenant shall not be deemed
breached unless BATS on a consolidated basis shall have failed to maintain the
required minimum Net Worth for two (2) consecutive fiscal quarters and (c) the
end of each fiscal year commencing with the fiscal year ending December 31,
1997, a Net Worth in an amount not less than the amount of Net Worth on the
last day of the prior fiscal year minus the payment, if any, of the Additional
Cash Consideration which was not deducted in determining Net Worth for such
fiscal year.
6.6. Current Ratio. Maintain at all times a ratio of
Current Assets to Current Liabilities of not less than 3.0 to 1.0.
6.7. Fixed Charge Coverage Ratio. Maintain as of the end
of each fiscal period set forth below a Fixed Charge Coverage Ratio
of not less than the ratio set opposite each fiscal period below:
================================================================================
FIXED CHARGE
FISCAL PERIOD COVERAGE RATIO
- --------------------------------------------------------------------------------
January 1, 1997 - June 30, 1997 1.00 to 1.0
- --------------------------------------------------------------------------------
January 1, 1997 - September 30, 1997 1.00 to 1.0
- --------------------------------------------------------------------------------
January 1, 1997 - December 31, 1997 1.00 to 1.0
- --------------------------------------------------------------------------------
April 1, 1997 - March 31, 1998 1.00 to 1.0
- --------------------------------------------------------------------------------
July 1, 1997 - June 30, 1998 1.05 to 1.0
- --------------------------------------------------------------------------------
October 1, 1997 - September 30, 1998 1.10 to 1.0
- --------------------------------------------------------------------------------
January 1, 1998 - December 31, 1998 1.20 to 1.0
- --------------------------------------------------------------------------------
April 1, 1998 - March 31, 1999 1.20 to 1.0
- --------------------------------------------------------------------------------
July 1, 1998 - June 30, 1999 1.20 to 1.0
- --------------------------------------------------------------------------------
October 1, 1998 - December 31, 1999 1.20 to 1.0
================================================================================
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6.8. EBITDA. Maintain as of the end of each fiscal period
set forth below, EBITDA of at least the amount set opposite such fiscal period
below:
================================================================================
FISCAL PERIOD EBITDA
- --------------------------------------------------------------------------------
January 1, 1997 - June 30, 1997 $1,425,000
- --------------------------------------------------------------------------------
January 1, 1997 - September 30, 1997 $2,150,000
- --------------------------------------------------------------------------------
January 1, 1997 - December 31, 1997 $2,850,000
- --------------------------------------------------------------------------------
April 1, 1997 - March 31, 1998 $3,000,000
- --------------------------------------------------------------------------------
July 1, 1997 - June 30, 1998 $3,300,000
- --------------------------------------------------------------------------------
October 1, 1997 - September 30, 1998 $3,600,000
- --------------------------------------------------------------------------------
January 1, 1998 - December 31, 1998 $3,700,000
- --------------------------------------------------------------------------------
April 1, 1998 - March 31, 1999 $4,000,000
- --------------------------------------------------------------------------------
July 1, 1998 - June 30, 1999 $4,000,000
- --------------------------------------------------------------------------------
October 1, 1998 - December 31, 1999 $4,000,000
================================================================================
6.9. Execution of Supplemental Instruments. Execute and deliver
to Agent from time to time, upon demand, such supplemental agreements,
statements, assignments and transfers, or instructions or documents relating
to the Collateral, and such other instruments as Agent may request, in order
that the full intent of this Agreement may be carried into effect.
6.10. Payment of Indebtedness. Pay, discharge or otherwise
satisfy at or before maturity (subject, where applicable, to specified grace
periods and, in the case of the trade payables, to normal payment practices)
all its obligations and liabilities of whatever nature, except when the
failure to do so could not reasonably be expected to have a Material Adverse
Effect on Borrowers taken as a whole or when the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and each
Borrower shall have provided for such reserves as Agent may reasonably deem
proper and necessary, subject at all times to any applicable subordination
arrangement in favor of Lenders.
6.11. Standards of Financial Statements. Cause all financial
statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and 9.13 as
to which GAAP is applicable to be complete and correct in all material
respects (subject, in the case of interim financial statements, to normal
year-end audit adjustments) and to be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as
the case may be, and disclosed therein).
6.12. Exercise of Rights. Enforce all of its rights under
the Acquisition Agreement, including, but not limited to, all
indemnification rights and pursue all remedies available to it with
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diligence and in good faith in connection with the enforcement of any such
rights.
6.13. Termination of ESOP. Promptly following the Closing Date,
(a) terminate the ESOP, (b) obtain an updated fair market valuation of WSBS
with respect to the fairness to the participants of the ESOP of the
transactions contemplated by the WSBS Acquisition Agreement and (c) apply for
a favorable determination letter from the Internal Revenue Service regarding
the termination of the ESOP.
VII. NEGATIVE COVENANTS.
No Borrower shall, without the prior written consent of Agent,
until satisfaction in full of the Obligations and termination of this
Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person other than a Borrower or acquire
all or a substantial portion of the assets or stock of any Person other than a
Borrower or permit any other Person to consolidate with or merge with it other
than a borrower.
(b) Sell, lease, transfer or otherwise dispose of
any of its properties or assets, except in the ordinary course of its business.
7.2. Creation of Liens. Create or suffer to exist any
Lien or transfer upon or against any of its property or assets now owned or
hereafter acquired, except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of
any Person by assumption, endorsement or guaranty thereof or otherwise (other
than to Lenders) except the endorsement of checks in the ordinary course of
business.
7.4. Investments. Purchase or acquire obligations or stock of, or
any other interest in, any Person, except (a) obligations issued or guaranteed
by the United States of America or any agency thereof, (b) commercial paper
with maturities of not more than 180 days and a published rating of not less
than A-1 or P-1 (or the equivalent rating), (c) certificates of time deposit
and bankers' acceptances having maturities of not more than 180 days and
repurchase agreements backed by United States government securities of a
commercial bank if (i) such bank has a combined capital and surplus of at
least $500,000,000, or (ii) its debt obligations, or those of a holding
company of which it is a Subsidiary, are rated not less than A (or the
equivalent rating) by a nationally recognized investment rating agency, and
(d) U.S. money market funds that invest solely in obligations issued or
guaranteed by the United States of America or an agency thereof.
7.5. Loans. Make advances, loans or extensions of credit
to any Person, including without limitation, any Parent, Subsidiary or
Affiliate except with respect to (a) the extension of commercial
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trade credit in connection with the sale of Inventory in the ordinary course
of its business and (b) advances, loans or extensions of credit to another
Borrower.
7.6. Capital Expenditures. Contract for, purchase or make
any expenditure or commitments for fixed or capital assets (including
capitalized leases) in any fiscal year in an amount in excess of $1,000,000.
7.7. Dividends. Declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of any Borrower (other
than dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets
to the purchase, redemption or other retirement of any common or preferred
stock, or of any options to purchase or acquire any such shares of common or
preferred stock of any Borrower except that so long as (a) a notice of
termination with regard to this Agreement shall not be outstanding, (b) no
Event of Default or Default shall have occurred and be continuing prior to or
after giving effect to any such redemption or payment, and (c) the purpose for
such redemption or payment shall be as set forth in writing to Agent at least
ten (10) days prior to such redemption and such redemption shall in fact be
used for such purpose, BATS shall be permitted to (i) redeem the Preferred
Stock in accordance with the terms of the Preferred Stock as in effect on the
Closing Date and make the payments required in connection with the Preferred
Stock Redemption and (ii) make payments of accrued dividends on the Preferred
Stock not to exceed $100,000 in the aggregate.
7.8. Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) of Borrower except in respect of (i)
Indebtedness to Lenders; (ii) Indebtedness incurred for capital expenditures
permitted under Section 7.6 hereof; (iii) Indebtedness assumed under the
Acquisition Agreement; and (iv) other Indebtedness not to exceed at any time
outstanding the maximum amount of $250,000.
7.9. Nature of Business. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically
permitted hereby purchase or invest, directly or indirectly, in any assets or
property other than in the ordinary course of business for assets or property
which are useful in, necessary for and are to be used in its business as
presently conducted.
7.10. Transactions with Affiliates. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, any Affiliate, except (a) transactions
disclosed in the ordinary course of business, on an arm's-length basis on
terms no less favorable than terms which would have been obtainable from a
Person other than an Affiliate; (b) the Management Agreement and (c) the
Affiliated Leases.
7.11. Leases. Enter as lessee into any lease arrangement
for real or personal property (unless capitalized and permitted under Section
7.6 hereof) if after giving effect thereto, aggregate
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annual rental payments for all leased property would exceed $1,250,000 in any
one fiscal year.
7.12. Subsidiaries.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or
similar arrangement.
7.13. Fiscal Year and Accounting Changes. Change its
fiscal year from December 31 or make any change (i) in accounting treatment
and reporting practices except as required by GAAP or (ii) in tax reporting
treatment except as required by law.
7.14. Pledge of Credit. Now or hereafter pledge Agent's or any
Lender's credit on any purchases or for any purpose whatsoever or use any
portion of any Advance in or for any business other than such Borrower's
business as conducted on the date of this Agreement or as permitted pursuant
to the terms of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws.
Amend, modify or waive any term or material provision of its Articles of
Incorporation or By-Laws unless required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or permit any
member of the Controlled Group to maintain, or (y) become obligated to
contribute, or permit any member of the Controlled Group to become obligated
to contribute, to any Plan, other than those Plans disclosed on Schedule
5.8(d), (ii) engage, or permit any member of the Controlled Group to engage,
in any non-exempt "prohibited transaction", as that term is defined in section
406 of ERISA and Section 4975 of the Code, (iii) incur, or permit any member
of the Controlled Group to incur, any "accumulated funding deficiency", as
that term is defined in Section 302 of ERISA or Section 412 of the Code, (iv)
terminate, or permit any member of the Controlled Group to terminate, any Plan
where such event could result in any liability of any Borrower or any member
of the Controlled Group or the imposition of a lien on the property of any
Borrower or any member of the Controlled Group pursuant to Section 4068 of
ERISA, (v) assume, or permit any member of the Controlled Group to assume, any
obligation to contribute to any Multiemployer Plan not disclosed on Schedule
5.8(d), (vi) incur, or permit any member of the Controlled Group to incur, any
withdrawal liability to any Multiemployer Plan; (vii) fail promptly to notify
Agent of the occurrence of any Termination Event, (viii) fail to comply, or
permit a member of the Controlled Group to fail to comply, with the
requirements of ERISA or the Code or other applicable laws in respect of any
Plan, (ix) fail to meet, or permit any member of the Controlled Group to fail
to meet, all minimum funding requirements under ERISA or the Code or postpone
or delay or allow any member of the Controlled Group to postpone or delay any
funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or
indirectly, prepay any Indebtedness (other than to Lenders), or repurchase,
redeem, retire or otherwise acquire any Indebtedness of any Borrower except
for the Preferred Stock Redemption made in accordance with the terms of
Section 7.7.
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7.18. Other Agreements. Enter into any material amendment,
waiver or modification of the Acquisition Agreement or any related agreements.
7.19. Payments of Additional Cash Consideration. Directly
or indirectly make payments with respect to the Additional Cash Consideration
which exceed $1,000,000 in the aggregate.
7.20. Management Fees. Directly or indirectly make any
payments under the Management Agreement except in accordance with the terms of
the Management Agreement as in effect on the Closing Date.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of
Lenders to make the initial Advances requested to be made on the Closing Date
is subject to the satisfaction, or waiver by Lenders, immediately prior to or
concurrently with the making of such Advances, of the following conditions
precedent:
(a) Note. Agent shall have received the Note
duly executed and delivered by an authorized officer of each Borrower;
(b) Filings, Registrations and Recordings. Each
document (including, without limitation, any Uniform Commercial Code financing
statement) required by this Agreement, any related agreement or under law or
reasonably requested by the Agent to be filed, registered or recorded in order
to create, in favor of Agent, a perfected security interest in or lien upon
the Collateral shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and Agent shall have received an acknowledgment copy,
or other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee, tax
or expense relating thereto;
(c) Corporate Proceedings of Borrowers. Agent
shall have received a copy of the resolutions in form and substance reasonably
satisfactory to Agent, of the Board of Directors of each Borrower authorizing
(i) the execution, delivery and performance of this Agreement, the Other
Documents and the Acquisition Agreement (collectively the "Documents") and
(ii) the granting by each Borrower of the security interests in and liens upon
the Collateral in each case certified by the Secretary or an Assistant
Secretary of each Borrower as of the Closing Date; and, such certificate shall
state that the resolutions thereby certified have not been amended, modified,
revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrowers. Agent
shall have received a certificate of the Secretary or an Assistant Secretary
of each Borrower, dated the Closing Date, as to the incumbency and signature
of the officers of each Borrower executing this Agreement, any certificate or
other documents to be delivered by it pursuant hereto, together with evidence
of the incumbency of such Secretary or Assistant Secretary;
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(e) Certificates. Agent shall have received a
copy of the Articles or Certificate of Incorporation of each Borrower, and all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation together with copies of the
By-Laws of each Borrower and all agreements of each Borrower's shareholders
certified as accurate and complete by the Secretary of each Borrower;
(f) Good Standing Certificates. Agent shall have
received good standing certificates for each Borrower dated not more than ten
(10) days prior to the Closing Date, issued by the Secretary of State or other
appropriate official of each Borrower's jurisdiction of incorporation and each
jurisdiction where the conduct of each Borrower's business activities or the
ownership of its properties necessitates qualification;
(g) Legal Opinion. Agent shall have received the
executed legal opinions of Brock, Fensterstock, Silverstein, McAuliffe & Wade,
LLC and Berger, Newmark & Fenchel, P.C. in form and substance satisfactory to
Agent which shall cover such matters incident to the transactions contemplated
by this Agreement, the Other Documents and the Acquisition Agreement as Agent
may reasonably require and each Borrower hereby authorizes and directs such
counsel to deliver such opinions to Agent and Lenders;
(h) No Litigation. (i) No litigation,
investigation or proceeding before or by any arbitrator or Governmental Body
shall be continuing or threatened against any Borrower or against the officers
or directors of any Borrower (A) in connection with this Agreement, the Other
Documents, the Acquisition Agreement or any of the transactions contemplated
thereby and which, in the reasonable opinion of Agent, is deemed material or
(B) which could, in the reasonable opinion of Agent, have a Material Adverse
Effect on Borrowers taken as a whole; and (ii) no injunction, writ,
restraining order or other order of any nature materially adverse to Borrower
or the conduct of its business or inconsistent with the due consummation of
the Transactions shall have been issued by any Governmental Body;
(i) Financial Condition Certificates. Agent
shall have received an executed Financial Condition Certificate in the form of
Exhibit 8.1(i);
(j) Collateral Examination. Agent shall have
completed Collateral examinations and received appraisals, the results of
which shall be satisfactory in form and substance to Lenders, of the
Receivables, Inventory, General Intangibles and Equipment of each Borrower and
all books and records in connection therewith;
(k) Fees. Agent shall have received all fees
payable to Agent and Lenders on or prior to the Closing Date
pursuant to Article III hereof;
(l) Pro Forma Financial Statements. Agent shall
have received a copy of the Pro Forma Financial Statements which shall be
satisfactory in all respects to Lenders;
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(m) Financial Statements. Agent shall have
received in form and substance satisfactory to it the financial statements of
BN, WSBS and WSJ Enterprises, Inc. for the fiscal years ending December 31,
1994, and December 31, 1995 and the nine month period ending September 30,
1996, prepared in accordance with GAAP and reported upon without qualification
by Deloitte & Touche LLC;
(n) Acquisition Documents. Agent shall have
received final executed copies of the Acquisition Agreement and all related
agreements, documents and instruments as in effect on the Closing Date and the
transactions contemplated by such documentation shall be consummated
simultaneous with the making of the initial Advance;
(o) Capitalization. Agent shall have received
evidence satisfactory to Agent that after giving effect to the Transactions,
BATS shall have a capitalization of at least $10,000,000 consisting of common
and preferred stock;
(p) Collateral Assignment and Other Documents.
Agent shall have received executed by each Party thereto the Collateral
Assignment, the Pledge Agreement together with the applicable stock
certificates and stock powers executed in blank and all Other Documents, each
in form and substance satisfactory to Lenders;
(q) Insurance. Agent shall have received in form
and substance satisfactory to Agent, certified copies of Borrowers' casualty
insurance policies, together with loss payable endorsements on Agent's
standard form of loss payee endorsement naming Agent as loss payee, and
certified copies of Borrowers' liability insurance policies, together with
endorsements naming Agent as a co-insured;
(r) Payment Instructions. Agent shall have
received written instructions from Borrowers directing the application of
proceeds of the initial Advances made pursuant to this Agreement;
(s) Blocked Accounts. Agent shall have received
duly executed agreements establishing the Blocked Accounts or Depository
Accounts with financial institutions acceptable to Agent for the collection or
servicing of the Receivables and proceeds of the Collateral;
(t) Consents. Agent shall have received any and
all Consents necessary to permit the effectuation of the transactions
contemplated by this Agreement and the Other Documents; and, Agent shall have
received such Consents and waivers of such third parties as might assert
claims with respect to the Collateral, as Agent and its counsel shall deem
necessary;
(u) No Adverse Material Change. (i) Since
September 30, 1996, there shall not have occurred any event, condition or
state of facts which could reasonably be expected to have a Material Adverse
Effect on Borrowers taken as a whole and (ii) no representations made or
information supplied to Lenders shall have been proven to be inaccurate or
misleading in any material respect;
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(v) Leasehold Agreements. Agent shall have
received landlord, mortgagee or warehouseman agreements satisfactory to Agent
with respect to all premises leased by Borrowers at which Inventory is
located;
(w) Net Worth. Agent shall have received the Pro
Forma Balance Sheet reflecting a Net Worth after giving effect to the
Transactions of at least $9,250,000;
(x) Contract Review. Agent shall have reviewed
all material contracts of Borrowers including, without limitation, leases,
union contracts, labor contracts, vendor supply contracts, license agreements
and distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Agent;
(y) Closing Certificate. Agent shall have
received a closing certificate signed by the Chief Financial Officer of each
Borrower dated as of the date hereof, stating that (i) all representations and
warranties set forth in this Agreement and the Other Documents are true and
correct on and as of such date, (ii) Borrowers are on such date in compliance
with all the terms and provisions set forth in this Agreement and the Other
Documents and (iii) on such date no Default or Event of Default has occurred
or is continuing;
(z) Borrowing Base. Agent shall have received
evidence from Borrowers that the aggregate amount of Eligible Receivables and
Eligible Inventory is sufficient in value and amount to support Advances in
the amount requested by Borrowers on the Closing Date;
(aa) Undrawn Availability. After giving effect to
the initial Advances hereunder, Borrowers shall have Undrawn
Availability of at least $2,500,000; and
(ab) Other. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent, Lenders and
their counsel.
8.2. Conditions to Each Advance. The agreement of Lenders
to make any Advance requested to be made on any date (including, without
limitation, the initial Advance), is subject to the satisfaction of the
following conditions precedent as of the date such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by any Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date;
(b) No Default. No Event of Default or Default
shall have occurred and be continuing on such date, or would exist after
giving effect to the Advances requested to be made, on such
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date and, in the case of the initial Advance, after giving effect to the
consummation of the transactions contemplated by the Acquisition Agreement;
provided, however that Lenders, in their sole discretion, may continue to make
Advances notwithstanding the existence of an Event of Default or Default and
that any Advances so made shall not be deemed a waiver of any such Event of
Default or Default; and
(c) Maximum Advances. In the case of any
Advances requested to be made, after giving effect thereto, the aggregate
Advances shall not exceed the maximum amount of Advances permitted under
Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance
that the conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWERS.
Each Borrower shall, until satisfaction in full of the Obligations
and the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning
thereof, report to Agent all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, any Borrower's reclamation or repossession of, or the
return to any Borrower of, a material amount of goods or claims or disputes
asserted by any Customer or other obligor.
9.2. Schedules. Deliver to Agent on or before the fifteenth
(15th) day of each month as and for the prior month (a) accounts receivable
ageings, (b) accounts payable schedules and (c) Inventory reports. In
addition, each Borrower will deliver to Agent at such intervals as Agent may
require: (i) confirmatory assignment schedules, (ii) copies of Customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding the Collateral as Agent may
require including, without limitation, trial balances and test verifications.
Agent shall have the right to confirm and verify all Receivables by any manner
and through any medium it considers advisable and do whatever it may deem
reasonably necessary to protect its interests hereunder. The items to be
provided under this Section are to be in form satisfactory to Agent and
executed by each Borrower and delivered to Agent from time to time solely for
Agent's convenience in maintaining records of the Collateral, and any
Borrower's failure to deliver any of such items to Agent shall not affect,
terminate, modify or otherwise limit Agent's Lien with respect to the
Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with
a certificate signed by the President, a Vice-President or Chief Financial
Officer of each Borrower stating, to the best of his knowledge, that each
Borrower is in compliance in all material respects with all federal, state and
local laws relating to environmental protection and control and occupational
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safety and health. To the extent any Borrower is not in compliance with the
foregoing laws, the certificate shall set forth with specificity all areas of
non-compliance and the proposed action Borrower will implement in order to
achieve full compliance.
9.4. Litigation. Promptly notify Agent in writing of any
litigation, suit or administrative proceeding affecting any Borrower, whether
or not the claim is covered by insurance, and of any suit or administrative
proceeding, which in any such case could reasonably be expected to have a
Material Adverse Effect on Borrowers taken as a whole.
9.5. Material Occurrences. Promptly notify Agent in writing upon
the occurrence of (a) any Event of Default or Default; (b) any event,
development or circumstance whereby any financial statements or other reports
furnished to Agent fail in any material respect to present fairly, in
accordance with GAAP consistently applied, the financial condition or
operating results of any Borrower as of the date of such statements; (c) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject any Borrower to a tax imposed by Section 4971 of
the Code; (d) each and every default by any Borrower which might result in the
acceleration of the maturity of any Indebtedness, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (e) any other
development in the business or affairs of any Borrower which could reasonably
be expected to have a Material Adverse Effect on Borrowers taken as a whole;
in each case describing the nature thereof and the action Borrowers propose to
take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if
any of its Receivables arise out of contracts between any Borrower and the
United States, any state, or any department, agency or instrumentality of any
of them.
9.7. Annual Financial Statements. Furnish Agent within one
hundred and twenty (120) days after the end of each fiscal year of Borrowers,
financial statements of BATS on a consolidated basis together with
consolidating schedules including, but not limited to, statements of income
and stockholders' equity and cash flow from the beginning of the current
fiscal year to the end of such fiscal year and the balance sheet as at the end
of such fiscal year, all prepared in accordance with GAAP applied on a basis
consistent with prior practices, and in reasonable detail and reported upon
without qualification by an independent certified public accounting firm
selected by Borrowers and satisfactory to Agent (the "Accountants"). The
report of the Accountants shall be accompanied by a statement of the
Accountants certifying that (i) they have caused the Loan Agreement to be
reviewed, (ii) in making the examination upon which such report was based
either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any
related agreement or, if such information came to their attention, specifying
any such Default or Event of Default, its nature, when it occurred and whether
it is continuing, and such
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report shall contain or have appended thereto calculations which set forth
Borrowers' compliance with the requirements or restrictions imposed by
Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof. In addition, the reports
shall be accompanied by a certificate of each Borrower's Chief Financial
Officer which shall state that, based on an examination sufficient to permit
him to make an informed statement, no Default or Event of Default exists, or,
if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken
by Borrower with respect to such event, and such certificate shall have
appended thereto calculations which set forth Borrowers' compliance with the
requirements or restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and
7.11 hereof.
9.8. Monthly Financial Statements. During the first twelve (12)
months of the Term, within forty five (45) days after the end of each month
and at all other times, within thirty (30) days after the end of each month,
furnish Agent an unaudited balance sheet of BATS on a consolidated basis and
BATS on a consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of BATS on a consolidated basis and BATS on
a consolidating basis reflecting results of operations from the beginning of
the fiscal year to the end of such month and for such month, prepared on a
basis consistent with prior practices and complete and correct in all material
respects, subject to normal year end adjustments; provided, however, the
monthly financial statements for the month ending January 31, 1997 shall not
be required to be delivered until March 31, 1997 and the monthly financial
statements for the month ending December 31, 1997 shall not be required to be
delivered until March 31, 1998. The reports shall be accompanied by a
certificate of each Borrower's Chief Financial Officer of each Borrower, which
shall state that, based on an examination sufficient to permit him to make an
informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by Borrowers with
respect to such event and, such certificate shall have appended thereto
calculations which set forth Borrowers' compliance with the requirements or
restrictions imposed by Sections 6.5, 6.6, 6.7, 6.8, 7.6 and 7.11 hereof.
9.9. Other Reports. Furnish Agent as soon as available, but in
any event within ten (10) days after the issuance thereof, (i) with copies of
such proxy statements, financial statements, reports and returns as each
Borrower shall send to its stockholders and (ii) copies of all regular,
periodic and special reports or registration statements which any Borrower
files with the Securities and Exchange Commission or any governmental
authority which may be substituted therefor, or any national securities
exchange.
9.10. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Other Documents have been complied with by Borrowers
including, without limitation and without the necessity of any request by
Agent, (a) copies of all environmental audits and reviews, (b) at least thirty
(30) days prior thereto, notice of any Borrower's opening of any new office
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or place of business or any Borrower's closing of any existing office or place
of business, and (c) promptly upon any Borrower's learning thereof, notice of
any labor dispute to which any Borrower may become a party, any strikes or
walkouts relating to any of its plants or other facilities, and the expiration
of any labor contract to which any Borrower is a party or by which any
Borrower is bound.
9.11. Projected Operating Budget. Furnish Agent, (a) no later
than February 28, 1997 for Borrowers' fiscal year 1997 and (b) no later than
thirty (30) days prior to the beginning of each Borrower's fiscal years
commencing with fiscal year 1998, a month by month projected operating budget
and cash flow of BATS on a consolidated and consolidating basis for such
fiscal year (including an income statement for each month and a balance sheet
as at the end of the last month in each fiscal quarter), such projections to
be accompanied by a certificate signed by the President or Chief Financial
Officer of each Borrower to the effect that such projections have been
prepared on the basis of sound financial planning practice consistent with
past budgets and financial statements and that such officer has no reason to
question the reasonableness of any material assumptions on which such
projections were prepared.
9.12. Variances From Operating Budget. Furnish Agent,
concurrently with the delivery of the financial statements referred to in
Section 9.7 and each monthly report, a written report summarizing all material
variances from budgets submitted by Borrowers pursuant to Section 9.11 and a
discussion and analysis by management with respect to such variances.
9.13. Notice of Suits, Adverse Events. Furnish Agent with prompt
notice of (i) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any other Person that is material to the
operation of any Borrower's business, (ii) any refusal by any Governmental
Body or any other Person to renew or extend any such Consent; and (iii) copies
of any periodic or special reports filed by any Borrower with any Governmental
Body or Person, if such reports indicate any material change in the business,
operations, affairs or condition of any Borrower, or if copies thereof are
requested by Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate
to any Borrower.
9.14. ERISA Notices and Requests. Furnish Agent with immediate
written notice in the event that (i) any Borrower or any member of the
Controlled Group knows or has reason to know that a Termination Event has
occurred, together with a written statement describing such Termination Event
and the action, if any, which such Borrower or member of the Controlled Group
has taken, is taking, or proposes to take with respect thereto and, when
known, any action taken or threatened by the Internal Revenue Service,
Department of Labor or PBGC with respect thereto, (ii) any Borrower or any
member of the Controlled Group knows or has reason to know that a prohibited
transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has
occurred together with a written statement describing such transaction and the
action which such Borrower or any member of the Controlled Group has taken, is
taking or proposes to take with respect thereto, (iii) a funding waiver
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request has been filed with respect to any Plan together with all
communications received by any Borrower or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any
existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the
Controlled Group was not previously contributing shall occur, (v) any Borrower
or any member of the Controlled Group shall receive from the PBGC a notice of
intention to terminate a Plan or to have a trustee appointed to administer a
Plan, together with copies of each such notice, (vi) any Borrower or any
member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Plan under Section 401(a) of the Code, together with copies
of each such letter; (vii) any Borrower or any member of the Controlled Group
shall receive a notice regarding the imposition of withdrawal liability,
together with copies of each such notice; (viii) any Borrower or any member of
the Controlled Group shall fail to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for
such installment or payment; (ix) any Borrower or any member of the Controlled
Group knows that (a) a Multiemployer Plan has been terminated, (b) the
administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.
9.15. Additional Documents. Execute and deliver to Agent,
upon request, such documents and agreements as Agent may, from time to time,
reasonably request to carry out the purposes, terms or conditions of this
Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by any Borrower to pay any principal or interest on
the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay,
or by required prepayment or failure to pay any other liabilities or make any
other payment, fee or charge provided for herein when due or in any Other
Document;
10.2. any representation or warranty made or deemed made by any
Borrower in this Agreement or any related agreement or in any certificate,
document or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial
information when due or within ten (10) days after Borrowing Agent receives
notice from Agent of such request when requested, or (ii) permit the
inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment,
injunction or attachment against a material portion of any
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Borrower's property which is not satisfied, stayed or discharged of record
within thirty (30) days ;
10.5. except as otherwise provided for in Sections 10.1 and 10.3,
(a) failure or neglect of any Borrower to perform, keep or observe any term,
provision, condition, covenant in Sections 4.6, 4.7, 4.9, 4.11, 6.1, 6.3, 6.4,
9.4 or 9.6 hereof which is not cured within the earlier of thirty (30) days
from the occurrence of such failure or neglect or fifteen (15) days from the
date Borrowing Agent is notified by Agent of the occurrence of such failure or
neglect and (b) a failure or neglect of any Borrower to perform, keep or
observe any other term, provision, condition, covenant herein contained or
contained in any other Document.
10.6. any judgment is rendered or judgment liens filed
against any Borrower for an aggregate amount in excess of $250,000
which within forty (40) days of such rendering or filing is not
either satisfied, stayed or discharged of record;
10.7. any Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, liquidator or similar fiduciary of itself or of all or a substantial
part of its property, (ii) make a general assignment for the benefit of
creditors, (iii) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
10.8. any Borrower shall admit in writing its inability, or
be generally unable, to pay its debts as they become due or cease
operations of its present business;
10.9. any Subsidiary of any Borrower shall (i) apply for, consent
to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of
its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. any change in any Borrower's condition or affairs
(financial or otherwise) which in Agent's opinion has a Material Adverse Effect
on Borrowers taken as a whole;
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10.11. any Lien created hereunder or provided for hereby or
under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
10.12. a default of the obligations of any Borrower under
any other agreement to which it is a party shall occur which default is not
cured within any applicable grace period and has a Material Adverse Effect on
Borrowers taken as a whole;
10.13. any Change of Control to which Agent shall have not
consented shall occur;
10.14. any material provision of this Agreement shall, for
any reason, cease to be valid and binding on any Borrower, or any Borrower
shall so claim in writing to Agent;
10.15. (i) any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of any Borrower, the continuation of which is material to the continuation of
any Borrower's business, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, tradename
or patent and such proceedings shall not be dismissed or discharged within
sixty (60) days, or (c) schedule or conduct a hearing on the renewal of any
license, permit, trademark, tradename or patent necessary for the continuation
of any Borrower's business and the staff of such Governmental Body issues a
report recommending the termination, revocation, suspension or material,
adverse modification of such license, permit, trademark, tradename or patent;
(ii) any agreement which is necessary or material to the operation of any
Borrower's business shall be revoked or terminated and not replaced by a
substitute acceptable to Agent within thirty (30) days after the date of such
revocation or termination, and such revocation or termination and
non-replacement would reasonably be expected to have a Material Adverse Effect
on Borrowers taken as a whole;
10.16. any portion of the Collateral shall be seized or taken by
a Governmental Body, or any Borrower or the title and rights of any Borrower
which is the owner of any material portion of the Collateral shall have become
the subject matter of litigation which might, in the reasonable opinion of
Agent, upon final determination, result in impairment or loss of the security
provided by this Agreement or the Other Documents;
10.17. the operations of any three of the facilities of AFA, BN
or TEI are interrupted at any time for a period of fourteen (14) consecutive
days, unless such Borrower shall (i) be entitled to receive for such period of
interruption, proceeds of business interruption insurance sufficient to assure
that its per diem cash needs during such period is at least equal to its
average per diem cash needs for the consecutive three month period immediately
preceding the initial date of interruption and (ii) receive such proceeds in
the amount described in clause (i) preceding not later than thirty (30) days
following the initial date of any such interruption; provided, however, that
notwithstanding the provisions of clauses (i) and (ii) of this section, an
Event of Default shall be deemed to have occurred if such Borrower shall be
receiving the proceeds of business interruption insurance for a period of
thirty (30) consecutive days; or
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10.18. an event or condition specified in Sections 7.16 or 9.14
hereof shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group shall incur, or in the opinion
of Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or
both) which, in the reasonable judgment of Agent, would have a Material
Adverse Effect on Borrowers taken as a whole.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances
shall be deemed terminated; and, (ii) any of the other Events of Default and
at any time thereafter (such default not having previously been cured), at the
option of Required Lenders all Obligations shall be immediately due and
payable and Lenders shall have the right to terminate this Agreement and to
terminate the obligation of Lenders to make Advances. Upon the occurrence of
any Event of Default, Agent shall have the right to exercise any and all other
rights and remedies provided for herein, under the Uniform Commercial Code and
at law or equity generally, including, without limitation, the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of
and sell any or all of the Collateral with or without judicial process. Agent
may enter any of Borrower's premises or other premises without legal process
and without incurring liability to any Borrower therefor, and Agent may
thereupon, or at any time thereafter, in its discretion without notice or
demand, take the Collateral and remove the same to such place as Agent may
deem advisable and Agent may require Borrowers to make the Collateral
available to Agent at a convenient place. With or without having the
Collateral at the time or place of sale, Agent may sell the Collateral, or any
part thereof, at public or private sale, at any time or place, in one or more
sales, at such price or prices, and upon such terms, either for cash, credit
or future delivery, as Agent may elect subject to compliance with applicable
laws. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Agent shall give Borrowers reasonable notification of such
sale or sales, it being agreed that in all events written notice mailed to
Borrowers at least five (5) days prior to such sale or sales is reasonable
notification. At any public sale Agent or any Lender may bid for and become
the purchaser, and Agent, any Lender or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and such right
and equity are hereby expressly waived and released by each Borrower. In
connection with the exercise of the foregoing remedies, Agent is granted
permission to use all of each Borrower's trademarks, trade styles, trade
names, patents, patent applications, licenses, franchises and other
proprietary rights which are used in connection with (a) Inventory for the
purpose of disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The proceeds realized from the
sale of any Collateral shall be applied
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as follows: first, to the reasonable costs, expenses and attorneys' fees and
expenses incurred by Agent for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of the Collateral; second, to
interest due upon any of the Obligations; and, third, to the principal of the
Obligations. If any deficiency shall arise, Borrowers shall remain liable to
Agent and Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take
any other action with respect thereto and such determination will not in any
way modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any
Lender may have under applicable law, upon the occurrence of an Event of
Default hereunder, Agent and such Lender shall have a right to apply any
Borrower's property held by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the
exercise of any right or remedy shall not preclude the exercise of any other
right or remedies provided for herein or otherwise provided by law, all of
which shall be cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Each Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2. Delay. No delay or omission on Agent's or any
Lender's part in exercising any right, remedy or option shall operate as a
waiver of such or any other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND
EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS
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WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of
and shall be binding upon the respective successors and permitted assigns of
each Borrower, Agent and each Lender, shall become effective on the date
hereof and shall continue in full force and effect until January 7, 2000 (the
"Term") unless sooner terminated as herein provided. Borrowers may terminate
this Agreement at any time upon ninety (90) days' prior written notice upon
payment in full of the Obligations. In the event the Obligations are prepaid
in full prior to the last day of the Term (the date of such prepayment
hereinafter referred to as the "Early Termination Date"), Borrowers shall pay
to Agent for the benefit of Lenders an early termination fee in an amount
equal to (x) $260,000 if the Early Termination Date occurs on or after the
Closing Date to and including the date immediately preceding the first
anniversary of the Closing Date and, (y) $130,000 if the Early Termination
Date occurs on or after the first anniversary of the Closing Date to and
including the date immediately preceding the second anniversary of the Closing
Date.
13.2. Termination. The termination of the Agreement shall not
affect any Borrower's, Agent's or any Lender's rights, or any of the
Obligations having their inception prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or
Obligations have been fully disposed of, concluded or liquidated. The security
interests, Liens and rights granted to Agent and Lenders hereunder and the
financing statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrowers'
Account may from time to time be temporarily in a zero or credit position,
until all of the Obligations of each Borrower have been paid or performed in
full after the termination of this Agreement or each Borrower has furnished
Agent and Lenders with an indemnification satisfactory to Agent and Lenders
with respect thereto. Accordingly, each Borrower waives any rights which it
may have under Section 9-404(1) of the Uniform Commercial Code to demand the
filing of termination statements with respect to the Collateral, and Agent
shall not be required to send such termination statements to each Borrower, or
to file them with any filing office, unless and until this Agreement shall
have been terminated in accordance with its terms and all Obligations paid in
full in immediately available funds. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination
hereof until all Obligations are paid or performed in full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates IBJS to
act as Agent for such Lender under this Agreement and the Other Documents.
Each Lender hereby irrevocably authorizes Agent to take such action on its
behalf under the provisions of this Agreement
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and the Other Documents and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of Agent
by the terms hereof and thereof and such other powers as are reasonably
incidental thereto and Agent shall hold all Collateral, payments of principal
and interest, fees (except the fees set forth in Sections 3.3(a) and 3.4),
charges and collections (without giving effect to any collection days)
received pursuant to this Agreement, for the ratable benefit of Lenders. Agent
may perform any of its duties hereunder by or through its agents or employees.
As to any matters not expressly provided for by this Agreement (including
without limitation, collection of the Note) Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless
Agent is furnished with an indemnification reasonably satisfactory to Agent
with respect thereto.
14.2. Nature of Duties. Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
Other Documents. Neither Agent nor any of its officers, directors, employees
or agents shall be (i) liable for any action taken or omitted by them as such
hereunder or in connection herewith, unless caused by their gross (not mere)
negligence or willful misconduct, or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or
any officer thereof contained in this Agreement, or in any of the Other
Documents or in any certificate, report, statement or other document referred
to or provided for in, or received by Agent under or in connection with, this
Agreement or any of the Other Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement,
or any of the Other Documents or for any failure of Borrower to perform its
obligations hereunder. Agent shall not be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any of the Other
Documents, or to inspect the properties, books or records of any Borrower. The
duties of Agent as respects the Advances to Borrowers shall be mechanical and
administrative in nature; Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon Agent any obligations in respect of this Agreement except as
expressly set forth herein.
14.3. Lack of Reliance on Agent and Resignation. Independently
and without reliance upon Agent or any other Lender, each Lender has made and
shall continue to make (i) its own independent investigation of the financial
condition and affairs of each Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not taking of any
action in connection herewith, and (ii) its own appraisal of the
creditworthiness of each Borrower. Agent shall have no duty or responsibility,
either initially or on a continuing basis, to
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provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Advances or at any
time or times thereafter except as shall be provided by any Borrower pursuant
to the terms hereof. Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any agreement, document, certificate or a statement delivered in connection
with or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement or any Other
Document, or of the financial condition of any Borrower, or be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement, the Note, the Other
Documents or the financial condition of any Borrower, or the existence of any
Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each of
Lenders and Borrowing Agent and upon such resignation, the Required Lenders
will promptly designate a successor Agent reasonably satisfactory to
Borrowers.
Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and the term "Agent" shall mean such successor agent
effective upon its appointment, and the former Agent's rights, powers and
duties as Agent shall be terminated, without any other or further act or deed
on the part of such former Agent. After any Agent's resignation as Agent, the
provisions of this Article XIV shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request
instructions from Lenders with respect to any act or action (including failure
to act) in connection with this Agreement or any Other Document, Agent shall
be entitled to refrain from such act or taking such action unless and until
Agent shall have received instructions from the Required Lenders; and Agent
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, Lenders shall not have any right of action whatsoever
against Agent as a result of its acting or refraining from acting hereunder in
accordance with the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
order or other document or telephone message believed by it to be genuine and
correct and to have been signed, sent or made by the proper person or entity,
and, with respect to all legal matters pertaining to this Agreement and the
Other Documents and its duties hereunder, upon advice of counsel selected by
it. Agent may employ agents and attorneys-in-fact and shall not be liable for
the default or misconduct of any such agents or attorneys-in-fact selected by
Agent with reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder or under the Other Documents, unless Agent has received notice from
a Lender or a Borrower referring to this Agreement or the Other Documents,
describing such Default or Event
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of Default and stating that such notice is a "notice of default". In the event
that Agent receives such a notice, Agent shall give notice thereof to Lenders.
Agent shall take such action with respect to such Default or Event of Default
as shall be reasonably directed by the Required Lenders; provided, that,
unless and until Agent shall have received such directions, Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrowers, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement
or any Other Document; provided that, Lenders shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's
gross (not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the
obligation of Agent to lend under this Agreement, the Advances made by it
shall have the same rights and powers hereunder as any other Lender and as if
it were not performing the duties as Agent specified herein; and the term
"Lender" or any similar term shall, unless the context clearly otherwise
indicates, include Agent in its individual capacity as a Lender. Agent may
engage in business with any Borrower as if it were not performing the duties
specified herein, and may accept fees and other consideration from any
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to Lenders.
14.9. Delivery of Documents. To the extent Agent receives
documents and information from any Borrower pursuant to the terms of this
Agreement, Agent will promptly furnish such documents and information to
Lenders.
14.10. Borrowers' Undertaking to Agent. Without prejudice to
their respective obligations to Lenders under the other provisions of this
Agreement, each Borrower hereby undertakes with Agent to pay to Agent from
time to time on demand all amounts from time to time due and payable by it for
the account of Agent or Lenders or any of them pursuant to this Agreement to
the extent not already paid. Any payment made pursuant to any such demand
shall pro tanto satisfy the relevant Borrower's obligations to make payments
for the account of Lenders or the relevant one or more of them pursuant to
this Agreement.
XV. BORROWING AGENCY.
15.1. Borrowing Agency Provisions.
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(a) Each Borrower hereby irrevocably designates
Borrowing Agent to be its attorney and agent and in such capacity to borrow,
sign and endorse notes, and execute and deliver all instruments, documents,
writings and further assurances now or hereafter required hereunder, on behalf
of such Borrower or Borrowers, and hereby authorizes Agent to pay over or
credit all loan proceeds hereunder in accordance with the request of Borrowing
Agent.
(b) The handling of this credit facility as a co-
borrowing facility with a borrowing agent in the manner set forth in this
Agreement is solely as an accommodation to Borrowers and at their request.
Neither Agent nor any Lender shall incur liability to Borrowers as a result
thereof. To induce Agent and Lenders to do so and in consideration thereof,
each Borrower hereby indemnifies Agent and each Lender and holds Agent and
each Lender harmless from and against any and all liabilities, expenses,
losses, damages and claims of damage or injury asserted against Agent or any
Lender by any Person arising from or incurred by reason of the handling of the
financing arrangements of Borrowers as provided herein, reliance by Agent or
any Lender on any request or instruction from Borrowing Agent or any other
action taken by Agent or any Lender with respect to this Section 15.1 except
due to willful misconduct or gross (not mere) negligence by the indemnified
party.
(c) All Obligations shall be joint and several,
and each Borrower shall make payment upon the maturity of the Obligations by
acceleration or otherwise, and such obligation and liability on the part of
each Borrower shall in no way be affected by any extensions, renewals and
forbearance granted to Agent or any Lender to any Borrower, failure of Agent
or any Lender to give any Borrower notice of borrowing or any other notice,
any failure of Agent or any Lender to pursue or preserve its rights against
any Borrower, the release by Agent or any Lender of any Collateral now or
thereafter acquired from any Borrower, and such agreement by each Borrower to
pay upon any notice issued pursuant thereto is unconditional and unaffected by
prior recourse by Agent or any Lender to the other Borrowers or any Collateral
for such Borrower's Obligations or the lack thereof.
15.2. Waiver of Subrogation. Each Borrower expressly waives any
and all rights of subrogation, reimbursement, indemnity, exoneration,
contribution of any other claim which such Borrower may now or hereafter have
against the other Borrowers or other Person directly or contingently liable
for the Obligations hereunder, or against or with respect to the other
Borrowers' property (including, without limitation, any property which is
Collateral for the Obligations), arising from the existence or performance of
this Agreement, until termination of this Agreement and repayment in full of
the Obligations.
XVI. MISCELLANEOUS.
16.1. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against any Borrower
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with respect to any of the Obligations, this Agreement or any related
agreement may be brought in any court of competent jurisdiction in the State
of New York, United States of America, and, by execution and delivery of this
Agreement, each Borrower accepts for itself and in connection with its
properties, generally and unconditionally, the non-exclusive jurisdiction of
the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement. Each Borrower hereby
waives personal service of any and all process upon it and consents that all
such service of process may be made by registered mail (return receipt
requested) directed to Borrowing Agent at its address set forth in Section
16.6 and service so made shall be deemed completed five (5) days after the
same shall have been so deposited in the mails of the United States of
America, or, at the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such Borrower's
Agent for the purpose of accepting service within the State of New York.
Nothing herein shall affect the right to serve process in any manner permitted
by law or shall limit the right of Agent or any Lender to bring proceedings
against any Borrower in the courts of any other jurisdiction. Each Borrower
waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon FORUM NON CONVENIENS. Any judicial proceeding by any
Borrower against Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or
state court located in the City of New York, State of New York.
16.2. Entire Understanding. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between each
Borrower, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, signed by each
Borrower's, Agent's and each Lender's respective officers. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or
by any course of dealing, or in any manner other than by an agreement in
writing, signed by the party to be charged. Each Borrower acknowledges that it
has been advised by counsel in connection with the execution of this Agreement
and Other Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent
in writing of the Required Lenders, and Borrowers may, subject to the provisions
of this Section 16.2 (b), from time to time enter into written supplemental
agreements to this Agreement or the Other Documents executed by Borrowers, for
the purpose of adding or deleting any provisions or otherwise changing,
varying or waiving in any manner the rights of Lenders, Agent or Borrowers
thereunder or the conditions, provisions or terms thereof of waiving any Event
of Default thereunder, but only to the extent specified in such written
agreements; PROVIDED, HOWEVER, that no such supplemental agreement shall,
without the consent of all Lenders:
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(i) increase the Commitment Percentage
of any Lender;
(ii) extend the maturity of any Note or
the due date for any amount payable hereunder, or decrease the rate of
interest or reduce any fee payable by Borrowers to Lenders pursuant to this
Agreement;
(iii) alter the definition of the term
Required Lenders or alter, amend or modify this Section 16.2(b);
(iv) release any Collateral during any
calendar year (other than in accordance with the provisions of this Agreement)
having an aggregate value in excess of $1,000,000; or
(v) change the rights and duties of
Agent.
Any such supplemental agreement shall apply equally to each Lender and shall
be binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or
not the subsequent Event of Default is the same as the Event of Default which
was waived), or impair any right consequent thereon.
16.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and
inure to the benefit of Borrowers, Agent, each Lender, all future holders of
the Obligations and their respective successors and assigns, except that no
Borrower may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of Agent and each Lender.
(b) Each Borrower acknowledges that in the
regular course of commercial banking business one or more Lenders may at any
time and from time to time sell participating interests in the Advances to
other financial institutions (each such transferee or purchaser of a
participating interest, a "Transferee"). Each Transferee may exercise all
rights of payment (including without limitation rights of set-off) with
respect to the portion of such Advances held by it or other Obligations
payable hereunder as fully as if such Transferee were the direct holder
thereof provided that Borrowers shall not be required to pay to any Transferee
more than the amount which it would have been required to pay to Lender which
granted an interest in its Advances or other Obligations payable hereunder to
such Transferee had such Lender retained such interest in the Advances
hereunder or other Obligations payable hereunder and in no event shall
Borrowers be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations
payable hereunder to both such Lender and such Transferee. Each Borrower
hereby grants to any Transferee a continuing security interest in any
deposits, moneys or other property actually or constructively held by such
Transferee as security for the Transferee's interest in the Advances.
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(c) Any Lender may with the consent of Agent
which shall not be unreasonably withheld or delayed sell, assign or transfer
all or any part of its rights under this Agreement and the Other Documents to
one or more additional banks or financial institutions and one or more
additional banks or financial institutions may commit to make Advances
hereunder (each a "Purchasing Lender"), in minimum amounts of not less than
$5,000,000 (except with respect to a sale, assignment or transfer made by IBJS
in which no minimum shall apply), pursuant to a Commitment Transfer
Supplement, executed by a Purchasing Lender, the transferor Lender, and Agent
and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement,
the Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Borrowers hereby consent to the addition of such Purchasing
Lender and the resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the Other
Documents. Borrowers shall execute and deliver such further documents and do
such further acts and things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of
each Commitment Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Advances
owing to each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and Borrowers, Agent and Lenders
may treat each Person whose name is recorded in the Register as the owner of
the Advance recorded therein for the purposes of this Agreement. The Register
shall be available for inspection by Borrowers or any Lender at any reasonable
time and from time to time upon reasonable prior notice. Agent shall receive a
fee in the amount of $2,500 payable by the applicable Purchasing Lender upon
the effective date of each transfer or assignment to such Purchasing Lender.
(e) Borrowers authorize each Lender to disclose
to any Transferee or Purchasing Lender and any prospective Transferee or
Purchasing Lender any and all financial information in such Lender's
possession concerning Borrowers which has been delivered to such Lender by or
on behalf of Borrowers pursuant to this Agreement or in connection with such
Lender's credit evaluation of Borrowers.
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16.4. Application of Payments. Agent shall have the continuing
and exclusive right to apply or reverse and re-apply any payment and any and
all proceeds of Collateral to any portion of the Obligations. To the extent
that any Borrower makes a payment or Agent or any Lender receives any payment
or proceeds of the Collateral for any Borrower's benefit, which are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver,
custodian or any other party under any bankruptcy law, common law or equitable
cause, then, to such extent, the Obligations or part thereof intended to be
satisfied shall be revived and continue as if such payment or proceeds had not
been received by Agent or such Lender.
16.5. Indemnity. Each Borrower shall indemnify Agent, each Lender
and each of their respective officers, directors, Affiliates, employees and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and
disbursements of counsel) which may be imposed on, incurred by, or asserted
against Agent or any Lender in any litigation, proceeding or investigation
instituted or conducted by any governmental agency or instrumentality or any
other Person with respect to any aspect of, or any transaction contemplated
by, or referred to in, or any matter related to, this Agreement or the Other
Documents, whether or not Agent or any Lender is a party thereto, except to
the extent that any of the foregoing arises out of the willful misconduct of
the party seeking indemnification or being indemnified.
16.6. Notice. Any notice or request hereunder may be given to any
Borrower or to Agent or any Lender at their respective addresses set forth
below or at such other address as may hereafter be specified in a notice
designated as a notice of change of address under this Section. Any notice or
request hereunder shall be given by (a) hand delivery, (b) overnight courier,
(c) registered or certified mail, return receipt requested, (d) telex or
telegram, subsequently confirmed by registered or certified mail, or (e)
telecopy to the number set out below (or such other number as may hereafter be
specified in a notice designated as a notice of change of address) with
electronic confirmation of its receipt. Any notice or other communication
required or permitted pursuant to this Agreement shall be deemed given (a)
when personally delivered to any officer of the party to whom it is addressed,
(b) on the earlier of actual receipt thereof or three (3) days following
posting thereof by certified or registered mail, postage prepaid, or (c) upon
actual receipt thereof when sent by a recognized overnight delivery service or
(d) upon actual receipt thereof when sent by telecopier to the number set
forth below with electronic confirmation of its receipt, in each case
addressed to each party at its address set forth below or at such other
address as has been furnished in writing by a party to the other by like
notice:
(A) If to Agent or IBJ Schroder Bank & Trust Company
IBJS at: One State Street
New York, New York 10004
Attention: Chris Norrito
Telephone: (212) 858-2000
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Telecopier: (212) 858-2151
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to a Lender other than Agent, as specified on the
signature pages hereof
(C) If to Borrowing Agent
or any Borrower, at: Batteries Batteries, Inc.
c/o Founders Equity, Inc.
200 Madison Avenue
New York, New York 10016
Attention: Warren H. Haber
Telephone: (212) 953-0100
Telecopier: (212) 953-0626
with a copy to: Brock, Fensterstock, Silverstein,
McAuliffe & Wade, LLC
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Leo Silverstein, Esq.
Telephone: (212) 371-2000
Telecopier: (212) 371-5500
16.7. Survival. The obligations of Borrowers under Sections
2.2(f), 3.7, 3.8, 3.9, 4.19(h), 14.7 and 16.5 shall survive termination of
this Agreement and the Other Documents and payment in full of the Obligations.
16.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated
thereby and shall be given effect so far as possible.
16.9. Expenses. All costs and expenses including, without
limitation, reasonable attorneys' fees and disbursements incurred by Agent,
Agent on behalf of Lenders and Lenders (a) in all efforts made to enforce
payment of any Obligation or effect collection of any Collateral, or (b) in
connection with the entering into, modification, amendment, administration and
enforcement of this Agreement or any consents or waivers hereunder and all
related agreements, documents and instruments, or (c) in instituting,
maintaining, preserving, enforcing and foreclosing on Agent's security
interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any Lender's transactions
with any Borrower, or (e) in connection with any advice given to Agent or any
Lender with respect to its rights and obligations under this Agreement and all
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related agreements, may be charged to Borrowers' Account and shall be part of
the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that, in the
event any Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy at law may prove
to be inadequate relief to Lenders; therefore, Agent, if Agent so requests,
shall be entitled to temporary and permanent injunctive relief in any such
case without the necessity of proving that actual damages are not an adequate
remedy.
16.11. Consequential Damages. Neither Agent nor any Lender,
nor any agent or attorney for any of them, shall be liable to any Borrower for
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the
Obligations.
16.12. Captions. The captions at various places in this
Agreement are intended for convenience only and do not constitute and shall
not be interpreted as part of this Agreement.
16.13. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any
signature delivered by a party by facsimile transmission shall be deemed to be
an original signature hereto.
16.14. Construction. The parties acknowledge that each party and
its counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement
or any amendments, schedules or exhibits thereto.
16.15. Confidentiality. Agent, each Lender and each Transferee
shall hold all non-public information obtained by Agent, such Lender or such
Transferee pursuant to the requirements of this Agreement in accordance with
Agent's, such Lender's and such Transferee's customary procedures for handling
confidential information of this nature; provided, however, Agent, each Lender
and each Transferee may disclose such confidential information (a) to its
examiners, affiliates, outside auditors, counsel and other professional
advisors, (b) to Agent, any Lender or to any prospective Transferees and
Purchasing Lenders, and (c) as required or requested by any Governmental Body
or representative thereof or pursuant to legal process; provided, further that
(i) unless specifically prohibited by applicable law or court order, Agent,
each Lender and each Transferee shall use its best efforts prior to disclosure
thereof, to notify Borrower of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the
financial condition of a Lender or a Transferee by such Governmental Body) or
(B) pursuant to legal process and (ii) in no event shall Agent, any Lender or
any Transferee be obligated to return any materials furnished by any Borrower
other than those documents and instruments in possession of Agent or any
Lender in order to perfect its Lien on
-81-
<PAGE>
the Collateral once the Obligations have been paid in full and this Agreement
has been terminated.
16.16. Publicity. Each Borrower hereby authorizes Agent and
Lenders to make appropriate announcements of the financial arrangement entered
into among Borrowers, Agent and Lenders, including, without limitation,
announcements which are commonly known as tombstones, in such publications and
to such selected parties as Agent or Lenders shall in its sole and absolute
discretion deem appropriate.
-82-
<PAGE>
Each of the parties has signed this Agreement as of the day and
year first above written.
BATTERIES BATTERIES, INC.
By: /s/ Ronald Badke
-------------------------------
Ronald Badke, Chief Operating
Officer
200 Madison Avenue
New York, New York 10016
TAUBER ELECTRONICS, INC.
By: /s/ Ronald Badke
-------------------------------
Ronald Badke, Chief Operating
Officer
10656 Roselle Street
San Diego, California 92121
ADVANCED FOX ANTENNA, INC.
By: /s/ Ronald Badke
-------------------------------
Ronald Badke, Chief Operating
Officer
1840 Country Line Road
Huntingdon Valley, PA 19006
SPECIFIC ENERGY CORPORATION
By: /s/ Ronald Badke
-------------------------------
Ronald Badke, Chief Operating
Officer
3915 E. LaSalle Street
Phoenix, Arizona 85051
-83-
<PAGE>
BATTERY NETWORK, INC.
By: /s/ Ronald Badke
-------------------------------
Ronald Badke, Chief Operating
Officer
4071 Albany Street
McHenry, Illinois 60050
W.S. BATTERY & SALES COMPANY, INC.
By: /s/ Ronald Badke
-------------------------------
Ronald Badke, Chief Operating
Officer
4071 Albany Street
McHenry, Illinois 60050
BATTERY ACQUISITION CORP.
By: /s/ Ronald Badke
-------------------------------
Ronald Badke, Chief Operating
Officer
200 Madison Avenue
New York, New York 10016
IBJ SCHRODER BANK & TRUST COMPANY,
as Lender and as Agent
By: /s/ David Cunn
-------------------------------
David Cunn, Vice-President
One State Street
New York, New York 10004
Commitment Percentage: 100%
-84-
<PAGE>
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 6th day of January, 1997, before me personally came
Ronald Badke, to me known, who, being by me duly sworn, did depose and say
that he is the Chief Operating Officer of Batteries Batteries, Inc., Tauber
Electronics, Inc., Advanced Fox Antenna, Inc., Specific Energy Corporation,
Battery Network, Inc., W.S. Battery & Sales Company, Inc. and Battery
Acquisition Corp., the corporations described in and which executed the
foregoing instrument; and that he was authorized to sign his name thereto on
behalf of said corporations.
/s/ Lisa M. Vaccaro
------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 6th day of January, 1997, before me personally came David
Cunn, to me known, who, being by me duly sworn, did depose and say that he is
the Vice-President of IBJ Schroder Bank & Trust Company, the corporation
described in and which executed the foregoing instrument; and that he was
authorized to sign his name thereto on behalf of said corporation.
/s/ Lisa M. Vaccaro
------------------------------
NOTARY PUBLIC
-85-
<PAGE>
List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note
Exhibit 2.9 Letter of Credit and Security Agreement
Exhibit 3.2 Letter of Credit Fees
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 15.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Numbers
Schedule 5.6 Prior Names
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow
Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
-86-
<PAGE>
SCHEDULE 1.2
Permitted Encumbrances:
None.
<PAGE>
SCHEDULE 4.5
Equipment and Inventory Locations:
(a) 4056 148th Avenue, N.E., Redmond, Washington 98073 (Warehouse)
(b) 2215 Vinyard Avenue, Escondido, California 92029, San Diego County
(Warehouse)
(c) 50 Tannery Road, Unit 2, North Branch, New Jersey 08876 (Warehouse)
(d) 280 Griffin Street, McDonough, Georgia 30253 (Warehouse)
(e) 3415 Glendale Avenue, Phoenix Arizona 85051 (Retail)
(f) 1829 E. Southern Avenue, Tempe Arizona 85282 (Retail)
(g) 4747 E. Bell Road, Phoenix Arizona 85032 (Retail)
(h) 4519 E. Thomas Road, Phoenix, Arizona 85018 (Retail)
(i) 10100 North 90th Street, Scottsdale, Arizona 85258 (Retail)
(j) 370 Howe Avenue, Cuyahoga Falls, Ohio 44221 (Retail)
(k) 27845 Chardin Road, Ohio 44092 (Retail)
(l) 7851 Northwest 15th Street, Miami, Florida 33126 (Office)
(m) 1840 County Line Road, Huntingdon Valley, Pennsylvania 19006 (Office
and 2 Warehouses)
(n) 10656 Roselle Street, San Diego, California 92121 (Distribution
Center)
<PAGE>
SCHEDULE 4.15(c)
Location of Executive Offices:
(a) Batteries Batteries, Inc.
c/o Founders Equity Inc.
200 Madison Avenue
New York, New York 10016
New York County
(b) Advanced Fox Antenna, Inc.
1840 County Line Road
Huntingdon Valley, Pennsylvania 19006
Montgomery County
(c) Tauber Electronics Inc.
10656 Roselle Street
San Diego, California 92121
San Diego County
(d) Specific Energy Corporation
3915 E. LaSalle Street
Phoenix, Arizona
(e) Battery Network, Inc.
4071 Albany Street
McHenry, Illinois 60050
McHenry County
(f) W.S. Battery & Sales Company, Inc.
4071 Albany Street
McHenry, Illinois 60050
McHenry County
(g) Battery Acquisition Corp.
c/o Founders Equity Inc.
200 Madison Avenue
New York, New York 10016
<PAGE>
SCHEDULE 5.2(a)
States of Qualification and Good Standing:
Batteries Batteries Inc. -- Delaware
Battery Acquisition Corp. -- New York
Advanced Fox Antenna -- Delaware, Pennsylvania
Tauber Electronics, Inc. -- California
Specific Energy Corporation -- Arizona
Battery Network, Inc. -- Illinois
W.S. Battery & Sales Company, Inc. -- Illinois
<PAGE>
SCHEDULE 5.2(b)
Subsidiaries of Batteries Batteries, Inc.:
(a) Advanced Fox Antenna, Inc.
(b) Tauber Electronics Inc.
(c) Battery Network, Inc.
(d) W.S. Battery & Sales Company, Inc.
Subsidiary of Battery Acquisition Corp.
(e) Specific Energy Corporation
<PAGE>
SCHEDULE 5.4
Federal Tax Identification Numbers:
(a) Batteries Batteries, Inc. -- 13-383-5420
(b) Advanced Fox Antenna, Inc. -- 23-258-4863
(c) Tauber Electronics Inc. -- 95-2947712
(d) Specific Energy Corporation -- 86-0532358
(e) Battery Network, Inc. -- 36-3979231
(f) W.S. Battery & Sales Company, Inc. -- 36-2721662
(g) Battery Acquisition Corp. -- 13-3925731
<PAGE>
SCHEDULE 5.6
Prior Names:
(a) Specific Energy Corporation was previously doing business as
"Lynntronics Corp." It now conducts business under the name
"Batteries Batteries for everything."
(b) WSJ Enterprises, Inc. was previously named Alexander Battery
Co., Inc.
(c) Batteries Batteries, Inc. was previously "Founders Associates Inc."
The amendment to the Certificate of Incorporation changing the name
was filed in June 1995. Founders Associates Inc. was previously
"China Capital Corporation," having changed its name in July 1994.
Batteries Batteries, Inc. did not conduct any business until the
acquisition by Battery Acquisition Corp. of the shares of capital
stock of Specific Energy.
(d) Specific Energy Corporation applied for, in Arizona, and was granted,
the Trade Name "Batteries Batteries for everything" on March 28,
1996.
(d) Battery Network, Inc. uses the tradename "Absolute Battery."
<PAGE>
SCHEDULE 5.8(b)
Litigation:
Blenheim Group USA, Inc. vs. Battery Network involving a claim for
approximately $6,456.11 in connection with a vendor dispute.
<PAGE>
SCHEDULE 5.8(d)
Plans:
o Alexander Battery Co. East, Inc. Specimen Profit Sharing Plan Adoption
Agreement and
o Alexander Battery Co. East, Inc. Specimen Profit Sharing Plan & Trust
o Alexander Battery Co. West, Inc. Specimen Profit Sharing Plan & Trust
o Alexander Battery Co. South, Inc. Specimen Profit Sharing Plan Adoption
Agreement and Alexander Battery Co. South Inc. Profit Sharing Plan &
Trust
o W.S. Battery & Sales Co., Inc. Employee Stock Ownership Plan and Trust
and W.S. Battery & Sales Co., Inc. Specimen Money Purchase Pension
Plan & Trust
o Battery Network, Inc. Specimen Profit Sharing Plan Adoption Agreement
and Battery Network, Inc. Specimen Profit Sharing Plan & Trust
<PAGE>
SCHEDULE 5.9
Intellectual Property, Source Code Escrow Agreements:
"Batteries Batteries for Everything" Trademark application filing date
August 21, 1995 status pending
"Battery Network" Trademark registration granted on July 4, 1995 U.S. Trademark
Registration No. 1,903,4646.
"Absolute" Trademark registration application filed February 4, 1994, trademark
file number 74/487,834
<PAGE>
SCHEDULE 5.10
Licenses and Permits:
California -- Sellers Permit, California City of Escondido
New Jersey -- Sales and Use Tax Recycling Permit
Illinois -- Illinois Department of Revenue
Washington -- Certificate of Coverage -- Master License
License Agreement -- De Pew Engineering Inc.
<PAGE>
SCHEDULE 5.14
Labor Disputes:
None
<PAGE>
TERM NOTE
$3,000,000 New York, New York
January 6, 1997
This Term Note is executed and delivered under and pursuant
to the terms of that certain Revolving Credit, Term Loan and Security
Agreement dated as of January 6, 1997 (as amended, supplemented or modified
from time to time the "Loan Agreement") by and among BATTERIES BATTERIES,
INC., a corporation organized under the laws of the State of Delaware
("BATS"), TAUBER ELECTRONICS, INC., a corporation organized under the laws of
the State of California ("TEI"), ADVANCED FOX ANTENNA, INC., a corporation
organized under the laws of the State of Delaware ("AFA"), SPECIFIC ENERGY
CORPORATION, a corporation organized under the laws of the State of Arizona
("SEC"), BATTERY NETWORK, INC., a corporation organized under the laws of the
State of Illinois ("BN"), W.S. BATTERY & SALES COMPANY, INC., a corporation
organized under the laws of the State of Illinois ("WSBS") and BATTERY
ACQUISITION CORP., a corporation organized under the laws of the State of New
York ("BAC") (BATS, TEI, AFA, SEC, BN, WSBS and BAC, each a "Borrower" and,
jointly and severally, the "Borrowers"), IBJ SCHRODER BANK & TRUST COMPANY
("IBJS"), each of the other financial institutions named in or which hereafter
become a party to the Loan Agreement (IBJS and such other financial
institutions, the "Lenders") and IBJS as agent for the Lenders (IBJS in such
capacity, the "Agent"). Capitalized terms not otherwise defined herein shall
have the meanings as provided in the Loan Agreement.
FOR VALUE RECEIVED, Borrowers, jointly and severally, hereby
promise to pay to the order of Agent for the ratable benefit of Lenders at its
offices located at One State Street, New York, New York 10004 or at such other
place as Agent may from time to time designate to Borrowers in writing:
(i) the principal sum of THREE MILLION AND 00/100 DOLLARS
($3,000,000.00) payable in accordance with the terms of the Loan Agreement,
subject to acceleration upon the occurrence of an Event of Default under the
Loan Agreement, earlier termination of the Loan Agreement or earlier
prepayment as required pursuant to the terms thereof; and
(ii) interest on the principal amount of this Note from time
to time outstanding, payable at the Term Loan Rate in accordance with the
provisions of the Loan Agreement. Upon and after the declaration of an Event
of Default, and during the continuation thereof, interest shall be payable at
the Default Rate. In no event, however, shall interest hereunder exceed the
maximum interest rate permitted by law.
This Note is the Term Note referred to in the Loan Agreement
and is secured, inter alia, by the Liens granted pursuant to the Loan
Agreement and the Other Documents, is entitled to the benefits of the Loan
Agreement and the Other Documents and is subject to all of the agreements,
terms and conditions therein contained.
<PAGE>
This Note is subject to mandatory prepayment and may be
voluntarily prepaid, in whole or in part, on the terms and conditions set
forth in the Loan Agreement.
If an Event of Default under Section 10.7 of the Loan
Agreement shall occur, then this Note shall immediately become due and
payable, without notice, together with reasonable attorneys' fees if the
collection hereof is placed in the hands of an attorney to obtain or enforce
payment hereof. If any other Event of Default shall occur under the Loan
Agreement or any of the Other Documents, which is not cured within any
applicable grace period, then this Note may, as provided in the Loan
Agreement, be declared to be immediately due and payable, without notice,
together with reasonable attorneys' fees, if the collection hereof is placed
in the hands of an attorney to obtain or enforce payment hereof.
This Note is being delivered in the State of New York, and
shall be construed and enforced in accordance with the laws of such State.
Borrowers expressly waive any presentment, demand, protest,
notice of protest, or notice of any kind except as expressly provided in the
Loan Agreement.
BATTERIES BATTERIES, INC.
TAUBER ELECTRONICS, INC.
ADVANCED FOX ANTENNA, INC.
SPECIFIC ENERGY CORPORATION
BATTERY NETWORK, INC.
W.S. BATTERY & SALES COMPANY, INC.
BATTERY ACQUISITION CORP.
By: /s/ Ronald E. Badke
-------------------------------
Name: Ronald E. Badke
-----------------------------
Vice President and COO-CEO of the
foregoing corporations
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 6th day of January, 1997, before me personally came
Ronald Badke, to me known, who being by me duly sworn, did depose and say that
he is the VP-COO-CFO of each of Batteries Batteries, Inc., Tauber Electronics,
Inc., Advanced Fox Antenna, Inc., Specific Energy Corporation, Battery
Network, Inc., W.S. Battery & Sales Company, Inc. and Battery Acquisition
Corp., the corporations described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the each of the
respective boards of directors of said corporations.
/s/ Lisa M. Vaccaro
-------------------------------
Notary Public
LISA M. VACCARO
NOTARY PUBLIC, STATE OF NEW YORK
NO 02VA5049635
QUALIFIED IN NASSAU COUNTY
COMMISSION EXPIRES 9/18/97
<PAGE>
REVOLVING CREDIT NOTE
$10,000,000 New York, New York
January 6, 1997
This Revolving Credit Note is executed and delivered under
and pursuant to the terms of that certain Revolving Credit, Term Loan and
Security Agreement dated as of January 6, 1997 (as amended, supplemented or
modified from time to time the "Loan Agreement") by and among BATTERIES
BATTERIES, INC., a corporation organized under the laws of the State of
Delaware ("BATS"), TAUBER ELECTRONICS, INC., a corporation organized under the
laws of the State of California ("TEI"), ADVANCED FOX ANTENNA, INC., a
corporation organized under the laws of the State of Delaware ("AFA"),
SPECIFIC ENERGY CORPORATION, a corporation organized under the laws of the
State of Arizona ("SEC"), BATTERY NETWORK, INC., a corporation organized under
the laws of the State of Illinois ("BN"), W.S. BATTERY & SALES COMPANY, INC.,
a corporation organized under the laws of the State of Illinois ("WSBS") and
BATTERY ACQUISITION CORP., a corporation organized under the laws of the State
of New York ("BAC") (BATS, TEI, AFA, SEC, BN, WSBS and BAC, each a "Borrower"
and, jointly and severally, the "Borrowers"), IBJ SCHRODER BANK & TRUST
COMPANY ("IBJS"), each of the other financial institutions named in or which
hereafter become a party to the Loan Agreement (IBJS and such other financial
institutions, the "Lenders") and IBJS as agent for the Lenders (IBJS in such
capacity, the "Agent"). Capitalized terms not otherwise defined herein shall
have the meanings as provided in the Loan Agreement.
FOR VALUE RECEIVED, Borrowers, jointly and severally, hereby
promise to pay to the order of Agent for the ratable benefit of Lenders at its
offices located at One State Street, New York, New York 10004 or at such other
place as Agent may from time to time designate to Borrowers in writing:
(i) the principal sum of TEN MILLION 00/100 DOLLARS
($10,000,000) or, if different from such amount, such amount of evolving
Advances as may be due and owing under the Loan Agreement, payable in
accordance with the provisions of the Loan Agreement and subject to
acceleration upon the occurrence and during the continuation of an Event of
Default under the Loan Agreement or earlier termination of the Loan Agreement
pursuant to the terms thereof; and
(ii) interest on the principal amount of this Note from time
to time outstanding, payable at the Revolving Interest Rate in accordance with
the provisions of the Loan Agreement. Upon and after the declaration of an
Event of Default, and during the continuation thereof, interest shall be
payable at the Default Rate. In no event, however, shall interest exceed the
maximum interest rate permitted by law.
This Note is the Revolving Credit Note referred to in the
Loan Agreement and is secured, inter alia, by the Liens granted pursuant to
the Loan Agreement and the Other Documents, is entitled to the benefits of the
Loan Agreement and the Other Documents and is subject to all of the
agreements, terms and conditions therein contained.
<PAGE>
This Note may be voluntarily prepaid, in whole, on the terms
and conditions set forth in the Loan Agreement.
If an Event of Default under Section 10.7 of the Loan
Agreement shall occur, then this Note shall immediately become due and
payable, without notice, together with reasonable attorneys' fees if the
collection hereof is placed in the hands of an attorney to obtain or enforce
payment hereof. If any other Event of Default shall occur under the Loan
Agreement or any of the Other Documents, which is not cured within any
applicable grace period, then this Note may, as provided in the Loan
Agreement, be declared to be immediately due and payable, without notice,
together with reasonable attorneys' fees, if the collection hereof is placed
in the hands of an attorney to obtain or enforce payment hereof.
This Note is being delivered in the State of New York, and
shall be construed and enforced in accordance with the laws of such State.
Borrowers expressly waive any presentment, demand, protest,
notice of protest, or notice of any kind except as expressly provided in the
Loan Agreement.
BATTERIES BATTERIES, INC.
TAUBER ELECTRONICS, INC.
ADVANCED FOX ANTENNA, INC.
SPECIFIC ENERGY CORPORATION
BATTERY NETWORK, INC.
W.S. BATTERY & SALES COMPANY, INC.
BATTERY ACQUISITION CORP.
By: /s/ Ronald E. Badke
----------------------------------
Name: Ronald E. Badke
--------------------------------
V/P COO and CEO of each of the
foregoing corporations
-2-
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the 6th day of January, 1997, before me personally came
Ronald E. Badke, to me known, who being by me duly sworn, did depose
and say that he is the VP-CFO-COO of each of Batteries Batteries,
Inc., Tauber Electronics, Inc., Advanced Fox Antenna, Inc., Specific Energy
Corporation, Battery Network, Inc., W.S. Battery & Sales Company, Inc. and
Battery Acquisition Corp., the corporations described in and which executed
the foregoing instrument; and that he signed his name thereto by order of the
each of the respective boards of directors of said corporations.
/s/ Lisa M. Vaccaro
-------------------------------
Notary Public
LISA M. VACCARO
NOTARY PUBLIC, STATE OF NEW YORK
NO 02VA5049635
QUALIFIED IN NASSAU COUNTY
COMMISSION EXPIRES 9/18/97
-3-
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of January 6, 1997, made by
BATTERY ACQUISITION CORP., a New York corporation ("Pledgor") to IBJ SCHRODER
BANK & TRUST COMPANY, as Agent (as hereinafter defined) (the "Pledgee").
BACKGROUND TO THE AGREEMENT
This Pledge Agreement is executed and delivered under and
pursuant to the terms of that certain Revolving Credit, Term Loan and Security
Agreement dated as of January 6, 1997 (as amended, supplemented or modified
from time to time, the "Loan Agreement") by and among Pledgor, Tauber
Electronics, Inc. ("TEI"), Advanced Fox Antenna, Inc. ("AFA"), Specific Energy
Corporation ("SEC"), Battery Network, Inc. ("BN"), W.S. Battery & Sales
Company, Inc. ("WSBS") and Batteries Batteries, Inc. ("BATS" and together with
Pledgor, TEI, AFA, SEC, BN and WSBS, each a "Borrower" and, collectively, the
"Borrowers"), IBJ Schroder Bank & Trust Company ("IBJS"), each of the other
financial institutions named in or which hereafter become a party to the Loan
Agreement (IBJS and such other financial institutions, the "Lenders") and IBJS
as agent for the Lenders (IBJS in such capacity, the "Agent"), pursuant to
which Pledgee agreed, subject to the terms and conditions contained therein,
to provide certain financial accommodations to Borrowers.
In order to induce Pledgee to provide the financial
accommodations described in the Loan Agreement, Pledgor has agreed to pledge
and grant a security interest to Pledgee in the Pledged Collateral (as
hereinafter defined).
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged, Pledgor hereby agrees with Pledgee as follows:
SECTION 1. Defined Terms
Unless otherwise defined herein, terms defined in the Loan
Agreement shall have such defined meanings when used herein.
SECTION 2. Pledge
Pledgor hereby pledges, assigns, hypothecates, transfers and
grants a security interest to Pledgee for the ratable benefit of the Lenders
in all of the following (the "Pledged Collateral"):
(a) the shares of stock set forth on Schedule A annexed
hereto and expressly made a part hereof (the "Pledged Stock"), the
certificates representing the Pledged Stock and all dividends, cash,
instruments and other property or proceeds from time to time
<PAGE>
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Stock;
(b) all additional shares of stock of any issuer of the
Pledged Stock (the "Issuer") from time to time acquired by the Pledgor in any
manner, including, without limitation, stock dividends or a distribution in
connection with any increase or reduction of capital, reclassification,
merger, consolidation, sale of assets, combination of shares, stock split,
spin-off or split-off (which shares shall be deemed to be part of the Pledged
Collateral), and the certificates representing such additional shares, and all
dividends, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares; and
(c) all options and rights, whether as an addition to, in
substitution of or in exchange for any shares of the Pledged Stock and all
dividends, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all such options and rights.
SECTION 3. Indebtedness Secured
This pledge is made to secure and the Pledged Collateral is
security for the payment of (a) all the Obligations and (b) any and all other
indebtedness, obligations and liabilities of Pledgor and/or Borrowers to
Pledgee whether now existing or hereafter arising, direct or indirect,
liquidated or unliquidated, absolute or contingent, due or not due and whether
under, pursuant to or evidenced by a note, agreement, guaranty, other
instrument or otherwise ((a) and (b) collectively, the "Indebtedness").
SECTION 4. Delivery of Pledged Collateral
All certificates representing or evidencing the Pledged
Stock shall be delivered to and held by or on behalf of Pledgee pursuant
hereto and shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Pledgee.
Pledgor hereby authorizes the Issuer upon demand by Pledgee to deliver any
certificates, instruments or other distributions issued in connection with the
Pledged Collateral directly to Pledgee, in each case to be held by Pledgee,
subject to the terms hereof. Pledgee shall have the right, at any time in its
discretion and without notice to the Pledgor, to transfer to or to register in
the name of Pledgee or any of its nominees any or all of the Pledged Stock. In
addition, Pledgee shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Stock for certificates or
instruments of smaller or larger denominations.
SECTION 5. Representations and Warranties
Pledgor represents and warrants to Pledgee that:
(a) Pledgor has the requisite power and authority to enter
into this Agreement, to pledge the Pledged Collateral for the purposes
described herein and to carry out the transactions contemplated by this
Agreement;
<PAGE>
(b) The execution, delivery and performance by Pledgor of
this Agreement has been duly and properly authorized and does not and will not
result in any violation of any agreement, indenture or other instrument,
license, judgment, decree, order, law, statute, ordinance or other
governmental rule or regulation applicable to Pledgor;
(c) This Agreement constitutes a legal, valid and
binding obligation of Pledgor enforceable in accordance with its terms;
(d) Pledgor is the direct and beneficial owner of each
share of the Pledged Stock;
(e) All of the shares of the Pledged Stock have been
duly authorized, validly issued and are fully paid and nonassessable;
(f) Upon delivery of the Pledged Stock to Pledgee or an
agent for Pledgee, this Agreement creates and grants a valid first lien on and
perfected security interest in the Pledged Collateral and the proceeds
thereof, subject to no prior Lien, or to any agreement purporting to grant to
any third party a Lien upon the property or assets of Pledgor which would
include the Pledged Collateral;
(g) There are no restrictions on transfer of the Pledged
Stock contained in the Certificate of Incorporation or by-laws of the Issuer
or otherwise which have not otherwise been enforceably and legally waived by
the necessary parties;
(h) None of the Pledged Stock has been issued or transferred
in violation of the securities registration, securities disclosure or similar
laws of any jurisdiction to which such issuance or transfer may be subject;
(i) No consent, approval, authorization or other order of
any Person and no consent, authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required by the Pledgor either (i) for the pledge of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or performance of
this Agreement or (ii) for the exercise by the Pledgee of the voting or other
rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement, except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally;
(j) No notification of the pledge evidenced hereby to
any Person is required;
(k) As of the date hereof, there are no existing options,
warrants, calls or commitments of any such character whatsoever relating to
any Pledged Stock and no indebtedness or other security convertible into any
Pledged Stock; and
(l) The Pledged Stock constitutes one hundred percent (100%)
of the issued and outstanding shares of capital stock of the Issuers thereof
set forth on Schedule A annexed hereto.
<PAGE>
The representations and warranties set forth in this Section
5 (other than those contained in Section (k)) shall survive the execution and
delivery of this Agreement.
SECTION 6. Covenants
Pledgor covenants that, until the Indebtedness shall be
satisfied in full and the Loan Agreement is irrevocably terminated:
(a) Pledgor will not sell, assign, transfer, convey, or
otherwise dispose of its rights in or to the Pledged Collateral or any
interest therein; nor will Pledgor create, incur or permit to exist any Lien
whatsoever with respect to any of the Pledged Collateral or the proceeds
thereof other than that created hereby;
(b) Pledgor will, at its expense, defend Pledgee's
right, title and security interest in and to the Pledged Collateral against
the claims of any Person;
(c) Pledgor shall at any time, and from time to time, upon
the written request of Pledgee, execute and deliver such further documents and
do such further acts and things as Pledgee may reasonably request in order to
effect the purposes of this Agreement including, but without limitation,
delivering to Pledgee upon the occurrence of an Event of Default irrevocable
proxies in respect of the Pledged Collateral in form satisfactory to Pledgee.
Until receipt of irrevocable proxies by Pledgee, this Agreement shall
constitute Pledgor's proxy to Pledgee or its nominee to vote all shares of
Pledged Collateral then registered in Pledgor's name;
(d) Pledgor will not consent to or approve the issuance of
(i) any additional shares of any class of capital stock of the Issuer; (ii)
any securities convertible either voluntarily by the holder thereof or
automatically upon the occurrence or nonoccurrence of any event or condition
into, or any securities exchangeable for, any such shares; or (iii) any
warrants, options, contracts or other commitments entitling any person to
purchase or otherwise acquire any such shares;
(e) Pledgor will not create, incur, assume or suffer to
exist any Lien upon any property or assets, whether now owned or hereafter
acquired, except for liens incidental to the conduct of Pledgor's business or
the ownership of its assets or properties not incurred in connection with the
borrowing of money or the acquisition of any asset, and which in the aggregate
do not materially detract from Pledgor's operations, property or financial
condition; and
(f) Pledgor will not convey, sell, lease, transfer or
otherwise dispose of in one or a series of related transactions, all or any
substantial part of its property, business or assets.
SECTION 7. Voting Rights and Dividends
In addition to Pledgee's rights and remedies set forth in
Section 9 hereof, in case an Event of Default shall have occurred and has been
declared by Pledgee, Pledgee shall (i) vote the Pledged Collateral (ii) be
entitled to give consents, waivers and ratifications in
<PAGE>
respect of the Pledged Collateral (Pledgor hereby irrevocably constituting and
appointing Pledgee, with full power of substitution, the proxy and
attorney-in-fact of Pledgor for such purposes) and (iii) be entitled to
collect and receive for its own use cash dividends paid on the Pledged
Collateral. Pledgor shall not be permitted to exercise or refrain from
exercising any voting rights or other powers if, in the reasonable judgment of
Pledgee, such action would have a material adverse effect on the value of the
Pledged Collateral or any part thereof; and, provided, further, that Pledgor
shall give at least five (5) days' written notice of the manner in which
Pledgor intends to exercise, or the reasons for refraining from exercising,
any voting rights or other powers other than with respect to any election of
directors and voting with respect to any incidental matters. All dividends and
all other distributions in respect of any of the Pledged Collateral, whenever
paid or made, shall be delivered to Pledgee to hold as Pledged Collateral and
shall, if received by the Pledgor, be received in trust for the benefit of
Pledgee, be segregated from the other property or funds of the Pledgor, and be
forthwith delivered to Pledgee as Pledged Collateral in the same form as so
received (with any necessary indorsement).
SECTION 8. Event of Default
An Event of Default shall be deemed to have occurred and may
be declared by Pledgee upon the happening of any of the following events:
(a) An Event of Default shall occur under the Loan
Agreement and/or Pledgor or any Borrower shall default in the payment of any
Obligation;
(b) Pledgor shall default in the performance of any of
its obligations under any agreement between Pledgor and Pledgee, including,
without limitation, this Agreement;
(c) Any representation, warranty, statement or covenant made
or furnished to Pledgee by or on behalf of Pledgor in this Agreement proves to
have been false in any material respect when made or furnished or is breached,
violated or not complied with; or
(d) Pledgor and/or any Borrower (i) apply for, consent to,
or suffer to exist the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or other fiduciary of itself or of
all or a substantial part of its property, (ii) make a general assignment for
the benefit of creditors, (iii) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing.
SECTION 9. Remedies
In case an Event of Default shall have occurred and be
declared by Pledgee, Pledgee may:
(a) Transfer any or all of the Pledged Collateral into
its name, or into the name of its nominee or nominees;
<PAGE>
(b) Exercise all corporate rights with respect to the
Pledged Collateral including, without limitation, all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining
to any shares of the Pledged Collateral as if it were the absolute owner
thereof, including, but without limitation, the right to exchange, at its
discretion, any or all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other readjustment of the
Issuer thereof, or upon the exercise by the Issuer of any right, privilege or
option pertaining to any of the Pledged Collateral, and, in connection
therewith, to deposit and deliver any and all of the Pledged Collateral with
any committee, depository, transfer agent, registrar or other designated agent
upon such terms and conditions as it may determine, all without liability
except to account for property actually received by it;
(c) Subject to any requirement of applicable law, sell,
assign and deliver the whole or, from time to time, any part of the Pledged
Collateral at the time held by Pledgee, at any private sale or at public
auction, with or without demand, advertisement or notice of the time or place
of sale or adjournment thereof or otherwise (all of which are hereby waived,
except such notice as is required by applicable law and cannot be waived), for
cash or credit or for other property for immediate or future delivery, and for
such price or prices and on such terms as Pledgee in its sole discretion may
determine, or as may be required by applicable law.
Pledgor hereby waives and releases any and all right or
equity of redemption, whether before or after sale hereunder. At any such
sale, unless prohibited by applicable law, Pledgee may bid for and purchase
the whole or any part of the Pledged Collateral so sold free from any such
right or equity of redemption. All moneys received by Pledgee, hereunder
whether upon sale of the Pledged Collateral or any part thereof or otherwise
shall be held by Pledgee and applied by it as provided in Section 12 hereof.
No failure or delay on the part of Pledgee in exercising any rights hereunder
shall operate as a waiver of any such rights nor shall any single or partial
exercise of any such rights preclude any other or future exercise thereof or
the exercise of any other rights hereunder. Pledgee shall have no duty as to
the collection or protection of the Pledged Collateral or any income thereon
nor any duty as to preservation of any rights pertaining thereto, except to
apply the funds in accordance with the requirements of Section 12 hereof.
Pledgee may exercise its rights with respect to property held hereunder
without resort to other security for or sources of reimbursement for the
Indebtedness. In addition to the foregoing, Pledgee shall have all of the
rights, remedies and privileges of a secured party under the Uniform
Commercial Code of New York regardless of the jurisdiction in which
enforcement hereof is sought.
SECTION 10. Registration
If Pledgee shall exercise its right to sell all or any part
of the Pledged Collateral, and if, in the opinion of counsel for Pledgee, it
is necessary to have the Pledged Collateral being sold registered under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"),
Pledgor will use its best efforts to cause the Issuer to execute and deliver,
and to cause the directors and officers of the Issuer to execute and deliver,
all at Pledgor's expense, all such instruments and documents and to do or
cause to be done all such other acts and things as may be necessary to
register the Pledged Collateral being sold under the provisions of the
Securities Act. Pledgor shall cause any such registration statement to
<PAGE>
become effective and to remain effective for a period of one year from the
date of the first public offering of the Pledged Collateral being sold and to
make all amendments thereto and to related documents which, in the opinion of
Pledgee or its counsel, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Pledgor shall also
cause the Issuer to comply with the provisions of the "Blue Sky" law of any
jurisdiction which Pledgee shall designate in connection with any sale
hereunder; and to cause the Issuer to make available to its security holders,
as soon as practicable, an earnings statement (which need not be audited)
covering a period of at least twelve months but not more than eighteen months,
beginning with the first month after the effective date of any such
registration statement, which earnings statement will satisfy the provisions
of Section 11(a) of the Securities Act. Pledgor acknowledges that a breach of
any of the covenants contained in this Section may cause irreparable injury to
Pledgee that Pledgee will have no adequate remedy at law with respect to such
breach and, as a consequence, such covenants of Pledgor shall be specifically
enforceable against Pledgor.
SECTION 11. Private Sale
Notwithstanding anything contained in Section 10, Pledgor
recognizes that Pledgee may be unable to effect (or to do so only after delay
which would adversely affect the value that might be realized from the Pledged
Collateral) a public sale of all or part of the Pledged Collateral by reason
of certain prohibitions contained in the Securities Act, and may be compelled
to resort to one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor agrees that any such private sale may
be at prices and on terms less favorable to the seller than if sold at public
sales and that such private sales shall be deemed to have been made in a
commercially reasonable manner. Pledgor agrees that Pledgee has no obligation
to delay sale of any Pledged Collateral for the period of time necessary to
permit the Issuer to register the Pledged Collateral for public sale under the
Securities Act.
SECTION 12. Proceeds of Sale
The proceeds of any collection, recovery, receipt,
appropriation, realization or sale of the Pledged Collateral shall be applied
by Pledgee as follows:
(a) First, to the payment of all costs, expenses and charges
of Pledgee, as such, or the reimbursement of Pledgee for the prior payment of
such costs, expenses and charges incurred in connection with the care and
safekeeping of any of the Pledged Collateral (including, without limitation,
the expenses of any sale or other proceeding, the expenses of any taking,
reasonable attorneys' fees and expenses, court costs, any other expenses
incurred or expenditures or advances made by Pledgee in the protection,
enforcement or exercise of its rights, powers or remedies hereunder) with
interest on any such reimbursement at the rate prescribed in the Loan
Agreement as the Default Rate from the date of payment.
(b) Second, to the payment of the Indebtedness, in whole or
in part, in such order as Pledgee may elect, whether such Indebtedness is then
due or not due.
<PAGE>
(c) Third, to such Persons as required by applicable law
including, without limitation, Section 9-504(1)(c) of the Uniform Commercial
Code.
(d) Fourth, to the extent of any surplus thereafter
remaining, to Pledgor or as a court of competent jurisdiction may direct.
In the event that the proceeds of any collection, recovery,
receipt, appropriation, realization or sale are insufficient to satisfy the
Indebtedness, Pledgor shall be liable for the deficiency together with
interest thereon at the rate prescribed in the Loan Agreement as the Default
Rate plus the reasonable fees of any attorneys employed by Pledgee to collect
such deficiency.
Pledgee, in its sole and absolute discretion, with or
without notice to Pledgor, may deposit any proceeds of any collection,
recovery, receipt, appropriation or sale of the Pledged Collateral in a
non-interest bearing cash collateral deposit account to be maintained as
security for the Indebtedness.
SECTION 13. Information
Pledgor will promptly give or cause to be given written
notice to Pledgee of any notices or other documents received by it with
respect to Pledged Collateral registered in the name of Pledgor.
SECTION 14. Termination
This Agreement shall terminate and Pledgor shall be entitled
to the return, at Pledgor's expense, of such of the Pledged Collateral as has
not theretofore been sold or otherwise applied pursuant to this Agreement,
together with any moneys at any time held by Pledgee, upon payment in full of
the Indebtedness and irrevocable termination of the Loan Agreement.
SECTION 15. Concerning Pledgee
The recitals of fact herein shall be taken as statements of
Pledgor for which Pledgee assumes no responsibility. Pledgee makes no
representation to anyone as to the value of the Pledged Collateral or any part
thereof or as to the validity or adequacy of the security afforded or intended
to be afforded thereby or as to the validity of this Agreement. Pledgee shall
be protected in relying upon any notice, consent, request or other paper or
document believed by it to be genuine and correct and to have been signed by a
proper person. The permissive rights of Pledgee hereunder shall not be
construed as duties of Pledgee. Pledgee shall be under no obligation to take
any action toward the enforcement of this Agreement or rights or remedies in
respect of any of the Pledged Collateral except in the event Pledgee chooses
to exercise its rights and remedies hereunder it shall comply with its
obligations under this Agreement. Pledgee shall not be personally liable for
any action taken or omitted by it in good faith and reasonably believed by it
to be within the power or discretion conferred upon it by this Agreement.
<PAGE>
SECTION 16. Notices
Any notice or request hereunder may be given to Pledgor or
to Pledgee at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice or request hereunder shall be
given by (a) hand delivery, (b) registered or certified mail, return receipt
requested, (c) a recognized overnight delivery service, or (d) telefax to the
number set out below (or such other number as may hereafter be specified in a
notice designated as a notice of change of address) with telephone
communication to a duly authorized officer of the recipient confirming its
receipt as subsequently confirmed by registered or certified mail. Any notice
or other communication required or permitted pursuant to this Agreement shall
be deemed given (1) when personally delivered to any officer of the party to
whom it is addressed, (2) on the earlier of actual receipt thereof or three
(3) days following posting thereof by certified or registered mail, postage
prepaid, or (3) upon actual receipt thereof when sent by a recognized
overnight delivery service or (4) upon actual receipt thereof when sent by
telecopier to the number set forth below with telephone communication
confirming receipt and subsequently confirmed by registered, certified or
overnight mail to the address set forth below, in each case addressed to each
party at its address set forth below or at such other address as has been
furnished in writing by a party to the other by like notice:
(A) If to Pledgee, at: IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10104
Attention: Chris Norrito
Telephone: (212) 858-2000
Telecopier: (212) 858-2151
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to Pledgor, at: Batteries Acquisition Corp.
c/o Founders Equity, Inc.
200 Madison Avenue
New York, New York 10016
Attention: Warren H. Haber
Telephone: (212) 953-0100
Telecopier: (212) 953-0626
<PAGE>
with a copy to: Brock, Fensterstock, Silverstein,
McAuliffe & Wade, LLC
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Leo Silverstein, Esq.
Telephone: (212) 371-2008
Telecopier: (212) 371-5500
SECTION 17. Governing Law.
This Agreement and all rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of New York
applied to contracts to be performed wholly within the State of New York.
SECTION 18. Waivers.
PLEDGOR AND PLEDGEE EACH HEREBY EXPRESSLY WAIVE ANY AND ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OTHER AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE; AND PLEDGOR AND PLEDGEE EACH HEREBY AGREE AND
CONSENT THAT ANY SUCH ACTIONS OR PROCEEDINGS SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
OTHER PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
SECTION 19. Litigation.
PLEDGOR EXPRESSLY CONSENTS TO THE JURISDICTION AND VENUE OF THE
SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, AND OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR ALL PURPOSES
IN CONNECTION WITH THIS AGREEMENT. ANY JUDICIAL PROCEEDING BY PLEDGOR AGAINST
PLEDGEE INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR CLAIM IN ANY WAY
ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT SHALL BE BROUGHT
ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK OR THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. PLEDGOR
FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR PAPERS
(INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO
EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN
CONNECTION WITH ANY PROCEEDINGS
<PAGE>
HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF THE STATE OF NEW YORK OR THE
SOUTHERN DISTRICT OF NEW YORK BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, OR BY PERSONAL SERVICE PROVIDED A REASONABLE TIME FOR APPEARANCE IS
PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF
SAID COURTS. PLEDGOR WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY
ACTION INSTITUTED HEREON AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS.
SECTION 20. No Waiver; Cumulative Remedies.
No failure on the part of Pledgee to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any such right, power or
remedy by Pledgee preclude any other or further exercise thereof or the
exercise of any right, power or remedy. All remedies hereunder are cumulative
and are not exclusive of any other remedies provided by law.
SECTION 21. Severability.
In case any security interest or other right of Pledgee shall be
held to be invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other security interest or other right,
privilege or power granted under this Agreement.
SECTION 22. Counterparts.
This Agreement may be executed in one or more counterparts, each
of which may be executed by one or more of the parties hereto, but all of
which when taken together shall constitute but one agreement binding on all
the parties hereto.
SECTION 23. Miscellaneous
Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing,
signed by Pledgee and Pledgor. The provisions of this Agreement shall be
binding upon the successors and assigns of Pledgor. The term "Pledgee", as
used herein, shall include any successor or assign of Pledgee at the time
entitled to the pledged interest in the Pledged Collateral. The headings in
this Agreement are for purposes of reference only and shall not limit or
define the meaning hereof.
SECTION 24. Captions
The captions at various places in this Agreement are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Agreement.
<PAGE>
SECTION 25. Recapture
Anything in this Agreement to the contrary notwithstanding, if
Pledgee receives any payment or payments on account of the Indebtedness, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver, or any other party under the United States Bankruptcy Code,
as amended, or any other federal or state bankruptcy, reorganization,
moratorium or insolvency law relating to or affecting the enforcement of
creditors' rights generally, common law or equitable doctrine, then to the
extent of any sum not finally retained by Pledgee, Pledgor's obligations to
Pledgee shall be reinstated and this Agreement shall remain in full force and
effect (or be reinstated) until payment shall have been made to Pledgee, which
payment shall be due on demand.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed as of the 6th day of January, 1997.
BATTERY ACQUISITION CORP.
By: /s/ Ronald Badke
___________________________
Its: Vice President, CFO COO
__________________________
IBJ SCHRODER BANK & TRUST
COMPANY, AS AGENT
By: David Cunn
___________________________
Its: Vice President
__________________________
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the 6th day of January, 1997, before me personally came
Ronald Badke, to me known, who being by me duly sworn, did depose and say that
he is a VP-CFO-COO of Batteries Batteries, Inc., the corporation described in
and which executed the above instrument; and that he signed his name thereto by
like order of the board of directors of said corporation.
/s/ Lisa M. Vaccaro
--------------------------------
Notary Public
Lisa M. Vaccaro
Notary Public, State of New York
No. 02VA5049635
Qualified in Nassau County
Commission Expires 9/18/97
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the 6th day of January, 1997, before me personally came
David Cunn, to me known, who being by me duly sworn, did depose and say that he
is a VP of IBJ Schroder Bank & Trust Company, the corporation described in and
which executed the above instrument; and that he signed his name thereto by
like order of the board of directors of said corporation.
/s/ Lisa M. Vaccaro
--------------------------------
Notary Public
Lisa M. Vaccaro
Notary Public, State of New York
No. 02VA5049635
Qualified in Nassau County
Commission Expires 9/18/97
<PAGE>
SCHEDULE A
TO PLEDGE AGREEMENT DATED AS OF JANUARY 6, 1997 BETWEEN BATTERY
ACQUISITION CORP., AND IBJ SCHRODER BANK & TRUST COMPANY, AS AGENT.
PLEDGED STOCK
Class of Stock Certificate Par Number of
Issuer Stock Number Value Shares
Specific Energy Common 13 $1.00 150
Corporation
<PAGE>
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of January 6, 1997, made by
BATTERIES BATTERIES, INC., a Delaware corporation ("Pledgor") to IBJ SCHRODER
BANK & TRUST COMPANY, as Agent (as hereinafter defined) (the "Pledgee").
BACKGROUND TO THE AGREEMENT
This Pledge Agreement is executed and delivered under and
pursuant to the terms of that certain Revolving Credit, Term Loan and Security
Agreement dated as of January 6, 1997 (as amended, supplemented or modified
from time to time, the "Loan Agreement") by and among Pledgor, Tauber
Electronics, Inc. ("TEI"), Advanced Fox Antenna, Inc. ("AFA"), Specific Energy
Corporation ("SEC"), Battery Network, Inc. ("BN"), W.S. Battery & Sales
Company, Inc. ("WSBS") and Battery Acquisition Corp. ("BAC" and together with
Pledgor, TEI, AFA, SEC, BN and WSBS, each a "Borrower" and, collectively, the
"Borrowers"), IBJ Schroder Bank & Trust Company ("IBJS"), each of the other
financial institutions named in or which hereafter become a party to the Loan
Agreement (IBJS and such other financial institutions, the "Lenders") and IBJS
as agent for the Lenders (IBJS in such capacity, the "Agent"), pursuant to
which Pledgee agreed, subject to the terms and conditions contained therein,
to provide certain financial accommodations to Borrowers.
In order to induce Pledgee to provide the financial
accommodations described in the Loan Agreement, Pledgor has agreed to pledge
and grant a security interest to Pledgee in the Pledged Collateral (as
hereinafter defined).
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged, Pledgor hereby agrees with Pledgee as follows:
SECTION 1. Defined Terms
Unless otherwise defined herein, terms defined in the Loan
Agreement shall have such defined meanings when used herein.
SECTION 2. Pledge
Pledgor hereby pledges, assigns, hypothecates, transfers and
grants a security interest to Pledgee for the ratable benefit of the Lenders
in all of the following (the "Pledged Collateral"):
(a) the shares of stock set forth on Schedule A annexed
hereto and expressly made a part hereof (the "Pledged Stock"), the
certificates representing the Pledged Stock and all dividends, cash,
instruments and other property or proceeds from time to time
<PAGE>
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Stock;
(b) all additional shares of stock of any issuer of the
Pledged Stock (the "Issuer") from time to time acquired by the Pledgor in any
manner, including, without limitation, stock dividends or a distribution in
connection with any increase or reduction of capital, reclassification,
merger, consolidation, sale of assets, combination of shares, stock split,
spin-off or split-off (which shares shall be deemed to be part of the Pledged
Collateral), and the certificates representing such additional shares, and all
dividends, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares; and
(c) all options and rights, whether as an addition to, in
substitution of or in exchange for any shares of the Pledged Stock and all
dividends, cash, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all such options and rights.
SECTION 3. Indebtedness Secured
This pledge is made to secure and the Pledged Collateral is
security for the payment of (a) all the Obligations and (b) any and all other
indebtedness, obligations and liabilities of Pledgor and/or Borrowers to
Pledgee whether now existing or hereafter arising, direct or indirect,
liquidated or unliquidated, absolute or contingent, due or not due and whether
under, pursuant to or evidenced by a note, agreement, guaranty, other
instrument or otherwise ((a) and (b) collectively, the "Indebtedness").
SECTION 4. Delivery of Pledged Collateral
All certificates representing or evidencing the Pledged
Stock shall be delivered to and held by or on behalf of Pledgee pursuant
hereto and shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Pledgee.
Pledgor hereby authorizes the Issuer upon demand by Pledgee to deliver any
certificates, instruments or other distributions issued in connection with the
Pledged Collateral directly to Pledgee, in each case to be held by Pledgee,
subject to the terms hereof. Pledgee shall have the right, at any time in its
discretion and without notice to the Pledgor, to transfer to or to register in
the name of Pledgee or any of its nominees any or all of the Pledged Stock. In
addition, Pledgee shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Stock for certificates or
instruments of smaller or larger denominations.
SECTION 5. Representations and Warranties
Pledgor represents and warrants to Pledgee that:
(a) Pledgor has the requisite power and authority to enter
into this Agreement, to pledge the Pledged Collateral for the purposes
described herein and to carry out the transactions contemplated by this
Agreement;
<PAGE>
(b) The execution, delivery and performance by Pledgor of
this Agreement has been duly and properly authorized and does not and will not
result in any violation of any agreement, indenture or other instrument,
license, judgment, decree, order, law, statute, ordinance or other
governmental rule or regulation applicable to Pledgor;
(c) This Agreement constitutes a legal, valid and
binding obligation of Pledgor enforceable in accordance with its terms;
(d) Pledgor is the direct and beneficial owner of each
share of the Pledged Stock;
(e) All of the shares of the Pledged Stock have been
duly authorized, validly issued and are fully paid and nonassessable;
(f) Upon delivery of the Pledged Stock to Pledgee or an
agent for Pledgee, this Agreement creates and grants a valid first lien on and
perfected security interest in the Pledged Collateral and the proceeds
thereof, subject to no prior Lien, or to any agreement purporting to grant to
any third party a Lien upon the property or assets of Pledgor which would
include the Pledged Collateral;
(g) There are no restrictions on transfer of the Pledged
Stock contained in the Certificate of Incorporation or by-laws of the Issuer
or otherwise which have not otherwise been enforceably and legally waived by
the necessary parties;
(h) None of the Pledged Stock has been issued or transferred
in violation of the securities registration, securities disclosure or similar
laws of any jurisdiction to which such issuance or transfer may be subject;
(i) No consent, approval, authorization or other order of
any Person and no consent, authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required by the Pledgor either (i) for the pledge of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or performance of
this Agreement or (ii) for the exercise by the Pledgee of the voting or other
rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement, except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally;
(j) No notification of the pledge evidenced hereby to
any Person is required;
(k) As of the date hereof, there are no existing options,
warrants, calls or commitments of any such character whatsoever relating to
any Pledged Stock and no indebtedness or other security convertible into any
Pledged Stock; and
(l) The Pledged Stock constitutes one hundred percent (100%)
of the issued and outstanding shares of capital stock of the Issuers thereof
set forth on Schedule A annexed hereto.
<PAGE>
The representations and warranties set forth in this Section
5 (other than those contained in Section (k)) shall survive the execution and
delivery of this Agreement.
SECTION 6. Covenants
Pledgor covenants that, until the Indebtedness shall be
satisfied in full and the Loan Agreement is irrevocably terminated:
(a) Pledgor will not sell, assign, transfer, convey, or
otherwise dispose of its rights in or to the Pledged Collateral or any
interest therein; nor will Pledgor create, incur or permit to exist any Lien
whatsoever with respect to any of the Pledged Collateral or the proceeds
thereof other than that created hereby;
(b) Pledgor will, at its expense, defend Pledgee's
right, title and security interest in and to the Pledged Collateral against
the claims of any Person;
(c) Pledgor shall at any time, and from time to time, upon
the written request of Pledgee, execute and deliver such further documents and
do such further acts and things as Pledgee may reasonably request in order to
effect the purposes of this Agreement including, but without limitation,
delivering to Pledgee upon the occurrence of an Event of Default irrevocable
proxies in respect of the Pledged Collateral in form satisfactory to Pledgee.
Until receipt of irrevocable proxies by Pledgee, this Agreement shall
constitute Pledgor's proxy to Pledgee or its nominee to vote all shares of
Pledged Collateral then registered in Pledgor's name;
(d) Pledgor will not consent to or approve the issuance of
(i) any additional shares of any class of capital stock of the Issuer; (ii)
any securities convertible either voluntarily by the holder thereof or
automatically upon the occurrence or nonoccurrence of any event or condition
into, or any securities exchangeable for, any such shares; or (iii) any
warrants, options, contracts or other commitments entitling any person to
purchase or otherwise acquire any such shares;
(e) Pledgor will not create, incur, assume or suffer to
exist any Lien upon any property or assets, whether now owned or hereafter
acquired, except for liens incidental to the conduct of Pledgor's business or
the ownership of its assets or properties not incurred in connection with the
borrowing of money or the acquisition of any asset, and which in the aggregate
do not materially detract from Pledgor's operations, property or financial
condition; and
(f) Pledgor will not convey, sell, lease, transfer or
otherwise dispose of in one or a series of related transactions, all or any
substantial part of its property, business or assets.
SECTION 7. Voting Rights and Dividends
In addition to Pledgee's rights and remedies set forth in
Section 9 hereof, in case an Event of Default shall have occurred and has been
declared by Pledgee, Pledgee shall (i) vote the Pledged Collateral (ii) be
entitled to give consents, waivers and ratifications in
<PAGE>
respect of the Pledged Collateral (Pledgor hereby irrevocably constituting and
appointing Pledgee, with full power of substitution, the proxy and
attorney-in-fact of Pledgor for such purposes) and (iii) be entitled to
collect and receive for its own use cash dividends paid on the Pledged
Collateral. Pledgor shall not be permitted to exercise or refrain from
exercising any voting rights or other powers if, in the reasonable judgment of
Pledgee, such action would have a material adverse effect on the value of the
Pledged Collateral or any part thereof; and, provided, further, that Pledgor
shall give at least five (5) days' written notice of the manner in which
Pledgor intends to exercise, or the reasons for refraining from exercising,
any voting rights or other powers other than with respect to any election of
directors and voting with respect to any incidental matters. All dividends and
all other distributions in respect of any of the Pledged Collateral, whenever
paid or made, shall be delivered to Pledgee to hold as Pledged Collateral and
shall, if received by the Pledgor, be received in trust for the benefit of
Pledgee, be segregated from the other property or funds of the Pledgor, and be
forthwith delivered to Pledgee as Pledged Collateral in the same form as so
received (with any necessary indorsement).
SECTION 8. Event of Default
An Event of Default shall be deemed to have occurred and may
be declared by Pledgee upon the happening of any of the following events:
(a) An Event of Default shall occur under the Loan
Agreement and/or Pledgor or any Borrower shall default in the payment of any
Obligation;
(b) Pledgor shall default in the performance of any of
its obligations under any agreement between Pledgor and Pledgee, including,
without limitation, this Agreement;
(c) Any representation, warranty, statement or covenant made
or furnished to Pledgee by or on behalf of Pledgor in this Agreement proves to
have been false in any material respect when made or furnished or is breached,
violated or not complied with; or
(d) Pledgor and/or any Borrower (i) apply for, consent to,
or suffer to exist the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or other fiduciary of itself or of
all or a substantial part of its property, (ii) make a general assignment for
the benefit of creditors, (iii) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing.
SECTION 9. Remedies
In case an Event of Default shall have occurred and be
declared by Pledgee, Pledgee may:
(a) Transfer any or all of the Pledged Collateral into
its name, or into the name of its nominee or nominees;
<PAGE>
(b) Exercise all corporate rights with respect to the
Pledged Collateral including, without limitation, all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining
to any shares of the Pledged Collateral as if it were the absolute owner
thereof, including, but without limitation, the right to exchange, at its
discretion, any or all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other readjustment of the
Issuer thereof, or upon the exercise by the Issuer of any right, privilege or
option pertaining to any of the Pledged Collateral, and, in connection
therewith, to deposit and deliver any and all of the Pledged Collateral with
any committee, depository, transfer agent, registrar or other designated agent
upon such terms and conditions as it may determine, all without liability
except to account for property actually received by it;
(c) Subject to any requirement of applicable law, sell,
assign and deliver the whole or, from time to time, any part of the Pledged
Collateral at the time held by Pledgee, at any private sale or at public
auction, with or without demand, advertisement or notice of the time or place
of sale or adjournment thereof or otherwise (all of which are hereby waived,
except such notice as is required by applicable law and cannot be waived), for
cash or credit or for other property for immediate or future delivery, and for
such price or prices and on such terms as Pledgee in its sole discretion may
determine, or as may be required by applicable law.
Pledgor hereby waives and releases any and all right or
equity of redemption, whether before or after sale hereunder. At any such
sale, unless prohibited by applicable law, Pledgee may bid for and purchase
the whole or any part of the Pledged Collateral so sold free from any such
right or equity of redemption. All moneys received by Pledgee, hereunder
whether upon sale of the Pledged Collateral or any part thereof or otherwise
shall be held by Pledgee and applied by it as provided in Section 12 hereof.
No failure or delay on the part of Pledgee in exercising any rights hereunder
shall operate as a waiver of any such rights nor shall any single or partial
exercise of any such rights preclude any other or future exercise thereof or
the exercise of any other rights hereunder. Pledgee shall have no duty as to
the collection or protection of the Pledged Collateral or any income thereon
nor any duty as to preservation of any rights pertaining thereto, except to
apply the funds in accordance with the requirements of Section 12 hereof.
Pledgee may exercise its rights with respect to property held hereunder
without resort to other security for or sources of reimbursement for the
Indebtedness. In addition to the foregoing, Pledgee shall have all of the
rights, remedies and privileges of a secured party under the Uniform
Commercial Code of New York regardless of the jurisdiction in which
enforcement hereof is sought.
SECTION 10. Registration
If Pledgee shall exercise its right to sell all or any part
of the Pledged Collateral, and if, in the opinion of counsel for Pledgee, it
is necessary to have the Pledged Collateral being sold registered under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"),
Pledgor will use its best efforts to cause the Issuer to execute and deliver,
and to cause the directors and officers of the Issuer to execute and deliver,
all at Pledgor's expense, all such instruments and documents and to do or
cause to be done all such other acts and things as may be necessary to
register the Pledged Collateral being sold under the provisions of the
Securities Act. Pledgor shall cause any such registration statement to
<PAGE>
become effective and to remain effective for a period of one year from the
date of the first public offering of the Pledged Collateral being sold and to
make all amendments thereto and to related documents which, in the opinion of
Pledgee or its counsel, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Pledgor shall also
cause the Issuer to comply with the provisions of the "Blue Sky" law of any
jurisdiction which Pledgee shall designate in connection with any sale
hereunder; and to cause the Issuer to make available to its security holders,
as soon as practicable, an earnings statement (which need not be audited)
covering a period of at least twelve months but not more than eighteen months,
beginning with the first month after the effective date of any such
registration statement, which earnings statement will satisfy the provisions
of Section 11(a) of the Securities Act. Pledgor acknowledges that a breach of
any of the covenants contained in this Section may cause irreparable injury to
Pledgee that Pledgee will have no adequate remedy at law with respect to such
breach and, as a consequence, such covenants of Pledgor shall be specifically
enforceable against Pledgor.
SECTION 11. Private Sale
Notwithstanding anything contained in Section 10, Pledgor
recognizes that Pledgee may be unable to effect (or to do so only after delay
which would adversely affect the value that might be realized from the Pledged
Collateral) a public sale of all or part of the Pledged Collateral by reason
of certain prohibitions contained in the Securities Act, and may be compelled
to resort to one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. Pledgor agrees that any such private sale may
be at prices and on terms less favorable to the seller than if sold at public
sales and that such private sales shall be deemed to have been made in a
commercially reasonable manner. Pledgor agrees that Pledgee has no obligation
to delay sale of any Pledged Collateral for the period of time necessary to
permit the Issuer to register the Pledged Collateral for public sale under the
Securities Act.
SECTION 12. Proceeds of Sale
The proceeds of any collection, recovery, receipt,
appropriation, realization or sale of the Pledged Collateral shall be applied
by Pledgee as follows:
(a) First, to the payment of all costs, expenses and charges
of Pledgee, as such, or the reimbursement of Pledgee for the prior payment of
such costs, expenses and charges incurred in connection with the care and
safekeeping of any of the Pledged Collateral (including, without limitation,
the expenses of any sale or other proceeding, the expenses of any taking,
reasonable attorneys' fees and expenses, court costs, any other expenses
incurred or expenditures or advances made by Pledgee in the protection,
enforcement or exercise of its rights, powers or remedies hereunder) with
interest on any such reimbursement at the rate prescribed in the Loan
Agreement as the Default Rate from the date of payment.
(b) Second, to the payment of the Indebtedness, in whole or
in part, in such order as Pledgee may elect, whether such Indebtedness is then
due or not due.
<PAGE>
(c) Third, to such Persons as required by applicable law
including, without limitation, Section 9-504(1)(c) of the Uniform Commercial
Code.
(d) Fourth, to the extent of any surplus thereafter
remaining, to Pledgor or as a court of competent jurisdiction may direct.
In the event that the proceeds of any collection, recovery,
receipt, appropriation, realization or sale are insufficient to satisfy the
Indebtedness, Pledgor shall be liable for the deficiency together with
interest thereon at the rate prescribed in the Loan Agreement as the Default
Rate plus the reasonable fees of any attorneys employed by Pledgee to collect
such deficiency.
Pledgee, in its sole and absolute discretion, with or
without notice to Pledgor, may deposit any proceeds of any collection,
recovery, receipt, appropriation or sale of the Pledged Collateral in a
non-interest bearing cash collateral deposit account to be maintained as
security for the Indebtedness.
SECTION 13. Information
Pledgor will promptly give or cause to be given written
notice to Pledgee of any notices or other documents received by it with
respect to Pledged Collateral registered in the name of Pledgor.
SECTION 14. Termination
This Agreement shall terminate and Pledgor shall be entitled
to the return, at Pledgor's expense, of such of the Pledged Collateral as has
not theretofore been sold or otherwise applied pursuant to this Agreement,
together with any moneys at any time held by Pledgee, upon payment in full of
the Indebtedness and irrevocable termination of the Loan Agreement.
SECTION 15. Concerning Pledgee
The recitals of fact herein shall be taken as statements of
Pledgor for which Pledgee assumes no responsibility. Pledgee makes no
representation to anyone as to the value of the Pledged Collateral or any part
thereof or as to the validity or adequacy of the security afforded or intended
to be afforded thereby or as to the validity of this Agreement. Pledgee shall
be protected in relying upon any notice, consent, request or other paper or
document believed by it to be genuine and correct and to have been signed by a
proper person. The permissive rights of Pledgee hereunder shall not be
construed as duties of Pledgee. Pledgee shall be under no obligation to take
any action toward the enforcement of this Agreement or rights or remedies in
respect of any of the Pledged Collateral except in the event Pledgee chooses
to exercise its rights and remedies hereunder it shall comply with its
obligations under this Agreement. Pledgee shall not be personally liable for
any action taken or omitted by it in good faith and reasonably believed by it
to be within the power or discretion conferred upon it by this Agreement.
<PAGE>
SECTION 16. Notices
Any notice or request hereunder may be given to Pledgor or
to Pledgee at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice or request hereunder shall be
given by (a) hand delivery, (b) registered or certified mail, return receipt
requested, (c) a recognized overnight delivery service, or (d) telefax to the
number set out below (or such other number as may hereafter be specified in a
notice designated as a notice of change of address) with telephone
communication to a duly authorized officer of the recipient confirming its
receipt as subsequently confirmed by registered or certified mail. Any notice
or other communication required or permitted pursuant to this Agreement shall
be deemed given (1) when personally delivered to any officer of the party to
whom it is addressed, (2) on the earlier of actual receipt thereof or three
(3) days following posting thereof by certified or registered mail, postage
prepaid, or (3) upon actual receipt thereof when sent by a recognized
overnight delivery service or (4) upon actual receipt thereof when sent by
telecopier to the number set forth below with telephone communication
confirming receipt and subsequently confirmed by registered, certified or
overnight mail to the address set forth below, in each case addressed to each
party at its address set forth below or at such other address as has been
furnished in writing by a party to the other by like notice:
(A) If to Pledgee, at: IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10104
Attention: Chris Norrito
Telephone: (212) 858-2000
Telecopier: (212) 858-2151
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to Pledgor, at: Batteries Batteries, Inc.
c/o Founders Equity, Inc.
200 Madison Avenue
New York, New York 10016
Attention: Warren H. Haber
Telephone: (212) 953-0100
Telecopier: (212) 953-0626
<PAGE>
with a copy to: Brock, Fensterstock, Silverstein,
McAuliffe & Wade, LLC
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Leo Silverstein, Esq.
Telephone: (212) 371-2008
Telecopier: (212) 371-5500
SECTION 17. Governing Law.
This Agreement and all rights and obligations hereunder shall be
governed by and construed in accordance with the laws of the State of New York
applied to contracts to be performed wholly within the State of New York.
SECTION 18. Waivers.
PLEDGOR AND PLEDGEE EACH HEREBY EXPRESSLY WAIVE ANY AND ALL
RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OTHER AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE; AND PLEDGOR AND PLEDGEE EACH HEREBY AGREE AND
CONSENT THAT ANY SUCH ACTIONS OR PROCEEDINGS SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
OTHER PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
SECTION 19. Litigation.
PLEDGOR EXPRESSLY CONSENTS TO THE JURISDICTION AND VENUE OF THE
SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, AND OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR ALL PURPOSES
IN CONNECTION WITH THIS AGREEMENT. ANY JUDICIAL PROCEEDING BY PLEDGOR AGAINST
PLEDGEE INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR CLAIM IN ANY WAY
ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT SHALL BE BROUGHT
ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK OR THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. PLEDGOR
FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR PAPERS
(INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO
EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN
CONNECTION WITH ANY PROCEEDINGS
<PAGE>
HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF THE STATE OF NEW YORK OR THE
SOUTHERN DISTRICT OF NEW YORK BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, OR BY PERSONAL SERVICE PROVIDED A REASONABLE TIME FOR APPEARANCE IS
PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF
SAID COURTS. PLEDGOR WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY
ACTION INSTITUTED HEREON AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS.
SECTION 20. No Waiver; Cumulative Remedies.
No failure on the part of Pledgee to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any such right, power or
remedy by Pledgee preclude any other or further exercise thereof or the
exercise of any right, power or remedy. All remedies hereunder are cumulative
and are not exclusive of any other remedies provided by law.
SECTION 21. Severability.
In case any security interest or other right of Pledgee shall be
held to be invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other security interest or other right,
privilege or power granted under this Agreement.
SECTION 22. Counterparts.
This Agreement may be executed in one or more counterparts, each
of which may be executed by one or more of the parties hereto, but all of
which when taken together shall constitute but one agreement binding on all
the parties hereto.
SECTION 23. Miscellaneous
Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing,
signed by Pledgee and Pledgor. The provisions of this Agreement shall be
binding upon the successors and assigns of Pledgor. The term "Pledgee", as
used herein, shall include any successor or assign of Pledgee at the time
entitled to the pledged interest in the Pledged Collateral. The headings in
this Agreement are for purposes of reference only and shall not limit or
define the meaning hereof.
SECTION 24. Captions
The captions at various places in this Agreement are intended for
convenience only and do not constitute and shall not be interpreted as part of
this Agreement.
<PAGE>
SECTION 25. Recapture
Anything in this Agreement to the contrary notwithstanding, if
Pledgee receives any payment or payments on account of the Indebtedness, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver, or any other party under the United States Bankruptcy Code,
as amended, or any other federal or state bankruptcy, reorganization,
moratorium or insolvency law relating to or affecting the enforcement of
creditors' rights generally, common law or equitable doctrine, then to the
extent of any sum not finally retained by Pledgee, Pledgor's obligations to
Pledgee shall be reinstated and this Agreement shall remain in full force and
effect (or be reinstated) until payment shall have been made to Pledgee, which
payment shall be due on demand.
IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed as of the 6th day of January, 1997.
BATTERIES BATTERIES, INC.
By: /s/ Ronald Badke
___________________________
Its: Vice President, CFO COO
__________________________
IBJ SCHRODER BANK & TRUST
COMPANY, AS AGENT
By: /s/ David Cunn
___________________________
Its: Vice President
__________________________
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the 6th day of January, 1997, before me personally came
Ronald Badke, to me known, who being by me duly sworn, did depose and say that
he is a VP-COO-CFO of Batteries Batteries, Inc., the corporation described in
and which executed the above instrument; and that he signed his name thereto
by like order of the board of directors of said corporation.
/s/ Lisa M. Vaccaro
--------------------------------
Notary Public
Lisa M. Vaccaro
Notary Public, State of New York
No. 02VA5049635
Qualified in Nassau County
Commission Expires 9/18/97
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK)
On the 6th day of January, 1997, before me personally came
David Cunn, to me known, who being by me duly sworn, did depose and say that he
is a VP of IBJ Schroder Bank & Trust Company, the corporation described in and
which executed the above instrument; and that he signed his name thereto by
like order of the board of directors of said corporation.
/s/ Lisa M. Vaccaro
--------------------------------
Notary Public
Lisa M. Vaccaro
Notary Public, State of New York
No. 02VA5049635
Qualified in Nassau County
Commission Expires 9/18/97
<PAGE>
SCHEDULE A
TO PLEDGE AGREEMENT DATED AS OF JANUARY 6, 1997 BETWEEN
BATTERIES BATTERIES, INC. AND IBJ SCHRODER BANK & TRUST COMPANY, AS
AGENT.
PLEDGED STOCK
Class of Stock Certificate Par Number of
Issuer Stock Number Value Shares
Tauber Electronics, Inc. Common 8 $1.00 7,500
Advanced Fox Antenna, Common 2 .01 100
Inc.
Battery Network, Inc. Common 1 -0- 333.33
Common 2 -0- 333.33
Common 3 -0- 333.33
Common 4 -0- 1,834
Common 5 -0- 1,827
Common 6 -0- 1,729
W.S. Battery & Sales Common 14 -0- 500
Company, Inc.
Batteries Acquisition Common 2 .01 100
Corp.
<PAGE>
FIRST AMENDMENT TO LEASE
This First Amendment to Lease dated as of this 1st day of January, 1997
by and between J.W.S. Partnership, an Illinois general partnership
(hereinafter referred to as "Lessor") and Battery Network, Inc., an Illinois
corporation (hereinafter referred to as "Lessee").
WITNESSETH
WHEREAS, Lessor and Lessee are parties to a certain Lease dated as of the
1st day of January, 1997 for the property commonly known as 4071 Albany
Street, McHenry, Illinois for a five (5) year term commencing January 1, 1997
and ending on December 31, 2001; and
WHEREAS, the parties hereto desire to amend the Lease to provide for an
option for an additional five (5) year term upon the expiration of the initial
five (5) year term of the Lease.
NOW THEREFORE, in consideration of the mutual covenants and conditions in
the Lease and as hereinafter contained, the parties agree as follows:
1. The Lease is hereby modified to add the following Sections 3102:
"3102. Lessee shall have the right, exercisable by giving
<PAGE>
written notice thereof to Lessor, at least six (6) months prior to
the expiration of the primary term of this Lease to extend the term
of this Lease for an additional term of five (5) years commencing on
January 1, 2002 and expiring on December 31, 2006, upon all of the
terms, covenants and conditions hereof except that the Minimal
Annual Rental shall be determined as hereinafter set forth in
Section 3102, provided that (i) Lessee shall not be in default
pursuant to the terms of this Lease as of the date of such exercise
and as of the commencement of such renewal term and (ii) there has
been no prior termination of this Lease."
2. The Lease is hereby modified to add the following Sections 3102:
"3102. The Minimal Annual Rental payable during the option period
shall be equal to the Minimal Annual Rental payable during the last
year of the initial term of the Lease subject to an increase
commencing with the first year of the option term in accordance with
the provisions of Sections 301(a)(ii). Each successive year of the
option term shall be subject to increase in accordance with the
provisions of said Sections 301 (a)(ii)."
3. Except as modified herein all terms and conditions of the Lease shall
remain in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this First Amendment
to Lease as of the date and year first above written.
LESSOR:
J.W.S. PARTNERSHIP
/s/ Susan Grandt
-------------------------
Susan Grandt
General Partner
LESSEE:
BATTERY NETWORK, INC.
/s/ Susan Grandt
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Susan Grandt
President
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L E A S E
THIS LEASE, effective as of this 1st day of January, 1997, between
J.W.S. PARTNERSHIP, an Illinois General Partnership (hereinafter referred to
as "Lessor,") and BATTERY NETWORK, INC., an Illinois corporation, (hereinafter
referred to as "Lessee").
W I T N E S S E T H:
PREMISES
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SECTION 101. Lessor, for and in consideration of the rents herein
reserved and of the covenants and agreements herein contained on the part of
the Lessee to be kept, observed and performed, does by these presents, demise
and lease to Lessee, and Lessee hereby hires and lets from Lessor, the real
estate commonly known as 4071 Albany Street, McHenry, Illinois 60050 and
legally described on Exhibit A attached hereto and made a part hereof,
together with all improvements now located and hereinafter located thereon.
SECTION 102. Said real estate and improvements are sometimes herein
referred to as "demised premises."
TERM
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SECTION 201. The term of this Lease shall be for a period of five (5)
years commencing on January 1, 1997, and terminating on December 31, 2001.
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RENTAL
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SECTION 301. Lessee agrees to pay as rental for the use and occupancy of
the demised premises, at the times and in the manner hereinafter provided, the
following sums of money:
(a) MINIMUM ANNUAL RENTAL: For the purposes hereof, "Minimum Annual
Rental" shall mean the amount provided in this Section 301, adjusted as
provided in this Lease.
(i) Lessee agrees to pay to Lessor without deduction or set-off
of any kind, the sum of Sixty-Three Thousand Six Hundred and 00/100
($63,600.00) Dollars per annum as Minimum Annual Rental for the leased
premises, said Minimum Annual Rental to be payable in twelve (12) equal
monthly installments of Five Thousand Three Hundred and 00/100 ($5,300.00)
Dollars, in advance, upon the first day of each and every month during the
term hereof, commencing on January 1, 1997 (the Rental Commencement) and,
subject to the terms of this Lease, ending upon the termination date of this
Lease. In the event such rental shall be determined to commence or end on a
day other than the first day of last day respectively of a month, then the
monthly installment of the Minimum Annual Rental for such partial month shall
be prorated accordingly. All past due rentals, additional rentals, and/or
other sums due to Lessor under the terms of this Lease shall bear interest
from the due date until paid by Lessee, at a rate equal to the then published
prime rate of The First National Bank of Chicago plus two percent (2%) (such
rate of interest is hereinafter referred to as the "Default Rate"); and such
interest shall be deemed to be additional rental. All rentals provided for in
this Lease (those hereinafter stipulated as well as said Minimum Annual
Rental) shall be paid or mailed to:
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J.W.S. PARTNERSHIP
3731 Pitzen Road
McHenry, Illinois 60050, Attention: Ms. Susan Grandt
or to such other payee or address as Lessor may designate in writing to
Lessee. Payments shall be deemed made only upon receipt by such payee at such
address.
(ii) The Minimum Annual Rental shall be increased on each
anniversary of the Rental Commencement Date commencing with the second
anniversary of the Rental Commencement Date by an amount equal to the percent
increase of the Consumer Price Index (All items - Chicago-Gary-Lake County,
1982-84 = 100) ("Index") as published by the United States Department of
Labor, Bureau of Labor Statistics, for the "Comparison Month" (described
below) over the Index for the calendar month ("Base Month") which is two (2)
months prior to the first (1st) anniversary of the Rental Commencement Date.
The Base Month Index shall be compared with the Index for the month which is
two (2) months prior to the applicable anniversary of the Rental Commencement
Date ("Comparison Month"). If the Index for any Comparison Month is higher
than the Base Month Index, then the Minimum Annual Rental for the lease year
following the Comparison Month shall be increased commencing on each
anniversary of the Rental Commencement Date by a percentage which shall be
calculated by dividing that number which represents the difference when
subtracting the Base Month Index from the Index for any Comparison Month by
the Base Month Index. In no event, shall the Minimum Annual Rental be less
than 100% of the Minimum Annual Rent payable during the preceding year. If
said increase is determined after the rental has been paid for the month of
the anniversary of the Rental Commencement Date or subsequent months, Lessee
shall pay to Lessor the amount of any shortage upon demand. Should said Bureau
discontinue the
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publication of the Index, or publish the same less frequently, or alter the
same in some other manner, then Lessor shall adopt a substitute Index or
substitute procedure which reasonably reflects and monitors consumer prices.
TAXES AND ASSESSMENTS
---------------------
SECTION 401: Lessee further agrees to pay as additional rent for the
demised premises, all taxes and assessments, general and special, water rates,
condominium assessments (if applicable), and all other impositions, ordinary
and extraordinary, of every kind and nature whatsoever, which may be levied,
assessed or imposed upon the demised premises or any part thereof or upon any
building or improvements at any time situated thereon, accruing or becoming
due and payable during the term of this Lease and any extension thereof
provided, however, that the general taxes levied against the demised premises
shall be prorated between Lessor and Lessee as of the date of expiration of
said term for the last year of the term hereof and any extension thereof, all
on the basis of the then last available tax bills.
SECTION 402. Nothing herein contained shall be construed to require
Lessee to pay any franchise, inheritance, estate, succession or transfer tax
of Lessor or any income or excess profits tax assessed upon or in respect of
any income of Lessor or chargeable to or required to be paid by Lessor unless
such tax shall be specifically levied against the gross income of Lessor
derived from the rent by this Lease reserved, expressly and as and for a
specific substitute for the real estate taxes, in whole or in part, upon the
demised premises or the improvements situated thereon, in which event said
rent shall be considered as the sole income of Lessor.
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SECTION 403. Upon written request, Lessee further agrees to deliver to
Lessor duplicate receipts or photostatic copies thereof showing the payment of
all said taxes, assessments and other impositions within thirty (30) days
after the due date for payment.
SECTION 404. Lessor shall, at her option, have the right at all times
during the term hereof to pay any such taxes, assessments or other charges or
impositions not paid by Lessee within thirty (30) days after the due date
thereof, and the amounts so paid, including reasonable expenses, interest and
penalties, if any, shall be so much additional rent due at the next rent day
after any such payments, with interest at The First National Bank of Chicago's
then prime rate plus two percent (2%) per annum from the date of payment
thereof.
SECTION 405. Lessee shall not be required to pay any tax, assessment, tax
lien or other imposition or charge upon or against said demised premises or
any part thereof or the improvements at any time situated thereon so long as
Lessee shall, in good faith and with due diligence, contest the same or the
validity thereof by appropriate legal proceedings which shall have the effect
of preventing the collection of the tax, assessments, tax lien or other
imposition or charge so contested, provided that, pending any such legal
proceedings Lessee shall give Lessor such reasonable security as may be
demanded by Lessor to ensure payment of the amount of the tax, assessment, tax
lien or other imposition or charge, and all interest and penalties thereon.
SECTION 406. In the event that Lessee at any time institutes suit to
recover any tax, assessment, tax lien or other imposition or charge paid by
Lessee under protest in Lessor's name, Lessee shall have the right at its own
sole expense, to institute and prosecute such suit or suits in Lessor's name,
in which event Lessee covenants and agrees to indemnify Lessor
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and save her harmless from and against all costs, charges or liabilities in
connection with any such suit. All funds recovered as a result of any such
suit shall belong to Lessee.
USE
---
SECTION 501. The demised premises may be used and occupied for assembly,
warehouse, office and related business purposes, provided, however, that if
the use thereof is other than assembly, warehouse, office and related business
purposes, then notwithstanding anything to the contrary hereinbefore or
hereinafter stated, if said use causes wear and tear to the leased premises
over and above the wear and tear the premises would have been subject to if
used for assembly, warehouse, office and related purposes, then Lessee shall
restore the premises at the end of the term or any extended term to the same
condition as the premises would have been had they been used for assembly,
warehouse, office and related purposes.
Lessee shall not use or occupy the demised premises or permit the demised
premises to be used or occupied contrary to any statute rule, order,
ordinance, requirement or regulation applicable thereto or in any manner which
would violate any certificate of occupancy affecting the same, or which cause
structural injury to the improvements or preclude the obtaining of insurance
as required under the terms of this Lease or cause the value or usefulness of
the demised premises or any part thereof to diminish or which would constitute
a public or private nuisance or waste, and Lessee agrees that it will,
promptly upon discovery of any such use, take all necessary steps to compel
the discontinuance of such use and to oust the principal occupant guilty of
such use.
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UTILITIES
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SECTION 601. Lessee agrees to pay or cause to be paid all charges for
gas, water, electricity, light, heat or power, telephone or other
communication service used, rendered or supplied upon or in connection with
the demised premises throughout the term of this Lease, (and if any of the
foregoing are not paid when due the same shall constitute additional rent
under this Lease), and to indemnify Lessor and save her harmless against any
liability or damages on such account. Lessee further shall, at its sole cost
and expense, procure any and all necessary permits, licenses or other
authorizations required for the lawful and proper installation and maintenance
upon the demised premises of wires, pipes, conduits, tubes and other equipment
and appliances for use in supplying any such service to and upon the demised
premises.
REPAIR AND MAINTENANCE OF PREMISES
----------------------------------
SECTION 701. Lessee shall be responsible for repairs to the building
systems, foundation, roof and structural members of the demised premises and
for structural repairs to the exterior walls. Lessee represents that it has
inspected the demised premises and accepts the demised premises in the
condition it is in at the commencement of this Lease and shall maintain said
demised premises in the same condition, order and repair as it is at said
time.
SECTION 702. Lessee covenants through the term of this Lease, at Lessee's
sole cost and expense, to take good care of the demised premises, the
buildings and improvements now or at any time erected thereon, including but
not limited to the equipment, fixtures, motors and machinery thereof, and the
parking areas, sidewalks, fences and vaults, if any, and to keep the same in
good order and condition (except for reasonable wear), and shall
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promptly, at Lessee's own cost and expense, make all necessary repairs,
structural and nonstructural, ordinary as well as extraordinary, foreseen as
well as unforeseen. The term "repairs" and "maintenance" shall include
replacements or renewals when necessary, and all such repairs made by Lessee
shall be equal in quality and class to the original work. At the termination
of this Lease, Lessee shall surrender the premises in the same condition as
when received, except for reasonable use and natural wear.
SECTION 703. All work done in connection with any repairs or alterations
shall be done in good and workmanlike manner and in compliance with building
and zoning ordinances, and with all other applicable laws, ordinances, rules,
regulations and requirements of all federal, state and municipal governments
or appropriate departments, commissions, boards and officers thereof, and in
accordance with the rules, orders and regulations of the fire underwriters.
Lessee shall provide lien waivers to Lessor and any other documentation which
may be reasonably required by any title company examining same to ensure
prompt and full payment for any such repairs.
SECTION 704. Lessor shall have the right at all times by its duly
authorized agents to go upon and inspect the demised premises during
reasonable business hours except in emergency situations, and Lessor may make
demand in writing upon Lessee to make any necessary repairs to the demised
premises, which are the obligation of Lessee. In the event that Lessee shall
fail to make any such repairs within thirty (30) days after notice by Lessor,
Lessor may enter upon the demised premises and cause such repairs to be made,
and charge the cost thereof to Lessee as additional rental with all the rights
and remedies hereinafter provided for the collection of rents, provided,
however, such payments must be reimbursed
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to Lessor within ten (10) days after Lessee's receipt of invoices for such
work and payments not made within such ten (10) day period shall bear interest
at a per annum rate equal to the First National Bank of Chicago's then prime
rate plus two percent (2%) from the date when the same was due hereunder until
the same shall be paid. Nothing herein shall imply any duty upon the part of
the Lessor to do any such work, which, under provision of this Lease, Lessee
shall be required to perform and the performance thereof by Lessor shall not
constitute a waiver of Lessee's default in failing to perform the same. Lessor
may, during the progress of any work in the demised premises, keep and store
upon the demised premises all necessary materials, tools and equipment. Lessor
shall not in any event be liable for inconvenience, annoyance, disturbance,
loss of business or other damages to Lessee by reason of making repairs or the
performance of any work in the demised premises during the course thereof, and
the obligation of Lessee under this Lease shall not thereafter be affected in
any manner whatsoever. Lessor agrees, however, in connection with the doing of
any such work, to cause as little inconvenience, annoyance, disturbance, loss
of business or other damage to Lessee as may reasonably be possible in the
circumstances.
LIABILITY AND BOILER INSURANCE
------------------------------
SECTION 801. Lessee further agrees that it will at all times during the
term hereof, carry and maintain, for the mutual benefit or Lessor and Lessee,
general public liability insurance against claims for personal injury,
sickness or disease, including death and property damage in, on or about the
demised premises, or in, on or about the streets, sidewalks or premises
adjacent to the demised premises, such insurance to afford protection to the
limit of not less than One Million and 00/100 Dollars ($1,000,000.00) bodily
injury
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and property damage per occurrence. Lessee shall furnish Lessor with a
duplicate certificate or certificates of such insurance policy or policies
naming Lessor and its beneficiary as additional insured. All such insurance
shall be procured from a responsible company or companies reasonably
satisfactory to Lessor and authorized to do business in the state where the
demised premises are located and may be obtained by Lessee by endorsement on
its blanket insurance policies, provided the insurance company or companies
are reasonably satisfactory to Lessor. All such policies shall provide that
the same may not be canceled or altered except upon thirty (30) days' prior
written notice to Lessor.
FIRE INSURANCE
--------------
SECTION 901. Lessee shall, at all times during the term of this Lease, at
its expense, keep in effect, insurance on all buildings and improvements on
the demised premises against loss by fire, the risks covered by what is
commonly known as "extended coverage," malicious mischief and vandalism, in an
amount equal to the replacement value, excluding foundation, from time to
time, of such buildings and improvements. The policy or policies evidencing
such insurance shall be written by a company or companies reasonably
satisfactory to Lessor and authorized to do business in the state where the
demised premises are located, and shall provide that losses shall be paid to
said Lessor and Lessee. The deductible on Lessee's fire insurance shall not
exceed $1,000.00. Lessor and its beneficiary shall be named as loss payee on
said policy. The policy shall contain a waiver by the insurance company of
recourse against Lessor and Lessee and their officers and agents because of
any act or negligence of Lessor or Lessee and shall further provide that the
same
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shall not be canceled or altered except upon ten (10) days prior written
notice to Lessor and to its mortgagee.
SECTION 902. In case Lessee shall at any time fail, neglect or refuse to
insure such buildings and improvements and to keep the same insured as
hereinabove provided, then Lessor may, at her election, procure or renew such
insurance, and any amounts paid therefor by Lessor shall be so much additional
rental due at the next rent day after any such payment, with interest at a per
annum rate equal to The First National Bank of Chicago's then prime rate, plus
two (2%) percent, from the date of payment thereof.
SECTION 903. It is further agreed that, in the event of loss under any
such policy or policies, the insurance proceeds shall be deposited into an
escrow at Chicago Title Insurance Company and paid out during the course of
Lessee's repairs and rebuilding upon deposit of proper lien waiver
documentation and architects' certificates, and providing the terms of Section
1002 shall be complied with, for the expense of repairing or rebuilding the
buildings or improvements which have been damaged or destroyed, provided,
however, that it shall first appear to the reasonable satisfaction of Lessor
that the amount of insurance money in its hands shall at all times be
sufficient to pay for the completion of said repairs and rebuilding; and upon
the completion of said repairs or rebuilding, free from all liens of mechanics
and materialmen and others, any surplus of insurance money shall be paid to
Lessor. In the event the insurance proceeds are not sufficient to complete the
repairs or rebuilding, Lessee shall immediately deposit with Lessor a sum
sufficient to increase the monies on deposit to an amount equal to the cost or
repairing or rebuilding the buildings or improvements. The cost of said escrow
shall be paid by Lessee.
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DAMAGE OR DESTRUCTION
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SECTION 1001. Lessee further agrees that in case of damage to or
destruction of any building or improvements on the demised premises or of the
fixtures and equipment therein, by fire or other casualty, it will promptly
repair, restore or rebuild the same to a condition equal to or greater than
existed immediately prior to such damage. Lessor shall cooperate with Lessee
in the event the damage is caused by an insurable risk and shall make
available to Lessee for said repair or rebuilding the entire insurance
proceeds arising out of such damage or destruction. Rent shall not abate
during the period of such repair, restoration or rebuilding or if the
improvements are not tenantable because of such damage or destruction.
SECTION 1002. Before commencing such repairing, restoration or
rebuilding, involving an estimated cost of more than One Hundred Thousand and
00/100 Dollars ($100,000.00), (a) plans and specifications therefor shall have
been submitted to and approved by Lessor, provided, however, that Lessor shall
not unreasonably withhold nor delay its approval and further provide that
Lessor shall be deemed to have approved such plans and specifications if they
provide for repair, restoration or rebuilding to a condition substantially
similar to the condition existing prior to the occurrence of the damage or
destruction; (b) Lessee shall have furnished to Lessor, an estimate of the
cost of the proposed work certified by a licensed architect by whom such plans
and specifications shall have been prepared; and (c) Lessee shall establish a
construction escrow at Chicago Title Insurance Company and otherwise comply
with the terms and provisions of Section 903.
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LIENS
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SECTION 1101. Lessee shall not do any act which shall in any way encumber
the title of Lessor in and to said demised premises nor shall the interest or
estate of Lessor in said demised premises be in any way subject to any claim
by way of lien or encumbrance, whether by operation of law or by virtue of any
express or implied contract by Lessee, and any claim to or lien upon said
demised premises arising from any act or omission of Lessee shall accrue only
against the leasehold estate of Lessee and shall in all respects be subject
and subordinate to the paramount title and rights of Lessor in and to said
premises and the buildings and improvements thereon.
Lessee will not permit the demised premises to become subject to any
mechanic's, laborers' or materialmen's lien on account of labor or materials
furnished to Lessee or claimed to have been furnished to Lessee in connection
with work of any character performed or claimed to have been performed on the
demised premises by or at the direction or sufferance of Lessee; provided,
however, that Lessee shall have the right to contest in good faith and with
reasonable diligence, the validity of any such lien or claimed lien if Lessee
shall give to Lessor reasonable security to ensure payment thereof and to
prevent any sale, foreclosure or forfeiture of the demised premises by reason
of nonpayment thereof; provided on final determination of the lien or claim
for lien, Lessee will immediately pay any judgment rendered, with all proper
costs and charges, and will, at its own expense, have the lien released and
any judgment satisfied. Lessee shall remove or bond over any such lien claim
within thirty (30) says after receipt of written notice from Lessor.
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SECTION 1102. In case Lessee shall fail to contest the validity of any
lien or claimed lien and give security to Lessor to ensure payment thereof, or
having commenced to contest the same and having given such security, shall
fail to prosecute such contest with diligence, or shall fail to have the same
released and satisfy any judgment rendered thereon, then Lessor may, at its
election (but shall not be required so to do) remove or discharge such lien or
claim for lien (with the right, in its discretion, to settle or compromise the
same) and any amounts advanced by Lessor for such purposes shall be so much
additional rental due from Lessee to Lessor at the next rental day after any
such payment, with interest at a per annum rate equal to The First National
Bank of Chicago's then prime rate, plus two (2%) percent, from the date of
payment thereof.
CONDEMNATION
------------
SECTION 1201. In the event the whole of the demised premises shall be
taken or condemned for a public or quasi-public use or purpose by any
competent authority, then the term of this Lease shall terminate when
possession of the demised premises shall be required for such use or purpose.
SECTION 1202. In the event only a portion of the demised premises shall
be taken or condemned for a public or quasi-public use or purpose by any
competent authority, and as a result thereof this Lease may not be terminated
as per the terms of Section 1203 by Lessee as to a portion of the demised
premises, then Lessor at her sole cost and expense shall repair and restore
the demised premises to a condition substantially similar to the condition
which existed prior to the taking, which restoration shall take place after
Lessor has been paid the condemnation proceeds. Further the annual net rental
due under the terms of this Lease shall
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be reduced on a pro rata basis based upon the reduction of square footage of
the building from the size of the original building.
SECTION 1203. In the event in excess of fifty (50%) percent of the square
footage of the building shall be taken for public or quasi-public purposes,
and the remaining portion of any such parcel is not suitable for the purpose
for which it is then being used, then Lessee shall have the option of
terminating this Lease on the date possession of the parcel or parcels is
surrendered to the governmental agency condemning the same, by giving written
notice to Lessor of its election so to do, which notice must be given within
sixty (60) days of the date of the notice given to the parties of such
condemnation. In the event such option to terminate is not so exercised within
the sixty (60) day period, then it cannot be exercised thereafter but the
annual net rental due under the terms of this Lease shall be reduced on a pro
rata basis based upon the reduction of square footage from the size of the
original parcel. Also, if such option to terminate is not so exercised Lessor
shall, at its sole cost and expense, repair and restore as set forth in
Section 1202.
It is further understood and agreed that anything notwithstanding stated
in Section 1203 Lessor shall not be required to restore any leasehold
improvements to which Lessee will be entitled to a portion of the award as
specified in Section 1204 of this Lease.
SECTION 1204. It is expressly agreed and understood that all sums awarded
or allowed for such taking of said leased premises or any part thereof, or for
damages for such taking, or paid in lieu thereof, shall belong to Lessor, and
the same are hereby assigned to Lessor, and Lessee shall have no interest in
or claim to such award, or any part thereof, whether such award shall be for
the taking of such property or for damages or otherwise. Lessee
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may, at its own expense, take independent proceedings against the public
authority exercising the power of Eminent Domain, to prove and establish any
damage Lessee may have sustained.
RENT ABSOLUTE
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SECTION 1301. Except as otherwise specifically provided herein, damage to
or destruction of any portion or all of the buildings, structures and fixtures
upon the demised premises, by fire, the elements or any other cause
whatsoever, whether with or without fault on the part of Lessee, shall not
terminate this Lease or entitle Lessee to any abatement of or reduction in the
rent payable, or otherwise affect the respective obligations of the parties
hereto, any present or future law to the contrary notwithstanding. If the use
of demised premises for any purpose should at any time during the term of this
Lease, be prohibited by law or ordinance or other governmental regulation, or
prevented by injunction, this Lease shall not, except as otherwise
specifically provided herein, be thereby terminated, nor shall Lessee be
entitled by reason thereof to surrender the demised premises or to any
abatement or reduction in rent.
ASSIGNMENT AND SUBLET
---------------------
SECTION 1401. Lessee shall not have the right without the written consent
of Lessor to assign this Lease or to sublet all or any portion or portions of
the demised premises, provided, however, such consent shall not be
unreasonably withheld. In the event of any assignment, letting or subletting,
Lessee shall remain liable to Lessor for the performance of all the
obligations imposed on Lessee under the terms of this Lease, and with such
assignee or sublessee shall be jointly and severally bound to abide by the
terms of this Lease, and said
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Lessee shall obtain from its assignee or sublessee such forms or other
documents as may be reasonably required by Lessor to bind such assignee or
sublessee, together with Lessee, to the terms and obligations of this Lease.
No sublessee or assignee shall have the right to pay the mortgage on the
premises directly to the Mortgagee or the right to exercise the right of first
refusal, the right of first offer or the rights to extend the term of the
lease.
SECTION 1402. Lessor shall have the absolute right to sell, assign,
transfer, set over and convey any or all of its right, title and interest in
and to this Lease, including the rent to accrue hereunder.
RESPONSIBILITY OF LESSEE
------------------------
SECTION 1501. Lessee agrees to indemnify and save harmless Lessor against
and from any and all claims, costs, losses, expenses and fees by or on behalf
of any person or persons, firm or firms, corporation or corporations,
municipality, state or federal agency or entity, arising from the conduct or
management of or from any work or thing whatsoever, done in or about the
demised premises during the term hereof and to further indemnify and save
Lessor harmless against and from any and all claims, costs, losses, expenses
and fees arising during the term of this Lease from the demised premises, or
any vaults, passageways or spaces therein or appurtenant thereto, or signs
affixed to the demised premises, or arising from any breach or default on the
part of Lessee in the performance of any covenant or agreement on the part of
Lessee to be performed pursuant to the terms of this Lease or arising from any
act of negligence of Lessee, or any of its agents, contractors, servants,
employees or licensees, or arising from any accident, injury or damage
whatsoever caused to any person, firm or corporation occurring during the term
of this Lease in or about the
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demised premises, or upon or under the sidewalk and the land adjacent thereto,
and from and against all costs, counsel fees, expenses and liabilities
incurred in or about any such claim or action or proceeding brought thereon,
and in case any action or proceeding be brought against Lessor by reason of
any such claim, Lessee, upon notice from Lessor, covenants to resist or defend
such action or proceeding, with counsel reasonably acceptable to Lessor,
provided, however, that Lessee shall not be liable for acts or omissions of
Lessor, its agents or employees.
INDEMNITY FOR LITIGATION
------------------------
SECTION 1601. Lessee further agrees to pay all costs and expenses,
including attorneys fees, which may be incurred by or imposed on Lessor in
enforcing this Lease, and if paid by Lessor, shall be so much additional rent
due on the next rent date after such payment together with interest at a per
annum rate equal to The First National Bank of Chicago's then prime rate, plus
two (2%) percent, from the date of payment thereof. Anything to the contrary
notwithstanding under Section 1601, the Lessee's obligation to pay costs,
expense and attorneys' fees as provided in this section shall apply only if
Lessor is successful in any litigation involving the enforcement of this Lease
by Lessor. Lessor shall be obligated to pay all Lessee's costs, expenses and
attorneys' fees incurred by Lessee because of Lessee, through no fault of
Lessee, becoming a defendant in any litigation arising out of this Lease.
ESTOPPEL CERTIFICATE
--------------------
SECTION 1701. Lessee further agrees at any time and from time to time,
upon not less than ten (10) days prior written request by Lessor, to execute,
acknowledge and deliver to
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Lessor a statement in writing certifying that this Lease is unmodified and in
full force and effect if such be the case (or if there have been
modifications, that the same is in full force and effect as modified, and
stating the modifications) and the date to which the rental and other charges
have been paid in advance, if any, and such other representations as may be
reasonably requested by Lessor, it being intended that any such statement
delivered pursuant to this Section 1701, may be relied upon by a prospective
purchaser of the fee, or mortgagee or assignee of any mortgage upon the fee of
the demised premises.
ALTERATIONS
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SECTION 1801. Lessee shall not make any exterior or interior, structural
alterations, improvements or additions to the demised premises without the
prior written consent of Lessor, which consent will not be unreasonably
withheld. Lessee shall pay the entire cost of all such alterations,
improvements or additions. All alterations, improvements, additions or
fixtures installed upon the premises shall remain upon the premises at the
expiration or sooner termination of this Lease and become the property of
Lessor, excepting such trade fixtures that are susceptible of removal without
structural damage or injury to said premises, provided such removal shall not
damage the premises in such manner as to reduce its value and that Lessee
shall restore as hereinafter provided. In the event of the removal of any such
trade fixtures, Lessee shall place that portion of the demised premises in the
same condition as prior to the installation or placement thereof. Lessor may,
upon the termination of this Lease, give written notice to Lessee to remove,
and thereupon Lessee shall remove such alterations, improvements and
additions, and restore the premises to the same good order and
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condition in which they were prior to the making of such alterations,
additions or improvements, except for reasonable use and natural wear.
SECTION 1802: Lessor may require, as a condition for its consent to the
making of any exterior and interior alterations, additions or improvements,
Lessee's compliance with Section 1002 and proof of the procurement of all
municipal permits and other governmental permits for such alteration, approval
of Lessor of detailed plans and specifications for any structural change or
alterations, which approval shall not be unreasonably withheld, and
satisfactory guarantee against mechanics' liens. Lessor may also require proof
of workmen's compensation, public liability and property damage insurance in
amounts and in companies reasonably satisfactory to Lessor, including
insurance coverage for Lessor and its beneficiary from all major contractors
employed for such alterations. All payments for such work shall be processed
in the manner set forth in Section 903 through an escrow at Chicago Title
Insurance Company.
SECTION 1803. In the event Lessor has consented to Lessee's alteration,
Lessee shall submit to Lessor copies of all architectural, structural and
mechanical drawings, plans and specifications for the proposed work, as well
as copies of all contracts let or to be let for the work.
DISPLAY OF SIGNS
----------------
SECTION 1901. Lessor is hereby given the right, during usual business
hours to enter and inspect the demised premises and to exhibit the same to
prospective purchasers. Lessor shall also have the right, during the last six
(6) months of the term of this Lease, to display the usual "for sale" or "for
rent" signs in such manner as to not unreasonably interfere with
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Lessee's business, and the Lessee agrees that such signs may remain unmolested
upon the demised premises.
SECTION 1902. Lessee shall have the right to install, maintain and
display upon the demised premises such inside and outside signs as Lessee may
reasonably deem necessary or desirable for the carrying on of its business,
provided that such signs shall be restricted to those advertising Lessee's
name or the products manufactured or sold by Lessee, and shall comply with all
local, county or state laws, or any regulations and restrictions applicable
thereto. Lessee agrees that all signs installed by it shall not hinder the
obtaining of any liability or fire insurance required under the terms of this
Lease and shall not create any damage to the premises being leased at the time
of installation. Further, Lessee agrees that at the time this Lease is
terminated, Lessee shall remove the signs upon request by Lessor and repair or
replace at Lessee's cost any damage done by installation thereof, normal wear
and tear excepted.
SECTION 1903. It is expressly understood and agreed that this Lease shall
be subject and subordinate to any mortgage or mortgages or deed of trust now
upon the demised premises and be subject and subordinate to any first mortgage
hereafter placed upon the demised premises by Lessor. Lessee agrees to
execute, if the same is required within ten (10) days of submission to Lessee,
any and all instruments in writing which may be requested by Lessor to
subordinate Lessee's rights acquired by the Lease to the lien of any mortgage
described herein.
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<PAGE>
NON-LIABILITY OF LESSOR
-----------------------
SECTION 2001. To the extent permitted by law, Lessor shall not be liable
to Lessee or to its officers, agents and employees for any injury done or
occasioned by wind or by or from any defect of plumbing, electric wiring or of
insulation thereof, gas pipes, water pipes or steam pipes, or from broken
stairs, railings or walks, or from the backing up of sewer pipe or downspout,
or from the bursting, leaking or running of any tank, tub, washstand, water
closet or waste pipe, drain, or any other pipe or tank in, upon or about the
premises or the building of which they are a part nor from the escape of steam
or hot water from any radiator, it being agreed that said radiators are under
the control of Lessee, nor for any such damage or injury occasioned by water,
snow or ice being upon or coming through the roof, skylight, trap door,
stairs, walks or any other place upon or near the premises, or otherwise, nor
for any such damage or injury done or occasioned by the falling of any
fixture, nor for any damage or injury arising from any act, omission, or
negligence of other persons, occupants of adjoining or contiguous buildings or
of owners of adjacent or contiguous property, or of Lessor's agents, employees
or officers, all claims for any such damage or injury being hereby expressly
waived by Lessee.
COVENANT OF QUIET POSSESSION
----------------------------
SECTION 2101. The Lessee, upon the payment of the rent herein reserved
and upon the performance of all the terms of this Lease, shall at all times
during the lease term and during any extension or renewal term peaceably and
quietly enjoy the leased property without any disturbance from the Lessor or
from any other person claiming through the Lessor.
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DEFAULT AND LESSOR'S REMEDIES
-----------------------------
SECTION 2201. The following events shall constitute a default by Lessee:
(a) Failure to pay any of the rentals or other monies provided to be
paid herein within five (5) days after the due date for payment of
rentals or other monies due to Lessor;
(b) Failure to pay, when due, any taxes, assessments or other
charges as required herein, unless in the case of taxes or assessments
there be a permissive contest as authorized in this Lease;
(c) Failure to observe or perform any other covenants, conditions,
agreements or provisions hereof, which are not remedied within thirty
(30) days after notice of such default in writing from Lessor or in the
case of such covenants, conditions, agreements or provisions which are
not capable of being remedied within thirty (30) days, the failure to
diligently proceed to remedy such covenant, condition, agreement or
provision continuously to completion;
(d) If Lessee makes an assignment for the benefit of creditors, or
applies for or consents to the appointment of a trustee or receiver for
all or for a major part of its property;
(e) If a trustee or receiver is appointed for Lessee or for the
major part of its property and is not discharged within ninety (90) days
after such appointment;
(f) If bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings for relief under any
bankruptcy law or similar law for the relief of debtors is instituted by
or against Lessee, and if instituted against
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Lessee, is allowed against Lessee, or is consented to, or is not
dismissed within ninety (90) days after such institution;
SECTION 2202. In the case of any default as hereinabove provided, Lessor
may, at her option, exercise any one or more of the following remedies:
(a) Lessor may terminate this Lease by giving to Lessee notice of
Lessor's intention so to do, in which event the term of this Lease or any
renewal thereof shall end, and all right, title and interest of Lessee
hereunder shall expire on the date stated in such notice, which shall not
be less than ten (10) days after the date of the notice by Lessor of her
intention so to terminate;
(b) Lessor may terminate the right to Lessee to possession of the
premises by giving notice to Lessee that Lessee's right of possession
shall end on the date stated in such notice, which shall not be less than
ten (10) days from the date of such notice, whereupon the right of Lessee
to the possession of the premises or any part thereof shall cease on the
date stated in such notice;
(c) Lessor may enforce the provisions of this Lease and may enforce
and protect the rights of Lessor hereunder by actions in equity or at law
for the specific performance of any covenant or agreement contained
herein or for the enforcement of any other appropriate legal or equitable
remedy.
SECTION 2203. If Lessor exercises either of the remedies provided for in
Section 2202(a) or 2202(b) aforesaid, Lessor may then or at any time
thereafter reenter and take complete and peaceful possession of the premises,
with process of law, and may remove all
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<PAGE>
persons therefrom, and Lessee covenants in any such event peacefully and
quietly to yield up and surrender the premises to Lessor.
SECTION 2204. If Lessor terminates the right of possession as provided in
Section 2202(a) or 2202(b), Lessor may reenter the premises and take
possession of all thereof (including any and all equipment and apparatus
thereon), may remove any portion of the equipment, machinery, or apparatus
thereon which Lessor elects so to do, and shall, sublet or re-let, for the
account and benefit of Lessee, the premises or any part thereof from time to
time for all or any part of the unexpired part of the then term hereof, or for
a longer period for such reasonable rents and on such reasonable terms and
conditions and to such persons and for such periods as may seem reasonably fit
to Lessor. Lessor agrees to accept or receive any reasonable tenant offered by
Lessee. Lessor may collect the rents from such re-letting or subletting, and
apply the same, first, to the payment of the expenses of reentry and
re-letting, including commissions to agents, and such expenses as Lessor may
have incurred in putting the premises in good order and condition, or
preparing or altering the same for re-letting, and all other expenses and
charges paid, assumed or incurred by Lessor in or about re-letting the
premises, and, secondly, to the fixed dollar rentals herein provided to be
paid by Lessee, and in the event that the proceeds of such re-letting or
subletting are not sufficient to pay in the foregoing, Lessee shall remain and
be liable therefor, and Lessee promises and agrees to pay the amount of any
such deficiency from time to time on the demand of Lessor, and Lessor may at
any time and from time to time sue and recover judgment for any such
deficiency or deficiencies. Any such re-letting may be for the remainder of
the term or any renewal term of this Lease or for a longer or shorter period.
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Lessor shall be entitled, notwithstanding any other provision of this Lease,
or Lessee's estate, to the extent permitted by law, the amount of damages
which Lessor sustains by reason of Lessee's default, including the right to
recover the difference between the total rent, taxes and charges which the
Lessor is able to obtain in a new lease for the balance of the term. The
acceptance of a tenant by Lessor, in place of Lessee, shall not operate as a
cancellation hereof, nor release Lessee from the performance of any covenant,
promise or agreement herein contained, and performance by any substituted
tenant by the payment of rent, or otherwise, shall constitute only
satisfaction pro tanto of the obligations of Lessee arising hereunder.
SECTION 2205. In the event of the termination of this Lease by Lessor as
provided for in Section 2202(a) hereof, Lessor shall be entitled to recover
from Lessee all the fixed dollar rentals accrued and unpaid for the period up
to and including such termination date, as well as all other additional sums
payable by Lessee, or for which Lessee is liable or in respect to which
Lessee, under any of the provisions hereof, has agreed to indemnify Lessor,
which may be then owing and unpaid, and all costs and expenses, including
court costs and reasonable attorneys' fees incurred by Lessor in the
enforcement of her rights and remedies hereunder. In addition, Lessee shall
pay to Lessor as damages the discounted present value (at the then Federal
Reserve Bank discount rate) of the aggregate rent and other charges during the
period commencing with the termination date and ending on the expiration date
of this Lease.
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<PAGE>
NOTICES OR DEMANDS
------------------
SECTION 2301. All notices to or demands upon Lessor or Lessee desired or
required to be given under any of the provisions hereof, shall be in writing.
Any notice or demand from Lessor to Lessee shall be deemed to have been fully
and sufficiently given if a copy thereof has been delivered personally, or
mailed by United States registered or certified mail, return receipt
requested, in an envelope properly stamped and addressed to Lessee at
_____________________________________, or at such other address as Lessee may
theretofore have furnished by written notice to Lessor; with a copy of any
such notice to Leo Silverstein, Brock, Fensterstock, Silverstein, McAuliffe &
Wade, L.L.C., One Citicorp Center, 153 E. 53rd Street, 56th Floor, New York,
NY 10022, and any notice or demand from Lessee to Lessor shall be deemed to
have been duly and sufficiently given if a copy thereof has been delivered
personally or mailed United States registered or certified mail, return
receipt requested, in an envelope properly stamped and addressed to Lessor at
3731 Pitzen Road, McHenry, Illinois, 60050, or at such other address as Lessor
may theretofore have furnished by written notice to Lessee, and a copy to
Michael R. Wolfe, Berger, Newmark & Fenchel, P.C., 222 N. LaSalle, Suite 1900,
Chicago, IL 60601.
COVENANTS OF LEASE EXTEND TO
ASSIGNS, SUCCESSORS & TRANSFEREES
---------------------------------
SECTION 2401. All of the covenants, agreements, conditions and
undertakings in this Lease contained shall extend and inure to and be binding
upon the heirs, executors, administrators, successors and assigns of the
respective parties hereto, the same as if they were in every case specifically
named, and wherever in this Lease reference is made to either of the parties
hereto, it shall be held to include and apply to, wherever applicable, the
heirs,
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executors, administrators, successors and assigns of such party. Nothing
herein contained shall be construed to grant or confer upon any person or
persons, firm, corporation or governmental authority, other than the parties
hereto, their heirs, executors, administrators, successors and assigns, any
right, claim or privilege by virtue of any covenant, agreement, condition or
undertaking in this Lease contained.
SECTION 2402. The term "Lessor" as used in this Lease, so far as
covenants or obligations on the part of Lessor are concerned, shall be limited
to mean and include only the owner or owners at the time in question of the
fee of the demised premises, and in the event of any transfer or transfers of
the title to such fee, Lessor herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall be automatically freed and
relieved, from and after the date of such transfer or conveyance, of all
personal liability as respects the performance of any covenants or obligations
on the part of Lessor contained in this Lease thereafter to be performed;
provided that any funds in the hands of such Lessor or the then grantor at the
time of such transfer, in which Lessee has an interest, shall be turned over
to the grantee, and any amount then due and payable to Lessee by Lessor or the
then grantor under any provisions of this Lease, shall be paid to Lessee.
TIME OF ESSENCE
---------------
SECTION 2501. Time is of the essence of this Lease, and all provisions
herein relating thereto shall be strictly construed.
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<PAGE>
MISCELLANEOUS
-------------
SECTION 2601. The captions of this Lease are for convenience only and are
not to be construed as part of this Lease and shall not be construed as
defining or limited in any way the scope or intent of the provisions hereof.
SECTION 2602. If any term or provision of this Lease shall to any extent
be held invalid or unenforceable, the remaining terms and provisions of this
Lease shall not be affected thereby, but each term and provision of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
SECTION 2603. This Lease shall be construed and enforced in accordance
with the laws of the State of Illinois.
SECTION 2604. Lessee hereby waives any and all rights it may have to
demand a jury trial in any proceedings arising out of this Lease.
SECTION 2605. The obligations of this Lease shall run with the land, and
this Lease shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. No owner of the demised
premises shall be liable under this Lease except for breaches of Lessor's
obligations occurring while owner of the demised premises. The obligations of
Lessor shall be binding upon the assets of Lessor which comprise the demised
premises but not upon other assets of Lessor. No individual partner, member,
trustee, employee, or beneficiary of Lessor shall be personally liable under
this Lease and Lessee shall look solely to Lessor's interest in the demised
premises in pursuit of its remedies upon an event of default hereunder, and
the general assets of Lessor and its partners, members, trustees,
stockholders, officers, employees or beneficiaries of Lessor shall not be
subject to levy, execution or other enforcement procedure for the satisfaction
of the remedies of Lessee.
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SECTION 2606. All waivers shall be in writing and signed by the waiving
party. Lessor's failure to enforce any provision of this Lease or its
acceptance of Rent shall not be a waiver and shall not prevent Lessor from
enforcing that provision or any other provision of this Lease in the future.
No statement on a payment check from Lessee or in a letter accompanying a
payment check shall be binding on Lessor. Lessor may, with or without notice
to Lessee, negotiate such check without being bound by to the conditions of
such statement.
SECTION 2607. If Lessee is a corporation, each person signing this Lease
on behalf of Lessee represents and warrants that (s)he has full authority to
do so and that this Lease binds the corporation. Within thirty (30) days after
this Lease is signed, Lessee shall deliver to Lessor a certified copy of a
resolution of Lessee's Board of Directors authorizing the execution of this
Lease or other evidence of such authority reasonably acceptable to Lessor.
SECTION 2608. This Lease may be executed in counterparts and, when all
counterpart documents are executed, the counterparts shall constitute a single
binding instrument. Lessor's delivery of this Lease to Lessee shall not be
deemed to be an offer to lease and shall not be binding upon either party
until executed and delivered by both parties.
SECTION 2609. All representations and warranties of Lessor and Lessee
shall survive the termination of this Lease.
SECTION 2610. Lessor and Lessee expressly agree that there are and shall
be no implied warranties of merchantability, habitability, suitability,
fitness for a particular purpose or of any other kind arising out of this
Lease, and there are no warranties which extend beyond those expressly set
forth in this Lease without limiting the generality of the foregoing, Lessee
expressly acknowledges that Lessor has made no warranties or representations
concerning any Hazardous Materials or other environmental matters
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affecting any part of the Property and Lessor hereby expressly disclaims and
Lessee waives any express or implied warranties with respect to any such
matters.
SECTION 2611. Lessee represents and warrants to Lessor that there are no
agents, brokers, finders or other parties with whom Lessee has dealt who may
be entitled to any commission or fee with respect to this Lease or the demised
premises. Lessee agrees to indemnify and hold Lessor harmless from any claim,
demand, cost or liability, including, without limitation, attorneys' fees and
expenses, asserted by any party based upon dealings of that party with Lessee.
SECTION 2612. Lessee shall accept the demised premises and the Premises
in their condition as of the execution of the Lease, subject to all recorded
matters, laws, ordinances, and governmental regulations and orders. Except as
provided herein, Lessee acknowledges that neither Lessor nor any agent of
Lessor has made any representation as to the condition of the demised premises
or the suitability of the demised premises for Lessee's intended use. Lessee
represents and warrants that Lessee has made its own inspection of and inquiry
regarding the condition of the demised premises and is not relying on any
representations of Lessor or any Broker with respect thereto.
SECTION 2613. Lessee shall cause a Guaranty in form and substance, as
attached hereto and made a part hereof as Exhibit B, to be executed by the
Guarantor named herein. Any dishonor or purported repudiation of said Guaranty
by, or insolvency, bankruptcy or dissolution of said Guarantor shall be a
default hereunder.
REMEDIES TO BE CUMULATIVE
-------------------------
SECTION 2701. No remedy herein or otherwise conferred upon or reserved to
Lessor, shall be considered exclusive of any other remedy, but the same shall
be cumulative and shall be in addition to every other remedy given hereunder
now or hereafter existing at law or in
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equity or by statute, and every power and remedy given by this Lease to Lessor
may be exercised from time to time and as often as occasion may arise or as
may be deemed expedient. No delay or omission of Lessor to exercise any right
or power arising from any default, shall impair any such right or power or
shall be construed to be a waiver of any such default or an acquiescence
therein.
SECTION 2702. No waiver of any breach of any of the covenants of this
Lease shall be construed, taken or held to be a waiver of any other breach or
waiver, acquiescence in or consent to any further or succeeding breach of the
same covenant.
SECTION 2703. Neither the rights herein given to receive, collect, sue
for or distrain for any rent or rents, moneys or payments or to enforce the
terms, provisions and conditions of this Lease, or to prevent the breach or
nonobservance thereof, or the exercise of any such right or of any other right
or remedy hereunder or otherwise granted or arising, shall in any way affect
or impair or toll the right or power of Lessor to declare the term hereby
granted ended, and to terminate this Lease as provided for in this Lease,
because of any default in or breach of the covenants, provisions or conditions
of this Lease.
SECTION 2704. In the event Lessor shall fail to pay any sum due under any
mortgage upon the demised premises to which this Lease is subordinate, or
commit any other default thereunder, Lessee shall have the right at its sole
option to pay such sum or cure such default on behalf of Lessor and any sums
expended by Lessee to cure such default shall be paid by Lessor to Lessee upon
demand and, if not so paid, Lessee shall have the right to deduct such sums
from rentals due hereunder.
HOLDOVER
--------
SECTION 2801. Lessee will, at termination of this Lease by lapse of time
or otherwise, yield up immediate possession to Lessor, and failing so to do,
will pay as liquidated
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damages, for each and every month or partial month during which Lessee shall
withhold possession, a sum of money equal to one hundred fifty percent (150%)
of the monthly rental (the Minimum Annual Rental and any further rent) in
effect and payable just prior to the termination of this Lease; but the
provisions hereof shall not be held as a waiver by Lessor of any right granted
to Lessor in this Lease.
STATUTORY COMPLIANCE
--------------------
SECTION 2901. Lessee acknowledges and warrants and represents to
Lessor that the Lessee at all times during its occupancy of the demised
premises shall be:
a) in full compliance with any and all applicable state, federal and
local laws, ordinances, rules, regulations and policies as more fully set
forth in the Americans with Disabilities Act of 1990, 42 U.S.C. ss.12101 et
seq.;
b) the demised premises shall be in compliance with the public
accommodation provisions of the Americans with Disabilities Act of 1990, and
with any and all other applicable related federal, state and local laws,
ordinances, rules, regulations and policies;
c) the demised premises shall be in compliance with all federal,
state and local laws, ordinances, rules, regulations and policies; and
d) the Lessee shall take all actions necessary to ensure compliance
therewith.
ENVIRONMENTAL
-------------
SECTION 3001. As used in this Lease, the term "Hazardous Material"
shall mean any flammable items, explosives, radioactive materials, oil,
hazardous or toxic substances, material or waste or related materials,
including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes," "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal state
or local laws or regulations, including without limitation petroleum-based
products, paints, solvents, lead,
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cyanide, DDT, printing inks, acids, pesticides, ammonia compounds and other
chemical products, asbestos, PCBs and similar compounds, and including any
different products and materials which are subsequently found to have adverse
effects on the environment or the health and safety of persons. Lessee shall
not cause or permit any Hazardous Material to be generated, produced, brought
upon, used, stored, treated or disposed of in or about the demised premises by
Lessee, its agents, employees, contractors, sublessees or invitees without the
prior written consent of Lessor. Lessor shall be entitled to take into account
such other factors or facts as Lessor may reasonably determine to be relevant
in detecting whether to grant or withhold consent to Lessee's proposed
activity with respect to Hazardous Material. In no event, however, shall
Lessor be required to consent to the installation or use of any storage tanks
on the demised premises. If Lessee's transportation, storage, use or disposal
of Hazardous Materials on the Premises results in the contamination of the
soil or surface or ground water or loss or damage to person(s) or property,
then Lessee agrees to: (a) notify Lessor immediately of any contamination,
claim of contamination, loss or damage, (b) after consultation with the
Lessor, clean up the contamination in full compliance with all applicable
statutes, regulations and standards and (c) indemnity, defend and hold Lessor
harmless from and against any claims, suits, causes of action, costs and fees,
including attorney's fees and costs, arising from or connected with any such
contamination, claim of contamination, loss or damage. Lessee agrees to fully
cooperate with Lessor and provide such documents, affidavits and information
as may be requested by Lessor (i) to comply with any environmental law, (ii)
to comply with the request of any lender, purchaser or tenant, and/or (iii)
for any other reason deemed necessary by Lessor in its sole discretion. Lessee
shall notify Lessor promptly in the event of any spill or other release of any
Hazardous Material at, in, on, under or about the Premises which is required
to be reported to a
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governmental authority under any environmental law, will promptly forward to
Lessor copies of any notices received by Lessee relating to alleged violations
of any environmental law and will promptly pay when due any fine or assessment
against Lessor, Lessee or the Premises relating to any violation of an
environmental law during the term of this Lease. If a lien is filed against
the Premises by any governmental authority resulting from the need to expend
or the actual expending of monies arising from an act or omission, whether
intentional or unintentional, of Lessee, its agents, employees or invitees, or
for which Lessee is responsible, resulting in the releasing, spilling,
leaking, leaching, pumping, emitting, pouring, emptying or dumping of any
Hazardous Material into the waters or onto land located within or without the,
State where the Premises is located, then Lessee shall, within thirty (30)
days from the date that Lessee is first given notice that such lien has been
placed against the lien) either (i) pay the claim and remove the lien, or (ii)
furnish a cash deposit, bond, or such other security with respect thereto as
is satisfactory in all respects to Lessor and is sufficient to effect a
complete discharge of such lien on the Premises. The provisions of this
Section 502 shall survive the expiration or earlier termination of this Lease.
SECURITY DEPOSIT
----------------
SECTION 3101. Lessee has deposited with Lessor the sum of Ten Thousand
Six Hundred and 00/100 ($10,600.00) Dollars as security for the full and
faithful performance and observance by Lessee of all the covenants, terms, and
conditions herein contained to be performed and observed by Lessee, and Lessor
may use, apply, or retain the whole or any part of said security to the extent
required for the payment of any rent or any sum as to which Lessee is in the
default in respect to any of the covenants, terms, or conditions of this
Lease. Said sum, without interest, or any balance thereof, shall be returned
to Lessee after the time fixed as the expiration of the Lease provided that
Lessee shall have fully performed
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all of said covenants, terms and conditions. It is agreed that said security
is not an advance payment of, or on account of the rent herein reserved, or
any part of settlement thereof, or a measure of Lessor's damages, and in no
event, shall Lessee be entitled to a return or particular application of said
sum or any part thereof, until the end of the term hereby granted. If, as a
result of any default by Lessee, Lessor shall apply any part of said security
deposit toward damages, prior to the expiration of this Lease, Lessee shall
promptly pay the amount so applied to Lessor so that said security deposit
amount shall remain constant. In the event of a sale of the demised premises,
Lessor shall have the right to transfer the security to the Purchaser and
Lessor shall thereupon be released from all liability for the return of such
security.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed effective the day and year first above-written.
LESSOR:
J.W.S. PARTNERSHIP
By: /s/ Susan Grandt
---------------------------
Susan Grandt
General Partner
LESSEE:
BATTERY NETWORK, INC.
By: /s/ Susan Grandt
--------------------------
Susan Grandt
President
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EXHIBIT A
---------
Legal description for property commonly known as 4071 Albany Street,
McHenry, Illinois 60050:
LOT 31 IN TONYAN'S INDUSTRIAL PARK UNIT THREE, BEING A
SUBDIVISION OF PART OF THE NORTHEAST QUARTER OF SECTION 10,
AND PART OF THE WEST HALF OF THE NORTHWEST QUARTER OF
SECTION 11, ALL IN TOWNSHIP 44 NORTH, RANGE 8 EAST OF THE
THIRD PRINCIPAL MERIDIAN, ACCORDING TO THE PLAT THEREOF
RECORDED MARCH 21, 1984 AS DOCUMENT NO. 877524, IN MCHENRY
COUNTY, ILLINOIS.
PERMANENT INDEX NUMBER: 14-10-277-007
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<PAGE>
EXHIBIT B
----------
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
J.W.S. Partnership, an Illinois general partnership ("Lessor") to enter into
the lease dated January 1, 1997 (the "Lease"), for the premises commonly known
as 4071 Albany Road, McHenry, Illinois, 60050, with Battery Network, Inc., an
Illinois corporation ("Lessee"), the undersigned hereby absolutely and
unconditionally guarantees to Lessor, its successors and assigns, the prompt
and full payment of all rent, including, without limitation, Minimum Annual
Rental, additional rent, and all other payments to be made by Lessee under the
Lease, and the full performance and observance by Lessee of all the other
terms, covenants, conditions and agreements therein provided to be performed
and observed by Lessee, for which the undersigned shall be jointly and
severally liable with Lessee. The undersigned hereby waives any notice of
nonpayment, nonperformance or nonobservance, or proof of notice or demand. The
undersigned agrees that, in the event of a default by Lessee under the Lease,
Lessor may proceed against the undersigned before, after or simultaneously
with proceeding against Lessee. This Guaranty shall not be terminated,
affected or impaired in any manner by reason of: (1) the assertion by Lessor
against Lessee of any of the rights or remedies reserved to Lessor pursuant to
the provisions of the Lease; (2) the relief of Lessee from any of Lessee's
obligations under the Lease by operation of law or otherwise; (3) the
commencement of summary or other proceedings against Lessee; (4) the failure
of Lessor to enforce any of its rights against Lessee; or (5) the granting by
Lessor of any extensions of time to Lessee; and the undersigned hereby waives
all defenses of suretyship. The undersigned further covenants and agrees that:
(1) the undersigned shall be bound by all the provisions, terms, conditions,
restrictions and limitations contained in the Lease which are to be observed
or performed by Lessee thereunder, the same as if the undersigned were named
therein as Lessee; and (2) this Guaranty shall be absolute and unconditional
and shall be in full force and effect notwithstanding any amendment, addition,
assignment, sublease, transfer, renewal, extension or other modification of
the Lease, whether or not the undersigned shall have knowledge or have been
notified of or agreed or consented thereto. The failure of Lessor to insist in
any one or more instances upon strict performance or observance of any of the
terms, provisions or covenants of the Lease or to exercise any right therein
contained shall not be construed or deemed to be a waiver or relinquishment
for the future of such term, provisions, covenant or right but the same shall
continue and remain in full force and effect. If Lessor at any time is
compelled to take action, by legal proceedings or otherwise, to enforce or
compel compliance with the terms of this Guaranty, the undersigned shall, in
addition to any other rights or remedies to which Lessor may be entitled
hereunder or as a matter of law or in equity, pay to Lessor all costs,
including reasonable attorneys' fees, incurred or expended by Lessor in
connection therewith. In the event the Lease is disaffirmed by a Trustee in
Bankruptcy for Lessee, the undersigned agrees that it shall, at the election
of Lessor, either assume the Lease and perform all of the covenants, terms and
conditions of Lessee thereunder or enter into a new lease, which said new
lease shall be in form and substance identical to the Lease. All duties and
obligations of the undersigned pursuant to this Guaranty shall be binding upon
the successors and assigns of the undersigned. If the undersigned consists of
more than one person, then each such person shall be jointly and severally
liable for the obligations of he undersigned under this Guaranty.
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<PAGE>
For purposes of this Guaranty, the word "Lessee" shall also include the
successors and permitted assigns of Lessee. All capitalized terms used in this
Guaranty shall have the same meanings as are given to such terms in the Lease,
unless otherwise specifically defined in this Guaranty. This Guaranty shall be
governed and construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, this Guaranty is executed as of the FIRST day of
JANUARY, 1997.
BATTERIES, BATTERIES, INC.
By: /s/ Warren H. Haber
----------------------------------
CEO
Address:
-------------------------------------
-------------------------------------
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<PAGE>
FIRST AMENDMENT TO LEASE
This First Amendment to Lease dated as of this 1st day of January, 1997
by and between J.W.S. Partnership, an Illinois general partnership
(hereinafter referred to as "Lessor") and Battery Network, Inc., an Illinois
corporation (hereinafter referred to as "Lessee").
WITNESSETH
WHEREAS, Lessor and Lessee are parties to a certain Lease dated as of the
1st day of January, 1997 for the property commonly known as 50 Tannery Road,
Unit 2, North Branch, New Jersey 08876 for a five (5) year term commencing
January 1, 1997 and ending on December 31, 2001; and
WHEREAS, the parties hereto desire to amend the Lease to provide for an
option for an additional five (5) year term upon the expiration of the initial
five (5) year term of the Lease.
NOW THEREFORE, in consideration of the mutual covenants and conditions in
the Lease and as hereinafter contained, the parties agree as follows:
1. The Lease is hereby modified to add the following Sections 3102:
"3102. Lessee shall have the right, exercisable by giving
<PAGE>
written notice thereof to Lessor, at least six (6) months prior to
the expiration of the primary term of this Lease to extend the term
of this Lease for an additional term of five (5) years commencing on
January 1, 2002 and expiring on December 31, 2006, upon all of the
terms, covenants and conditions hereof except that the Minimal
Annual Rental shall be determined as hereinafter set forth in
Section 3102, provided that (i) Lessee shall not be in default
pursuant to the terms of this Lease as of the date of such exercise
and as of the commencement of such renewal term and (ii) there has
been no prior termination of this Lease."
2. The Lease is hereby modified to add the following Sections 3102:
"3102. The Minimal Annual Rental payable during the option period
shall be equal to the Minimal Annual Rental payable during the last
year of the initial term of the Lease subject to an increase
commencing with the first year of the option term in accordance with
the provisions of Sections 301(a)(ii). Each successive year of the
option term shall be subject to increase in accordance with the
provisions of said Sections 301 (a)(ii)."
3. Except as modified herein all terms and conditions of the Lease shall
remain in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this First
Amendment to Lease as of the date and year first above written.
LESSOR:
J.W.S. PARTNERSHIP
/s/ Susan Grandt
-------------------------
Susan Grandt
Title: General Partner
LESSEE:
BATTERY NETWORK, INC.
/s/ Susan Grandt
---------------------------
Susan Grandt
Title: President
3
<PAGE>
L E A S E
---------
THIS LEASE, effective as of this 1st day of January, 1997, between J.W.S.
PARTNERSHIP, an Illinois General Partnership (hereinafter referred to as
"Lessor,") and BATTERY NETWORK, INC., an Illinois corporation, (hereinafter
referred to as "Lessee").
W I T N E S S E T H:
PREMISES
--------
SECTION 101. Lessor, for and in consideration of the rents herein
reserved and of the covenants and agreements herein contained on the part of
the Lessee to be kept, observed and performed, does by these presents, demise
and lease to Lessee, and Lessee hereby hires and lets from Lessor, the real
estate commonly known as 50 Tannery Road, Unit 2, North Branch, NJ 08876, and
legally described on Exhibit A attached hereto and made a part hereof,
together with all improvements now located and hereinafter located thereon.
SECTION 102. Said real estate and improvements are sometimes herein
referred to as "demised premises."
TERM
----
SECTION 201. The term of this Lease shall be for a period of five (5)
years commencing on January 1, 1997, and terminating on December 31, 2001.
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<PAGE>
RENTAL
------
SECTION 301. Lessee agrees to pay as rental for the use and occupancy of
the demised premises, at the times and in the manner hereinafter provided, the
following sums of money:
(a) MINIMUM ANNUAL RENTAL: For the purposes hereof, "Minimum Annual
Rental" shall mean the amount provided in this Section 301, adjusted as
provided in this Lease.
(i) Lessee agrees to pay to Lessor without deduction or set-off
of any kind, the sum of Eighty Thousand Four Hundred and 00/100 ($80,400.00)
Dollars per annum as Minimum Annual Rental for the leased premises, said
Minimum Annual Rental to be payable in twelve (12) equal monthly installments
of Six Thousand Seven Hundred and 00/100 ($6,700.00) Dollars, in advance, upon
the first day of each and every month during the term hereof, commencing on
January 1, 1997 (the Rental Commencement) and, subject to the terms of this
Lease, ending upon the termination date of this Lease. In the event such
rental shall be determined to commence or end on a day other than the first
day of last day respectively of a month, then the monthly installment of the
Minimum Annual Rental for such partial month shall be prorated accordingly.
All past due rentals, additional rentals, and/or other sums due to Lessor
under the terms of this Lease shall bear interest from the due date until paid
by Lessee, at a rate equal to the then published prime rate of The First
National Bank of Chicago plus two percent (2%) (such rate of interest is
hereinafter referred to as the "Default Rate"); and such interest shall be
deemed to be additional rental. All rentals provided for in this Lease (those
hereinafter stipulated as well as said Minimum Annual Rental) shall be paid or
mailed to:
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<PAGE>
J.W.S. PARTNERSHIP
3731 Pitzen Road
McHenry, Illinois 60050, Attention: Ms. Susan Grandt
or to such other payee or address as Lessor may designate in writing to
Lessee. Payments shall be deemed made only upon receipt by such payee at such
address.
(ii) The Minimum Annual Rental shall be increased on each
anniversary of the Rental Commencement Date commencing with the second
anniversary of the Rental Commencement Date by an amount equal to the percent
increase of the Consumer Price Index (All items - Chicago-Gary-Lake County,
1982-84 = 100) ("Index") as published by the United States Department of
Labor, Bureau of Labor Statistics, for the "Comparison Month" (described
below) over the Index for the calendar month ("Base Month") which is two (2)
months prior to the first (1st) anniversary of the Rental Commencement Date.
The Base Month Index shall be compared with the Index for the month which is
two (2) months prior to the applicable anniversary of the Rental Commencement
Date ("Comparison Month"). If the Index for any Comparison Month is higher
than the Base Month Index, then the Minimum Annual Rental for the lease year
following the Comparison Month shall be increased commencing on each
anniversary of the Rental Commencement Date by a percentage which shall be
calculated by dividing that number which represents the difference when
subtracting the Base Month Index from the Index for any Comparison Month by
the Base Month Index. In no event, shall the Minimum Annual Rental be less
than 100% of the Minimum Annual Rent payable during the preceding year. If
said increase is determined after the rental has been paid for the month of
the anniversary of the Rental Commencement Date or subsequent months, Lessee
shall pay to Lessor the amount of any shortage upon demand. Should said Bureau
discontinue the
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<PAGE>
publication of the Index, or publish the same less frequently, or alter the
same in some other manner, then Lessor shall adopt a substitute Index or
substitute procedure which reasonably reflects and monitors consumer prices.
TAXES AND ASSESSMENTS
---------------------
SECTION 401: Lessee further agrees to pay as additional rent for the
demised premises, all taxes and assessments, general and special, water rates,
condominium assessments (if applicable), and all other impositions, ordinary
and extraordinary, of every kind and nature whatsoever, which may be levied,
assessed or imposed upon the demised premises or any part thereof or upon any
building or improvements at any time situated thereon, accruing or becoming
due and payable during the term of this Lease and any extension thereof
provided, however, that the general taxes levied against the demised premises
shall be prorated between Lessor and Lessee as of the date of expiration of
said term for the last year of the term hereof and any extension thereof, all
on the basis of the then last available tax bills.
SECTION 402. Nothing herein contained shall be construed to require
Lessee to pay any franchise, inheritance, estate, succession or transfer tax
of Lessor or any income or excess profits tax assessed upon or in respect of
any income of Lessor or chargeable to or required to be paid by Lessor unless
such tax shall be specifically levied against the gross income of Lessor
derived from the rent by this Lease reserved, expressly and as and for a
specific substitute for the real estate taxes, in whole or in part, upon the
demised premises or the improvements situated thereon, in which event said
rent shall be considered as the sole income of Lessor.
-4-
<PAGE>
SECTION 403. Upon written request, Lessee further agrees to deliver to
Lessor duplicate receipts or photostatic copies thereof showing the payment of
all said taxes, assessments and other impositions within thirty (30) days
after the due date for payment.
SECTION 404. Lessor shall, at her option, have the right at all times
during the term hereof to pay any such taxes, assessments or other charges or
impositions not paid by Lessee within thirty (30) days after the due date
thereof, and the amounts so paid, including reasonable expenses, interest and
penalties, if any, shall be so much additional rent due at the next rent day
after any such payments, with interest at The First National Bank of Chicago's
then prime rate plus two percent (2%) per annum from the date of payment
thereof.
SECTION 405. Lessee shall not be required to pay any tax, assessment, tax
lien or other imposition or charge upon or against said demised premises or
any part thereof or the improvements at any time situated thereon so long as
Lessee shall, in good faith and with due diligence, contest the same or the
validity thereof by appropriate legal proceedings which shall have the effect
of preventing the collection of the tax, assessments, tax lien or other
imposition or charge so contested, provided that, pending any such legal
proceedings Lessee shall give Lessor such reasonable security as may be
demanded by Lessor to ensure payment of the amount of the tax, assessment, tax
lien or other imposition or charge, and all interest and penalties thereon.
SECTION 406. In the event that Lessee at any time institutes suit to
recover any tax, assessment, tax lien or other imposition or charge paid by
Lessee under protest in Lessor's name, Lessee shall have the right at its own
sole expense, to institute and prosecute such suit or suits in Lessor's name,
in which event Lessee covenants and agrees to indemnify Lessor
-5-
<PAGE>
and save her harmless from and against all costs, charges or liabilities in
connection with any such suit. All funds recovered as a result of any such
suit shall belong to Lessee.
USE
---
SECTION 501. The demised premises may be used and occupied for
assembly, warehouse, office and related business purposes, provided, however,
that if the use thereof is other than assembly, warehouse, office and related
business purposes, then notwithstanding anything to the contrary hereinbefore
or hereinafter stated, if said use causes wear and tear to the leased premises
over and above the wear and tear the premises would have been subject to if
used for assembly, warehouse, office and related purposes, then Lessee shall
restore the premises at the end of the term or any extended term to the same
condition as the premises would have been had they been used for assembly,
warehouse, office and related purposes.
Lessee shall not use or occupy the demised premises or permit the demised
premises to be used or occupied contrary to any statute rule, order,
ordinance, requirement or regulation applicable thereto or in any manner which
would violate any certificate of occupancy affecting the same, or which cause
structural injury to the improvements or preclude the obtaining of insurance
as required under the terms of this Lease or cause the value or usefulness of
the demised premises or any part thereof to diminish or which would constitute
a public or private nuisance or waste, and Lessee agrees that it will,
promptly upon discovery of any such use, take all necessary steps to compel
the discontinuance of such use and to oust the principal occupant guilty of
such use.
-6-
<PAGE>
UTILITIES
---------
SECTION 601. Lessee agrees to pay or cause to be paid all charges for
gas, water, electricity, light, heat or power, telephone or other
communication service used, rendered or supplied upon or in connection with
the demised premises throughout the term of this Lease, (and if any of the
foregoing are not paid when due the same shall constitute additional rent
under this Lease), and to indemnify Lessor and save her harmless against any
liability or damages on such account. Lessee further shall, at its sole cost
and expense, procure any and all necessary permits, licenses or other
authorizations required for the lawful and proper installation and maintenance
upon the demised premises of wires, pipes, conduits, tubes and other equipment
and appliances for use in supplying any such service to and upon the demised
premises.
REPAIR AND MAINTENANCE OF PREMISES
----------------------------------
SECTION 701. Lessee shall be responsible for repairs to the building
systems, foundation, roof and structural members of the demised premises and
for structural repairs to the exterior walls. Lessee represents that it has
inspected the demised premises and accepts the demised premises in the
condition it is in at the commencement of this Lease and shall maintain said
demised premises in the same condition, order and repair as it is at said
time.
SECTION 702. Lessee covenants through the term of this Lease, at Lessee's
sole cost and expense, to take good care of the demised premises, the
buildings and improvements now or at any time erected thereon, including but
not limited to the equipment, fixtures, motors and machinery thereof, and the
parking areas, sidewalks, fences and vaults, if any, and to keep the same in
good order and condition (except for reasonable wear), and shall
-7-
<PAGE>
promptly, at Lessee's own cost and expense, make all necessary repairs,
structural and nonstructural, ordinary as well as extraordinary, foreseen as
well as unforeseen. The term "repairs" and "maintenance" shall include
replacements or renewals when necessary, and all such repairs made by Lessee
shall be equal in quality and class to the original work. At the termination
of this Lease, Lessee shall surrender the premises in the same condition as
when received, except for reasonable use and natural wear.
SECTION 703. All work done in connection with any repairs or alterations
shall be done in good and workmanlike manner and in compliance with building
and zoning ordinances, and with all other applicable laws, ordinances, rules,
regulations and requirements of all federal, state and municipal governments
or appropriate departments, commissions, boards and officers thereof, and in
accordance with the rules, orders and regulations of the fire underwriters.
Lessee shall provide lien waivers to Lessor and any other documentation which
may be reasonably required by any title company examining same to ensure
prompt and full payment for any such repairs.
SECTION 704. Lessor shall have the right at all times by its duly
authorized agents to go upon and inspect the demised premises during
reasonable business hours except in emergency situations, and Lessor may make
demand in writing upon Lessee to make any necessary repairs to the demised
premises, which are the obligation of Lessee. In the event that Lessee shall
fail to make any such repairs within thirty (30) days after notice by Lessor,
Lessor may enter upon the demised premises and cause such repairs to be made,
and charge the cost thereof to Lessee as additional rental with all the rights
and remedies hereinafter provided for the collection of rents, provided,
however, such payments must be reimbursed
-8-
<PAGE>
to Lessor within ten (10) days after Lessee's receipt of invoices for such
work and payments not made within such ten (10) day period shall bear interest
at a per annum rate equal to the First National Bank of Chicago's then prime
rate plus two percent (2%) from the date when the same was due hereunder until
the same shall be paid. Nothing herein shall imply any duty upon the part of
the Lessor to do any such work, which, under provision of this Lease, Lessee
shall be required to perform and the performance thereof by Lessor shall not
constitute a waiver of Lessee's default in failing to perform the same. Lessor
may, during the progress of any work in the demised premises, keep and store
upon the demised premises all necessary materials, tools and equipment. Lessor
shall not in any event be liable for inconvenience, annoyance, disturbance,
loss of business or other damages to Lessee by reason of making repairs or the
performance of any work in the demised premises during the course thereof, and
the obligation of Lessee under this Lease shall not thereafter be affected in
any manner whatsoever. Lessor agrees, however, in connection with the doing of
any such work, to cause as little inconvenience, annoyance, disturbance, loss
of business or other damage to Lessee as may reasonably be possible in the
circumstances.
LIABILITY AND BOILER INSURANCE
------------------------------
SECTION 801. Lessee further agrees that it will at all times during the
term hereof, carry and maintain, for the mutual benefit or Lessor and Lessee,
general public liability insurance against claims for personal injury,
sickness or disease, including death and property damage in, on or about the
demised premises, or in, on or about the streets, sidewalks or premises
adjacent to the demised premises, such insurance to afford protection to the
limit of not less than One Million and 00/100 Dollars ($1,000,000.00) bodily
injury
-9-
<PAGE>
and property damage per occurrence. Lessee shall furnish Lessor with a
duplicate certificate or certificates of such insurance policy or policies
naming Lessor and its beneficiary as additional insured. All such insurance
shall be procured from a responsible company or companies reasonably
satisfactory to Lessor and authorized to do business in the state where the
demised premises are located and may be obtained by Lessee by endorsement on
its blanket insurance policies, provided the insurance company or companies
are reasonably satisfactory to Lessor. All such policies shall provide that
the same may not be canceled or altered except upon thirty (30) days' prior
written notice to Lessor.
FIRE INSURANCE
--------------
SECTION 901. Lessee shall, at all times during the term of this
Lease, at its expense, keep in effect, insurance on all buildings and
improvements on the demised premises against loss by fire, the risks covered
by what is commonly known as "extended coverage," malicious mischief and
vandalism, in an amount equal to the replacement value, excluding foundation,
from time to time, of such buildings and improvements. The policy or policies
evidencing such insurance shall be written by a company or companies
reasonably satisfactory to Lessor and authorized to do business in the state
where the demised premises are located, and shall provide that losses shall be
paid to said Lessor and Lessee. The deductible on Lessee's fire insurance
shall not exceed $1,000.00. Lessor and its beneficiary shall be named as loss
payee on said policy. The policy shall contain a waiver by the insurance
company of recourse against Lessor and Lessee and their officers and agents
because of any act or negligence of Lessor or Lessee and shall further provide
that the same
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<PAGE>
shall not be canceled or altered except upon ten (10) days prior written
notice to Lessor and to its mortgagee.
SECTION 902. In case Lessee shall at any time fail, neglect or refuse to
insure such buildings and improvements and to keep the same insured as
hereinabove provided, then Lessor may, at her election, procure or renew such
insurance, and any amounts paid therefor by Lessor shall be so much additional
rental due at the next rent day after any such payment, with interest at a per
annum rate equal to The First National Bank of Chicago's then prime rate, plus
two (2%) percent, from the date of payment thereof.
SECTION 903. It is further agreed that, in the event of loss under any
such policy or policies, the insurance proceeds shall be deposited into an
escrow at Chicago Title Insurance Company and paid out during the course of
Lessee's repairs and rebuilding upon deposit of proper lien waiver
documentation and architects' certificates, and providing the terms of Section
1002 shall be complied with, for the expense of repairing or rebuilding the
buildings or improvements which have been damaged or destroyed, provided,
however, that it shall first appear to the reasonable satisfaction of Lessor
that the amount of insurance money in its hands shall at all times be
sufficient to pay for the completion of said repairs and rebuilding; and upon
the completion of said repairs or rebuilding, free from all liens of mechanics
and materialmen and others, any surplus of insurance money shall be paid to
Lessor. In the event the insurance proceeds are not sufficient to complete the
repairs or rebuilding, Lessee shall immediately deposit with Lessor a sum
sufficient to increase the monies on deposit to an amount equal to the cost or
repairing or rebuilding the buildings or improvements. The cost of said escrow
shall be paid by Lessee.
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<PAGE>
DAMAGE OR DESTRUCTION
---------------------
SECTION 1001. Lessee further agrees that in case of damage to or
destruction of any building or improvements on the demised premises or of the
fixtures and equipment therein, by fire or other casualty, it will promptly
repair, restore or rebuild the same to a condition equal to or greater than
existed immediately prior to such damage. Lessor shall cooperate with Lessee
in the event the damage is caused by an insurable risk and shall make
available to Lessee for said repair or rebuilding the entire insurance
proceeds arising out of such damage or destruction. Rent shall not abate
during the period of such repair, restoration or rebuilding or if the
improvements are not tenantable because of such damage or destruction.
SECTION 1002. Before commencing such repairing, restoration or
rebuilding, involving an estimated cost of more than One Hundred Thousand and
00/100 Dollars ($100,000.00), (a) plans and specifications therefor shall have
been submitted to and approved by Lessor, provided, however, that Lessor shall
not unreasonably withhold nor delay its approval and further provide that
Lessor shall be deemed to have approved such plans and specifications if they
provide for repair, restoration or rebuilding to a condition substantially
similar to the condition existing prior to the occurrence of the damage or
destruction; (b) Lessee shall have furnished to Lessor, an estimate of the
cost of the proposed work certified by a licensed architect by whom such plans
and specifications shall have been prepared; and (c) Lessee shall establish a
construction escrow at Chicago Title Insurance Company and otherwise comply
with the terms and provisions of Section 903.
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<PAGE>
LIENS
-----
SECTION 1101. Lessee shall not do any act which shall in any way encumber
the title of Lessor in and to said demised premises nor shall the interest or
estate of Lessor in said demised premises be in any way subject to any claim
by way of lien or encumbrance, whether by operation of law or by virtue of any
express or implied contract by Lessee, and any claim to or lien upon said
demised premises arising from any act or omission of Lessee shall accrue only
against the leasehold estate of Lessee and shall in all respects be subject
and subordinate to the paramount title and rights of Lessor in and to said
premises and the buildings and improvements thereon.
Lessee will not permit the demised premises to become subject to any
mechanic's, laborers' or materialmen's lien on account of labor or materials
furnished to Lessee or claimed to have been furnished to Lessee in connection
with work of any character performed or claimed to have been performed on the
demised premises by or at the direction or sufferance of Lessee; provided,
however, that Lessee shall have the right to contest in good faith and with
reasonable diligence, the validity of any such lien or claimed lien if Lessee
shall give to Lessor reasonable security to ensure payment thereof and to
prevent any sale, foreclosure or forfeiture of the demised premises by reason
of nonpayment thereof; provided on final determination of the lien or claim
for lien, Lessee will immediately pay any judgment rendered, with all proper
costs and charges, and will, at its own expense, have the lien released and
any judgment satisfied. Lessee shall remove or bond over any such lien claim
within thirty (30) says after receipt of written notice from Lessor.
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<PAGE>
SECTION 1102. In case Lessee shall fail to contest the validity of any
lien or claimed lien and give security to Lessor to ensure payment thereof, or
having commenced to contest the same and having given such security, shall
fail to prosecute such contest with diligence, or shall fail to have the same
released and satisfy any judgment rendered thereon, then Lessor may, at its
election (but shall not be required so to do) remove or discharge such lien or
claim for lien (with the right, in its discretion, to settle or compromise the
same) and any amounts advanced by Lessor for such purposes shall be so much
additional rental due from Lessee to Lessor at the next rental day after any
such payment, with interest at a per annum rate equal to The First National
Bank of Chicago's then prime rate, plus two (2%) percent, from the date of
payment thereof.
CONDEMNATION
------------
SECTION 1201. In the event the whole of the demised premises shall be
taken or condemned for a public or quasi-public use or purpose by any
competent authority, then the term of this Lease shall terminate when
possession of the demised premises shall be required for such use or purpose.
SECTION 1202. In the event only a portion of the demised premises shall
be taken or condemned for a public or quasi-public use or purpose by any
competent authority, and as a result thereof this Lease may not be terminated
as per the terms of Section 1203 by Lessee as to a portion of the demised
premises, then Lessor at her sole cost and expense shall repair and restore
the demised premises to a condition substantially similar to the condition
which existed prior to the taking, which restoration shall take place after
Lessor has been paid the condemnation proceeds. Further the annual net rental
due under the terms of this Lease shall
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<PAGE>
be reduced on a pro rata basis based upon the reduction of square footage of
the building from the size of the original building.
SECTION 1203. In the event in excess of fifty (50%) percent of the square
footage of the building shall be taken for public or quasi-public purposes,
and the remaining portion of any such parcel is not suitable for the purpose
for which it is then being used, then Lessee shall have the option of
terminating this Lease on the date possession of the parcel or parcels is
surrendered to the governmental agency condemning the same, by giving written
notice to Lessor of its election so to do, which notice must be given within
sixty (60) days of the date of the notice given to the parties of such
condemnation. In the event such option to terminate is not so exercised within
the sixty (60) day period, then it cannot be exercised thereafter but the
annual net rental due under the terms of this Lease shall be reduced on a pro
rata basis based upon the reduction of square footage from the size of the
original parcel. Also, if such option to terminate is not so exercised Lessor
shall, at its sole cost and expense, repair and restore as set forth in
Section 1202.
It is further understood and agreed that anything notwithstanding stated
in Section 1203 Lessor shall not be required to restore any leasehold
improvements to which Lessee will be entitled to a portion of the award as
specified in Section 1204 of this Lease.
SECTION 1204. It is expressly agreed and understood that all sums awarded
or allowed for such taking of said leased premises or any part thereof, or for
damages for such taking, or paid in lieu thereof, shall belong to Lessor, and
the same are hereby assigned to Lessor, and Lessee shall have no interest in
or claim to such award, or any part thereof, whether such award shall be for
the taking of such property or for damages or otherwise. Lessee
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<PAGE>
may, at its own expense, take independent proceedings against the public
authority exercising the power of Eminent Domain, to prove and establish any
damage Lessee may have sustained.
RENT ABSOLUTE
-------------
SECTION 1301. Except as otherwise specifically provided herein, damage to
or destruction of any portion or all of the buildings, structures and fixtures
upon the demised premises, by fire, the elements or any other cause
whatsoever, whether with or without fault on the part of Lessee, shall not
terminate this Lease or entitle Lessee to any abatement of or reduction in the
rent payable, or otherwise affect the respective obligations of the parties
hereto, any present or future law to the contrary notwithstanding. If the use
of demised premises for any purpose should at any time during the term of this
Lease, be prohibited by law or ordinance or other governmental regulation, or
prevented by injunction, this Lease shall not, except as otherwise
specifically provided herein, be thereby terminated, nor shall Lessee be
entitled by reason thereof to surrender the demised premises or to any
abatement or reduction in rent.
ASSIGNMENT AND SUBLET
---------------------
SECTION 1401. Lessee shall not have the right without the written consent
of Lessor to assign this Lease or to sublet all or any portion or portions of
the demised premises, provided, however, such consent shall not be
unreasonably withheld. In the event of any assignment, letting or subletting,
Lessee shall remain liable to Lessor for the performance of all the
obligations imposed on Lessee under the terms of this Lease, and with such
assignee or sublessee shall be jointly and severally bound to abide by the
terms of this Lease, and said
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Lessee shall obtain from its assignee or sublessee such forms or other
documents as may be reasonably required by Lessor to bind such assignee or
sublessee, together with Lessee, to the terms and obligations of this Lease.
No sublessee or assignee shall have the right to pay the mortgage on the
premises directly to the Mortgagee or the right to exercise the right of first
refusal, the right of first offer or the rights to extend the term of the
lease.
SECTION 1402. Lessor shall have the absolute right to sell, assign,
transfer, set over and convey any or all of its right, title and interest in
and to this Lease, including the rent to accrue hereunder.
RESPONSIBILITY OF LESSEE
------------------------
SECTION 1501. Lessee agrees to indemnify and save harmless Lessor against
and from any and all claims, costs, losses, expenses and fees by or on behalf
of any person or persons, firm or firms, corporation or corporations,
municipality, state or federal agency or entity, arising from the conduct or
management of or from any work or thing whatsoever, done in or about the
demised premises during the term hereof and to further indemnify and save
Lessor harmless against and from any and all claims, costs, losses, expenses
and fees arising during the term of this Lease from the demised premises, or
any vaults, passageways or spaces therein or appurtenant thereto, or signs
affixed to the demised premises, or arising from any breach or default on the
part of Lessee in the performance of any covenant or agreement on the part of
Lessee to be performed pursuant to the terms of this Lease or arising from any
act of negligence of Lessee, or any of its agents, contractors, servants,
employees or licensees, or arising from any accident, injury or damage
whatsoever caused to any person, firm or corporation occurring during the term
of this Lease in or about the
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demised premises, or upon or under the sidewalk and the land adjacent thereto,
and from and against all costs, counsel fees, expenses and liabilities
incurred in or about any such claim or action or proceeding brought thereon,
and in case any action or proceeding be brought against Lessor by reason of
any such claim, Lessee, upon notice from Lessor, covenants to resist or defend
such action or proceeding, with counsel reasonably acceptable to Lessor,
provided, however, that Lessee shall not be liable for acts or omissions of
Lessor, its agents or employees.
INDEMNITY FOR LITIGATION
------------------------
SECTION 1601. Lessee further agrees to pay all costs and expenses,
including attorneys fees, which may be incurred by or imposed on Lessor in
enforcing this Lease, and if paid by Lessor, shall be so much additional rent
due on the next rent date after such payment together with interest at a per
annum rate equal to The First National Bank of Chicago's then prime rate, plus
two (2%) percent, from the date of payment thereof. Anything to the contrary
notwithstanding under Section 1601, the Lessee's obligation to pay costs,
expense and attorneys' fees as provided in this section shall apply only if
Lessor is successful in any litigation involving the enforcement of this Lease
by Lessor. Lessor shall be obligated to pay all Lessee's costs, expenses and
attorneys' fees incurred by Lessee because of Lessee, through no fault of
Lessee, becoming a defendant in any litigation arising out of this Lease.
ESTOPPEL CERTIFICATE
--------------------
SECTION 1701. Lessee further agrees at any time and from time to time,
upon not less than ten (10) days prior written request by Lessor, to execute,
acknowledge and deliver to
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Lessor a statement in writing certifying that this Lease is unmodified and in
full force and effect if such be the case (or if there have been
modifications, that the same is in full force and effect as modified, and
stating the modifications) and the date to which the rental and other charges
have been paid in advance, if any, and such other representations as may be
reasonably requested by Lessor, it being intended that any such statement
delivered pursuant to this Section 1701, may be relied upon by a prospective
purchaser of the fee, or mortgagee or assignee of any mortgage upon the fee of
the demised premises.
ALTERATIONS
-----------
SECTION 1801. Lessee shall not make any exterior or interior, structural
alterations, improvements or additions to the demised premises without the
prior written consent of Lessor, which consent will not be unreasonably
withheld. Lessee shall pay the entire cost of all such alterations,
improvements or additions. All alterations, improvements, additions or
fixtures installed upon the premises shall remain upon the premises at the
expiration or sooner termination of this Lease and become the property of
Lessor, excepting such trade fixtures that are susceptible of removal without
structural damage or injury to said premises, provided such removal shall not
damage the premises in such manner as to reduce its value and that Lessee
shall restore as hereinafter provided. In the event of the removal of any such
trade fixtures, Lessee shall place that portion of the demised premises in the
same condition as prior to the installation or placement thereof. Lessor may,
upon the termination of this Lease, give written notice to Lessee to remove,
and thereupon Lessee shall remove such alterations, improvements and
additions, and restore the premises to the same good order and
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condition in which they were prior to the making of such alterations,
additions or improvements, except for reasonable use and natural wear.
SECTION 1802: Lessor may require, as a condition for its consent to the
making of any exterior and interior alterations, additions or improvements,
Lessee's compliance with Section 1002 and proof of the procurement of all
municipal permits and other governmental permits for such alteration, approval
of Lessor of detailed plans and specifications for any structural change or
alterations, which approval shall not be unreasonably withheld, and
satisfactory guarantee against mechanics' liens. Lessor may also require proof
of workmen's compensation, public liability and property damage insurance in
amounts and in companies reasonably satisfactory to Lessor, including
insurance coverage for Lessor and its beneficiary from all major contractors
employed for such alterations. All payments for such work shall be processed
in the manner set forth in Section 903 through an escrow at Chicago Title
Insurance Company.
SECTION 1803. In the event Lessor has consented to Lessee's alteration,
Lessee shall submit to Lessor copies of all architectural, structural and
mechanical drawings, plans and specifications for the proposed work, as well
as copies of all contracts let or to be let for the work.
DISPLAY OF SIGNS
----------------
SECTION 1901. Lessor is hereby given the right, during usual business
hours to enter and inspect the demised premises and to exhibit the same to
prospective purchasers. Lessor shall also have the right, during the last six
(6) months of the term of this Lease, to display the usual "for sale" or "for
rent" signs in such manner as to not unreasonably interfere with
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Lessee's business, and the Lessee agrees that such signs may remain unmolested
upon the demised premises.
SECTION 1902. Lessee shall have the right to install, maintain and
display upon the demised premises such inside and outside signs as Lessee may
reasonably deem necessary or desirable for the carrying on of its business,
provided that such signs shall be restricted to those advertising Lessee's
name or the products manufactured or sold by Lessee, and shall comply with all
local, county or state laws, or any regulations and restrictions applicable
thereto. Lessee agrees that all signs installed by it shall not hinder the
obtaining of any liability or fire insurance required under the terms of this
Lease and shall not create any damage to the premises being leased at the time
of installation. Further, Lessee agrees that at the time this Lease is
terminated, Lessee shall remove the signs upon request by Lessor and repair or
replace at Lessee's cost any damage done by installation thereof, normal wear
and tear excepted.
SECTION 1903. It is expressly understood and agreed that this Lease shall
be subject and subordinate to any mortgage or mortgages or deed of trust now
upon the demised premises and be subject and subordinate to any first mortgage
hereafter placed upon the demised premises by Lessor. Lessee agrees to
execute, if the same is required within ten (10) days of submission to Lessee,
any and all instruments in writing which may be requested by Lessor to
subordinate Lessee's rights acquired by the Lease to the lien of any mortgage
described herein.
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<PAGE>
NON-LIABILITY OF LESSOR
-----------------------
SECTION 2001. To the extent permitted by law, Lessor shall not be liable
to Lessee or to its officers, agents and employees for any injury done or
occasioned by wind or by or from any defect of plumbing, electric wiring or of
insulation thereof, gas pipes, water pipes or steam pipes, or from broken
stairs, railings or walks, or from the backing up of sewer pipe or downspout,
or from the bursting, leaking or running of any tank, tub, washstand, water
closet or waste pipe, drain, or any other pipe or tank in, upon or about the
premises or the building of which they are a part nor from the escape of steam
or hot water from any radiator, it being agreed that said radiators are under
the control of Lessee, nor for any such damage or injury occasioned by water,
snow or ice being upon or coming through the roof, skylight, trap door,
stairs, walks or any other place upon or near the premises, or otherwise, nor
for any such damage or injury done or occasioned by the falling of any
fixture, nor for any damage or injury arising from any act, omission, or
negligence of other persons, occupants of adjoining or contiguous buildings or
of owners of adjacent or contiguous property, or of Lessor's agents, employees
or officers, all claims for any such damage or injury being hereby expressly
waived by Lessee.
COVENANT OF QUIET POSSESSION
----------------------------
SECTION 2101. The Lessee, upon the payment of the rent herein reserved
and upon the performance of all the terms of this Lease, shall at all times
during the lease term and during any extension or renewal term peaceably and
quietly enjoy the leased property without any disturbance from the Lessor or
from any other person claiming through the Lessor.
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<PAGE>
DEFAULT AND LESSOR'S REMEDIES
-----------------------------
SECTION 2201. The following events shall constitute a default by Lessee:
(a) Failure to pay any of the rentals or other monies provided to be
paid herein within five (5) days after the due date for payment of
rentals or other monies due to Lessor;
(b) Failure to pay, when due, any taxes, assessments or other
charges as required herein, unless in the case of taxes or assessments
there be a permissive contest as authorized in this Lease;
(c) Failure to observe or perform any other covenants, conditions,
agreements or provisions hereof, which are not remedied within thirty
(30) days after notice of such default in writing from Lessor or in the
case of such covenants, conditions, agreements or provisions which are
not capable of being remedied within thirty (30) days, the failure to
diligently proceed to remedy such covenant, condition, agreement or
provision continuously to completion;
(d) If Lessee makes an assignment for the benefit of creditors, or
applies for or consents to the appointment of a trustee or receiver for
all or for a major part of its property;
(e) If a trustee or receiver is appointed for Lessee or for the
major part of its property and is not discharged within ninety (90) days
after such appointment;
(f) If bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings for relief under any
bankruptcy law or similar law for the relief of debtors is instituted by
or against Lessee, and if instituted against
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<PAGE>
Lessee, is allowed against Lessee, or is consented to, or is not
dismissed within ninety (90) days after such institution;
SECTION 2202. In the case of any default as hereinabove provided, Lessor
may, at her option, exercise any one or more of the following remedies:
(a) Lessor may terminate this Lease by giving to Lessee notice of
Lessor's intention so to do, in which event the term of this Lease or any
renewal thereof shall end, and all right, title and interest of Lessee
hereunder shall expire on the date stated in such notice, which shall not
be less than ten (10) days after the date of the notice by Lessor of her
intention so to terminate;
(b) Lessor may terminate the right to Lessee to possession of the
premises by giving notice to Lessee that Lessee's right of possession
shall end on the date stated in such notice, which shall not be less than
ten (10) days from the date of such notice, whereupon the right of Lessee
to the possession of the premises or any part thereof shall cease on the
date stated in such notice;
(c) Lessor may enforce the provisions of this Lease and may enforce
and protect the rights of Lessor hereunder by actions in equity or at law
for the specific performance of any covenant or agreement contained
herein or for the enforcement of any other appropriate legal or equitable
remedy.
SECTION 2203. If Lessor exercises either of the remedies provided for in
Section 2202(a) or 2202(b) aforesaid, Lessor may then or at any time
thereafter reenter and take complete and peaceful possession of the premises,
with process of law, and may remove all
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<PAGE>
persons therefrom, and Lessee covenants in any such event peacefully and
quietly to yield up and surrender the premises to Lessor.
SECTION 2204. If Lessor terminates the right of possession as provided in
Section 2202(a) or 2202(b), Lessor may reenter the premises and take
possession of all thereof (including any and all equipment and apparatus
thereon), may remove any portion of the equipment, machinery, or apparatus
thereon which Lessor elects so to do, and shall, sublet or re-let, for the
account and benefit of Lessee, the premises or any part thereof from time to
time for all or any part of the unexpired part of the then term hereof, or for
a longer period for such reasonable rents and on such reasonable terms and
conditions and to such persons and for such periods as may seem reasonably fit
to Lessor. Lessor agrees to accept or receive any reasonable tenant offered by
Lessee. Lessor may collect the rents from such re-letting or subletting, and
apply the same, first, to the payment of the expenses of reentry and
re-letting, including commissions to agents, and such expenses as Lessor may
have incurred in putting the premises in good order and condition, or
preparing or altering the same for re-letting, and all other expenses and
charges paid, assumed or incurred by Lessor in or about re-letting the
premises, and, secondly, to the fixed dollar rentals herein provided to be
paid by Lessee, and in the event that the proceeds of such re-letting or
subletting are not sufficient to pay in the foregoing, Lessee shall remain and
be liable therefor, and Lessee promises and agrees to pay the amount of any
such deficiency from time to time on the demand of Lessor, and Lessor may at
any time and from time to time sue and recover judgment for any such
deficiency or deficiencies. Any such re-letting may be for the remainder of
the term or any renewal term of this Lease or for a longer or shorter period.
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Lessor shall be entitled, notwithstanding any other provision of this Lease,
or Lessee's estate, to the extent permitted by law, the amount of damages
which Lessor sustains by reason of Lessee's default, including the right to
recover the difference between the total rent, taxes and charges which the
Lessor is able to obtain in a new lease for the balance of the term. The
acceptance of a tenant by Lessor, in place of Lessee, shall not operate as a
cancellation hereof, nor release Lessee from the performance of any covenant,
promise or agreement herein contained, and performance by any substituted
tenant by the payment of rent, or otherwise, shall constitute only
satisfaction pro tanto of the obligations of Lessee arising hereunder.
SECTION 2205. In the event of the termination of this Lease by Lessor as
provided for in Section 2202(a) hereof, Lessor shall be entitled to recover
from Lessee all the fixed dollar rentals accrued and unpaid for the period up
to and including such termination date, as well as all other additional sums
payable by Lessee, or for which Lessee is liable or in respect to which
Lessee, under any of the provisions hereof, has agreed to indemnify Lessor,
which may be then owing and unpaid, and all costs and expenses, including
court costs and reasonable attorneys' fees incurred by Lessor in the
enforcement of her rights and remedies hereunder. In addition, Lessee shall
pay to Lessor as damages the discounted present value (at the then Federal
Reserve Bank discount rate) of the aggregate rent and other charges during the
period commencing with the termination date and ending on the expiration date
of this Lease.
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<PAGE>
NOTICES OR DEMANDS
------------------
SECTION 2301. All notices to or demands upon Lessor or Lessee desired or
required to be given under any of the provisions hereof, shall be in writing.
Any notice or demand from Lessor to Lessee shall be deemed to have been fully
and sufficiently given if a copy thereof has been delivered personally, or
mailed by United States registered or certified mail, return receipt
requested, in an envelope properly stamped and addressed to Lessee at
_____________________________________, or at such other address as Lessee may
theretofore have furnished by written notice to Lessor; with a copy of any
such notice to Leo Silverstein, Brock, Fensterstock, Silverstein, McAuliffe &
Wade, L.L.C., One Citicorp Center, 153 E. 53rd Street, 56th Floor, New York,
NY 10022, and any notice or demand from Lessee to Lessor shall be deemed to
have been duly and sufficiently given if a copy thereof has been delivered
personally or mailed United States registered or certified mail, return
receipt requested, in an envelope properly stamped and addressed to Lessor at
3731 Pitzen Road, McHenry, Illinois, 60050, at such other address as Lessor
may theretofore have furnished by written notice to Lessee, and a copy to
Michael R. Wolfe, Berger, Newmark & Fenchel, P.C., 222 N. LaSalle, Suite 1900,
Chicago, IL 60601.
COVENANTS OF LEASE EXTEND TO
ASSIGNS, SUCCESSORS & TRANSFEREES
---------------------------------
SECTION 2401. All of the covenants, agreements, conditions and
undertakings in this Lease contained shall extend and inure to and be binding
upon the heirs, executors, administrators, successors and assigns of the
respective parties hereto, the same as if they were in every case specifically
named, and wherever in this Lease reference is made to either of the parties
hereto, it shall be held to include and apply to, wherever applicable, the
heirs,
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executors, administrators, successors and assigns of such party. Nothing
herein contained shall be construed to grant or confer upon any person or
persons, firm, corporation or governmental authority, other than the parties
hereto, their heirs, executors, administrators, successors and assigns, any
right, claim or privilege by virtue of any covenant, agreement, condition or
undertaking in this Lease contained.
SECTION 2402. The term "Lessor" as used in this Lease, so far as
covenants or obligations on the part of Lessor are concerned, shall be limited
to mean and include only the owner or owners at the time in question of the
fee of the demised premises, and in the event of any transfer or transfers of
the title to such fee, Lessor herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall be automatically freed and
relieved, from and after the date of such transfer or conveyance, of all
personal liability as respects the performance of any covenants or obligations
on the part of Lessor contained in this Lease thereafter to be performed;
provided that any funds in the hands of such Lessor or the then grantor at the
time of such transfer, in which Lessee has an interest, shall be turned over
to the grantee, and any amount then due and payable to Lessee by Lessor or the
then grantor under any provisions of this Lease, shall be paid to Lessee.
TIME OF ESSENCE
---------------
SECTION 2501. Time is of the essence of this Lease, and all provisions
herein relating thereto shall be strictly construed.
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MISCELLANEOUS
-------------
SECTION 2601. The captions of this Lease are for convenience only and are
not to be construed as part of this Lease and shall not be construed as
defining or limited in any way the scope or intent of the provisions hereof.
SECTION 2602. If any term or provision of this Lease shall to any extent
be held invalid or unenforceable, the remaining terms and provisions of this
Lease shall not be affected thereby, but each term and provision of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
SECTION 2603. This Lease shall be construed and enforced in accordance
with the laws of the State of New Jersey.
SECTION 2604. Lessee hereby waives any and all rights it may have to
demand a jury trial in any proceedings arising out of this Lease.
SECTION 2605. The obligations of this Lease shall run with the land, and
this Lease shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. No owner of the demised
premises shall be liable under this Lease except for breaches of Lessor's
obligations occurring while owner of the demised premises. The obligations of
Lessor shall be binding upon the assets of Lessor which comprise the demised
premises but not upon other assets of Lessor. No individual partner, member,
trustee, employee, or beneficiary of Lessor shall be personally liable under
this Lease and Lessee shall look solely to Lessor's interest in the demised
premises in pursuit of its remedies upon an event of default hereunder, and
the general assets of Lessor and its partners, members, trustees,
stockholders, officers, employees or beneficiaries of Lessor shall not be
subject to levy, execution or other enforcement procedure for the satisfaction
of the remedies of Lessee.
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SECTION 2606. All waivers shall be in writing and signed by the waiving
party. Lessor's failure to enforce any provision of this Lease or its
acceptance of Rent shall not be a waiver and shall not prevent Lessor from
enforcing that provision or any other provision of this Lease in the future.
No statement on a payment check from Lessee or in a letter accompanying a
payment check shall be binding on Lessor. Lessor may, with or without notice
to Lessee, negotiate such check without being bound by to the conditions of
such statement.
SECTION 2607. If Lessee is a corporation, each person signing this Lease
on behalf of Lessee represents and warrants that (s)he has full authority to
do so and that this Lease binds the corporation. Within thirty (30) days after
this Lease is signed, Lessee shall deliver to Lessor a certified copy of a
resolution of Lessee's Board of Directors authorizing the execution of this
Lease or other evidence of such authority reasonably acceptable to Lessor.
SECTION 2608. This Lease may be executed in counterparts and, when all
counterpart documents are executed, the counterparts shall constitute a single
binding instrument. Lessor's delivery of this Lease to Lessee shall not be
deemed to be an offer to lease and shall not be binding upon either party
until executed and delivered by both parties.
SECTION 2609. All representations and warranties of Lessor and Lessee
shall survive the termination of this Lease.
SECTION 2610. Lessor and Lessee expressly agree that there are and shall
be no implied warranties of merchantability, habitability, suitability,
fitness for a particular purpose or of any other kind arising out of this
Lease, and there are no warranties which extend beyond those expressly set
forth in this Lease without limiting the generality of the foregoing, Lessee
expressly acknowledges that Lessor has made no warranties or representations
concerning any Hazardous Materials or other environmental matters
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affecting any part of the Property and Lessor hereby expressly disclaims and
Lessee waives any express or implied warranties with respect to any such
matters.
SECTION 2611. Lessee represents and warrants to Lessor that there are no
agents, brokers, finders or other parties with whom Lessee has dealt who may
be entitled to any commission or fee with respect to this Lease or the demised
premises. Lessee agrees to indemnify and hold Lessor harmless from any claim,
demand, cost or liability, including, without limitation, attorneys' fees and
expenses, asserted by any party based upon dealings of that party with Lessee.
SECTION 2612. Lessee shall accept the demised premises and the Premises
in their condition as of the execution of the Lease, subject to all recorded
matters, laws, ordinances, and governmental regulations and orders. Except as
provided herein, Lessee acknowledges that neither Lessor nor any agent of
Lessor has made any representation as to the condition of the demised premises
or the suitability of the demised premises for Lessee's intended use. Lessee
represents and warrants that Lessee has made its own inspection of and inquiry
regarding the condition of the demised premises and is not relying on any
representations of Lessor or any Broker with respect thereto.
SECTION 2613. Lessee shall cause a Guaranty in form and substance, as
attached hereto and made a part hereof as Exhibit B, to be executed by the
Guarantor named herein. Any dishonor or purported repudiation of said Guaranty
by, or insolvency, bankruptcy or dissolution of said Guarantor shall be a
default hereunder.
REMEDIES TO BE CUMULATIVE
-------------------------
SECTION 2701. No remedy herein or otherwise conferred upon or reserved to
Lessor, shall be considered exclusive of any other remedy, but the same shall
be cumulative and shall be in addition to every other remedy given hereunder
now or hereafter existing at law or in
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equity or by statute, and every power and remedy given by this Lease to Lessor
may be exercised from time to time and as often as occasion may arise or as
may be deemed expedient. No delay or omission of Lessor to exercise any right
or power arising from any default, shall impair any such right or power or
shall be construed to be a waiver of any such default or an acquiescence
therein.
SECTION 2702. No waiver of any breach of any of the covenants of this
Lease shall be construed, taken or held to be a waiver of any other breach or
waiver, acquiescence in or consent to any further or succeeding breach of the
same covenant.
SECTION 2703. Neither the rights herein given to receive, collect, sue
for or distrain for any rent or rents, moneys or payments or to enforce the
terms, provisions and conditions of this Lease, or to prevent the breach or
nonobservance thereof, or the exercise of any such right or of any other right
or remedy hereunder or otherwise granted or arising, shall in any way affect
or impair or toll the right or power of Lessor to declare the term hereby
granted ended, and to terminate this Lease as provided for in this Lease,
because of any default in or breach of the covenants, provisions or conditions
of this Lease.
SECTION 2704. In the event Lessor shall fail to pay any sum due under any
mortgage upon the demised premises to which this Lease is subordinate, or
commit any other default thereunder, Lessee shall have the right at its sole
option to pay such sum or cure such default on behalf of Lessor and any sums
expended by Lessee to cure such default shall be paid by Lessor to Lessee upon
demand and, if not so paid, Lessee shall have the right to deduct such sums
from rentals due hereunder.
HOLDOVER
--------
SECTION 2801. Lessee will, at termination of this Lease by lapse of time
or otherwise, yield up immediate possession to Lessor, and failing so to do,
will pay as liquidated
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damages, for each and every month or partial month during which Lessee shall
withhold possession, a sum of money equal to one hundred fifty percent (150%)
of the monthly rental (the Minimum Annual Rental and any further rent) in
effect and payable just prior to the termination of this Lease; but the
provisions hereof shall not be held as a waiver by Lessor of any right granted
to Lessor in this Lease.
STATUTORY COMPLIANCE
--------------------
SECTION 2901. Lessee acknowledges and warrants and represents to
Lessor that the Lessee at all times during its occupancy of the demised
premises shall be:
a) in full compliance with any and all applicable state, federal and
local laws, ordinances, rules, regulations and policies as more fully set
forth in the Americans with Disabilities Act of 1990, 42 U.S.C. ss.12101
et seq.;
b) the demised premises shall be in compliance with the public
accommodation provisions of the Americans with Disabilities Act of 1990,
and with any and all other applicable related federal, state and local
laws, ordinances, rules, regulations and policies;
c) the demised premises shall be in compliance with all federal,
state and local laws, ordinances, rules, regulations and policies; and
d) the Lessee shall take all actions necessary to ensure compliance
therewith.
ENVIRONMENTAL
-------------
SECTION 3001. As used in this Lease, the term "Hazardous Material" shall
mean any flammable items, explosives, radioactive materials, oil, hazardous or
toxic substances, material or waste or related materials, including any
substances defined as or included in the definition of "hazardous substances",
"hazardous wastes," "hazardous materials" or "toxic substances" now or
subsequently regulated under any applicable federal state or local laws or
regulations, including without limitation petroleum-based products, paints,
solvents, lead,
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cyanide, DDT, printing inks, acids, pesticides, ammonia compounds and other
chemical products, asbestos, PCBs and similar compounds, and including any
different products and materials which are subsequently found to have adverse
effects on the environment or the health and safety of persons. Lessee shall
not cause or permit any Hazardous Material to be generated, produced, brought
upon, used, stored, treated or disposed of in or about the demised premises by
Lessee, its agents, employees, contractors, sublessees or invitees without the
prior written consent of Lessor. Lessor shall be entitled to take into account
such other factors or facts as Lessor may reasonably determine to be relevant
in detecting whether to grant or withhold consent to Lessee's proposed
activity with respect to Hazardous Material. In no event, however, shall
Lessor be required to consent to the installation or use of any storage tanks
on the demised premises. If Lessee's transportation, storage, use or disposal
of Hazardous Materials on the Premises results in the contamination of the
soil or surface or ground water or loss or damage to person(s) or property,
then Lessee agrees to: (a) notify Lessor immediately of any contamination,
claim of contamination, loss or damage, (b) after consultation with the
Lessor, clean up the contamination in full compliance with all applicable
statutes, regulations and standards and (c) indemnity, defend and hold Lessor
harmless from and against any claims, suits, causes of action, costs and fees,
including attorney's fees and costs, arising from or connected with any such
contamination, claim of contamination, loss or damage. Lessee agrees to fully
cooperate with Lessor and provide such documents, affidavits and information
as may be requested by Lessor (i) to comply with any environmental law, (ii)
to comply with the request of any lender, purchaser or tenant, and/or (iii)
for any other reason deemed necessary by Lessor in its sole discretion. Lessee
shall notify Lessor promptly in the event of any spill or other release of any
Hazardous Material at, in, on, under or about the Premises which is required
to be reported to a
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governmental authority under any environmental law, will promptly forward to
Lessor copies of any notices received by Lessee relating to alleged violations
of any environmental law and will promptly pay when due any fine or assessment
against Lessor, Lessee or the Premises relating to any violation of an
environmental law during the term of this Lease. If a lien is filed against
the Premises by any governmental authority resulting from the need to expend
or the actual expending of monies arising from an act or omission, whether
intentional or unintentional, of Lessee, its agents, employees or invitees, or
for which Lessee is responsible, resulting in the releasing, spilling,
leaking, leaching, pumping, emitting, pouring, emptying or dumping of any
Hazardous Material into the waters or onto land located within or without the,
State where the Premises is located, then Lessee shall, within thirty (30)
days from the date that Lessee is first given notice that such lien has been
placed against the lien) either (i) pay the claim and remove the lien, or (ii)
furnish a cash deposit, bond, or such other security with respect thereto as
is satisfactory in all respects to Lessor and is sufficient to effect a
complete discharge of such lien on the Premises. The provisions of this
Section 502 shall survive the expiration or earlier termination of this Lease.
SECURITY DEPOSIT
----------------
SECTION 3101. Lessee has deposited with Lessor the sum of Thirteen
Thousand Four Hundred and 00/100 ($13,400.00) Dollars as security for the full
and faithful performance and observance by Lessee of all the covenants, terms,
and conditions herein contained to be performed and observed by Lessee, and
Lessor may use, apply, or retain the whole or any part of said security to the
extent required for the payment of any rent or any sum as to which Lessee is
in the default in respect to any of the covenants, terms, or conditions of
this Lease. Said sum, without interest, or any balance thereof, shall be
returned to Lessee after the time fixed as the expiration of the Lease
provided that Lessee shall have fully performed
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<PAGE>
all of said covenants, terms and conditions. It is agreed that said security
is not an advance payment of, or on account of the rent herein reserved, or
any part of settlement thereof, or a measure of Lessor's damages, and in no
event, shall Lessee be entitled to a return or particular application of said
sum or any part thereof, until the end of the term hereby granted. If, as a
result of any default by Lessee, Lessor shall apply any part of said security
deposit toward damages, prior to the expiration of this Lease, Lessee shall
promptly pay the amount so applied to Lessor so that said security deposit
amount shall remain constant. In the event of a sale of the demised premises,
Lessor shall have the right to transfer the security to the Purchaser and
Lessor shall thereupon be released from all liability for the return of such
security.
IN WITNESS WHEREOF, the parties hereto have caused this
Lease to be executed effective the day and year first above-written.
LESSOR:
J.W.S. PARTNERSHIP
By: /s/ Susan Grandt
---------------------------
Susan Grandt
General Partner
LESSEE:
BATTERY NETWORK, INC.
By: /s/ Susan Grandt
---------------------------
Susan Grandt
President
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<PAGE>
EXHIBIT A
---------
Legal description for property commonly known as 50 Tannery Road, Unit 2,
North Branch, New Jersey, 08876.
ALL THAT CERTAIN TRACT, PARCEL AND LOT OF LAND LYING AND BEING
SITUATE IN THE TOWNSHIP OF READINGTON, COUNTY OF HUNTERDON, STATE OF
NEW JERSEY, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
UNIT NO. 2 IN THE CONDOMINIUM MASTER DEED MADE BY GRANTOR UNDER DATE
OF JANUARY 18, 1988 AND RECORDED IN THE HUNTERDON COUNTY CLERK'S
OFFICE ON JANUARY 21, 1988 IN BOOK 1001 OF DEEDS AT PAGE 901, AS
AMENDED BY AMENDMENT TO CONDOMINIUM MASTER DEED DATED FEBRUARY 6,
1990 AND RECORDED IN THE HUNTERDON COUNTY CLERK'S OFFICE ON MARCH 28,
1990 IN BOOK 1041 OF DEEDS AT PAGE 023, ALONG WITH AN UNDIVIDED 12.54
PERCENT INTEREST IN THE COMMON ELEMENTS OF THE CONDOMINIUM.
BEING ALSO KNOWN AS (REPORTED FOR INFORMATIONAL PURPOSES ONLY):
LOT 53.04 00002, BLOCK 39, ON THE OFFICIAL TAX MAP OF THE
TOWNSHIP OF READINGTON
PERMANENT INDEX NUMBER: 14-10-277-007
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<PAGE>
EXHIBIT B
---------
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
J.W.S. Partnership, an Illinois general partnership ("Lessor") to enter into
the lease dated January 1, 1997 (the "Lease"), for the premises commonly known
as 50 Tannery Road, Unit 2, North Branch, New Jersey, 08876, with Battery
Network, Inc., an Illinois corporation ("Lessee"), the undersigned hereby
absolutely and unconditionally guarantees to Lessor, its successors and
assigns, the prompt and full payment of all rent, including, without
limitation, Minimum Annual Rental, additional rent, and all other payments to
be made by Lessee under the Lease, and the full performance and observance by
Lessee of all the other terms, covenants, conditions and agreements therein
provided to be performed and observed by Lessee, for which the undersigned
shall be jointly and severally liable with Lessee. The undersigned hereby
waives any notice of nonpayment, nonperformance or nonobservance, or proof of
notice or demand. The undersigned agrees that, in the event of a default by
Lessee under the Lease, Lessor may proceed against the undersigned before,
after or simultaneously with proceeding against Lessee. This Guaranty shall
not be terminated, affected or impaired in any manner by reason of: (1) the
assertion by Lessor against Lessee of any of the rights or remedies reserved
to Lessor pursuant to the provisions of the Lease; (2) the relief of Lessee
from any of Lessee's obligations under the Lease by operation of law or
otherwise; (3) the commencement of summary or other proceedings against
Lessee; (4) the failure of Lessor to enforce any of its rights against Lessee;
or (5) the granting by Lessor of any extensions of time to Lessee; and the
undersigned hereby waives all defenses of suretyship. The undersigned further
covenants and agrees that: (1) the undersigned shall be bound by all the
provisions, terms, conditions, restrictions and limitations contained in the
Lease which are to be observed or performed by Lessee thereunder, the same as
if the undersigned were named therein as Lessee; and (2) this Guaranty shall
be absolute and unconditional and shall be in full force and effect
notwithstanding any amendment, addition, assignment, sublease, transfer,
renewal, extension or other modification of the Lease, whether or not the
undersigned shall have knowledge or have been notified of or agreed or
consented thereto. The failure of Lessor to insist in any one or more
instances upon strict performance or observance of any of the terms,
provisions or covenants of the Lease or to exercise any right therein
contained shall not be construed or deemed to be a waiver or relinquishment
for the future of such term, provisions, covenant or right but the same shall
continue and remain in full force and effect. If Lessor at any time is
compelled to take action, by legal proceedings or otherwise, to enforce or
compel compliance with the terms of this Guaranty, the undersigned shall, in
addition to any other rights or remedies to which Lessor may be entitled
hereunder or as a matter of law or in equity, pay to Lessor all costs,
including reasonable attorneys' fees, incurred or expended by Lessor in
connection therewith. In the event the Lease is disaffirmed by a Trustee in
Bankruptcy for Lessee, the undersigned agrees that it shall, at the election
of Lessor, either assume the Lease and perform all of the covenants, terms and
conditions of Lessee thereunder or enter into a new lease, which said new
lease shall be in form and substance identical to the Lease. All duties and
obligations of the undersigned pursuant to this Guaranty shall be binding upon
the successors and assigns of the undersigned. If the undersigned consists of
more than one person, then each such person shall be jointly and severally
liable for the obligations of he undersigned under this Guaranty.
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For purposes of this Guaranty, the word "Lessee" shall also include the
successors and permitted assigns of Lessee. All capitalized terms used in this
Guaranty shall have the same meanings as are given to such terms in the Lease,
unless otherwise specifically defined in this Guaranty. This Guaranty shall be
governed and construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, this Guaranty is executed as of the FIRST day of
JANUARY, 1997.
BATTERIES BATTERIES, INC.
By: /s/ Warren H. Haber
-----------------------
CEO
Address:
--------------------------
--------------------------
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